Guru Review: Eat People

WARNING: Do not read this review if a passage like this gives you pause: "Get rid of humans and you have probably found a rich vein of productivity and therefore wealth... That's the goal of every economy -- to increase the standard of living of its participants. If that means over a generation replacing low skill jobs with higher-skilled careers, then you are creating wealth for the entire economy."

But if you agree (privately or publicly) that among the essential principles for creating wealth might realistically include eliminating unproductive jobs because it benefits everyone in the long run, read on.

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.

Kessler has written several previous books, including the bestseller Running Money, and has been a stock analyst, investment banker, venture capitalist, and hedge fund manager. He's evaluated folks like Sergey Brin, Meg Whitman, and Larry Ellison. He's listened to hundreds of pitches and knows enough to answer a huge question: what's the next big thing, and how can you tell if you're making a smart bet or chasing a delusion?

Big Idea:

Kessler sums up the book by saying "You should be a scalable, wasteful, horizontal, edge-hugging, Tom Sawyer-ish, productive, human-adapting, people-eating, market-driven, exceptional, market-entrepreneuring, zero-marginal, virtual-pipe-controlling return maximizer."

That's not easy to say, but it's a lot easier to say than do. Kessler breaks each of those 13 characteristics down into digestible rules.

Key Takeaways:

Here's a sampling of a few of Kessler's rules.

If it doesn't scale, it will get stale. If your offering gets cheaper every year and demand goes up so you sell more, you scale. If the only way to grow is to add more people or raise prices, you don't.

Waste what's abundant to make up for what's scarce. This one demands your reading of Kessler's dinner conversation with George Gilder, author of the 1981 book Wealth and Poverty. Hint: look for something headed for zero cost over the next few decades.

When in doubt, get horizontal. This is not what it sounds like. It means vertical doesn't scale. If you insist on designing everything yourself, build a huge sales force, compete with everyone in the industry rather than partner, you're leaning vertical.

Intelligence moves out to the edge of the network. Think like Tom Sawyer: provide paint and brushes, but get others to do the work.

Adapt to humans; don't make them adapt to you. Figure out what people want...for them! Example: the Pandora music service. Think one move ahead.

Eat people. Not literally, of course, although the chapter is entitled "Be Soylent--Eat People," a reference to the 1972 sci-fi movie Soylent Green. "The road to wealth," writes Kessler, "passes through the graveyard of today's jobs." Kessler puts "Creators,"--designers of productive things-- at the top of the food chain.

There are another half dozen rules, including:

• Markets make better decisions than managers
• Embrace exceptionalism
• Be a market entrepreneur and attack political entrepreneurs
• Use zero marginal cost to create a flood (or someone else will)
• Money sloshes to the highest returns
  

Liked Most:

I must admit I found the chapter for which the book is named most entertaining. After putting Creators on the productivity pedestal, Kessler runs down the rest of the workforce with a no-holds-barred narrative that essentially assails the Servers, a broad category that encompasses anyone not deemed a Creator. Servers don't create wealth, Kessler explains, because they don't create productivity (greater output per worker hour).

Then there are the "Sloppers," who move stuff around without adding any value. Meet the "Super Sloppers," aka the marketers who "take a $5 sneaker, put Michael Jordan's name on it, run expensive commercials, and then turn around and sell it for $150." Let's not forget the "Sponges," who "employ several little tricks to increase their pay without their really adding value, like real estate brokers or lawyers who would be just ordinary Servers but instead are highly paid, sponging off the rest of us."

Then come the "Thieves," a distinct subset of "Sponges who masquerade as entrepreneurs and sometimes even try to pass themselves off as Creators." Finally, we come to the "Slimers," the financiers--including bankers, brokers, traders, venture capitalists, and hedge fund managers--of which Kessler readily admits he was one and for which he has a soft spot. Slimers grease the skids and lubricate the economy. "Slimy but necessary," as he puts.

All very entertaining stuff, and I found myself chuckling often as I read. But as any great comic can attest, humor has its source in truth.

Best For:

Anyone looking to be or become what Kessler terms a "Free Radical." What is a free radical? Writes Kessler: "...in its simplest form, a Free Radical is someone who not only creates wealth for themselves, but at the very same time, improves the world, makes life better, and increases everyone else's standard of living."

What People Are Saying:

"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." --Rich Karlgaard, publisher of Forbes.

Links:

You can connect with Andy Kessler through his website, Facebook, and Twitter @andykessler.