The Science of Success: How Market-Based Management Built the World's Largest Private Company

From whom could it be better to learn the Science of Success in business than one of the most successful business owners in the United States today. Charles Koch has built a tremendous operation through an understanding of economics, the free enterprise system and, mainly, by consistently providing value in the marketplace. Being rewarded for adding value to peoples' lives is essentially what Capitalism is all about. This is simply a terrific book by a man who has studied the principles of human behavior and action and realized great results through tapping into those principles. The central premise of the book is that "Capitalism Works" both for general society and for an individual business. In fact, when one actually studies capitalism one realizes that it is not only the most profitable and beneficial economic system there is but, by far, the most charitable one, as well (another recommended read: "The Capitalist Manifesto" by Andrew Bernstein). The more truly capitalistic (free) a society is the longer life span of its citizens, the higher the standard of living, and the better off are even its poor. Yes, Capitalism helps all. And, charity flourishes in a free-enterprise based society, as well. Side point: Capitalism (or free-enterprise), an economic system where people are allowed to freely buy, sell or trade in such a way as to best serve their own perceived wants and needs (with government involved only to protect against force and fraud), needs to be understood for what it is. Unfortunately, today's society all-too-often equates Capitalism with companies such as Enron. Enron, of course, was not Capitalism in action; it was theft in action. On the other hand, Mrs. Fields' Cookies is an excellent example of Capitalism. Capitalism is personified by Adam Smith's example about the baker and the brewer providing the best product and service possible knowing that doing so will benefit them while at the same time benefiting their customers. This must be taught and re-taught on a consistent basis in order for the mainstream in our society to be open to the benefits of Capitalism instead of the resistance it now receives. According to Mr. Koch's teaching, the same basic principles of human behavior, action and motivation that serves general society also serve a business, its customers and the economy, as well. It's so obvious that he is correct. He's to be congratulated for pointing this out. Market-Based Management is a system Mr. Koch developed for taking those same principles that work so well in general society and applying them to one's business. He is humble enough to point out the challenges of this system and how it is very easy to veer off the path. All-in-all, however, the proof is in the pudding; the accomplishments of this man, using his system, speak for themselves. He has grown his business 2,000-fold in the last 20 years, having 80,000 employees in 60 countries with $90 billion in revenues. And his company was called by Forbes "The world's largest private company." In a truly free-enterprise based economy, the amount of money one makes is directly proportional to the number of people they serve. Mr. Koch has served a lot of people.

A fair amount of this book presents an interesting, well-written personal account of how Koch Industries applies management principles that a lot of other good management books talk about: clear sense of mission, high ethical standards, and the like. At Koch, these are codified as "Market-Based Management." The book really shines, I think, in its discussion of Human Resources. Koch industries does three things that I think are interesting: 1) When a new person enters a team, the firm redesigns the roles for every member of that team so that the new person fits in best. 2) Koch Industries pays close attention to Howard Gardner's theory of multiple intelligences in designing roles and picking people. (This is the idea that there are eight different but complimentary types of intelligence, six of them important in Koch's business, and that nearly everyone is above average in at least one of them.) 3) It use a version of Jack Welch's famous "rank and yank" system that grades everyone A-C. Although nearly every employer at least does one of these things, I don't know of any other company that does all three. The first two are touchy-feely supportive. The last one, in many cases, brutal to the "C performers" targeted. Firing some "Cs" was one of the worst management tasks I've ever taken on myself. As Koch explains, however, they're all mutually reinforcing ways of making sure that all employees have the ability to do their jobs well, do things they're good at, and have co-workers who can support their efforts. I would tend to believe that this, more than anything else, leads to Koch Industries' apperent success in replicating the market's vibrancy within the firm. More market-based economies do better, I've always believed, because they do a better job letting people realize their potential. Sometimes this involves pain when a person ends up in a job that they can't do. A lot of the time, it's wonderful.

While I don't think all the quotes credited to members of the Koch family were actually given birth by them, this is an interesting, albeit self-serving book. Having said that, most anyone who writes about his own business is going to be self-serving. So one can't be condemned for that. If you're interested in bringing success into your organization, you need to read this book. It gives you a unique look at a truly successful business and the basic philosophy that is alleged to have created and maintained it. I had a bit of a problem with the author when he expressed his belief of doing business on a handshake. In today's world that's not something I would want to try. I'm a firm believer in a good contract to prevent most of the problems that can come up in even the best relationships. But one doesn't have to agree with everything he reads as no one person is necessarily right. Nor is one way of doing business a good fit for everyone. Koch Industries is indeed a highly respected company. The family is reputed to have fought a good deal over control and money yet the book makes the family sound very close. But, again, the author wants to put the best light on things and perhaps as we get older we only want to recall the good. Nonetheless, this is a good read. It's short. It won't take long to read and you probably will dig out a gem or two that you can use and capitalize on. The Koch family (at least the author) is a free market thinker and holds to libertarian beliefs. As a free market thinker and libertarian myself, I understand and appreciate this style of capitalism. You'll find that in this book. And that's a good thing.

Koch Industries is obviously a very successful organization and this book, written by one of the “Koch Brothers” (Charles Koch), tells his approach to management and leadership. The book appears to be out of print, or at least Amazon didn’t seem to stock a current printing. But many used copies were available from book sellers who list their inventory on Amazon. I was drawn to the book because my boss and several co-workers had previously worked for Koch and had spoken highly of the concepts described in this book. I can see how the concepts in this book have shaped their leadership styles and the processes they seek to put in place to manage an organization. I’ve witnessed those principles be primarily successful and it was intriguing to hear Charles Koch share his take on the principles I’ve seen my co-workers apply for several years. Koch does a good job of explaining these principles and then backing them up with quotes and comments from leadership and management experts. Some of the writing is dry, more like a management textbook than a management book written for the masses. He does weave into the text little anecdotes and references to the Koch business. Some of these work well and some seem a little dated. A few of the anecdotes lack proper foundation if you don’t have knowledge of Koch Industries. However, these points aside, I’m a fan of the concepts explained in the book and have seen them be effective. I would highly recommend the book as I assure you that you’ll find some things to take away from this insightful book.

I have a bachelor's degree in business management and this book came out at the right time since I have been looking for books on management that match my philosophy and brush up on what I learned. My only complaints with this book is that it is too short and I would have like to have seen more real-life examples of how MBM was successful. Essentially, Charles Koch outlines a management philosophy based on the economic writings of Ludwig von Mises. Koch's management style is one of employee empowerment by treating them like entrepreneurs while looking to retain and train the best people. His no-nonsense style is clear throughout the book and he gave some interesting insights into how Market-Based-Management works. Koch Industries has been using MBM for years and, as a result, the company is the world's largest multi-billion dollar corporation. He must be doing something right with these kinds of results and I am sure if Professor von Mises was alive he would be gleeful at how his economics can be used successfully in other ways as well. Best of luck to Mr. Koch in getting other companies to sign on to his philosophy. If Koch Industries with MBM is any indication, America's corporate culture will never be the same! I am very glad that this book was the first book on management I have read since having graduated.

I only say that because you'll receive a free copy once you sign on with the company. I bought the book after I accepted a job there and lo and behold I had two copies of The Science of Success. As far as the book goes, it was pretty good, the only thing that it was really weak on were examples of how Koch Industries actually used MBM to make money. After having worked there I really can't tell you how they have used MBM to make money either because during the two day MBM training you only hear one example and you'll be left saying, "Why of course we made money off of that because we're in oil!" Other than that it does a very good job of outlining the economic principles that have made up the Koch management structure. Each company within Koch is very nimble and small and we really weren't bogged down in bureaucracy (just accounting rules) like most companies are. The book also gives a very good look into the culture at Koch which was the strongest asset and the best thing I took away from working there.

Unlike too many books about business, this is written by the direct participant for over 50 years in that business and it's many expansions, acquisitions, new industries entered etc. to the point that Koch took a medium-sized business begun by his father, a consulting engineer in oil refinery design, to the same gross revenues as Microsoft without any of Microsoft's advantages (90% profit margins in the early days, a key monopoly on the dominant operating system, acquisitions on the cheap for vastly profitable key products like the operating system and Microsoft Office's components). It's the kind of analytical structure that many companies built substantially through acquisitions like Harold Geneen's ITT, Jimmy Ling's LTV, Ken Lay's Enron, Worldcom, actually most conglomerates of the 20th Century convinced gullible investors/analysts they'd figured out but turned out to be building houses of cards that collapsed or stalled. Koch's framework is drawn from a deep analysis of how the economy and markets actually work, instead of B-School/consulting/merger transaction-paid advisors rationalizations for just buying growth other people had achieved at companies that could be bought-the dominant thinking behind acquistions, Koch's makes deep sense and unlike the others has actually worked quite well and for a very long time in many business cycles and volatile, low-margin, mature industries like oil refining and chemicals manufacturing with vast, inflexible capital investments required. It actually makes more sense than Warren Buffet's guidance on sizing up acquisitions/investments while operational managers will find Koch's advice particularly useful.

There was little substance to this book. I didn't disagree with much that I read, but some of it was pretty fundamental. In the areas that weren't fundamental, the book was disappointing because it offered no details. Yes, measuring employees' value and rewarding them on that basis is a great idea -- how you do it is where things get tricky. Instead, the book is mostly platitudes. Where it gets worse is when the author inserts his views on the free market and government. Again, I largely agree with these views, but it makes for a worse book since it veers off the topic and even then just scratches the surface. In other words, it's just a distraction.