The Misfit Economy

Lessons in Creativity from Pirates, Hackers, Gangsters and Other Informal Entrepreneurs

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About The Book

A book that argues that lessons in creativity, innovation, salesmanship, and entrepreneurship can come from surprising places: pirates, bootleggers, counterfeiters, hustlers, and others living and working on the margins of business and society.

Who are the greatest innovators in the world? You're probably thinking Steve Jobs, Thomas Edison, Henry Ford. The usual suspects. This book isn't about them. It's about people you've never heard of. It's about people who are just as innovative, entrepreneurial, and visionary as the Jobses, Edisons, and Fords of the world. They’re in the crowded streets of Shenzhen, the prisons of Somalia, the flooded coastal towns of Thailand. They are pirates, computer hackers, pranksters, and former gang leaders. Across the globe, diverse innovators operating in the black, grey, and informal economies are developing solutions to a myriad of challenges. Far from being "deviant entrepreneurs" that pose threats to our social and economic stability, these innovators display remarkable ingenuity, pioneering original methods and practices that we can learn from and apply to move formal markets. This book investigates the stories of underground innovation that make up the Misfit Economy. It examines the teeming genius of the underground. It asks: Who are these unknown visionaries? How do they work? How do they organize themselves? How do they catalyze innovation? And ultimately, how can you take these lessons into your own world?

Excerpt
The Misfit Economy

INTRODUCTION
“AM I TALKING TOO MUCH?” Sam Hostetler, an Amish farmer in Miller, Missouri, asks for the third time before continuing the story of how he, an exotic-animal aficionado, started milking camels.

Hostetler was born to devout Christian parents in Tampico, Illinois, “the same town [where] Ronald Reagan was born.” When he was nine years old, his family moved to a farm in Buffalo, Missouri. His father set up a building business and became a bishop in the community church. Sam and his brothers were raised to be moral, observant, and open-minded people. He married his wife, Corlene, when he was twenty-one years old, “after knowing her forever,” he says, laughing.

When Hostetler was a small child, everybody commented on his affinity for things that lay off the beaten path. He reflects, “I don’t know. I guess I’ve always liked a challenge.” Hostetler reminisces how this love for the unusual led to his interest in exotic chickens—birds that had long tails, unlike regular chickens. When he was nine, his parents ordered twenty-five of them, and Hostetler’s lifelong interest in exotic animals was born.

Hostetler’s farming career began when he bought a few ostriches. He raised and traded them for a while, he said, then began to look for even more exotic animals. He bought hippos and rhinos—and became, as he likes to call it, an “alternative-livestock farmer.” He has been in the trade for close to thirty years.

Then one afternoon a Missouri doctor phoned, opening the call with an unusual question: “Have you ever heard of milking camels?” Even Hostetler had never heard of such a thing in the United States. The doctor said that she wanted to give one of her patients camel milk and wondered whether Hostetler knew where she could find some. “Well, I’ve been known to do some crazy things over the years, one more won’t hurt me,” Hostetler responded.

Soon after the call, Hostetler began to plot his way into the camel milking business: a business that, to his knowledge, did not exist in the United States at the time. For Hostetler, there was some appeal in creating a new income stream, but he was drawn to the camel milking business primarily “because it was different.” He started very much on a shoestring, buying a few camels, but eventually his herd grew to around thirty. He enjoys the challenge of doing something unusual, and he appears to have an affinity with the animals. He says: “I just like camels. They’re not pretty, they’re ugly, but I like them.”

DUBBED “THE WHITE GOLD OF the desert,” camel milk is seen by some as an almost mythical elixir. It has alleged medicinal qualities, particularly in its raw, unpasteurized form, with people the world over claiming that it has helped with symptoms of Crohn’s disease, autism, diabetes, Alzheimer’s, and hepatitis C. Some even profess that the milk alleviates certain symptoms of HIV/AIDS.

The milk has deep historical and religious roots. To many, it’s a spiritual experience: The prophet Muhammad allegedly ordered some of his companions to drink it as a natural remedy. Used for centuries in the Middle East by nomads and Bedouins to help sustain them through the harsh desert weather, camel milk has long been praised for its healing properties. It is said that it provides more absorbable calcium than any other kind of milk, and is easier to digest, nonallergenic, and anti-inflammatory. Parents of autistic children claim the milk helps their kids with their motor skills and digestive system. While beliefs about camel milk’s medicinal properties are widely held, most of the evidence for its effects on disorders and diseases has been anecdotal so far.

Despite being popular in Asia, the Middle East, and Africa, the commodity has been largely ignored in the United States. Only in the last five years has an embryonic market—a true misfit economy—started to develop, bringing together a diverse group of unlikely characters, including Amish farmers like Sam Hostetler.

THE DEMAND FOR CAMEL MILK has given families like Hostetler’s a steady, sustainable income. Other Amish and Mennonite farmers have joined him, buying camels when they become available and building small herds on their farms. We spoke to Marlin Troyer, another of the farmers to enter the trade. A Mennonite who lives and works in Branch, Michigan, Troyer told us how his entrance into the business let him grow his farm from ten to eighty acres in the span of four years. The demand for camel milk, he says, “allows my family and me to make the necessary payments to keep our farm steady and in working order.”

Hostetler, too, began to experience growth in demand for camel milk, leading him to establish Humpback Dairies, a private membership association through which he sells his product. Most Amish farmers in the business sell through several permutations of this model.

Raw camel milk is sold in this way because selling raw milk (as opposed to pasteurized milk) from any source (including a cow) is illegal in many states. In all cases, it is illegal to distribute raw milk across state lines. What is legal is to consume produce from livestock that you own. So Hostetler and his family, and those who buy into his livestock by joining the Humpback Dairies association, are allowed to consume the milk produced by the camel herd.

Most of Hostetler’s business arrived through referrals, by word of mouth and family recommendations. This changed when a then-twenty-three-year-old University of Southern California graduate showed up on his doorstep.

WALID ABDUL-WAHAB, A NATIVE OF Saudi Arabia, arrived in the United States in 2009 to enroll in the University of Southern California’s Marshall School of Business. Shortly after his graduation in September 2013, Abdul-Wahab became the first person to establish a camel milk retail business in the United States.

This venture has not been without its challenges, given the illegality of distributing raw camel milk across state lines, the outright illegality of raw milk in many states, and the small population of camels in the United States. However, with admirable determination, Abdul-Wahab has sought to navigate these obstacles and others (including constant scrutiny from the U.S. Food and Drug Administration) in the pursuit of his commercial goal.

The genesis of Desert Farms, Abdul-Wahab’s company, lies in a trip he took to his home country of Saudi Arabia during his sophomore year in college. His visit coincided with the traditional Muslim holiday of Ramadan, during which observers of the religion must fast every day from dawn until sunset for one month. One evening a friend approached him with what he says was a very unappetizing dripping Ziploc bag of camel milk. “It wasn’t really very attractive at the start,” he says. When Abdul-Wahab asked where he got it, his friend responded that he had traveled twenty miles into the desert and picked it up from a Bedouin.

The moment Abdul-Wahab drank the milk, he fell in love with it. A couple of days later, he came up with an idea: Bring this drink to health-conscious Californians. When a class project for an entrepreneurship course came around, he began to research the state of camel milk production in the United States. He wanted to ascertain whether a market existed.

Abdul-Wahab found that it did, though in a very small way. Only a handful of people like Sam Hostetler and Marlin Troyer owned and milked camels, and as described above, they sold it solely through cooperatives. Abdul-Wahab drew a comparison with the Dallas Buyers Club, founded by Ron Woodroof and the subject of an Oscar-nominated film in 2013. Woodroof, who was suffering from AIDS, smuggled into the United States illegal pharmaceutical drugs that he had found improved his health. Wanting to sell them to others, he and a partner established the Dallas Buyers Club, which distributed the drugs to those who wished to join and pay a monthly fee.

“It didn’t have to be like drugs,” Abdul-Wahab told us. “People believe that camel milk helps them . . . [and] if it’s helping people, we don’t want to create a black market for it.”

So he wrote a business plan in which he developed his aspirations to take the drink into the mainstream. He advertised in newspapers: “Have camels? Milk them!” He traveled all across the United States to find camel farmers. He met a few who had already been milking camels and selling their product through private membership associations. However, many camel owners were just leasing their camels ten weeks a year, for nativity scenes. Abdul-Wahab began to sell them on the idea that camel milk could be a new and sustainable source of income.

Abdul-Wahab struck an exclusive deal with seven Amish farmers in Colorado, Michigan, Ohio, Missouri, Pennsylvania, and Texas. Building the relationships was not an easy task. With the Amish’s strong stance against technology, it was difficult to sustain communication. “A firm handshake was all I had as a guarantee of a deal,” he said. Because Abdul-Wahab is Muslim, he said he could connect with the Amish on the basis of being judged by his religious beliefs. He pays the farmers for their labor and for the milk itself (eighty dollars per gallon), and provides all the machinery and supplies to milk the animals and bottle the milk.

While Abdul-Wahab spends much of his time arguing with the U.S. Food and Drug Administration—who many times have raided the camel farms he works with—he and his team (“me, the farmers, and the camels”) have managed to get seventy Whole Foods stores across five states to stock pasteurized camel milk. Desert Farms also distributes raw camel milk through small mom-and-pop shops across the United States.

It was this goal—getting camel milk into Whole Foods—that he had in the back of his mind when he started developing his business. We asked whether he feels like a success now. In his quiet yet expressive voice, he gives a resounding no. His parents were Palestinian refugees who met while hiding in an apartment during the first Lebanon war. By the time his father was twenty-four years old, he had already made his first million. His father, along with Abdul-Wahab’s older brother, runs a family steel business, which supplies large government projects in Saudi Arabia. Abdul-Wahab tells us how his father jokes that he sent his son to one of America’s top business schools, and yet he ended up a farmer. In a family constantly urging him to craft a career in investment banking, Abdul-Wahab feels like a misfit, constantly trying to prove the virtue of his mission.

While Abdul-Wahab hit a hundred thousand dollars of turnover six months after establishing his operation, he still hopes to make much more of a splash in the drinks industry. The market for alternatives to cow’s milk (soy, almond, rice, coconut) has grown by 30 percent since 2011.1 At the same time, the consumption of cow’s milk has been in decline, from a per capita consumption of 273.8 pounds in 1970 to 198.8 in 2012.2 Camel milk can, according to Abdul-Wahab, join the ranks of the billion-dollar American dairy alternatives industry.

SAM HOSTETLER AND WALID ABDUL-WAHAB are, each in his own way, misfits, forging a path in the unconventional world of camel milk trading. And yet, from these misfits, we can learn much about ingenuity, about determination, about the innate human itch to create, build, and exploit an opportunity.

By definition, a misfit is “a person whose behavior or attitude sets them apart from others in an uncomfortably conspicuous way.”3 While some misfits—like Sam and Walid—are merely unconventional, many others are branded as outsiders—swindlers, rogues, scavengers, vagrants, gangsters, hackers, and hermits—and are frequently met with skepticism and suspicion. Yet across the globe, in small towns and large cities, there are misfits operating more creatively than some of the world’s biggest companies, developing solutions to challenges that traditional businesses can’t touch.

The characters you will read about in this book are found on pirate ships. They’re found in gangs and within hacker collectives. They’re in the crowded streets of Shenzhen, the prisons of Somalia, the flooded coastal towns of Thailand. Resourceful and creative, loyal and wily, they are slum dwellers, dissidents, and outlaws.

Call it the gray market, the black market, the informal economy. Or shadow markets or the makeshift economy. We call it the Misfit Economy. Whatever the term, misfit innovators inhabit a different world—a world that, by conventional wisdom, should have nothing to do with traditional businesses and mainstream markets. However, far from being deviants who pose a threat to our social and economic stability, these entrepreneurial misfits are pioneering new ways of thinking and operating, establishing new best practices that we all can learn from and apply to formal markets.

This book investigates the true stories of underground innovation and distills five key principles unique to the Misfit Economy. These stories and principles are based on our original research, which began in 2011 with a focus on social entrepreneurs and innovators in the informal economy, but soon expanded to include the black market and artistic and activist communities, as well as insider misfits working to transform some of our most established institutions. After sourcing more than five thousand case studies, we narrowed our selection to a top thirty that we decided to explore in more depth.

Our aim was to bring attention to misfits operating within diverse geographies across the globe, fields of practice (the arts, technology, activism, black and informal markets), and time periods (we sought out stories of both contemporary and historic misfits). In addition to diversity, the top thirty cases had to meet criteria of originality. These misfits had to pioneer an unusual, creative, or alternative way of working. They had to be innovating. And that innovation had to lead to some kind of disruption—to the transformation of an attitude, norm, or organizational practice.

The more we probed these misfit economies, the more we learned that the underground and informal economies can be plagued by the same level of conformity one finds in the mainstream economy. Working for a Mexican drug cartel can be a lot like working for Exxon: You are subjected to a hierarchical command-and-control system. That’s why the innovation angle became our knockout test for selecting the stories in this book. To make the cut, these misfits couldn’t be just outsiders; they had to be innovative and disruptive outsiders.

TAKE SOMALI PIRATES. THEIR STORY is not just one of theft, it is a story of transformation: from a small, local, and informal industry to a large, international, and sophisticated business that has not only appeared in media across the world but also driven the development of a counter-piracy industry. It is also a story of opportunity or, rather, a story of how you build a market opportunity where one does not seem to exist.

Piracy first arose in Somalia in the early 1990s, as a response to foreign ships illegally fishing in Somalia’s waters. The country had recently experienced a collapse of its government, and its navy and coastal police were unable to effectively repel this illegal fishing. Faced with diminished fishing stocks, an economy in turmoil, and an inability to find alternative employment, some fishermen turned to attacking foreign fishing vessels.

In these early days, piracy in Somalia was a relatively informal and unsophisticated business. A former pirate whom we spoke to, Abdi (no surname given), attested to this. He told us that he and his friends attacked foreign trawlers in their fishing skiffs in Hafun, a coastal town in northeastern Somalia. Abdi built the group with friends and family from his clan, splitting the spoils according to how much each person invested.

These original pirates—the aggrieved fishermen—were, in essence, hustlers. They had noticed that valuable cargo was crossing their shores; struggling with low fishing stock, they spotted a chance to gain income in a different, albeit illegal, way. Their country was in economic and social disarray, their livelihoods threatened by the foreign trawlers illegally encroaching on their waters.

Instead of accepting this destiny, these individuals took matters into their own hands. They did not sit back and wait for the government to improve things. They did not just continue to fish with ever-decreasing success. Rather, they recognized an opportunity and seized it. They had limited resources—just an idea and fishing boats—but driven by scarcity and the desire for income, they sowed the seeds of what would evolve into a lucrative and sophisticated criminal movement.

From its informal beginning, piracy in Somalia evolved rapidly, gaining major international attention in 2008 with the capture of the Ukrainian ship MV Faina. The ship, which was carrying military cargo—grenade launchers and tanks—was released by the pirates after they received $3.5 million in ransom money. The operation was a professional one and an illustration of how piracy in Somalia would develop.

The MV Faina was hijacked by a group of pirates led by a man who goes by the name of Afweyne (which translates to “Big Mouth”). Afweyne had founded the Somali Marines—a group of highly trained pirates—after searching and finding investors to turn what was an opportunistic, disorganized operation into a functioning, plan-driven business. Afweyne’s group was well organized, working very much as a military operation would, with a leadership hierarchy delineating admirals, vice admirals, and lieutenants.

Many credit Afweyne with being one of the key figures responsible for transforming Somali piracy from a scrappy, self-funded force into a well-invested, transnational multimillion-dollar industry. The spoils of piracy would soon after be traced as far as India and Dubai, with ransom money reinvested in equipment and training but also put toward the development of the khat drug trade (khat is a narcotic plant popular in Somalia).

For pirates such as Afweyne, the use of mother ships (usually fishing dhows) distinguished their attacks from those of the less sophisticated, earlier generations of a pirate mission. Setting their base in the ocean via these mother ships, rather than on the shore, allowed the professional groups to extend their reach into the high seas, way beyond local waters, enabling them to target bigger cargo ships.

Some pirates we spoke with told us how, using these mother ships, they would head out to shipping lanes, waiting to spot a vessel, and then launch an opportunistic attack with a two-, sometimes three-skiff team. Once the pirates take control of the ship, they steer it to shore, where a negotiator engages with the shipping company and others to agree on a ransom payment. While the negotiation is ongoing, a local economy serves the hostages and the pirates, providing them with food, water, and khat. Pirate gangs also employ lawyers, pimps to service gangs with prostitutes, and banknote checkers who use machines to detect fake money.

Another pirate whom we spoke with, Abdi Hasan, described a similar strategy of attack, speaking of an operation that was even more organized. Unlike the pirate crews who would simply head out to shipping lanes, waiting to launch an opportunistic attack on a passing vessel, his organization had been guided by someone who resides abroad—“probably Dubai,” our fixer interjected—who would provide the location of the suitable target ship. He and others spoke of how pirates tended to target slower and undermanned ships that had low freeboards (for easier boarding); and they preferred to attack at dusk, when visibility was low. Hasan told us that he and other foot soldiers would get paid regardless of the result of the attack: if the ship was captured and a ransom was appropriated, the pirates received higher compensation; if it wasn’t, less.

It has been reported that in the case of a successful mission, pirates receive between $30,000 and $75,000 each, and that the first pirate to board a ship—and those who bring their own weapon or ladder—receive a $10,000 bonus.4 They can chew khat and eat and drink on credit, which is then deducted from their share of the ransom when it is received. These sorts of operations may require $30,000 of financing, usually provided by fishermen, former pirates, ex-police and military officials, and khat dealers, who take between 30 and 75 percent of the spoils.5

This difference in strategy—from waiting and attacking a passing target to knowing exactly where it sits and then heading out—is reflective of the shift in business model: from a local cottage industry to a commercial business with international support, driven by a group of innovators (the business leaders, the financiers, the pirates themselves) who were able to adapt their business according to its potential for growth.

Somali piracy seeped its way into international attention because its successes were frequent, far-reaching (well beyond Somalia’s territorial waters), and lucrative. A November 2013 report by the World Bank, Interpol, and the United Nations stated that, since the first known hijacking in April 2005, up to $385 million U.S. had been claimed as ransom money for 179 hijacked ships.

The phenomenon has also increased the cost of trade, causing an estimated $18 billion U.S. expense to the world economy. International navies have naturally ramped up their presence in the region in an attempt to thwart the threat, though pirates have been innovative in their responses to greater and more concerted efforts to catch them. Each pirate we spoke to told how they upgraded to faster skiffs, improved their methods of communication—stocking up on satellite phones—and carried heavier weaponry to break through safety rooms in ships.

WHILE SOMALI PIRATES HAVE GAINED widespread international attention, many misfits—such as smugglers, waste pickers, or camel milk traders—are under the radar, operating in the shadows with great stealth. They represent the ingenuity of the underground. And so this book asks: Who are these unknown hustlers? How do they work? How do they organize themselves? How do they catalyze innovation? What challenges do they face? And—most important—what can we learn from them?

A caveat before we continue: While there is undoubtedly a dark side to some of the innovation, this book is not intended as an endorsement of criminal activity. We are aware that arms traders deliver weapons that fuel genocides. Drug cartels encourage debilitating addiction. Human traffickers continue to maintain reprehensible slave and sex trade across the globe. We are not attempting to glorify the immorality of these actions.

Rather, the argument we make is simple: The free market economy does not possess a monopoly on innovation. While many great innovation practices have been and will be distilled from the Googles, eBays, and Toyotas of the world, our research has revealed that not only has underground innovation been overlooked as a significant driver of the economy, but it also offers its own unique and valuable insights.

While other innovation-related books rightly chronicle the creativity and ingenuity of fast-moving start-ups, corporate strategy, and visionary CEOs, this book goes outside the conventional scope to show a broader view of the world economy. Formal markets are only one part of the whole. We will make visible some portion of the rest.
About The Authors

Alexa Clay is a storyteller and leading expert on subculture. She is the cofounder of the League of Intrapreneurs, a movement to create change from within big business and the founder of Wisdom Hackers, an incubator for philosophical inquiry. Alexa initiates projects through the collective The Human Agency, which aims to create communities of purpose around the world. Formerly she was a director at Ashoka, a global nonprofit that invests in social entrepreneurs. A graduate of Brown University and Oxford University, she is the author (with Kyra Maya Phillips) of The Misfit Economy.  

Kyra Maya Phillips is a writer and innovation strategist. She is a director of The Point People, a network based consultancy focused on innovation and systemic change. Previously, Kyra worked as a journalist for The Guardian, where she focused on environmental reporting, and at as a consultant at SustainAbility, a London based think-tank and consultancy. She grew up in Caracas, Venezuela, but is now based in London, where she lives with her husband and son. A graduate of The London School of Economics, she is the author (with Alexa Clay) of The Misfit Economy.

Product Details
  • Publisher: Simon & Schuster (June 2015)
  • Length: 256 pages
  • ISBN13: 9781451688825

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Raves and Reviews

“This imaginative, provocative book reveals that if we want to overcome barriers, we can find surprisingly valuable lessons underground. I never expected to learn so much about entrepreneurship and innovation from pirates and gangsters.”

– Adam Grant, Wharton professor and author of GIVE AND TAKE

"What do Somali pirates, Amish camel-milkers, and gang leaders have in common? They're all innovative—and successful—misfits in today's global economy. Think you can't learn anything from outlaws and provocateurs? This book will make you think again with engaging stories and insightful analysis of how people operating on the fringes create unique business models, and in the process transform the culture around them."

– Daniel H. Pink, author of TO SELL IS HUMAN and DRIVE

"The Misfit Economy helps us to understand the lives of those men and women who have had to depend on illegal enterprise just to get by. In this book you'll learn how the misfit economies can bring meaning to those who are hopeless, jobless, and hungry for more than a handout. You'll meet people who are just like everyone else in searching for freedom and opportunity, but aren't afraid to bend the rules of the system."

– King Tone, Former Leader of the Latin Kings, a hispanic street gang

"If you want to learn what Somali pirates have in common with Silicon Valley entrepreneurs, read this book. It's a colourful guide on how to shine a light on the ingenuity that often lies in the dark depths of all types organisations."

– Rachel Botsman, co-author of What's Mine is Yours: How Collaborative Consumption is Changing the Way We Live

“For those wanting a fresh perspective on business practices or working lives, this is a snappy introduction to a new way of thinking.”

– Financial Times

A well-paced read about a unique perspective on supply and demand and those who create it. For anyone interested in business or economics—especially those who hustle.

– Library Journal

 "Lively and insightful."—The Economist 

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