Latest / TFTC: A Bitcoin Podcast / #784: The Billionaire Playbook with Chase Koch

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#784: The Billionaire Playbook with Chase Koch · TFTC: A Bitcoin Podcast

0:00
You've had a dynamic where money has become freer than free.
0:10
If you talk about a Fed just gone nuts, all the central banks going nuts.
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So it's all acting like safe haven.
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I believe that in a world where central bankers are tripping over themselves to devalue their
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currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor.
0:28
I mean, that's part of the bull case for Bitcoin.
0:31
If you're not paying attention, you probably should be.
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Case Coke, welcome to the show.
0:38
Thanks, Marty.
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I appreciate you having me on.
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I'm honored to have you on, as we've been discussing over a couple of conversations over the last few months.
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We've implemented Coke Industries principle based management system here at TFTC.
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And it's been wonderful.
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Is it working?
0:58
It is. I think it is working.
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I think it is.
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That's good, man.
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Yeah.
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What have you found is like the most helpful, like right out of the gates to you guys?
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I think for us, we did a, we probably spent three months doing PBM implementation with a consultant.
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And through that process, we realized that we had a bunch of knowledge gaps in the company.
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and we have a relatively small team and I think that was the most surprising thing is since we're
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so small it should be relatively easy to get information and data to every member of the team
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but through the process we noticed that there are some knowledge gaps and mainly because I've been
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running the company I ran the company as a solo founder for like six six or seven years and we've
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grown the team over the last two and there's a lot of embedded knowledge that I built up in my own
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head over the course of the first seven years that I just took for granted and needed to
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open up to the rest of the company. Well, good. Well, I appreciate you
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experimenting with it, you know, and the principles, like what you're talking about
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on the knowledge side. Also, there's the framing of trying to have a republic of science. So,
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well, you know, Polanyi's idea of a republic of science, whether it's a very small team
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or like Coke, we have 140,000 employees and growing to try to get knowledge on a specific
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problem to try to get the best knowledge we can from the talent that we have around the world.
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And then make the best decisions at scale with the knowledge we have. It's always been the,
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one of our biggest challenges, right? But it starts with a mindset of having a Republic of
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science and not thinking about an organization in silos, which I think is a trap that many
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companies have, is that if you have four or five different companies or even capabilities,
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right, sales versus marketing versus operations, whatever the, however your company's set up,
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how you can work as a team and design knowledge systems to make knowledge move as quickly as
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possible to where it's needed most. And we are actually talking about this yesterday because
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all of the innovation in AI that we're trying to experiment with, and it's been amazing over
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the last year just to see the company from the bottom up experiment with some of these models
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and not do that from the top down.
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Sure, we have a vision of leveraging technology
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and driving transformation with it.
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But where you get the magic,
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at least in our experience and learning,
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is when you can create a bottom-up culture
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where it's spontaneous order,
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where someone has an idea,
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let's say two businesses in our fertilizer business,
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and then we have Georgia Pacific,
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where someone says,
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you know what, I think some of these folks
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over in Georgia Pacific and operations
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can also benefit from this knowledge.
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And that knowledge automatically transfers to those people,
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and no one's telling them to do it.
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No one's from the top down waving some magic wand.
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It's like, oh, you need to tell this person that there's no way you can do that
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in a really large company.
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So back to what I was saying, like yesterday we were in a meeting,
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and we were thinking, how do you create a faster republic of science with technology?
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and so there's so many new models that are being spun up um like in with you know anthropic for
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example or even a microsoft copilot we use all the all these different technologies and
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um there's amazing models that are being built but back to the how do you make it so it's not
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stuck in silos and groups in the cfo group are just you know applying it in their group and like
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how do you get that over to Georgia Pacific or to our fertilizer or energy
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business or whatever,
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so that not all these groups are making the same model right Over and over and over because that drives your cost up and there also waste and inefficiency in that So we just talking about how do you how do you build like a
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it's almost like an app store, a Coke app store where people can see these are the,
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you can see the trends within the company of these are the ones that are being used the most
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and are adding the most value. And Hey, why don't you try it on your business instead of starting
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from scratch, this one's probably 80% all the way there. So back to your point on knowledge,
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this is one of our key principles, knowledge and transformation, and then also creative destruction,
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having every employee have the mindset of one, how do I transfer knowledge across the organization,
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but how am I innovating with these models and how fast they're moving and staying ahead to
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create a competitive advantage for the company. So what you, what you're working on within your
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shop, we're, we're working on in spades as well. So I think what's cool about principles and like
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knowledge as an example, or creative destruction, it can work for one person. It can work for a
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10 person shop or 140,000 person company. That's what, that's where we're, we, we see,
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we're so excited about what these principles can do.
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And that's going to, that's going to be, you know,
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kind of make or break Coke in the future.
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Are we still, are we going to keep applying these principles and innovating or,
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or not? Right. And that to me, to, to us, that's like,
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that depends on the results and the future of Coke and where we go as a
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company.
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Well, that's what really drew me to principles-based management when it was
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originally pitched is that it's really seeped in Hayekian, Mises, Austrian principles of
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grassroots. I mean, on the macro scale grassroots development of an economy, but you can apply that
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to the micro too. And I think information and being the source of the inputs that go into the
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decision making, whether it's a bleak, grown economy or a business is something that I've
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believed very deeply in on the macro side for years. And so it was very intuitive.
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Once I found principle-based management, so just apply this to your business. And
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to your point about AI, I think it was very serendipitous that we started our PBM journey
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when we did, which was November of last year when Opus 4.6 was coming out.
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And then in January, we were still going through the process and OpenClaw was becoming popular.
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And we hopped on that right away and actually helped us solve this knowledge gap.
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And I think it was a combination of PBM, the agents, and then the paper that Jack Dorsey
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and Roloff from Sequoia put out about businesses becoming this intelligence layer and sort of
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flattening the hierarchy that most businesses follow with a managerial executive class,
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managerial class, and then underlings between them in these silos and identifying that we had
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this knowledge gap and then having the tool of these models and then the harnesses that make
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them very powerful has enabled us to solve those those knowledge problems that we had pretty quickly
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because now we've built up this agentic system internally with a company brain and instead of
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people having to communicate even with each other they can just ping the company brain the
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intelligence layer to figure out okay who do we have coming on the podcast for the next week what
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uh is there a headshot that we need to get is there uh yeah need to insert and it's interacting
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with the agent. I mean, obviously we're still interacting with each other, but you can sort of
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solve that knowledge problem with the agent as well. Well, I mean, it's so exciting to hear that
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you're, you're practicing these principles and experimenting with them. Like for us, you know,
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the reason my, my father and I just wrote this book, it's called, um, becoming a principle driven
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leader. It's the first book I've ever been a part of. It was my dad's fifth. Um, and, but not just
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to get these ideas out to Coke employees,
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which we feel like we have so much opportunity
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just to empower people with these principles
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to continue to transform the company.
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But we want to get it out to society too
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because we feel like we will all be much better off
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if we can solve problems in a principled way
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and not only get better business results,
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but interact in a way in society that takes us out of this divisiveness.
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And I mean, look, we are all living in unprecedented uncertainty, right?
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Whether it's economic uncertainty or the stuff we're just talking about with AI,
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you know we have to place jobs all of those things or just divisiveness in general So the whole reason why we think a principled approach wins is that you have to have something to navigate all of this uncertainty
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If you don't have like a principled approach and a framework to kind of work with, I think too many people, unfortunately, like blow with the wind.
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Right. And whatever is trending or whatever is the most popular, then you can apply that to business and just chasing the trends.
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Or you can apply that to like what you believe at your core based on what you read in social media.
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Right. So our hope is that this principle based framework and the way we're kind of organizing this and then communicating it to the world gives people a navigation tool to that unprecedented uncertainty.
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So big picture. I know we started like right in the business, but this is for us.
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It's much more of a societal thing.
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I know you've studied all this stuff and I did as a kid to a Hayek,
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von Mises, Milton Friedman,
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all of the core philosophers that really my father learned these principles
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from, but it's more than just transforming a business.
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It's like transforming your life, right.
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And transforming society at large.
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So anyway, just as for your audience,
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It's just more of like a broader picture of, you know, why we're so excited to get these ideas out into the world.
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That's the reason why.
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To your point, I think they're very important to get out there because I think the principles that you've laid out in becoming a principle driven leader.
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And the book that I read when I first started getting into PBM was Good Profit, which Father Charles wrote.
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And it really helped orient myself as we're beginning to go through this process.
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And I think to take that step back, Coke's been around since 1940, 86 years.
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And I believe our conversation in May or June that we had our first call, one of the ideas that's been stuck in my mind since I've read Good Profit is it seems very clear to me that Coke Industries has paired patient.
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patients, just in general, patient capital, risk-taking, and creative destruction in a way
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that the very few companies have done over the last century. And I think that particularly that
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idea of patient capital, taking long-term bets, staying private so you can take those long-term
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bets is something that is underappreciated these days, particularly in a world where we like to say
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on this show that we live in a world of a high-velocity trash economy where everything's
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driven by quarterly financials and really just thinking day to day, not taking a step back and
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thinking long term. And I think Coke having been around for 86 years is a testament to
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the other way of doing things, which is long term principles, seeped in principles,
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immorals and taking the time to actually do things in a calculated way.
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Well, Marty, I appreciate what you're saying about the company. And you're right. I mean, it's up to the last almost 90 years. It's been an enduring business, to your point, because of this principle-based approach. That is the differentiator and where it started.
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And but I will tell you, a lot of people think that the Coke story is like this, like up into the right.
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And if you've read the book, you've seen the story you've heard.
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You read the story that it has been a rocky road, rocky road.
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I mean, there was almost like two bankruptcies in there in the story that but but the way we framed the storytelling of the book that we hope is most helpful to to the world is through the lens of failure.
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And I think that's one of the biggest differentiators on how we tell the story is that we learn a hell of a lot more from our failures than we do our successes.
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And back to this principle-based approach, all of those failures, the consistency comes to ignoring one or more of the principles where we just ignored it and we just plowed ahead and we didn't challenge ourselves with that.
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And all of our successes or where we've transformed and dug ourselves out of the ditch is because we really focused on the principles to dig ourselves out.
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So, you know, um, Rocky road, lots of failures, but it's how you learn from those failures and then internalize the principles at a deeper level and then share those stories with others so they can learn from your mistakes and, um, and keep growing, you know, from, from that standpoint.
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So but yeah, I mean, it's a it's a crazy story.
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It's, you know, like I said, it's a rocky road, but it's been a nine thousand X growth since, you know, the early 60s.
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Something that my father never does never in his goals you know to build a company that but he just kept learning from failure but also studying the principles of human progress and what worked in society what made countries successful what made countries
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fail, and then kept adding these principles and then just like empowering great talent with those
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principles and getting out of the way. Um, and I think like just, uh, I don't know. I like
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celebrating my father, not only because he's my best friend and mentor, but he leads by example.
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Right. I mean, that's the only way this works. And you have the story that you do is that he
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looked at his own, you know, his own gifts and where his own weaknesses were. And instead of
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kind of thinking about himself as a typical CEO that top down, you know, making a lot of the
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strategic decisions, he thought about himself more as a chief philosophy officer because his
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core gift was these abstract principles. He learned them, he understood them. And then how
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do you communicate that into a large organization where if people can understand the principle,
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they can go empower it in their own way, not in a rules or formulaic basis. A lot of companies are
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run that way, very process driven. And we've always done it this way. We're going to do it that way.
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He wants it to change daily, right, in terms of what are the new systems and processes?
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How do we leverage AI in a new way?
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I used to do it this way.
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How can we blow that up and start over, right?
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And you and I talked about this before, but one of the key principles that is core in our vision statement is creative destruction.
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And that's, you know, as you know, Joseph Schumpeter's principle that he coined in 1942, that if you're not disrupting yourself from within, the market will disrupt you and turn you into a dinosaur.
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Right. And we're seeing that, you know, his whole idea of the ground is always crumbling beneath your feet.
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My father always says, well, now it's earthquakes. It's not crumbling.
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Like you were all dealing with earthquakes all the time.
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And, and so that's why creative destruction is in every meeting and every conversation of what we're what we're doing to transform ourselves and disrupt what we've done in the past.
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And there's no sacred cows at Coke. Even though my grandfather started the company in pipelines, crude oil pipelines and energy and refining, none of that's sacred.
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We're investing in all sorts of alternative energies, right?
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Because we believe that the energy stack of the future is we need all of it to power the world, right?
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We need fossil fuels, natural gas and crude oil.
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We need solar.
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We need nuclear.
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And so a lot of people, I think, have a misperception that, well, Coke's just focused on fossil fuels because that's where they started.
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that's like four percent of the capital that we have in the business goes towards that
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and why because we believe in creative destruction and constantly investing in the next technology
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um and make experiments make investments that we we know have low probability of success but
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if we're not in the game testing and learning and driving that principle of experimental discovery
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will eventually become a dinosaur.
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And so a combination of creative destruction
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and experimental discovery,
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you've got to live and breathe that every day, right?
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And not just the top, right?
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We need the whole organization to be thinking that way
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and innovating in their day-to-day roles,
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their jobs, all their tactics.
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And yeah, it's core to what got us here
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and it will be core to see if we can keep this going for multiple generations.
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And I think another sort of list of values or principles that you've talked about in the book
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and just having observed from going through the process that we have here at TFTC,
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is there a level of humility that's necessary for the individual within Koch Industries,
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even at the top, and meritocracy that exists based off of that humility?
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humility to notice what you're good at and focus on that what you're passionate about because at
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the end of the day that will benefit the company overall and you went through this personally
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yes i did within the time and time again many many times and yeah how did you
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recognize that you need to step back i believe you were the head of the um
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the fertilizer division yeah yeah so um maybe just to give your audience just kind of a high
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level framing on the company. We have nine, we, we touched the majority of the economy.
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You know, I mentioned we have 140,000 employees, one of the largest private, privately owned
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businesses in the U S and we're,
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You know, it's in one of those businesses, one of those nine operating businesses and fertilizers.
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So we're wood products with Georgia Pacific. We're in technology with, you know, Molex connectors, global business in force, very large ERP software company.
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We're in glass manufacturing. So anyway, a lot of different things that were very broad and we own and operate those platforms.
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that I spent about a decade in the fertilizer business. And this goes back to one of the
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principles that you're talking about, whether it's humility, you can say intellectual honesty
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about who you really are, but also the principle of comparative advantage. What have you demonstrated
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your gift is relative to what everyone else can do on the team, right? And that's a very important
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point and what you can do relative to others, what you're good at, but relative to what
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the, what others are good at on the team. I think a lot of people mistaken comparative advantage
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for absolute advantage. It's like, what am I best at in a vacuum? And if you're not looking at
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trade-offs of what you could be doing relative to your alternatives and relative to what others
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can be doing, you're missing out on a huge opportunity. So that just as kind of a pre,
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just to tee up my story and looking at my father and how he recognized his comparative advantage
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was abstract concepts and really organized his role and his job around being more of a chief
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philosophy officer and really challenging with principles and empowering people with principles.
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I realized in the fertilizer business that I was a much better builder than I was operator.
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And, you know, I had a great opportunity to be president of the business. It was third,
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third largest profit driver of Coke, huge business operating in 30 countries and three or 4,000
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employees. But I realized that I was not, it was not my comparative advantage after about nine
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months. And frankly, I was, I was miserable on the role. You know, most people think that,
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oh, you got the big job, you're running the whole thing now. You know, why would you ever
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step away from that? And it's because one, my father taught me humility and intellectual honesty
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to really look in the mirror and understand who you are. But the second thing is I really understood
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comparative advantage. And I looked at the guy, Scott, that could have been running. He was a
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great operator and he, I knew he was going to be a great president as well. And he was operating
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a smaller part of the business. So his opportunity cost of not running the whole thing, but then my
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opportunity costs back to the trade-offs and what I was giving up as a team member was focusing on
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building and looking at innovation and what we can do to drive creative destruction. Is that if I was,
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I was honest with myself, even though it was cool to have the CEO title and like what everyone thinks you should want.
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I wasn't happy and I wasn't doing a good job relative to the alternatives we had in the business and someone like Scott running it.
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And we are missing out on this big opportunity to go invest in new technologies.
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And so once once I met with leadership and we talked about all the different trade offs, I've I've you know, I've called it like firing myself before.
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That's really that it doesn't really articulate the principle itself, because if you look at it objectively, it's just about wrong person, wrong role and too many trade offs for all the people involved.
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Right. So think about everyone's comparative advantage, just like a sports team.
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Get everyone in the right positions, quarterback, wide receiver, lineman, tight end or what that relative to what they could be doing.
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Other roles on the football team and and go get the best results overall and go win the championship.
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Right. And so that's what we did. And we started getting better.
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The business performed better. And then I got to ultimately start Coke Disruptive Technologies.
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That was a whole new arm for Coke.
25:13
And then everyone, if they're in their comparatively advantaged role and they can look in the mirror and say, this is my sweet spot.
25:22
You start to see the results follow that.
25:25
Right.
25:25
And so to me, like, you know, we talk about 41 principles in the book.
25:30
Comparative advantage is one of the most powerful.
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And I think it's one of the most misapplied principles.
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And I think the reason why for that is too often we worry about what everyone else thinks
25:44
about our job, you know, our own ego or how many people report to me.
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And that's some kind of measure of success when the measure of success is, are you maximizing
25:56
how much value you can create as an individual towards the overall vision of the business Right And I just think so much is missed in that across so many businesses that I mean what is
26:08
what is societal transformation we can make if we just all apply,
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think about what the world would look like.
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If you just,
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we all applied comparative advantage and people would be self-actualizing
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because it's like,
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I'm killing it every day and I'm not in the wrong role.
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You know it's,
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a really big one. I know I probably over explained that one, Marty. Sorry, but I'm very passionate
26:33
about that one because I've seen it misapplied so much. And I'm example number one on that.
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Yeah, that was a know your role is a concept that's been in my mind since high school. I played at a very I played on a very good lacrosse team. We were we were number one in the state. We were very good coaches. And that was the one thing that they beat. I know your role. You don't need to be the star. You just do your your role perfectly.
29:55
For some reason, it's easier to apply in sports.
29:58
It's more obvious.
29:59
But then when you apply that in business, for whatever reason, it's just more gray, I think, in terms of who does what.
30:05
So we have a lot of people working on the wrong things.
30:08
Yeah.
30:08
Well, I mean, it seems clear that you're enamored by creative destruction.
30:14
And I think that can lead into a couple of other principles from the book, too.
30:19
Because with creative destruction, you're venturing into the unknown in a way to figure out what's new and how you can apply it to your business.
30:28
That comes with a lot of experimenting and a lot of failure as well, which could both be expected.
30:33
And that's another thing in the book that I really appreciated is the normalization of failure and rapid experimentation, which is necessary for actually going to be able to successfully creatively destruct your incumbent business.
30:49
Yeah. Well, you know, I mean, just to kind of to jump on that one, whether it's creative destruction or experimental discovery, I mentioned that before, but those are two of the 41 principles as well.
31:03
And I go through this one because it also an illustration of if someone like reading the book or trying to get their head around the principles it can be daunting to say oh my God there 41 Why does there have to be so many
31:20
But the reality is like, these are, and why 41? These are just the ones that we had the stories
31:26
that we thought were most powerful that could help the most people. And, but you really only
31:32
need like one or two to get started. And if you take the story, the comparative advantage story
31:39
that I applied to my own role.
31:41
And it was one of the most important decisions of my life
31:44
because it set my life on a completely new trajectory.
31:49
And I also enjoyed my life a lot more.
31:51
I was having more fun.
31:52
I was adding more value.
31:54
I even had a better relationship with my kids
31:57
because work was going bad.
31:59
It all ties together, right?
32:02
But then when you take experimental discovery
32:05
and creative destruction,
32:06
The next role of starting something like Koch Disruptive Technologies, which was basically our venture capital to growth equity platform, we had a gap within Koch.
32:20
If we're going to drive creative destruction, to your point, we have to be able to see what technologies are coming at us.
32:26
Otherwise, we're going to wake up one day and wonder what happened.
32:30
We have to be able to see around corners.
32:32
And as you know, now with all your work in AI, that's more important than ever.
32:38
But then how do you apply experimental discovery to areas that we don't understand and but we need to be in the game?
32:47
And so this this goes and this is a learning.
32:50
And I think I talk a little bit about this in the book of the early days of KDT.
32:55
we were, because of me, we were violating experimental discovery in some cases,
33:03
meaning we were making like in healthcare, right? That's an area we didn't have a lot of expertise
33:08
in, but we saw it as 20% of our economy. We need to really start to set some experiments in there.
33:17
Well, we were writing $100, $200 million checks into these companies without a lot of knowledge
33:23
around that specific company. And so when you think about, okay, what have we learned from that?
33:29
To apply experimental discovery, even in venture, and you can apply this to any element of your
33:34
business, it's like bet your knowledge size. The size of your bet should be equivalent to
33:43
the size of your knowledge on that. And make some bets and you're going to lose. But
33:49
a great experiment we define as the value of the learning exceeds the cost of the loss.
33:58
So you can approach anything like that, whether it's a venture capital bet
34:02
or trying out a new vendor for AI as an example, that you know it might fail,
34:08
but you need to put enough experiments out there on the board to say, all right,
34:13
we got to try new things. We got to figure out who our preferred partner is that we want to work with.
34:18
And so I share that just so your audience understands.
34:23
You mentioned experimental discovery.
34:26
I had to fail a number of times with experimental discovery to understand what good looks like in applying it.
34:33
And so I just encourage your audience that think about like, OK, where am I stagnant?
34:38
And where have I not made any changes?
34:42
and how do I put some responsible experiments in place that where I can bet, basically make small
34:49
bets that are relative to the size of my knowledge and to figure out how I can learn from them,
34:54
knowing that a couple of those will be failures. Yeah. And I think, um, one of the examples in the
34:59
book is not necessarily a creative destruction, but after the acquisition of Molex, I think
35:05
from where I recall
35:07
the pure
35:09
KPI was revenue growth but that wasn't
35:11
really leading to increased
35:13
profit margins so you had to do a deep dive
35:15
on the different products
35:17
that Molex was spinning
35:19
out and you found some
35:21
interesting things that came in with
35:23
some assumptions and they proved to be wrong
35:25
particularly about which products were
35:27
the most successful
35:29
and where you should focus on new initiatives
35:31
and I think
35:32
a lot of from what I recall
35:35
reading the book. One of the problems was you just had this, or the managers of Molex had this
35:42
assumption that we've been running this for a while and it's a popular product. But after going
35:47
in and dissecting exactly what was going on, it became obvious like, oh, this actually isn't the
35:52
right way to do things. No, I think that's right. And Molex has always been a fantastic company,
35:59
But I would say that like that's a great example of the challenge of M&A and doing an acquisition and bringing a new very large company.
36:09
I think when we bought it, it's 50,000 employees.
36:12
So you can imagine, you know, that took Coke from 80 or 90,000 to, you know, 130, 140,000 employees overnight.
36:21
That is a that is a large gulp to integrate and to take on And to your point you right on the story is that you know Molex had been public for decades And so this is where you started the conversation back
36:36
on one of the key principles of our principle-based culture is long-term thinking versus
36:45
short-term. But if you're thinking top line, and a lot of public companies have this problem,
36:50
You're thinking quarter to quarter and making sure that you hit your numbers for the analysts.
36:56
It's very, very difficult to make the capability investments you need for the long term.
37:02
And so that was one thing that culturally we had to overcome.
37:06
But I'd say it was top line thinking versus bottom line, to your point.
37:10
And that took many years to start to turn the corner there.
37:14
But it was also some top down thinking versus bottom up empowerment.
37:21
And so I think that's been one of the biggest transformations in Molex is, you know, empowering people here.
37:30
Let me back up a little bit. And, you know, you I think you benefit from having experimented with PBM in your own organization.
37:38
For your audience, though, if you take a principle-based management culture and what we've tried and developed within Coke over many, many decades, if you boil what that is basically down to a nutshell, I always tell people, what if you had a business where people knew what to do without being told?
38:00
And that is the simplest way I can describe all of these principles, all of our frameworks of like what you're you're never going to get there perfectly.
38:11
Right. But that's what you aspire to be. And that's your vision.
38:16
Then you can start designing and running your business with that operating system with a bottom up empowerment mindset.
38:24
It's just like what I talked about with my dad. He tries to empower people with principles and let them run.
38:30
It is not him at the top saying, well, you guys need to go do this and you need to do this with this strategy.
38:38
He challenges all the time, right?
38:40
But it's more of, you know best, you're closest to the opportunity, you're closest to the problem.
38:46
How can I help you?
38:47
How can I remove barriers?
38:49
And just on your point on Molex, the last quarterly business review or last board meeting we had, I remember, you know, they're really performing well.
39:00
right now across all their businesses, automotive, healthcare, their data center business,
39:06
their consumer business, all of them are growing. More things need to be connected in this IoT
39:15
world that we live in, and especially with AI, driving transformative demand. But our data center
39:23
business in particular, we can't keep up with demand. We make the connectors that connect all
39:30
the data centers and the cables and products like that.
39:35
So, but I remember in the quarterly business review,
39:38
instead of going through a 40 page PowerPoint on just a page turn and what are the results
39:44
and asking a bunch of detailed questions, his approach and most of our senior leaders are
39:50
just what are the top problems?
39:53
How can we help you remove constraints?
39:55
And let's talk about what principles are, you know, are either we're not applying
39:59
there that we should be. Change is a whole dynamic of the culture, but also how businesses are run.
40:09
Right. So I think it's like that kind of mindset, culture, and leadership that enables you to go
40:15
from a top-down kind of control and dependency of leadership to bottom-up empowerment. And when you
40:24
have leaders doing that, what that does is it gives everyone else permission downstream to say,
40:30
oh, well, I need to do that too, right? I see how that's empowering me. How am I empowering my people
40:37
instead of operating as a supervisor, a leader, and just telling them what they need to be doing?
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Well, this ties into the next thing I wanted to talk about, and I think really builds on that,
43:13
like other principles you talk about in the book are incentives are much more than money. It really
43:19
comes down to motivation and how you create an incentive structure internally that motivates
43:24
people to do better. Yeah. Boy, I mean, that is a big one. And I would say, you know, we,
43:32
one of our, one of our frameworks at Coke is around motivation. We call it five dimensions.
43:40
It's like a problem solving tool, problem solving framework and motivation. It used to be called
43:46
incentives. We now call it motivation because it's much more, people think incentives, they think
43:52
money. But to your point, it's much broader than that. And motivation is about motivating
43:59
long-term value creation, right? So, and you may be motivated by different things that I'm motivated
44:05
by, right? You may be motivated by what teams you get to work on, who you get to work with,
44:13
which exciting projects do you get to be a part of? It's not just about, okay, what's my total
44:17
compensation at the end of the year. There's all these different things, right? So I, to,
44:22
to break it down, like for your audience and like how we think about motivation, there's kind of
44:26
four key areas that we want to motivate every employee to, to unlock their potential on.
44:33
And it's not, you know, the first thing you'd say was like, how, how much money are you making
44:38
right now? That's not the first thing that we look at, right? It's more about cultural alignment
44:44
to these principles that we're talking about is are you as an individual, like if Marty works at
44:50
Coke, are you advancing the culture or are you taking away from it? Right. And we, we have a 360
44:57
process where the, we'd ask the people that you work with your supervisor, even your customers,
45:04
your vendors, your coworkers, Hey, how's Marty doing on that? And you get very specific, um,
45:10
examples of what's going well and what's not. And so then it's like, okay, let's see what Marty's
45:16
doing on culture. But then the other thing is on capability building, right? And thinking about
45:23
what's Marty doing to innovate and building for the future for his role and for his business.
45:29
That's highly subjective. There's no like, you made X dollars, so therefore you get Y,
45:35
Right. But then and then we think about long term value creation.
45:41
Like, you know, what are you doing to advance the long term value of Coke or whatever business that you're in?
45:48
And then leadership is one, too.
45:51
And it doesn't mean that you have to have people reporting to you to be a leader.
45:56
Right. It's like, are you helping others around you succeed?
45:59
And it's like, how's Marty doing on that?
46:02
And then, of course, there's the more objective thing is like, well, how's Marty's like P&L and how's his results?
46:08
But that's a very, again, a very different approach than most companies that if you're a salesperson, well, I brought in $10 million of business this year.
46:19
And so I made X. Therefore, I get why you got to put all these subjective factors.
46:24
Otherwise, you're not motivating people on a principle based culture.
46:29
So you have to have all those factors in it.
46:31
It's harder to do.
46:32
It takes more time.
46:34
And we put a lot of, we put all that leadership back on supervisors of their people to really
46:41
make recommendations on bonuses and base salaries based on those factors.
46:48
And so I think that one of the key elements of our secret sauce to build the culture that we have You have to hire based on that culture You have to fire based on that culture
46:59
You have to motivate day to day based on on that as well.
47:03
And it's it's just like having read the book.
47:10
You Coke has like the internal process.
47:14
what I like about your principles and your view on the world and how a company should operate
47:19
in that is that it's seeped to mutual benefit too, which I think is,
47:23
which I think can tie into this. You create this cultural, this culture internally, but then you're
47:31
making sure that you have partners and that you're actually doing good to your counterparts as you're
47:35
doing business throughout the world. I think particularly in today's day and age, I mean,
47:39
AI is the big topic right now, but if you're looking at the AI race right now, many of the
47:45
leaders in that space view it as a zero-sum game. And I think one of the core principles
47:50
of Coke is that it's not a zero-sum game. There's mutual benefit to be had.
47:56
Yeah. And I think you hit on what we don't want in society is a constrained pie thinking.
48:03
We want to grow the pie together. And if you pick the right partners to do that,
48:08
And you have, like, let me hit two principles in here because I think they're very important.
48:13
One is preferred partnerships.
48:16
This is one that I've learned because the nature of my role is I'm, you know, I'm pounding the pavement a lot.
48:22
I'm trying to find the next disruptive technology, the next, you know, family-owned business that we can help with a capital solution.
48:30
I'm in that, like, flow every day.
48:32
And this, I think this is one that is very important.
48:37
And one of the principles that I think is a big differentiator for Coke as well and how we select and how we choose what we're going to work on and who we're going to partner with and who we want.
48:50
Creative destruction is one of those principles that we learned from Joseph Schumpeter back in the 40s on.
48:55
But preferred partners, we learned from failure internally and we created our own principle around that.
49:01
So this one's a good example.
49:02
But a preferred partnership requires three things.
49:07
One, an aligned vision.
49:10
Two, aligned values.
49:12
And three, complementary capabilities.
49:14
And when you have all three of those in place, you have the best, the highest probability of creating the most long-term value and having a long-term growing partnership with someone.
49:25
And again, that applies to business and a customer, a supplier.
49:29
It applies to an M&A deal.
49:33
It applies in your personal life, your girlfriend or your wife.
49:36
I mean, it is a principle that applies to everything that we found.
49:44
And anytime when you pull one of those out, you don't have an aligned vision, right?
49:50
Because one partner is thinking long term, the other one's thinking short term.
49:56
That's just vision misalignment, right?
49:58
You see that at board levels all the time.
50:00
Someone wants to sell, the other one wants to hold on and keep growing.
50:04
I mean, that's just a misalignment that's going to break the company or align values.
50:09
Right. Do you operate with integrity? Do you, you know, how you treat your customers?
50:16
Are you compliant or do you cut corners with rules and regulations and that sort of thing?
50:22
And then the third one around complementary capabilities.
50:25
If you and I are partnering, do you bring something to the table that I don't have?
50:29
And do I bring something to the table that you don't have?
50:31
and then because if we both bring something to the table, then there's synergy.
50:37
And then that goes back to this.
50:39
We grow the pie together.
50:41
And you're right.
50:43
I mean, the alternative to that is zero sum game.
50:46
So do you want to have a zero sum game thinking of which there's a story?
50:51
I won't belabor it here, but there's a story where I learned mutual benefit through failure
50:56
because I was I was running the trading group and Coke fertilizer.
51:00
And I basically took one of my trading partners to the mat where he didn't make any money on the trade.
51:06
And I did really, really well.
51:08
And we're all high-fiving on the trading floor, only to find that three months later, he competed with me and set up a whole business that destroyed everyone's business.
51:19
And then there was nothing for anyone.
51:20
Because I thought, because I applied short-term zero-sum game thinking to one trade, like what could have been this amazing long-term partnership where everyone won, I left that on the table and I'll never forget that, right?
51:38
And so thinking about how you help the other person win, if you have a preferred partnership and you have the aligned vision, values, complementary capabilities, and you have the mutually beneficial mindset where I'm going, how am I helping my partner win all the time?
51:54
And they do the same for you.
51:55
That is a beautiful long relationship where you going to grow the pie and everyone going to win and everyone going to get results So so many examples where we screwed that up as a company and we paid for it Right
52:10
But those, those failures in the early days are almost blessings because you learn from
52:14
them and it's like, boy, mutual benefit is so core to everything that we do.
52:20
Yeah.
52:20
It goes back to the patience, right?
52:22
The low time preference that's necessary.
52:24
That's right.
52:25
That's right.
52:26
Exactly.
52:26
Trade-offs conceding some upside in certain parts of the relationship to make sure that the ultimate upside is there in the long term.
52:34
And again, I can't stop thinking about the high-velocity trash economy.
52:40
And I'm very happy that you and your father decided to write this book.
52:43
and you're putting a concerted effort
52:45
to spread these principles outside of Cook Industries
52:48
because I do look out at a lot of the modern economy
52:53
and the giants and exist today.
52:56
And again, bringing it back to the AI sector,
52:58
there's too many people that view the world as zero sum
53:01
and it's very cannibalistic in the long term
53:05
and not good for the health of the individual companies
53:09
and the economy broadly.
53:11
And so on that note, what would you say are the biggest mistakes that companies that exist today make?
53:20
Or what changes could they make coalescing around principle-based management to get everybody rowing in the same direction?
53:29
Wow.
53:29
I mean, we've hit on a bunch of them, right?
53:32
I think if you just took a step back and said, what if we have a culture of mutual benefit?
53:41
And we just think of that one principle. You think about every interaction, whether it's a customer, a vendor, a supplier, every decision.
53:49
And we have that in our DNA, every employee. And you think about think about how the results that you could get and also just like how the world would work.
54:03
I think that's a big one. I think the comparative advantage one where I told my story about being in the wrong role.
54:09
What if everyone just really thought about their own role and their own comparative advantage and we had the right people in the right roles in society, right?
54:22
I mean, not just in your business, but across other businesses and other nonprofit organizations, right?
54:32
Sports teams, you can apply it to anything.
54:34
I think those are those are two that are just really, really significant.
54:44
And then to your point on time preference, thinking long term versus short term.
54:49
So much of our decision making is as a society is short term versus what's best for everyone long term.
54:56
Um, and I, but I think the overarching principle for all that's almost like, I think about like
55:03
this umbrella principle for then take this to society and how we think about the institutions
55:10
across our economy, whether that's our education system, um, our government systems, um, are like
55:18
how business works bottom up versus top down bottom up empowerment.
55:25
And if we actually believe in people and we empower them with principles and we believe that people that are closest to the problem are the ones that should be solving those problems, as opposed to the alternative and where so much of our society works today and we're trending in the wrong direction, top down control and dependency.
55:52
to where the government keeps getting bigger and bigger and bigger, more regulations,
56:00
more telling people how to live their lives, and more, sadly, more people, especially the
56:06
next generation that believes, when we've done the research on this, that that is the answer.
56:11
We can't solve our own problems anymore. We need someone else to come in and solve them for us.
56:17
that's a very scary place to be. And it's a very scary trend. That's why I say bottom up
56:23
empowerment and just that mind, that one mindset alone, and that one principle,
56:27
what that could do for us to start to strip back more of the layers of bureaucracy,
56:33
red tape barriers that we're putting on ourselves as a country and, um, believing in people to go
56:43
like help people improve their lives, apply mutual benefit, help their neighbor,
56:48
make a contribution, not just in business, but in your community as well.
56:52
We need to get back. We need to get to that. And that's where the country started. Right. I mean,
56:58
the Declaration of Independence and it's all about like grit and entrepreneurship and making
57:04
a contribution to your community. That's that's where we got it. We got to turn the tide on that.
57:10
I completely agree And I happy you brought this up because that where I wanted to go And if you think of the federal government how big it gotten the Federal Reserve how important it become It a complete derelict of the knowledge process and the principle that you talk about
57:28
Because from an information theory perspective, there's no way that people congregating in Washington, D.C. and in the Eclis Building and in New York City can get all the local information necessary to make decisions for small towns across the country and cities across the country.
57:47
It literally does. You're right. But but what we've done a bad job on the people that believe in bottom up empowerment and like where we're like what made the country such a like a beacon of entrepreneurship and hope and everyone wanted to come here.
58:03
was because there's the fewest barriers in their way to go, you go chase the American dream.
58:11
And so what we try to keep putting more barriers, so it's, it's less attractive and let fewer and
58:17
fewer people. It's like the system is rigged against them. So they can't. Right. So we,
58:24
what we've done a bad job of is get the stories out there so people can connect to the principle
58:29
of bottom-up empowerment as opposed to top-down control to fix problems.
58:35
I'll just hit two quick examples if I could, Marty.
58:38
I talked about education as one of the key institutions of our society.
58:44
So many of our problems are downstream of our broken education system,
58:51
K-12 as an example.
58:53
and um but what we're seeing in terms of the transformation of the opportunities
59:00
of where that trend is going is very exciting so i don't want to be someone that comes on doom and
59:06
gloom and say everything's so screwed up or whatever what are we going to do about it right
59:10
how are you going to drive change and this is one of the things we have an organization called stand
59:15
together we've talked a lot about business we apply all those same principles into our non-profit
59:22
organization called Stand Together. And I'd encourage any of your audience to dig in and
59:29
check us out. But I'll give you two examples of just some things that some problems that we're
59:33
working on where we're seeing some very exciting results. Education, back to that.
59:40
Bottom-up empowerment vision for education is one where you basically have individualized
59:50
education and understand that every kid is different. Every kid has a different gift.
59:55
Every kid learns differently. So why do we have this broken system that's one size fits all?
1:00:02
You know what I mean? We're, we're treating our kids like an assembly line with this teach to test
1:00:08
model where everyone's on the same. They have to, and then they don't understand, you know,
1:00:15
basic math, but then they go on to the next grade without having that fundamental understanding.
1:00:20
Right. So we have to we have to look at every kid as an individual in our education system and figure
1:00:25
out how we help support them and move at their speed. And now we have the tools to do that.
1:00:33
I mean, you look at Sal Khan with Khan Academy, what he's done with technology, with his mastery
1:00:38
system. Look at Joe Lehmont with his Alpha School concept and leveraging AI. He's taking failing
1:00:46
students out of the broken system and by thinking about new ways to motivate them and meeting where
1:00:53
they are and helping them with AI to A students in three to six months. So this is the exciting
1:01:00
stuff to me. And one of the things that Stand Together has really invested, and we work with
1:01:06
the Walton family on this, we have a Vela fund. And so basically think about venture capital for
1:01:12
education, right? So writing very small checks to what we call education entrepreneurs that
1:01:20
have are sick of the existing system. It could be a pissed off parent, a teacher that says,
1:01:28
this system is failing my kids. I got to get out and I have a better way.
1:01:32
And then so we fund those people to go build like micro schools and new concepts or new software, right?
1:01:40
Like, like a Sal Khan.
1:01:41
And so over the last since COVID, we've built, I think now we're at like 5000 new schools across the country.
1:01:51
And we thought it'd be like venture capital where 70% of them would just fail and it wouldn't work.
1:01:57
But those 30% would be really like awesome new models.
1:02:00
what we're finding is more than 80% are succeeding.
1:02:04
This is a crazy result, right?
1:02:06
80% of those are succeeding and don't need more capital
1:02:10
because they're sustainable and like the market wants it
1:02:14
and the market's willing to pay for it.
1:02:15
And it's priced in a way where even the least advantage
1:02:19
are benefiting from these new microschool concepts.
1:02:24
So education transformation is underway,
1:02:28
but one of the things that enables
1:02:29
that was really changing the whole regulatory framework for education.
1:02:37
And now I think there's 30 plus states that have gone through education reform.
1:02:42
A lot of those are school choice reforms in these states.
1:02:46
And so when I talk about barriers that are stacked against kids in our society, those
1:02:51
are the barriers we need to remove.
1:02:53
So they have options and then we can have a new system where they can learn and self-actualize,
1:02:59
understand their gift, get the right job, and then go start the right business or whatever,
1:03:04
right? I mean, it's that one thing alone, I think is one of the most exciting things that's happening.
1:03:11
And from a society standpoint, I'll leave you with this. We did all the research pre COVID in
1:03:17
terms of families that were open to new models for their kids. And it was like 20% or something
1:03:25
like very, very low. And then post COVID, because families saw how wrecked the system was,
1:03:31
and seeing some of these models emerge now more than 80% are open to their kid going to
1:03:37
a new innovative kind of school model. So to me, it starts there. It starts with
1:03:43
completely transforming the education system and we're making progress.
1:03:48
I completely agree. Sal Khan helped me dearly in college.
1:03:52
and uh i mean his con academy was i leaned on heavily in college uh and then alpha school we've
1:04:00
actually had an alpha school student on on the podcast that's one thing i love that go
1:04:04
great and one of the they gave her a hard problem she made a she made a her like semester project
1:04:15
she had to go out and find a way to get on a podcast and talk about it and she did that's
1:04:20
And we talked about Alpha School, what the process is like, and it's incredible.
1:04:24
Then on top of that, like shout out to Corey DeAngelis, who's really been on the tip of the spear of school choice, which I think is a no brainer option.
1:04:33
Give parents the ability to take their tax dollars and spend it how they want on their children's education.
1:04:39
So, you know, hopefully you get more like what you're doing.
1:04:42
You put one of the kids on your podcast.
1:04:45
People see the results.
1:04:46
They see it's a show versus tell.
1:04:48
I think we got to do that across all these and bad regulations that are holding people back We have to get the stories out that show people there is a better way and empowering people and like removing barriers is what is going to transform all of our lives and make society better off
1:05:08
So anyway, but I'm glad you're doing what you're doing by getting these ideas out there.
1:05:14
It's it's it's great.
1:05:16
We need more of that.
1:05:16
Well, the feeling is mutual. I'm glad that you're doing what you're doing and for taking the time. I know you're an extremely busy person, but principle-based management has been great for us at TFTC.
1:05:30
becoming a principle driven leader is a book I highly recommend if you're looking to reorient
1:05:37
your philosophy of business and how to apply free market grassroots principles to what you're doing
1:05:45
to get the best results. And I'm very happy that you're out there beating the drum, getting this
1:05:52
message of PBM out there, because I think the world would be a better place if more companies
1:05:57
adopted this and hopefully it would prove to the government that we don't need, we don't need them
1:06:03
as much. And we can, we can have a flourishing economy that, that the founders envisioned when,
1:06:09
when they started this country. Well, Marty, like it's a great opportunity for me to,
1:06:15
to be on your, your podcast. So I appreciate you thinking of me, but I wanted to, to leave
1:06:21
your audience with a real practical way that they can like leverage the principles. So I don't want
1:06:26
to miss this opportunity. And so to, and something that you're working on, um, and very focused on
1:06:32
is AI. Um, the combination of principles with AI to me is one of the biggest opportunities that we
1:06:41
have. And so our first experiment was with this book where we created an app that was, that was
1:06:48
basically powered with these principles to solve very specific problems. So, um, if, so we have an
1:06:56
It's called Principal Companion, and you can get it on any of the app stores, Apple Store,
1:07:03
Google Play, all the platforms, and it's free.
1:07:06
So if you download it, you can put any problem you're having, not only in business, whether
1:07:11
you run any type of organization a sports team you having problems with your kids it just like a chat GPT field type your problem in and it coaches you to think through that problem with two or three of these principles
1:07:26
So instead of the alternative is saying, well, I got to go learn all these 41 principles.
1:07:30
And you feel like you got to eat the elephant all at once. Start with a problem that you have right
1:07:36
now today. Take five minutes and engage with it. And to me, then it's like you start to see and
1:07:42
connect, it's like, oh, wow, I can think about that problem differently. And this is very effective
1:07:47
in helping me get to an answer through a principled approach. And then what happens is you get momentum,
1:07:54
right? It's like, oh, I learned about mutual benefit there. I'm going to put in another problem.
1:07:57
Oh, it's telling me I need to really think about creative destruction, or maybe my own role was
1:08:01
comparative advantage. And so we started there and we've had some really good success internally
1:08:09
and externally of people solving problems.
1:08:12
Like that's one of the most rewarding thing for me
1:08:14
is me getting the emails and texts like,
1:08:16
oh dude, I tried this and like,
1:08:18
it actually transformed the way I'm looking at my team.
1:08:21
Or I tried this with my wife or my kids or whatever.
1:08:26
And so like, those are so rewarding
1:08:27
because it's actually, you see people transforming
1:08:31
and like getting real results with it.
1:08:34
But the next step of what we're doing,
1:08:36
I love your ideas or anyone in your audience that has ideas of how to combine principles with AI.
1:08:43
We're taking that same brain that we have that we've been building that feeds the principal companion.
1:08:49
And we want to apply that to more surface areas.
1:08:52
So, for example, the one of the next steps within the company is, you know, we use Microsoft Copilot, you know, and almost all more than 100,000 employees are using this.
1:09:02
So to get these principles and problem solving tools into the flow of their existing work and meeting them where they are, much different than having them go download an app, right?
1:09:15
So how can we open source these principles in a way that it really helps people solve problems in a principle driven way?
1:09:25
So any ideas that you have that we want to experiment with in your shop or anyone that listens to this, we are wide open on this.
1:09:35
And I thinking about this much more than just what helps cope transform I thinking about this at the societal level And we just so excited We just like scratching the surface and what possible because of AI and the power of this technology
1:09:50
So principal companion one, go try it. That's out there now. But bigger ideas on this that you or
1:09:58
anyone on your team or your audience has, please ping me, reach out to me. Would love it. Put it
1:10:07
in the chat and we can we can discuss you know big opportunities because this is going to change
1:10:12
the game yeah i'll leave you with one um that's been very helpful for us we have the principle
1:10:18
based management we have a bunch of skills but the most helpful one has been uh the after action
1:10:22
review so we'll do a launch or um a webinar or something like that and immediately after we have
1:10:28
a pbm skill after action review how'd it go where'd you mess up what do you want to do better oh that's
1:10:33
beautiful. We need to take notes from you. I don't apply this within Coke. I love that though. I mean,
1:10:40
the more any organizations applying this and then back to that Republic of science, you share
1:10:45
knowledge, what's working. That's, that's how we're going to keep transforming. So very exciting.
1:10:51
And thanks for your interest in the principles. Well, thank you, Chase. Um, and thank your father
1:10:57
for me for co-writing the book with you. Uh, it's been like a great pleasure. Hopefully we can do
1:11:01
this again at some point. Yeah, thanks, Marty. Appreciate you, man. Thanks a lot. Peace and love,
1:11:05
freaks. Okay. Thank you for listening to this episode of TFTC. If you've made it this far,
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