Book Review: Knowledge and Power by George Gilder

I picked up this book based on some excerpts on the Farnam St. Blog (which I encourage you to check out), and was not disappointed.

George Gilder is known as a writer, investor and visionary. His writing is credited with influencing the Reagan policy that became known as supply side economics. He has spent years involved in the tech industry as a writer and investor, and his work includes insights derived from close relationships with many tech luminaries.

The premise of the book is to expound the value of information theory, the role of the entrepreneur based on the tenets of this theory and the value of the supply side of the equation for growing an economy.

Information theory in essence is a unique and counter intuitive way of looking at and developing something, in this case technology and economic growth. A quote: “information theory provides the foundation for an economics driven not by equilibrium or order but by falsified entrepreneurial surprises”.

The book is divided into 3 sections with several chapters. Some of these chapters are profoundly interesting, others entertaining. The articulation of information theory, and the role in which it has played in the growth of the information age, internet and technology in general is fascinating. This is followed by looking into some of his most important influences like William Bain, founder of the now infamous PE firm, and others.

The supply side idea develops around the premise that surprises and disruptive ideas provide new, fresh and potentially transformative opportunities and new information. The movement and development of information requires some important structures.

The first is what he refers to as the low information environment: a stable society with predictable government, laws, customs and property rights drawn from tradition both legal and religious. Then there is the high information, surprise rich high entropy environment populated by the entrepreneur and risk takers. These people deliver this information through the benefits of the low entropy environment. Both of these entropic conditions are necessary for optimal results. This is how society develops, grows and moves forward.

He explores why when government attempts to make everything predictable, non surprising, lacking in volatility that they actually destroy or hamper economic growth and entrepreneurial activity. Government control effectively stifles development by making what information that is available of little or no value. Here he gives the example of company news releases and disclosures.

You may find the ideas he has related to insider trading interesting, as well as his interpretation of the recent financial crisis. He takes Wall Street to task, then follows by exploring the role he thinks banking should play with a couple of specific examples.

The work at times displays the temperament of a crotchety old man, who pulls no punches. In the chapter on Taleb, there is a rhetorical slap, left hook, upper cut…followed by a handshake and a hat tip. For Romney: praise as the PE professional and disdain for the governor. There are ample barbs tossed at all political persuasions, and flaming arrows for the various schools of economics. All of this is done through the lens of Information Theory.

These take-downs in some instances are also one of the key flaws of the book as they may appear out of place or unnecessary. The critiques of two writers for example seem somewhat extraneous.

I think this book ( the central idea of it) will be of value to almost anyone regardless of your political or economic persuasion. The book is so interesting that it merits, at least in my case a second read.

Initially my intention was to include some quotes; but discovered that there were so many, that no value would be provided by including them. The last chapter alone, a rework from his original book: Wealth and Poverty, was rich in content and inspiring to read. I could have quoted half of it.

This book was outstanding and interesting. It was easy to consume, but the concepts are designed to encourage thought and debate.

This work deserves your attention, and I highly recommend it.

 

I know George personally; a really wonderful guy. His kid has a few problems, but he's a really nice older fellow -- full of energy and he's taken a lot of flak in recent years (his Israel book for one) but never once did he ever raise his voice. I believe he's in his late 60s or early 70s, but he has the energy of a gazelle.

Do buy his book, he deserves every cent.

 

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And so it goes

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