On Eating People
Or How to Find the Next Big Thing
“How entrepreneurs find the next big thing — and make it huge?”, inquired Andy Kessler.
“Eat people,” he wrote in his book.
In the book, Kessler laid down what he called “unapologetic rules for game-changing entrepreneurs”:
- If It Doesn’t Scale, It Will Get Stale
- Waste What’s Abundant to Make Up for What’s Scarce
- When in Doubt, Get Horizontal
- Intelligence Moves Out to the Edge of the Network
- Wealth Comes from Productivity; Everything Else Is Gravy
- Adapt to Humans; Don’t Make Them Adapt to You
- Be Soylent — Eat People
- Markets Make Better Decisions Than Managers
- Embrace Exceptionalism
- Be a Market Entrepreneur and Attack Political Entrepreneur
- Use Zero Marginal Cost to Create Flood (or Someone Else Will)
- Create Your Own Scarcity with a Virtual Pipe
You should read Kessler’s book if you’re an entrepreneur or in the process of becoming one.
In the book, he emphasized that we are in “productivity-driven economy, where the output of the human mind creates wealth.” The economy is no longer about the distribution of wealth — it’s no longer about the haves and have-nots. It’s about recognizing that the game has changed, and finding ways to have the edge.
Scale
The first rule is the most important among his twelve rules, specially in the tech sphere: Scale.
What is Scale in terms of tech entrepreneurship? Lower costs to increase the demand. Think Wal-Mart. It’s cheap and it creates a lot of wealth. Kesslers observed that, in tech, price drop creates growth.
The next question, now, is, “How do you recognize Scale?” The trick, according to Kessler, “is to find something where the price goes down and the demand goes up.”
“How do you recognize Scale? The trick is to find something where the price goes down and the demand goes up.”
If you are operating a startup, find the tasks that you can do cheaper — either by tweaking the process or cutting down the cost of doing them— without compromising quality. There’s a reason why Facebook and Twitter didn’t monetize on the onset. Free was cheap enough to create the demand they wanted for their services.
Abundance
After Scale, your next key is to look for what is Abundant. Cheap servers, bandwidth, microprocessors and abundance of great talents drive Google. And all those make Google scarce — or valuable.
Flickr is “wasting” storage and bandwidth just so everyone gets a free terabyte.
Kessler realized that “something that gets cheaper and cheaper increases the value of something else.
Horizontal
There are times when doing everything on your own is the best strategy. That’s Vertical.
Obvious Corp knew better. Medium would not have been as awesome a writing platform as it can get had they not tapped the expertise of Teehan+Lax. This is, according to Kessler, going Horizontal.
Edge of the Network
Kessler also recognized the trend of intelligence at the edge of the network. He said that intelligence exists at the edge of the network. What is this edge of the network? “It’s your computer or phone or even servers sitting in a data center.” It’s also the human beings at the end of these awesome devices and tablets.
Make the backend as dumb as possible so you can push and ship smarter and faster to the frontend. The Smart Pause feature of the Samsung Galaxy S4 comes to mind when I think of “intelligence at the edge.”
And of course, the perfect example is the battle of the cloud. We don’t really care what’s running behind these cloud infrastructure. What we care about is what’s at the edge. We don’t care much what’s behind Google Apps or Office 365. What we do care about is how efficient can we become by using it.
“Live out at the edge.” That’s the key. And that is where the battle is fought.
Productivity
Productivity is another important factor in finding the next big thing. It’s what creates wealth. Or profit.
We always confuse productivity with efficiency and/or effectiveness, and vice-versa.
Efficiency = Actual Output : Actual Input (ratio)
Productivity = Output
Effectiveness = Output <> Planned/Desired
“Productivity,” according to Kessler, “is really just doing the right things while doing things right.”
“Productivity is really just doing the right things while doing things right.”
Adaptation
Another emphasis that Kessler made is on adaptation to humans. Steve Jobs is the best at this. He knew most of his consumers are more stupid than they care to admit. Apple designs compensate that shortcoming - simple and intuitive. And, yes, “people don’t know what they want.”
Soylent
Now, the most controversial rule in Kessler’s rules is this:
“Be soylent. Eat people. The best way to leverage Abundance and Scale and to create Productivity is to get rid of people.”
This is another reference to the 1973 movie Soylent Green.
“Be Soylent. Eat People.”
“Eat people” means, in Kessler’s book, “get rid of worthless jobs.” Now, the question is, which ones?
According to Kessler, there are two types of people: Creator and Server.
Creators build software that automates stuff. They create better systems. They increase the output.
Those that “stand in the way of increased output” are the perfect candidates for eating.
Servers are those that don’t belong to the Creators.These are the burger-flippers, cashiers, receptionists, marketers, lawyers, doctors, and practically everyone that does not create.
Identify the jobs in this class that can be replaced with automation and smart systems and you identify the ones that can be eaten.
Markets
Kessler’s rule number eight is applicable if you are public. What he’s trying to say is that the market is in control of your capital — “the market makes the decision if you get capital or not.”
Rule number eight is a guide to better stock pricing — a strategy to price discovery. Don’t trust the managers to set it. “Trust markets to get to the correct price.”
Exceptional
The outliers are out there. There is an abundance of talented, smart people. You must embrace them. The common denominator among companies like Facebook, Twitter, Google, Apple, Microsoft, and other tech giants is that they have great supplies of talents - exceptional creators.
Market Entrepreneur vs Political Entrepreneur
Here’s the difference between the two types of entrepreneurs:
Political entrepreneurs leverage their political power to own something and then tax the crap out of the rest of us to use it. Political Power instead of competition.
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.”
Does that sound familiar? Just pick any news about certain Giant Company X suing smaller Company Y over patent issues. Look at the details of the case. You can easily recognize who’s the political entrepreneur and the real entrepreneur.
Zero Marginal Cost
“If it can be had for free, it will be had for free or close to free,” said Kessler. We’ve seen this with Facebook and Twitter. “Charge for value rather than cost,” added Kessler. Being able to offer your services or products for free is an advantage, if you know how to take advantage of it.
Virtual Pipes
Should you care about the media? Media is practically everything to everyone. “Media,” according to Kessler, “is about control of a pipe.”
“Control the pipe and you’ve got an economic engine to run ads against your “scarce” content, charge subscriptions, sell voice calls, and charge per minute — the world is your oyster.”
Market entrepreneurs don’t have pipes, but they can create a virtual pipe — something you can use to keep users in your corral. Perfect example, Apple — they have iTunes and App Store. They have created virtual pipe where they have control over music, apps, and software that go to their devices. You don’t need to get out of Apple to do all the things you need and want to do digitally.
These are your rules to follow to find the next big thing. This is your blueprint. But it’s up to you now.
Connect with Marlon via Twitter - @MarlonRibunal
