A Different Kind of Invisible Hand :: AO
A Different Kind of Invisible Hand :: AO: "A Different Kind of Invisible Hand
Profits alone don't determine success.
nobida [] | POSTED: 02.20.06 @18:58
Forbes Publisher Rich Karlgaard and Yahoo's director of business development, Eric Grafstrom, talk about the roles that faith and morality play in the in today's fast-paced high-tech economy. This session was called 'Surviving in the Turbulent 2000s.'
A Different Kind of Invisible Hand
Profits alone don't determine success.
nobida [] | POSTED: 02.20.06 @18:58
Forbes Publisher Rich Karlgaard and Yahoo's director of business development, Eric Grafstrom, talk about the roles that faith and morality play in the in today's fast-paced high-tech economy. This session was called "Surviving in the Turbulent 2000s."
Eric Grafstrom: Good morning. Thanks for coming out. As I mentioned, my name is Eric Grafstrom, and I want to thank you for just giving me the chance to share a little bit of my story. This is a story of coming to faith, versus just simply meeting an obligation. You know, I’m pretty good about meeting obligations. If you’re like me you spend your days meeting obligations: a busy career, family, community activities, and various other endeavors. But leading up to that change I would like to tell you a little bit about how I got there.
I’ve been happily married for 10 years to a very loving, very patient, and very supportive woman. Now remember that—patient and supportive. We have two great kids, ages 6 ½ and 4, and we added a puppy last year just to kind of keep things lively. I currently work at Yahoo as the director of business development for our communications group, which is Yahoo Mail, IM Voice, things like that. And getting to this point, in this location, is part of my journey.
It started back in 1996. I walked into a loft in Dallas that had been converted into a temporary office. There were about 40 or so people there working for two guys who were intent on building an Internet broadcast company on the Internet called AudioNet. After having failed twice at my own two startups, both in the first year of my marriage—and again, patient and supportive wife—I decided to get a real job.And this was it: sitting at a card table pumping out 60 to 70 cold calls a day to see if anyone in corporate America was crazy enough to give me money to broadcast something on the Internet for them. At the time I was desperate, but now I like to say I had vision.
Within two years the Internet really started to take off, and [AudioNet] changed its named to Broadcast.com. We went public in 1998.
My wife gave birth to our son in January 1999. That same summer, Yahoo acquired Broadcast.com. End of December, they were looking for someone to help build their operations in Europe. Without even visiting the offices in London, I accepted the job. We sold the house and cars, gave the dog to some friends, and moved to London on Feb. 14, 2000. Valentine's Day. My gift to my wife.
I was working and traveling across Europe, and our daughter was born in May 2001. We were finally starting to really enjoy living in London, but we knew we wanted to move back at some point. By summer I had asked if we could go home and was fortunate to get an offer for the Yahoo offices back in Dallas. We landed in the U.S. in December 2001.
Two years abroad and it was a great experience.
We tried to plug back into our network of friends. We went to the church we had attended previously, but then things soon started to unravel—challenges at home, not connecting with our friends, and I really didn’t like my new role at work. We did go to church but we just sat in a pew because I grew up going to church and we wanted our kids to have that church as part of their lives.
In retrospect, I realize that that doesn’t work: Showing up at a ballpark every day doesn’t make you a ball player, either.
A friend at work invited us to a church he had been attending. They did not have a building so they met in a high school auditorium. First, I passed on the offer. I was polite and all, but, you know, I just wasn’t up for it. I needed some time away and knew that just showing up at church is not what God had in mind for me. But I still felt empty. So one day at the office I told him we would meet him and his wife there.
But before I can tell you about that Sunday I need to give you a little bit of background.
I grew up in the Midwest. I went to a traditional Presbyterian Church and an all-boys Catholic school. We hugged sideways. You are considered kind of funny if you wear pink shirts and goofy socks. And we were just not real gregarious kind of people. Even today, I drive a Volvo.
So we go in and there are people. There are lots of people. They are wearing shorts. They’re hugging. They’re talking. They’re acting like they’re headed to a barbecue, and they’re all excited and happy to be there. Then the music kicks in. Basically we freak out. What’s with the Bermudas and the rock band? Were we going to watch the Cowboys game on this big jumbo [tron] thing?
The minister rolls onto the stage. He is looking like he just came out from the pro shop. But that day I felt something. It was a bit weird for me but I actually felt something. And once I got past this whole church-in-a gym thing—and the rock band—we decided to come back on a regular basis.
It took some time to start warming up but I started to grow excited about coming back to church again. So after about 18 months in Dallas a new job opportunity came up with the Yahoo offices in Sunnyvale. And since we had not fully unpacked and we had just finished an extensive remodel, it seemed like a good time to move again.
The theme of the supportive, patient wife.
But here is the thing. I actually prayed about it. I hadn’t done that before. I gave it some prayerful thought and felt that God wanted us to move to California to take this job. So I thought.
We moved almost exactly two years to the day from having come back from London. And it was a bumpy landing here in California. We had an unexpected delay getting into a house, which caused us to move three times from apartment to apartment. The kids were getting restless. And, oh yeah, I had to shut down the group I was hired to build out and lay off a bunch of people, some of whom were my close friends.
So now I’m thinking, Man, I thought God wanted us to move here, but I don’t have this prayer thing down at all. I was way off. I thought he was listening.
And that was when the change started to happen. God made clear to me I was not here for a job or a career or some other objective I had in mind to meet and cross off my list. God put me in a desert and I was lost. I was hungry, I was thirsty and I was downright cranky. And I was asking him, 'I have done everything you require. I have met all the obligations and this is what happens.' Then it became clear: My faith is not an obligation to cross off a list or yet another thing for me to try to balance between a busy career and my family. In April 2004, I called Dave Peterson. I had never called anybody in a church staff before. I had never attended a church meeting before. I never really knew anyone at church. I didn’t have any friends at church. It just never fit in above and beyond 90 passive minutes on a Sunday. As a result of that step—and a lot of other steps—and support from a lot of other tremendous men, there have been a lot of changes in the past year.
I’m now part of a men’s ministry program, and I recently helped with a friend of mine, Rob Paine, to start a fathers’ fellowship. I have friends at church and I attend the men’s summit and am looking forward to going next year. However, despite all that, I’m still in the same fast-pace work environment. It’s competitive, it’s political, and it’s very stressful, but I know what grounds me now. I pray at work sometimes. Sometimes it is just for a few seconds going into a meeting, when I know that I’m going to need to have God’s hand upon me. Sometimes I step outside and I take time to walk around or even find a few moments or a couple of minutes to sit and pray and ask for God’s guidance and support. My faith has changed how I interact with others and the decisions that I make. It truly does. But I stumble. I say things that I know are wrong and at times are hurtful and I have to go back and correct those mistakes the best that I can. But I know I’m not alone anymore. No matter what, God is alive and well with me. He is alive and well at Yahoo. He is not at Google, but he is at Yahoo, by the way. Just kidding. He is and always has been there. And, in short, I work with God instead of just visiting him on Sunday.
I could go on and tell you more about this but my time is up. I’m looking forward to hearing Rich, and thank very much for a chance to share my story and I invite everyone who is headed off to work today to remember one thing: God is already there and he is ready to help you out. Thank you, and God bless.
Dave Peterson: Rich Karlgaard, founding editor of Upside and Forbes ASAP, is now a noted technology journalist and publisher of Forbes magazine. In his Digital Rules—Technology and the New Economy column, Rich writes about technology, entrepreneurship, regional economic development, and the future of business at work. He also lectures on these subjects and is a regular participant on the Fox News Channel’s Forbes on Fox. His first book, Life 2.0: How People Across America Are Transforming Their Lives by Finding the Where of Their Happiness, which has a forward by Dr. Rick Warren, author of A Purpose-Driven Life, was an instant Amazon and the Wall Street Journal best seller. It is in this book where Rich embarks on a journey to discover how other Americans are taking advantage of the best America has to offer by taking a chance at the American dream and actually succeeding.
Rich was raised in Bismarck, N.D., and graduated from Stanford University with a B.A. in Political Science. Before joining Forbes, Rich cofounded the 2,500-member Churchill Club, for which he shared a Northern California “Entrepreneur of the Year” award given by Ernst & Young. In addition to all this he cofounded Garage.com with Guy Kawasaki and he sits on several boards. Rich is married with two children. When he is not working or spending time with his family, Rich likes to fly his airplane around the country and meet people who make America unique and great.
Now I want to leave you with one intriguing quote that he wrote just before the high-tech and dot-com bubble burst. (It is amazing what you can find on the Internet.)
“From where did this loony idea emerge that a cow-licked Midwesterner who buys stock in companies that turn out syrupy fizz water, bland ice milk, and lefty newspapers should thus be known as a value investor? Tech will roar back. It will continue its merry dash towards infinite powers at zero cost. It will transform all in its path. Markets may (and just did) correct for overvalue but they can’t abjure the laws of physics. Bottom line: In such an explosive economy, there will be no safe harbors for traditional value stocks.”
I’ll let him translate that for you.
With that I would like to give a warm welcome to Rich Karlgaard.
Rich Karlgaard: Thanks so much. You know, when you said that you found something on the Internet that I’d written in the late 90s I thought it was probably a recommendation to buy Yahoo when it had a market value of $104 billion—but it is coming back.
I want to talk about the economy for a little bit, then loop it back in to faith in the economy, and then maybe drive it down to a bit of a personal level; although, as I said to Dave Peterson, I’m not going to do a testimonial. I can write testimonials but I can’t speak testimonials, so you’ll just have to accept me for who I am on that score.
We live in an awfully strange economy right now.
In fact, I want to take a poll.
Raise your hand if you think the American economy is in good shape right now. Okay. Raise your hand if you think—not necessarily the opposite—its anywhere from nervous to bad?
You know, you pretty much reflect how Americans feel about the economy. Every poll over the last 18 months shows that 60% of Americans think the economy is in bad shape or is about to go off a cliff. Now one would be tempted to link this to the problems over the last three months: Hurricane Katrina, some of President Bush’s problems over the last couple months, mounting dissatisfaction about the war in Iraq, and other figures. But in fact the 60/40 split goes back 18 months.
60% of Americans feel bad about the economy. But when you look at the numbers of the economy they make an unambiguous, overwhelming, undisputed case that this is one of the best economies that we’ve ever lived through. It may not feel that way but the numbers are pretty clear on this.
Any of you happen to notice the GDP growth rate of the third quarter that was reported two weeks ago? 3.8%. Do you remember what the mainstream media pundits were saying about the third quarter after Katrina; what would happen to the third quarter? Even the most optimistic people thought that Katrina would shave 2 points off the GDP, that at best it would come in at around 1.5% to 2%. Many people thought Katrina would tip us into a recession.
3.8%.
Now bear in mind that most of the quarters since coming out of the recession in 2002, get an upward revision. That has been the historical trend. No guarantee that it’s going to happen this time, but if the 3.8% reported at the end of October follows the trend of the last three years it could actually turn out to be 4.3%. That is great. In any era in the American economy since World War II, that is a good number; and the numbers have been averaging 3.5% since coming out of the recession.
Again, we might not feel this way, but it is fact.
Unemployment is now below 5%, at 4.9%. Do you want to take a guess what the average rate of unemployment is from World War II through the present? It is 5.5%. So we’re easily a half point under the historical rate of unemployment. Productivity in the American economy in some quarters rivals figures that we haven’t seen since the second half of the nineteenth century; a period when the U.S. went from an agrarian nation to being on its way to becoming the most powerful economic nation on earth. All of this technology—so much of it invented here—is being embedded into the American economy and people have become so much more productive as a result. Home ownership is at record levels in the United States. Interest rates—though they’re ticking up—are still near 40-year lows.
So, anyway you measure this, if you look at the facts, they are making a clear-cut case; and yet we don’t feel it in our gut. I think there are explanations to that that go beyond the kind of things that you read in the headlines, and I’m going to get to that in a bit. But let me ask one more question, since Silicon Valley is a rather stock-price-obsessed part of the world: How many of you think the American stock markets will—let’s say from this starting point, from today over the next five or 10 years—beat the historical rate of return for stocks? The historical rate of return is 7% after inflation but counting dividend reinvestment. How many of you think it will do better than 7%?
Okay. You guys must not have taken the walloping in the tech stock bubble collapse of 2001. How many of you agree with Warren Buffet that the market is in year 5 of a 15 year secular bear market; raise your hand? That it’s going to underperform the historical rate of return? Well I’ll tell you, since my friend Tony Perkins and I—Tony Perkins is going to be speaking early next year—since Tony and I founded Upside Magazine in 1988 and I’ve been immersed in looking at businesses and stock prices, I have never seen such a wider array of forecasts as to where the market is going than I do now. I mean, you look at what knowledgeable people—people who have real money in the market—are saying and the span is just breathtaking.
Barron's, the financial publication, had an interview with Laffer, the economist, in the spring. Now Art Laffer, famous for the Laffer curve, said if you reduce marginal tax rates you get more economic activity and tax receipts will actually go up. Art Laffer told Barron's he thought the market was 50% under value. Why did he say that? He looked at the productivity growth rates; he looked at the profit growth rates; he looked at the amount of cash that American publicly traded companies have on their balance sheets.
$2 trillion. Never seen before. American balance sheets are the strongest they have ever been. And he said all the bad news—the Iraq War, fiscal deficits, and stuff like that—were embedded into the prices but all the good news that I mentioned were not. And if you were patient you would see this 50% bump in the next two or three years.
Now one week later Barron's had an interview with somebody at the completely opposite end of the spectrum. It was a hedge fund manager out of Boston named Jerome Grantham.
Grantham runs a fund that has $40 billion in it, presumably smart money. I mean, you don’t get into a hedge fund unless you have quite a bit of money to begin with; and Grantham has been in the market for 30 years, so he wasn’t just some unknown figure. Grantham said—talking about the markets—he thought we were in an echo bubble. Just as we had this bubble in ’99 and 2000, we were now in an echo bubble and when the echo bubble popped—and Grantham said it would pop between the interview and the 2006 elections. And when it popped, the Dow would go down to about 6000; Nasdaq would plummet through 1,000 and settle in at around 800, and only then would a long- term bull rally begin.
Now, 15,000 over here, 6,000 over here. Let us agree that’s a range. It’s a huge range. And the thing to note is that these aren’t anonymous webloggers saying the most outrageous thing they can to get attention. These are people, credible figures, who have been in the market for 30 years. You can fill in this gap from 6,000 to 15,000 with household names at every point along the way. I mentioned Buffet. Buffet is joined by John Bogle, the founder of Vanguard and PIMCO's Bill Gross, the giant bond fund manager out of Southern California. These guys believe that we are in a secular bear market that we’ll run another 10 years.
The market will underperform. Their argument is simplicity itself: It’s a regression to the mean argument. The historical rate of return in the American equity market is at 7%. But from 1982 to 2000 it was 15%. We had this 17 ½-year period where the market did slightly better than two times of the historical rate of return. The bull market in 82 began in June. Anybody want to take a guess what the Dow index was in June of 82?
777.
Not 7.
777.
In January 2000—about the time Yahoo was worth more than the entire American automobile industry, part suppliers included—the Dow peaked at 11,731. So over that 17 ½-year period it went up in leaps and bounds. The mean theory says it now has to flatline for an equal number of years to connect back to this historical rate of return of 7%. Not a happy prediction, particularly if you live in Silicon Valley. Particularly if you’re a part of the IPO economy that is triggered by a market that is going up.
Now, I must say that in my time at Forbes I probably picked a fight with Warren Buffet six times over the last six years. And subsequent events later reveal that one of us has been full of hot air and our reputation has been demolished. I’m 0 for 6 against Warren. That is all you need to know. But just to end this on a slightly more positive note, there is a camp in the market that is more optimistic; not as optimistic as Art Laffer, but again credible figures who believe the market right now is about 20% undervalued. In fact it is, I believe. We have already seen a 5% march in the market since George Bush named Ben Bernanke as Allan Greenspan’s replacement. 5%. The market likes what it sees and I think we are going to see an 11,000 Dow by the end of the year.
But remember I’m the guy that is 0 for 6 against Buffet.
The moderately bullish camp believes the market is around 20% undervalued right now. Steve Forbes is in that camp. Larry Kudlow, a television commentator is in that camp. Talk about a testimonial. Kudlow was a figure on Wall Street in the 80s and 90s and developed a cocaine and alcohol addiction, found the Lord, and has now been clean and sober for a long time. So when you watch Larry Kudlow, know that he is one of us. David Malpass, the chief economist for Bear Stearns; I think the best economist on Wall Street. Malpass. Google him or Yahoo him and look at his work. These guys believe a lot of things that Art Laffer does; maybe not to quite the same extent. And all of them would put an asterisk on their rosy forecast. The asterisk would [be for this]: Are we going to get a Fed chairman who is as good as Greenspan? (Well, it looks like we have a pretty good candidate.) Are we going to get meaningful tax reform? Are we going to get some kind of tort reform? Will free trade continue? And so on. And if these things happen, yes the market is in a position to go up.
So there is your range: 6,000 to 15,000, everybody in between. I talked about the economy. 60% of Americans think the economy is in bad shape even though the numbers describe an economy that in any era would be considered a good economy. So why is it that we look at the same data—whether it’s the economy or the market—and we come to such wildly different conclusions? Well I’m going to attempt to take a guess at that in the next 15 minutes or so.
I think it is because—despite the economy is good and markets are in a position to go up—we live in an economy that makes us very uncomfortable and nervous. And the reason we do is because the economy in the United States and around the globe is going through a greater transformation compacted into a shorter period of time than anybody has lived through in the past. Now, over the last 120 years we’ve certainly seen inventions. The pace of invention has changed everything from automobiles to airplanes to radio, television, personal computers, the Internet, antibiotics. An amazing 120-year period of invention. But now we’re living through a period of business-model change that is much shorter, and we’re now just beginning to realize what’s going on. This is driving just an enormous velocity of change into a very compacted period.
In fact, McKenzie, the consulting firm, took a stab at this measure of volatility and came up with some amazing statistics to describe what’s going on. They wrote a paper in February called “Extreme Competition” and they coined a phrase in this paper called the “topple rate.” The topple rate was used to describe the number of leading companies that fell out of leadership over its 20-year study period. From 1975 to 1995 McKenzie determined the number of companies that were in the top quartile of their industry and then fell out of the top quartile or were toppled doubled over that time. Volatility—David slaying Goliath—doubled over the 20-year period. And here is the thing: McKenzie predicts that in the next 20-year period, from ’95 to 2015, the topple rate will double again.
Personally, I think McKenzie is sandbagging it. I think the topple rate is going to be more than double over that period. Why? Because now suddenly 2 billion people in the world are participating in this great game of capitalism; something that hardly existed in the 75 -to-95 period. But now one-third of the world, which previously had no access to participating in the global economy other than digging ditches and stuff like that, now has a portal into the global economy. The topple rate, I guarantee you, will more than double; it will triple or quadruple.
Well, this volatility is what has us nervous I contend. Even though we’re in a great economy nothing seems safe. Nothing seems certain today.
I’ll give you five examples of volatility in the economy today.
Most of those examples you will be familiar with living here in Silicon Valley. But example No. 1 of what’s going on in the economy today comes from about six weeks ago. EBay decided to buy a company that had forward revenue projections of I believe $60 million, and eBay bought it for $4.1 billion. That is a lot of money. Even by the bubble standards of the 90s, that is a lot of money. The company is called Skype. Skype does voice over Internet. You all know how it works: You go to Skype’s website, you download the software, you put it on your computer or your PDA, and all of a sudden you can make a free phone call any where in the world to anybody else who has Skype software on their machine. You can see why eBay wants this. EBay wants to facilitate a conversation between buyers and sellers on the eBay marketplace. But imagine if you’re AT&T. Imagine if you’re BellSouth or Verizon or SBC and all of a sudden out of nowhere you have a competitor that is offering a service for free that you used to charge for?
The market has noticed this. Mr. Market is smart. Mr. Market can see around corners. And even though the Skype announcement was six weeks ago, over the last 12 months $40 billion of market cap has tiptoed out of AT&T, BellSouth, Verizon, SBC, and Nextel during a period when the market has been flat. You know, smart capital sees the Skype and Vonage revolution coming and is exiting.
Example No. 2: Google and Microsoft. Sorry to mention Google for you Yahoo fans. What amazes me most about Google and Microsoft is how these two trends came together in one year. Let’s go back to 1998. What was the main headline in the technology world in 1998? It was the justice department’s attempt to break up Microsoft. You know, many in Silicon Valley actually funded that effort. Microsoft was thought to be so powerful that nothing capitalism could offer could break it up. Therefore the most powerful government on the face of the earth was the only thing that was a counterbalance against this unending Microsoft monopoly that would go into the 24th century or something like that.
Another event in 1998 that occurred here got almost no attention and that was when Sergey Brin and Larry Page founded Google. It got no attention because there were search engines already in the market. There were at least—I think Guy probably mentioned this in his last talk—there were five or six search engines easily already in the market in 1998. Inktomi, which powered Yahoo’s search engine, and there were others. And who cared about another search engine? Well in the space of seven years we now have a situation where Microsoft is mortally threatened. Now, it may not seem like a company that is generating $12 billion a year in profit is mortally threatened, but Mr. Market thinks so. Because Mr. Market has taken Microsoft’s market value down by about half㬮%—over that period of time, and Microsoft trades right at the market now. The market won’t even pay a premium for a company with Microsoft’s fabulous margins. It is underperforming as a stock, where it should be. And here is Google and everybody knows Google’s story. I mean, in the space of seven years, who in 1998 thought that a company that was going into the market with a free service would be the one that would cause Microsoft the most heartburn and possibly bring them down?
Example No. 3: China. The most important figure I think that sums up everything going on in China is cellphone penetration. In 1996 China had 7 million cellphones. Today it has 350 million. That is more than are in North America, by the way. China graduates six times as many scientists and engineers as does the United States. Do you know China graduates more English-speaking scientists and engineers than the United States does now? By the way, do you know that entrepreneurial capitalism is the main delivery system for Christianity in China right now? You know, they can’t gather in churches. They gather in the work place. So this is an amazing positive development. Nobody should look at the rise of China’s entrepreneurial economy and see bad things, which unfortunately I think some of our politicians in Washington are wont to do.
And No. 4: India. Do you know what the fastest-growing business industry in India is? You’re going to say software, right? Call centers? It is actually medical tourism. You can get on a boat and you can go to India and get a hip replacement for about $3,000 or $4,000—maybe one-tenth of the cost that would be in the United States. People in the United States aren’t going to do that, but people in Western Europe are. Why? Because the downside of national health care. The good side of national health care is that you can get it; if you have some immediate problem you can go in and get care. But if you are waiting for elective surgery such as a hip replacement, you may wait forever. So India is taking advantage of this with this enormously talented workforce that it has.
And the last example I want to mention is a total goofball example that I wrote on in my Forbes column 18 months ago. It was about a high school junior named Max Oshman. Max lives in suburban New Jersey, or did. Now he is a freshman at NYU. If you have teenagers—we do—Max is the kind of teenager you want to have. SAT’s over 1500; a grade point average of 3.9; played on the high school varsity basketball team; managed the high school yearbook. Pretty accomplished kid, but that is not why I wrote about him. I wrote about him because he had a business that he had started on the side. And this business that he had on the side had generated $900,000 in revenue in the previous three months. Now I’m seeing these thought bubbles rising over your heads and they’re asking, What kind of business could that be? Could it be a legal business?
Indeed it was a legal business.
Some of you, a little more salacious of thought, are saying could it be an ethical business? You know, does Max have some kind of scheme where he is trying to addict people to gambling or pornography on the Internet? And the answer is no to that although it was an Internet business.
It was a web design business.
Okay, let’s step back and think about that. Web design business. High school kid. Web design business. I get that. You know, high school kid; smart; couple of powerful personal computers; Macromedia Flash; he’s in business. What I don’t get though is the $900,000. High school kids don’t have businesses that generate that kind of money. They help Joe the plumber get on the web, right? Max didn’t have Joe the plumber, and his business—Plotdev.com—is still going, by the way. His clients included Stevie Wonder and the rap singer Sean Combs. Plotdev.com is doing some work for Adobe Systems and was just about to get some contract work from Microsoft. A 17-year-old kid out of New Jersey.
Now here is where the story gets interesting and says everything you need to know about the economy that we live in.
It wasn’t just Max, obviously. What Max had done was put together a virtual web design team, average age 23, scattered all around the world ... in Croatia, the Ukraine, Singapore, Hong Kong. They had never met each other. They had talked on the phone. When I interviewed them 18 months ago, twice they had communicated solely by email and instant messaging.
I asked Max, 'How much do you charge for your web work, say, as compared to a Hollywood web design firm or a New York web design firm?'
Max answered, 'Well we charge about 5% to 10% as much as they do.'
I said, 'You know, I’m a lot older than you and I’m getting deaf. Just clear this up for me. Did you say 5% to 10% less or did you say 5% to 10% of?'
He said, 'Of.'
So how would you like to be that Madison Avenue or Hollywood web design firm doing work that is not discernibly better than some high school kid out of New Jersey operating out of his parent’s bedroom and coming into the market charging 5% to 10% of what you do? That is what is going on in the economy. It’s people coming out of nowhere who are assembling cheap technology and global labor pools to come up with a business model that may have an underlying cost structure that could be as much as 10 times less than incumbents in any industry. And year by year some business model appears that attacks some industry that nobody thought could be attacked.
You always thought that surgeons in the West would be protected from this. After all you have to show up for surgery, right? Yes, there were predictions of telesurgery in the 90s, and that really hasn’t panned out yet. But nobody predicted medical tourism; people going to India where the cost of transportation plus the surgery plus the vacation to recuperate would still come in at about one-quarter of the cost of what it costs in the West.
The world that we have inherited that makes us very nervous. It will go on. It is not going to go away. It is not just this year’s phenomenon or next year’s phenomenon. One of the most important drivers in the economy today is Moore's law. Everybody knows about Moore's law. In April, we celebrated the 40th anniversary of Moore's law. I would contend, though, that is actually a corollary of Moore's law that is more important in the economy right now. Moore's law predicts everything. I am interpreting Gordon Moore's Law loosely here but digital stuff gets twice as fast every 18 to 24 months. He was really talking narrowly about devices, components on silicon, but let’s just call it “stuff.”
The corollary or the back side of Moore's law is that at the same performance point, stuff gets cheap; prices drop 30% to 40%. Anybody packing a BlackBerry or a Treo right now? You know the microprocessor in that is about a 33MHz microprocessor. That is exactly the same as the Intel 486, circa 1989, when it came out.
Now when the Intel 486 came out in 1980, it cost the OEM $750 to buy it. That is about $1,300 in today’s dollars. The first computer to use the 486 was the Compaq System Pro, and it cost $13,995. A year later Compact had it in a $4,000 device, and then competition from Dell and others drove it down to $3,000, and so on, and so on.
But just imagine if Chinese and Indians had to pay $13,995 for their portal into the global economy. It wouldn’t be happening. We wouldn’t be talking about the China and India phenomenon today. So cheap technology is cartelizing these new talent pools. My other back side of Moore's law—this amuses me to no end, every time I think of it—but there was an iPod 20 years ago. It was a Sony Walkman hooked up to an IBM mainframe, but it was there. Where else were you going to get 60GB of storage other than an IBM mainframe in a device the size of a master bedroom? And it is that backside of Moore's law that is driving the world today and causing change, because Max Oshman is invited in: a high school kid with an allowance can start a business today.
It is a great economy but it’s one that properly makes us nervous. I will just give you three or four kind of speculations about where I think this leads us. Many of you have read The World is Flat, by Tom Friedman, and he is very nervous about where the U.S. hits in this economy, looking at education in India and China and so on and looking at the decline of math and science skills across the United States. I’m more positive than that, but I do think we’ve entered an era where speed now beats scale. And one of the reasons I think people feel bad about this economy is because of the way the mainstream media writes about business: It obsesses on the troubles of big companies. And big companies are in trouble across the board, because we’re in an era where speed trumps scale.
Big companies don’t have a monopoly on all the tools that are required to be competitive today. Little companies, and even really goofball little companies like Max Oshman’s company, have access to technology today. We’re in an economy where private may be public for some time. If Warren Buffet is right about the direction of the stock market then, in combination with Sarbanes-Oxley and these other burdens that are now put on publicly traded companies, you talk to any CEO or board of directors today and it is just a time waste for publicly traded companies. Privately held companies may outperform publicly traded companies on balance. And again, we’re not going to see this, because the press writes about publicly traded companies, because you have access to their financial information, and so on. I think that Google beats Harvard. Google beats Stanford. Search engines beat Stanford.
Tom Friedman I think got many things right in The World is Flat about the need for people to constantly be upgrading their skills, but I think search engines have severed the link between learning and education. It is not about education; it’s about learning. Whether it’s an individual or a company, individuals and companies that are on a constant learning curve are going to outperform those who think they know it all. I think that blogging beats institutional arrogance. One of my passions is small-plane aviation. The fastest-growing companies—like companies in small-plane aviation—are the ones that have the most active independent bloggers writing about them because the customers can now talk to each other. And they don’t always say nice things about your company. They can say some awfully tough things about your company, but the smart companies are going to listen to this because when they get their customers talking honestly they really learn something.
And the last thing I wanted to say; which is a segue into talk about faith and the importance of morality in capitalism, is that purpose will be a three-year plan. There is no question whether in your own life or in your business, a clearly defined purpose is going to be any kind of a three-year rational plan that you can come up with. How can you plan rationally in a world where nobody has any visibility going forward? When your competitors can come out of nowhere? When they can come out of a New Jersey bedroom and suddenly cause a world of hurt for you?
Now that is sort of my point of segue into just a few words about what my own mission is at Forbes and what I try to do in my talks and my column. And that is to really—it is up to every generation that participates in the great game of capitalism and enterprise, as most of us do here—it is our obligation to fix the moral underpinnings of capitalism. Capitalism is a wonderful system. But it’s a system that is very much—as Churchill said about democracy—it’s the worst system that anybody could come up with except for all others.
The angriest mail that I get in response to columns that I write at Forbes, other than recommending tech stocks at the top of the bubble, are not from people who are anti-capitalists and left of center. I mean Forbes is a pro-capitalist, right-of-center magazine. They are not from people who are anti-capitalist and left of center. They are actually from a kind of Ayn Rand libertarian type whenever I write a column talking about the importance of morality in capitalism and how the two work together. A free enterprise will perish in two generations if it doesn’t have the underlying foundation of morality. That isn’t true [they say], capitalism is morally sufficient on to itself. And they never make the argument. They say because Ayn Rand said so.
It is just sort of an amazing little cult out there. But there are a lot of kind of what I would call soft libertarians out there who kind of believe the same. And I think the mainstream media is guilty of portraying capitalism as this kind of individual pursuit of greed and somehow it all works together. That is a complete misinterpretation of what Adam Smith said.
Adam Smith wrote lengthily about the necessity for capitalism existing on a moral basis. Kind enough to mention Rick Warren, writing a forward in my book, Life 2.0. Very interesting to see what Rick Warren is doing now in Africa; now that he’s achieved about everything that he can with saddleback and his purpose-driven mission in the United States, he has turned his attention to Africa, where there is this intractable poverty. His test case is Rwanda, and his plan is to bring together government, business, and faith-based organizations to bear on these deep, deep problems of poverty. And it won’t work without all three because all three must come together on this. I was talking to Rick recently and I love what he said about this notion of free enterprise and capitalism: 'That we were created in God’s image; we were created by a creator; ergo we were born to create.'
And that is what the free enterprise system allows us to do. He talks about not just giving men fish and not just teaching them to fish. Because in today’s modern economy we need to teach them how to process fish; distribute fish; get fish into the supply chain; sell fish. He says people in Rwanda, even after all of the carnage of the 90s are actually very self sufficient. The problem is they are all doing the same thing. You drive down a road and everybody is selling the same agricultural produce. So you’ve gotten to the level where you have a sustaining economy at some kind of a level, of subsistence economy—there’s the word—but not anything that can grow and improve people’s lives.
So my mission at Forbes, what first attracted me to the magazine in the mid-80s long before I ever went to work there, was that they had a Jesuit priest columnnist, named Michael Novak, who wrote some wonderful stuff on why capitalism works. It doesn’t work for the reason Hollywood or the mainstream media thinks it works. It really works because we go out and create; we go out and serve. That is how you succeed. That is where I feel that my own personal mission is; is to do everything that I can to get that particular message across.
So I think I’ve come to the end of my time on my talk. Dave, did you have some pre questions or anybody who wants to fire any questions, go ahead.
Peterson: If you have any questions from the audience and then we’ll open it up to group discussion.
Audience Question: I’m one of those kind of foot-in-mouth people. I always like to know where people’s feet are compared to their talk. What do you think is Art Laffer’s percentage of assets that he has investments [inaudible] ?
Karlsgaard: Oh, going back to the point about Art Laffer’s prediction that the stock market is 50% undervalued. Is he just saying that because he happens to be heavily invested in stocks? I don’t know the answer to that but you could spin it around and say that he is a true believer. Having watched his career I don’t see anything that would cause you to doubt that Art Laffer isn’t saying anything that he doesn’t truly believe in. He may be wrong on that. I’m closer myself to Steve Forbes’ view, not just because he’s my boss. I do think that when you see this amazing productivity going on in the economy that you’re going to see this continuing growth and I don’t think the United States is going to, as China and India arise, I don’t think that is going to come at our expense, which is everybody’s worry in Washington. A world created by our Lord is not zero sum. I think the source of the majority of the world’s misery, the majority of the world’s corrupt ideologies, the majority of the world’s bad governance arises from this idea that it is a zero-sum game out there. I mean, maybe this is embedded in our DNA, but we go beyond our DNA.
We in this room know that we are more than the sum of our DNA. We were born to create. The Malthusian view of the world—that population growth will exceed our ability to feed people; that there would be catastrophe all around—never came to pass because people are more than consumers; they are creators and contributors. They add more than they take. So that has always biased me toward the miracle of free enterprise married with the belief in a God who could have gotten us this far. Imagine, we all have our BlackBerries and our Treo’s, and yet the electromagnetic spectrum wasn’t even thought of I think until the 1860s. Here in the United States while we were consumed with the Civil War some guy was thinking that there is a medium out there and now we’ve learned how to use it. Entrepreneurs have learned how to use it.
I think the most interesting development in science—this idea that photons anywhere in the universe can influence other photons by their behavior—is suggestive of a medium of communication that is instant. Now, if you come from a very scientific computer base, particularly a computer-based point of view, and you want to believe in God then you have to believe that God has an instant form of communication. You have to believe that there is infinite processing power and infinite storage.
Well, we’re heading toward infinite processing power. We’re heading for infinite storage. Right now speed of light is the fastest thing that we know of but when Nathan Rothschild made a bunch of money buying bonds against everybody in England who was panicked and selling bonds in the early 1800s, but he had carrier pigeons that brought back the message that Wellington had defeated Napoleon at Waterloo. Then bonds suddenly went up and guess who was holding all the bonds? Carrier pigeons flew at 30mph. That was the fastest horse in the race in the early 1800s. We’ve gone from that to the speed of light in 200 years. Entanglement theory now is suggestive that there is something instant. And who would ever doubt it? I mean if you believe in God who would ever doubt that that is true?
Peterson: Let’s do one more question and then we’ll open it up to group discussion.
Audience Question: I think John Adams, or somebody, said that Democracy requires virtue. So, what do we do in this room this morning to ensure capitalism? What is the world foundation that we in this room can really participate in?
Karlsgaard: That is a great question, because, as I said, I think both capitalism and democracy could be lost in an extremely short period of time if we don’t under gird it with a belief. I’m of the belief that 100 million people died on the continent of Europe in the 20th century. Why was that? I believe Chesterton’s prediction made in, I think, 1913 ... Well, let me go back further. This is a slightly long-winded answer but it’s worth waiting for. Darwin published Origin of the Species in 1859. In 1863, there was a debate in London between the Archbishop of Canterbury and Thomas Huxley. And it was whether the Origin of the Species killed God. Was there any room for God within Darwin’s theory of evolution, and not just evolution but evolution by random selection? And by all accounts Huxley, cleaned the Archbishop’s clock. It was not a good moment for Christianity. We didn’t prep our guy well enough.
Four years later Nietzsche, writing about that, declared the death of God: his famous “God is dead.” He meant God is dead among the intellectual classes. Chesterton wrote on the eve of World War I that when people stop believing in God, they will believe in anything. It is not that they stop believing; they will believe in anything else. You know, they’ll believe in corrupt ideologies. They’ll believe in fascism, Nazism, communism, anarchism. And by gosh, they did. And in Europe, where the intellectual classes declared that it was no longer cool or politically correct to believe in God, they gave themselves to these far more corrupt ideologies. About 100 million people died in Europe and Western Russia in the 20th century merely on that. Anywhere from 30 million to 70 million people died in Mao’s China. And 5 million to 10 million died in Cambodia. It is just a horror story. This is what happens when people lose their faith.
It is incumbent on us to not hide our faith. It is incumbent on us to walk the walk in business. I mean we go out and create and we go out and serve. If you want a great business, besides Guy Kawasaki’s The Art of the Start, two great business manuals I’ll recommend—and of course Forbes and Forbes.com—that will tell you more about how to grow a business than any other: one is the Book of Acts, and the second is Rick Warren’s lesser known book The Purpose Driven Church. Read it and just substitute the word business for church and you will have a mission-driven, purpose-driven book with all the tactics that you could ever want. So I guess we’ll close on that. Thank you very much.
Profits alone don't determine success.
nobida [] | POSTED: 02.20.06 @18:58
Forbes Publisher Rich Karlgaard and Yahoo's director of business development, Eric Grafstrom, talk about the roles that faith and morality play in the in today's fast-paced high-tech economy. This session was called 'Surviving in the Turbulent 2000s.'
A Different Kind of Invisible Hand
Profits alone don't determine success.
nobida [] | POSTED: 02.20.06 @18:58
Forbes Publisher Rich Karlgaard and Yahoo's director of business development, Eric Grafstrom, talk about the roles that faith and morality play in the in today's fast-paced high-tech economy. This session was called "Surviving in the Turbulent 2000s."
Eric Grafstrom: Good morning. Thanks for coming out. As I mentioned, my name is Eric Grafstrom, and I want to thank you for just giving me the chance to share a little bit of my story. This is a story of coming to faith, versus just simply meeting an obligation. You know, I’m pretty good about meeting obligations. If you’re like me you spend your days meeting obligations: a busy career, family, community activities, and various other endeavors. But leading up to that change I would like to tell you a little bit about how I got there.
I’ve been happily married for 10 years to a very loving, very patient, and very supportive woman. Now remember that—patient and supportive. We have two great kids, ages 6 ½ and 4, and we added a puppy last year just to kind of keep things lively. I currently work at Yahoo as the director of business development for our communications group, which is Yahoo Mail, IM Voice, things like that. And getting to this point, in this location, is part of my journey.
It started back in 1996. I walked into a loft in Dallas that had been converted into a temporary office. There were about 40 or so people there working for two guys who were intent on building an Internet broadcast company on the Internet called AudioNet. After having failed twice at my own two startups, both in the first year of my marriage—and again, patient and supportive wife—I decided to get a real job.And this was it: sitting at a card table pumping out 60 to 70 cold calls a day to see if anyone in corporate America was crazy enough to give me money to broadcast something on the Internet for them. At the time I was desperate, but now I like to say I had vision.
Within two years the Internet really started to take off, and [AudioNet] changed its named to Broadcast.com. We went public in 1998.
My wife gave birth to our son in January 1999. That same summer, Yahoo acquired Broadcast.com. End of December, they were looking for someone to help build their operations in Europe. Without even visiting the offices in London, I accepted the job. We sold the house and cars, gave the dog to some friends, and moved to London on Feb. 14, 2000. Valentine's Day. My gift to my wife.
I was working and traveling across Europe, and our daughter was born in May 2001. We were finally starting to really enjoy living in London, but we knew we wanted to move back at some point. By summer I had asked if we could go home and was fortunate to get an offer for the Yahoo offices back in Dallas. We landed in the U.S. in December 2001.
Two years abroad and it was a great experience.
We tried to plug back into our network of friends. We went to the church we had attended previously, but then things soon started to unravel—challenges at home, not connecting with our friends, and I really didn’t like my new role at work. We did go to church but we just sat in a pew because I grew up going to church and we wanted our kids to have that church as part of their lives.
In retrospect, I realize that that doesn’t work: Showing up at a ballpark every day doesn’t make you a ball player, either.
A friend at work invited us to a church he had been attending. They did not have a building so they met in a high school auditorium. First, I passed on the offer. I was polite and all, but, you know, I just wasn’t up for it. I needed some time away and knew that just showing up at church is not what God had in mind for me. But I still felt empty. So one day at the office I told him we would meet him and his wife there.
But before I can tell you about that Sunday I need to give you a little bit of background.
I grew up in the Midwest. I went to a traditional Presbyterian Church and an all-boys Catholic school. We hugged sideways. You are considered kind of funny if you wear pink shirts and goofy socks. And we were just not real gregarious kind of people. Even today, I drive a Volvo.
So we go in and there are people. There are lots of people. They are wearing shorts. They’re hugging. They’re talking. They’re acting like they’re headed to a barbecue, and they’re all excited and happy to be there. Then the music kicks in. Basically we freak out. What’s with the Bermudas and the rock band? Were we going to watch the Cowboys game on this big jumbo [tron] thing?
The minister rolls onto the stage. He is looking like he just came out from the pro shop. But that day I felt something. It was a bit weird for me but I actually felt something. And once I got past this whole church-in-a gym thing—and the rock band—we decided to come back on a regular basis.
It took some time to start warming up but I started to grow excited about coming back to church again. So after about 18 months in Dallas a new job opportunity came up with the Yahoo offices in Sunnyvale. And since we had not fully unpacked and we had just finished an extensive remodel, it seemed like a good time to move again.
The theme of the supportive, patient wife.
But here is the thing. I actually prayed about it. I hadn’t done that before. I gave it some prayerful thought and felt that God wanted us to move to California to take this job. So I thought.
We moved almost exactly two years to the day from having come back from London. And it was a bumpy landing here in California. We had an unexpected delay getting into a house, which caused us to move three times from apartment to apartment. The kids were getting restless. And, oh yeah, I had to shut down the group I was hired to build out and lay off a bunch of people, some of whom were my close friends.
So now I’m thinking, Man, I thought God wanted us to move here, but I don’t have this prayer thing down at all. I was way off. I thought he was listening.
And that was when the change started to happen. God made clear to me I was not here for a job or a career or some other objective I had in mind to meet and cross off my list. God put me in a desert and I was lost. I was hungry, I was thirsty and I was downright cranky. And I was asking him, 'I have done everything you require. I have met all the obligations and this is what happens.' Then it became clear: My faith is not an obligation to cross off a list or yet another thing for me to try to balance between a busy career and my family. In April 2004, I called Dave Peterson. I had never called anybody in a church staff before. I had never attended a church meeting before. I never really knew anyone at church. I didn’t have any friends at church. It just never fit in above and beyond 90 passive minutes on a Sunday. As a result of that step—and a lot of other steps—and support from a lot of other tremendous men, there have been a lot of changes in the past year.
I’m now part of a men’s ministry program, and I recently helped with a friend of mine, Rob Paine, to start a fathers’ fellowship. I have friends at church and I attend the men’s summit and am looking forward to going next year. However, despite all that, I’m still in the same fast-pace work environment. It’s competitive, it’s political, and it’s very stressful, but I know what grounds me now. I pray at work sometimes. Sometimes it is just for a few seconds going into a meeting, when I know that I’m going to need to have God’s hand upon me. Sometimes I step outside and I take time to walk around or even find a few moments or a couple of minutes to sit and pray and ask for God’s guidance and support. My faith has changed how I interact with others and the decisions that I make. It truly does. But I stumble. I say things that I know are wrong and at times are hurtful and I have to go back and correct those mistakes the best that I can. But I know I’m not alone anymore. No matter what, God is alive and well with me. He is alive and well at Yahoo. He is not at Google, but he is at Yahoo, by the way. Just kidding. He is and always has been there. And, in short, I work with God instead of just visiting him on Sunday.
I could go on and tell you more about this but my time is up. I’m looking forward to hearing Rich, and thank very much for a chance to share my story and I invite everyone who is headed off to work today to remember one thing: God is already there and he is ready to help you out. Thank you, and God bless.
Dave Peterson: Rich Karlgaard, founding editor of Upside and Forbes ASAP, is now a noted technology journalist and publisher of Forbes magazine. In his Digital Rules—Technology and the New Economy column, Rich writes about technology, entrepreneurship, regional economic development, and the future of business at work. He also lectures on these subjects and is a regular participant on the Fox News Channel’s Forbes on Fox. His first book, Life 2.0: How People Across America Are Transforming Their Lives by Finding the Where of Their Happiness, which has a forward by Dr. Rick Warren, author of A Purpose-Driven Life, was an instant Amazon and the Wall Street Journal best seller. It is in this book where Rich embarks on a journey to discover how other Americans are taking advantage of the best America has to offer by taking a chance at the American dream and actually succeeding.
Rich was raised in Bismarck, N.D., and graduated from Stanford University with a B.A. in Political Science. Before joining Forbes, Rich cofounded the 2,500-member Churchill Club, for which he shared a Northern California “Entrepreneur of the Year” award given by Ernst & Young. In addition to all this he cofounded Garage.com with Guy Kawasaki and he sits on several boards. Rich is married with two children. When he is not working or spending time with his family, Rich likes to fly his airplane around the country and meet people who make America unique and great.
Now I want to leave you with one intriguing quote that he wrote just before the high-tech and dot-com bubble burst. (It is amazing what you can find on the Internet.)
“From where did this loony idea emerge that a cow-licked Midwesterner who buys stock in companies that turn out syrupy fizz water, bland ice milk, and lefty newspapers should thus be known as a value investor? Tech will roar back. It will continue its merry dash towards infinite powers at zero cost. It will transform all in its path. Markets may (and just did) correct for overvalue but they can’t abjure the laws of physics. Bottom line: In such an explosive economy, there will be no safe harbors for traditional value stocks.”
I’ll let him translate that for you.
With that I would like to give a warm welcome to Rich Karlgaard.
Rich Karlgaard: Thanks so much. You know, when you said that you found something on the Internet that I’d written in the late 90s I thought it was probably a recommendation to buy Yahoo when it had a market value of $104 billion—but it is coming back.
I want to talk about the economy for a little bit, then loop it back in to faith in the economy, and then maybe drive it down to a bit of a personal level; although, as I said to Dave Peterson, I’m not going to do a testimonial. I can write testimonials but I can’t speak testimonials, so you’ll just have to accept me for who I am on that score.
We live in an awfully strange economy right now.
In fact, I want to take a poll.
Raise your hand if you think the American economy is in good shape right now. Okay. Raise your hand if you think—not necessarily the opposite—its anywhere from nervous to bad?
You know, you pretty much reflect how Americans feel about the economy. Every poll over the last 18 months shows that 60% of Americans think the economy is in bad shape or is about to go off a cliff. Now one would be tempted to link this to the problems over the last three months: Hurricane Katrina, some of President Bush’s problems over the last couple months, mounting dissatisfaction about the war in Iraq, and other figures. But in fact the 60/40 split goes back 18 months.
60% of Americans feel bad about the economy. But when you look at the numbers of the economy they make an unambiguous, overwhelming, undisputed case that this is one of the best economies that we’ve ever lived through. It may not feel that way but the numbers are pretty clear on this.
Any of you happen to notice the GDP growth rate of the third quarter that was reported two weeks ago? 3.8%. Do you remember what the mainstream media pundits were saying about the third quarter after Katrina; what would happen to the third quarter? Even the most optimistic people thought that Katrina would shave 2 points off the GDP, that at best it would come in at around 1.5% to 2%. Many people thought Katrina would tip us into a recession.
3.8%.
Now bear in mind that most of the quarters since coming out of the recession in 2002, get an upward revision. That has been the historical trend. No guarantee that it’s going to happen this time, but if the 3.8% reported at the end of October follows the trend of the last three years it could actually turn out to be 4.3%. That is great. In any era in the American economy since World War II, that is a good number; and the numbers have been averaging 3.5% since coming out of the recession.
Again, we might not feel this way, but it is fact.
Unemployment is now below 5%, at 4.9%. Do you want to take a guess what the average rate of unemployment is from World War II through the present? It is 5.5%. So we’re easily a half point under the historical rate of unemployment. Productivity in the American economy in some quarters rivals figures that we haven’t seen since the second half of the nineteenth century; a period when the U.S. went from an agrarian nation to being on its way to becoming the most powerful economic nation on earth. All of this technology—so much of it invented here—is being embedded into the American economy and people have become so much more productive as a result. Home ownership is at record levels in the United States. Interest rates—though they’re ticking up—are still near 40-year lows.
So, anyway you measure this, if you look at the facts, they are making a clear-cut case; and yet we don’t feel it in our gut. I think there are explanations to that that go beyond the kind of things that you read in the headlines, and I’m going to get to that in a bit. But let me ask one more question, since Silicon Valley is a rather stock-price-obsessed part of the world: How many of you think the American stock markets will—let’s say from this starting point, from today over the next five or 10 years—beat the historical rate of return for stocks? The historical rate of return is 7% after inflation but counting dividend reinvestment. How many of you think it will do better than 7%?
Okay. You guys must not have taken the walloping in the tech stock bubble collapse of 2001. How many of you agree with Warren Buffet that the market is in year 5 of a 15 year secular bear market; raise your hand? That it’s going to underperform the historical rate of return? Well I’ll tell you, since my friend Tony Perkins and I—Tony Perkins is going to be speaking early next year—since Tony and I founded Upside Magazine in 1988 and I’ve been immersed in looking at businesses and stock prices, I have never seen such a wider array of forecasts as to where the market is going than I do now. I mean, you look at what knowledgeable people—people who have real money in the market—are saying and the span is just breathtaking.
Barron's, the financial publication, had an interview with Laffer, the economist, in the spring. Now Art Laffer, famous for the Laffer curve, said if you reduce marginal tax rates you get more economic activity and tax receipts will actually go up. Art Laffer told Barron's he thought the market was 50% under value. Why did he say that? He looked at the productivity growth rates; he looked at the profit growth rates; he looked at the amount of cash that American publicly traded companies have on their balance sheets.
$2 trillion. Never seen before. American balance sheets are the strongest they have ever been. And he said all the bad news—the Iraq War, fiscal deficits, and stuff like that—were embedded into the prices but all the good news that I mentioned were not. And if you were patient you would see this 50% bump in the next two or three years.
Now one week later Barron's had an interview with somebody at the completely opposite end of the spectrum. It was a hedge fund manager out of Boston named Jerome Grantham.
Grantham runs a fund that has $40 billion in it, presumably smart money. I mean, you don’t get into a hedge fund unless you have quite a bit of money to begin with; and Grantham has been in the market for 30 years, so he wasn’t just some unknown figure. Grantham said—talking about the markets—he thought we were in an echo bubble. Just as we had this bubble in ’99 and 2000, we were now in an echo bubble and when the echo bubble popped—and Grantham said it would pop between the interview and the 2006 elections. And when it popped, the Dow would go down to about 6000; Nasdaq would plummet through 1,000 and settle in at around 800, and only then would a long- term bull rally begin.
Now, 15,000 over here, 6,000 over here. Let us agree that’s a range. It’s a huge range. And the thing to note is that these aren’t anonymous webloggers saying the most outrageous thing they can to get attention. These are people, credible figures, who have been in the market for 30 years. You can fill in this gap from 6,000 to 15,000 with household names at every point along the way. I mentioned Buffet. Buffet is joined by John Bogle, the founder of Vanguard and PIMCO's Bill Gross, the giant bond fund manager out of Southern California. These guys believe that we are in a secular bear market that we’ll run another 10 years.
The market will underperform. Their argument is simplicity itself: It’s a regression to the mean argument. The historical rate of return in the American equity market is at 7%. But from 1982 to 2000 it was 15%. We had this 17 ½-year period where the market did slightly better than two times of the historical rate of return. The bull market in 82 began in June. Anybody want to take a guess what the Dow index was in June of 82?
777.
Not 7.
777.
In January 2000—about the time Yahoo was worth more than the entire American automobile industry, part suppliers included—the Dow peaked at 11,731. So over that 17 ½-year period it went up in leaps and bounds. The mean theory says it now has to flatline for an equal number of years to connect back to this historical rate of return of 7%. Not a happy prediction, particularly if you live in Silicon Valley. Particularly if you’re a part of the IPO economy that is triggered by a market that is going up.
Now, I must say that in my time at Forbes I probably picked a fight with Warren Buffet six times over the last six years. And subsequent events later reveal that one of us has been full of hot air and our reputation has been demolished. I’m 0 for 6 against Warren. That is all you need to know. But just to end this on a slightly more positive note, there is a camp in the market that is more optimistic; not as optimistic as Art Laffer, but again credible figures who believe the market right now is about 20% undervalued. In fact it is, I believe. We have already seen a 5% march in the market since George Bush named Ben Bernanke as Allan Greenspan’s replacement. 5%. The market likes what it sees and I think we are going to see an 11,000 Dow by the end of the year.
But remember I’m the guy that is 0 for 6 against Buffet.
The moderately bullish camp believes the market is around 20% undervalued right now. Steve Forbes is in that camp. Larry Kudlow, a television commentator is in that camp. Talk about a testimonial. Kudlow was a figure on Wall Street in the 80s and 90s and developed a cocaine and alcohol addiction, found the Lord, and has now been clean and sober for a long time. So when you watch Larry Kudlow, know that he is one of us. David Malpass, the chief economist for Bear Stearns; I think the best economist on Wall Street. Malpass. Google him or Yahoo him and look at his work. These guys believe a lot of things that Art Laffer does; maybe not to quite the same extent. And all of them would put an asterisk on their rosy forecast. The asterisk would [be for this]: Are we going to get a Fed chairman who is as good as Greenspan? (Well, it looks like we have a pretty good candidate.) Are we going to get meaningful tax reform? Are we going to get some kind of tort reform? Will free trade continue? And so on. And if these things happen, yes the market is in a position to go up.
So there is your range: 6,000 to 15,000, everybody in between. I talked about the economy. 60% of Americans think the economy is in bad shape even though the numbers describe an economy that in any era would be considered a good economy. So why is it that we look at the same data—whether it’s the economy or the market—and we come to such wildly different conclusions? Well I’m going to attempt to take a guess at that in the next 15 minutes or so.
I think it is because—despite the economy is good and markets are in a position to go up—we live in an economy that makes us very uncomfortable and nervous. And the reason we do is because the economy in the United States and around the globe is going through a greater transformation compacted into a shorter period of time than anybody has lived through in the past. Now, over the last 120 years we’ve certainly seen inventions. The pace of invention has changed everything from automobiles to airplanes to radio, television, personal computers, the Internet, antibiotics. An amazing 120-year period of invention. But now we’re living through a period of business-model change that is much shorter, and we’re now just beginning to realize what’s going on. This is driving just an enormous velocity of change into a very compacted period.
In fact, McKenzie, the consulting firm, took a stab at this measure of volatility and came up with some amazing statistics to describe what’s going on. They wrote a paper in February called “Extreme Competition” and they coined a phrase in this paper called the “topple rate.” The topple rate was used to describe the number of leading companies that fell out of leadership over its 20-year study period. From 1975 to 1995 McKenzie determined the number of companies that were in the top quartile of their industry and then fell out of the top quartile or were toppled doubled over that time. Volatility—David slaying Goliath—doubled over the 20-year period. And here is the thing: McKenzie predicts that in the next 20-year period, from ’95 to 2015, the topple rate will double again.
Personally, I think McKenzie is sandbagging it. I think the topple rate is going to be more than double over that period. Why? Because now suddenly 2 billion people in the world are participating in this great game of capitalism; something that hardly existed in the 75 -to-95 period. But now one-third of the world, which previously had no access to participating in the global economy other than digging ditches and stuff like that, now has a portal into the global economy. The topple rate, I guarantee you, will more than double; it will triple or quadruple.
Well, this volatility is what has us nervous I contend. Even though we’re in a great economy nothing seems safe. Nothing seems certain today.
I’ll give you five examples of volatility in the economy today.
Most of those examples you will be familiar with living here in Silicon Valley. But example No. 1 of what’s going on in the economy today comes from about six weeks ago. EBay decided to buy a company that had forward revenue projections of I believe $60 million, and eBay bought it for $4.1 billion. That is a lot of money. Even by the bubble standards of the 90s, that is a lot of money. The company is called Skype. Skype does voice over Internet. You all know how it works: You go to Skype’s website, you download the software, you put it on your computer or your PDA, and all of a sudden you can make a free phone call any where in the world to anybody else who has Skype software on their machine. You can see why eBay wants this. EBay wants to facilitate a conversation between buyers and sellers on the eBay marketplace. But imagine if you’re AT&T. Imagine if you’re BellSouth or Verizon or SBC and all of a sudden out of nowhere you have a competitor that is offering a service for free that you used to charge for?
The market has noticed this. Mr. Market is smart. Mr. Market can see around corners. And even though the Skype announcement was six weeks ago, over the last 12 months $40 billion of market cap has tiptoed out of AT&T, BellSouth, Verizon, SBC, and Nextel during a period when the market has been flat. You know, smart capital sees the Skype and Vonage revolution coming and is exiting.
Example No. 2: Google and Microsoft. Sorry to mention Google for you Yahoo fans. What amazes me most about Google and Microsoft is how these two trends came together in one year. Let’s go back to 1998. What was the main headline in the technology world in 1998? It was the justice department’s attempt to break up Microsoft. You know, many in Silicon Valley actually funded that effort. Microsoft was thought to be so powerful that nothing capitalism could offer could break it up. Therefore the most powerful government on the face of the earth was the only thing that was a counterbalance against this unending Microsoft monopoly that would go into the 24th century or something like that.
Another event in 1998 that occurred here got almost no attention and that was when Sergey Brin and Larry Page founded Google. It got no attention because there were search engines already in the market. There were at least—I think Guy probably mentioned this in his last talk—there were five or six search engines easily already in the market in 1998. Inktomi, which powered Yahoo’s search engine, and there were others. And who cared about another search engine? Well in the space of seven years we now have a situation where Microsoft is mortally threatened. Now, it may not seem like a company that is generating $12 billion a year in profit is mortally threatened, but Mr. Market thinks so. Because Mr. Market has taken Microsoft’s market value down by about half㬮%—over that period of time, and Microsoft trades right at the market now. The market won’t even pay a premium for a company with Microsoft’s fabulous margins. It is underperforming as a stock, where it should be. And here is Google and everybody knows Google’s story. I mean, in the space of seven years, who in 1998 thought that a company that was going into the market with a free service would be the one that would cause Microsoft the most heartburn and possibly bring them down?
Example No. 3: China. The most important figure I think that sums up everything going on in China is cellphone penetration. In 1996 China had 7 million cellphones. Today it has 350 million. That is more than are in North America, by the way. China graduates six times as many scientists and engineers as does the United States. Do you know China graduates more English-speaking scientists and engineers than the United States does now? By the way, do you know that entrepreneurial capitalism is the main delivery system for Christianity in China right now? You know, they can’t gather in churches. They gather in the work place. So this is an amazing positive development. Nobody should look at the rise of China’s entrepreneurial economy and see bad things, which unfortunately I think some of our politicians in Washington are wont to do.
And No. 4: India. Do you know what the fastest-growing business industry in India is? You’re going to say software, right? Call centers? It is actually medical tourism. You can get on a boat and you can go to India and get a hip replacement for about $3,000 or $4,000—maybe one-tenth of the cost that would be in the United States. People in the United States aren’t going to do that, but people in Western Europe are. Why? Because the downside of national health care. The good side of national health care is that you can get it; if you have some immediate problem you can go in and get care. But if you are waiting for elective surgery such as a hip replacement, you may wait forever. So India is taking advantage of this with this enormously talented workforce that it has.
And the last example I want to mention is a total goofball example that I wrote on in my Forbes column 18 months ago. It was about a high school junior named Max Oshman. Max lives in suburban New Jersey, or did. Now he is a freshman at NYU. If you have teenagers—we do—Max is the kind of teenager you want to have. SAT’s over 1500; a grade point average of 3.9; played on the high school varsity basketball team; managed the high school yearbook. Pretty accomplished kid, but that is not why I wrote about him. I wrote about him because he had a business that he had started on the side. And this business that he had on the side had generated $900,000 in revenue in the previous three months. Now I’m seeing these thought bubbles rising over your heads and they’re asking, What kind of business could that be? Could it be a legal business?
Indeed it was a legal business.
Some of you, a little more salacious of thought, are saying could it be an ethical business? You know, does Max have some kind of scheme where he is trying to addict people to gambling or pornography on the Internet? And the answer is no to that although it was an Internet business.
It was a web design business.
Okay, let’s step back and think about that. Web design business. High school kid. Web design business. I get that. You know, high school kid; smart; couple of powerful personal computers; Macromedia Flash; he’s in business. What I don’t get though is the $900,000. High school kids don’t have businesses that generate that kind of money. They help Joe the plumber get on the web, right? Max didn’t have Joe the plumber, and his business—Plotdev.com—is still going, by the way. His clients included Stevie Wonder and the rap singer Sean Combs. Plotdev.com is doing some work for Adobe Systems and was just about to get some contract work from Microsoft. A 17-year-old kid out of New Jersey.
Now here is where the story gets interesting and says everything you need to know about the economy that we live in.
It wasn’t just Max, obviously. What Max had done was put together a virtual web design team, average age 23, scattered all around the world ... in Croatia, the Ukraine, Singapore, Hong Kong. They had never met each other. They had talked on the phone. When I interviewed them 18 months ago, twice they had communicated solely by email and instant messaging.
I asked Max, 'How much do you charge for your web work, say, as compared to a Hollywood web design firm or a New York web design firm?'
Max answered, 'Well we charge about 5% to 10% as much as they do.'
I said, 'You know, I’m a lot older than you and I’m getting deaf. Just clear this up for me. Did you say 5% to 10% less or did you say 5% to 10% of?'
He said, 'Of.'
So how would you like to be that Madison Avenue or Hollywood web design firm doing work that is not discernibly better than some high school kid out of New Jersey operating out of his parent’s bedroom and coming into the market charging 5% to 10% of what you do? That is what is going on in the economy. It’s people coming out of nowhere who are assembling cheap technology and global labor pools to come up with a business model that may have an underlying cost structure that could be as much as 10 times less than incumbents in any industry. And year by year some business model appears that attacks some industry that nobody thought could be attacked.
You always thought that surgeons in the West would be protected from this. After all you have to show up for surgery, right? Yes, there were predictions of telesurgery in the 90s, and that really hasn’t panned out yet. But nobody predicted medical tourism; people going to India where the cost of transportation plus the surgery plus the vacation to recuperate would still come in at about one-quarter of the cost of what it costs in the West.
The world that we have inherited that makes us very nervous. It will go on. It is not going to go away. It is not just this year’s phenomenon or next year’s phenomenon. One of the most important drivers in the economy today is Moore's law. Everybody knows about Moore's law. In April, we celebrated the 40th anniversary of Moore's law. I would contend, though, that is actually a corollary of Moore's law that is more important in the economy right now. Moore's law predicts everything. I am interpreting Gordon Moore's Law loosely here but digital stuff gets twice as fast every 18 to 24 months. He was really talking narrowly about devices, components on silicon, but let’s just call it “stuff.”
The corollary or the back side of Moore's law is that at the same performance point, stuff gets cheap; prices drop 30% to 40%. Anybody packing a BlackBerry or a Treo right now? You know the microprocessor in that is about a 33MHz microprocessor. That is exactly the same as the Intel 486, circa 1989, when it came out.
Now when the Intel 486 came out in 1980, it cost the OEM $750 to buy it. That is about $1,300 in today’s dollars. The first computer to use the 486 was the Compaq System Pro, and it cost $13,995. A year later Compact had it in a $4,000 device, and then competition from Dell and others drove it down to $3,000, and so on, and so on.
But just imagine if Chinese and Indians had to pay $13,995 for their portal into the global economy. It wouldn’t be happening. We wouldn’t be talking about the China and India phenomenon today. So cheap technology is cartelizing these new talent pools. My other back side of Moore's law—this amuses me to no end, every time I think of it—but there was an iPod 20 years ago. It was a Sony Walkman hooked up to an IBM mainframe, but it was there. Where else were you going to get 60GB of storage other than an IBM mainframe in a device the size of a master bedroom? And it is that backside of Moore's law that is driving the world today and causing change, because Max Oshman is invited in: a high school kid with an allowance can start a business today.
It is a great economy but it’s one that properly makes us nervous. I will just give you three or four kind of speculations about where I think this leads us. Many of you have read The World is Flat, by Tom Friedman, and he is very nervous about where the U.S. hits in this economy, looking at education in India and China and so on and looking at the decline of math and science skills across the United States. I’m more positive than that, but I do think we’ve entered an era where speed now beats scale. And one of the reasons I think people feel bad about this economy is because of the way the mainstream media writes about business: It obsesses on the troubles of big companies. And big companies are in trouble across the board, because we’re in an era where speed trumps scale.
Big companies don’t have a monopoly on all the tools that are required to be competitive today. Little companies, and even really goofball little companies like Max Oshman’s company, have access to technology today. We’re in an economy where private may be public for some time. If Warren Buffet is right about the direction of the stock market then, in combination with Sarbanes-Oxley and these other burdens that are now put on publicly traded companies, you talk to any CEO or board of directors today and it is just a time waste for publicly traded companies. Privately held companies may outperform publicly traded companies on balance. And again, we’re not going to see this, because the press writes about publicly traded companies, because you have access to their financial information, and so on. I think that Google beats Harvard. Google beats Stanford. Search engines beat Stanford.
Tom Friedman I think got many things right in The World is Flat about the need for people to constantly be upgrading their skills, but I think search engines have severed the link between learning and education. It is not about education; it’s about learning. Whether it’s an individual or a company, individuals and companies that are on a constant learning curve are going to outperform those who think they know it all. I think that blogging beats institutional arrogance. One of my passions is small-plane aviation. The fastest-growing companies—like companies in small-plane aviation—are the ones that have the most active independent bloggers writing about them because the customers can now talk to each other. And they don’t always say nice things about your company. They can say some awfully tough things about your company, but the smart companies are going to listen to this because when they get their customers talking honestly they really learn something.
And the last thing I wanted to say; which is a segue into talk about faith and the importance of morality in capitalism, is that purpose will be a three-year plan. There is no question whether in your own life or in your business, a clearly defined purpose is going to be any kind of a three-year rational plan that you can come up with. How can you plan rationally in a world where nobody has any visibility going forward? When your competitors can come out of nowhere? When they can come out of a New Jersey bedroom and suddenly cause a world of hurt for you?
Now that is sort of my point of segue into just a few words about what my own mission is at Forbes and what I try to do in my talks and my column. And that is to really—it is up to every generation that participates in the great game of capitalism and enterprise, as most of us do here—it is our obligation to fix the moral underpinnings of capitalism. Capitalism is a wonderful system. But it’s a system that is very much—as Churchill said about democracy—it’s the worst system that anybody could come up with except for all others.
The angriest mail that I get in response to columns that I write at Forbes, other than recommending tech stocks at the top of the bubble, are not from people who are anti-capitalists and left of center. I mean Forbes is a pro-capitalist, right-of-center magazine. They are not from people who are anti-capitalist and left of center. They are actually from a kind of Ayn Rand libertarian type whenever I write a column talking about the importance of morality in capitalism and how the two work together. A free enterprise will perish in two generations if it doesn’t have the underlying foundation of morality. That isn’t true [they say], capitalism is morally sufficient on to itself. And they never make the argument. They say because Ayn Rand said so.
It is just sort of an amazing little cult out there. But there are a lot of kind of what I would call soft libertarians out there who kind of believe the same. And I think the mainstream media is guilty of portraying capitalism as this kind of individual pursuit of greed and somehow it all works together. That is a complete misinterpretation of what Adam Smith said.
Adam Smith wrote lengthily about the necessity for capitalism existing on a moral basis. Kind enough to mention Rick Warren, writing a forward in my book, Life 2.0. Very interesting to see what Rick Warren is doing now in Africa; now that he’s achieved about everything that he can with saddleback and his purpose-driven mission in the United States, he has turned his attention to Africa, where there is this intractable poverty. His test case is Rwanda, and his plan is to bring together government, business, and faith-based organizations to bear on these deep, deep problems of poverty. And it won’t work without all three because all three must come together on this. I was talking to Rick recently and I love what he said about this notion of free enterprise and capitalism: 'That we were created in God’s image; we were created by a creator; ergo we were born to create.'
And that is what the free enterprise system allows us to do. He talks about not just giving men fish and not just teaching them to fish. Because in today’s modern economy we need to teach them how to process fish; distribute fish; get fish into the supply chain; sell fish. He says people in Rwanda, even after all of the carnage of the 90s are actually very self sufficient. The problem is they are all doing the same thing. You drive down a road and everybody is selling the same agricultural produce. So you’ve gotten to the level where you have a sustaining economy at some kind of a level, of subsistence economy—there’s the word—but not anything that can grow and improve people’s lives.
So my mission at Forbes, what first attracted me to the magazine in the mid-80s long before I ever went to work there, was that they had a Jesuit priest columnnist, named Michael Novak, who wrote some wonderful stuff on why capitalism works. It doesn’t work for the reason Hollywood or the mainstream media thinks it works. It really works because we go out and create; we go out and serve. That is how you succeed. That is where I feel that my own personal mission is; is to do everything that I can to get that particular message across.
So I think I’ve come to the end of my time on my talk. Dave, did you have some pre questions or anybody who wants to fire any questions, go ahead.
Peterson: If you have any questions from the audience and then we’ll open it up to group discussion.
Audience Question: I’m one of those kind of foot-in-mouth people. I always like to know where people’s feet are compared to their talk. What do you think is Art Laffer’s percentage of assets that he has investments [inaudible] ?
Karlsgaard: Oh, going back to the point about Art Laffer’s prediction that the stock market is 50% undervalued. Is he just saying that because he happens to be heavily invested in stocks? I don’t know the answer to that but you could spin it around and say that he is a true believer. Having watched his career I don’t see anything that would cause you to doubt that Art Laffer isn’t saying anything that he doesn’t truly believe in. He may be wrong on that. I’m closer myself to Steve Forbes’ view, not just because he’s my boss. I do think that when you see this amazing productivity going on in the economy that you’re going to see this continuing growth and I don’t think the United States is going to, as China and India arise, I don’t think that is going to come at our expense, which is everybody’s worry in Washington. A world created by our Lord is not zero sum. I think the source of the majority of the world’s misery, the majority of the world’s corrupt ideologies, the majority of the world’s bad governance arises from this idea that it is a zero-sum game out there. I mean, maybe this is embedded in our DNA, but we go beyond our DNA.
We in this room know that we are more than the sum of our DNA. We were born to create. The Malthusian view of the world—that population growth will exceed our ability to feed people; that there would be catastrophe all around—never came to pass because people are more than consumers; they are creators and contributors. They add more than they take. So that has always biased me toward the miracle of free enterprise married with the belief in a God who could have gotten us this far. Imagine, we all have our BlackBerries and our Treo’s, and yet the electromagnetic spectrum wasn’t even thought of I think until the 1860s. Here in the United States while we were consumed with the Civil War some guy was thinking that there is a medium out there and now we’ve learned how to use it. Entrepreneurs have learned how to use it.
I think the most interesting development in science—this idea that photons anywhere in the universe can influence other photons by their behavior—is suggestive of a medium of communication that is instant. Now, if you come from a very scientific computer base, particularly a computer-based point of view, and you want to believe in God then you have to believe that God has an instant form of communication. You have to believe that there is infinite processing power and infinite storage.
Well, we’re heading toward infinite processing power. We’re heading for infinite storage. Right now speed of light is the fastest thing that we know of but when Nathan Rothschild made a bunch of money buying bonds against everybody in England who was panicked and selling bonds in the early 1800s, but he had carrier pigeons that brought back the message that Wellington had defeated Napoleon at Waterloo. Then bonds suddenly went up and guess who was holding all the bonds? Carrier pigeons flew at 30mph. That was the fastest horse in the race in the early 1800s. We’ve gone from that to the speed of light in 200 years. Entanglement theory now is suggestive that there is something instant. And who would ever doubt it? I mean if you believe in God who would ever doubt that that is true?
Peterson: Let’s do one more question and then we’ll open it up to group discussion.
Audience Question: I think John Adams, or somebody, said that Democracy requires virtue. So, what do we do in this room this morning to ensure capitalism? What is the world foundation that we in this room can really participate in?
Karlsgaard: That is a great question, because, as I said, I think both capitalism and democracy could be lost in an extremely short period of time if we don’t under gird it with a belief. I’m of the belief that 100 million people died on the continent of Europe in the 20th century. Why was that? I believe Chesterton’s prediction made in, I think, 1913 ... Well, let me go back further. This is a slightly long-winded answer but it’s worth waiting for. Darwin published Origin of the Species in 1859. In 1863, there was a debate in London between the Archbishop of Canterbury and Thomas Huxley. And it was whether the Origin of the Species killed God. Was there any room for God within Darwin’s theory of evolution, and not just evolution but evolution by random selection? And by all accounts Huxley, cleaned the Archbishop’s clock. It was not a good moment for Christianity. We didn’t prep our guy well enough.
Four years later Nietzsche, writing about that, declared the death of God: his famous “God is dead.” He meant God is dead among the intellectual classes. Chesterton wrote on the eve of World War I that when people stop believing in God, they will believe in anything. It is not that they stop believing; they will believe in anything else. You know, they’ll believe in corrupt ideologies. They’ll believe in fascism, Nazism, communism, anarchism. And by gosh, they did. And in Europe, where the intellectual classes declared that it was no longer cool or politically correct to believe in God, they gave themselves to these far more corrupt ideologies. About 100 million people died in Europe and Western Russia in the 20th century merely on that. Anywhere from 30 million to 70 million people died in Mao’s China. And 5 million to 10 million died in Cambodia. It is just a horror story. This is what happens when people lose their faith.
It is incumbent on us to not hide our faith. It is incumbent on us to walk the walk in business. I mean we go out and create and we go out and serve. If you want a great business, besides Guy Kawasaki’s The Art of the Start, two great business manuals I’ll recommend—and of course Forbes and Forbes.com—that will tell you more about how to grow a business than any other: one is the Book of Acts, and the second is Rick Warren’s lesser known book The Purpose Driven Church. Read it and just substitute the word business for church and you will have a mission-driven, purpose-driven book with all the tactics that you could ever want. So I guess we’ll close on that. Thank you very much.
posted by financeblog at
2/26/2006 11:20:00 PM
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