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What an honor to be here. Thank you for hosting us, Forbes. And welcome. This will be put out as the all-in interview.
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So, I'm really excited to share this conversation with everyone on the world
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on the internet and to get some time with Charles Ko, Chase Ko. Chase and I have known each other since 2013.
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>> Yep. >> When we overlapped in the agriculture industry, got to know each other. We've
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been business partners. And Charles and I have gotten to know each other a few times over the years. But I'm really
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excited for this conversation tonight. So, Charles, thank you for being here. >> Thanks for having us.
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>> It's an honor. >> Every few years, a new ad channel opens before the market catches on. That's
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axon.ai right now. The AI ad platform behind one of the biggest runs in tech with access to over a billion daily
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active users. Full screen video ads in mobile games watched for a median of 35 seconds. Businesses are profitably
00:00:54
spending hundreds of thousands of dollars a day on it. And most advertisers don't even know it exists
00:00:58
yet. The window is open at axon.ai/allin. In Silicon Valley, entrepreneurs and even mature company CEOs always like to
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learn about the story of other businesses and the success of those businesses. And I've always felt like
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Coke Industries was that untold story. Uh probably the most profitable private family-owned business in the world.
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Maybe I'm off on a couple points, but certainly up there. and one of the most
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impressive business stories because of the evolution of the business, which I'm
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hopeful we can hear a little bit about how that evolution came to be tonight. And just for some statistics, if CO were
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publicly traded, the revenue would put it easily in the top 25 of the Fortune 500. It's a family-owned business based
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out of Witchah. Founded in 1940 by Fred Ko with businesses ranging from energy, agriculture, chemicals, building
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products, consumer products, even cloud computing and a very active minority investment portfolio with 120,000 plus
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employees. That statistic might be off across 60 countries. very unique operating model which we'll get into
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today including principles around disruptive innovation of the business reinvesting 90% of profits in new
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businesses and growth meritocratic values and I'm hopeful that tonight we can take an opportunity to hear about
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the evolution of the business and talk about some of those principles and maybe we can get started Charles if you could
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give us a sense of the scale of the business what are the business lines that you operate today and and maybe you
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know provide a little more color to those highle statistics I shared today. >> I can go back through some of the
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history and the failures and successes, but uh I I'll go through what we've
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grown since the early 1960s. And then we had uh 30 thou three 300 employees. Now we have more than
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130,000. and uh in in 60 countries and uh we have uh increased in value 9,000 times over
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that period. >> When did you join the business? In >> 1961 full-time I'd been working Well, my
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father uh we lived on a farm and and he told me at age six he didn't want me to
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be a country club bum. So made me work in all my spare time which I hated and and so I was always in trouble and uh
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and so he was kind of tough on me rightfully so. And and thank God he did. Years later I I asked him, "Pop, why
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were you so much tougher on me than you were on my younger brothers?" And he
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said, "Son, you plumb me out >> when you came into the business. What was the scope of the business? What
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was the business operating? >> We we had two main businesses. One was uh to uh uh design and make uh
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fractionating trays. That is that they separate liquids by differences in boiling points. And then the our largest
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business was a crude oil gathering system in in Oklahoma. And and so so my father uh and I I was
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uh I had finished just a few years earlier finished MIT and I was uh working for Arthur D. Little then a
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leading consulting firm and and I was and and you'll think this is a joke at
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age 25 I was doing managing cons management consulting. mean that I have to laugh at absurdity of that but I
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but they were paying me for it believe it or not. So my father called me and he said son
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uh I want you to come back and join the business and as tough as he had been on me and as I say rightly so
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uh I declined. So he called me a few weeks later and he said, "Son, either you come back to run the company or I'm
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going to have to sell it because my health is bad and the companies aren't doing well and uh and I don't have long
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to live." Uh so I agreed because uh I well for for a number of reasons. one. The first one is uh I got three
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degrees at MIT and engineering and I sucked as an engineer. I mean, get that. And what? So, how'd
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you get through MIT? Because I was real good at the math and the science and the
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theory. And I was no good at making or operating things. So, I figured out pretty quickly that I
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wasn't going to make it as an engineer. So I need to be an entrepreneur and uh and because I was good at
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principles and that's why we led. So I was always looking for principles that
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would help me uh contribute and and succeed and and and that's what uh that's what
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transformed our our company. So you you come into the business couple hundred employees you said at the time 300
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employees >> and how did you think was the mandate to grow the business? Was it just to keep
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it stable? >> No, it was it was Could I take a few minutes and go through those first two
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business? Okay, sounds great. Yeah. >> Okay. The first one was uh uh making
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fractionating trays, designing those. Uh we had a president then who who was uh was one of our principles.
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You don't want to be a negative is top down and obsessed with controlling everybody. So he would send out a memos
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every week demanding they on what they spent, how did you spend it on, what did you do, what did you do this right? So
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they were frust matter of fact they started ignoring him and then the whole culture was protectionist
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that is when you s when they sold the internals for fractionating tower uh they wouldn't tell them the design
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and well we need to know the design so we can correct it. No, they wouldn't give it to them. And then and then
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what's even worse to to satisfy the European market, they didn't even build
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a plant there. They uh they had multiple subcontractors do parts of a tray and then bring them
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all together and assemble with another contractor. Now, you can imagine how that was for speed and cost. So we were
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losing our ass if you excuse the expression. And so I changed the the management
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and changed the philosophy. Okay, the first thing we're going to focus on is
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creating value for our customers. And then then the second thing we're going to empower our employees so they
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want to to to do this. And the third thing we're going to be do a plant we're
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going to build a plant in Italy to satisfy the European market. we're going to do it all ourselves
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and uh and so we got became profitable and uh and and then we started adding uh related products
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and and I I'll get to that later but uh and and and so we started growing. >> Can I ask a question?
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>> Yeah. You come in at 25 plus or minus a little bit and you see the problems at
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the business. It's not profitable. It's not being well managed and you overturn
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the management team. How did you have the confidence at this age coming with the experience you had to take that
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level of action that quickly? Well, I it was life or death. And my father said, "You can run this business any way you
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want. The only thing you need me of my approval on is to sell." That's the way
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he talked me into coming back after I said I didn't want to uh or I wasn't going to.
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And then and then in 1970, what really helped is my brother, younger brother David
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uh uh joined the business and then and then he continued that growth. >> And then you're now running a profitable
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operation. You've got a European business. And at that point did you start to think about expanding into
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other products and other >> Well, that's it. And this is so >> I was learning all these different
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principles and I and what I saw we were doing not here not just here but in other things
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is we were building capabilities that is I looked at it we need to be capability bounded
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not industrybounded like okay you could say uh to a certain extent because we were in crew oil
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gathering we're in the oil industry oh that means Everybody was saying you need
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to be an integrated oil company. You need to be in everything. And I was applying divisional labor by comparative
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advantage. No, you need to be in the part of it of the of the industry in the part of the value chain where you can
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create more value than others. Otherwise, you're going to fail. And that's what we're seeing happening now.
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There's more specialization by comparative advantage. And so that's what so so I I I started this created
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this principle called uh uh uh creating virtuous cycles of mutual benefit. And what that led us to do is to to to start
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this uh neverending cycle of of uh of growth uh innovation, success and failures.
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and failures that when we did it right that we learned from and made us better and taught us
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better how to apply principles to create value and we're still going through
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that. We have a lot of failures and that's when you when you apply creative destruction in your new things. If
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you're not failing at everything, you're not doing anything new. >> Where did you learn that lesson? So,
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what was the first major failure that you know they always say you got to plan until you get punched in the face. What
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was the first punch in the face? >> Well, I had a bunch of them with uh with
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uh w with with that company. It was called Coke Engineering then. And like like I said, okay, we're when we got
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into refining, we created petroleum coke. So I said, well, let's come up with a a way to to use that as base to
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make activated carbon. And that was a fair we spent a fair amount of money on that. And I just we
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had a whole bunch of those and we've had we've had many more. >> How did you make the decision to shut it
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down or walk away some point? A lot of entrepreneurs have this problem. They they build something, they're too in
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love with it and they don't know when to say enough is enough. >> Yeah. Well, that's when enough is
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enough. When we lose our ass enough. No, it's it's when we decide we don't have
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the capability to create superior value for our customers and that we're going
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to be rewarded for. And sometimes it can be the structure of a of a business like
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uh like the company that Case founded Coke disruptive technology insight tech. It's
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been it it does tremendous things but it it is a structure that makes it hard to
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make it profitable. >> And so so that's the other thing is so so that's another these are principles
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that we've learned. Okay, we didn't apply that. What were the principles
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that we didn't apply that caused us to fail? That's what I mean we learned from
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failure. So the businesses we're you ask the businesses we're in now and Jason
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there's coke people here. You you all can catch me up if I the ones I miss. But uh we have uh uh engineered
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projects, engineering construction. We have uh uh we build uh solar plants. We have commodity uh trading and and
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distribution. Uh we have uh fertilizers. We have refined products. We have chemicals and
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polymers. We have glass. We have uh uh uh forest and consumer products. We have four different uh investment firms with
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different comparative advantages. Uh and we we have electrical products and we we have uh software uh systems
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uh uh for management. >> Dave, let me just hit one point something. No, you got it. You did a
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great job. Um I mean basically like um eight eight wholly owned um business unit platforms
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that he described and then four investment um uh different businesses. But I just wanted to kind of really
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drill a point home because when I when I came out and when I started um really hanging out with you and the whole tech
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community and trying to like build that network, a lot of people had the same question that you did about who is Coke?
00:15:03
What are you guys all about? you know, I know it's a large private business, but
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being in Witchto, Kansas, we don't know that much about it. I think this point
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that is so different about Coke um versus almost any other company out there is what my father said on um being
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capability bounded, not industry bounded. And you know, how do you get from a small crude oil gathering company
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in southern Oklahoma to all of those businesses that he described? And there's I mean the principles obviously
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throughout which we'll be talking about um in this discussion but one of the
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absolute core differences is that whole approach to capabilities and um I would encourage anyone that's in a business
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and trying to scale think about it from that lens. What capabilities have I demonstrated that I can add value to
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customers and then um point it at new industries where I can experiment. This is one of our um one of our principles
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as well. experimental discovery, not trying to do everything at once and trying to conquer the world, but
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experiment and test. Does the customer value my product or not? Um, and then along the way, you know, those those
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core capabilities for us started off as operations, logistics, trading in the very early days of KO, that's what we
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demonstrated we we were good at. We were getting great customer feedback. But then when we had the capability approach
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to say okay we started in energy we started in crude oil gathering pipelines and refineries can we point those same
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capabilities into natural gas can we point those into chemicals let's experiment there can we point those into
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fertilizers because then we learned about natural gas and then then the Georgia Pacific uh opportunity comes
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along and it's like hey these are wood products it doesn't seem similar to
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these other um businesses, but it's the same core capabilities. We buy Georgia Pacific and along the way
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it was somewhat of a happy accident that we started learning learning about consumer products and branding. So
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branding became a new capability for KO through acquisition, but it started with
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where do we think we can add value and do a good job on that and collect new capabilities along the way. So, I think
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that's like a really simple way to think about Coke and it's o over the course of
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time like how we're different. One other thing I'll mention too um because I I've
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been asked many times it's like well so is it sort of like um you know a Birkshshire Haway where you have all
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these different businesses and conglomerate and um I would say no. I mean obviously Warren Buffett and his
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team have done an unbelievable job operating the business the way they have but we think about our business very
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differently instead of operating them all as independent businesses and almost like in silos um think about it as a
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republic of science. We're not a conglomerate. We're an integrated set of
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capabilities. Is it fair to say that you wouldn't consider an acquisition or a
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new business line if there wasn't some relatedness to an existing competency at
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the company? >> It depends. I mean, as you see when you read the book, we went through uh one
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chapter on creative destruction and uh and what Champer called all the different ways to do that and one is to
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create a new management approach. Okay, that's our biggest one. So the question
00:18:34
is when we bought Molex makes electrical connectors which has done fantastic and
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at first it wasn't doing great. So we said we think if we can get them to apply these principles it will turn them
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around and and we didn't we and the problem when we do that they they they tendency is to learn the lingo and so
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you can call everything by these by these names and you still do what you always did and that's what was going on
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there. And so finally we got in. No, we we had changed the management and and once we did that and and and uh
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and and and they started applying these principles, they took off and now they're knocking it out of the park. But
00:19:26
let let me go back to failures. I because I'm I mean we're understating our our our great strength in failures.
00:19:36
And that is I I'll give you our worst failures and what caused it. And it caused us by by violating
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the principle of of of hiring people first on values and second on talent. And and what I've for years I told our
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people, look, if you want to hire somebody with bad values cuz you like them or something, hire them slow and
00:20:07
stupid and so we can catch them real quick and get them the hell out. Maybe get them to go to work for our
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competitors or something. >> Maybe help them get a job. >> But anyway, that was huge. And then we
00:20:22
made that even worse by uh by taking people who were ter had terrible values and
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made them leaders and and so what we call that is is rather than we want everybody in the
00:20:42
company to be contribution motivated that I want to succeed by by contributing. I want to be rewarded for
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my contributions, not for anything else. And the value I create for our customers
00:20:56
or for the future. And and so they would some of these people were destructively motivated.
00:21:04
What they wanted was power or control and and they would hide their failures and uh and make up their successes.
00:21:16
And so I'll give you two examples. One goes back to 1973. You remember the war
00:21:22
in the Middle East and everything. And they had gotten us into all kinds of wild reckless trade. So that could have
00:21:30
bankrupted the c the company. And then later because I mean much later shows you
00:21:40
that u that repetition penetrates even the dullest of mind. So I needed this to happen a bunch of times. So finally,
00:21:49
okay, I got it. I got it. God, don't punish me anymore, please, for my stupid
00:21:54
mistakes. So So this was we we did it about the same time, our a group. We are we put leaders in who were
00:22:06
destructively motivated. And in refining, we we we got in a leader and they were destroying those businesses
00:22:15
and uh and and so it it didn't almost bankrupt, but it almost wiped out all of
00:22:23
KO's earnings in the in the late uh 1990s. >> You you'll appreciate.
00:22:29
>> So, does that give you a flavor? >> Yeah. So, you'll appreciate this being
00:22:32
an a guy. To go a little deeper on what happened in the late '9s um in our a
00:22:37
business, we uh we called it the strategy the gas to bread spread. So, we wanted to basically be in every element
00:22:44
of the value chain all the way from pulling the natural gas out of the ground, converting it into fertilizer,
00:22:50
making the nitrogen products to grow the crops that would ultimately um then end
00:22:56
up on the grocery store shelves and being bread. we got in pizza crust, all this crazy stuff. When you look back on
00:23:02
like what the hell are you doing, right? But um it was it was what he was saying
00:23:07
is like um like leadership thinking about we can do we can do anything and if we like basically kind of control the
00:23:13
the entire value chain like we can be make that successful completely violates probably all 41 principles in in the
00:23:21
book, right? experimental discovery, knowing where your capabilities are, right people, um, right roles, and so
00:23:29
the we yeah, we called it the gas to bread spread. Some people called the as to bread spread, too. Um, so,
00:23:35
>> and there's another one in there, integrity, >> because when they knew there were losses
00:23:41
in some of these and then they wouldn't tell us, they wanted to go ahead anyway.
00:23:45
>> We had a we had a deal within that, you know, like purina dog food. So one of
00:23:50
the thing one of the things that was acquired was the large animal um uh feed mainly hog.
00:23:57
>> Yeah. So hog hog feed and um did no diligence and this is one of our principles. Apply the scientific method.
00:24:04
So disprove your hypothesis as much as you you try to prove it. And um and so we we closed that acquisition and within
00:24:13
days we found out that we had hundreds of millions of out- of-the- money um hog contracts because we didn't didn't even
00:24:19
look at the contracts. So I mean that's when I think this is really important
00:24:23
for founders that want to grow right you have this growth at all cost mindset and
00:24:27
you start not like asking why not and this is the kind of trouble that you get get yourself in.
00:24:33
>> So let's go back to the management piece. How do you take these principles
00:24:38
which you've applied successfully to I would use the term iterate because for
00:24:42
me like failure is all about iteration to success and finding paths that work, finding businesses that work and
00:24:49
ultimately finding people that work. But how do you drive that culture that represents the principles? Because you
00:24:55
could create a book and give it to all your employees and say, "Guys, here's 41
00:24:58
principles. We've sat down. We've thought about it. We've written them.
00:25:02
They're going to work." >> Yeah. but to actually live them to realize them to hold people not just
00:25:07
responsible but accountable to them. How do you how did you do that as you develop these over the decades? Because
00:25:13
at first uh we tried to get them do it through sheep dipping that is you take everybody in you give
00:25:19
them a big seminar now go do this and uh from Palani we if you want to read a book that's hard to read I mean
00:25:30
if you want really hard one you can read human action this is even harder called
00:25:33
personal knowledge by Michael Palan who was a a chemist and and then became a philosopher
00:25:43
and uh and and he goes through what it takes to to to develop personal knowledge. It's
00:25:52
it's you have to rewire your brain to have it work differently, right? You have a habit. So, you don't need to
00:26:00
think about it. And then if you want to change like, do I brush my teeth first or do I comb my hair first? No, I want
00:26:07
to start combing my hair first. And all of a sudden you're back brushing your
00:26:11
teeth first and you because you're not thinking about it. And so because your
00:26:15
brain gets I mean you know your body let's say you're you're a weightlifter
00:26:20
and you want to be a marathoner. Okay it's going to take work with intensity
00:26:25
over time to change your body. Well your brain's part of your body. So you've got
00:26:30
to do the same thing. So we said, "Okay, we've got to start with, okay, let's
00:26:35
find a group that's really interested in this. They're struggling. They're having
00:26:40
problems and here are the principles and we'll coach them. We'll help them
00:26:47
start doing it." And if they work with intensity on it, and then they succeed,
00:26:52
then we don't need ship dipping because then the other uh businesses and capability says, "Gosh, I'd like to do
00:27:00
that." So you don't need to call them in. Then then we have more demand for
00:27:05
people who can help them. And the hardest thing is to have our people in strategy or or our principalbased
00:27:13
management group who are really good at helping them. And boy, they're in they're in more demand than anybody.
00:27:20
>> So the best thing is success will drive social mimicry. You'll see other
00:27:24
>> That's it. Here's another um like take on what he's saying um that I think like
00:27:29
really connects about culture to your question and that is like the essence of like principalbased management and all
00:27:36
the principles in this book as well is like what if you could um have a business and a culture small, medium or
00:27:43
large where everyone knew what to do without being told. And so that's like hard to get your head
00:27:50
around, right? Because I think most businesses come at it from top down. There's the iconic leader that's the
00:27:57
smartest guy in the room building the strategy and then telling everyone what to do. And so I think one of the most
00:28:03
important principles in this that we tell a lot of stories around is to flip that on its head. And it's about
00:28:08
bottom-up empowerment with principles and empowering your your talent, your team, your leaders with these
00:28:15
principles. So, so that then you use the collective knowledge of everyone, not a
00:28:20
couple smart guys at the top of the company. >> Most people in most enterprises that
00:28:24
aren't owner operators don't want to fail. They want to keep their job. They
00:28:28
want to move up the ladder by being repeatedly successful. And if you want to create a culture of creative
00:28:34
destruction, if you want to create a culture of failing and learning from failure, it's very hard to get
00:28:39
individuals who live on an income on a salary to do that because if they make a mistake, if they fail and then they fail
00:28:44
again and they fail again, I'm worried about losing my job. So what you typically see in most scaled
00:28:49
organizations is middle management and even senior management when founders or owners don't operate it anymore saying,
00:28:56
"I'm going to take the less risky path. I'm going to do the less creatively
00:28:59
destructive thing. I'm going to do the thing that's least likely to fail
00:29:03
because I don't want to lose my job. I want to keep my job, get my bonus, move
00:29:06
on to year two and go home to my kids and my wife and take care of the family or whatever the the family situation is.
00:29:12
And that's my objective. >> But see, and that's and that's that that
00:29:17
approach creates perverse incentives. And so we we try to align our incentives that we want to reward people according
00:29:28
to their overall contribution to KO's future. So for example, if they have an
00:29:36
experiment and that doesn't mean doing this thing in a where you buy all these
00:29:42
hogs and you lose hundreds of millions of dollars over what that's not an experiment. It's an experiment. A a a a
00:29:50
good experiment is where the value you you what you learn from this is higher value from this failure than the cost of
00:30:01
the experiment and and so when we do that and we're we're evaluating what the person you are
00:30:10
building capability for the future. That's why we're so we we put so much
00:30:15
emphasis on are you building capability and capability part of it is the culture
00:30:20
and what Chase did with with KO Labs when he started Coke disruptive he said Ko Labs I want every business to be a
00:30:29
laboratory for what we find both to help us source these these opportunities these tech
00:30:38
opportunities and and then we'll that we'll we'll if they're just trying some, we'll try it
00:30:45
out in that business. And being in all these different businesses that that touch almost every part of the economy,
00:30:52
it gives us a big advantage in that. So, but that affected the whole culture. I mean, on your business, don't you want
00:30:59
to be part of Coke Labs? We're we're an experimental discovery group. We're just
00:31:04
not a bunch of grunts here grinding stuff out. >> Yeah. I think um the KDT example is a
00:31:11
really good one because you asked about motivating and like what if you fail and
00:31:14
then what if you get fired and and all that. Um we we tried to basically take a little bit of the Silicon Valley
00:31:21
approach and bring the you know of experimental discovery. You learn more and you you pivot and learn have a
00:31:27
failure but then now I know what I don't want to do. I'm going to pivot my
00:31:30
strategy to what may be working. I'm going to keep trying. As long as you don't go sink the company with some
00:31:35
massive bet, right? And I think um KDT was a a great experience like I call um you know when when we did that um when
00:31:46
when we made that those first investments you know this in venture um you're the the losers fall out first and
00:31:53
the winners take a hell of a lot longer to to uh materialize. So if we would have just judged it based on, okay guys,
00:31:59
you got three or four years to figure this out, we would have shut down KDT because we you had the but but it was
00:32:05
that experimental discovery principle and mindset that we applied to it. And oh by the way, we were learn we were
00:32:11
learning so much as Coke from seeing the technologies that were coming around the
00:32:16
corner that might disrupt our core business. And so we value that learning and we rewarded the people that were
00:32:24
bringing that knowledge in. If you just look at it on the bottom line basis in the first couple years, you said just
00:32:29
shut this down, right? But then over time like all these different things and that and then the returns are starting
00:32:34
to come because we thought long term about it. But it all came from that experimental discovery one principle and
00:32:40
then creative destructions like if we're not in the game on technology and we
00:32:44
don't see what's coming, something's going to happen. Especially with how
00:32:47
fast uh techn is moving today, the u some of our businesses are going to become dinosaurs. How much of that risk
00:32:54
were you willing to take and did you take on acquisitions? So, doing homegrown experiments on new business
00:33:00
ideas and strategies and products can be lower cost. But if you're going to do an
00:33:05
acquisition, do you have less room for fail? >> Well, how about this? We were a much
00:33:09
smaller company and we bought Georgia Pacific for 20 billion. >> Well, can just tell us what Georgia
00:33:14
Pacific is for those who don't know. >> It's a wood products company and it's
00:33:17
got two uh big um pieces to it. Building products and consumer products. Well, it's got it's got a third one, but
00:33:25
>> Yeah. >> Okay. I'm I'm generalizing, >> but go ahead.
00:33:28
>> Sorry. No, no, I'll shut up. Shut up. >> Shut up, you old guy.
00:33:33
>> No, no, no. Um, but but anyway, but on on that one. >> So, when did you buy it and how big of a
00:33:41
betting the company move was that? >> 2005. >> Well, that was Yeah, we were much
00:33:46
smaller in 2005. I can't remember how much smaller but it was a lot smaller.
00:33:51
>> It was a massive bed. >> How'd it come up? >> Okay, we were looking applying this
00:33:58
virtual cycles of mutual benefit. We were saying okay what's uh one of these
00:34:05
uh these cycles are chemical process industries and and wood creating the pulp and stuff
00:34:15
was matter of fact we found in my my my father's thesis he he he did a a study in Maine on this
00:34:26
very thing on pulping I mean I found it later but that that did his MIT thesis. >> Yeah. Yeah.
00:34:32
>> Wow. >> So, we said, "Okay, let's look at the Oh, and they were they were saying they
00:34:38
need to spin off some of those pars the pulping part." And we said, "Okay,
00:34:46
let's buy that." And we bought that as an experiment and we did real well with
00:34:52
it. And so we said, "Wow, they they have other because that was a commodity
00:34:58
business and they were trying to get their price to earnings ratio. It was like six and if they became more of a
00:35:05
consumer products, they could get it up to nine. So we proposed we met with them and and proposed that
00:35:14
uh we uh uh we buy the the uh the commodity part and we'll pay them a high enough price
00:35:24
that then they can be all consumer products and get their price. and we showed them all the economics and
00:35:31
they said that's fine but we'll be cons sued for constructive fraud because we
00:35:37
we all have this all these lawsuits against us and and uh and so we can't do
00:35:46
it but we like the value and so we went home and says well okay what if we just offered the whole thing
00:35:53
and the a couple of them were getting ready to retire and the senior officers so they were really liking it and and
00:36:01
they were kicked out of all the board meetings from then on. But anyway, so we we sold them and that was a time
00:36:08
when money was tight and stuff so nobody came in and and topped us. I'll give you
00:36:14
just one funny story. We sent one of our people in to be the CEO, Joe Mohler, who
00:36:20
had been president of a company and uh and and and he They had it was totally top down
00:36:33
bureaucratic. They were in Atlanta they had this 51story building. Was it 51? You can
00:36:41
correct me. >> That's right. Yeah, you got it. I >> help you. and and they had a private
00:36:46
elevator to get up there and you didn't have to wear a coat and tie but if if
00:36:51
you came up to visit all the management was on this 51st floor and you had to put on a coat and tie and get permission
00:36:58
to come up there and so Joe immediately kicked them all out. Well, we fired a bunch of them
00:37:06
>> and then set the remaining ones down to work with their groups >> and on the regular floor
00:37:12
>> and then regular floor and then turned it all into offices. I mean into meeting
00:37:17
rooms open to anybody >> and so that I mean you asked about how you get culture change. A lot of it is
00:37:23
signals like that particularly when a bunch of them get fired for being so bureaucratic and hierarch. Would you say
00:37:31
that that business unit operates like the rest of KO industries today? >> Oh, absolutely.
00:37:35
>> For how long? >> I mean, I I'll just say like that is such a rare and difficult thing to pull
00:37:41
off. I mean, there's just countless stories of acquisitions where the acquirer thinks that they have culture,
00:37:47
thinks that they know how to transfer culture, and literally no one seems to be able to do it. This was one of the
00:37:52
insights from Warren Buffett is you find great managers. You let them continue to
00:37:56
operate as owners of that business and they get some profit share or whatnot and they've got a durable moat so he can
00:38:02
make a long-term investment and he just leaves them and >> that's see that wouldn't work for us the
00:38:08
stuff we bought. Well, let let me give give another one if I could that's was
00:38:14
even more difficult and that is uh uh sadly my my father died not too long after I came with the company in
00:38:24
1967 and we had owned an interest in a small refinery in Minnesota and uh and so but two years later we
00:38:34
were able to buy it and And it was not being operated very well because the management had let the union
00:38:47
control how it was run. And so it was run very inefficiently. And so the first thing we tried to do is
00:38:55
change the work rules. So they went out on strike. And uh by the way that was at the start
00:39:02
of my honeymoon. Thanks a lot guys. And it was violent. I mean, they they ran a switch engine and tried to knock
00:39:12
down one of our units. They shot high power rifles in there and they blocked the gates. I mean, it was impossible to
00:39:19
get in there. We had to take helicopter. But we we were successful in operating without the union workers
00:39:31
for nine months, bringing people in from other plants. and it operated better than they did. So, finally we got the
00:39:40
work rules changed and then we uh then we said, "Okay, we're going to empower the employees.
00:39:48
We're going to change the culture." Now, you think at Georgia Pacific it was
00:39:52
tough. This was much tougher than that. And and so we we we worked and worked on
00:40:00
it to try to make their jobs better, get their opinions, get them to work as teams, get them to come up with
00:40:08
innovations. And when they did, we reward them and we got the union to to agree with that and and like like one
00:40:16
they said a group of them said, "God, we're buying all these spare parts we
00:40:22
need. uh we can if you if you'll build a machine shop we can do it cheaper and
00:40:27
faster and they did and then other things they saved ton of money for us made things more efficient and now the
00:40:36
culture there is fantastic you I mean I mean we're talking about we're not
00:40:41
talking about witchah we're talking about Minnesota >> so I mean we're so proud of what they've
00:40:49
done and it just uh it still blows me away how how much they've taken these principles to heart and using them to
00:41:00
make that place. So it's so we've increased the capacity tenfold and it's one of the best refineries in
00:41:07
the country. >> Bob, wouldn't you say that? Um I mean the common theme on all of these because
00:41:12
we have the same story on Molex, you know, sim similar but different than Georgia Pacific. This was a a technology
00:41:18
company, a a connector and cabling and connector company, one of the largest in the world. Um that makes products in
00:41:25
your iPhone and medtec products, your automobile. And um when we bought that in 2013, it was a a paradigm that needed
00:41:35
to be changed. You you described Georgia Pacific top down versus bottom up. There
00:41:39
was a lot of that too, but it was topline thinking versus bottom line thinking. It was all about revenue
00:41:45
growth, right? this is a technology company and it was also a public company for 30 plus years as well
00:41:51
>> because what the market rewarded them for >> and so like the whole the
00:41:55
>> stock price >> the public versus private uh discussion is interesting here and it just what
00:42:01
we've learned is it takes a hell of a lot longer than you think to change the
00:42:06
culture and almost in every case I mean pop tell me if you agree with this but in almost every case it requires
00:42:12
changing leadership that has the paradigm of bottomup empowerment and that learns and applies the principles.
00:42:20
Almost every time when we fail, it comes down to ignoring the principles. You can
00:42:24
and that's what the the book is about. You can kind of reverse engineer these
00:42:28
stories like well we missed that principle, we missed this principle. Um but it comes down to talent and the
00:42:34
right people with the right mindset. And I want to share just one story with you
00:42:37
that really um shows like how we apply this at COPE. Um he talked about our talent vision being um you start with um
00:42:47
basically culture first, you know, skills second, values first, skills second. I always add a third dimension
00:42:53
to that as well. Values first, skills second, credentials last. And that is a very different mindset than than most
00:43:01
companies because most companies, I think, look at it and say, I want I want the guys, you know, that have the 40
00:43:06
from the Ivy League school and all that. And there are some incredibly smart obviously folks from that. But by by our
00:43:15
um experience and also is one of the reasons why we stayed in Witchaw, Kansas is that we can basically hire the farm
00:43:22
team, right? Kids that have grown up on the farm that have that contribution motivated mindset that work their tails
00:43:29
off and want to come in to make a contribution as opposed to coming in expecting all this stuff and coming in
00:43:36
with more of an entitlement mindset. So we um case in point, our CIO today, his name is Jared Benson. Um he start his
00:43:46
first interaction with KO was based striping lines in our parking lot. So no college degree whatsoever, but he found
00:43:54
his way into Coke because he demonstrated that hey, he knows a little bit about data science and he could help
00:43:58
us. This is about 20 years ago. And then ultimately he came in, he proved himself. He was running circles around a
00:44:05
lot of the team and like just you know contribution motive mindset um adding value. He saw the cyber security risk
00:44:13
and that wave coming built a whole capability to protect us from cyber attacks and then now he's CIO of the
00:44:21
company guy with no college degree. So I mean that kind of mindset in terms of our talent vision and like that values
00:44:29
first and someone that just wants to come in and they they just love the job and they want to make a difference.
00:44:35
>> Do you actually codify these principles and everyone at the company has a
00:44:38
handbook that lists them out and then they're part of the assessment process
00:44:42
for quarterly or annual reviews with people? >> Yeah, I mean obviously there's the book
00:44:47
and he's this is his fifth book. It's my first but but so um good profit science
00:44:52
of success we have >> it's my best book because of >> hey Brian the one we did is pretty good
00:44:59
too >> hooks won't like that >> right >> um but yeah no there is a there's a
00:45:04
discipline right and and really it comes down to the leaders taking it seriously
00:45:10
and there the leader first responsibility is to help their people >> okay I'm going to put my analyst hat on
00:45:16
for a second and I'm going to say My observation would I would create a theory. We could test the theory right
00:45:22
now that being in Witchah being founder or owner operated and you know having this ability to be
00:45:32
isolated from a monoculture. I just feel like Silicon Valley a lot of companies replicate each other. You have to kind
00:45:40
of there's this term that's being used a lot now over socialization. You have to
00:45:44
operate like everyone around you or you're not part of the you have to fund raise in the right way and do these
00:45:49
deals. You have to hire people this way. You have to do this sort of vesting schedule, this sort of equity.
00:45:53
Everyone's the same. And if you don't, you're kind of a weirdo. But by being in
00:45:56
Witchah, you don't really have that problem. You can think your own way. You
00:46:01
can challenge yourselves. You can debate. You can come up with your own principles without feeling like everyone
00:46:06
else is conforming to the groups around you. But they can because they're a bunch in Silicon Valley that are that
00:46:12
are a challenge. >> Yeah. >> So they're not all that way. >> They're not all.
00:46:16
>> Yeah. And this this >> But is is it is it always been a competitive advantage? I mean, did you
00:46:20
ever think to move the headquarters to New York City or >> No, but the main thing the We've We've
00:46:25
never thought of that, but but what we've uh Sorry about that. I mean, there are advantages of being in
00:46:34
New York City. I mean, you have a great mayor now, so we're good to go. But anyway, so we we that's a compet
00:46:43
competitive advantage of us. >> That'll be a >> But but this is No, but the main the
00:46:48
main threat we've had is we we had songs that wanted to go p take us public and I said it' be over my dead body and
00:46:57
some of them thought that would be a good idea just like they're thinking that about
00:47:02
Trump. with a lot of people thought still think about I get a lot of nice notices of my imminent death
00:47:11
and and they say okay your brother died we hope it was I know this is painful but I hope it was slow and painful and I
00:47:20
hope Charles is even worse that's the kind of crap we get u but anyway what the the biggest is the uh push has been
00:47:30
for us to go public God will be worth so much and stuff and but it and I I think our view we never could
00:47:41
have accomplished what we've have first of all we never have would have built a
00:47:46
principalbased framework and then we we never would have been able to pull off this uh capability bounded versus
00:47:57
industrybounded because then I mean people don't understand it. Now, if you're Buffett
00:48:03
and you've sold that long, then people Okay, but but he wasn't trying to
00:48:08
integrate them the way we do. No one would believe it. And and so what the what and and and that's because uh
00:48:17
you've got to you got to have a story that people the analysts can understand.
00:48:22
Otherwise, we would like Georgia Pacific, we would have a low price earnings ratio. And so being private,
00:48:29
being in Witchah, competitive advantages, what about being owner operated or founder operated? There's
00:48:35
this argument that the the the best Silicon Valley companies are those who are founderled for as long as possible
00:48:42
because the founders are willing to destroy the business creatively. They're
00:48:46
willing to think about what's over the hill, make the tough decisions, reinvent
00:48:49
the company, hire and fire as needed, be willing to take the short-term financial
00:48:54
loss for the long term. Have you been able to get that to distill down into the organization? Because that's the
00:48:59
thing that most public companies that are not owner operated deal with and struggle with is managers that are
00:49:05
short-term incentivized and and aren't and can't take the big risks and the the
00:49:09
risks of failure that that you're able to embrace. >> No, but I I think it depends on the
00:49:14
values of the owners. If uh I'd like one of our principles is that any good partnership of any kind
00:49:24
whether it's marriage, friend, employee, partner requires three things. It requires shared vision, shared values
00:49:34
and having complimentary capabilities that you use to to make each other better. And if you miss any one of
00:49:42
those, you're not going to have a lasting good partnership. And so I I remember I was I was to the YPO group in
00:49:51
Witchaw. I was presenting this is like 20 years ago presenting what we were doing and why. And one of them said,
00:49:59
"Well, how do you get that to work in a private company?" And and I answered, "Well, no, it's
00:50:06
easier than in a public company, just like I did." And then I I thought who it
00:50:12
was and he was talking about his father. His father was a total dictator and no way he could apply any of these
00:50:22
principles in that. So it all the ma matters who the owners are and what their values are.
00:50:30
>> Can a public CEO that doesn't have a big ownership stake in the company adopt
00:50:34
these principles and transform the culture of that company? If you can get a if you can sell it like Buffett has
00:50:41
but I mean he wasn't doing these principle but he had a different principle and that is I'm going to buy
00:50:46
companies not going to take top price but what meaning what's meaningful to them is they run it so I'm going to buy
00:50:55
it and let them run it and so that was his his value that he sold that made him tremendous well that the other one was
00:51:03
buy insurance companies so you'd have a lot liquidity to go do all these things
00:51:08
and those two things are what made him successful. >> Right. Chase, I want to just go back to
00:51:13
your getting involved in the business. We didn't get into that, but how did you
00:51:17
get started at Coke? How and were you always a believer in the principles from a young age? Were you around the
00:51:24
organization around your kid? >> I'm a chip off the old block. >> It took me a while to come around.
00:51:32
>> No, this is the most remarkable transformation. We've been talking about
00:51:35
them all even. This is the primo. >> Here we go. >> Unbelievable. >> Do I get to tell my story?
00:51:42
>> From the absolute bottom to the absolute top. >> He'll correct.
00:51:46
>> No, he's blown beyond me. He's doing things I wouldn't even dream of or have
00:51:51
the capability to do. >> So, he'll correct he'll correct me 10 times as I tell the story. But, um,
00:51:58
>> well, cuz you're too damn humble. >> Um, so I didn't start when I was six. I
00:52:03
started when I was 15, so he cut me some slack, but it's because I was a pretty
00:52:08
competitive tennis player. And so >> he was nationally ranked. See the humility ranked. That's first first
00:52:13
time. Um so um but at 15 I got burned out, you know, tennis like typical story where I wanted to hang out with my
00:52:22
friends. I wanted to have a good time. I was tired of playing six hours a day. So
00:52:26
I I started throwing tennis matches intentionally to get out of it, out of these tournaments. So, I go home and
00:52:31
party with my friends and and he uh he said, "Look, your attitude is terrible.
00:52:37
You can either um give 100% on the tennis court and apply yourself or I'm going to get you a job." I said, "I'm
00:52:43
sick of tennis. I'm done with it." And uh so I had his my the job was figured
00:52:49
out the next morning for me. >> Yeah. But interrupt again because this is important. He thought he would get a
00:52:55
nice cushy job in Witchah so he go out and party with his friends at night. Yeah.
00:53:00
>> Well, you know, I'm I may be old and slow, but I'm not that slow.
00:53:07
>> Yeah, he was kicked out of a number of school. >> I was born at night, but not last night.
00:53:12
>> But yeah, so >> probably a a parallel story movie that could be made.
00:53:16
>> Yeah. No, seriously, there there really is. >> But basically, all my was packed for me.
00:53:22
>> Yeah. >> And it was thrown in the back of a truck and 6 hours later I showed up at a at a
00:53:27
feed yard and I lived in a single wide trailer. the whole summer with with my boss. I slept on the floor, worked seven
00:53:33
days a week, and uh just shoveled cow shed and dug post holes. >> And so that was my forgot about that.
00:53:41
Let's keep it. Let's keep it manageable here. So, um, so anyway, um, but the the
00:53:48
the interesting part of that story, even though I went from literally being like,
00:53:53
uh, you know, kind of country club rich kid to to doing that within 24 hours, it
00:54:00
was an absolute transformation for me that the fact that he kind of he made me do that and I chose, but I didn't know
00:54:07
what I was exactly, you know, choosing. Um, but by after, you know, I was a month or two into this job, I started
00:54:15
like actually feeling like better my better about myself, you know, I was like I hadn't really made a contribution
00:54:21
up until that point in life. And then I'm actually I'm working with a team.
00:54:24
I'm getting paid minimum wage. I'm working my tail off. I'm adding value
00:54:29
even though it may be like just menial work. Um and this is I go back to um a letter that his father um you know wrote
00:54:39
to him and the and his other three brothers. >> No, no, my my older brother.
00:54:44
>> Your older brother >> cuz I was 3 months old when you wrote it. >> This letter about basically like when I
00:54:51
pass on um you're going to get what seems to be a large sum of money. Um I hope you don't squander it. I hope you
00:54:59
don't use it for but I hope you actually apply yourself because I want you to
00:55:03
feel the glorious feeling of accomplishment and um it's this it's a really amazing
00:55:09
letter. He has it hung in his office. Um but uh I you know that was the first time I felt that even though it was
00:55:16
working at a feedard I was like this feels good actually. You know I could have gone down the path of of you know
00:55:23
just kind of staying on the tennis circuit. I have no idea where I'd end up in life had I had I not gone down that
00:55:29
path. And so I basically worked every summer for Coke from that summer on. I worked in a gas liquids plant. I worked
00:55:36
in our refineries um all the way through junior year in college. I always had a Coke, you know, kind of summer job. But
00:55:43
um another So that was an absolute like transformation for me in my life. >> Let me I give you one more credit here.
00:55:52
See what he he has great humor which is great but and that is Chase has I I have
00:55:58
this gift for abstractions. He's he's like his mother. He has a gift for people. He understands people and
00:56:06
can relate to them and he can go around like like she can or Sterling Barner who
00:56:13
was our president in the early days who by the way uh was born. His father had ran mules in an oil field camp. And he
00:56:23
was born in a tent and there damn near died. Uh never went to college. And and he could whoever he met with wanted to
00:56:37
do business with us. And that's the way Chase is. He goes around meets these
00:56:42
people and all of a sudden they're friends and they want to do business. And that's true for stand together too.
00:56:49
Go people you think oh they don't they don't want these these capitalists or
00:56:54
these free enterprise people to do business with them and and and he gets them on our side and shows them the
00:57:04
value of these principles. >> Well let me let me make >> is that fair
00:57:08
>> um with whatever you said. No, I mean that's my job that that's
00:57:13
what I do uh now you origination and partnerships and about the time I met you that's when I started you know
00:57:19
getting into technology and trying to build a new community so that we could get access to the most disruptive um
00:57:25
founders. Um, but one quick story I want to tell because I think it would be helpful for for your audience as well
00:57:32
that we haven't touched on yet is the principle of comparative advantage because another meaningful like total
00:57:37
shift in my job at KO and my role at KO, but also in my my personal life um was when I was running the A business. This
00:57:47
was this was later on. We talked about the late 90s, the the gas to bread spread and all that. This is a separate
00:57:52
business uh with Coke fertilizer. I spent 10 years in that business really understanding the operations of a
00:58:00
business. I worked in sales and and in marketing and um the accounting, the finance, like every piece of it, the
00:58:07
trading and um I ran a lot of the smaller business units, but at one point my boss at the time wanted to add a
00:58:15
whole natural gas trading business to it. So, he's like, "Hey, I got a want to
00:58:18
put a parent company called A and Energy Solutions, and I want you I'm going to
00:58:22
throw you the keys to the fertilizer business. you're ready to run it. And so
00:58:26
I was promoted to president of Coke Fertilizer at that time. And about 9 months in, I realized that I was not the
00:58:34
guy for the job. And I walked in my boss my boss's office and fired myself. And
00:58:39
the humiliating, right? It's like especially being the boss's son and like
00:58:44
thinking about, oh my god, I'm a failure. You know, I could I couldn't make this work. The business was still
00:58:49
doing fine, but I wasn't doing a good job as a leader. and I knew there was someone else that had the comparative
00:58:55
advantage to be a great operator CEO, you know, president um type role. And so I learned through all that, you call it
00:59:03
a failure in in that job that um that I wasn't an operator and I wasn't a good
00:59:12
optimization type leader and I was a builder. Like all I wanted to do was go work on the innovation stuff. That was
00:59:19
about the time I met you and I learned about climate corp and all that. I just wanted to go focus on that and and go
00:59:26
build the stuff, you know, this whole idea of creative destruction that would disrupt the core business that I was
00:59:31
running. And so that whole thing around like understanding your comparative advantage, what you're good at and what
00:59:38
you're not relative to others that could be doing that job was a huge deal. And
00:59:43
like my hope was that that was a little bit of an example for other like KO leaders as well. It's like if you're not
00:59:50
in the right job, like you know, you don't have to like fire yourself, but um
00:59:56
but figure out where what your power alley really is and where you can contribute and and um and add the most
01:00:03
value. So that experience for me, what was amazing if you look at like what happened after that, we we got a great
01:00:10
president to continue to transform the fertilizer business. It's one of our most exciting businesses today and we
01:00:18
keep we keep growing um with it. So that that did better than it would have done
01:00:23
had I stayed in the role. But then all of this led to Coke disruptive technologies which we talked about which
01:00:28
is a totally you know an innovation platform for KO to to see around corners. So like that one move made one
01:00:36
large business much better and and also created a whole new thing right and so like I always think about it's like we
01:00:44
have 130,000 employees what if that one principle comparative advantage what if everyone like deeply understood that and
01:00:51
and redesign their role to where they are truly like in their power alley and what what would what are the results of
01:00:58
the business if we could do that you're never you're never going to be perfect
01:01:02
but that's the vision that we have and how we >> organiz thinking about individuals
01:01:09
>> how do I self-actualize how do I find my path of purpose happiness success in
01:01:17
life by leveraging these sorts of principles in a world that feels radically transforming and continuously
01:01:26
constrained. I don't have infinite flexibility. I'm not on the board of Coke. I'm not on the board of my my
01:01:31
company that I'm employed by. How do I find a path in this world? Because I do
01:01:35
think many people today are struggling for that sense of purpose, for that sense of identity, for that sense of
01:01:43
realizing their their their potential and feeling fulfillment in work today. Well, that's I I mean that's critical
01:01:50
and that's that's every all the we we have what 20ome thousand supervisors
01:02:00
in the company and so this is one of their top jobs is is making sure that that each employee is in the right role.
01:02:12
for example, they're working hard and trying and part of the work they're
01:02:16
doing well in and others not. Well, rather than beating up, you got to keep doing better. Like, like there's certain
01:02:22
things if you told me I had to do, I mean, I'm I'm I'm good at at concepts
01:02:28
and logic and math and to go do something else that's quite different. I mean, I'd be a total failure. and you
01:02:36
could you could whip me till I was a grease spot on the floor and I I couldn't do better. And so that's the
01:02:43
role of the supervisors to not go tell them, okay, your role is to go do this and they're just trying harder and
01:02:50
harder and so you're making them miserable and so they hate you, they hate the company. And so that's that's
01:02:57
the way you empower them. That's what what Maslo said. If he said that that if
01:03:05
everyone has capability and and if if you don't develop it and apply it in a way that creates value for
01:03:13
others, you will be you you may be successful monetarily or in some way, but you'll be deeply unhappy your whole
01:03:22
life because you won't be fulfilling your nature. Your nature. And I know what mine is. I know what makes people
01:03:29
say, "You're 90. Why don't you go out, lie on the beach? I said, "What? You
01:03:34
want me to die? I'd be dead in in a a week." >> It's not your nature.
01:03:40
>> No, it's not my nature. My nature is to is to I have this gift. And a lot of our
01:03:47
people here may say, "Yeah, you damn right. You use it too damn much." So,
01:03:51
>> what keeps most people from realizing their gift? >> Well, I I think part of it is an
01:03:55
education system. So, the schools need to be set up. Okay, we're going to help
01:04:01
you find your gift and what you're passionate about and and and and what is motivating to you. So the whole system
01:04:10
demotivates you and that's what the way businesses are managed demotivate our
01:04:14
whole deal. That's why we we have five dimensions in the in the way we apply
01:04:20
this. The first is vision. You got to get the right vision like capabilities of creating value for others. Uh then
01:04:28
then it's virtue and talents. We we've talked about that. Then it's knowledge.
01:04:33
That's republic of sh of science. Uh creative destruction. All those things.
01:04:40
And then the the final one is motivation. And so that's what we need to do. And
01:04:46
like Joe Lamont has created the schools. He says it's 90% or 80% motivation.
01:04:52
And so you have games, you have other things that the kids can do that they learn from and enjoy doing. They want to
01:04:59
do more. And that's I mean I raised our kids with these principles and I made
01:05:04
them do it. So I was piss poor at applying the my principles in in teaching them this and he's doing it. He
01:05:11
makes a game out of it. He has them reading the book and parts of it and then they have
01:05:18
competition on who can do it better and who's who's living up to this better,
01:05:23
who's applying this principle better and they're loving it. >> Yeah. I'm not uh having my kids uh
01:05:29
listen to books on tape from Milton Friedman when they're 10 years old. >> No, Aristotle Aristotle. There was there
01:05:35
were plenty of them. Um but um but let let me just make >> you listen you were told or suggested or
01:05:43
encouraged to listen to Aristotle on tape as >> Yeah. >> Yeah. >> No, he wasn't encouraged. No, we'd go
01:05:51
Sunday evenings. >> I got to take a note for my >> Elizabeth and and Chase and I would go
01:05:56
into my library and I would play these tape. I'd only play it for 10 minutes
01:06:00
because I knew Chase's attention span little Elizabeth was on it. Boy, she was
01:06:05
on it. She ran circles around. >> She was getting straight A's and everything. And Chase would fall asleep.
01:06:10
And then then after 10 minutes, I'd wake him up and Okay. What what was his point
01:06:17
here? >> Is a test every 15 minutes >> and then and then you may have seen on
01:06:21
on where was it? Well, you talked about uh about you we we worked together to do
01:06:27
your error term paper. >> Yes. >> And why don't you tell that story?
01:06:32
>> Okay. Well, I mean, we had a it was like a fifth grade paper. Like, choose your
01:06:36
philosopher, write about it. You know, it's got to be 500 words or whatever.
01:06:40
So, I came I was like, I don't know like what philosopher am I going to write
01:06:43
about. And so, he's like, you're going to write about Aristotle and we're going
01:06:46
to work together on it. But, I learned a hell of a lot about Aristotle in in fifth grade. And um I turned in the
01:06:53
paper and um the professor um had a lot of red ink all over it and said, "F, you
01:07:00
did not write this. And I'm And so I'm like, "Oh god, you know, this is so embarrassing." And so I
01:07:06
took it back to him and I told him, I said, "Pop, um, we got an F on our paper."
01:07:13
And >> I know, you said, "You got an F." >> Yeah. And, um, so, and then I didn't
01:07:18
think he was going to pick up the phone and call the the teacher. So he said, um, you know, Dr. Cohen, I'll never
01:07:25
forget this. I was hiding under the table during this phone call. He said, "Dr. Cohen, um, you know, I helped my
01:07:31
son write this paper and he learned a lot from it and yet, you know, do you not want me to help my son? Do you not
01:07:39
want any parents to help their kids like learn? And and um, he said, you know, I
01:07:45
think you have a point, uh, Mr. Coke. And so the next day, the next day I come back and it had 99 written on the top.
01:07:54
>> See, I made a contribution. Let me let me let me go back. It's a great story. I
01:08:01
know. But um let me go back to something I think you were getting at um around how do you remove more barriers for more
01:08:09
people? Um and this is really kind of the stand together story. He mentioned education. I just want to use one
01:08:15
example of how important we feel like transforming education is. And we also feel like it's a movement with
01:08:22
tremendous opportunity right now. And so um our vision for education is to go from a teachto test model teacher at the
01:08:33
front of the classroom teach you know talking at kids to one that's individualized education because we all
01:08:40
as we we talked about we all learn differently. >> Everyone learns differently.
01:08:43
>> Yeah. And our kid all of our kids learn learn differently as well. So um we did
01:08:48
the research at Stand Together and prior to co um >> and Stand Together just
01:08:53
>> Oh yeah. Sorry. Stand. So stand together for those that don't know this is really
01:08:57
um you know comes from my father's efforts on social change which he's been
01:09:01
working on for for 60 years and stand together in 2003 was created that really um I think we had the insight of we can
01:09:11
do a lot more together versus do it alone. If we operate in philanthropy and social change in silos, we're just not
01:09:18
going to get the leverage to drive the change that we want to. Um, and so Stand Together is made up of, you know, close
01:09:25
to a thousand business leaders. It's it's just like the name describes. It's
01:09:30
a community of business leaders that align on vision and values on where we want to see the country. And it's really
01:09:37
around this this this pretty simple idea that every human has a gift, but there's
01:09:42
so many barriers across all of our institutions. um education, uh you know, broken education system, a broken
01:09:50
criminal justice system, um bad policy holding people back so you can't chase
01:09:56
the American dream and build a business. All of these things, right? So, we're
01:09:59
very broad in terms of the issues that we focus on, but education is one of the biggest ones. And so, I described the
01:10:06
vision of where where we're trying to help take it and be a catalyst for change. And one of the things that you
01:10:12
know we do a lot of research on where public opinion is and uh prior to COVID roughly 20% of families were open to a
01:10:20
new model of education very low right and then everyone saw during co how screwed up the system was and they saw
01:10:27
their kids come home they had learned a hell of a lot more on YouTube learning than they actually did in the classroom.
01:10:33
So after um after COVID three or four years later, you look at that same data and it's 70 to 80% families are open to
01:10:41
a completely, you know, to transform the education system because everyone now understands that it's just broken. So,
01:10:48
um, where we're supporting, we have these amazing preferred partnerships as my father described, whether it's Joe
01:10:55
Limont with what he's doing at the Alpha School, like closing the motivation gap
01:10:59
and meeting kids where there are and bringing like gamification and like the principles of Fortnite into education in
01:11:07
a way that kids are like he's taking kids that are failing students to top of
01:11:12
the class in 3 months because >> meeting them where they're at. meeting
01:11:15
them where they they're at and solving the motivation gap and like making learning fun and cool, right? Sal Khan
01:11:22
did the same. He's a huge partner with Khan Academy. And a really interesting
01:11:26
one uh that we uh we partnered with the Walton family on is the Veila Fund basically applying venture capital uh to
01:11:33
education entrepreneurs. So coming out of co there were um thousands of pissed-off parents and teachers that
01:11:40
were just fed up with the system like I'm just going to create my own school.
01:11:44
You know these small micro schools and so with a relatively modest amount of money um over the last five six years
01:11:52
we've helped create and seed over 5,000 schools. So what's happening is there's
01:11:57
this huge movement where people see is like my kids are learning the the um the skills of what the the future is going
01:12:06
to be like not this teachest model where you don't know how to interact with
01:12:10
people the reality is it's projectbased learning they need to have exposure to
01:12:15
these AI models you don't ban them you empower them with these models right and
01:12:21
um so so we're it's one of the most exciting movements that I think stand
01:12:25
together is really leading on and uh yeah, we we need more partners that are are willing to to to get behind this.
01:12:31
>> I want to go back though, Charles. This work at Stand Together is like taken
01:12:34
off. I know a lot of people that are engaging with you, Chase, on this work and everything you say is so sensible
01:12:39
and we're all it's also it always feels so obvious. Can we go back to the work
01:12:44
you've done historically in social change and what you got right, what you got wrong? Because the the narrow view
01:12:50
of the word coke comes from a broad public perception of political activity that I think's been amplified and the
01:12:56
narrative's been written for you. And I don't think I've personally seen a lot
01:13:00
of conversation publicly from you about what you did when how you were thinking about social change. Maybe you can go
01:13:07
back to the origins of the work you started to engage in in trying to drive social change and over time what you got
01:13:14
right, what you got wrong. >> Well, it started with these these principles. I mean the to me they're the
01:13:20
principles of human progress. But rather than than as Frederick Douglas say, I'll work
01:13:27
with anyone to do right, no one to do wrong. I I I was only working with uh the people who believed to in all of
01:13:37
these and and so we were limited. I mean with work I work with the limit libertarian
01:13:45
party and that got so narrow and and then they started fighting over who has bigger greater more purity in these
01:13:54
principles to get in exactly like and one brilliant guy but but totally this way he says I I he said my libertarian
01:14:04
is this plum line anybody disagrees I he purged so it's almost like the communist
01:14:08
party doing the same thing that Lynn did and they and They admired Lyn. Yeah, he
01:14:13
had the right strategy. Well, no, you can't go murder anybody that does like
01:14:17
so it doesn't work for liberty. It works for totalitarianism. And so when and then and then I started
01:14:25
reading uh Maslo uh uh usakian management and his strategy and then Victor Frankle is the one that really
01:14:35
got me going. And Victor Frankl uh this tremendous insight. He says the the problem today is ever more people
01:14:47
have the means to live and no meaning to live for. So if you can't find a path to a life of
01:14:57
meaning which comes from as I said from uh finding your gift and using it to succeed by helping
01:15:10
others succeed in a way that gives your life meaning then you you have two choices. You can
01:15:20
either choose to go for power or you can go for pleasure. And and you see this today and
01:15:28
you see this through the the history of the world. So if you if you choose power, then you're always going to want
01:15:37
you become addicted to power. I want more power. I need more power. And we've
01:15:42
seen that in, as I said, in our businesses, but you damn sure see that in politicians and you see that in all
01:15:48
the dictators in the world. Then if you say if you if you've given up and you say, well,
01:15:58
uh, I've given up. I'm going to to go for p for pleasure. and you and you d
01:16:04
you you you dedicate yourself to to pleasure uh without considering the long-term qu
01:16:12
consequences then you have uh you're going to experience failure. You're also have a tendency to become
01:16:23
addicted to an addict to become suicidal and to even engage in crime. And we see
01:16:33
both of these today. So the problem today is when you have a world that is based on power and pleasure,
01:16:44
it's a slippery slope slope to totalitarianism, authoritarianism, and socialism.
01:16:53
And that's that's what we're saying today. So, so that's the solution
01:17:02
is to help people find their gift and a way to apply it that enables them to succeed by helping
01:17:10
others succeed. And so what does that mean? That means we need to all of us more fully live up to the
01:17:20
promise in the Declaration of Independence to better apply these principles of human progress.
01:17:29
And then the other thing that I screwed up on is is uh for the first I've been at this more
01:17:40
than 60 years and for the first 50 I avoided pol politics or major party politics. I mean being in the
01:17:48
Libertarian party there was no thought of winning. The the only reason I got into that is well this is a time people
01:17:56
are listening they're interested in politics so we'll engage in that because
01:18:00
people are talking so we'll throw that in the hopper in hopes it takes on. Well
01:18:05
the way we did it it didn't take on at all. It blew up in our face. So then but
01:18:10
we decided we needed to get in because we desperately needed some principalbased policies. Look at all the
01:18:17
policies that we have today. They're destructive. They're leading to more and
01:18:21
more power and pleasure, socialism and authoritarianism. And and the mistake we made or I made is
01:18:31
trying to do it through one party. You can't do that. So now we we follow Frederick Douglas's advice
01:18:40
to work with anyone to do right and no one to do wrong. >> Where are we in the cycle? So there's a
01:18:48
rising number of political leaders around the country. Initially it was in local
01:18:54
elections and now it's on kind of the national stage declaring themselves socialist or some form of socialism. Are
01:19:01
we kind of on an upswing and >> upswing? What we is there a social >> I thought hell was down not up
01:19:13
>> so where are we? I think we continue this about we're going to hell in a
01:19:17
basket. It's what it's what Thomas Jefferson he had slaves but what he said
01:19:23
about slavery. He says if if if God is just, I despair for the future of our country. That's kind of
01:19:34
where I am. If God is just, I despair for the future of the country. the people we're electing both Republicans
01:19:41
and Democrats. I mean, and the the mistreatment you I mean, you look at at at at
01:19:49
what's being done. I mean, occupational lensure, the way they're the the the the way
01:19:56
they're treating illegal immigrants, you name it, across the board. and the socialists, the way they're they're
01:20:04
treating all the the crime, all of that is uh it's what we we've got to elect people
01:20:16
who have some principles beyond power and pleasure. >> What are your principles for changing
01:20:23
people's minds? >> My it's it's what Chase says. We find them where we are just like we have in
01:20:30
the company and we show them this doesn't get results. Now if you're if you're a dedicated communist
01:20:39
if you're like like Trosky is if we can get rid of private property we'll get a
01:20:46
we'll get rid of greed and then every ma every man will be a gerta and a beethoven and we will uh or we will be
01:20:57
able to create ever ready warehouses of all the goods and everybody can go in because out of their goodwill. They'll
01:21:05
be making all this stuff. If people still have those fantasies, it's never worked in history.
01:21:12
And so, >> but it's different this time. >> Yeah. >> Yeah. That's Well, that's right. And so,
01:21:18
that's what we're trying to do at Stand Together. And >> Dave, what what we've learned on this is
01:21:23
that you to change minds and change paradigms, you show versus tell. And um go back to what we were talking about
01:21:31
before bottom up empowerment as opposed to top down control. I mean I think that's like a overarching umbrella
01:21:37
principle on all of these. So our whole thing with stand together and that's I
01:21:41
think why it's growing exponentially is we have stories of PE we believe in people. We don't need top down to come
01:21:49
in and tell people how to to solve problems. That's the That's the book that Brian Hooks and I wrote which we
01:21:54
just uh we we have a new edition based on the 250 and we got Martin Luther King III wrote a forward to it and
01:22:06
>> and that's that's another book besides this one. If you're interested in these
01:22:10
the very these ideas we're talking about on social change there's much more in
01:22:15
that on than than this book on that. Although we have quite a bit on this book, we have
01:22:20
>> one one of the key concepts in that is um if you believe that people aren't the
01:22:24
problems to be solved, the people that are in the problem, they're the ones with the best ideas and they're the
01:22:30
source of the solution. That's a totally different mindset, right? And I mean
01:22:34
that's what Stand Together does. We talk about venture capital a lot. We bet on
01:22:38
people that have found something that works. Um just give a quick example, Scott Strode from the Phoenix. We found
01:22:46
Scott. Um, his story is amazing. About eight years ago where he battled addiction most of his life. He had a
01:22:53
mentor that put him in in the gym and got him in boxing gloves and like exercise was the thing that helped him
01:23:00
kick addiction. And what he did, he's like, "Well, if this helps me, I think I
01:23:04
can help other people with this this same concept." He built a gym called the
01:23:08
Phoenix. Combined the power of community with others that are struggling with the
01:23:13
same thing. um you know multiplied by the power of um of exercise and he was getting insane
01:23:20
results like relapse rates that were below 10%. So what we do is like instead of like some top- down program to handle
01:23:28
addiction, go bet on Scott. And that's what we've done the last seven or eight
01:23:33
years is we've gone from he had a couple gyms in Colorado when we met him, you
01:23:37
know, impacting a couple thousand people. He just hit a million people basically overcoming addiction in this
01:23:44
last year. That's a movement, right? And I mean that's a key difference I think
01:23:48
of Stand Together is like how do you do what you're talking about at scale and
01:23:52
help people change paradigms? You show them with stories like Scott that let's
01:23:56
be let's believe in the people and let's bet on them to transform society
01:23:59
>> for addiction and crime that resonates wholeheartedly. Let me ask about the
01:24:04
economic condition of America. Kids are graduating college. They got hundreds of
01:24:08
thousands of dollars in student loan debt. No one can afford to go to the doctor. Grocery bills are too high.
01:24:14
People are worried about paying for their next grocery bill. You look at the polling data, the survey data, the
01:24:19
average American is really struggling. I think more than half of Americans, 60 plus% maybe 63% have negative equity.
01:24:26
They have more debt than they have assets and everything's getting more expensive and no one's moving up the e
01:24:30
economic ladder. There's no mobility anymore. People are really struggling. And then they're looking on TV and
01:24:35
they're seeing spaceships launching up to space, holding flowers out the window, smiling and laughing. And it's a
01:24:42
really dark time. And it really leads people down this path of I need the government to help me. I need support. I
01:24:47
need help. I need to elect the people that will fix this for me. How do we address the economic crisis that's
01:24:54
facing the average person in America? The lack of economic mobility, the principles around these distraught
01:25:00
situations, fantastic. But this fundamental economic crisis that we're facing,
01:25:04
>> that's a damn good question. It's it's like here's the question. Okay, the eggs
01:25:10
have have been scrambled. It's your job to unscramble them, >> right? >> So, that's the problem. Once you create
01:25:17
these uh entitlements, I mean, you almost can never get rid of them. I you you almost need well may
01:25:27
maybe uh maybe Argentina if he can pull off what he's doing because they were in
01:25:32
worse shape. >> But they went through it. >> Yeah, >> we haven't got through it.
01:25:37
>> Well, maybe we will getting there. >> Well, let me ask a question. Does
01:25:40
capitalism work long term? And let me give you a an argument why it might not. The success at Koch Industries is built
01:25:46
on an algorithm, your principles, and you've been able to adapt that algorithm, and as a result, scale your
01:25:51
business, generate cash, reinvest that cash, generate more cash, reinvest that cash, and so on, and you've scaled
01:25:57
9,000x. You've built a compounding advantage in your business. >> As is the case with all successful
01:26:03
capitalists, you build a compounding advantage. The problem with compounding in any system is it eventually eats all
01:26:08
of the whatever is in the system or it makes it hard for others to compete in that system or participate effectively
01:26:15
in that system. And that's the argument that's being made today against capitalism. How do we counter that idea
01:26:20
and share that capitalism should be more accessible to all that everyone can participate and everyone can benefit
01:26:26
that it doesn't end up in this monopolistic end state where no one >> Well, it starts from removing the
01:26:31
barriers. That's what I said. You you've we've got to work for a system
01:26:38
where we remove the barriers that are holding people back from realizing their potential, finding their gifts,
01:26:46
realizing their potential and succeeding by contributing. Okay. So I mean I mean so we we should
01:26:56
start like occupational licensing all of this. There are hundreds of hundreds as
01:27:01
you know of occupations where they make it so tough all the local people who are
01:27:06
in that business make it impossible for anybody who starts with nothing to to do
01:27:12
it. And then and then the way we're treating illegal immigrants, the one here working and contributing, we harass
01:27:19
them and are going to kick them out. No, we ought to welcome them and kick some of the others, the bad ones out. But uh
01:27:27
I mean so some of this is is basic and then we we we've got to reward people
01:27:35
who want to contribute. That's why we keep you've got to get people to be
01:27:40
contribution motivated. Then you're going to have a life of meaning and and that's what Vic Victor Frankle was
01:27:47
trying to tell us. And if we don't we're we're going to fail. And we're failing
01:27:53
because we're taking away the chance for most people to have a life of meaning
01:27:59
because we're setting up all these obstacles and and I'm not picking on one party or
01:28:05
the other. They're both doing it and then set up all these tariffs which undermine the divisional labor by
01:28:11
comparative advantage which makes everything more expensive. So it's just I mean everywhere you look it's a it's a
01:28:18
tragedy. There's a debate happening at this moment on AI regulating AI. How does AI become an enabler of
01:28:25
self-actualization, giving every individual the capacity to develop themselves, accelerate and succeed
01:28:31
versus making a fewer number of people even more wealthy and taking jobs away from the masses? What's your view on
01:28:37
where AI is taking us? >> Well, it's it depends on how it's done. I mean that's why we back Cosmos who is
01:28:44
who is doing backing people who do AI based on these principles of market-based management based on these
01:28:52
these principles of human progress and uh and and why don't you tell everybody
01:28:58
what you've done in the in the book with AI >> there I mean just one principle on like
01:29:03
our approach to AI is just simple concept of permissionless innovation open I mean the cost of AI to get it in
01:29:10
people's hands is dropping it just to an incredibly cheap level that hopefully
01:29:16
everyone can have access to that and then combine that with their gifts to unlock their potential and learn 1000x
01:29:24
faster. That's I mean from an AI standpoint that's that's that's our
01:29:27
mindset on it. But and that's what we're doing internally at KO as well. Like I
01:29:32
think one of the most exciting innovations that we have is all around human empowerment back to bottomup
01:29:38
empowerment with principles. So, not only are we, you know, trying to make sure that we have the right supervisors
01:29:44
that are helping people, you know, understand their principles so they can apply them. Um, you know, with the book,
01:29:50
we've created an app. Um, I sent it to you, Dave. I don't know if you you
01:29:53
played with it or not, but it's called, uh, Principal Companion. You can download it in the app store. And, um,
01:30:00
it's really taking off within Coke because it's just another way to engage
01:30:04
with principles in a very simple way and meeting people where they are. um whether it's chat GPT or Claude and
01:30:11
solving a problem in 5 to 10 minutes that otherwise would have taken a long time. We're basically powering it with
01:30:16
the principles that are in the book to like any problem. So it's one field, you
01:30:21
know, whatever your problem is in business and philanthropy and if you run a sports team or you're having problems
01:30:28
with your kids, >> it helps you with that, right? And so that I think that's just one example of
01:30:33
how we're trying to like really drive human >> and it doesn't give you an you can't say
01:30:37
well I got this problem what's the answer no it asks you questions okay okay given that have you thought about
01:30:45
this have you thought about that so it's a Socratic method and we know what happened to Socrates so
01:30:51
>> yeah okay >> so listen we're going to need to wrap in a minute but before we do Chase you know
01:30:57
what was the experience like writing the book with your What's it like working
01:31:01
with your dad >> and biggest lesson lessons learned from your dad? Yeah, >> I want to give you a chance.
01:31:09
>> Absolutely incredible. I'd say it's probably the most important project that
01:31:12
I've ever worked on. Um, getting invited into writing this book and I've said to
01:31:17
many people, um, I've learned more in the last 18 months than I probably have
01:31:21
the last 18 years, just because when you write something, as you know, the the the depth of learning and going back
01:31:27
into the details of the stories, figuring out how to tell that story in a book in a way that connects with as many
01:31:33
people as possible. Um, I always say like you really don't know something until you have to teach it. And writing
01:31:40
a book is a form of like trying to to teach others with it. So my depth of learning because I got to be right, you
01:31:48
know, be alongside this guy and and there was many others across KO that that contributed to this to this book as
01:31:54
well. But um learned a tremendous amount. Um the other thing of just doing this with him, um he applied the
01:32:04
principles to the bookw writing process, right? So it's like everything and it's
01:32:10
he's so consistent it almost like drives you nuts, right? In terms of of applying
01:32:15
principles to everything, but principles like openness, creative, he's written,
01:32:19
this is his fifth book. This is my first, but he wanted to drive creative destruction of his first four, right?
01:32:25
And so I think bringing me in to it, just bringing a fresh perspective, bringing technology to it and uh telling
01:32:33
stories in a different way. Um that's an open mindset. He could have eas the
01:32:38
boss. I've done this before. What the hell do you know? You know, um but he he
01:32:42
had that mindset to it and you know applied the principles to it. But I will say he's such a stickler with words and
01:32:52
um you should talk to my mother about this and how it drives her effing nuts. Um but so I got I got kind of a an
01:33:00
18-month window on what it's like to be mom maybe. Um but um but the you know we
01:33:07
had one chapter in there on on stewardship and I think we were on we were on version 27 of it or something
01:33:14
like that. >> Yeah, I rewrote it of I like pop >> 15 times myself. >> You are not applying the principle of
01:33:20
marginal analysis. >> Version 26 was pretty damn good >> and so >> so anyway we but we had a lot of fun
01:33:29
with it and yeah of course there was tension in terms of how you you'd write
01:33:33
something or whatever but overall most important project I've ever worked on.
01:33:37
>> Yeah. Now words have meaning. I mean people say the proof is in the pudding.
01:33:42
No, the proof of the pudding is in the eating. >> For God's sake, that means nothing. The
01:33:49
proof is in the pudding. >> Yeah. >> What? You stuck your foot in it?
01:33:53
>> Yeah. >> He corrects the coke leader on that in about every meeting we're in. So,
01:33:57
>> Oh, and then and then I used to give grammar lessons in our discovery board.
01:34:01
>> What's it like working with Chase? What's it been like writing the book?
01:34:05
It's I mean he is I thought he'd help some with the book and he would get us a
01:34:10
a a perspect different perspective on how to reach young people and do some things and and improve it from his p
01:34:18
perspective but he's taken it to a whole level like bringing in AI and have AI as
01:34:26
the as a principal companion to the book and all of these that are way beyond me.
01:34:32
So he's taken the as he has in everything taken it to a whole level beyond where I am.
01:34:39
>> You've uh written a lot of books. You've built an unbelievable business, one of
01:34:42
the greatest on earth. You've engaged in extraordinary social and civic engagement. What do you want the legacy
01:34:51
to be? >> I want us I want our country to more fully live up to the promise in the
01:34:57
Declaration of Independence. >> Charles Ko. Chase Coke. Thank you. >> Stay safe.
01:35:22
>> I'm going all in.