Andy Kessler

WSJ: The Pension Rate-of-Return Fantasy

http://online.wsj.com/article/SB10001424127887324100904578403213835796062.html

It has been said that an actuary is someone who really wanted to be an accountant but didn't have the personality for it. See who's laughing now. Things are starting to get very interesting, actuarially-speaking.

Federal bankruptcy judge Christopher Klein ruled on April 1 that Stockton, Calif., can file for bankruptcy via Chapter 9 (Chapter 11's ugly cousin). The ruling may start the actuarial dominoes falling across the country, because Stockton's predicament stems from financial assumptions that are hardly restricted to one improvident California municipality.

Stockton may expose the little-known but biggest lie in global finance: pension funds' expected rate of return. It turns out that the California Public Employees' Retirement System, or Calpers, is Stockton's largest creditor and is owed some $900 million. But in the likelihood that U.S. bankruptcy law trumps California pension law, Calpers might not ever be fully repaid.

So what? Calpers has $255 billion in assets to cover present and future pension obligations for its 1.6 million members. Yes, but . . . in March, Calpers Chief Actuary Alan Milligan published a report suggesting that various state employee and school pension funds are only 62%-68% funded 10 years out and only 79%-86% funded 30 years out. Mr. Milligan then proposed—and Calpers approved—raising state employer contributions to the pension fund by 50% over the next six years to return to full funding. That is money these towns and school systems don't really have. Even with the fee raise, the goal of being fully funded is wishful thinking.

Read the rest here.

WSJ: Want to Change the World? How About a Billion-Dollar Prize

http://online.wsj.com/article/SB10001424127887323628804578348002211277908.html

Last month 11 scientists were awarded $3 million each as winners of the first annual Breakthrough Prize in Life Sciences. The awards—funded by Google's Sergey Brin and his wife, Anne Wojcicki, Facebook’s Mark Zuckerberg and his wife Priscilla Chan, and Russian investor Yuri Milner—are intended to recognize "excellence in research aimed at curing intractable diseases and extending human life" and to "enhance medical innovation."

This type of prize is commendable, its generosity admirable. But it prompts a question: Will such a prize actually spur innovation or do anything to help society? Or will it be like those given to MacArthur Fellows, who receive $500,000 over five years? Last year the MacArthur winners included a marine ecologist and a stringed-instrument bow maker – in other words, those that are good at giving TED talks. Good for the winners, good for those giving out the money. For the rest of us? Not so much.

But what do you expect from a prize without a contest? Human psyche gets rewarded via vanity (read Nobel, Oscars). Yet economies and entrepreneurs need the incentives of a good old-fashioned contest.

Read the rest here.

WSJ: When Interest Rates Rise, Watch Out

http://online.wsj.com/article/SB10001424127887324048904578318372831147906.html

Can Ben Bernanke fly us through a needle's eye? Minutes released this week from the last Federal Reserve policy meeting suggest evaluations are taking place that "might well lead the Committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labor market had occurred." It's about time. The experiment to kick-start the economy with near-zero interest rates has failed. Maybe our central bankers have figured out that low rates are what is holding back lending and hiring and growth.

Meanwhile, even as the stock market hits highs not seen since 2007, everyone on Wall Street knows interest rates will go up—although no one except Mr. Bernanke knows when. Investors are playing a game of chicken with rates, enjoying the ride but bracing for a downturn when the rates turn up. When rates go up, bonds become more attractive than stocks because you get returns with less risk.

Those of us on Wall Street in 1994 witnessed something very similar. After several years of essentially flat short-term rates, the Fed raised rates by 25 basis points (or 0.25%) on Feb. 4, 1994. The Fed raised short-term rates a total of six times and 2.5% over the next 10 months.

In what became known as a bond-market massacre, the price of long bonds dropped almost 9%. The stock market dropped 9% in three months, killing a then-vibrant market for initial public offerings.

Today we are at the bitter end of a three-decade-long interest rate cycle, culminating in Mr. Bernanke's near-zero rates. You can't fall off the floor. And the prospect of higher interest rates is like the Sword of Damocles hanging over the stock market.

Read the rest here.

 

WSJ Weekend Interview - Uber CEO Travis Kalanick: The Transportation Trustbuster

http://online.wsj.com/article/SB10001424127887324235104578244231122376480.html

I walk to the security desk in the lobby of what could be any of this city's downtown office buildings filled with lawyers, architects and finance firms. "I'm here to see Travis Kalanick at Uber."

"You'll have to email him, they're very secretive. And take a seat."

I sit down and send a note to say I have arrived for the interview. Nearby, several middle-aged men, all wearing black suits, white shirts and ties, listen to a young guy in jeans, orange socks and sneakers. He is consulting a MacBook as he talks to them. "Your account is no longer active, due to quality concerns from negative feedback," he says to one of the men. "You've had 105 trips and your quality scores are low."

These are Uber drivers, I surmise, and one of them is being given the heave-ho. The company is a hot San Francisco startup that already has 25 outposts around the world for its simple, seductive service: on-demand transportation. With an iPhone or Android app, you call up the Uber map, spot an available town car or taxi, and summon it with a click. The fare and tip for a town car, or limo, is maybe 50% higher than for a regular taxi ride and paid for through the service.

As the "no longer active" driver might attest, the company puts a premium on customer satisfaction. Uber has been successful enough that city bureaucrats across the country, eager to protect homegrown taxi and limousine services, have thrown up regulatory roadblocks left and right.

An Uber staffer fetches me and I am taken to meet Mr. Kalanick. The 36-year-old CEO isn't dressed in the usual geek-chic uniform. Instead, he wears a light-gray Italian suit with a pink shirt, no tie. But the Uber offices themselves have the usual Silicon Valley accouterments—as I walk with Mr. Kalanick to a cluttered conference room, we pass a game room with a Foosball table, a Pepsi-stocked fridge and two tapped beer kegs.

His background is also classic Silicon Valley. 

 

Read the rest here.

WSJ: In the Privacy Wars, It's iSpy vs. gSpy

http://online.wsj.com/article/SB10001424127887323984704578206063994711952.html

Randi Zuckerberg, sister of Mark, thinks she's got problems? Last week she complained that a family photo posted to Facebook had been circulated on Twitter without her authorization. Well, over a few hours around town that day I counted 57 cameras—at traffic lights, various stores and the bank—and my phone told me I switched between eight different cellphone towers. We are all being watched, whether we like it or not.

So who's winning? It is a battle between you and the government—like Mad Magazine's Spy vs. Spy comic, but it's gSpy vs. iSpy.

There are thousands of toll booths at bridges and turnpikes across America recording your license plate. There are 4,214 red-light cameras and 761 speed-trap cameras around the country. Add 494,151 cell towers and 400,000 ATMs that record video of your transactions. New York City alone has 2,400 official surveillance cameras and recently hired Microsoft to monitor real-time feeds as part of the Orwellian-named Domain Awareness System. And that is nothing compared with England, where over four million surveillance cameras record the average Londoner 300 times a day.

Popular Mechanics magazine estimates that there are some 30 million commercial surveillance cameras in the U.S. logging billions of hours of video a week. I guarantee that you're in hundreds if not thousands of these. In the year 1984, we only had lame amber-screened PCs running Lotus 123. Now, 64 years after George Orwell sent "1984" to his publisher, we have cheap video cams and wireless links and terabyte drives and Big Brother is finally watching.

So gSpy is winning, right?

Read the rest here.

 

Weekly Standard: We've Been ZIRPed

http://www.weeklystandard.com/articles/we-ve-been-zirped_666600.html

Father-son talks are always difficult, but it was time to teach my teenager about how things work. I dragged him to our local branch of Wells Fargo and opened a checking account with ATM card privileges and a savings account where he deposited his hard-earned umpiring cash. Having worked on Wall Street for 25 years, I stroked my chin and provided some sage advice: Checking accounts don’t pay interest, so keep your money in the savings account and just move it to checking when you need it. None other than Albert Einstein, I noted, said, “compound interest is the most powerful force in the universe.”

His first bank statement showed interest income of $0.01​—​and a series of $35 fees for insufficient funds, wiping out all his money. I got a “You’re a financial genius, Dad,” dripping with sarcasm.

My son got ZIRPed. Senior citizens living on fixed incomes are getting ZIRPed. We all are. Since December 2008, when Ben Bernanke’s Federal Reserve started buying mortgage backed securities in order to “solve” the financial crisis, we have all been subject to a zero interest rate policy.

Banks were (and still are) sitting on piles of underwater mortgages. They can’t sell them at depressed prices, else they trigger losses and writedowns to their leveraged balance sheets and maybe​—​yikes​—​go bankrupt. The stock market knows this, which is why Bank of America shows $20 in book value (assets minus liabilities) on their balance sheet, but the stock is selling for under $11. Citigroup’s book value is $64, and the stock is $37. Better that banks had been stripped of these mortgages back in 2009 via temporary nationalization or good bank/bad bank splits. But no one had the courage, so instead we are subject to ZIRP, at least through mid-2015.

WSJ: Obama Needs to 'Pull a Rubin'

http://online.wsj.com/article/SB10001424127887323353204578128720204387356.html

Facing stubbornly high unemployment and slow growth, swelling deficits and a divided Congress, President Obama is surely scrambling for an economic elixir. He has often cited the economy of the 1990s during the administration of his Democratic predecessor, Bill Clinton, as his ideal. President Clinton managed to keep the economy moving ahead briskly despite repeated foreign currency crises—and despite raising taxes, which should have been an economic drag.

That seems to be Mr. Obama's plan. As he has said repeatedly, he wants to increase tax rates on "millionaires and billionaires" to "the same rate we had when Bill Clinton was president"—39.6%—"the same rate we had when our economy created nearly 23 million new jobs."

Dream on. Given increases in state, local, payroll and other taxes since the 1990s, the effective rate is considerably higher. In California—the home of venture capital and of many job creators—the top marginal income-tax rate would exceed 50% thanks to the state's new 13.3% rate. The top capital gains rate in the Golden State, if Mr. Obama gets his way, would rise past 37%—the scheduled increase on Jan. 1 to 20% plus 3.8% in ObamaCare plus the 13.3%, since the state taxes capital gains as ordinary income.

Here's a better idea. If Mr. Obama wants the economy to get some of that Clinton mojo, he needs to pull a Rubin.

Robert Rubin, who took over as Treasury Secretary in January 1995 after 26 years at Goldman Sachs, understood a thing or two about markets. In particular, he knew that during the inflationary 1970s, weak dollars flowed into commodities instead of stocks and ventures that were vulnerable to shifts in the value of the currency. During the Reagan era, Mr. Rubin and Goldman Sachs thrived by learning that a strong dollar attracts productive investment that drives a growing economy.

Under President Clinton, Treasury Secretary Rubin told everyone who asked that "the U.S. supports a strong dollar." And he put the country's money where his mouth was, pushing a strong-dollar policy that included working with central banks to keep the dollar's value up by buying and selling currencies and advocating free trade. During Mr. Rubin's nearly five-year tenure at Treasury, the dollar price of oil and gold dropped; the unemployment rate declined to 4.3% from 5.6%; and the stock market more than doubled. The Clinton economic legacy exists primarily because Robert Rubin acted on what he learned during the 1980s.

But somewhere in the dozen years since the end of the Rubin era, the country has lost its way. As low-end manufacturing jobs began to be outsourced to Japan, then Taiwan and now China, support for a strong dollar dissipated as the mistaken view took hold that a weak dollar would boost exports and return U.S. manufacturing to its glory days.

WSJ: Get Your Daily-Deal Stocks-75% Off!

http://online.wsj.com/article/SB10001424052970203335504578086643047833844.html

That didn't take long. In December 2010, Amazon invested $175 million for a minority stake in daily-deal site LivingSocial, right around the time rival Groupon turned down a $6 billion buyout offer from Google. The next big thing in selling online had arrived. Yet last week Amazon wrote down the value of its LivingSocial stake by $169 million, and Groupon's stock is down more than 75% from its initial public offering price of $20 a year ago. Apart from the cash on its balance sheet, Groupon is worth less than $2 billion. Pretty quick fall from grace.

Millions know that daily-deal sites collect emails and pitch 50% off local sky diving lessons or 40% off aromatherapy sessions if enough people sign up. So LivingSocial and Groupon were smack dab in the center of three hot trends: social, mobile and local. Amazon CEO Jeff Bezos has a pretty good nose for what works. So why the return to earth?

First, neither LivingSocial nor Groupon was really a technology company even though both were valued like one. Groupon has 10,000 employees, most of whom are sales people who solicit deals and write up enticing offers. This doesn't scale well because if you want to grow in Cleveland, you have to hire lots of people in Cleveland.

CNBC: Is College a Waste?

Weekly Standard: Our 19th Century Curriculum

http://www.weeklystandard.com/articles/our-19th-century-curriculum_653241.html?nopager=1

Going off to college or, like me, sending your child? Suckers! Why? Because after paying average private college tuition and room and board of $28,500 a year (Harvard is now $54,500), over half of college graduates with bachelor degrees under the age of 25 don’t have jobs or are underemployed. Half! And this despite the 3.8 million job openings in the economy as of June. A whopping 1.5 million recent graduates just aren’t qualified for outstanding jobs—not a ringing endorsement of higher education.

What’s the problem? Most blame outsourcing or technology or the financial crisis. Forget it. Look no further than the huge disconnect between what colleges are turning out and what employers want in new hires. And the gap is widening. Sorry, but good old reading, writing, and ’rithmetic ain’t cutting it anymore.

Check out the adjoining test. It looks just like the math section of the SAT or ACT tests you sweated over for college admissions, right? Except this one is from the entrance exam for the Massachusetts Institute of Technology—from 1869. What was so important back then? Simple, the Brooklyn Bridge started construction in January 1870 and every other city in America was itching to build a steel-wire suspension bridge. Designers and builders were the hot jobs and required understanding parabolas and quadratic equations.

FBN and WSJ TV: Job Growth

Video streaming by Ustream

WSJ: The U.S. Needs More i-Side Economics

http://online.wsj.com/article/SB10000872396390444100404577641280041366306.html

No jobs? No wonder, given what passes for economic thought these days.

In his acceptance speech at the Democratic convention in Charlotte, N.C., this month, President Obama said, "We believe that when a CEO pays his auto workers enough to buy the cars that they build, the whole company does better."

And last month in Leesburg, Va., the president said, "When we've got new teachers doing great work with our kids, then you know what, they go to a restaurant and spend that money. And so suddenly businesses are doing well, the economy is doing well, and we get into a virtuous cycle. And we go up."

This myth—that you can just give money to the middle class and good things happen—is widely shared and is at the basis of a lot of government policy. And it is why the recovery is stuck between lack and luster.

Let's go back. Henry Ford is popularly credited with inventing the middle class by doubling his workers' salaries to $5 per day in 1914. A multiplier for the economy, right? Wrong.

The year before, Ford revolutionized manufacturing with the moving assembly line, slashing automobile build times to just 90 minutes from 14 hours. That's productivity. It allowed Ford to reduce the price over time of his Model T to $290 from $950. Demand took off because it was far cheaper than the cars made by his 88 competitors.

Bull market 30 years old today

The Bull market started 30 years ago today. Yes, it’s been interrupted by a few brief technical down 20% Bear markets, but move from a Dow Jones closing at 777 on August 12, 1982 through 13,161 today is an era defining trend. It didn’t just coincide with a 31 year decline in interest rates from a peak for 3 month T Bills of 16% in May of 1981, and a 32 year decline in inflation, which stood at 13.5% in 1980, it was driven by stocks becoming more attractive than fixed income bonds.

What does it really mean? Simply, the market and the economy transitioned from funding fixed assets (oil, gold, land) to funding ideas. Software, the ultimate idea, was born and grew through this 30 year run. I don’t think it’s matured yet.

The path towards many destinations 30 years out will depend on how the market and the economy transition from here. Printing money doesn’t drive markets, productive ideas do.

Yes, it is harder to argue that stocks can go up as interest rates go up, but it does happen.

WSJ: The Incredible Jobs Machine

http://online.wsj.com/article/SB10001424052702303740704577527200796292034.html

Did Mitt Romney and Bain Capital help office-supply retailer Staples create 88,000 jobs? 43,000? 252? Actually, Staples probably destroyed 100,000 jobs while creating millions of new ones.

Since 1986, Staples has opened 2,000 stores, eliminating the jobs of distributors and brokers who charged nasty markups for paper and office supplies. But it enabled hundreds of thousands of small (and not so small) businesses to stock themselves cheaply and conveniently and expand their operations.

It's the same story elsewhere. Apple employs just 47,000 people, and Google under 25,000. Like Staples, they have destroyed many old jobs, like making paper maps and pink "While You Were Out" notepads. But by lowering the cost of doing business they've enabled innumerable entrepreneurs to start new businesses and employ hundreds of thousands, even millions, of workers world-wide—all while capital gets redeployed more effectively.

This process happens during every business cycle and always, always creates jobs. Yet is ignored by policy mavens.

WSJ Weekend Interview - Sebastian Thrun: What's Next for Silicon Valley?

http://online.wsj.com/article/SB10001424052702303807404577434891291657730.html

Hewlett-Packard is laying off 27,000 people. Yahoo is treading water. Facebook IPO shares got flipped and then flopped. Has Silicon Valley reached the end of the line? Will everyone just develop me-too iPhone apps?

I knew just the guy to prove otherwise.

The entrance to his building is littered with the gaudy red, blue, yellow and green bicycles that Googlers tool around on. I'm at the secret headquarters of the not-so-secret Google X, where the way-out-there projects of the search giant turn into reality. The gregarious play master, Sebastian Thrun, leads us into a well-worn conference room. The chairs are a shade of green not found in nature and the disrupting clang and cheers from a rousing foosball game waft in through the door. Mr. Thrun, 45 and slight in stature, is sporting a gray T-shirt of a local start-up and speaks softly with German-English diction.

"I feel I jump from an ocean liner and then learn how to swim," he starts. Oh, this is going to be interesting.

Mr. Thrun earned a Ph.D. in computer science from the University of Bonn, "the 53rd of 53 German computer-science schools," he adds. His focus was on artificial intelligence, a field that failed in the 1980s with a rules-based approach—because humans could never come up with all the rules a machine needed—but then flourished in the mid-90s when machines had to learn the rules by themselves, by trial and error, almost like an infant.

Why I wrote KAWS

My oldest son just finished his sophomore year in colllege. On a visit a month or so ago, I met a bunch of his fraternity brothers, all great guys, and many of them who were seniors and graduating were, to my surprise. headed to Wall Street.

I wanted to give advice, but loud music and dueling beer pong tables made it tough. Plus, what can you tell someone in 5 minutes that took 20 years to figure out. So I put this little e-book together. Short and hopefully to the point, it's a set of 10 things anyone starting on Wall Street or wanting to get ahead needs to figure out to do well. Or at least understand the craziness.

I was going to give it away, but you get what you pay for and all that, plus I figured $4.99 on Amazon would give it much wider distribution than being forwarded via email.

I hope it helps.

http://www.amazon.com/dp/B00892AVDW

First Chapter of Kick Ass on Wall Street

All right! You got a job on Wall Street. Way to go. Welcome aboard. If history is any guide, you’re wicked smart, a great athlete and know somebody. Or any combo of the above. Don’t matter. You got the job. Feels good, right? When you got the offer, you were probably as pumped as Will Ferrell in Semi-Pro, “Yes! Give me ten Norton! Everyone can eat s***! A big bag of s***! Ha ha ha! I'm the greatest man in the world! Whoo!”

OK. Not so fast. All you got was a ticket to the dance. Now what? You’re set for life, right? Uh, well…not really. Actually, far from it. Since its near-death experience in 2008, Wall Street has been mutating into something far different than its fabled land of golden dreams.

But so what? You got the job. And you’re going to be overpaid. And making more than almost every single one of your friends with real jobs. But don’t get smug, not yet anyway. The trick is not landing on Wall Street, it’s staying on Wall Street and excelling on Wall Street and staying overpaid for a long, long time.

This is not your father’s Wall Street where any bumbling idiot could (and did) answer phones all day and pull in six figures. I used to work with them. Now, it’s nasty out there. Harder than it’s ever been.  It’ll chew you up and spit you out like nothing you’ve ever experienced. That’s OK. I assume your tough enough. Just be ready for it.

So you should just hunker down and do as you’re told, right? WRONG. If you sit on your ass and do all the things your hemorrhoid-annoyed boss tells you to do, you’ll end up a doormat and stepped on and replaced when the newer, prettier version comes along. You’ve got to make a name for yourself. Stand out. Become indispensible.

Who am I to tell you all this? Well, I spent 20+ years on Wall Street and though I can’t profess to know everything, I’ve seen a lot. And I’ve been involved in a lot of crazy things - I was a research analyst, a not very good investment banker, a venture capitalist and ran a $1 billion hedge fund. And just when I think I’ve seen it all, something even more bizarre hits. It’s hard to keep a level head. But a strong gut and steady resolve is the trick to making a name and creating longevity through boom times and through the disasters.

The highs are highs and the lows are face down in the gutter. Wall Street is not a charity and you’re going to prove yourself again and again and again as worthy. When you start, you’ll meet a lot of different folks. Most will be the smartest mofos you’ve ever met. Scary smart. Others will have a last name like Rockefeller or Throckmorton and can’t even tie their shoes. Others may look disheveled and be a secret genius (including a few Rocks and Throcks.) Others will just confuse you as in how-the-hell-did-they-get-a job-here, I thought there were standards (usually a nephew or son-in-law of a client or long retired muckity muck.) It doesn’t matter. You’re there. You got the job (“Give me ten Norton,” etc.) Now you’ve got to execute. Not today, not tomorrow, but over the next number of years.

OK, here are the big things you really need to understand and do to kick ass on Wall Street. To do well, you’ve got to do most of the following:

1. Figure Out The Meritocracy
2. Make A Good First Impression
3. Understand The Big Picture
4. Find the Right Role
5. Get A Mentor
6. Lock Down Clients
7. Be A Hero
8. Guard Your Reputation
9. Get Paid
10. Read, Read, Read

 

But before getting into all that, first let me throw you a little armchair philosophy. Working on Wall Street is a privilege. You’ve been chosen. Even before you start working, you will be labeled a snobby rich bastard and a flesh-eating soulless baby seal cub beater. And worse. In other word, others want to tear you down.

Lots of unemployed and unemployable protesters lived in smelly parks in tents to Occupy Wall Street. And for all I know, they probably still do. You, because of your job, are part of the 1%, even if you haven’t made a penny yet. The implication of the 1% label is that you exploit the other 99%. Nothing further is from the truth.

Some of it is envy, some of it is rationalization for the Occupiers’ own failures, and some of it is because groups just need something to protest and what the heck, ripping on a bunch of rich (predominately) white dudes doesn’t violate any of the unwritten political correctness standards and rules.

I’m not here to rationalize why you chose a job on Wall Street vs. building huts in Costa Rica. That’s you’re doing. I’ve put this together to explain how Wall Street works and what I think you need to do to succeed.

I look at Wall Street as the lubricant that greases the gears of the economy. Without capital and finances raised by Wall Street, those gears would freeze up. We’re still going through the hangover from the financial crisis when the grease did disappear for months on end. Wall Street sneezed and the World caught pneumonia.

Wall Street is not a bunch of greedy bastards shaking down Main Street for every last dime – although there are plenty of those types of ass wipes that do work on Wall Street. Wall Street provides a needed function in the economy. It is real. It provides real economic value. You will generate wealth, for yourself AND for society. Really. But believe me, it’s hard, if not outright impossible, for most others to see this value.

Movies like Wall Street don’t help. Nor does Bernie Madoff or any of the other villains. And what the heck, Goldman Sachs Lloyd Blankfein and JP Morgan’s Jamie Dimon don’t help the cause with their massive compensation. I think they deserve their due, but they should take it all in stock and sell it when they retire.

I’m proud of my 20+ years working on Wall Street. Maybe I’m just rationalizing its economic purpose to make myself feel good and so I have something to talk about at cocktail parties. But I don’t think so.

You’ll figure this out for yourself.

But in the mean time, just understand that no matter how you got there, your job and your payday and your social position are not a gift. You have to deserve it.

And when you do well, you will.

 http://www.amazon.com/dp/B00892AVDW

New e-book: How to Kick Ass on Wall Street

Just starting on Wall Street or trying to figure out how to get ahead? This survival guide to the rough and tumble world of Wall Street and high finance is for you. Andy Kessler, a Wall Street insider for over 20 years, shares his tips on how to deal with all the alpha dogs, navigate the meritocracy, get a mentor, be a hero, guard your reputation and most importantly, how to get paid. Don't leave home without it.

Kindle only for now. http://www.amazon.com/dp/B00892AVDW

Russian Campus-Online magazine May issue

I gave a talk in Moscow one morning (via Skype from a startup enclave in town) and it turned into this article. Always wondered about my name in Cyrillic.

http://www.campus-online.ru/?c=article&id=291
Fun to read the Russian to English Translation. Can't vouch for the accuracy!

WSJ: Patent Trolls vs. Progress

http://online.wsj.com/article/SB10001424052702303772904577336483746932506.html

Microsoft announced this week that it's paying America Online $1.1 billion in cash for 800 of its patents. This comes just nine months after Apple, Microsoft and others beat out Google and Intel for control of Nortel Networks' 6,000 patents, paying a then astounding $4.5 billion in cash. And in August of last year, Google announced a deal for Motorola Mobility along with their 24,000 patents for $12.5 billion. What's going on here?

It goes back to March 2006, when BlackBerry phone maker RIM agreed to pay a whopping $612.5 million to settle a mobile email patent infringement case with patent-holding company NTP. This comes to $6 for each BlackBerry ever sold. So-called patent trolls, those that own patents but don't sell products or services, are a pain in the side of those that do.

Microsoft founder Paul Allen spent $100 million in the 1990s on Interval Research, without much to show for it. But in August 2010 he turned it into a patent troll, suing Apple, Google, Facebook and others (but not Microsoft) for infringing four patents. Nathan Myhrvold's Intellectual Ventures has a large portfolio of patents and a series of clients like Verizon and Cisco who invest or pay a subscription not to get sued. We all pay for this with higher prices.

I'm pretty sure James Madison never saw a smartphone...

Read the rest here.

 

Dunya (Istanbul Turkey) response to Newsweek 'Merkel Uber Alles' piece

Google Translate needs some work (let alone their dream of a universal translator.) I'm not sure what this guy from the newspaper Dunya in Instanbul really thinks...

http://www.dunya.com/almanya-ekonomik-gucunu-nasil-surdurebilir-147833yy.htm

WSJ: How Much Is Apple Worth?

http://online.wsj.com/article/SB10001424052702304692804577281340088197580.html

Apple is a juggernaut. Its stock touched $600 on Thursday, which represents $560 billion in market capitalization. Compare this to Exxon Mobil, with a market cap of $400 billion, IBM's $240 billion and Wal-Mart's $210 billion. Can Apple really be worth that much?

The easy answer is that the company is worth whatever the market says it's worth. Well, yes, the market is right every day—but it is right only for that day. What about tomorrow?

Smart investors look under every rock to estimate what's going to happen next. And some are breathlessly claiming the stock is cheap and headed for $1,000—a trillion-dollar market cap. Others invoke the Wall Street adage that no tree grows to the sky.

So which is it?

Newsweek: Merkel Uber Alles

http://www.thedailybeast.com/newsweek/2012/03/04/a-bailed-out-eurozone-could-restore-germany-to-greatness.html

It's clear what Germany is up to. Let the rest of Europe wallow in their own red ink. Let riots in the streets cause regime change. Dangle as bailout bait a "fiscal union" with countries giving up sovereign control of their budgets in exchange for Germany guaranteeing debts. The ECB will do the dirty work but it's Germany alone that will save the day and end up owning Europe. But why?

The euro zone is a wasteland of "entitlementarians" while Germany is an industrial might. But this source of German wealth is sputtering. Germany's industrial icons—Mercedes, BMW, Siemens, ThyssenKrupp—are so '80s. Teutonic efficiency hasn't adapted well to modern-knowledge industries.

Germany doesn't have an Apple or a Google or a Cisco, let alone a LinkedIn or Zynga. SAP is Oracle's weak sister. There's no Pfizer or Johnson & Johnson. Boehringer Ingelheim, Germany's largest pharma company, doesn't crack the top 10 globally. MorphoSys, their largest biotech company, is 43rd globally. Their Neuer Markt (rival: NASDAQ) closed in 2003.

Demographics stink. Go to Germany and you basically see Germans. Entrepreneurial companies require the best, no matter nationality. Silicon Valley feasts on a smorgasbord of international scientists and coders. Same in the London. Germany's no melting pot.

The economic history of war is that when internal wealth creation runs out, you have to beggar thy neighbor. Obviously, there's no military option, but Angela Merkel is on an economic mission. Her goal is to take over Europe and coax out Teutonic efficiency from players in the knowledge economy. Germany needs to harness them and pump knowledge wealth as the Russians pump gas.

Start with French wine, Italian fashion, Spanish farming, and Greek tourism. They can all use huge management efficiencies. In France, bureaucrats control half of the economy. Just privatizing government stakes can set off a productivity bonfire.

Merkel may also have designs on turning East Europe into a startup-driven Silicon Valley. Estonia is critical. Skype, bought by Microsoft for $8.5 billion, was founded there. Silicon Valley startups are hooked on Estonian employees and contract out programming to a country with 22 percent taxes.

Done right, Germany's Europe can kickstart a knowledge economy. Merkel may have Germany on the cusp of lasting greatness by being, well, a little less German--while all the rest are a little more so.

 

 

WSJ: When Will Social Media Elect a President?

http://online.wsj.com/article/SB10001424052970203960804577244961842322348.html

The Lincoln-Douglas debates of 1858 took place over seven venues, with 10,000-20,000 attendees and no microphones. One candidate would speak for an hour, followed by a 90-minute rebuttal and then a half-hour response from the original speaker (which alternated debate to debate). This description alone is almost 280 characters—clearly we've come a long way from Honest Abe to the Twitter age. But should we believe the hype about social media's impact on the 2012 election?

Pew Research says no. "Cable leads the pack as campaign news source," it concludes in a recently released 35-page report. "Twitter, Facebook play very modest roles.”

Too bad that misses the point. New technologies have always altered campaigns and usually in mysterious ways. Party conventions were first televised in 1952 and soon lost their relevance, becoming scripted theater. Richard Nixon lost votes by sweating under harsh lighting during his televised debate with JFK. Bill Clinton bypassed the traditional news media, playing "Heartbreak Hotel" on his sax on Arsenio Hall's late-night show. MoveOn.org used the Internet to accumulate small donations and host a virtual primary won by Howard Dean, who in turn was brought down by a scream, which in turn went viral on the Web. YouTube was soon created and in 2008 hosted "Obama Girl" and other user-generated campaign ads.

WSJ Video: Obama Hearts Twitter

CNBC clip today talking about Facebook

WSJ: The Button That Made Facebook Billions

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 humans—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 ads—a $500 billion business.

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

Eat People makes 800CEOREAD short list for 2011 Business Book Awards

Entrepreneurship & Small Business (1 of 8 categories)

Eat People: And Other Unapologetic Rules for Game-Changing Entrepreneurs by Andy Kessler published by Portfolio

The Entrepreneur Equation: Evaluating the Realities, Risks, and Rewards of Having Your Own Business by Carol Roth published by BenBella

The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses by Eric Ries, published by Crown Business

Making It Happen: Turning Good Ideas Into Great Results by Peter Sheahan, published by BenBella

The Method Method: Seven Obsessions That Helped Our Scrappy Start-Up Turn an Industry Upside Down by Eric Ryan & Adam Lowry, published by Portfolio

 

http://blog.800ceoread.com/2012/01/04/2011-business-book-awards-the-short-list/

WSJ: The Rise of Consumption Equality

http://online.wsj.com/article/SB10001424052970204632204577128230588463516.html

It used to be so cool to be wealthy—an elite education, exclusive mobile communications, a private screening room, a table at Annabel's on London's Berkeley Square. Now it's hard to swing a cat without hitting yet another diatribe against income inequality. People sleep in tents to protest that others are too damn wealthy.

Yes, some people have more than others. Yet as far as millionaires and billionaires are concerned, they're experiencing a horrifying revolution: consumption equality. For the most part, the wealthy bust their tail, work 60-80 hour weeks building some game-changing product for the mass market, but at the end of the day they can't enjoy much that the middle class doesn't also enjoy. Where's the fairness? What does Google founder Larry Page have that you don't have?

Luxury suite at the Super Bowl? Why bother? You can recline at home in your massaging lounger and flip on the ultra-thin, high-def, 55-inch LCD TV you got for $700—and not only have a better view from two dozen cameras plus Skycam and fun commercials, but you can hit the pause button to take a nature break. Or you can stream the game to your four-ounce Android phone while mixing up some chip dip. Media technology has advanced to the point that things worth watching only make economic sense when broadcast to millions, not to 80,000 or just a handful of the rich.

WSJ: In San Francisco, There Are Many Ways to Occupy Wall Street

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 empty—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.

WSJ: How Wilson Greatbatch 'Gave Back'

 
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 productivity—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 stents—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.

Obama Jobs Speech Score-At-Home Scorecard

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.

1. Climb poles for wireless - every streetlight can be a wireless access point, let's get workers climbing poles to build a new wireless infrastructure
2. Dig fiber ditches - solve the bandwidth constraint by hiring workers to dig ditches to bring fiber to every neighborhood and home
3. Sequence proteins - and identify cancer signatures to enable early detection of disease, especially expensive to treat cancer
4. Lighten backpacks - scan textbooks and issue Kindles or the like, so that 5th graders have 20 pounds less to carry on their backs
5. Scan medical records - doctors are too lazy (or conflicted) to do it. The information unlocked will provide extremely valuable to lowering healthcare costs and improving outcomes.
6. Require Time of Use electric meters - get price signals from the electric grid. Much more effective for conservation than outlawing incandescent light bulbs.
7. Free spectrum - lots of spectrum is in the wrong hands so make them use it or lose it, PLUS, technology allows us to share spectrum rather than "own" it in the first place
8. Disease diagnostics - same as sequence proteins from above, but something so important has been ignored, so worth mentioning twice
9. End the mail monopoly - end the Postal Service first and third class mail monopoly and entrepreneurs will come out of the woodwork with new services
10. Frack this - encourage hydraulic fracturing for natural gas by having drillers post bond for environmental damage
11. Government as a platform - make agencies post an API (Application Programming Interface) and watch entrepreneurs write clever code to harness government
12. Rental society - allow a six month foreclosure amnesty so home prices seek the correct price and a vibrant rental market can blossom

With double counting, there are really 10 ideas.

Give one point for each mentioned.

Subtract one point for:

• Spending on (or Infrastructure Bank for) highways and bridges
• Spending for Green jobs
• Temporary tax incentive to hire workers
• Extending jobless benefits
• Extending payroll tax reduction
• Direct transfers to states and cities

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

WSJ: How Steve Jobs Changed the World

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 awakening—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.

WSJ: Five Ideas to Kick-Start Job Creation

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

Now that the debt-ceiling gyrations are over, the Obama administration is "pivoting" to its biggest problem—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 jobs—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:

Audio version of How We Got Here available for free download

Assistive Media, Inc. is providing a free download of my book How We Got Here from their webiste: http://www.assistivemedia.org/HWGH/HWGH.zip

Be warned, it's a 415 MB zip file that expands into 18 mp3 files covering the 5 main sections of the book. It sounds great!

I was honored to provide the book to Assitive Media. Here is a little bit about them:

Assistive Media was the Internet's first spoken word audio service for persons with print reading/access barriers thereby opening a unique avenue of accessibility for many individuals with cognitive, physical, and communication disabilities. 

Used in a variety of environmental settings (home, school, community, work place), Assistive Media provides a solution that allows individuals with disabilities access to  previously inaccessible literary and in-depth journalistic materials which provides independence and integration into the mainstream of society and community life.

Assistive Media seeks to offer material that is immediate yet timeless, energetic and thoughtful, serious and funny. Assistive Media's very simple goal is to offer accessibility to good writing, a point of view, and a deeper understanding of people, communities, and cultures through the highest standards of nonprofit service.

David H. Erdody
Founder, Director, Editor-in-Chief

 

 

WSJ: The 'Brady Bond' Solution for Greek Debt

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.

backed by utilities, railroads, tourism, Ouzo factories and maybe even the islands of Santorini and Mykonos.

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 value—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.

NPR: Examining The Process Of An Initial Public Offering

WSJ: Easy Money and the IPO Boom

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 ride—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.

Moving to Twitter for email notifications

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.

WSJ: Make Way for the Virtual Exchange

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.

Stock Market and Oil vs. Monetary Base

A picture is worth a thousand printed dollars!

The Dow Jones vs. Monetary Base:

Oil (West Texas Intermediate) vs. Monetary Base:

WSJ: Raise Rates to Boost the Economy

The chairman of the Federal Reserve is stuck between a rock and a hard place—well, more like a house and a gas tank. How to escape? Mr. Bernanke, raise interest rates now.

In order to the save bank balance sheets that he never cleared of toxic mortgage assets, Ben Bernanke's near-zero interest rate policy and dollar- printing programs were an attempt to create a so-called wealth effect. "Lower mortgage rates will make housing more affordable and allow more homeowners to refinance," Mr. Bernanke wrote in a Washington Post op-ed last November. "Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending."

In other words, the Fed is manipulating the stock market. And it has been on a tear, up 19% since Mr. Bernanke's Jackson Hole speech last August outlining a second round of quantitative easing.

Unfortunately, when you print dollars, you debase the currency—and it shows up in higher oil prices, already rising well before the rebellions in Egypt and Libya. Copper and wheat and food are also seeing increases. For that matter, just about everything is rising except home prices. The Case-Shiller home price index dropped 2.4% in December.

What Mr. Bernanke's dollar printing has given to consumers in a supposed wealth effect, it has taken away in the cost of living.

Mises.org Douglas French review of Eat People

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.

Sounding very much like F.A. Hayek, Kessler says that markets make better decisions than managers.

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.

 

WSJ: Dave Kansas review of Eat People

Early in "Eat People," a business-advice book for "game-changing entrepreneurs," former hedge-fund manager Andy Kessler casts his mind back to 10th-grade chemistry to muse on the "highly reactive" nature of atoms and molecules called free radicals. Because free radicals have an unpaired electron, he says, "they are always looking for something to do, hungry for some chemical reaction—like combustion."

Mr. Kessler's heroes, he says, are the free radicals of the business world, "someone who not only creates wealth . . . but at the very same time, improves the world, makes life better, and increases everyone else's standard of living." The roster ranges from modern free radicals like Steve Jobs and Sam Walton back to Andrew Carnegie and John D. Rockefeller, though the latter two gents "at some point" stopped being free radicals and "became monopolists." Rockefeller, Mr. Kessler says, was "more likely criminal." 

It's a typically cheeky aside from Mr. Kessler, who likes to incite and amuse while getting his unvarnished free-market views across to readers. After a long and varied career in finance—he was an analyst, banker and venture capitalist in addition to managing a hedge fund—he has become an author. Much of his early writing—"Wall Street Meat" (2004), "Running Money" (2005) and "How We Got Here" (2005)—was grounded in his first-hand experience.

WSJ: Is Your Job an Endangered Species?

Technology is eating jobs—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 globalization—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 economy—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 jobs—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.

Investor Insight Outside the Box

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.

Fun, informative, and thought-provoking. Another irreverent, gonzo book.

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

American Express Open Forum - Matthew May Guru, Review

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.

a cut-to-the-chase message, take-no-prisoner attitude

 

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.

Washington Post Express: Ready, Set, Start-Up

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 — 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.

Response to WNYC Brian Lehrer interview

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

In this radio interview author Andy Kessler discusses the concept of creative destruction--where the quality of life of the consumer is improved as inefficient companies go out of business. The cynical radio host and his listener/caller's comments afford a treasure of insight into the mind of scarcity-based Luddites who want to force everyone to retrogress into lower quality of life and believe this is the first time inefficient jobs have been eliminated by efficiency technologies.

 

Mitchell York entrepreneurs.about.com review and questions

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.

Truly groundbreaking. Every entrepreneur needs to read as a reality check on her business

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