Jim Hannan, an executive vice president who oversees about half of Koch’s subsidiaries, said tech “has led to a much more common set of issues and opportunities across all our businesses.”
At the same time, big industrials are struggling to grow.
“We are rapidly moving to a digital economy,” said Nick Heymann of William Blair & Co. “Most of the net worth in the last 20 years in this country has been created outside tangible manufacturing businesses.”
For Charles Koch, it was a question of survival. At a 2017 leadership meeting, he pushed his managers to embrace technology and prepare for a knowledge-based future. His message: “Do it or we’ll end up in the Dumpster.”
Falling technology costs are generating new threats to established industries.
There’s “a level of competition that these players did not face,” said Sanjay Agarwal of Boston-based venture-capital fund F-Prime Capital. “Now you can have startups out of a garage building an autonomous vehicle. That was just not possible earlier.”
Cheap computing power and data will fundamentally change every industry, said Koch Chief Financial Officer Steve Feilmeier. The firm said it has invested more than $17 billion in technology companies since 2013, with big bets in cloud computing and enterprise data analytics. Investments have included acquisitions as well as strategic stakes.
If it’s going to be disrupted by a new technology, Koch wants to be doing the disrupting and “investing in it in a way where we better understand it,” Feilmeier said.
The focus on tech isn’t as big a shift as it appears, said Christopher Leonard, author of “Kochland,” a just-released book about the dynasty.
“If you go back to the 1970s, this company was a knowledge company,” he said. “Yes, they owned oil refineries, but they also filled the basement with IBM computers to study the crude-oil market, the gasoline market, to figure out how to run the refineries at the most optimum level.”