Forbes has
a cover
story puff piece out on the Koch brothers, but it is informative
in a number of ways. We learn for example how the Koch brothers
became billionaires. Using their father’s asset base, they bought
more assets, sometimes using great debt, that then soared in value
as a result of Federal Reserve money printing:

Over time, Charles says, he learned he could take on profitable
risk by investing in long-lived assets that his customers didn’t
want to buy themselves.

Koch’s father died on a hunting trip in 1967 at age 67,
shortly after handing full management control over to Charles,
setting in motion the two most momentous turning points in the
company’s history. The following year Charles made the riskiest,
and likely most profitable, move of his career. His family owned
35% of the Pine Bend refinery outside Minneapolis, with Union
Oil of California holding 40% and J. Howard Marshall owning 15%.
Koch wanted to buy out Unocal, but the company was asking too
much. So he persuaded the older and more experienced Marshall–who
later became infamous at age 89 for marrying the young stripper-turned-Playboy-pinup
Anna Nicole Smith–to combine his 15% interest with Koch’s
35% to prevent Unocal from assembling a majority stake to sell
to outsiders.

The risk paid off handsomely. Marshall’s heirs, including
the widow of his son, J. Pierce, hold Koch Industries stock worth
at least $10 billion. And while Charles took on a potentially
crippling $25 million in debt to buy out Unocal–something
he has eschewed ever since–Pine Bend evolved into a cash
engine that provided Charles the fuel to expand.

It wasn’t rocket
science, but they did act. Charles was most likely influenced by
Murray Rothbard’s What
Has Government Done to Our Money, which was published in 1963,
five years before the Unocal refinery acquisition. The monograph discussed
how the Fed was debasing the currency and how it would lead to major
price inflation, which did occur and peaked out in the early 1980s
at around 15%. If it wasn’t for that inflation, foreseen by Rothbard,
the Koch acquisition of the Unocal asset, with the heavy
debt taken on, would have been a bust.

Price
inflation from 1963 to 1981

In the Forbes profile, we also learn of a very peculiar view
Charles holds about democracy:

 The
goal has always been, Charles says, “true democracy,”
where people “can run their own lives and choose what they
want to buy, choose how to spend their money.” (“Now
in our democracy you elect somebody every two to four years and
they tell you how to run your life,” he says.)

People running
their own lives would be less democracy and more a private property
society (i.e., a Rothbardian anarcho-capitalist view), without legislators
and other government operators attempting to micro-manage populations.
Such a private property society would be a good thing,
but it is hard to square Charles’ supposed take on this with the
brothers behind the scenes role in propping up various politicians
who move in a direction quite different from a private property
society. Says Forbes:

Mitt Romney’s loss was a huge blow to them, both in terms
of likely policy outcomes and personal reputation.[…]“We
raised a lot of money and mobilized an awful lot of people, and
we lost, plain and simple,” says David. “We’re
going to study what worked, what didn’t work, and improve
our efforts in the future. We’re not going to roll over
and play dead.”

Quite instructive
in the piece, for which Charles and David were clearly cooperating,
is that Friedrich Hayek is mentioned, but not the Austrian economists
Rothbard and Ludwig von Mises:

Koch Industries essentially applies the ideas of Friedrich Hayek
to the art of making money. Hayek, the dean of the so-called Austrian
School of economists, celebrated the chaos of decentralized decision-making
as a way for every individual to decide what’s in his or
her best self-interest.

Charles and
David know better. The Cato Institute is mentioned in the piece,
but not the fact that the idea of the Institute and the early driving
force behind it was Rothbard. Rothbard, in fact, came up with the
name, Cato, for the Institute. It is named after Cato’s
Letters, a series of British essays penned in the early 18th
century by John Trenchard and Thomas Gordon expounding the political
views of philosopher John Locke, that had a strong influence on
the American Revolution’s intellectual environment The essays were
named after Cato the Younger, the defender of republican institutions
in Rome.

As David Gordon once said to me with a laugh, it wasn’t Charles
Koch and Ed Crane, who came up with the name based on their deep knowledge of
the early 18th century intellectual influences on the American Revolution.

Also interesting, in a sidebar to the Forbes piece,
we  learn
there is a good Koch brother, who is not into manipulating the world:

 Frederick,
who never got involved with company management, moved to Monaco
after selling out to his brothers. The 79-year-old Yale Drama
graduate now lives quietly, collecting rare books, fine art and
opera manuscripts. He’s also an arts patron: he funded the
full refurbishment of Shakespeare’s Swan Theatre in Stratford-upon-Avon
in the 1980s and has donated works to permanent collections at
the Frick, Morgan and Carnegie libraries. Frederick owns properties
across Europe, including an Austrian hunting lodge and French
villa.