Good Profit : How Creating Value for Others Built One of the World's Most Successful Companies
by Charles G. Koch and Paul Michael and Charles G. Koch


In 1967, Charles Koch took the reins of his father's company and began the process of growing it from a $21 million start-up into a global corporation with revenues of about $115 billion, according to Forbes.


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More About Good Profit by Charles G. Koch; Paul Michael; Charles G. Koch


In 1967, Charles Koch took the reins of his father's company and began the process of growing it from a $21 million start-up into a global corporation with revenues of about $115 billion, according to Forbes.
So how did this MIT engineer manage grow Koch Industries into one of the largest private companies in the world today with growth exceeding that of the S&P 500 by almost 30-fold over the last five decades? Through his unique five-dimensional management process and system called Market-Based Management. Based on five decades of cross-disciplinary studies, experimental discovery, and practical implementation across Koch companies and their 100,000 employees worldwide, the core objective of Market-Based Management's framework is as simple as it is effective: to generate good profit.
What is good profit? Good profit results when a company creates value for customers in a way that helps them improve their lives. Good profit is the result of innovations that customers freely vote for with their own dollars; it's the result of business decisions that create long term value for everyone—customers, employees, shareholders, and society.
While you won't find the Koch Industries name on your home's stain-resistant carpet, your baby's more comfortable but absorbent diapers your stretch denim jeans, or your television with a better clarity screen, MBM™ drove these innovations and many more.
Here, drawing on revealing, honest stories from his five decades in business – the company's many successes as well as its stumbles – Koch walks the reader step-by-step through the five dimensions of Market-Based Management to show stockholders, entrepreneurs, leaders, students — and innovators, supervisors and employees of all kinds, in any field —how to apply the principles to generate Good Profit in their organizations, companies, and lives.
From the Hardcover edition.

  • Publisher: Penguin Random House Audio Publishing Gr
  • Date: Oct 2015

From the cover
Chapter 1

The Glorious Feeling of Accomplishment

Life Lessons from My Father

I should regret very much to have you miss the glorious feeling of accomplishment and I know you are not going to let me down. Remember that often adversity is a blessing in disguise and is certainly the greatest character builder.

—Fred Koch1

You can tell the Dutch," my father would joke about himself, "but you can't tell them much." Square-jawed, determined, and persistent certainly described Fred Koch, who plunged headfirst into countless ventures—some profitable, some not. His own father, Harry, was also a risk-taker—emigrating as a teenager from the Netherlands with very little money and a head full of stories about America's "Wild West."

Whether their reputation for stubbornness is deserved or not, the Dutch emerged from Spanish rule in 1581 with a thirst for peace, tolerance, knowledge, and new ideas. During the Dutch Golden Age of the seventeenth century, they created the first stock exchange, generated the highest standard of living in the world, excelled in arts and science, and sustained a flourishing culture. The Dutch thrived thanks to freedom and a system of mutual advantage, while their less free European neighbors endured bloodshed and poverty.

Harry Koch arrived in New York as a printer's apprentice and brushed up on his English skills while working at Dutch newspapers in Michigan and Chicago. His work led him to travel down the Mississippi to Louisiana, and then to Trinity, Austin, and Galveston, Texas. In 1891 he followed the railroad to Quanah, where he bought a print shop and struggling weekly newspaper called the Chief. Quanah was in a very poor area, so many of Harry's customers paid, in part, with barter. They valued the news and advertising space his paper offered, and he valued their patronage. In an example of good profit at work, what is now the Tribune-Chief is still published today.

Harry had a thick Dutch accent and pronounced the name "Koch" with a soft, guttural "ch." The West Texan pronunciation sounded more like a crow's "caw." Years later, someone paged my father at a train station and mispronounced his name over the microphone as "Fred Coke." My father had never liked the West Texas version, so he adopted that pronunciation on the spot, thereby making a significant contribution to American phonology.

Fred played varsity football for Quanah's high school, and was an excellent orator and student. He attended the Rice Institute in Houston (an all-scholarship school at that time), where he was elected class president. Always ready to take any risk that might pay off, he transferred to MIT in Cambridge, Massachusetts, upon learning it had created the first-ever chemical engineering program. MIT's tuition at the time was about $300 a year. Before he moved from Texas to Boston, Fred spent the summer mopping decks on a tramp steamer—a merchant ship with no set schedule—sailing between New York and London.

Chemical engineering suited Fred Koch. His bachelor's thesis at MIT addressed environmental issues at a paper mill in Bangor, Maine, which was, coincidentally, later owned by Georgia-Pacific. (GP sold that mill but still owns the Acme gypsum plant near Quanah where my father held a summer job.) The opportunities presented by the Bangor mill—including the profitable recycling of waste products as well as energy conservation, both of which improved the environment—were important to my father and remain important to Koch, because they are mutually beneficial to our company and our communities.

At MIT, Fred, having been taught by his father to box,...

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