Running Money, Andy Kessler
6/1/07
Running Money is a memoir of Andy Kessler running a small hedge fun during the late 90’s tech bubble out of a small office in Silicon Valley. Andy takes the time to show us what kind of value he is seeking for his fund that isn’t trying to turn quick profit, rather take a longer, few year approach to finding “ten baggers” (stocks that will double 10 times over).
The fun money running stories aside, there was much to be learned about how money flows. He uses the example of the steam engine igniting the industrial revolution to explain how integrated circuits revolutionized the American intellectual property economy. The “scale” of the processor, or the steam engine, is such that everything needs it, from the cotton gin to the iron smelter, and from the browser company (Netscape) to the online vendor (Amazon).
Andy’s travels around the world and learns how the entire concern of a trade deficit is misunderstood. Perhaps the most interesting theme of the book is how American companies export a plan for a chip or a design for a part and then turn around and import the packaged product. Nothing of monetary value exported, only intellectual property, and then the goods are “purchased” back in. Hence the deficit, but then what do the foreign companies do with the money they made off of our ideas? They buy our t-bills and reinvest in our stocks there by driving our intellectual property economy. Simple powerful cycle. And of course the middle class rises in the manufacturing countries and they begin to produce a bit of their own intellectual property.
I like the business based globalized themes. The book is a great extension to Friedman’s The World is Flat.
