Tuesday, August 19, 2008

Agribusiness Students at Koch Industries

Each year, the largest private firm in America, Koch Industries, hires our some of our brightest agribusiness students for both full time jobs and internships. In fact, Koch hires only our best students, causing me to suspect that Koch particularly values the training our undergraduate program provides. To better understand Koch's appeal to our students, and to investigate what our graduates/interns are doing in the workplace, this summer I paid these students a visit at their cubicles.

After my visit I concluded that if I had to describe the one career our department best prepares students for, it is a career at Koch Industries.

With the headquarters located in Wichita, KS, Koch deals in numerous enterprises; including fertilizer, refining, chemicals, polymers, and commodity trading. Like the BASF slogan, they don't make a lot of the products you buy, they make a lot of the products you buy better.

The headquarters gave the impression of a giant brain. Floors stacked upon floors of talented college graduates working under Charles Koch's Market Based Management philosophy, each person was an enthusiastic neuron working in harmonious diligence in the noble pursuit of profits ("noble pursuit" not said sarcastically). For a change, I learned from my former students.

Lindsey's Lesson: The Importance of Supply and Demand

Lindsey Kuzma, shown to the left, is a market analyst specializing in the market for base oil, which I think is a by-product of oil refineries. Koch knew what they were doing when they hired her. I didn't know her as an undergrad but I have seen her performance and wish she had taken my classes! She spends most all of her time in Excel, studying base oil prices, with a particular emphasis on long-term fundamentals. Each week, she participates in a Supply and Demand Meeting where they discuss the supply and demand of base oil. She is expected to understand the big picture of the base oil market, where the market is heading, and must communicate this understanding to others clearly - that is her job! So when teaching supply and demand, and you feel the need to motivate its importance, simply introduce the students to Lindsey Kuzma!

Myriah's Lesson: The Importance of Studying Prices
Most every undergraduate attends lectures regarding the Law of One Price; describing how the price of a commodity should behave across different regions, how to predict price movements, and how to take advantage of price discrepancies.
This is not just academic curiosity. Myriah Johnson conducted an internship in Koch's fertilizer division. One of her jobs consisted of observing fertilizer prices at various locations, accounting for transportation costs between those regions, and comparing the regional net prices to the New Orleans fertilizer price. They call this "net-back analysis." The results of such analyses are used to determine how to set forward contract prices, where to expand their fertilizer market, and dictate storage decisions - among other uses.
Myriah also built economic models to help determine when farmers would switch the form of nitrogen they apply (e.g. liquid or solid nitrogen) to aid Koch's nitrogen storage decisions.
This type of price analysis has been taught for decades in agricultural economics classes. Thanks to Myriah, we know such analyses are still in style!

Jeff's Lesson: Understand Finance and Economics Well, and Explain It Even Better

Jeff Clark had worked at Koch for several years and had more information to provide about the types of projects they perform and the methods they use. I did not have the pleasure of knowing Jeff when he was at OK State, but I was glad I got to meet him during this visit. The guy is smart - really, smart - and articulate. Within five minutes you learn more than a feeble head like mine can hold!
Jeff works in the carbon commercial development portion of Koch, which includes projects like assessing the feasibility of purchasing coal, sulfur, and cement companies. How do they assess the feasibility of company purchases? By constructing economic and financial models. They calculate net present value regularly. They use Excel to conduct "what-if" scenarios. They employ many of the topics taught in agribusiness management and agricultural finance classes. I especially appreciate Jeff's statement that, "around here, you have to think like an economist."
Moreover, Jeff stressed the need to communicate the basics and the results of such analyses clearly. For example, the ability to describe a project succinctly is a necessity. This reminded me of all the memos I wrote in my business communications class, where I learned the challenge of combining information and brevity. Financial analyses at Koch are often sent up a review channel for the upper levels to consider. At each higher rung in the ladder, less information must be presented, less time consumed in the decision, yet at each higher rung the decision becomes more crucial. Understanding the key elements that should be passed along and expressing it clearly is essential to giving any quantitative financial analysis its chance of coming to contribute to the company.

Randis' Advice: Learn to Network
Randis (shown left) was one of my favorite students, who combines a sharp intellect with a contagious zeal for life. Most anything she says, I believe. Randis stressed the importance of networking in obtaining a prestigious job such as the one she fills at Koch. I asked her to articulate what she meant by networking. I had this strange view of networking as being an obnoxious sycophant at cocktail parties, but conjectured that was not the case. Academics' need for networking is not as strong as their need for focus, so networking is not something I know much about.
Randis described networking as doing little things to keep in touch with people. Sending Christmas cards is an example. It is all about not letting other people forget about you. It also entails simply being friendly. Sending a nice email for no good reason, dropping a compliment, asking advice in a manner that illustrates you respect a person: these are all networking skills.
Networking is not something we focus on in college (except for our excellent sales class taught by Kim Anderson). People like Randis are smart enough to figure out networking on their own. I wonder, though, if I could help other students without Randis' natural abilities by spending at least some time on networking?

Shea's Lesson: Hold Onto Something, This Ride is Just Beginning!
Some students are under the false impression that they can stop thinking, stop learning once they get out of college. Shea would quickly tell these students they are in for a rude awakening!
Shea Griffin is an admirably smart person. I wonder if I could even make a test hard enough for her. More than just books-mart, she is naturally clever and perceptive. I know exactly why Koch hired her, and I know Koch was lucky to get her.
Yet Shea was quick to relay how much she had to learn in her newly acquired job as a market analyst at Koch, and the intellectual challenges that everyday business can impose. In school, we told her what she needed to know, she studied it, she answered the questions correctly, and she made her A grade. At Koch, she had to do more than answer the question, she had to figure out what that question was! She had to think: critically and nimbly. We discussed how college could change to prepare students better for these tasks, but between the two of us, did not arrive at any tenable conclusion.
Koch hired Shea because Shea was an academic talent, and Koch knew she would be able to think her way through anything. Our department didn't make Shea. However, our assignment of grades revealed Shea's talent, and Koch jumped on it.
The lesson is that when students graduate they are not expected to simply apply what they were taught. They are expected to learn what they were not taught. To identify the salient questions, and to diligently investigate those questions.
Often in class we frustrate students by making them think for themselves - by making them identify the question - by making them decide how to approach the problem - by refusing to identify the one correct answer, because there rarely is one correct answer. When students show you their frustration, tell them Shea's story. Perhaps they will appreciate your provocations!
A Lesson From All: Become Proficient in Excel!
This was a great visit. I become friends with most all students, and I take personal joy in seeing them happy and successful. They were truly happy working at Koch (I asked them in private just to make sure they were telling the truth). Koch knows they are smart students, and smart students need a challenge, and need control over their own projects.
When I asked Randis about some of her daily tasks she proceeded to tell me about several companies that she "owned." I didn't understand what she meant by "owned", so I asked. It turns out that when Koch gives an employee a project, they tell the employee that they "own" that task. Randis, it turns out, was in charge of overseeing the finances of several companies owned by Koch. It gave her a sense of importance, it gave her work a sense of importance, and I believe motivated her.
I interviewed twice as many people as I mentioned by name here. Others from our department include Amber Houser and Jeff Steichen. If there is one major lesson I took all my interviews it is the importance of Microsoft Excel. Every person I talked to spent a majority of their time in Excel. Remember earlier I stated that Koch headquarters feels like a giant brain? Continuing with this metaphor, Excel is the "software" this "brain" operates. An undergraduate program almost cannot integrate Excel enough.
When the students were asked the Excel functions and formulas they use, one that surprised me was pivot tables. I still do not know what they are, but I plan to learn and teach them. To my relief, Joe Schatzer in our department teaches them now.
That made me realize why our department is so effective. We are academics, and we love learning for the sake of learning. Yet we also care what our students will do when they graduate, and strive to prepare them well. I was not aware of pivot tables but Dr. Schatzer was. My visit reassured me we do a commendable job. There are areas for improvement, of course, but I am proud of our department - yet more proud of our students.

I would like to thank Koch Industries for my visit, Randis Galloway for coordinating my visit, and Shannon Angle-Rugg for her close ties to my department.