The Naval Podcast – An Example: From Laborer to Real Estate Tech Company

Check out Naval’s Episode Page & Show Notes

This podcast clip is part of an ongoing conversation between Naval Ravikant and Babak Nivi. Unless otherwise noted, quotes are from Naval. For reference, check out Naval’s famous How to Get Rich tweet storm.

Key Takeaways

  • An example from the real estate business:
    • A day laborer on a construction site, unless you’re in a skilled trade, doesn’t have specific knowledge
      • Even if you’re a carpenter or electrician, other people can be trained to do your job – you can probably be replaced
      • You don’t have much accountability – “You’re a faceless cog in the construction crew”
      • They don’t have much, if any, leverage
    • A general contractor, who someone hires to come and fix/repair their house, has a little more accountability
      • They’ll make more money than a day laborer, but they take more risk (if the project runs over budget, they’ll eat the loss)
      • The accountability gives them more potential income
      • They have labor leverage (people working for them)
    • A property developer is one level above a general contractor – these are people who go around looking for beaten down properties which have potential and then buy them to fix them up
      • They can make a healthy profit by selling a building for 2-3x what they bought it for
      • A developer has more accountability/risk and much more specific knowledge
        • They have to know which neighborhoods are worth buying in, which lots are good/bad, and what makes/breaks a specific property
      • They have capital leverage and labor leverage 
    • Beyond the property developer might be a famous architect/developer where just having your name on a property increases its value
    • Above that might be a property developer who builds entire communities
    • Above that – someone who funds real estate through an investment trust
    • Beyond that – someone (or a team of people) who understands the real estate market and the tech business (how to code/recruit developers/build a good product), and knows how to raise money from VCs
      • Think – something like Zillow 
      • This team/individual would have all forms of leverage – labor (people working for him/her), code, capital (money from investors)
    • As you climb the chain – You layer in more knowledge which can only be gained on the job, more accountability/risk taking, more capital, and more labor
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