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

by Daniel Schulman

  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.

  Charles had placed the magazine under the editorship of Roy Childs, a keen libertarian thinker and erudite essayist (and the source of the earsplitting Rachmaninoff). Childs had first struck up a correspondence with Charles’s philanthropic gatekeeper George Pearson in 1969, when he was a twenty-year-old college student at S.U.N.Y. Buffalo. He later managed to convince Charles to buy Libertarian Review and install him as editor, even though Cato had already started publishing a magazine of its own called Inquiry. While Inquiry’s target audience was libertarian allies on the Left, who shared similar views on issues such as civil liberties and foreign policy, Childs pitched a libertarian answer to National Review. “Roy’s message to Charles,” recalled Jeff Riggenbach, Libertarian Review’s executive editor in the late 1970s and early 1980s, “was that it takes a while to do this, but in National Review we see the benefits of doing it. If you stick with it and build the magazine gradually it will over time make a difference in the culture, it will over time turn people’s minds around.”

  Almost overnight, San Francisco became a hub of libertarian organizing, and the movement’s orbit now revolved largely around Charles Koch’s seemingly bottomless bank account. Charles closely monitored the operations he funded to ensure his investments would eventually yield the dividends he sought in transforming the political culture. “His rationale was that if he was funding an organization, he had the right to see that it was effective,” said Richard Wilcke, who in the late 1970s and early 1980s ran the Koch-created free-market advocacy group Council for a Competitive Economy. “It was not the intention to create sinecures for shiftless ideologues.” Charles jetted to San Francisco regularly to tour the offices of the outfits he was underwriting and to strategize with department heads. When he was in Wichita, he remained in daily contact with Crane.

  “His whole idea was that these institutions would become self-sustaining,” said Justin Raimondo, who worked for Libertarian Review and Students for a Libertarian Society. “They had to start making some money back. He was giving them seed money. He was pretty penurious, given the scale of his wealth, which of course was huge. He was watching pennies.” (In one case, Charles grew angry with Crane for approving a $300-per-month pay increase for Childs, which he viewed as exorbitant.)

  Charles’s libertarian comrades learned quickly that he was not a typical corporate fat cat. During the first board meeting of the Cato Institute, the participants broke for lunch at the Rusty Scupper, an upscale seafood restaurant nearby. Notably absent was Charles, who was spotted at the greasy spoon down the street, where Cato’s young, thrifty staffers frequently congregated for lunch. Charles sat alone at a corner table with his burger, Coke, and fries. He was lost in a copy of Hayek’s The Constitution of Liberty.

  Charles’s everyman persona surprised fellow libertarians in different ways as well. During a small conference on Austrian economics held in Scotland, Charles, the economist Walter Block, and their wives were chatting on a street corner when a surly drunk stumbled up. Sidewalks are for walking, not standing, he growled. A stunned Block watched as Charles calmly and wordlessly stepped out in front of the trio and raised his fists in the boxing stance.

  But it wasn’t just Charles’s down-to-earth demeanor that intrigued libertarians; it was also the fact that one of America’s wealthiest men shared their radi
cal views. “I was used to the idea that anyone who ran a big business and had a lot of money was a Republican,” Riggenbach said. “And of course, in recent years, Charles has looked more and more like that profile. Back then he seemed to me to be just as radical as Murray Rothbard or Ed Crane. He seemed to me to be an anarchist.”

  “He was contemptuous of government on every level,” Riggenbach continued. “It was not just on economic issues. He was not disposed to look on the people who later formed the Tea Party as his allies. He was instead disposed to look on them as people who were too terrified of the results of their thinking to pursue their ideas where they naturally led”—that is, to a worldview closer to anarchism than conservatism.

  Charles certainly talked the talk. Asked during a gathering of Wichita Rotarians in the late 1970s to describe his view of government, he responded, “It is to serve as a night watchman, to protect individuals and property from outside threat, including fraud. That is the maximum.” When Childs put together an issue of Libertarian Review devoted to strategy in August 1978 (“Toward the Second American Revolution,” was splashed on the cover), Charles contributed an impassioned, four-page essay that served as a libertarian call to arms to the business community, which he chided for hypocrisy. “How discrediting it is for us to request welfare for ourselves while attacking welfare for the poor,” he wrote. “Our critics rightfully claim that we want socialism only for the rich.”

  He decried corporate leaders who preached “freedom in voluntary economic activities,” but simultaneously called for “the full force of the law against voluntary sexual or other personal activities.” And he blasted the business community for buying into “the fallacious concept that the corporation has a broad ‘social responsibility’ beyond its duty to its shareholders.”

  He urged businessmen to resist the temptation to seek change via the Republican Party. “If this is our only hope then we are doomed,” he wrote. “The Republican Party is the party of ‘business’ in the worse [sic] sense—in the sense of business accommodation and partnership with government.” There was no way to “destroy the prevalent statist paradigm” through a political party that had helped to perpetuate it.

  Just as in the early 1960s, when the John Birch Society’s Robert Welch and his conspiracy-crazed followers caused hand-wringing among influential conservatives, the radical philosophy espoused by Charles, Murray Rothbard, and their fellow libertarians provoked similar unease on the Right. Once again, William Buckley’s National Review took it upon itself to protect the virtue of conservatism.

  In 1979, the year after Charles’s jeremiad against establishment conservatives, the magazine took aim at the movement and its main benefactor in a pair of articles devoted to eviscerating libertarianism.

  “Who is against liberty? Or prosperity, which, we are told, comes as a bonus with it?” wrote social critic Ernest Van Den Haag in the magazine’s cover story. “But how to get, and keep, both? The libertarian answer is beguilingly simple: The government is the problem, not the solution. Do away with it, and we will all be free and prosperous. Society has been wrong for the last few thousand years in making laws and demanding obedience to them. Murray Rothbard will put it right.

  “The character of the libertarian movement,” Van Den Haag concluded, “is now such that all true lovers of liberty must oppose it.”

  A separate article focused on Cato, which the magazine derided for falling in with the New Left foreign policy milieu, and it took a swipe at the sanity of the fellow bankrolling the whole mad endeavor, describing Charles as “a man whose wealth and devotion to privacy are straight out of the Howard Hughes legend.”

  By now Charles had begun to come under attack not just from outside the libertarian movement, but from within it as well. One of his most vocal critics was a mustachioed gadfly named Samuel Konkin III, who dressed in black in solidarity with his anarchist forefathers. A Dungeons & Dragons enthusiast, he embodied the movement’s sci-fi-geek side—the kind of eccentric activist getting in the way of Charles’s efforts to bring respectability to libertarianism.

  Konkin had watched in horror as his compatriots slavishly cozied up to the Wichita businessman in pursuit of funding. To Konkin, these Koch supplicants risked sullying the movement as the tool of an oil baron. He saw glaring hypocrisy in a movement of individualists, whose primary goals included rolling back a culture of government dependency and control, subjugating themselves to the dependency and control of a business mogul. He coined the term “Kochtopus” to describe the many-tentacled operation funded by Charles, whom he accused of trying to “buy the major Libertarian institutions—not just the Party—and run the movement as other plutocrats run all the other political parties in capitalist states.”

  The libertarian denizens of Montgomery Street paid little heed to such crankery, which they attributed mostly to the jealousy of those who had not managed to ingratiate themselves with Charles. This crowd of activists, scholars, and journalists considered themselves proud appendages of the “Kochtopus” and even adopted Konkin’s derisive term as their own.

  By the late 1970s, the movement—once small enough to squeeze into the living room of Murray Rothbard’s Upper West Side apartment—seemed finally on the march. “It was an exciting time, indeed,” remembered the economist Dominick Armentano. “There was plenty of debate about ideas and policy to be sure but most of the concern was over strategy. How aggressively do you push ideas, especially radical ones like libertarianism? Which alliances advance your cause and which ones should be avoided?”

  Gaining a firmer toehold in politics seemed the next logical step for Charles and his allies. And there was some evidence that libertarian ideas were resounding with the electorate. In California’s 1978 gubernatorial race, which pitted Democratic incumbent Jerry “Moonbeam” Brown against the state’s Republican attorney general, a libertarian candidate managed to capture almost 400,000 votes, more than 5 percent of the total. Thanks to his impressive showing, Ed Clark, a wonkish and somewhat stiff oil industry attorney, became an early favorite as the Libertarian Party’s presidential candidate in 1980. Charles and Cato’s Ed Crane—who now ran both the think tank and the Libertarian Party—saw the upcoming election as an opportunity to showcase libertarianism to a national audience on a scale that hadn’t been seen before.

  Ahead of the party’s 1979 nominating convention, Charles was asked to join a possible Ed Clark ticket as the Libertarian Party’s vice presidential nominee. With a company to run—and a deep aversion to publicity—Charles declined, but he cajoled Bill and David, both thirty-nine and working for Koch Industries, to consider running. Neither had gotten very involved with libertarianism, but because of Charles’s passion for the movement, they had both donated to the causes he supported.

  There was an ulterior motive to running a Koch. A loophole in the Federal Election Campaign Act allowed candidates to donate unlimited funds to their campaigns, circumventing individual contribution limits (which libertarians didn’t believe in to begin with). Staked by one of the Koch brothers, the Libertarian Party could mount a true national campaign.

  Bill considered the proposition, but ultimately begged off. David, however, went for the idea, inspired by the 1976 presidential campaign of Roger MacBride. “Here was a great guy, advocating all the things I believed in,” David said in 1980. “He wanted less government and taxes and was talking about repealing all these victimless-crime laws that had accumulated on the books. I have friends who smoke pot. I know many homosexuals. It’s ridiculous to treat them as criminals—and here was someone running for president, saying just that.”

  In mid-August 1979, a few weeks before the party’s nominating convention, David circulated a letter to the more than 500 Libertarian Party delegates announcing his candidacy and openly acknowledging it would allow him to pour money (he pledged “several hundred thousand dollars” to start) into the campaign.

  David’s candidacy caused some grumbling in the movement among libertarians who
, though grateful for the Kochs’ support, feared being viewed as a subsidiary of Koch Industries. Some also expressed concern about the optics of a businessman effectively buying the Libertarian Party’s nomination. “I was disturbed by it,” said Robert Poole, then the editor of the libertarian Reason magazine. “David Koch has not been active in the party. But everyone made the calculations.… He was a Libertarian, he agreed with us, he was offering money we couldn’t otherwise get.”

  In early September 1979, the Libertarian Party’s nominating convention kicked off in Los Angeles, as a thick shroud of smog enveloped the city. The Bonaventure Hotel, a futuristic-looking trio of cylindrical skyscrapers in downtown L.A., teemed with hundreds of libertarians from every strain of the eclectic movement: Miseians and Hayekians, anarcho-capitalists, shaggy-haired peaceniks, and black-clad anarchists.

  It wasn’t Madison Square Garden, where the following year Ted Kennedy would deliver a Camelot-worthy concession speech, or Detroit’s Joe Louis Arena, where at the last minute Ronald Reagan selected George H. W. Bush as his running mate after entertaining a “co-presidency” with Gerald Ford, but the libertarian convention was momentous in its own way. Donning patriotic skimmer hats and waving CLARK FOR PRESIDENT signs, here were more than two thousand people committed to eviscerating the political status quo and, in some cases, the government itself.

  On September 9, Roy Childs, the heavyset and bearded editor of Charles’s Libertarian Review, looked out on the audience from the dais in the ballroom. He was among a trio of speakers who would be endorsing David’s candidacy. Unifying libertarians was like herding cats, and the lingering reservations about David had to be confronted head on.