The Science of SuccessThe Science of Success, by Charles G. Koch, is going to be a business classic. If you're in business, especially if you want to make your business work better you need to read this book. Check that. You need to read and re-read and re-read this book. And you need to try out what you learn in experiments in your workplace. That was one of the first things I got from this book, the idea of seeing trials of new ideas as "experiments." It's a powerful concept because it immediately washes away all the "risk of failure" that makes it hard to try new things in so many companies. Koch's idea is amazingly simple. When you try something new, you see your trial as an experiment. Then you measure the results and learn from them. Whatever you learn, you've succeeded. It's like that old story about Edison trying a gazillion different things as a filament for the electric light bulb he was try to invent. Time after time he tried. And, one after another, the filaments he thought would work didn't. "I haven't failed," Edison told a person who questioned how he could stand all that failure. "I've found a gazillion things that don't work." One reason this is a great book is that there are those incredible insight like that all through it. You find yourself thinking, "Wow. That sure makes sense." You reach for your highlighter. You drape the book in sticky notes. The book is also great because it reminds you of basic concepts that you knew once. For example, you probably learned about "sunk costs" and "opportunity costs" in college. Koch will remind you of the definitions, but he does something more and more important. He shows you how to use those concepts in your decision process. Let's see how he does that. On page 33 he reminds you that a sunk cost is "an unrecoverable past expenditure." And he tells you "Such costs should seldom be taken into account when determining what to do in the future because, other than possible tax effects, they are irrelevant to what can be recovered." The money you put into developing that new product? It's a sunk cost. It's not an investment. You won't get it back. That means that it's irrelevant to whether or not to kill the new product or put more money into marketing it. Koch shows you how the economic concepts of sunk cost and opportunity cost ("the value of the most valuable alternative that must be foregone to undertake a given act") should affect your decision making. Another reason this book is great is that it brings together a very intelligent business owner's lifetime study of economics and human behavior and how they apply to making a company work. This isn't an academic treatise either. Koch has used these principles to run his company, where he is the primary owner. You many not be familiar with the name Koch Industries, but you surely know some of their brand names like Stainmaster, Dixie Cup, and Georgia Pacific. Koch Industries is the largest private US company. It got that way, in part, because Koch used the principles in this book to run the company. In 1960 Koch had revenues of about $70 million. In 2006 they were $90 Billion. In other words, this is not just theory. Koch has actually, truly, really put his money where his ideas are. In The Science of Success, he lays out what he's learned over a lifetime of study, thought and, more important for you, experimentation. Here's how he's structured the book. Chapter 1 is short history of Koch Industries. You'll learn about how the company evolved and get introduced to the experiments that worked and many that didn't. Chapter 2 is about Market-Based Management (MBM), which is what Koch calls his system. That's something of a misnomer. He's not referring to "market-driven" management. "Market-based" refers to "based on free market principles." This chapter also introduces the Science of Human Action. The Science of Human Action is "the study of how humans can achieve their ends through purposeful behavior." It's the action steps connected to economic principles and psychological truths. In the chapters that follow, Koch defines five dimensions along which you apply MBM. They are Vision, Virtue and Talents, Knowledge Processes, Decision Rights, and Incentives. There is a wealth of good ideas under every single heading. There are two downsides to this book. At times, Koch writes like the engineer that he is, but the ideas and concepts pull you right through the rough spots. The other downside is a result of the value that's here. It took Koch a lifetime to write this book and you won't get more than a fraction of the potential value from it unless you read it more than once. I'm staring my fourth read. No matter what business you're in, no matter where you are in your career, you should read this book. It's a new business classic, on a par with Peter Drucker's Managing for Results. It's got the same strength of intellectual underpinnings, the same solid logic, and the same rich simplicity. The biggest difference is that The Science of Success is written by a man who built a great company using the concepts he's writing about. To see what other folks thought of this book, or to purchase it from Amazon, click here.
 This review first appeared in the Three Star Leadership Blog.
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