Running Money: Hedge Fund Honchos, Monster Markets and My Hunt for the Big Score – A Wall Street Insider's Contrarian Investing Edge and Revolutionary Economic Insights

by Andy Kessler

A brilliant investor, a born raconteur and an overall smart-ass, Andy Kessler pulls back the curtain on the world of hedge funds and shows how the guys who run big money think, talk and act. Following on the success of Wall Street Meat, his self-published book on the lives of Wall Street stock analysts, Andy Kessler recounts his years as an extraordinarily successful hedge fund manager. To run a successful hedge fund you must have an investing edge -- that special insight that allows you to reap greater returns for your clients and yourself. A quick study, Kessler gets an education in investing from some fascinating and quirky personalities. Eventually he works out his own insight into the world economy, a powerful lens that reveals to him hidden value in seemingly negative trends. Focussing on margin surplus, Kessler comes to see that current American economy, at the apex of the information revolution, is not so different from the British economy at the height of the industrial revolution. Drawing out the parallels he develops a powerful investing tool which he shares with readers. Contrarian and confident, Kessler made a fortune applying his ideas to his hedge fund. Which only proves that they may not be as crazy as they sound.

Genres: Finance, Nonfiction, Business, Economics, Memoir, Money

312 pages, Paperback

First published September 14, 2004

About the author

Andy Kessler is an investor, author and businessman.

Andy Kessler has worked for about 20 years as a research analyst, investment banker, venture capitalist, and hedge fund manager. He was also the Co-founder and President of Velocity Capital Management, an investment firm based in Palo Alto, California, United States.

He has written forThe Wall Street Journal, The New York Times, Wired, Forbes, The Weekly Standard, the Los Angeles Times and The American Spectator.

Reviews

[إسلام جمال · Rating 4 out of 5]

In the market .. It is not important whether you are right or wrong .. What important is how much money you are gonna make when you are right and how much you will lose when you are wrong!

[Ged · Rating 5 out of 5]

Andy Kessler’s Running Money, Hedge Fund Honchos, Monster Markets And My Hunt For The Big Score is a well written set of memoirs from a technology fund manager. Together with his partner-in-crime Fred Kittler, Kessler managed to survive the highs and lows of the technology industry in the late 1990’s, he tells the story in a very articulate way that is as powerful as Robert X Cringely’s book Accidential Empires. The expansion of the tech sector is told using the industrial revolution as an analogy.

One of the first things portrayed in Running Money (and other books) is that the tech sector actually revolves around a relatively small group of people. In addition to writing his memoirs Kessler tries to make sense of it all and proves very illuminating to readers. In this respect it is far better than The New New Thing by Michael Lewis.

Post-industrial, IP-driven economy

The book looks beyond the technology sector to put a positive spin on the huge US deficit. Running Money explains that America is now an IP economy and assumes that the developing world will follow on behind as a wave sweeps across national borders moving the economic status through hunter gatherer, agriculture/extractive, industrial, service and intellectual property economies. In some respects the US with its IP economy is following Europe; what is the Swiss banking system, LVMH’s luxury brands and the continents big pharmaceutical firms if not part of an IP ecosystem?

Conclusion

I would recommend anybody to read Kessler’s book. I thought I would end however on some of the differences in viewpoint I have with his writing. Where some of Kessler’s writing differs from my own perspective is when he outlines his analysis of the current state of affairs and some of his future vision:

Kessler considers markets to be a perfect instrument in the long term; which I am not convinced about at all. Think the great depression, the S&L debacle of the 1980s for instance, markets can break and require occasional interference
The neat model of China being an industrial workshop for US intellectual property is simplistic. China is fast moving into building its own brands from mobile handsets to luxury watches (the first Chinese astronaut went into space with a relative expensive Chinese brand of chronograph. China and India has a huge film industry. It isn’t only China either, Japan is now a source of numerous fashion trends, hot movies in Korea have their scripts optioned by Hollywood, some of the best advertising creative teams come from South America and India)
Kessler talks about the entertainment industry as being part of this US IP powerhouse but this fails to see the many flaws and mismanagment in the music, media and film industries that make Worldcom seem well managed. The RIAA and MPAA have hid behind piracy to hide a deeper malaise highlighted in Michael Wolf’s Autumn of the Moguls
Kessler doesn’t talk about what the inevitable post-intellectual property economy looks like

[Jill · Rating 2 out of 5]

My interest was learning how hedge fund groups made their investment decisions.
Written in 2004, lots of this book does not hold up against time. I didn't expect the author to have a crystal ball but the larger impacts on markets such as the housing crash of 2008 or Covid in 2020 show that his success was as due as much to his time as his greater wisdom.
This book isn't worth buying.

Bad stuff first...
Kessler makes rude comments about Asians that are stupid - not funny, not glib - just stupid. He should apologize.
Kessler has an ongoing dumb quirk where he mocks companies by rhyming the name in an insulting way i.e. U.S. Scarelines. Ugh.
Here's a less than charming quote, page 292 in paperback; "It was like taking candy from a baby for these new guys to take market share from unionized United or US Air with their Vietnam-era pilots and aging battle-ax flight attendants."
Mr. Kessler, you are an arrogant man. I'd like to say worse but I will end it there.

He should have kept to this kind of information. Some concepts were worthy of underlining in my paperback copy.
This was his outline for positioning of companies for an IPO:
1. A large market
2. An unfair competitive advantage
3. A business model leveraging that unfair advantage
This is his summary of the stock market function:
1. Provide expansion capital for businesses
2. Agree on a price for a business
3. Transfer share from owners to others who may have a completely different risk profile or time horizon

[Andrew · Rating 5 out of 5]

This is a fabulous book.
Andy Kessler has a unique style, a style I personally enjoy, very matter of fact yet casual.
In this title Kessler presents his formative journey into managing money - through his outline of this journey he outlines in an extremely available way the machinations & realities of money management.

Within this title Kessler presents the idea of a universal money management philosophy, he leverages analogous analysis of the industrial revolution to formulate his in the context of innovation & progress, from parallel personal pursuits I now recognise the importance of forming a universal money management theory.
I now believe that markets themselves efficiently price collective perception, and thus provide opportunity to achieve capital return goals, however, I believe it to be beyond the bounds of our rationality to truly grasp the future, but within our rationality to formulate a depiction of a future.
When it comes to money management, via applying this view, if the reality that materialises is within the bounds of the reality you depicted & you materialised opportunities as such then you will find yourself at the most fortuitous position you may establish.
Hence, only by formulating a universal philosophy may we realise our full potential in terms of money management & in my opinion decision- making itself.

[Artur · Rating 4 out of 5]

This is an entertaining and witty account of a hedge fund manager's experience during the Dotcom boom and bust of 1996-2001. It follows in a succession of glimpses into times from the late 1980s to roughly 2002 showing different moments in the inception, development and eventual winding down of the author's hedge fund, interspersing well enough written prose elements with a bit heavier analytical stuff and excursions into the history of stock markets and Industrial Revolution up to the creation of packet networks and sillicon chips as well as some musings on the nature of hedge funds and investing.

Overall, I enjoyed reading this book and got to extract some valuable lessons and observations on the groundwork of investing and hedge fund management as well as intellectual property economy as a whole. It was OK, not groundbreaking, not a literary masterpiece, but still well worth the time, so I give it a solid 4 stars.

[Unnikrishnan · Rating 5 out of 5]

This was an entertaining education on innovation, markets and what makes America.. America. Kessler's short crash course on the British led industrial revolution mid-way through the book should itself be worth more than entire economics textbooks IMHO. Though I can't think of any non-fiction book quite like this, it is very close in spirit to some of the industrial revolution focused Discworld novels by Pratchett.
Now onto Kessler's next book "How we got here" where apparently he goes even deeper into the history of the industrial revolution. Yummy!

[Russell Chee · Rating 2 out of 5]

This is a really odd, dated book with lots of weird things going on (random rude descriptions of Asians, unsophisticated historical overviews) and written in a dull, conversation-heavy style. It's like Michael Lewis but without any of the flair. Anyway, it deserves a second star because it does make interesting points about investing and looking for alpha, but otherwise a really strange one.

[erick tavarez · Rating 5 out of 5]

Must read for any aspiring trader/money manager

This book really does crystallize the concept of "follow the money". It is direct, intuitive and just flat out an amazing read. Great job Mr. Kessler.

[Julio Cesar Nino · Rating 5 out of 5]

Pray-Vat investor

This us a fun story of real life of a hedge fund manager. Thank you Andy for sharing your story. I actually laughed during the reading.

[James · Rating 5 out of 5]

Awesome book and I never give five stars but this was the history of silicone valley and modern tech made interesting and understandable!

[Mohit · Rating 2 out of 5]

Entertaining but trite

[J. Boo]

Contains very funny interview with Morris Chang of TSMC, where he slags off on Korea and Japan.

[Federico Lucifredi · Rating 5 out of 5]

Interesting section on TSMC in chapter IV. Interesting and hilariously funny.

[Rhythm Gupta · Rating 4 out of 5]

Andy talks about his “running money” journey during the dotcom boom. He shares some original insights on how the world works, comparing it to the industrial revolution

[Hugo · Rating 5 out of 5]

Exhilarating, interesting insights on turn of the millenium Silicone Valley and flourishing globalisation

[Mark · Rating 4 out of 5]

Good fast read for the analogy of the US in current times to the UK during the Industrial Revolution, which rings quite true to the latest tech news today.

[Viktor Nilsson · Rating 4 out of 5]

Running Money tells the story of how Andy Kessler and a colleague ran a hedge fund in the late 90’s. That was the time of the dot com-boom – and later also the bubble and bust. Kessler was right in the middle of this, operating his small long-only fund from Silicon Valley and concentrating on computer companies (mostly public, but sometimes also private).

The book covers three different aspects of the same story. One is the development of his fund, how investments were chosen, his experience of the trading etc. The second is the atmosphere around him, both in the tech world and the investment world, or perhaps where they met – in the conferences, events and conversation. The third aspect is Kessler’s own development of a macro-economic theory on how the new technology will create unique investment opportunities. His theory is based on finding parallels to previous economical revolutions, mainly the industrial revolution. This theory of his is not only used as an explanation but is something that he developed during the time he was managing his fund to help find really good investments (and it worked – proving that history can be a great guide in the pursuit of good investments).

When I read a book like this, I mostly aim at exploring someone else’s story. I find that more interesting, unique, verifiable and more informative than being given broad guidelines on what to do. I found Kessler’s story to be a very interesting one, because it tells about the small details and his own personal experiences. It is also somewhat unique in that it mixes some understanding of macro (the historical parallels) into his own practical investment experience. I also like that his ideas come not as a prepared bundle, but that you actually get to see them develop as his career goes by – including all the mistakes.

Such a huge bubble that the dot com-era was, after the crash it has been more or less remembered as a bad hangover of a party you wouldn’t want to remember anyway. Maybe because Kessler got out of the market pretty soon after it peaked out, he doesn’t suffer the common illness of just trying to ignore that historical passage. It is a good reminder that most bubbles originally get started from very sound grounds and grow from developments that actually are quite revolutionary. Maybe this book could help us understand the next big revolution when it comes – if we will live for that long. Or at least help us understand the current one (which is still the digital revolution, this process is still far from being fully matured).

The writing style is very much based on dialogues. I’m not very used to this (I’ve never been a passionate novel reader), so it boggles my mind a bit sometimes. I would think that’s just my own weakness however, and anyway I have to say the book was not hard to get through and I enjoyed every moment of it. But some tech-savvy might be needed to be able to follow all the computer terms. It is by no means a guidance book, it covers a very specific topic and I think it’s fair to say it also assumes some investment knowledge from the reader.

There are 2 small things that I don’t like about this book: The first is the talk about dollars and points (“that stock was up $3 that day”), numbers that don’t tell you anything unless they can be put into proportion ($1 to $4 is quite different from $101 to $104). I don’t think I will ever understand why so many Americans and Canadians refuse to use percentages when talking about numerical changes. The other thing I don’t like is Kessler’s conclusion of his macro theory. After the bubble is over, he concludes that the world has changed dramatically, because now people are developing software in such obscure and faraway places as Norway and Finland. As if technology and creativity only existed in USA. Just plain ignorance I guess (the technology development and the dot com bubble was a global phenomenon). But still, it takes away a lot of credibility from his theoretical conclusion. On the other hand, his theory is just one of the parts of the book, and up to that point it did make a lot of sense, as he indeed proved by the stellar performance of his fund (which was not based on speculative gambles, as was the common way in those days).

In conclusion, I don’t think this is an investment book for everyone, but if you are interested in technology, history, investing and building theories, then this book will definitely be a good read for you.

[Farmingkat]

The sequel of his original autobiography.
There is a partial blueprint of his other book "How We got Here" over here, but it is combine with his bio of running a hedge fund, and how the philosophy help him

[Eugene Tan · Rating 3 out of 5]

Picked this up at a secondhand bookstore.
Interesting read on the struggles faced by a hedge fund and its spectacular rise to make money, injected with a does of humor.

Perhaps I'm still inexperienced in the financial matters. It took me a significant amount of time to understand the plot.

[Ming · Rating 4 out of 5]

This funny book still inspires me to start a hedge fund. It just goes to show that anyone with an idea, a will, and some luck can make it alright in the business.

[Aharon · Rating 2 out of 5]

If he were half as smart as he thinks he is, he'd be twice as smart as he is.

[Wei · Rating 5 out of 5]

interesting and thoughtful in investment.

[Brad Johnson · Rating 4 out of 5]

This was a fun read. Kessler is obviously a sharp guy, and I enjoy his smart-ass style. This was a good introduction to Silicon Valley and the investors that funded it.

[Dtap Tappin · Rating 4 out of 5]

must read for wall Street pups

[Andrew · Rating 3 out of 5]

lightweight read, fun if you are in the business and know the cast of characters - definitely kessler's view of reality

[Wolf Martin · Rating 4 out of 5]

Great book! The last chapters about IP and the trade deficit are very insightful.