Running Money

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The idea that history repeats itself has become commonly accepted in the modern world.  Enough time has passed, and historical records are accurate enough that trends in all parts of life can be identified be it religious, financial, political, or cultural.  In Andy Kessler’s Running Money, this idea is applied to the current state of investment in the United States.  His argument is that conditions today, for investors, are very much like those of the Industrial Revolution.  His argument is made in a wandering style that includes his own experiences, historical information, and a fair amount of quirkiness that keeps the entire book lighthearted.  Even though Kessler’s methods are comical as often as they are sincere, when the book is taken as a whole there is a definite plan at work.

Most of part one is spent establishing Kessler’s own particular writing style and setting the stage for his future success.  This is the part of the story that educates the reader about exactly how fly-by-the-seat-of-your-pants high-risk investment really can be, from the hiring phase to the money-raising to the possible payoff.  Kessler’s proposed strategy, which is developed and implemented over the course of the book as she moves in and out of the central 1996 to 2000 timeline, is demonstrated as he identifies a large market company with a solid model and a good chance at maintaining their competitive edge, and managing their investments during the internet bubble.  What never does become clear is how Kessler justified this strategy or if it had any chance of holding up in any scenario other than the one in this book, which only further illustrates the luck and boldness that seems to account for Kessler’s early success.

The “Ssangyong Sweat” prelude is just the first of many examples of this.  Kessler’s tale then moves on to his nearly graceless entry into the hedge management world, a process that might have just as easily ended with him being completely penniless or dead considering some of the questionable characters like Bernard Madoff, he appealed to for startup capital (Kessler 36).  Not only was he swimming in a pool packed with sharks, but he was also doing so without the understanding that sharks exist.  It starts to become apparent that what he is actually coming up against is a difference in understanding.

Kessler was working in the field of cutting edge investment when most people with the money had no idea what the cutting edge meant.  This problem was illustrated in a conversation about Silicon Valley’s pricing methods.  Not only were their methods of pushing the industry forward by lowering prices, but they were actually making more money doing it (Kessler 41-42).  And, to go one further, those who operated on the old principles didn’t understand that.  The idea of a product that could make more money by selling for less was baffling because so many people didn’t understand how vast and integrated the technology landscape already was and how much more so it could become.

This is how Kessler opened the door for his comparison between internet-age investment and the Industrial Revolution and how he justifies interrupting his own narrative to explain technological developments from over a century ago.  When the future of business grows beyond the understanding of investors, it takes intermediaries like Kessler to make that connection.  The potential has to be explained and confidence has to be built.  He argues that intellectual property is a largely unexplored commodity, much as it was when machines began to take on many of the rudimentary tasks that had always been manpower dependent.  Both were times that were limited only by the ability of creative people to develop and implement those ideas.

The bursting of the internet bubble proved that a time of such wild growth was unsustainable.  But that is a fitting end to Kessler’s time as a technology hedge manager since, after reaching the end of the book, a reader starts to wonder if any of Kessler’s ideas are sustainable.  He certainly makes his methods sound credible and they obviously work for him.  There is no shortage of examples and his references to historical parallels do a solid job of making his theories seem very academic.  But there is a conspicuous lack of big picture application in Kessler’s methods.  It would be impossible to cite these cases because you cannot point to what isn’t there. An example of when more development would be welcome could be his claim that intellectual property justifies the Federal Trade Commission's explanation of the U.S. trade deficit.  Such a thing sounds very nice, as does most of his book, but such a claim demands figures and facts to support it.

Generally, Running Money is an entertaining read with some interesting ideas.  It should not be taken as a textbook or proven authority on financial theory, but nor does it claim to be those things.  Kessler’s frequent use of humor and almost impish habit of making grand claims with very little support suggest that he doesn’t expect to be taken too seriously.  Even so, the man’s success cannot be ignored as that is one of the few things that he cites exhaustively.  Taken with a grain of salt, Kessler’s book is a look into the mind of a proven investment genius and possibly an inspiration to anyone with similar ambitions.

Work Cited

Kessler, Andy. Running Money. New York: HarperBusiness, 2005. Print.