‘The Misfit Economy’Business-Advice from Pirates and Gangsters
Do you know what a drug dealer could teach you about distribution network development? Or what you could learn about sustainable profit margins from Somalian pirates? Surprisingly a lot. Read More
Today’s startup age is all about people who believe in a particular idea — an idea they pursue, improve, try to convince others of, adjust if necessary, and which they hustle to make real. Whether the idea eventually succeeds depends on many factors, and only some can be directly controlled. The most basic core value of an idea, however, lies in its innovative potential.
And for innovative potential it doesn’t really matter whether the idea operates inside or outside the legal framework of a particular jurisdiction. A crook with a creative streak may have an idea slumbering in him worth tenfold the innovative potential of the annual output of a large corporation’s marketing department. Hence, if you are interested in the mechanics of innovation, it can pay off to take a sidestep and objectively look at the ideas and projects of underground innovators. If you prefer to do so from the safety of your home, Alexa Clay and Kyra Maya Phillips have written just the book for you. We talked to them about the idea behind it.
The Misfit Economy takes its readers into the world of pirates, hackers, gangsters and other ‘informal entrepreneurs’, and breaks their stories down into lessons on economics and creativity. For their systematic investigation of the principles of underground innovation, the authors sourced more than five thousand individual case stories from all kind of crooks and gangsters far from Wall Street. They then selected some thirty especially intriguing examples which they explored in more depth and turned into a handbook for social entrepreneurship and other economic ventures.
HUSTE, COPY, HACK, PROVOKE…
For most of The Misfit Economy’s protagonists, resourcefulness is the name of the game. What connects them is a do-it-yourself mentality, high creative potential, and a determination to pursue their dreams. Whether they are raiding ships or building a Ponzi scheme (a fraudulent investment scam that promises high rates of return with little risk for investors)— in their commitment and endurance they are not much different from anyone else who is enthusiastic about their startup. This is what makes them misfits, and the underlying similarity shared by criminals and business geeks alike.
From anecdotes illustrating the entrepreneurial spirit inside and outside common moral frameworks, Clay & Phillips identify five key principles unique to the misfit economy (hustle, copy, hack, provoke, pivot), and address each in five main chapters. In between they recount countless valuable anecdotes that provide lessons on organization, sales, management, and on other aspects of business life.
“Working for a Mexican drug cartel can be a lot like working for Exxon: You are subjected to a hierarchical command-and-control system.”
THE MISFIT POTENTIAL
The Misfit Economy started as a not entirely serious idea Alexa Clay presented at a public talk where she tried to convince her audience that the latest trends in innovation were coming out of the black market economy. “But after we started doing more research,” Alexa told Tea After Twelve, “we realized how many incredible examples of creativity and ingenuity were in the black market and informal economies. So what started as a joke then got a whole lot more serious as we were inspired by the conversations we were having with people in the field. “
One of the most amazing things about The Misfit Economy is that it never fails to recognize an opportunity for turning a handicap into an advantage. People with attention deficit disorder, the book states, may be jumpy, lack focus and are easily bored, but they can also be fontains of new ideas. Similarly, many drug dealers are natural salespeople. Look past the criminal labell, and you will see potential.
Mind you, the book in no way attempts to promote or downplay criminal or immoral behavior. It is essentially a collection of stories about outsiders who seek cultural transformation, who aspire to leave a mark on the world. “We really only focused on stories of misfits who were trying to transform the cultures they were in,” Kyra told us in an interview. “We didn't end up including people we thought didn't elicit empathy, or were part of old command and control systems. You can be a cog in the machine and work for the mafia, for example. Or sometimes the hierarchy of a drug cartel can be worse than Exxon Mobile.”
The first story in the book, for example, is not about a gun-slinging pirate or drug dealer, but about a humble Amish farmer named Sam Hostetler who became part of an international camel-milk distribution network.
An avid alternative livestock farmer who has bred ostriches, hippos and rhinos in Central Missouri, Hostetler easily qualifies as a misfit. And just like any other misfit, he has a passion and talent for overcoming obstacles. When founding his camel milking business — to his knowledge the first in the United States at the time — Hostetler was confronted with a whole series of hindrances, mostly bureaucratic in nature. Due to his farming experience, he had a flock of healthy camels providing high-grade milk, but it took a lot of creative effort to find a way around the red tape preventing him from selling it. For one thing, camel milk loses many of the beneficial effects attributed to it once it is heated. Unpasteurized milk is prohibited in many states and regardless of respective state laws, it is illegal to distribute raw milk across state lines.
The one thing authorities couldn’t prevent Hostetler from doing was drinking the unpasteurized milk of his own animals. In a sophisticated move, he founded the “Humpback Dairies Association” which allowed others to buy shares in his livestock, thus enabling them to consume unpasteurized camel milk legally.
One might imagine the camel milk market in the United States rather modest, but misfits never fail to see hidden potential. Recognizing an investment opportunity, Walid Abdul-Wahab, a native of Saudi Arabia, teamed up with Hostetler. They were determined to join forces and establish a nation-wide camel milk retail business, no matter how much arguing with the U.S. Food and Drug Administration (FDA) it took. Abdul-Wahab founded Desert Farms.
Several FDA raids and an inconceivable amount of red tape later, they succeeded in winning more and more people over. Today, seventy Whole Foods stores across the U.S. stock their camel milk.
One might imagine the camel milk market in the United States rather modest, but misfits never fail to see hidden potential.
VISIONARY CON ARTISTS
Quite a few of the lessons readers might take from The Misfit Economy stem from the realm of social engineering. Like the story of Lance Wailer, who made the first digital motion picture for $900 in 1996. When he first tried to pitch his movie to major production companies and received not even one reply, he turned to an old trick from the con man’s handbook: He wrote the production companies again, but this time intentionally misaddressed them, so that Sony, for example, would receive the letter apparently intended for Barco. Within days, the phone was running hot, and Wailer’s picture The Last Broadcast ended up grossing almost $5 million.
In her talks, Alexa likes to draw on examples from famous con men. She dwells on a Scottish con artist who tricked investors and over 200 settlers into boarding ships to an entirely fake colony, as well as a French con man who successfully convinced a buyer that he was selling the Eiffel tower as scrap metal.
“I think there is a lot we can learn from con men about how to sell people on alternative visions,” Alexa says. “It isn't about swindling or deceiving people, but using techniques of persuasion to lay out compelling visions. The Scottish con artist was successful, for example, because he created an entire world of artifacts to support the idea that there was a real colony called Poyais — he developed a currency, made up ballads, commissioned a fake natural history of the land, etc.
Whenever I have to make a pitch, I often take confidence in the fact that con artists can hook people on total falsities and if they can do that successfully, then surely I can make people excited and interested in my legal ventures. Con artists have a lot to teach us about how to pitch and make distant or alternative realities feel compelling.
Whose idea is it anyway?
One aspect of The Misfit Economy that will particularity appeal to sympathizers with the open-source movement is the clear stance the book takes against copyright policies and software patents. Innovation does not always require absolute originality, so why reinvent the wheel? For instance, taking an already existing concept and applying it to a different purpose can be highly innovative. But even blatant copying itself can turn out to be a sustainable business concept.
The book illustrates this concept by telling the story of the German Samwer brothers, who made a business out of reverse-engineering U.S.-based .com-sensations and selling them to back to the originators. This business concept, however, was born out of necessity. When eBay began growing big in the U.S., the Samwer brothers aspired to open a branch of the auction house in Germany. But eBay didn’t show much interest of bringing the three young entrepreneurs on board. With no other options left, the brothers built an eBay clone they baptized Alando. In 1999, Alando was sold to eBay for $43 million, and Oliver Samwer became director of eBay Europe.
Later on, the Samwer brothers struck a similar deal with Groupon, and at the moment they are running an Airbnb clone called Wimdu. They didn’t create anything new, but turned copying itself into an original business concept.
You might call it stealing, but they essentially worked out a creative way around restrictions that initially kept them from doing what they wanted to do.
Misfits aren't Scumbags
As The Misfit Economy repeatedly emphasizes, there is a distinct difference between justice and law. Immoral doesn’t equal illegal, and vice versa. Take the recent actions of Martin Shkreli for example. 'The most hated man in America', as Shkreli was infamously nicknamed, became CEO of a pharmaceutical company and in an outrageous scumbag move, raised the price of an AIDS drug many patients depend on by 5,000%. This ploy may seem disproportionately more evil than most of the ventures The Misfit Economy’s protagonists engage in, yet it was entirely legal. Justice of a sort prevailed when Shkreli was arrested last December, though for a completely unrelated case of securities fraud.
Yes, immoral doesn’t always equal illegal. The interwebs are actually full of ‘vice entrepreneurial’ businesses that are entirely legal but operate in an ethical twilight zone. The ACAD WRITE custom writing service, for example, specialize in selling essays and academic papers to college students. They advertise customized dissertations-on-demand, written by academic experts and ready-made from abstract to appendix. And while we’ve all had someone help us with our homework at one point or another, can it really be legal to purchase an academic thesis from a ghostwriter and hand it in in one’s own name? We asked the company’s CEO, Dr. Thomas Nemet: “Our General Terms and Conditions make it clear that customers are purchasing an academic template created on a subject of their choosing, according to their demands. We deliver exactly that. How they use the template is not my responsibility.”
The possibility of buying an academic paper from a ghostwriter gives affluent students an unfair advantage over their peers, which unquestionably places academic ghostwriting on the unethical end of the moral scale. And who wants to be represented by a lawyer who bought his L.L.M. thesis? Yet Dr. Nemet insists that his ghostwriters mostly help people in grim situations, like unlucky hard-working students who cannot miss an important deadline while family- or health-related issues require their full attention. From an entrepreneurial viewpoint, it doesn’t matter whether you see academic ghostwriting as an alarming symptom of an educational system that requires an overhaul, or as a harmless service for students in emergency situations. Dr. Nemet founded ACAD WRITE on €500 some 10 years ago, and since he has watched his company grow into an international multimillion dollar business, he has surely been laughing all the way to the bank.
JUST GANGSTERS, UNJUST LAWS
The Misfit Economy’s definition of misfit transcends law and legal practice. Just like Dr. Nemet, many of the book’s protagonists are not operating outside the legal framework (although the title somewhat provocatively suggests they might be). Many are, in fact, activists, artists, startup founders, community project leaders or other out-of-the-box thinkers. Even Alexa Clay’s father, who grew up on a farm under poor conditions, was accepted to Harvard and later became a pioneer of fair trade, is featured as a prominent case study.
Herein lies the true virtue of The Misfit Economy: It almost exclusively features positive examples. “We really focused on innovators with compelling ways of re-thinking culture,“ Alexa told us. Readers will soon find out that the real question posed by the book is not “What can a corporation learn from a drug cartel to optimize their own distribution networks?”, but “How can a drug dealer apply his skills in a constructive, positive way that enriches society?”
THE MISFIT REVOLUTION
To the critical reader, The Misfit Economy may appear a little repetitive and sometimes not distance itself clearly enough from the pseudoscientific rhetoric that certain case studies involve (DO NOT treat autism with camel milk!). However, overall it is an intriguing read for anyone who enjoys indulging in the anecdotes and adventures of creative minds that have been largely overlooked by the mainstream.
The book’s final chapter envisions a world in which the misfit revolution has occurred, where copying is fine, where hacks are appreciated, where no question is too absurd. It depicts an awkward but strangely conceivable utopia, where every predisposition is a positive one, and where every mishap is turned into an opportunity for improvement. So how can down-to-earth social entrepreneurs or even pragmatic capitalists benefit from this read? For Alexa, that’s the premise of the book: “To do good, sometimes you need to look at techniques from the dark side. I also don't think you have any better display of pragmatism than in the informal economy, where resourcefulness and frugality are key drivers behind innovation.“