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

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This podcast clip is part of a conversation between Naval Ravikant (@naval) and Babak Nivi (@nivi). Unless otherwise noted, quotes are from Naval. For reference, check out Naval’s famousHow to Get Richtweet 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