Andy Kessler

As bizarre as this sounds, one of the most valuable innovations in technology over the last several decades is Facebook's "Like" button. That's what has propelled the company to a galaxy-orbit valuation for its forthcoming initial public offering, filed Wednesday.

This is not only because the word "like" is, like, the identifying word of an entire generation. It's because computing has evolved beyond just taking directions from humansâ€â€and instead is cozying up to us and sniffing out our emotions and intent.

Advertisers are drooling. Procter & Gamble CEO Robert McDonald, while announcing a layoff of 1,600 people, said this week that the company is trimming its $10 billion annual ad budget as well because, he told analysts, "things like Facebook and Google" can be "much more efficient."

Computing's business model has evolved from selling hardware and software to enticing millions of users to one spot and then selling them something else. The industry has moved from the cool business of directly selling innovation to the age-old media model of selling adsâ€â€a $500 billion business.

And behind all the glitz, that's what Facebook is. 

Read the entire piece here.

http://online.wsj.com/article/SB10001424052970204485304576640962366762204.html

I figured before heading out I would wait for the fog to lift to shine some light on the Occupy San Francisco annex of Occupy Wall Street. I'm not sure it ever did. What many refer to as the People's Republic of San Francisco is socially liberal and economically neutered. The heaviest traffic is leaving the city in the morning and coming back in the evening. It's a bedroom community that has effectively banned both McDonald's Happy Meals and foie gras and has sadly turned into the pretty but growth-deprived stepsister of San Jose.

Still, who doesn't love a movement? Needing something to wear to an occupation and in bigger need of some protest mojo, my first stop was the corner of Haight and Ashbury, the mecca of movements, the center of the '60s hippie habitat. The streets were pretty emptyâ€â€usually this area is filled with homeless, stumbling along the block lined with body piercing shops, vintage clothing stores and "smoke" shops.

I found the Jimi Hendrix shirt I was looking for, but no signs of any protests, although I was accosted by four aggressive pink-T-shirt-wearing folks from Planned Parenthood and a Hasidic Rabbi with a lulav and etrog. I dove into the only sign of civilization, the Ben & Jerry's ice cream on the corner, and ordered a small Stephen Colbert Americone Dream, which cost a small fortune.

OccupySF has taken up at Justin Herman Plaza, at the bottom of Market Street, an irony probably lost on most. It's nestled between the Financial District and the recently renovated Ferry Building by the bay. It's also a block away from the Federal Reserve of San Francisco. Both are filled with sleeping bags and dreadlocks and body piercings and the pungent odor that often accompanies this scene. And signs. And more signs. Like most, I'm confused by what Occupy Wall Street is all about. Some of it is a place to hang out for the unemployed and homeless. Some of it is a party. The Haight-Ashbury crowd moved 40 years into the heart of San Francisco.

Read the rest here.

 
He invented the pacemaker. Wasn't he a benefactor of humanity even before he paid his taxes?

Wilson Greatbatch, 92, died this week a wealthy man. Investing $2,000 of his own money way back in 1958 and tending a garden to feed his family, Greatbatch invented the pacemaker. He licensed it to Medtronic, a company now valued at $36 billion that sells and continues to improve pacemakers and defibrillators. Greatbatch did his part to improve society, create wealth and increase, quite literally, our standard of living. But apparently that's not enough. President Obama suggested under a Cincinnati bridge this month that "if you've done well . . . then you should do a little something to give something back."

Give something back? Greatbatch did well specifically because he provided something that society needed. His and Medtronic's profits are what you and I are willing to pay above costs for these life-enhancing devices. This is true of Apple iPhones and Genentech Herceptin and Google Maps and Facebook Likes.

Ever since the mid-19th-century era of so-called Robber Barons, this country has had a philosophical divide over the role of business in a democracy. It's time to set the record straight.

History has proven that the road to increased standards of living and wealth was built on productivityâ€â€doing more with less. It was the Industrial Revolution that got us out of the growing fields and into factories, which allowed us to pay for roads and teachers and civil servants. And now the move out of factories into air-conditioned offices is creating anxiety. It shouldn't. Labor replacement is productivity. James Spangler's vacuum cleaner. The Walker brothers' dishwasher. Clarence Birdseye's flash freezing. DuPont's Kevlar. And John Simpson's guidewire catheter for angioplasty and heart stentsâ€â€the list goes on. Each invention generated wealth because it improved our lives, not because someone "gave back."

Aside from outsized government-assisted profits (think telecom, asbestos removal and Derek Jeter), it is the delivery of these productive goods and services that increases our wealth. The inventors get wealthy but society gets wealthier. No forced giveback needed.

Read the rest here.

I've written a few pieces on suggestions for job creation.

One focused on the stimulus: December 25, 2009 - WSJ: Put Down That Shovel

and another focused on opportunity: August 8, 2011 - WSJ: Five Ideas to Kick-Start Job Creation

Below is a handy-dandy guide for President Obama's September 8 Jobs Speech so you can score at home. Put a check mark next to announced programs - win valuable prizes.

With double counting, there are really 10 ideas.

Give one point for each mentioned.

Subtract one point for:

IMHO, any positive number means we head towards 8% unemployment by Election Day.

http://online.wsj.com/article/SB10001424053111904875404576530460630468114.html

If you want to know the secret of Steve Jobs, recall his advice to inventor Dean Kamen upon seeing the original version of the Segway scooter: "I think it sucks," he said. "Its shape is not innovative, it's not elegant, it doesn't feel anthropomorphic . . . There are design firms out there that could come up with things we've never thought of, things that would make you s*** in your pants."

At the end of the day, hardware is just a bunch of cold transistors and software code is just a bunch of bits to control them. But clever code can change the world and make us productive in ways we never imagined. Yet even that's not enough. As Hewlett-Packard and Nokia painfully know, everyone eventually has access to the same transistors, the same memory and displays and processors. All you can hope for is maybe a 12-18 month lead. Steve Jobs's magic was to marry clever code with a fanatical devotion to aesthetics, rare in the tech world. It worked, in spades. Now we pay huge premiums for Apple products made up of commonly available components.

That's right, we shell out $600 for $200 worth of sand. And here's the neat parlor trick. We actually feel good about it! In techland, there's no rest for the weary, better processors and storage and networks are daily creations. Mr. Jobs looked over the horizon and figured out not only what's next, but how to shape it into devices that all at once stirred a cognitive soup of psychology, behavior science, philosophy and for many, a spiritual awakeningâ€â€an iPhone as a cortexial extension of ourselves. Weird, but true.

How did he pull this off? By figuring out whathe wanted and controlling the whole process until he got it. Very few buttons, like Mr. Jobs's clothing. But more importantly, don't just touch your computer, feel it. Let the graphics and icons simplify life's complexities. Let your fingers flow over the glass instead of peck at it. Speak to it. Use your body and motion to sway your computer until it moves you. Until you are one. OK, I got a little carried away, but admit it, it's hard to unplug.

Read the rest here:

http://online.wsj.com/article/SB10001424053111903366504576490064002634754.html

Now that the debt-ceiling gyrations are over, the Obama administration is "pivoting" to its biggest problemâ€â€jobs. Unemployment ticked down to 9.1% in July, but the real unemployment rate, including discouraged workers, is still 16.1%. The stock market is not pleased. Why? Because the president's calls for "patent reform" and an "infrastructure bank" won't move the needle. It's time to go big or be sent home.

Can we agree that throwing money at the problem doesn't work? The 2009-10 stimulus package wasted more than $800 billion. The Federal Reserve's frantic quantitative easing, QE1 and QE2, printed money and bought mortgage paper on the street, helping banks and financial institutions recapitalize, but it hardly created jobsâ€â€not lasting ones anyway. Sadly, the economy grew at a subpar 1.3% rate in the second quarter instead of the typical 5% rocket out of a recession. What's missing is not capital, it's opportunity.

As Otter famously said in "Animal House," this situation "absolutely requires a really futile and stupid gesture be done on somebody's part." Well, at least a gesture that might appear stupid and futile but in reality kick-starts whole new industries and massive job growth. And all it will take is the stroke of a pen. Here are some instant job creators:

Read the rest here:

How much for the island of Mykonos? The Mexican standoff between European banks owning Greek debt and Greek taxpayers needs fresh thinking. I'm convinced that the only way out of Europe's financial crisis is for Germany to essentially own Greece.

How did we get here? Start with this: European accounting rules allowed Greek and other sovereign debt to be viewed the same as cash on European bank balance sheets. These bonds count toward a bank's capital base and new loans can be written against them without changing a bank's loan loss reserves.

Given this preferential treatment, and insured against default with good old credit default swaps, way too many increasingly worthless Greek bonds are now stuck inside German and French, and of course Greek, banks. Because of out-of-control government spending and entitlements, some half a trillion of Greek debt, 150% of the country's gross domestic product, is scattered throughout the world.

Of course Greece wants to default so it can start over again. Who wouldn't? But the Germans won't let them default, as that (and subsequent defaults in Italy, Spain and Portugal) would send virtually every European bank into insolvency. I don't know if these banks are carrying Greek debt at face valueâ€â€they won't say. But a good bet is the bonds are not marked to market, which today might be 50 cents on the euro. U.S. insurer Aflac has already written down almost $1 billion in losses from sales of European debt. A stress test of Europe's banks is due in July. We'll see who fesses up.

Read the rest here.

http://online.wsj.com/article/SB10001424052702304066504576345740316053266.html

It's no coincidence that last week, as the minutes from April's Federal Reserve meeting suggested interest rates won't go up for months or even years, Web professional network company LinkedIn went public at $45 a share. Its stock zoomed past $100 per share and settled at $94 on the first day. This valued the company at $9 billion, 30 times sales and 666 times earnings.

Yandex, also known as "Russia's Google," started trading on Monday and is now worth $10 billion. That's a lot of rubles.

Overvalued? Undervalued? Stocks are worth whatever the market says they are worth. On Wall Street, perception becomes reality, though often fleeting. Of course, it's not a real market. First, less than 15% of most IPO shares trade freely for the first six months (by longstanding practice, the rest are locked up). Worse, the Fed's current near-zero interest rate policy distorts everything.

Let's go back to fundamentals. Put simply, a stock is worth the sum of what investors think it will earn in the future discounted back to today. No one really knows a company's earnings, its growth rate, or what discount rate or risk adjustment to apply. That's what makes markets such a wild and crazy rideâ€â€stock prices change minute by minute. Industry news, new product uptake, interest rates, inflation, risks of recessions or wars or tsunamis all pose some form of risk and change collective perceptions.

The primary function of the stock market is to allocate capital to companies whose prospects it likes and starve those it thinks are past their prime. Yet these allocations and reallocations are based on guesses.

Read the rest here.

 

I've been using Feedburner for years to provide email notifications of blog posts.

I am canceling that service and going to use Twitter to send out notifications.

Click the twitter button to follow. Thanks.

http://on.wsj.com/j6JDf4

Should we care who owns the renowned New York Stock Exchange? Not really.

Right now, the Germans want it. In February, Deutsche Börse bid $9.5 billion for NYSE Euronext, only to be topped on April 1 by a combined $11.3 billion bid by U.S. exchanges Nasdaq and ICE. And yet, twice now, the NYSE has politely declined the higher offer, even calling it a "strategic mistake." That's a curious position to take, especially since a deal with Nasdaq would get rid of the only real competition for share listing.

Investors, not surprisingly, voiced their anger with management at the NYSE's annual shareholder meeting yesterday, questioning its preference for a bid that many believe undervalues the exchange.

But there's a more basic question worth asking: Do we even need exchanges anymore? It's been said that a stock exchange can only be as large as a voice can carry. On May 17, 1792, after years of shouting out on the street, a group of 24 prominent brokers met under a buttonwood tree at what is now 68 Wall Street and decided to move indoors, so to speak. They created the New York Stock and Exchange Board and vowed to "pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at least than one quarter of one percent Commission on the Specie value and that we will give preference to each other in our Negotiations."

This is classic collusion that, wrapped and hidden in regulatory language, pretty much exists to this day. But now technology has rendered the stock exchange as we know it obsolete.

Don't get me wrong. Stock trading is critical for capitalism. Stock markets provide price discovery, liquidity and the only real mechanism for capital allocation. When millions and billions of shares trade every day, based on news and innuendo about the future earnings power of corporations, a company's true value is discovered. Not always accurately, as markets are often missing information or have too much noise, but enterprise values rise and fall and do the dirty work of deciding who gets capital and who gets starved. Founders or early investors may sell shares of their company, thus unlocking and liquefying their risk capital to find more productive uses.

Read the rest here.

A picture is worth a thousand printed dollars!

The Dow Jones vs. Monetary Base:

Oil (West Texas Intermediate) vs. Monetary Base:

http://mises.org/daily/5047/Commerce-Is-a-Peoples-Revolution-Daily

The big-box book business has begun to crumble with the bankruptcy filing of book-selling behemoth Borders. The Chapter 11 filing indicates the company is looking to restructure its debts and continue on. But as in the case of bankrupt Blockbuster, there may not be anything to restructure, with both of these old-technology companies destined for liquidation and futures of little more than Wikipedia entries chronicling each company's past glories.

Old ideas are continually destroyed by life-changing entrepreneurs who take new ideas and make all of society the better for it. Joseph Schumpeter is smiling while the equity holders of Borders stock are crying.

Once upon a time Borders increased my standard of living; now it's Amazon, shipping books to my front door. No more wasting gas and time while a girl with purple hair and a nose ring swipes my card and bags my books. For others, convenience is loading their ebooks electronically.

In the big picture, the Borders BK is a beautiful thing. As opposed to General Motors and AIG, there will be no government rescue. The fertile minds and energies of the creative class are always busy making our lives better knowing they won't be protected like government's sacred cows.

Andy Kessler has met and knows many of the creators who have shaped our lives for the better. Their successes were not guaranteed by government contracts or sweetheart deals, Kessler explains. "The cool thing about all of these folks is that no one did them any favors," Kessler writes in his new book Eat People: Unapologetic Rules for Game-Changing Entrepreneurs.

Kessler has produced a few New York Times bestsellers: Wall Street Meat, Running Money, and The End of Medicine. Kessler self-published Wall Street Meat when he was told publishing a book takes a year by the traditional publishing houses. He published his novel Grumby last year, first for theKindle and then in hardcover.

Kessler writes in an engaging and conversational style, thinks outside the box, and draws inspiration from such divergent places as the leftist Rules for Radicals, a dopey 99% conference for creative thinkers, but most of all from the wisdom of the entrepreneurial geniuses he's met from his time in Silicon Valley and on Wall Street: like Mark Zuckerberg and Mark Cuban.

Read the rest of the review here.

 

Technology is eating jobsâ€â€and not just obvious ones like toll takers and phone operators. Lawyers and doctors are at risk as well

So where the heck are all the jobs? Eight-hundred billion in stimulus and $2 trillion in dollar-printing and all we got were a lousy 36,000 jobs last month. That's not even enough to absorb population growth.

You can't blame the fact that 26 million Americans are unemployed or underemployed on lost housing jobs or globalizationâ€â€those excuses are played out. To understand what's going on, you have to look behind the headlines. That 36,000 is a net number. The Bureau of Labor Statistics shows that in December some 4,184,000 workers (seasonally adjusted) were hired, and 4,162,000 were "separated" (i.e., laid off or quit). This turnover tells the story of our economyâ€â€especially if you focus on jobs lost as a clue to future job growth.

With a heavy regulatory burden, payroll taxes and health-care costs, employing people is very expensive. In January, the Golden Gate Bridge announced that it will have zero toll takers next year: They've been replaced by wireless FastTrak payments and license-plate snapshots.

Technology is eating jobsâ€â€and not just toll takers.

Tellers, phone operators, stock brokers, stock traders: These jobs are nearly extinct. Since 2007, the New York Stock Exchange has eliminated 1,000 jobs. And when was the last time you spoke to a travel agent? Nearly all of them have been displaced by technology and the Web. Librarians can't find 36,000 results in 0.14 seconds, as Google can. And a snappily dressed postal worker can't instantly deliver a 140-character tweet from a plane at 36,000 feet.

So which jobs will be destroyed next? Figure that out and you'll solve the puzzle of where new jobs will appear.

Read the rest here.

Mr. Kessler, a former hedge fund manager, is the author most recently of "Eat People And Other Unapologetic Rules for Game-Changing Entrepreneurs," just out from Portfolio.

This week’s Outside the Box is a little unusual, even for me. But it will be fun, informative, and thought-provoking. My friend Andy Kessler has written another irreverent, gonzo book called Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs. He has graciously allowed me to copy his introduction as this week’s missive.

Andy gives us 12 Rules and a Bonus Rule that characterize game-changing companies. They are: Scale, Waste, Horizontal, Edge, Productive, Adaptive, Eat People, Markets, Exceptionalism, Market Entrepreneur, Zero Marginal Cost, Virtual Pipe, and Highest Return. Find a company that embodies these rules early, and you get in on the ground floor of the next Apple or Microsoft.

Andy has done that. He turned $100 million into a billion for his investors, then got out more or less at the top. He is the real deal and I take every moment I can get with him. Now he just looks for the Next Big Thing for himself, but in Eat People he shares the rules for finding them, or even creating your own next big thing.

You can get his book at http://www.amazon.com/Eat-People-Unapologetic-Game-Changing-Entrepreneurs/dp/1591843774 for a cheap $13.48 or on your iPad or Kindle. You can read it in a few hours. Make notes. 

And get some of his other books while you are there. I think How We Got Here is one of the best, most readable books on the history of technology and the markets I have seen. His latest fiction work, called Grumby, takes a lopsided look at the whirl of technology as he shows how a product can go from nothing to millions almost overnight.

Read the following and think. And enjoy it.

John Mauldin

Now, a book on entrepreneurial wealth creation written by a Wall Streeter and former hedge fund manager might, at first blush, seem like one the average business reader would easily pass on. After all, wasn't it Wall Street and its various kin that had a great hand in destroying vast quantities of wealth? Wasn't it just a few weeks ago that Wall Street reported a record year of compensation and bonus payouts, while the rest of the employment world still struggles?

 

But on second thought, and taking into account the fact that we learn best from failure, maybe a book by someone with an inside understanding of Wall Street money (in all of its various forms), with a cut-to-the-chase message, take-no-prisoner attitude is exactly the book we need to read. If, that is, if we want to know why and how it is that in good times or bad, superstar entrepreneurs are able to not just start profitable companies, but overturn entire industries.

 

And that is exactly why I wanted to hear what Andy Kessler, author of the new book Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs, had to say. I wasn't disappointed. In fact, I loved the book. Not just because Kessler was there when Michael Dell was selling PCs out of his dorm, when Steve Jobs was getting thrown out of Apple, when Rupert Murdoch almost lost News Corporation, and before Mark Zuckerberg was Mark Zuckerberg... but because I'm starting a new venture and I'm a hound for this kind of valuable insight.

Read the rest here.

Don't worry: Andy Kessler's not encouraging cannibalism. In his provocatively titled new book, "Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs" ($25.95, Portfolio/Penguin), the one-time stock analyst, investment banker, hedge-fund manager and venture capitalist shares what he's discovered to be the secrets of success for start-up operations. We spoke with Kessler recently about everything from the importance of scale to why Bill Gates deserves our thanks.

So, what exactly do you mean by "eat people"?
The book is about a bunch of different things, but for the most part, it's rules for entrepreneurs on how to find the next big thing. I've got 13 of them, all based on my experience. What "eat people" is, besides being rule number seven, is the observation that most great pieces of technology that create massive amounts of wealth are about getting rid of jobs and getting rid of people in the work force.

But all we hear, from Congress to Main Street, are continuous calls for job creation. 

The good news is those old jobs are replaced by better jobs. Facebook is hiring,Groupon is hiring, Google, Twitter â€†these are all creators of productivity tools. Pick a sector and you can find a company using that technology that is creating jobs. The history of the U.S. economy is that it's not static. Every cycle, we destroy old jobs and ways of doing things, and wealth and great jobs are created.

Read the rest of the Q&A here.

from the blog Emancipation Propagation:

Andy Kessler points out that to build an iphone in 1972 would have cost 100 billion dollars; one bit of memory in 1972 cost one dollar, and today's iphone comes with 32 gigs or roughly 32 billion bits of memory. He does so to make the point that technology improves the quality of life at the cost of inefficiencies (inefficient companies and processes and technology are displaced and eliminated).  And that only the productive in a market economy will survive. 

Politicians can arbitrarily meddle with market economies so that the productive do not survive.  By imposing regulatory legislation politicians tilt the favor not to the productive but to the politically connected.

Listen below to the contrast in perspective of those that want to reward not the productive but the politically connected.

Andy Kessler: WNYC Brian Lehrer interview

 

Andy Kessler, former hedge fund manager and Silicon Alley investor, has published a book, Eat People, that every entrepreneur needs to read as a reality check on her business.

In Kessler's book, entrepreneurs will find a yardstick to measure the chance for success of their as-yet undeveloped concept, or more precariously, the one they've already birthed. Will your product reach thousands? Not bad. But not enough. It needs to scale to reach millions or billions to be important in a world in which technology cycles happen faster than even their inventors can keep up with.

Kessler answered my questions about entrepreneurship in the new century. His responses illuminate his book, which you should buy and read as soon as possible.

Read the Q&A with Mitchell York at entrepreneurs.about.com

 

New York City NPR affiliate. The comments are priceless.

4 Rules for Entrepreneurs Looking for the Next ‘Big Thing’

Now, after more than a decade into the new millennium, it is time to start seeing, acting, and doing things from a 21st century perspective. The rate of progress over the last century was more than ever recorded in the history of the human race, and with digital technology, progress will not stop. If anything, change will come faster. In order to face these changes, the willingness to look to the future is necessary, and understanding the need to eat people is one required tool to make it possible.

Andy Kessler provides a baker’s dozen of rules that provide much food for thought in Eat People: Unapologetic Rules for Game-Changing Entrepreneurs. But, foodie clichés aside, Kessler’s message is a wake-up call to those budding or wannabe entrepreneurs as much as it is to the slumbering moguls and managers.

If the concept of eating people is unsettlingâ€â€and that’s just the titleâ€â€the rest of the book is bound to rile complacency. Embrace the exceptional. Don’t be scared to “eat people†and eliminate jobs that are counterproductive. In the end, the new jobs created will require more skills. Those people who have been “eaten†may well come out ahead (if they choose) recycled and fit for some other purpose through retraining or by simply moving on and getting out of the way.

Read the entire review here.

http://www.techdirt.com/articles/20110130/00441512884/entrepreneurs-who-create-value-vs-entrepreneurs-who-lock-up-value.shtml

Andy Kessler is coming out with a new book today, called Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs, which I wholeheartedly recommend. It's billed as "rules for entrepreneurs," but it's more than your typical "rules" book, in that it really discusses many of the key underlying themes we talk about here on Techdirt all the time: things about abundance and scarcity, value vs. price, why zero marginal cost matters, the importance of "free," the nature of disruptive innovation and how value is often created in the tearing down of old monopolistic business models.

If you haven't read Andy's previous books, well, you should. But, this latest is typical Andy: packed full of thought-provoking insights, but done in a nice, easy (and quick) to read conversational manner. Like all of his books, this one made me stop and say "huh, I never quite thought of it that way... but that's exactly right" many times..

Andy Kessler Interview: Eat People and Other Unapologetic Rules for Game-Changing Entrepreneurs by Contrary Investing

Click here for transcript of the interview.

The Week in Geek is a terrific blog and newsletter from Prof. John Gallaugher of the Carroll School of Management at Boston College. He runs an annual Tech Trek for students through Silicon Valley and I'm often a stop in the tour. Sign up for his weekly newsletter at http://www.gallaugher.com.

From this Week's Geek: "TechTrek friend and class speaker Andy Kessler has another new book out  – “Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs“.  Kessler is a frequent contributor to the Wall Street Journal and is the author of several other books, including “Wall Street Meat†which covers his time as an award-winning tech stock analyst, and “Running Moneyâ€, a primer on how he turned $11 million into $1 billion as a co-head of Velocity Capital.  Disclosure, I blurbed the back cover of “Eat People†– the pre-release I reviewed last summer was hugely fun!  Unapologetic is the watch-word.  Don’t expect any “kumbaya†moments in a Kessler book.  But like all of Andy’s work, it’s a rollicking read that’s chock full of interesting examples and provocative analysis. I remain a big Kessler fan."

Professor Gallaugher's blurb is here: "Check your ego at the door! Eat People is a no-holds barred primer on what separates winners from losers in today's economy. Written by an insider with a killer track record spanning Wall Street to Silicon Valley, the book is a must-read for managers and investors."

Eat People: and Other Unapologetic Rules for Game-Changing Entrepreneurs

http://bit.ly/ggTcnS

Besides fun stories, the book is a set of rules or criteria to help entrepreneurs (or investors or job seekers) find the next big thing.

Rich Karlgaard, publisher of Forbes, was nice enough to say:

"American wealth happens when start-ups grow and get big. Andy Kessler takes us inside and reveals the secret of scale. Every entrepreneur should read this book. So should America's policy makers."

Pretty cool.

The Rules are here, but you have to read the book to figure out what they mean!

Scale Waste Abundance Horizontal Intelligence at the Edge Productive Adaptive Eat People Markets Exceptionalism Market Entrepreneur Zero Marginal Cost Virtual Pipe

and a bonus Rule: Be the Highest Return

Below is a short excerpt. Please let me know what you think.

Thanks, and if you find it worthy, help spread the word.

My Rule #7 is Eat People.

No, not like the 1973 Charlton Heston sci-fi cult classic Soylent Green about overpopulation in the year 2022 (“Soylent Green is people!â€). Instead, we need to eat worthless jobs. The best way to leverage abundance and scale, and to create productivity, is to get rid of people. Truly, the road to wealth passes through the graveyard of today’s jobs.

But who? Well…

There are two types of people in the worldâ€â€Creators and Servers.

Creators are at the top of the food chainâ€â€those who create productivity.

The Makes versus the Takes. The Vital Few. I don’t care if they are doing it themselves or work at a company that does. Productivity is preciousâ€â€we need to take it wherever we can get it. Someone is creating tools from what is abundant to make up for what is scarce.

A Creator might be someone writing a piece of code to automatically lay out magazines, getting rid of expensive graphic designers. Or designing a robot to pick and place a product into an Amazon box for shipping, getting rid of workers in a warehouse. Or writing algorithms for trading stocks in milliseconds, something humans couldn’t do even if you threw a thousand of them at the problem.

Figure out who to get rid of and you have found yourself a huge opportunity. (Hint: It’s Servers!)

Generically, Servers are the next tier downâ€â€those who provide service to the Creators. Creators have to eat, put their money somewhere, get haircuts, get their teeth fixed, forge contracts, and on and on. This requires legions of Servers setting up shop all over the place to take care of others. Society has built an entire service sector just to service the Creators, and, well, all the other Servers.

Often, Servers make decent money, enough to be part of the middle class. They are doing their part. Not knocking the ball out of the park, but not flipping burgers either. Servers earn all levels of pay, more or less in line with the value of the service they provide. Cashiers and baggers at the low end, followed by receptionists and furniture movers and painters, then plumbers and carpenters, then graphic artists and marketers, all the way to lawyers and doctors.

Shoeshine boy, paper delivery, I can go on and on. None of these create any wealth, because they aren’t creating any productivity, that is, more output per worker hour. If a clever shoeshine boy tied shoe brushes to a broomstick handle so he could shine six pairs of shoes at once, I’d happily bump him up to the rank of Creator.

The same is true of home builders. Homes are consumptive, not productive. A Take versus a Make. If you create better building materials or can build a neighborhood in an assembly line, then maybe you’ve got something productive. If not, you’re just milking Creators.

The vast majority of workers are Servers. They don’t know it, probably wouldn’t like being called that, but they are. Thank them for existing, as they do buy Creators’ stuff, but they are not Creators.

I label everyone who is not a Creator a Server. But even that is too broad a definition.

Sloppers are one mutation of Servers. There are legions that do nothing but move stuff from one side of things to anotherâ€â€across a factory floor, a warehouse, across town, or across the economy. They’re not Creatorsâ€â€just middlemen or brokers, marking up the price for slopping stuff aroundâ€â€milking someone else’s inventions and adding cost. And not just physical goods, Sloppers can even move information from one side of, say, a DMV counter to another.

I call them Sloppers because they’re just slopping stuff around without adding any real value. You can argue, perhaps, that by getting the right goods to the right place at the right time to make a sale, they are adding value. Maybe. Especially as more and more of output is services that can move at the speed of light down fiber strands. But they are still middlemen. Value? Not much.

A friend who works at a large multinational Japanese consumer electronics firm was pushing to increase productivity by putting in new systems that would make entire departments of people obsolete. “Before we invest in that automation you’re asking for,†the higher-ups said, “we’ll need the employee IDs of the people and jobs we’d be eliminating.†Can you imagine the politics once that list of employees appeared at a staff meeting?

Longshoremen are the ultimate Sloppers, moving things from ship to shore and back again. San Francisco used to be a vibrant port, with piers built on the Embarcadero along the edge of the city. But in 1971, the International Longshoremen’s and Warehousemen’s Union (ILWU) went on strike for 106 days to fight against container ships. Containerization had become all the rage in shipping. With huge cranes, you load a ship up with containers, which can be unloaded at the other end and hooked to tractor trailer trucks and driven to their final destination. No need for dock workers to unload ships box by box, by hand, with a few boxes inevitably ending up damaged, up to some threshold of “breakage,†pushed to the side as “bonuses†for the workers. The ILWU didn’t like the idea of unloading a ship in fifteen hours instead of over several days, and without a huge army of union-wage workers. The ILWU fought against “steady men,†crane operators hired directly rather than through the union. The ILWU eventually lost the strike and all the shipping business moved from San Francisco to Oakland across the Bay.

You’d think lessons would have been learned.

In 2002, I attended a baseball game in San Francisco’s Pac Bell Park, now AT&T Park. Looking out over the Bay, it was hard not to notice dozens and dozens of huge container ships, piled high and sitting low in the water. This time, the ILWU had gone on strike to protect the jobs of marine clerks, union workers at every gate who, armed with pen and clipboard, tracked container ships coming and going and handed out orders on paper slips to truckers telling them which container they were to pick up. What was the ILWU so worried about this time? Bar code readers and wireless technology and computers to track the containers as well as an ATM-like machine to provide truckers with their orders. Classic people-eating technology.

Technology eats people. Someone inevitably complains, but progress cannot be fought for long. Creating wealth means finding those jobs to eat.

Add to the mix of people all the overhead in getting something to market. All the government workers at the Department of Commerce, the Department of Energy, Department of Education, the Federal Trade Commission, and on and on. Buildings full of people who don’t add much if any real value or help create productive wealth; they often just burden the system with costs. Don’t mistake them for plain old Servers as they don’t provide any useful service, just a cost. Sure, you gotta have them up to a point, but in no way are they increasing output or adding anything to the productivity stock of society.

Government employees are a unique bunch and almost all are Sloppers. I was fortunate to have a conversation with author P. J. O’Rourke. And not just author (I’ve read all his books, Holidays in Hell and Eat the Rich, they’re all terrific), no, P.J. always get the additional modifier of “satirist.†How cool is that? O’Rourke has an eagle eye for how society really works and calls it like he sees it, with humor. It’s not really satire at all; it’s telling the truth, which can be even funnier. P.J. and I chatted about his book on cars, Driving Like Crazy, when I asked him about all the rules and regulations and government workers that bog down the automakers.

“You mean the Fun Suckers?†he asked.

“I guess . . .â€

“Think about the kid-has-to-put-a-hockey-helmet-on-to-answer-the-phone society we live in now,†he said. “These Fun Suckers are very interesting and they have been around forever and they are certainly not limited to any one political party or one political point of view. But they do gravitate towards politics and they are the people who come and tell you that everything you do is bad for you, bad for other people, insensitive, divisive, harms the climate, is unsustainable, it leaves too large a carbon footprint, it tangles things in the tuna nets that shouldn’t be tangled in them. Everything you do, wrong colored bathing suit destroys the manta ray population. Whatever. They’ve always got some reason to tell you what to do.â€

“Again and again.†I added.

“Of course,†P.J. continued, “and if you really think about it, it’s just a form of bullying for weaklings. These are not the kind of people that got to do a lot of bullying on the school yard. In fact, they probably got beat up a lot. But now that they’ve reached the fullness of age and maturity, they’ve figured out a way to bully us ordinary people. And it’s always something to be analyzed.â€

“But why?†I wanted to know.

“Politics is the art of achieving power and prestige without merit.â€

Government employees are classic Sloppers. Necessary? Sure, to some extent, but for the most part, these Sloppers are wealth destroyers, not Creators or adding much value to anything.

But there are plenty of other types of Servers: Sponges, Supersloppers, Slimers, Slackers and Thieves come to mind. We’ll get rid of most of them too.

Eat People: and Other Unapologetic Rules for Game-Changing Entrepreneurs
http://bit.ly/ggTcnS

This fall, the Chinese National University of Defense Technology announced that it had created the world's fastest supercomputer, Tianhe-1A, which clocks in at 2.5 petaflops (or 2,500 trillion operations) per second. This is the shape of the world to comeâ€â€but not in the way you might think.

Powering the Tianhe-1A are some three million processing cores from Nvidia, the Silicon Valley company that has sold hundreds of millions of graphics chips for videogames. That's rightâ€â€every time someone fires up a videogame like Call of Duty or World of Warcraft, the state of the art in technology advances. Hug a geek today.

What a switch. For centuries, the military has driven technology forward, fostering new waves of industrialization and corporate use. James Watt's steam engine was perfected with the help of a cannon-boring tool. Computers were created during World War II to calculate artillery firing and to break codes. The military bought half of all semiconductors until the late 1960s. Even the first global-positioning systems (GPS) were funded by Congress, not for navigation but as a nuclear detonation detection system. Add microwave ovens from radar, Blu-ray discs from lasers, or Velcro and Tang from NASA, and there's no doubt how much government acquisition programs have shaped our lives.

Fifty years ago, President Eisenhower was worried enough to declare that "We must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex." No need to worry anymore. That game (pardon the pun) is over: Welcome to the entertainment-industrial complex.

For the rest of the article, click here.

Here is my conclusion, that we are 3 years into a 7 or more year deleveraging of household debt. The blue is actual through the first quarter of 2010. The red is trendline and the transparent blue box is my estimate for household debt to get back to trendline. You can download the data from this St. Louis Fed page.

 

Here is the same chart with data from 1980 instead of all the way back to 1953.

 

The original Fed chart looks like this:

OK, and now to show you there is nothing up my sleeve, here is the chart showing trendline. I used household debt data from the fall of 1983 start of the economic expansion through the spring of 2004, which was when Alan Greenspan declared that there was no deflation, but oddly didn't raise rates fast enough, the seeds of the credit bubble to follow. I used the Excel trenline function, using a simple linear trendline. You can select your own data and get different results, but I think I am pretty close.

Starts at 1:40. Andrew Warner is a terrific interviewer. Got me talking way too much...