Inside the Koch Brothers' Industrial Empire
This is an adventure story.
It is an expedition into the heart of a huge and uniquely American industrial enterprise, its sweeping operations and its complex daily mechanics. It is also a rare exploration of what lies beneath and empowers the broad social influence of its owners, David and Charles Koch, the business and political titans who have helped reshape American politics.
People who don’t agree with the Koch brothers see them as pernicious, because their views are often extreme and because they have so much money with which to try to further those views. People who agree with them see them as saviors for the same reasons. Both groups care because of the Kochs’ enormous fortune, which is estimated to be $100 billion. But few outside business circles know where that fortune comes from or how pervasive their company’s industrial influence is on our everyday lives.
The breathtaking industrial machine that generates that money is what this story is about.
Koch Industries is a massive conglomerate—Charles is the CEO, David the executive vice president. What began as a petroleum processor when their father started it in 1940 is now considered by Forbes to be the second-largest private company by revenue in the United States, bringing in more than $115 billion annually from businesses that touch virtually every industry and every part of American life. Koch and its subsidiaries make the fibers in your carpet (Stainmaster), the toilet paper in your bathroom (Angel Soft), the stretch material in your jeans and yoga pants (Lycra). They make the connectors in your phone (Molex), the glass in your windows (Guardian), fertilizers used to grow your grocery-store-bought fruit and vegetables (Koch Agronomic Services), and pipelines that deliver the gas and petrochemicals from which many of those things are themselves made. The company employs more than a hundred thousand people in sixty countries, including close to sixty thousand in the United States. Koch is the biggest kind of big industry.
But, of course, that’s not what the name Koch is known for by most people. Around 2003 the Koch brothers started to give money to politicians. Not just for the reasons corporations usually do, donating to the campaigns of candidates who they hope will vote in such a way that furthers the interests of their company. That was part of it, of course. But the Koch brothers also began giving to people who shared their personal views on social issues, everything from climate change (which they think is overblown) to health care (which they think the government should stay out of). Their beneficiaries have been almost all Republican, and the Kochs now hold a private conference each year that has become an essential stop for any Republican hoping to win their blessing and financial support (except Donald Trump, who wasn’t invited to the event this past summer). Their contributions to political candidates, many of which are made through their super PAC (the Freedom Partners Action Fund), reach into the millions.
The breathtaking, throbbing industrial machine that generates that money—the smoke and fire and gas and oil, workers grinding and sweating and punching in and punching out, plastic and chemicals and paper and trees, pollution and purification, assembly lines stamping out the stuff that makes daily life in this country possible—is what this story is about. It is a world usually closed to public view, and entry into it was the product of persistent requests by this magazine and long negotiations. In the end the company—no doubt in an effort to burnish its public image—allowed Popular Mechanics unprecedented access to facilities in Kansas, Nebraska, Iowa, Louisiana, and Oklahoma. (They did not, however, initially allow access to Charles Koch, going so far as to reschedule one of his lunches to make sure we didn’t cross paths in the hall. They later did grant an interview with him, in support of a book he has coming out this month.) When they eventually allowed us into the Koch world, they showed us a wide range of what they do. But the seven facilities we visited are still only a part of Koch Industries. As a private company, it doesn’t divulge information about its business structure, so it’s hard to know precisely how these fit into the whole. According to Koch Industries, that whole includes “companies involved in refining, chemicals, biofuels, and ingredients; forest and consumer products; fertilizers; polymers and fibers; process and pollution control equipment and technologies; electronic components; commodity trading; minerals; energy; ranching; glass; and investments.” We didn’t see all, but we saw a lot.
“It’s not for the faint of heart or the pleated of pants.”
The first stop, a logical one, was Koch headquarters in Wichita. A summer day, the cafeteria buzzing. There are lines for sandwiches, salads, pizza, and something called Latin bowls, and a wall full of giant flat-screen TVs showing at least six different channels. The campus itself: nine long buildings of granite and glass housing thirty-six hundred employees centered on a 100-acre plot adjacent to a middle school and a program for children with special needs. (Koch donated a total of 55 acres of land.) There are on-site dry-cleaning drops, a company store that sells just about anything a business traveler could need—from golf shirts to packed lunches to gifts for the kids at home—and an algorithm-based elevator system designed to move the thousands of workers to their respective floors with absolute maximized efficiency. The employees seem diverse: young and old, a mix of ethnicities and backgrounds all eating their Latin bowls together. Then they get back to work, attending to the management of finances, the routines of administration, the delicate calculation of public relations, all of it with a focus on relentlessly making the company bigger.
Growth is the most fundamental part of the corporate culture. Short of actually releasing numbers, Koch’s CFO has said its growth rate of at least 12 percent allows it to double its earnings, on average, every six years. Accountants are told they essentially have no budgetary limitations. If an investment idea is sound, they’ll make it, regardless of scale. If there is a way to grow sustainably, they will, without apology. “If you don’t think of a way to make your own job obsolete,” one plant manager said, “someone, somewhere, will.”
Pipes for gas and oil
An hour from Wichita lies Invista, the fiber and polymer company Koch bought in 2004 and which alone employs ten thousand people in more than twenty countries. At one end of the factory is a four-by-four-by-four cardboard box filled with small, shiny black pellets connected to a high-powered vacuum. A thousand feet away the pellets have become a fifth of a mile of laser-engraved, bendable pipe, which is marketed under the name Raptor. It looks hard, but it’s made of nylon. It’s actually called nylon 6,6, a multiuse nylon that can withstand temperatures up to 200 degrees and pressure up to 500 pounds per square inch. Nylon 6,6 is lighter and cheaper than steel and just as flexible, but far stronger than polyethylene—those being the other two materials such pipes are traditionally made from. Nylon 6,6 is what they call a game changer.
At that end of the main factory, where the pipeline comes out, is a machine called a coiler. It looks like a robotic monster borrowed from the set of a Hollywood blockbuster—twice as tall as the men operating it, with eight yellow pinching claws powerful enough to pull you apart in seconds.
The complicated, intellectual-property-protected, true technological innovation happens closer to the cardboard box, where the heated nylon pellets are shaped into the dense pipe. But the flexibility of the pipeline, the fact that it can be coiled by that monster without breaking, is what makes this factory special. It means more than a mile of coiled pipeline can fit on the back of a truck—nearly twice as much as the traditional steel alternatives. The coiler is mesmerizing and terrifying. It winds through the pipeline with smooth, cool proficiency.
On the ride out to McPherson, an Invista engineer and a Raptor salesman explained some of the durability tests they’ve done in the half decade since they first started exploring the concept of nylon pipeline. There are temperature tests, in which they try to simulate years under the baking west Texas sun or in the bitter frozen hills of North Dakota in deep winter. There are fire tests, wind tests, and, because the pipe is meant to lie directly on the ground, tests to see if it can endure thousands of pounds of cattle marching back and forth across it. “It’s not for the faint of heart or the pleated of pants,” says a gravelly voice in a video on the company’s website, calling the nylon 6,6 material they use “engineering black magic.”
After the coiler turns and grips and ties off more than a mile of pipeline—which takes a matter of minutes—workers perform the pressurized water test that they put a segment of each shipment through before sending it out to a customer. “We want to know everything about the product before it leaves the factory,” Glenn Munshaw, the engineer, says. “That includes the specific limits of each piece we produce.”
Greg Standifer, the salesman, places his cellphone on top of a steel box with thick glass windows—the phone’s camera is facing down into the box so it can record the inside. “You’re gonna love this,” he says with a grin. “I like to try to get it on video.”
A piece of the black pipe is strapped inside the box, which is connected to a monitor streaming data. This is a pressure test—the pressure inside the box can be controlled from the outside. The test begins and the box emits a low roar. As the sound gets louder—like the loudest dishwasher you’ve ever heard—everyone takes a step back. The numbers push past the limits for which this particular grade of pipe is approved. They double, then triple. The anticipation is excruciating. Then, after the internal pressure pushes past five times the recommended limit, there’s an eruptive, cannon-sized pop—a bang so startling that several of those present jump, even though everyone knew it was coming.
Standifer rushes to get his phone so he can watch it again.
They talk about it like it’s a caged beast. As in: “You can give it so many different feedstocks and it still performs so well for so long,” or “We learned that you can, in fact, kill it under just the right circumstances.”
Nine men sit around a conference table next to a biodiesel plant far from anywhere you might accidentally wander. This was the site of a plant that was never completed, abandoned in 2007, and sold by the bank to a joint venture of Koch-owned Flint Hills Resources. The men—a mix of engineers, venture managers, plant and project managers, and money guys—are talking about the more than $100 million the company has since put into this project, which included building a small pilot plant outside Dallas and the retrofitting of this facility. When they talk about the beast, they’re referring to the catalyst they say could be the future of biodiesel energy.
Not that most people would understand much even if the men could talk in detail about the process, and for proprietary reasons they speak in loose metaphors anyway. Like when they say the catalyst would look to the layperson like a strange piece of rice you wouldn’t want to explain to airport security. This particular catalyst, when pretreated in just the right way, can convert any number of feedstocks, plant-based or animal fat, into high-powered biodiesel. They say this site, scheduled to open around the time of publication, can turn any of it into usable energy on a huge scale, energy that could light cities or power bullet trains. The plant is forty times the size of the Dallas pilot plant, sufficient to start making and selling 50 million gallons of biodiesel per year.
When they talk about the beast, they mean the catalyst that could be the future of biodiesel energy.
An enormous crane—it took fifty-five trucks to deliver it—stands ready to lower a new piece of equipment that’s coming by rail later in the week. The metal superstructure of the plant is about ten stories tall, and there are dozens of men hanging off of every level, welding. Sparks fly in every direction.
The place has come a long way since Flint Hills bought it. Michael Harris, one of the venture managers, says that at the time it looked like it was “straight out of a zombie movie.” They set about adapting it for their purposes. The site itself looks like most processing plants, the kind of industrial complex you might pass daily and never think about. (Locals seem more excited about the number of jobs the plant will provide—fifty—than the significant innovations inside.) But the company says it’s not just the multiple feedstock options that make this concept potentially world-changing. It’s the final product. They say that the fuel it makes is cleaner, more efficient, and more versatile than any existing biodiesel. Those specifics, too, are well guarded, but Jeremy Bezdek, whose title at Flint Hills is managing director, innovation, puts it like this: “Most biodiesel looks like a nice, hoppy beer, maybe an IPA. Our product is pure, clean vodka.”
Port Hudson, Louisiana
A deer runs across the road that leads to the gates of the Georgia-Pacific plant, built at least partially on a Civil War battlefield just feet from the banks of the Mississippi River. The 1,350-acre facility, surrounded by tall, lush greenery, employs nine hundred people who make Brawny paper towels, Quilted Northern toilet paper, and Spectrum printer paper. It can process 5,000 tons of wood—southern pine, gum, oaks, maples, and poplars—in a day.
The road on one side of the plant is backed up with trucks full of logs. Standing over the delivery spot, taking logs from huge piles as quickly as the trucks can dump them, is what looks like a colossal version of that arcade claw game, only in this game the claw always collects and delivers the prize, and the prize is always several tons of trees.
Each tree is stripped of its bark, which is then burned to power part of the plant. Kelvin Hill, the vice president of Port Hudson operations, says the site produces 95 percent of the energy it uses, “and we’re always pushing to try and get that number higher, higher.” Hill even has an idea about capturing the flammable dust particles that surround the tissue machine. “We can use that power,” he says. (The virtues of this kind of market-based management, or MBM, come up at several Koch locations. MBM is a business creed that emphasizes individual performance, in which each employee is empowered to think like an entrepreneur rather than a cog. The Koch website encourages workers to come up with their own solutions to problems “rather than waiting for orders from higher-ups.”) Half of all the energy Georgia-Pacific uses, according to Koch Industries, comes from renewable sources.
Hill has worked at the Port Hudson plant for more than twenty years. He loves thinking about the way paper is produced and about all the things people don’t know about the paper they use every day. He cites a fact he knows by heart, that in the timber industry, for every tree harvested five are planted. “If we’re ever out of trees, we’re out of business,” he says.
After they’re debarked, the logs are turned into pulp. Walking around outside, the air smells a little like boiling broccoli. Making paper takes a lot of water—millions of gallons a day at Port Hudson, typical of a plant this size—one of the reasons that paper mills are usually close to rivers. At every step, the wood—and then the paper—is hit with a precise amount of water, which helps break down the fibers and keep the products pliable. There are grates everywhere to recapture the water for reuse or to be treated and returned to the ground.
“If we’re ever out of trees, we’re out of business.”
Inside each of the buildings is a series of machines, some more than three stories tall and longer than a football field. One of the toilet-paper machines spins out huge “parent rolls” at a rate of one every 35 minutes. It takes two parent rolls to make fifty thousand individual rolls of Quilted Northern Ultra Soft & Strong Double Roll TP. (You need two because it’s two-ply.)
Most of the products leave here having never been touched by human hands. Workers refer to the largest laser-guided robots that haul products back and forth across the plant as “elephants” because they can reach 18 feet high and carry 40,000 pounds at once. The paper made here and at G-P’s other plants will be sold under any number of brand names and generics. “We got a letter from a lady saying she was never going to buy Angel Soft again because she found out it was owned by Koch,” one employee says. “So she said she was switching to Quilted Northern. I wanted to write her back and say, ‘Ma’am, that’s perfectly okay with me.’ ” Each of these two brands brings in more than $1 billion a year to Koch Industries.
This is what tomorrow looks like: Row upon row of robots pumping, turning, and pivoting with remarkable precision. Some can cut precious metals to a tenth of a millimeter in thickness. The humans at the Molex plant here in Lincoln, the ones who years ago might have been hunched over, working with their hands, now mostly monitor and aid the machines, sometimes at a ratio of one person to six or eight machines at a time. Koch purchased Molex—one of the world’s largest manufacturers of electronic connectors and components—in 2013 for around $7 billion.
Many of the machines are making half-dollar-sized plastic parts that will become connectors or circuit protectors in phones and cars and appliances. One robot makes tiny blue plastic pieces that will later be used in the circuit boxes of cars. (Molex has contracts with many major automakers and suppliers.) The robot shapes, then cuts, then measures four pieces at a time, kicking back any individual bits of plastic that don’t meet exact specifications, and dropping the usable parts into a box ready to ship.
To compete against the cheap cost of labor in China, factories like this have to produce twenty times as much as a Chinese factory of the same size, one manager said. The factory in Lincoln produces more than two billion individual pieces every month. There are so many plastic pieces for so many different products being produced at any given time that it is nearly impossible for a manager to walk over to any one machine and know exactly what it’s making.
If you could bisect the factory, you’d see two floors of machines working in unison. Upstairs is the pressing, the cutting, the shaping, full of tall, bright, spotlessly white rooms, each with the rows of robots. There are flat-screen monitors in the air showing which machines are producing the fastest. When one goes down for repair—which can cost thousands of dollars an hour, depending on the machine—it shows up in red on the board, like an injured athlete. Each robot upstairs has a corresponding machine downstairs that pumps up everything from power to polymers. There are wide tubs full of tiny pieces of plastic and reels of copper and silver and even some gold slowly unwinding. When the machine upstairs is done, defective pieces and excess material are sent back down, back into the grind. “Ninety percent of our scrap plastic resin is recycled in one way or another,” says Steve Norton, the director of operations at Molex in Lincoln. “And 100 percent of our metal scrap, cardboard, paper, batteries, and electronics.”
At first the small rocks on the ground start to jump, spontaneously popping a few inches into the air one after another. Nine combustion flares are blasting great flames into the sky, reaching higher and higher, as if a control knob on a humongous gas stove is being steadily turned up. As the flame pushes past 1,400 degrees, the rocks start jumping around like popcorn. The flames grow higher, the temperature approaches 3,000 degrees, and though you are standing more than two hundred feet away, protected by a neon-orange, flame-retardant coat and shielding your face with heavy, industrial gloves, the heat is starting to suck the moisture from your eyes.
This is all happening on a gravel lot behind an unremarkable two-story office building not far from the airport in Tulsa, Oklahoma. It’s the headquarters of John Zink Hamworthy, a combustion company that makes industrial burners and flares that can shoot flames eighty to a hundred feet into the air. (The company is often required to notify the airport before conducting tests.) A flare is essentially a safety device that uses combustion to convert flammable or otherwise dangerous gases or liquids into harmless compounds. They’re used at landfills to neutralize methane gas, and at liquefied natural gas plants, where they can burn off high volumes of gas in an emergency, to prevent damage to people, the plant itself, and whatever else is nearby. A burner, meanwhile, uses combustion as energy. It can generate steam in a boiler or the heat needed to make food or pharmaceuticals or any number of other products. Burners like the ones at Zink are designed to minimize pollution usually associated with combustion sources, and the combustion flares and burners made here are hotter and more efficient than traditional flares and scrubbers, which often generate their own off-gases, and they help reduce CO2 emissions.
As Americans we surround ourselves with material goods, some of which we keep forever, some of which we discard almost immediately. We don’t often consider how a lot of things are made—things like Bluetooth headsets or office carpet or printer paper—or what goes into them. But the somebody that makes a lot of this stuff is Koch Industries. Pollution is the toxic, potentially lethal cost of doing the business we do—and of enjoying the life most of us enjoy. Eventually a lot of by-products end up here, in the flame. Not literally here in Tulsa. But often, in a variety of industries, the emissions will run through a burner born here, on the gravel lots at John Zink Hamworthy’s combustion testing facility. Here, as many of those by-products as possible are burned away. Here, the air is cleaned, most of the toxic chemicals incinerated in the searing heat of the developed world.
The power of the flames stops you. You just stand there watching their power, wondering a little what they’re for and wondering a little how we got here. The soaring fireball is big and hard to define. It’s simultaneously awe-inspiring and dangerous. And its growth, its rapid spread from the ground into the sky, is a by-product of our very lives. America, by and large, for better or worse, pushes relentlessly ahead. There are by-products and emissions and pollutants, and we do our best to deal with those, but the pushing ahead always wins.
Koch is responsible for an enormous amount of pollution—with the sheer scale of their operations, it’s inevitable—but they are also responsible for technology that reduces the amount of pollution. Zink is one of the only manufacturers in its field to actually stay ahead of EPA standards, because it knows those standards will always change. They do this not because it might be noble or altruistic, but because, as the man at the paper mill in Port Hudson said, if they don’t have trees, they’re out of business.
The flames serve both to propel industry forward and to incinerate the terrible by-products that industry creates. The inside of the consummate American business is a giant blazing fireball that allows us to live the way we have chosen to live, and when you see it, you stare and stare until, eventually, you have to look away.