Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty (11 page)

Perhaps this was true of David, who followed his brother down the libertarian path and never became the ardent believer Charles was. But it seriously obscured the true nature of Charles’s association with LeFevre and the Freedom School, of which he was not just a graduate but a donor and board member. Under LeFevre’s tutelage, Charles drifted farther from his conservative roots into new, radical ideological terrain.

By the late 1960s, antiwar protests raged in the streets, schools across the South were being desegregated, and President Richard Nixon was paving the way for closer relations between the United States and Communist China and expanding the federal bureaucracy
to include the Environmental Protection Agency, the Occupational Health and Safety Administration, and a government-led War on Drugs. Meanwhile, members of the embryonic libertarian movement, composed of a small, unruly cadre of radical thinkers from Left and Right, were doing what they did best: disagreeing about almost everything other than their mutual disdain for government.

Charles increasingly immersed himself in this volatile stew of anarchists, Ayn Rand disciples, laissez-faire economists, disaffected Students for a Democratic Society members, and others on the political fringe. In 1969, Charles hired the first of a series of political adjutants—George Pearson, who joined Koch Industries to oversee Charles’s political and philanthropic endeavors. Pearson, who grew up in the small city of Beaver Falls, outside of Pittsburgh, had been a student of Hans Sennholz (a protégé of Austrian economist Ludwig von Mises) at Pennsylvania’s Grove City College. Pearson called the economist’s class “a defining moment in my life,” and he devoted his career to promoting the libertarian ideas Sennholz had awoken him to.

Together Charles and Pearson, then in his late twenties, formed a libertarian supper club in Wichita, where they invited notable speakers to lecture. These events featured the Freedom School’s LeFevre on at least one occasion; one attendee recalled that the libertarian guru “converted” his wife “to anarchy in about 30 minutes.”

His eyes opened, Charles was not content that the precepts of the libertarian philosophy stay confined to supper clubs, or discussion groups, or Rampart Mountain redoubts. “I was looking for ways to develop, apply, and spread the ideas I was learning,” he recalled. The problem was that “no one was familiar with these ideas.”

Charles took every opportunity he could to groom like-minded thinkers and identify libertarian converts. Gus diZerega recalled
meeting Charles in the mid-1960s at his Bircher bookstore. A politically precocious high school student, diZerega had attended Birch Society meetings with his mother and he had started a local chapter of Young Americans for Freedom. Spotting diZerega and a friend browsing in the store, Charles led them away from the anticommunist broadsides and over to the special section that he had filled with tracts on Austrian economics and classical liberalism. “Charles said, ‘You should start reading this kind of thing,’ and then he bought us some books that we could never have afforded,” diZerega remembered.

Charles later invited diZerega and his fellow YAF members over to his parents’ mansion for long, philosophical talks in the basement. “At that time,” diZerega said, “Charles was a very committed libertarian, possibly even what we call an anarcho-capitalist”—that is, someone who believes that virtually every function of society can be privately funded, eliminating the need for government. “He was very interested in ideas, very interested in talking about ideas, the implications of ideas, where they would lead, not just interested in power or money.” DiZerega—whose Freedom School education was also bankrolled by Charles—went on to get his Ph.D. in political science from Berkeley and credits the industrialist with setting him on the path to his career in academia. “I would never have gotten into serious academic work, I think, absent his influence.”

At the time when diZerega met Charles, there existed little infrastructure to incubate, let alone broadcast, libertarian dogma. Charles assessed the libertarian movement as if sizing up a failing business. In the marketplace of ideas, libertarianism was a product that few Americans wanted to buy, let alone finance, and its intellectuals were held at arm’s length by academia. Enraptured by the libertarian philosophy, Charles decided that advancing its precepts would form the backbone of his philanthropic legacy: He became libertarianism’s primary sugar daddy.

In 1974, Charles’s ideological aide-de-camp George Pearson offered a rare glimpse into the strategic thinking behind his boss’s philanthropy at a gathering of nonprofit directors. Pearson was now running the newly formed Charles Koch Foundation, a nonprofit created to finance Charles’s libertarian projects.

“We did not see politicians as setting the prevalent ideology but as reflecting it,” he noted, explaining that “[Friedrich] Hayek contends that the prevalent ideology is set by the intellectuals.… They are the teachers, preachers, journalists, lecturers, publicists, news writers and commentators, writers of fiction, cartoonists, artists, and all others who disseminate ideas.”

Charles’s strategy focused on grooming the intellectual class—through education, research funding, and other efforts—who would, in turn, shape public opinion and influence lawmakers. The “intellectual war,” Pearson said, would not be won overnight. “It took years to bring this country around to believing that government could solve problems better than the market, and it will take years to get rid of that destructive notion. Belief that government participation is necessary or helpful and that governments are beneficial needs [to be] challenged.”

Charles began to invest in institution building. Myriad libertarian and free-market organizations would later thrive because of his largesse. “None of these free market and policy institutions would have survived and prospered without Charles Koch,” said libertarian economist Dominick Armentano, an emeritus professor at the University of Hartford, who worked closely over the years with institutions that Charles funded.

In addition to his involvement with the Freedom School in the 1960s, Charles became a board member and key benefactor of the Institute for Humane Studies, which Baldy Harper had initially run out of his Menlo Park, California, garage. Its goal, then as now, was to mentor libertarian scholars, nurture the next generation of thought leaders, and “further the science of a free society.”

When Harper died suddenly of a heart attack in 1973, Charles stepped in briefly to helm the organization, vowing to continue Harper’s work and keep alive his vision. At the funeral, he tenderly eulogized his friend. “He taught us about liberty which was, in his words, ‘the absence of coercion of a human being by any other human being.’… Of all the teachers of liberty, none was as well beloved as Baldy, for it was he who taught the teachers and, in teaching, taught them humility and gentleness.”

Just as Charles focused intently, methodically, obsessively on growth at Koch Industries, he had similarly grand aspirations for libertarianism. He often grappled with the question of how to expand libertarianism beyond its ragtag confines. By its very nature, this philosophy had attracted a combustible mix of free thinkers, from sober-minded academics to black-flag-waving anarchists, and from buttoned-down executives to survivalists, sci-fi geeks, and eccentrics seeking to establish a floating libertarian utopia on the high seas.

Charles sought a coherent strategy, not the ad hoc approach that had characterized the movement up until then. There was plenty of informal parlor talk about how to elevate libertarianism to a genuine mass movement, but it was Murray Rothbard, another student of Mises’s, who wrote the manifesto that distilled the movement’s guiding principles and showed a path forward to greater acceptance. Part of the debate among libertarian thinkers centered on whether to advance the cause through an intellectual or an activist approach. To Rothbard, the Bronx-born son of Eastern European Jews who had received his Ph.D. in economics from Columbia University, the answer was both. Rothbard, known for his fiery, stem-winding diatribes against “statism,” captured Charles’s imagination.

During the winter of 1976, Charles invited the Brillo-haired and bespectacled economist, who was then forty-nine, to spend the weekend strategizing at a ski lodge in Vail, one of the
businessman’s favorite vacation destinations. A fire crackled in a stone fireplace as the two men bantered for hours about how to coalesce their fellow believers and attract new recruits to their freedom-fighting ranks. Prior to this retreat, Charles and Rothbard had outlined a strategy modeled closely on the John Birch Society. (For all its flaws, Welch’s group had managed to grow into a bona fide movement with an estimated 100,000 members at its peak.)

Their plan called for the formation of a Libertarian Society, replete with Bircheresque bookstores around the country. As they strategized in Vail, Charles and Rothbard came up with a handful of candidates to lead this new organization. Edward Crane III, a San Francisco–based financial advisor who, at thirty, had become the national chairman of the fledgling Libertarian Party, topped the list. Crane, the son of a Republican doctor, grew up in the suburbs of Los Angeles and he enjoyed going against the grain. Attending Berkeley during the turbulent 1960s, Crane ran for student government on a pledge to abolish it. During Barry Goldwater’s 1964 presidential campaign, he stumped for the conservative Arizona senator as precinct captain in this predominately left-wing enclave. Disillusioned by the Goldwater campaign, Crane drifted toward libertarianism. He was tough and opinionated, a contrarian who spoke his mind freely—even, and perhaps especially, to powerful business titans.

In May 1976, Rothbard approached Crane, who was then running the campaign of Libertarian presidential candidate Roger MacBride, to gauge his interest in heading the Libertarian Society. “Now, we have quite a few scholars in the libertarian movement (although not as much, of course, as we should have), and we have a large, amorphous, and often nutty rank-and-file; but we have no one with organizing ability,” Rothbard wrote to Crane. “This makes you, Ed, a unique and extremely scarce resource; not only are you the best person to head a Libertarian Society effort, but you are also the
only
one, and I know that Charles feels the same way.”

Crane and Charles had met during the 1976 campaign, when Charles threw a fund-raiser for MacBride at his midcentury modern home in Wichita, with its floor-to-ceiling windows and recessed living room. Crane’s candidate had become a libertarian hero four years earlier, when, as a Republican Electoral College elector in Virginia, MacBride refused to give his vote to Richard Nixon and Spiro Agnew, and instead cast a symbolic ballot for the Libertarian Party’s nominees. MacBride was also the “adopted grandson” of libertarian icon Rose Wilder Lane—namesake of the Freedom School’s lodge; upon her death, he became the literary heir to her mother’s
Little House
series, and as such was the cocreator of the long-running NBC television show.

Chatting with Charles, Crane was immediately struck by the depth of the businessman’s libertarian fervor. “He was more hard-core than I was,” Crane recalled. Crane’s commitment to the cause and competence similarly impressed Charles.

Following the election, where MacBride received a little less than 173,000 votes, a disheartened Crane considered leaving the Libertarian Party altogether and returning to his native California and a comfortable finance job. But Charles urged him to reconsider. The movement couldn’t afford to lose talent of Crane’s caliber. Its biggest weakness, as Charles saw it, was a lack of professionalism. He had tired of throwing money away on flaky activists and scholars who failed to deliver. To Charles, libertarianism wasn’t just theoretical. He wanted action. Wholesale political and social change. And he wanted to see it within his lifetime.

“What would it take to keep you in the movement?” Charles probed.

Crane considered the question. While running MacBride’s campaign, he had grown acquainted with the Beltway public policy shops such as Brookings and the American Enterprise Institute and marveled at their influence. Brookings, for its part, had managed to get a powerful new government division created in the
form of the Congressional Budget Office—then have one of its scholars appointed as its director.

Crane had daydreamed of a libertarian answer to the liberal and conservative organizations that dominated the think tank world, a goal long advocated and heartily endorsed by economist Murray Rothbard.

“It would be nice to have a libertarian think tank,” Crane replied.

The Cato Institute opened in early 1977, with Crane as its leader, Rothbard its intellectual muse and top scholar, and Charles the organization’s wallet. The think tank, at Rothbard’s suggestion, took its name from a series of eighteenth-century pseudonymous essays, signed Cato, that advocated freedom from government tyranny. They established the institute, at Charles’s insistence, under the laws of Kansas, which allowed nonprofit entities to issue stock. Unlike a typical corporation, these shares held no real monetary value, but they did offer a mechanism of control. Cato’s shareholders (among them, Charles, Crane, and Rothbard) had the ability to appoint the think tank’s board members, and in this way they could ensure that the think tank remained tethered to its founding mission.

Cato’s plush, wainscoted offices occupied half of the second floor of a three-story, redbrick building at 1700 Montgomery Street, at the foot of San Francisco’s Telegraph Hill. Portraits of what the Catoites called the “dead libertarians”—John Stuart Mill, Lysander Spooner, Benjamin R. Tucker, H. L. Mencken—lined the walls. Cato had headquartered in San Francisco because, first and foremost, this was where Crane wanted to live. But there was also something apropos about establishing the libertarian beachhead far from the den of corruption and compromise that was Washington.

A converted warehouse down the street, where Rachmaninoff
concertos boomed from a stereo and scruffy libertarian activists huddled over secondhand desks, housed the distinctly shabbier offices of two other Koch-funded operations, along with the California headquarters of the Libertarian Party: Modeled on Students for a Democratic Society, the newly established Students for a Libertarian Society had ambitions of fomenting a similar movement of campus activism around libertarian issues.
Libertarian Review
, a magazine that Charles had purchased in early 1977, also occupied the warehouse space.