2 Simple Lessons From Brothers Worth Billions

There are two brothers with an estimated fortune of almost $100 billion that few have ever heard of, and there is something we can all learn from them.

Feb 16, 2014 at 1:00PM

The fifth and sixth richest individuals on the planet are worth almost $100 billion combined, and despite some of the controversy surrounding them, there is something we all can learn from them.

Charles and David Koch are the two brothers at the helm of Koch Industries, one of the largest conglomerates in the United States. Each has a 42% stake in the company, and Bloomberg estimates they are each worth $49.5 billion.

They were raised in Wichita, Kansas, and both attended the world-renowned Massachusetts Institute of Technology for undergraduate and graduate school, earning degrees in engineering. Ultimately, they returned home to Wichita to run the business their father created. 

What Koch Industries does
Koch Industries is private and operates a variety of companies, from Flint Hills Resources that operates oil refineries in Minnesota, Texas, and Alaska that are capable of producing 670,000 barrels of oil a day, to Georgia-Pacific, which creates popular home goods products like Brawny, Angel Soft, and Dixie. In addition, there is Invista, which makes fabrics and products used in clothing and beyond, and Molex, which manufacturers a variety of industrial products.  


Source: Flickr / 401(K) 2013

Altogether, these and the other businesses at Koch are scattered across almost every major industry in the U.S. -- but largely concentrated in commodities -- and have total annual sales of almost $115 billion, which likely makes Koch Industries one of the largest companies few have ever heard of.

Who the brothers are
Much has been written about Charles and David, as each has distinct political leanings that often results in strong criticism from rival parties. The two combine conservative and libertarian leanings -- David was actually the Libertarian Party candidate for vice president in 1980 -- and are ardent critics of "big government."

The two have feuded with President Obama, and The New Yorker even ran an article in 2010 called "Covert Operations" with the byline, "The billionaire brothers who are waging a war against Obama." Some have estimated their political donations are in the hundreds of millions of dollars, and that is only likely to continue into the next presidential election. 

Yet not only have they had political battles, but familial ones as well. In 1980, their two other brothers, Bill and Frederick, attempted to take control of Koch Industries from Charles. Although Bill and Frederick sold their stake in the company to the two other brothers for $1.1 billion in 1983, a 15-year fight in the courtrooms erupted, and the courts finally sided with David and Charles.

What we can learn
The first lesson we can learn is diversification. Almost every investor should ensure their personal retirement portfolio includes a major stake in an S&P 500 index fund, which is one of the most diverse fund on the market, and encompasses numersous industries and companies.

Source Coca Cola

Warren Buffett. Source: Coca-Cola

Consider the Warren Buffett wisdom, "if your goal is not to manage money to earn a significantly better return than the world, then I believe in extreme diversification," which is certainly evident in the business model of Koch Industries.

Beyond diversity, the two brothers have operated with a distinct long-term vision and focused on ensuring the prolonged success of the business.

Being privately held allows them to make moves that focus on the long-term vision, ensuring it is run efficiently and profitably. All too often, both investors and decision-makers lose sight of long-term results in favor of short-term gains. 

The Koch brothers have generated an extreme amount of attention as a result of their political endeavors, but no matter where you side in relation to them, there is no denying their business successes are things we can all learn from.

One billionaire who is happy to share
While we can only learn from the outside looking in with the Koch Brothers, Warren Buffett is a man who has been happy to give advice and recommendations to everyone. In fact, while he has made billions through his investing, he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information