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 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 easily readable book on the history of technology and the markets I have read. 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.
I am trying to get over serious jet lag from Bangkok. Amazing place, but a long way from Texas, both literally and figuratively. I have been to over 55 countries, but way too little of Asia. That is going to change. By the way, some of the peppers in Thailand should be labeled as Weapons of Mass Destruction. Have a great week.
Your “my mouth is still numb” analyst,
This week's letter is part two of a series by my good friend, Andy Kessler, author of Running Money about his days running a hedge fund in the 1990's, a book that I highly recommend, especially to anyone in the "running money" business. (www.amazon.com)
Last week we ran the first part of the two part series on Andy's view of gold. The first part laid the groundwork by looking at the role of gold, currency and inflation in 18th and 19th century England. Kessler argues that, as a side product of using a gold standard coupled with a banking system and a currency printing press, a country that received more gold would increase their currency; this led to inflation which would lead to bank runs and financial crises.
This essay will be a little controversial to many. As I noted last week, I take exception to a few points. But Andy does make me, and I hope you, think through the concept of what that thing we call money really is.
If you want to review last week's letter it is archived here, but now let's read part two.
Confirmation bias is a very real psychological phenomenon. It especially infects investors. What we mean by confirmation bias is the tendency of people to read material which reinforces their present views. They associate with people who agree with them and who think like them. So their biases are constantly confirmed.
The antidote is to read material, and associate with people, that/who do not agree with your views. It is more important (and profitable) to learn why you are wrong than to hear why you are right.
Because of this, I spend a lot of my research time trying to figure out what is not common knowledge. While running with the herd is safe most of the time, it is not very rewarding. It is one of the reasons I started "Outside the Box," to bring you thought-provoking and challenging ideas.
Today we are going to look at an essay by a guy who definitely does not run with the herd. Indeed, he may be the anti-herd. My good friend Andy Kessler has just written Running Money about his days running what was the fourth most successful hedge fund for its time. He and a partner launched a Silicon Valley technology hedge fund in the mid-90's and began selling and taking profits in 1999. He ran all the way up the market, sold at the top, making his investors six times their money. He subtitles the book "Hedge Fund Honchos, Monster Markets and My Hunt for the Big Score." His book, like Kessler himself, is funny and irreverent. His publisher describes him as a brilliant investor, a born raconteur and an overall smart-ass. The Financial Times says this is going to be one of those books like Liar's Poker or Den of Thieves which is required reading for those in the industry. I agree. If you are in the game of running money, you gotta read this one. This should be required reading for brokers and advisors. Besides, it is a lot of fun. (www.amazon.com)
The next two weeks "Outside the Box" will probably be two of the more controversial of the year. Andy Kessler has a very different take on the one investment that inspires more passion than any other - gold. It is unlike the normal pablum from those who feel along with Keynes that "In truth, the gold standard is already a barbarous relic." But he does ask hard, thought-provoking questions. Gold bugs are warned to drink a few glasses of wine before reading.
I will be upfront that I do not buy all of his arguments. Next week, at the end of his piece I will do a short rebuttal. But he makes some very good points. We had a very pleasant lunch this last weekend in Palo Alto, discussing gold, the meaning of value and other pleasantries. Andy is one bright guy. Now, let's read part one.