Charles Koch Participates in Schumpeter’s Process of Creative Destruction

 

KochClharles.gif Charles Koch.  Source of image:  online version of WSJ article cited below.

 

I heard Charles Koch speak at the April 2005 Orlando meetings of the Association of Private Enterprise Education.  Part of his speech involved how he has tried to apply in his own business, Schumpeter’s process of creative destruction.  For a long time Koch has been a stalwart defender of the free market in word and deed.

Ideas seem to exhilarate him.  This no doubt explains in part why this professorial CEO delivers "dozens and dozens" of lectures around the country to his employees on these very topics.  But what does any of this have to do with explaining his company’s prodigious profitability?  Well, everything — he believes.  Mr. Koch contends that the key insight of his business career was melding these philosophical insights about the way the wealth-creation process works into a business operating system called "Market Based Management."  This system, which he has trademarked, enables every division of his business empire to operate as a separate, autonomous, profit-maximizing unit.  It is intended to reward employees who think like entrepreneurs.

"Long-term success entails constantly discovering new ways to create value for customers and building new capabilities to capture new opportunities," he instructs.  "In this sense, maintaining a business is, in reality, liquidating a business."  Mr. Koch likens the cycle to Schumpeter’s "creative destruction" — where the old and inefficient are ruthlessly swept away by the new.

 

For the full commentary, see: 

STEPHEN MOORE. "THE WEEKEND INTERVIEW with Charles Koch; Private Enterprise." The Wall Street Journal (Sat., May 6, 2006): A8.

 

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