Feb 062011
Cornelius Vanderbilt (1794–1877)

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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.

After reading the book, I asked Andy if he’d do a guest post, diving into one point he made about the difference between “political entrepreneurs” and “market entrepreneurs,” and he came back with the following wonderful historical example (also discussed in the book) about Cornelius Vanderbilt, who was the Skype or Napster of his day — figuring out ways to get around the “political entrepreneurs” who offered high prices due to their ability to gain monopolies. It’s a great read, enjoy:

While entrepreneurs are out there busting their humps, making something cheaper, expanding its usage, increasing productivity, fending off fierce competition, and hoping to turn a profit along the way, there are those who, through the stroke of a pen, make a killing doing absolutely nothing of value. These “political entrepreneurs” leverage their political power to own something and then overcharge or tax the crap out of the rest of us to use it. Political power instead of competition.

Carlos Slim Helu comes to mind who briefly passed Bill Gates in 2007 and 2010 to become the richest man in the word. He controls 90% of the phone lines in Mexico and 80% of cellular customers. He didn’t invent anything. He doesn’t drive down prices. There is little innovation. And why should there be? He is milking this franchise for all it’s worth.

Easy money forever. But then again, maybe not. Because for every stroke of the pen, for every piece of legislation, for every paid-off congressman, there now exists a price umbrella that overvalues what he or any political entrepreneur is doing. Real entrepreneurs, “market entrepreneurs,” recognize the price-to-value gap and jump in. Ignoring legislation, they innovate, disintermediate, compete, stay up all night coding, and offer something better and cheaper until the market starts to shift. I call home from Mexico using Skype. Eat that Slim!

There’s one guy who figured this out before being a market entrepreneur became fashionable.

Read more . . .

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