Andy Kessler

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. 

Read the entire piece here.

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.

Read the rest here:

 

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.

Read the rest here.

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.

Read the rest here.

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.

Read the rest here:

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:

Read the rest here:

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.

Read the rest here.

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.

Read the rest here.

 

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.

Read the rest here.

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.

Read the rest here.

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.

Read the rest of the review here.

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.

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.

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

How I got my VAX 11/780 (cutting room floor from my book Running Money)

Digital Equipment founder Ken Olsen died this week. I wrote a piece for GigaOm about DEC and mentioned buying VAX 11/780 minicomputers with ratepayer funds while working at Bell Labs. I wrote this story up years ago for my book Running Money, but it ended up on the cutting room floor. No better time than now to find it and put it up for all to read. Enjoy.

Here's a handy PDF.

 

Holmdel, New Jersey – December 1982

“Got a second?”

Uh-oh. I have learned that those dreaded three words usually mean weeks or months of hassle. It was back in the early ‘80’s and I had been working at Bell Labs for a couple of years, and almost no one ever told me what to do. Bell Labs was about research. I suppose they figured that if they didn’t tell you what to do, you would invent new and interesting things. Which was often true. You just kinda show up and figure out what to do. But every once in a while, someone pokes their head in your door and asks if you’ve “got a second.”

“George, what’s up?”

George Kutska was my boss, and probably one of the smartest guys I had ever met. He was big, not beer bellied, just rotund, and had some sort of medical problem, in that he always smelled. The kind of smell that deodorant or antiperspirant couldn’t hide for very long. Oddly, that never bothered me, I enjoyed his company because I was always laughing. He had a wicked cynical personality, which one gets, I suppose, from working inside the world’s largest monopoly for too many years.

“Well, it’s almost the end of the year,” George started.

“George, isn’t that always true when December rolls around?”

 “Yes, I realize that, Mr. Wisenheimer. Just listen for a change.”

WNYC Brian Lehrer interview

 

New York City NPR affiliate. The comments are priceless.

Black Enterprise Magazine slide show

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

Technology and the business climate have re-defined the rules for successful entrepreneurship. In his book, Eat People: and Other Unapologetic Rules for Game-Changing Entrepreneurs Andy Kessler takes a look at 12 of those new rules. Co-founder and president of Velocity Capital Management, an investment firm based that provided funding for private and public technology and communications companies, Kessler provided BLACK ENTERPRISE with four rules for not just profitability--but also how to identify the next big trend.--Alan Hughes

See the rest of the slide show here:

New York Journal of Books review of Eat People

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.

a worthy read for those willing to move ahead in business and into the future.

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 unsettling—and that’s just the title—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.

Brian Sullivan Fox Business interview: Productivity is the Only Way to Create Wealth

Mike Masnick Techdirt review and short excerpt

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..

Brett Owens Contrary Investor Interview

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

Click here for transcript of the interview.

Andrew Warner mixergy.com interview

Howard Lindzon Stocktwits Interview

The Week in Geek: Eat People review

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 Money”, 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."

But like all of Andy’s work, it’s a rollicking read that’s chock full of interesting examples and provocative analysis.

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."

My new book "Eat People" is out this week

My next book is finally done and out in the wild.

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!

1. Scale
2. Waste Abundance
3. Horizontal
4. Intelligence at the Edge
5. Productive
6. Adaptive
7. Eat People
8. Markets
9. Exceptionalism
10. Market Entrepreneur
11. Zero Marginal Cost
12. 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!”). 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 world—Creators and Servers.

Creators are at the top of the food chain—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 precious—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 down—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 another—across a factory floor, a warehouse, across town, or across the economy. They’re not Creators—just middlemen or brokers, marking up the price for slopping stuff around—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 . . .”

“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.”

“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.”

“But why?” I wanted to know.

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

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

Newsweek: Geopolitics à la Google - Lessons for the world from a “horizontal” company

Sometimes geopolitical lessons come from the strangest places. With Eric Schmidt stepping down as CEO of Google and replaced by founder Larry Page, I can’t help but wonder if world leaders are taking note. Google perfected the horizontal business model. To the delight of enthusiasts of David Ricardo, the comparative economist, the company does one thing really well—search—and has built an ecosystem for others to flourish using it as a platform.

Contrast this with IBM and AT&T, long past their expiration dates as successful vertical companies. It’s no coincidence that the Soviet Union and IBM, two raging, top-down, command-and-control systems, collapsed at about the same time. What do I mean by vertical? In its heyday, IBM did everything from soup to nuts. Designed chips, wrapped plastic around them, wrote operating systems and applications, and then sold and serviced mainframes. The giant captured half of computer-industry sales and 80 percent of profits until horizontal companies Intel and Microsoft knocked it out at its knees. AT&T owned phones and switches and long-distance lines until a very horizontal Internet and companies like Skype changed the economics of the phone call.

These same dynamics are now driving the world economy into a productive horizontal enterprise. And it’s about time.

Economies are about increasing the standard of living of their participants. If you don’t have an economic system to create productivity, you end up stealing it from your neighbors. Think Roman Empire. Or the British who colonized large parts of the world to lock up natural resources to plug into their manufactories. Both very vertical.

Hitler had a manufacturing engine, but felt Germans were above toiling in factories. So he chose to increase German living standards by the blitzkrieg process: take what you need by force. Grab territory. Steal their resources. Put them to work. Get rich. Vertical instead of horizontal.

And they lost to a nation that went the horizontal route. America won WWII. Japan and Germany could have been American territories. But the horizontal model kept them independent as trading partners and we bought manufactured goods from partners around the world, especially Japan and Germany. It was better economics to let these countries run at their own pace, and own some horizontal layer (radios, clothes, cars). Today they trade cars and TVs for oil.

Imperialism and territorialism are increasingly obsolete. Why take over a country and deal with the headaches of a welfare system, and have to fix the plumbing in Uzbekistan, when you can buy its output on the cheap?

The vertical Soviet system lost precisely because it had no productivity. If you just steal resources, there is no incentive for others to create productive solutions.

And what about China? Well, it’s found its place in the horizontal stack. It leverages its cheap labor force and owns the logistic slice. It’s also locking up resources in Africa, trading instead of owning.

As of 1989, the United States of America became the world’s sole superpower. But what is America going to do with this status? Unlike past empires, there’s no incentive to take over the rest of the world. Imperialism is such a hassle. The world economy transitioned from loosely knit but mainly stand-alone industrialized countries through the 1970s to a tightly wound digital ecosystem today. Imperialism and territorialism are increasingly obsolete. Why take over a country and deal with the headaches of a welfare system, and have to fix the plumbing in Uzbekistan, when you can buy its output on the cheap, even ordering its goods over the Web? Despite all the protests, globalization instills peace. Trade now represents 26 percent of world GDP, up from 18 percent in 1990.

Globalization has linked the free world in a smart horizontal alliance. Computers, cell phones, and fiber optics are not made in any single country to be exported worldwide, but instead have components and labor from more than 30 inseparable countries, including China and Vietnam. Horizontal rules!

Without much forethought or planning or a dictator, benevolent or otherwise, the world has structured itself into a horizontal wealth-creating and peace-maintaining system—a productive system that actually increases the standard of living of all the participants, not just those in the United States. America still sits on top of the heap, sure, but wealth has increased for every country, company, and person that contributes. And they get rich not by stealing from the rest of the world, but by adding value to the food chain. Just ask Google.

http://www.newsweek.com/2011/01/30/geopolitics-la-google.html

WSJ: How Videogames Are Changing the Economy

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 come—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 right—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.

Techcrunch TV: Keen On… Is It Time To Get Rid Of The FCC?

Spectrum Scarcity? Hardly.

I got a lot of grief for suggesting in a Wall Street Journal op-ed "It's Time to Shut Down the FCC" that there is no scarcity of electromagnetic spectrum. Here are some of the comments the WSJ received:

1. Mr. Kessler should stick to hedge funds. He clearly doesn't understand the physics involved in wide-area wireless technology. His statement that there is no scarcity of wireless spectrum illustrates his lack of expertise in this area.
2. Unfortunately much of Mr. Kessler’s comments are based on false premises. Bandwidth is actually very finite - go back and check freshman physics - and the FCC has really struggled to have more allocated from the old VHF TV bands and has considered options for the UHF TV bands.
3. Of course there is spectrum scarcity. Two signals can't operate the same space and time without disrupting each other. But the laws of physics interferes with desires of Wall Street wheeler and dealers to make a killing by selling the same thing twice, or even three times.
4. Bandwidth is an extremely scarce resource -- I don't know anyone in the business who would not agree with that basic statement.

It really stings (OK, actually its humorous) to be told I don't understand physics, especially after taking so many damn physics courses to complete my electrical engineering degrees. But that was a long time ago, maybe physics has changed. Here are my egregious statements.

1. "Founded in 1934 partly to regulate radio spectrum (which in reality hasn't ever been scarce), the FCC..."
2. "During the last two decades, the FCC has manufactured the idea that the electromagnetic spectrum used by wireless devices is scarce."
3. "The FCC can apply more Band-Aids to its broken scarcity-based regulatory model. Or we can close the agency and let consumers allocate capital efficiently."
4. "There is plenty of bandwidth, both inside of fiber optic cables and out in the air, and more everyday as faster chips can handle higher and higher speeds."

Look at this chart of the airwaves. Fun colors and everything. Click and you'll get a high res PDF of US Spectrum Allocation.

For the most part, your smartphone uses spectrum in these bands 824–849 MHz, 869–894 MHz, 1850–1910 MHz, and 1930–1990 MHz.  It's a tiny sliver in the 5th row down labeled 300 MHz to 3 GHz.

Note that a huge chunk of spectrum in one row is 1/10th the size in the next row. So while the 160 MHz of spectrum seems like a lot in the 18/1900 MHz (1.8 and 1.9GHz) band, its really tiny in the 18 GHz and 19 GHz band.)

One of the ways that operators do get more out of existing spectrum frequencies is they break geography into cells (hence the name). You can squeeze more out of alleged scarce spectrum by going to smaller and smaller cell sizes. You can't shrink them forever, but you can for a very long time.

But there is plenty of spectrum above 3 GHz and even more above 30 GHz. Now, I'm not making my case for a lack of spectrum scarcity based on misallocation of spectrum by the FCC (though that's certainly true), but instead by looking at the next two rows. At around 5 GHz there is spectrum used for Wi-Fi and cordless phones and that kind of stuff. It was completely unusuable a decade or so ago, until faster chips were mass produced to enable commercially available products. Was that new spectrum? No, of course not, it was always there. Because of advancing technology, spectrum scarcity, if it exists at all, is always fleeting.

As you go up in frequency, the wavelength gets shorter meaning the waves don't travel as far before degrading (see, even though I sat in the back of the lecture hall, I still paid attention!) This means making cell sizes smaller. While a problem for the current AT&T and Verizon Wireless business models of utilizing big ugly tall cell towers , it doesn't mean its not possible or even economic. AT&T will even sell you a femtocell for your home (they should give you one since it covers up the shortcomings of their big ugly towers.) 

But technology has always advanced to solve any fleeting scarcity issues. Semiconductor technology exists today for affordable handheld devices to operate in the 5-10 GHz range, and maybe even up to 30 GHz. This was my point with the "There is plenty of bandwidth...and more everyday as faster chips can handle higher and higher speeds" line. There is AT LEAST ten times as much room for high speed data as there is at 1900 MHz.

But even 30 GHz is nothing - we can't stop there. Look at this paper from NTT in Japan.  It describes a demodulator capable of operating in the 120 GHz band. The chip is capable of 10 gigabits per second speeds. Your 3G cellphone can maybe do a megabit per second (after an annoying one second delay.) The NTT chip is surely uneconomic today, its just a sample chip in a lab somewhere in Tokyo. But that high speed chip in your phone today was in a lab ten years ago, maybe less. And that microprocessor in your PC wasn't even buildable ten and maybe even five years ago. Yet you have it today and at a price point so cheap you'll throw it away in another 18 months. That's how fast technology is advancing.

When I claim there is no spectrum scarcity, all I am doing is looking at the map of INFINITE frequencies and plotting the forward technology curve that will make bigger and bigger swaths of that colorful spectrum allocation chart usable in mass produced commercially viable products. The FCC, almost by definition, takes a static view of the airwaves. Markets take a dynamic forward looking view. Which would you rather trust?

WSJ: Time to Shut Down the FCC

It's time to close the Federal Communications Commission. This week, FCC Chairman Julius Genachowski gave a speech outlining his push for net neutrality, the absurd notion that the Internet should be "open and free" when in fact it's quite expensive to build. Net neutrality will straitjacket the U.S. economy's single most important driver of productivity and transformation.

 
Besides the obvious question of whether the FCC even has the authority to regulate the Web—in April, the U.S. Court of Appeals for the D.C. Circuit said it doesn't—the agency has a long history of restraining trade. Founded in 1934 partly to regulate radio spectrum (which in reality hasn't ever been scarce), the FCC delayed FM radio by favoring AM and television in spectrum allocation, mandated a TV network oligopoly by restricting station ownership, and kept long-distance rates too high for decades by forcing operators to subsidize local telephone costs. Now, because of bad bandwidth policy, it limits what smart phones can really do.

Read the rest here.

WSJ: What's Really Behind Bernanke's Easing?

http://online.wsj.com/article/SB10001424052748704648604575621093223928682.html

Federal Reserve Chairman Ben Bernanke's $600 billion quantitative easing program has been roundly criticized in this country and around the world. So why is he doing it? Does he know something the rest of us don't? Mr. Bernanke claimed earlier this month in a Washington Post op-ed that "higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending." But, as Mr. Bernanke must know, the Japanese have been trying to influence their stock market for 20 years, with little effect on their economy. It is also unlikely, as some claim, that the Fed chairman is whipping up a stealth stimulus or orchestrating a currency devaluation. He knows these have been tried and are more likely to destroy jobs than create them.

I have a different explanation for the Fed's latest easing program: Without another $600 billion floating through the economy, Mr. Bernanke must believe that real estate (residential and commercial) would quickly drop, endangering banks. The 2009 quantitative easing lowered mortgage rates and helped home prices rise for a while. But last month housing starts plunged almost 12%. And in September, according to Core-Logic, home prices dropped 2.8% from 2009. Commercial real estate values are driven by job-creation and vacancy rates, both of which are heading the wrong way. Because of unexpectedly bad construction loans, the staid Wilmington Trust was sold to M&T Bank earlier this month in a rare "takeunder"—what Wall Street calls a deal done below a company's stock value, in this case by 40%.

In other words, real estate is at risk again.

For the rest of the article, click here.

Real world catches up to (Grumby) fiction - Twitter moods and stocks

Don't want to give too much of Grumby's plot away, but another real world sighting of  technology from it's fictional world. This time it's predicting stock market moves based on the mood of Twitter users - a paper from Indiana University and University of Manchester professors. (hat tip to Paul Kedrosky)

We analyze the text content of daily Twitter feeds by two mood tracking tools, namely OpinionFinder that measures positive vs. negative mood and Google-Profile of Mood States (GPOMS) that measures mood in terms of 6 dimensions (Calm, Alert, Sure, Vital, Kind, and Happy)...We find an accuracy of 87.6% in predicting the daily up and down changes in the closing values of the DJIA and a reduction of the Mean Average Percentage Error by more than 6%.

  Sounds familiar. From Grumby:

In one marathon coding session – I turned up the oxygen content in the middle of the night – I bang out arBroker. I am careful to not mix the mood code that determines individual risk profiles and the code that goes out and sums aggregate expectations of all our users about products and companies. I had to be really careful about whose mood I was interested in before issuing a ‘buy’ or a ‘sell’. Markets deal in aggregates but at the end of the day, individuals make all the decisions. I saw that on the floor of the stock exchange, at Fidelity’s offices and in my crude understanding about markets. Millions or billions of decisions are summed and calculated to determine the right price at that particular moment in time.

I can’t wait to fire it up, and fortunately, the market opens at 6:30 a.m. on the west coast, so I run out to Starbucks and buy a Venti Mocha Double Latte Extra Hot No Whip and I’m good to go and test this sucker out.

Thanks to Meeta, our database is filled with all sorts of formerly useless trivia, on buying habits of Grumby users, to questions asked at stores to real time reviews of products. It’s not really hard to find this stuff in the haystack of Grumby-collected data and aggregate it to match the mood of an individual.

As I load up arBroker, I take a long sip of my latte and then let out a long exhale of delight.

“You just bought 300 shares of Starbucks Corporation, symbol SBUX at twenty five dollars and forty two cents,” my Grumby informs me.

Whoa. That was fast.

 

Off the Phone Grid

I have officially cut the cord with AT&T. Landline anyway. For now, I'm stuck with AT&T Wireless for our iPhones, but like many others who have complained, they don't work at my house. This wasn't a landline for wireless move, or even a move to Vonage or MagicJack, this was dropping a $2000 a year AT&T for an almost-free roll-your-own internet phone set up. And it was pretty easy.

This photo shows the box on the side of my house (the important sounding Telephone Network Interface) with three telephone jacks disconnected, a sign of Victory!

I didn't do this on a whim. I worked at Bell Labs for five years and they sent me to grad school, so I have been a loyal customer, no MCI or Sprint for me. But even I got fed up. Every month its $16.45 per phone line plus $9.99 for CallerID for one line, plus $8.95 for a voicemail box plus $3.95 for International Savings Advantage Plan plus $13.20 for a Federal Subscriber Line Charge plus a 75 cent Rate Surcharge plus a 12 cent State Regulatory Fee plus $1.77 Federal Universal Service Fee plus $7.95 for a One Rate plan plus 14 cents a minute for calls in California plus 7 cents a minute for the rest of the country plus $2.86  for a Universal Connectivity Charge plus $2.39 for a Carrier cost recovery fee and finally $16.14 in a hodgepodge of Government Fees and Taxes. And without any of the even simplest features of Google Voice such as ringing calls on my landline and cellphone and letting me pick which one to answer or transcribed voicemails. It was time to drop AT&T like a bad habit.

I have three phone lines for six of us at home. One for our main number, one for a fax machine and one that rings on my home office desk. I now have three phone numbers with two different VOIP providers. The tricky part was keeping my main phone number that we've had for 18 years. I paid $10 extra for it, as it ends with 5377, which is KESS (pretty nice, eh?)

I currently pay Comcast a confiscatory $75.41 a month for internet access, call it IP dialtone if you will. $69.95 a month for Blast which claims 20 megabit per second service, which I've never seen, plus $5 to lease the cable modem plus 46 cents in State Sales Tax. Another ripoff, but we'll work on cutting that cord another time.

Dropping AT&T requires buying an Internet Phone Adapter. I've got an old Panasonic phone system that came with the house, plus a half dozen wireless phones, so I needed something that looked exactly like a real phone line, dialtone and rings and all. The one that is used widely is the Cisco/Linksys PAP2T. Think of it as one RJ-45 Ethernet jack in (from your router) and two RJ-11 phone jacks out. Exactly what you need and $45-50. The reason for going mainstream is that most VOIP serivces can tell you exactly how to configure the PAP2T. 

Next, you need a VOIP or Voice Over Internet Protocol service. I use two. The first one I signed up for, Sipgate, was free for the first line. They have local numbers in my area code and I spent probably an hour hitting refresh until i got a number that I liked. I probably shouldn't have bothered, as I use Google Voice to ring this number, but more on that later. I unplugged the telephone  jack on the outside of my house for the number that rings on my desk, plugged the phone line into the PAP2T picked up the phone and...nothing. OK, it's easy, but  not that easy.

Sipgate has a pretty good support section of their website that shows exactly how to configure the PAP2T. You hit "****" and then 110# and over the phone, the PAP2T tells you the IP address of the device. You plug that into your browser and get the configuration page for the PAP2T. My router is at 192.168.1.1 and my computers get assigned via DHCP IP addresses starting at 192.168.1.100 so I set the IP address for the PAP2T at 192.168.1.95.

Sipgate shows you what settings to change, mostly account number and password. Two numbers that are important are the SIP Port under the Line 1 tab in administrator view, which is probably 5060 and under the SIP tab, the RTP Port Min and RTP Port Max which is probably 5004 and 5020. These are the ports to control your device and to handle the actual phone calls. They are important because you will end up setting your router to forward those ports to your PAP2T.

I got a dial tone, made a few phone calls, and it all worked like a charm. You get 60 minutes of free calls, but I then entered my credit card and set Sipgate up to charge me $10 for credit every time my balance runs low. Domestic calls are 1.9 cents a minute, and so are calls to the U.K. or France (around 20 cents per minute to international cell phones). No need for One Rate or International Savings Plans.

After a while, I would notice that one side or the other of the phone call would drop. I couldn't hear the caller or they couldn't hear me. A common problem it turns out. SIP, or Session Initiation Protocol is one of those that doesn't work well with most routers that are set up for web surfing, specificially NAT or Network Address Translation. Read this for an explanation. No matter. Inside your router, probably under security, is a page that let's you forward ports or a range of ports. I forward 5060-5064 to 192.168.1.94 (I'll explain the range in a moment). I also forward those RPT ports, 5004-5020 to the PAP2T as well.

No more dropped voices. In fact, it works great. Or did.

Confident in my new abilities to drop AT&T, I immediately cut the cord on the fax line and plugged it into the second line of the PAP2T. A second line costs $2.90 per month and the same 1.9 cents per minute. Well worth it. You could try to create a second free account with a different email address, but why bother? You can pay another $1.90 per month for emergency 911, "required" by law for primary lines, but I didn't need it on what are basically secondary lines.

I set the SIP port for Line 2 to 5061 vs. 5060 on Line 1. All of a sudden, both line screwed up. Intermittent dial tones, sometimes dropped calls, wouldn't dial out, would dial out, etc. Lots of back and forth with support via email for 48 hours until we figured out I should set the SIP port on Line 2 to 5062, and keep the SIP port for Line 1 at 5060. Works great. That's why I forward the range of SIP ports. The RTP min and max ports where already forwarded.

Again, confident, I decided it was time to port our main phone line. Getting a new number was a non-starter. So I called AT&T and asked how much it would cost to forward our existing number to a new number. Well, I never did get a real answer. It might be $16.45 a month, which is the cost of the line today, or it could be $23.44 which is the cost of the line plus call forwarding. Does CallerID still work? Does it just pass it through? Well, it might be another $9.99 a month for that. Forget it.

Fortunately, there is something called LNP or Local Number Portability. Phone companies have to let you keep your number and just port it to another phone service on request. Unfortunately, Sipgate doesn't do LNP. I turns out LNP (probably designed by phone companies) is a very paperwork intensive process. Very little is automated. It's why Google Voice doesn't let you use your existing phone number. Google hates human intervention and paperwork.

So I did some digging around and found a service Voipvoip.com. $6.99 per month including e911. Calls are 1.5 cents domestic and 1.9 cents per minute to London. And they do Local Number Portability. It takes about three weeks. You need your old phone bill which has your complete account number. You digitally sign some paperwork and they do the rest. Three or so weeks later I got an email that said my number is ported. Voipvoip charges me $7 per month.

I had bought a second PAP2T. Setting it up different from the other one was a little tricky, because Voipvoip and Sipgate do things a little differently and you need to forward different ports to different PAP2Ts. I set up the second at 192.168.1.94. I used port 5160 instead of 5060, as recommended by Sipgate if you use more than one PAP2T. Voipvoip never really said what to use.

Voipvoip does have a automatic configuring system. You plug in an address under the Provisioning tab under Profile Rule and your PAP2T is set up by Voipvoip. You still have to go in and find the SIP Port and RTP min and max so you can have your router forward them. In my case, they are 5466 and 16384 and 16482. I still had issues until I plugged in Voipvoip STUN server address, stun.voipvoip.com, under the SIP tab. STUN is Simple Traversal of User Datagram Protocol (UDP) Through Network Address Translators (NATs). Another way to fix the incompatiblity of SIP and NAT. This sounds like a pain, but it really isn't. My three VOIP lines now work like a charm.

Each of the VOIP services have voicemail and CallerID and call forwarding built into the basic plan. But you also get total control. Forward to another number after a period of time, block certain numbers and more. But I happen to like the Google Voice voicemail transcription, so I set up our main number to forward after 15 seconds to Google Voice which pretty quickly emails me a transcription of the message. That costs nothing.

And I haven't even started on customizing my lines. There are tons of settings at both VOIP services, plus lots of things you can change inside the PAP2Ts to change ringtones and the like.

So I am out $6.99 per month for Voipvoip plus $2.90 a month for Sipgate. If I talk for 500 minutes a month, way more than I do on my cellphone, I'm out another $10 per month. So maybe $15-20 per month instead of my $125-175 per month to AT&T local and long distance. Almost a factor of ten savings!

A few issues. CallerID is just a number, not a name, which is annoying. Also, on all VOIP calls, you get some tiny slight delays and the full duplex/half duplex thing can be an issue. You start talking and the other person doesn't hear you to stop talking. It is a little different that AT&T landline. But certainly not 10 times worse. And way better than cell phone calls.

Finally, I've read a few descriptions of using Google Voice to dial out and save the 1.5 cents a minute per call. I wouldn't recommend it. I find that Google Voice calls have even more delays. It is hard to have a long conversation with Google Voice because of the delays and duplex issues. Plus, on my line anyway, a voice occaisionally interrupts saying "this call is being recorded", a bug that others are having. Or maybe Eric Schmidt is listening in. Either way, embarrassing to have to explain. A stupid bug. So stick with your VOIP provider for now, who my guess will improve quality in order to keep or attract customers.

But in the mean time, no more AT&T landline! (An important tip: You're AT&T local cancels automatically when your number gets ported away from them, but you have to cancel AT&T long distance yourself at 1-800-288-2747). I'll work on ditching AT&T Wireless when an alternative is ubiquitous, and then I'll work on Comcast and DirecTV. Five more years? Maybe so.

 

Simple Traversal of User Datagram Protocol (UDP) Through Network Address Translators (NATs)

Fox Business Interview with Brian Sullivan: What's Wrong With Wall Street?

WSJ: What's The Matter With Wall Street?

 

What's wrong with Wall Street? I don't mean the painfully slow and dreadful new Oliver Stone movie. I mean the real Wall Street. The stock market has been on a tear this month and is up a few percentage points for the year. But the stocks of most Wall Street firms are actually down close to 15% for the year.

It wasn't supposed to be this way. The Federal Reserve's near-zero interest rate policy makes it almost impossible for Wall Street not to make money by borrowing at next to nothing and buying anything, especially Treasury bonds. This gives banks easy profits and the wiggle room to write off the toxic mortgage assets that never got cleared out.

While most firms won't release earnings for another three or four weeks, Jefferies investment bank set off air raid sirens last week by announcing disappointing earnings, which CEO Richard Handler blamed on "painfully slow trading." And there's more trouble down the road.

For the rest of the article, click here:

 

Charts of Household Debt showing 7 years of overhang

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.

WSJ: We Should Have Eaten Those Toxic Assets

TARP and the Continuing Problem of Toxic Assets

It was a bold bet that the Treasury and Fed could engineer an economic recovery without allowing the repricing of U.S. housing stock.

We should have eaten those toxic assets instead of sweeping them under the carpet.

The Troubled Asset Relief Program (TARP) was a foolish bait and switch. To prevent the 2008 financial crisis from worsening, TARP was originally designed to buy toxic mortgage derivatives weighing down banks and Wall Street, but no one could decide what price to pay for them. Too high and TARP would look like a government handout. But if the Treasury paid what they were worth, which was not much, financial firms would have to take huge write-offs, forcing many of them into insolvency and even nationalization.

So Treasury Secretary Hank Paulson switched plans, investing TARP funds directly into banks for a piece of equity. The idea was that banks would "earn out" their toxic portfolio—i.e., slowly write them off against the profits gained by the Federal Reserve's zero interest rate policy. It was a bold bet that the Treasury and Fed could engineer an economic recovery without allowing the bottoming action of a sharp but swift repricing of the U.S. housing stock. It turns out they only bought time, not a recovery, and now we are paying for that mistake.

Read the rest of the article here.

Fox Business Interview with Brian Sullivan: Get used to market volatility

Interview with Andrew Warner at mixergy.com

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

Real world catches up to (Grumby) fiction - Sighting #2

Glenn Reynolds at Instapundit points out these video camera sunglasses. In Grumby, the shades are a lot cooler - Oakleys, naturally - and without the dorky extra plastic. Still, all these zShades30 need are Bluetooth and self generating power and a little code and ...

An excerpt below.

3:31 p.m., April 27, Milpitas

The counter on the plasma TV reads 387,428. Software sales are tracking pretty well to Grumby sales. People are buying at least one application, many two or three. The office is hopping as usual. People are everywhere. I saw someone sitting on the torture chair using a laptop. We’ve got a lot to do.

RecordAll is a hit. Meeta set the price at $20 if you store all your conversations on your own PC. Or for $1 a month, we can store them for you, on Amazon’s servers. We figure that even if someone leaves it on 24 hours a day and records everything, our cost from Amazon for storage and bandwidth won’t come to much more than 10 cents. Not bad.

Meeta walks up to my desk. I have to do a double take. I’ve never seen Oakley sunglasses quite like the ones Meeta is wearing.

“Cool shades, where’d you get them?” I ask.

“This guy,” Meeta says, pointing to a guy in a Hawaiian shirt at his desk.

“Does he work for us?”

“No.”

“Oh.”

“Oakley.”

“I can see.” I say, focusing on my screen.

“He’s from Oakley.”

“Ohhh,” I turn around. “Any more of those?”

“Sure, I’ve got a whole bag. The name’s David.”

I shake his hand, and then eye his bag as he reaches in and pulls out similar sunglasses and hands them to me. They have that classic Oakley tear drop shape and wire rims, but something is different. An expanded frame maybe. More of a tube than a wire. It looks spectacular.

“Awesome. You selling these?” Oakley’s are expensive, I figure these were probably $150 or $200. I don’t think I’ve ever spent that much on sunglasses. I lose them too often.

“No, not yet. That’s why I’m here,” David says.

“Well you can’t have these back.” I put my face in front of my Grumby and then look at the image of myself on my screen. arMirror, Meeta calls it. I’m definitely stylin’.

“We bombed with our Thumper,” David says.

“Excuse me?”

“Our MP3 sunglasses. Right idea, wrong execution. And way too early,” David admits.

He’s talking about those huge Oakley sunglasses with an MP3 player built in and clunky ear pieces.

“I remember seeing those. Too bulky, right? And the earphones were awkward.”

“Guilty.” David pauses. “So we’ve been playing around with carbon fiber and Bluetooth and…”

“Oh, I get it,” I interrupt. “You’re not here to sell us sunglasses are you?”

David looks at Meeta, who just shrugs and then looks back at me.

“No. Well yes, sort of. I’m here to sell you ON sunglasses.”

“Uh-huh?” I’m confused but curious.

“Here, give those back to me for second,” David says as he reached for my face.

I backed up. “No way. Take Meeta’s.”

“OK, sorry, my bad.”

David digs through his bag and pulls out another pair.

“Here, check this out,” he says.

He pops off a small translucent cover on the front of the glasses, which I hadn’t noticed before. It seems part of the design. Inside is a small imager.

“Wow, is that what I think it is?” I ask.

“We pried that out of a Grumby. I was reluctant to do an autopsy, er, maybe biopsy on a Grumby, but Meeta had sent down about a dozen of them and we designed these sunglasses to precisely fit the same imagers you use in your Grumby.”

I looked over and Meeta smiles. I just shake my head.

 “And those tiny holes there are for the microphones?” I ask.

“Precisely.”

 “And speakers.”

“Nope, we weren’t going to make that mistake again. It’s all Bluetooth. We figure someone will have a phone in their pocket and a Bluetooth headset…”

“in-yer-ear,” I mumble.

“We tried those. They’ll work. We want to do sunglasses and even designer prescription glasses and what you guys have is the perfect front end.”

 “So what about power? We can shove tons of lithium ion batteries in our Grumby, you don’t seem to have any room.”

“Great question. We use tiny hearing aid batteries,” David answers.

“Won’t the imagers and Bluetooth kill those in a few minutes?” I ask.

“We think we can get a couple of hours in standby mode and maybe 15 minutes active.”

“Oh, that’s all.”

I must sound disappointed.

“Hold on. We’re experimenting with a motion charger into the tube of the frame.”

“Huh?”

“Try holding your head still for more than a few seconds. It’s always in motion. We put in these tiny magneto-motion sensitive chargers, every time your head moves, it recharges the hearing aid batteries. If you need a good charge, you just shake your head around for a few seconds and you get another couple of minutes of juice.”

“Too cool. I love it. We’re in. We can work out a deal pretty quickly so that…”

David reaches into his back pocket.

“Meeta warned me.”

He hands me a check, made out to Grumby Mogul Limited Company Inc., for $20 million.

“And I understand that’s against $5 per unit and your cut of application software that we sell?” David asks.

 “Perfect. Meanwhile, can you send a hundred of these new ones?”

“Three hundred thirty seven,” Meeta corrects.

“Is that how many people we have?” I ask.

Meeta just nods.

“Well, thanks,” I say to David, fingering the shades on my head.

“No. Thank you, thank you, thank you,” he almost seems to bow as he walks backwards away from my desk. “This is going to be our biggest runner.”

After the Oakley dude left, I say “Meeta?”

“Yes, your lordship.”

I just laugh. “Cable?”

“Tolkien,” Meeta smiles.

“Well, at least he wrote his own stuff. Do we really need all these people?”

“More.” Meeta answers.

“For?”

“The ring.” Meeta quickly states.

“The…?”

“At this point, we’re going for it, are we not?”

“I guess so,” I mumble.

“It is very much too late to guess,” Meeta tells me.

“OK, the ring.”

 “Or else what?” I mumble.

“No else. Just the ring.”

I hear a chorus of, “One ring to rule them all…” from every Grumby in the building.

http://www.amazon.com/Grumby-ebook/dp/098271632X/ref=andykessler-20