How Did the Koch Brothers Make Their Money?

Charles and David Koch are infamous for using their vast wealth to affect political activities. Behind the Walton and Mars families, the Kochs are the third richest family in the United States and world.

They’re the face of both Koch Industries and the one percent itself to many Occupy Wall Street-era activists. What’s less well known is how did the Koch brothers make their money?

Their name is associated with the toxicity and greed of capitalism by younger generations. These brothers formed the KochPAC, which funded the Tea Party movement, a right-wing populist movement prominent in the late 2000s and early 2010s.

Koch Industries also drew the ire of Greenpeace and the Environmental Protection Agency (EPA) over pollution caused by its subsidiaries.

Before these brothers were outed as real-life Randolph and Mortimer Duke, the Koch family was a modest Kansas oil company.

How The Koch Brothers Got Started

Koch Industries was founded in 1940 by patriarch Fred Koch. He worked for a variety of oil companies before partnering with an MIT classmate in Wichita, Kansas to start their own oil-focused engineering company.

By 1927, Koch developed an efficient thermal cracking process to create gasoline from crude oil. Unfortunately, it infringed on his employer’s patents, so the only sale the company could make was to the Soviet Union, which didn’t recognize U.S. patent laws.

Working in Russia, the elder Koch helped build Stalin’s regime set up its oil refineries. He was then referred to Germany to build refineries for the Third Reich in Germany.

By the time World War II broke out in Europe, Koch returned to the U.S. with his Axis fortune to create Wood River Oil and Refining Company. This is the company that eventually became Koch Industries after Fred’s death in 1967 at the age of 67 during a hunting trip with his son David.

Did the Koch Brothers Inherit Their Money?

When Fred Koch passed, his estate was divided evenly among his four sons, Fred, Charles, and twins David and William. Each remained vested in the company until legal and boardroom battles caused Fred and Bill to sell their stakes for $1.1 billion, leaving Charles and David majority owners.

Each owns 42 percent of the company, although David’s stake belongs to his own heirs as of his August 23, 2019 death. The trust of J. Howard Marshall’s daughter in-law Elaine Tettlemer Marshall owns the remaining 16 percent.

Because it’s a privately owned company, Koch Industries avoids many financial transparency standards to which most major companies must adhere. This only fed into the criticisms against the company, which was the largest private company in America for the 2019 calendar year with an estimated $115 billion in annual revenue.

To be fair, Charles worked at the company for six years leading up to his father’s death. He became president in 1966 and chairman upon his father’s death in 1967. He honored his father’s memory by renaming it after the family in 1968, and he remained in charge through the most recent period of world turmoil.

So, how does Koch Industries make money?

What Products Do the Koch Brothers Make?

Koch Industries itself was originally an oil company, but it used its excessive cash flows to acquire a lot of companies, especially in the 2000s. The company bought Georgia-Pacific, Infor, Guardian Industries, Flint Hills Resources LP, Invista, Koch Minerals, Matador Cattle Company, Molex, and more.

It’s a vertically and horizontally integrated business that grew through aggressive acquisitions. The company collectively employs over 130,000 people across 70 countries, although most are Americans.

Through its subsidiaries, Koch produces oil, resins, polymers, glass, robotics, biofuels, paper, and toilet paper. Its $4.2 billion Invista subsidiary is a DuPont spinoff, Molex creates Fiber Optics and electronics for robotics applications.

Koch also holds plenty of oil, chemical, and energy assets, including fertilizer. This is how it grew to a $100 billion plus valuation.

How Did the Koch Brothers Make Their Money?

The Koch family are more than industrialists and tycoons – they’re also philanthropists and activists. Its non-profit foundations began with the Fred and Mary Koch Foundation in 1953 and also includes a variety of Koch-themed trusts.

Charles started aggressively expanding in 1968 when he partnered with Marshall to take over the Pine Bend oil refinery that greatly increased its capabilities. It soon entered global commodity trading, real estate, risk management, and more.

Think of him as the Michael Bluth of the family. He inherited a successful company, but he took it in a different direction. Of course, the Kochs were a lot more successful than the Bluths. This includes Charles’ son Chase Koch, who also works for the family business.

And it is a family business.

Why Is Koch Industries Not Public?

Koch Industries isn’t public because of the freedom it has being privately owned. There are phases where companies rush to IPOs versus staying public, and 2020 was definitely an IPO rush as struggling companies sought to recover coronavirus costs.

But the Koch family never needed to raise capital and thus never went public. This kept it from the public eye while also maintaining autonomy. The family owns and runs this business, and that’s the way they want to keep it.

That mentality also led to the company’s massive growth to become the biggest privately owned company. So, exactly how rich are the Koch brothers?

How Rich Are the Koch Brothers?

Charles Koch was worth an estimated $44.9 billion as of November 2020. Now 85, he’s approaching the end of his life and is quite frank that the board will choose who to replace him. It’s possible he’s the only person who blocked a Koch IPO and the family may decide to go public after his death.

The combined Koch fortune is estimated at over $100 billion, and being a toilet paper company during the toilet paper shortage of 2020 proved profitable.

Charles will one day leave his vast fortune to his own heirs, and even after diluting through generations, the Koch family is as wealthy as ever. 

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