October 12, 2017

Andreas Widmer, director, entrepreneurship, interviewed Charles Koch at the Good Profit Conference. The interview was published by Real Clear Politics.

... ANDREAS WIDMER: What impresses me, Charles, is —you let me go around in the company and met a lot of people. What I found is that your company is not... one big company. It’s like tons of entrepreneurs. And that reflects the culture, I think, of the values. One in particular is this, that you sort of put the money where the mouth is, in that you don’t really believe in budgets. Is that right? How does this work? How do you give, for example, spending authority and investment authority into projects—how do you delegate that down the organization?

CGK: Well, once again, this is the division of labor by comparative advantage. What—I mean, it’s kind of like a property rights system in a—in a well-functioning market economy. To work, it’s people accumulate property by creating value for others. And so, they have good profit. And then, they have more property. And let’s say they’re really good at making widgets and widgets that people really want and creates value for them. So, they gain a lot of property to make widgets. And let’s say they go into singing opera and they start losing. They’re gonna lose their property rights. And so, that’s what we try to emulate in the company. “You’re really good at these kind of decisions, and you’ve proven that. So, you get more and more authority to make these.” Let’s say you’re in a trading group and you’re really good at trading strategy. So, you’ll get more authority on that. But you’re not very good on hiring and selecting people for the team and managing them. So, you’re not gonna have authority on that. So, once again, it’s trying to really practice the division of labor by comparative advantage. ...

Continue reading in Real Clear Politics.

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