The Naval Podcast | How to Get Rich: Every Episode (Lessons in Life, Entrepreneurship, and Building Wealth from Naval Ravikant)

This podcast consists of a conversation between Naval Ravikant and Babak Nivi going over Naval’s famous How to Get Rich tweetstorm.

Key Takeaways

  • Wealth buys you freedom
  • EVERYONE can be rich
  • Aim to become so good at something, that luck eventually finds you
    • Over time, it isn’t luck – it’s destiny
  • You’re not going to get rich renting out your time
  • Aim to have a job, career, or profession where your inputs don’t match your outputs
  • People who are living far below their means enjoy a freedom that people busy upgrading their lifestyle just can’t fathom
  • Get rich by giving society what it doesn’t yet know how to get – at scale
  • The internet has massively broadened the space of possible careers
    • Whatever nice obsession you have, the internet allows you to scale it
  • Escape competition through authenticity
  • All the benefits in life come from compound interest
    • Whether it’s in relationships, life, your career, health, or learning
  • Pick people to work with who have high intelligence, high energy, and high integrity – you CANNOT compromise on this
  • Really successful people have an action bias
  • Arm yourself with specific knowledge
    • Specific knowledge is the stuff that feels like play to you but looks like work to others. It’s found by pursuing your innate talents, your genuine curiosity, and your passion.
  • Learning to build AND sell products is a superpower
  • Read what you love until you love to read
  • The 5 most important skills are reading, writing, arithmetic, persuasion, and computer programming
  • The number of iterations drives the learning curve
  • Get comfortable with frequent, small failures
    • If you’re willing to bleed a little bit every day, but in exchange, you win big later, you’ll be better off
  • Embrace accountability and take business risks under your own name. Society will reward you with responsibility, equity, and leverage
  • Product leverage is how fortunes will be made in the digital age – using things like code or media
  • Product and media leverage are permisionless – they don’t require someone else’s permission for you to use them or succeed
  • Wisdom is knowing the long-term consequences of your actions
  • Judgment is wisdom on a personal domain (wisdom applied to external problems)
    • The people with the best judgment are actually among the least emotional   
  • Set and enforce an aspirational hourly rate
    • If you can outsource something for less than your hourly rate, outsource it
  • The hierarchy of importance:
    • What you work on
    • Picking the right people to work with
    • How hard you work
  • A busy calendar and a busy mind will destroy your ability to do great things in this world
  • Become the best in the world at what you do. Keep redefining what you do until this is true.
  • Reject most advice, but remember you have to listen to/read enough of it to know what to reject and what to accept
  • Your physical health, your mental health, and your relationships will most likely bring you more peace and happiness than any amount of money ever will
  • Productize yourself
    • Create a product out of whatever it is you do naturally and uniquely well
  • Being honest leaves you with a clear mind
  • “A lot of wisdom is just realizing the long-term consequences of your actions. The longer-term you’re willing to look, the wiser you’re going to seem to everybody around you.” – Naval Ravikant
  • Negotiations are won by whoever cares less

Books Mentioned

Seek Wealth, Not Money or Status (Listen) | Episode 1

  • Having wealth means having assets that earn while you sleep
    • “The reason you want wealth is because it buys you freedom, so you don’t have to wear a tie like a collar around your neck, so you don’t have to wake up at 7 AM and rush to work in traffic, so you don’t have to waste away your entire life grinding all your productive hours away to a soulless job that doesn’t fulfill you.”Naval Ravikant
  • Money is how we transfer wealth
    • “Money won’t solve all your problems, but it will solve all your money problems” – Naval Ravikant
  • Wealth is a positive-sum game and status is a zero-sum game

Ethical Wealth Creation Makes Abundance for the World (Listen) | Episode 2

  • “What I am basically focused on is true wealth creation. It’s not about taking money. It’s not about taking something from somebody else. But it’s from creating abundance.” – Naval Ravikant
    • Basically all of the wealth society has today was created – we’re not still sitting around in caves figuring out how to divide pieces of firewood
  • “Everyone can be rich” – Naval Ravikant
    • In the First World, everyone is basically richer than almost anyone who was alive 200 years ago 
    • Furthermore, it’s better to be poor today than it was to be the richest man 200 years ago
  • Here’s a thought experiment…
    • Imagine if every human had the knowledge of a good software engineer – just think what society would look like 20 years from now
      • We’d ALL be living in massive abundance

Free Markets Are Intrinsic to the Human Species (Listen) | Episode 3

  • Capitalism is innate to the human species in every exchange we have
    • When two people are talking – there’s an information exchange
    • “The notion of exchange and keeping track of credits and debits – this is built into us as flexible social animals” – Naval Ravikant
  • Humans are the only animals in the animal kingdom that cooperate across genetic boundaries
    • Most animals don’t even cooperate – those that do cooperate only in packs or when they have some shared interest
  • What lets humans cooperate?
    • Keeping track of credits and debts – that’s free-market capitalism
  • “Everybody can be wealthy, everybody can be retired, everybody can be successful” – Naval Ravikant
    • It just comes down to education and desire
  • “If you get too many takers and not enough makers, society falls apart” – Naval Ravikant
    • This results in a communist country
      • Ex. – Venezuela

Build Your Character so Luck Becomes Your Destiny (Listen) | Episode 4

  • There are cliches for every kind of luck except for the last kind, which Naval terms as “luck that finds you” (see these Podcast Notes for more on the different types of luck)
    • 1) Blind luck – “dumb luck”
    • 2) Luck that comes to you through persistence – “fortune favors the bold”
    • 3) Spotted luck – “chance favors the prepared mind”
    • 4) Luck that finds you
  • More on the fourth kind of luck (luck that finds you)
    • “It eventually starts becoming so deterministic that it stops being luck” – Naval Ravikant
    • Luck becomes destiny
    • Another way to think about this type of luck – you build your character in a certain way, and then your character becomes your destiny
  • Build your character and your reputation so that eventually, you’ll be able to take advantage of opportunities that other people may characterize as lucky… but you know it wasn’t
    • For example – Warren Buffet gets offered deals, gets to buy companies, and do other things people can’t just because of his reputation
  • One piece of advice – be eccentric
    • Because the world is efficient, everyone has dug through all the obvious places – being eccentric helps to find the new and novel
    • Also be willing to dig deeper than anyone else, just because you’re interested
    • Related quotes:
      • “Extreme people get extreme results” Sam Altman
      • “You can’t be normal and expect abnormal results”Jeffery Pfeffer, a professor at Stanford

You Won’t Get Rich Renting out Your Time (Listen) | Episode 5

  • From Naval’s How to Get Rich tweetstorm – “You’re not going to get rich renting out your time. You must own equity – a piece of the business – to gain your financial freedom.”
    • You can’t become truly wealthy when your inputs are closely tied to your outputs
      • When you’re sleeping, you’re not earning
      • When you’re on vacation, you’re not earning
    • Doctors who get really rich open a private practice or build some kind of medical device
  • In most cases – renting out your time means you’re replaceable
  • “Everybody who really makes money at some point owns a piece of a product, or a business, or some kind of IP.” – Naval Ravikant
    • Ex. – stock options
    • But most of the time, the real wealth is created by starting your own companies
  • Aim to have a job, career, or profession where your inputs don’t match your outputs
    • Like software engineering
    • What’s the opposite of this?
      • Being a lumberjack
      • Even the best lumberjack in the world might only be 3x better than the worse lumberjack
    • The higher the creativity component of a profession, the more likely it is to have disconnected inputs and outputs

Live Below Your Means For Freedom (Listen) Episode 6

  • “People who are living far below their means enjoy a freedom that people busy upgrading their lifestyle just can’t fathom” – Naval Ravikant
    • Once you start making money, keep living like your old/poorer self
    • When you upgrade your life as you make more money, you just stay in the “wage slave trap”
  • Nassim Taleb has said – “The most dangerous things are heroin and a monthly salary”
    • They’re both highly addictive
  • One reason the very high marginal tax rates for the so-called wealthy are flawed:
    • For many people, they toil/work extremely hard for decades, and then it finally pays off with a massive payday
      • “Then of course Uncle Sam shows up, and basically says, ‘Hey, you know what, you just made a lot of money this year. Therefore, you’re rich. Therefore, you’re evil and you’ve got to hand it all over to us.’ So, it just destroys those kinds of creative risk-taking professions.” – Naval Ravikant

Give Society What it Doesn’t Know How to Get (Listen) | Episode 7

  • Get rich by giving society what it doesn’t yet know how to get – at scale
  • Money is like an IOU from society for something you did good in the past, that you can use in the future
  • “Society always wants new things and if you want to be wealthy, figure out which one of those things you can provide for society that it does not yet know how to get, but it will want, that’s natural to you and within your capabilities. And then you have to figure out how to scale it.” – Naval Ravikant
  • Creations start as just an act of creativity
    • Then, for a little while, only rich people have it (like a chauffeur)
    • Then it makes its way to everyone (like Uber)
  • “Entrepreneurship is essentially an act of creating something new from scratch, predicting that society will want it, and then figuring out how to scale it and get it to everybody in a profitable and self-sustaining way.” – Naval Ravikant

The Internet Has Massively Broadened Career Possibilities (Listen) | Episode 8

  • “The internet has massively broadened the possible space of careers. Most people haven’t figured this out yet.” – Naval Ravikant
  • The internet connects everyone on the planet
    • This means that you can find an audience for your product/service no matter how far away they are
    • “The internet allows any niche obsession…from people who collect snakes to people who like to ride hot air balloons to people who like to sail around the world by themselves…whatever nice obsession you have, the internet allows you to scale.” – Naval Ravikant
      • “If you want to reach 50,000 passionate people like you, there’s an audience out there for you”
  • “Each person on Earth has different interests and obsessions, and it’s that diversity that becomes a creative superpower” – Naval Ravikant
    • Before the internet – this didn’t really matter
      • Your town/village didn’t necessarily need your unique creative skill
    • But now – you can go out on the internet and find your audience and utilize that to build wealth
  • The space of careers has been broadened -Examples:
    • People are now able to upload videos to Youtube to make a living – this wasn’t possible 50 years ago
    • Professional bloggers
    • Podcasters – Joe Rogan makes about $100 million per year from his podcast alone
  • “The internet enables any niche interest, as long as you’re the best at it, to scale-out” – Naval Ravikant
    • Because every human is different, everyone is the best at something
  • “Escape competition through authenticity” – Naval Ravikant
    • Just do your own thing – “No one can compete with you on being you”
    • “The more authentic you are, the less competition you’re gonna have”

Play Long-term Games With Long-term People (Listen) | Episode 9

  • “All the benefits in life come from compound interest” – Naval Ravikant
    • Whether it’s in relationships, life, your career, health, or learning
  • Long-term games are good for both compound interest AND trust
  • If you want to be successful, more likely than not, you’ll need to work with other people
    • You’ll need to figure out who you can trust over a long period of time, so you can keep working with them so that eventually compound interest will let you collect the major rewards
  • If you keep switching careers/networks – compound interest can’t take effect 
    • Add to that – you won’t know who to trust and your new network won’t know to trust you
  • “It’s important to pick an industry where you can play long-term games with long-term people” – Naval Ravikant
  • A good analogy:
    • In a long-term game, everyone is making each other rich
      • It’s positive-sum
    • In a short-term game, everyone is making themselves rich

Pick Partners With Intelligence, Energy and Integrity (Listen) | Episode 10

  • Pick people to work with who have high intelligence, high energy, and high integrity – you CANNOT compromise on this
    • The world is full of smart/lazy people – this is why high energy is important
    • But high integrity is the most important
      • Otherwise, you just have a smart/hardworking crook who will eventually cheat you
  • How do you figure out if someone has good integrity?
    • Read signals
      • “Signals are what people do, despite what they say” – Naval Ravikant
      • If someone treats a waiter badly, it’s only a matter of time before they treat you badly
  • Another tip – Find people to work with who seem irrationally ethical
  • “Self-esteem is the reputation that you have with yourself” – Naval Ravikant
    • Good/ethical/reliable people tend to have high self-esteem because they have good reputations with themselves
  • “Generally, the more someone is saying that they’re moral, and ethical, and high integrity, the less likely they are to be that way” – Naval Ravikant
    • Similarly – “If you openly talk about how honest, and reliable, and trustworthy you are, you’re probably not that honest and trustworthy”
  • Sam Altman has said – “One of the important things for delegation is to delegate to people who are actually good at the thing that you want them to do”
    • “I almost won’t start a company, or hire a person, or work with somebody if I just don’t think they’re into what I want them to do” – Naval Ravikant
    • “If you’re trying to keep someone motivated for the long term, that motivation has to come intrinsically” – Naval Ravikant

Partner With Rational Optimists (Listen) | Episode 11

  • Don’t partner with pessimists
    • Avoid them
  • To create great things, you have to be a rational optimist
    • Rational in the way you see the world
    • Optimistic in your capabilities
  • “All of the really successful people I know have a really strong action bias. They just do things.” – Naval Ravikant
    • The easiest way to figure out if something is viable or not is by doing it
  • “You’ve got one life on this planet. Why not try to build something big?” – Naval Ravikant
  • But do know that it takes a lot of effort to build even small things
    • “I don’t think the corner grocery store owner is working any less hard than Elon Musk – Naval Ravikant
  • Think BIG – but be rational about it
  • Being an irrational optimist > being a rational cynic
  • If you think about it, we’re descended from pessimists
    • If two people were in a forest 10,000 years ago, and they hear a tiger – the optimist doesn’t run and ends up getting eaten, while the pessimist books it and survives
    • “We’re genetically wired to be pessimists, but modern society is far, far safer” – Naval Ravikant
      • “It made sense to be pessimistic in the past, but it makes sense to be an optimist today”
  • In society today, we’re dealing with situations which have limited downside and unlimited upside
    • Just think – if you build the next Tesla or SpaceX you can create billions of dollars of value for society (and yourself)
    • If you fail, so what? A few investors lose money and you’re right back to where you started.

Arm Yourself With Specific Knowledge (Listen) | Episode 12

  • “We have this idea that everything can be taught…..everything can be taught in school. And it’s not true that everything can be taught. In fact, the most interesting things cannot be taught. But everything can be learned.”  – Naval Ravikant
  • Specific knowledge is the knowledge that you care most about
  • You can’t be trained for specific knowledge
    • If it were possible to be trained for it – then someone else could be trained for it too
      • You’d then be extremely replaceable – by other humans and eventually robots
  • How do you discover your specific knowledge?
    • “Specific knowledge is found by pursuing your innate talents, your genuine curiosity, and your passion” – Naval Ravikant
      • “If you’re not 100% into it, then someone else who is 100% into it will outperform you”
    • Look back on your own life and see what you’re uniquely good at
    • Specific knowledge is the stuff that feels like play to you but looks like work to others

Specific Knowledge is Highly Creative or Technical (Listen) | Episode 13

  • Warren Buffet once went to Benjamin Graham, author of The Intelligent Investor, and offered to work for him for free so he could learn about investing
    • Benjamin told him – “Actually you’re overpriced. Free is overpriced.”
      • Apprenticeships are VALUABLE – if specific knowledge can somehow be taught, this is how
  • Specific knowledge tends to be highly technical or creative – on the bleeding edge of art, communication, or tech
  • An example of specific knowledge – what Scott Adams, the creator of Dilbert, has done with his career
    • He’s essentially becoming one of the most credible people in the world by making persuasive arguments and videos on Periscope
      • What he does will NEVER be automated
  • Specific knowledge can only be built by spending lots of time doing whatever you’re obsessed/interested in
    • It can’t be taught in a book or course
  • Career Advice –  Aim to get in the 10-25th percentile of 2-3 things and then combine them instead of trying to be the very best at only one thing
    • Scott Adams originated this idea in this blog post
    • For example: Become a very good writer and knowledgeable about finance – then write about finance
  • Double down on what you’re a “natural” at
    • Everyone is a natural at something
    • “Take the things that you are natural at and combine them so that you automatically, just through sheer interest and enjoyment, end up top in the top 25% or top 10% or top 5% at a number of things.” – Naval Ravikant

Learn to Sell, Learn to Build – You Will Be Unstoppable (Listen) | Episode 14

  • “Learn to sell, learn to build, if you can do both, you will be unstoppable.” – Naval Ravikant
    • Every business has someone who’s building/trying to grow it
    • Then there’s sales 
      • But selling can mean marketing, communicating, recruiting, raising money, inspiring people, or doing PR
  • The great companies have a killer combo of builder + seller 
  • If you can BOTH build and sell – it’s a superpower
    • Someone like Elon Musk or Marc Andreessen
    • “The real giants in any field are the people who can both build and sell” – Naval Ravikant
    • “Long term, people who understand the underlying product and how to build it and can sell it, these are catnip to investors. These people can break down walls if they have enough energy, and they can get almost anything done.” – Naval Ravikant
  • It’s much more difficult for someone skilled in selling to pick up the building skill than vice versa

Read What You Love Until You Love to Read (Listen) | Episode 15

  • We kick things off with some classic Naval quotes:
    • “There is no skill called business. Avoid business magazines and business classes. Study microeconomics, game theory, psychology, persuasion, ethics, mathematics, and computers.”
    • “Reading is faster than listening, doing is faster than watching”
    • “The foundation of learning is reading”
      • “I don’t know a smart person who doesn’t read”
  • Read what you love, until you love to read
    • People who read a lot love to read, and they love to read because they read books that they love
    • Start out reading what you enjoy —> reading becomes a habit —> you get bored of the simple stuff —> you gradually read more complex material (science, philosophy, mathematics, etc.)
      • You’ll naturally move up the hierarchy 
  • It is important, however, that you read foundational things (the original books in a given field which are scientific in nature)
    • Instead of reading a random business book, read The Wealth of Nations by Adam Smith
    • Instead of reading a recent book on biology or evolution, read Darwin’s On The Origin of Species
    • Instead of reading a recent biotech book, read The Eighth Day of Creation
    • Another recommendation – Richard Feynman’s Six Easy Pieces
    • “If you understand the basics, especially in mathematics and physics and science, then you will not be afraid of any book” – Naval Ravikant
      • Aim to eventually be able to walk into a library and not fear ANY book
  • “It’s not that the means of education or the means of learning are scarce, the means of learning are abundant. It’s the desire to learn that’s scarce.” – Naval Ravikant
  • Children are naturally curious
    • But over time, most tend to lose their curiosity – schools replace curiosity with compliance
      • “Once you replace curiosity with compliance, you get an obedient factory worker, but you no longer get a creative thinker” – Naval Ravikant

The Ultimate Foundations Are Math and Logic (Listen) | Episode 16

  • The ultimate foundations are mathematics and logic
    • If you understand logic and mathematics, then you have the basis for understanding the scientific method
      • Once you understand the scientific method, you can understand how to separate truth from falsehood
  • “It’s better to go through a book really slowly, and struggle and stumble and rewind, than it is to fly through it quickly just to say, ‘Well now I’ve read 20 books.'” – Naval Ravikant
  • As Bruce Lee said – “I don’t fear the man who knows a thousand kicks and a thousand punches. I fear the man who has practiced ONE punch 10,000 times.”
    • “It’s the understanding that comes through repetition and through usage and through logic and foundations that really makes you a smart thinker” – Naval Ravikant
  • The 5 most important skills are reading, writing, arithmetic, persuasion, and computer programming
    • “If you’re good with computers, if you’re good at basic math, if you’re good at writing, if you’re good at speaking, and if you like reading, you’re set for life.” – Naval Ravikant

There’s No Actual Skill Called “Business” (Listen) | Episode 17

  • Business school is mostly a waste of time
    • You’d probably be better off studying game theory, psychology, and logic
  • Doing is faster than watching
    • You’re going to learn a lot more about running a business by actually operating your own business, compared to just reading about how to do so
  • “The number of iterations drives the learning curve” – Naval Ravikant
    • Your speed of learning a field more so depends on iterations, not the hours you put in
    • For example – If you own a small business, constantly be experimenting – don’t just do the same thing over and over and expect to get good at business
      • Change the sign, experiment with social media, change the hours you’re opened, etc.
    • “The more iterations you can have…the faster you’re gonna learn”
  • Get comfortable with frequent, small failures
    • “If you’re willing to bleed a little bit every day, but in exchange, you win big later, you’ll do better” – Naval Ravikant
      • The crowd is after the reverse – frequent, small victories (don’t be the crowd)
    • Entrepreneurs bleed every day and they’re constantly stressed, but when they win, they win big

Embrace Accountability to Get Leverage (Listen) | Episode 18

  • You need to have accountability to get leverage
    • “Embrace accountability and take business risks under your own name. Society will reward you with responsibility, equity, and leverage.” – Naval Ravikant
    • “People who are stamping their names on things aren’t foolish. They’re just confident.” – Naval Ravikant
  • A well-functioning team is small and has clear accountability for each of the different positions
  • Putting your name out there is a risk (like when trying to become a personal brand), but it opens you up to loads of rewards
    • Without accountability, you can’t build credibility
    • “We’re still socially hardwired to not fail in public under our own names, but the people who have the ability to fail in public under their own names actually gain a lot of power”

Take Accountability to Earn Equity (Listen) | Episode 19

  • Accountability is important – it’s how you get credibility, leverage, and equity
    • “When you’re negotiating with other people, ultimately if someone else is making a decision about how to compensate you, that decision will be based on how replaceable you are” – Naval Ravikant
      • If you have high accountability, that makes you less replaceable (and you’ll likely get more equity)
  • Equity holders take on greater risk but in exchange, they get nearly unlimited upside
    • Why is their risk so high?
      • They’re the last in line to get paid behind people who take a salary and the debt holders who lent money to the company
  • Taking accountability for your actions is the same as taking an equity position in all of your work
  • “In modern society, the downside risk is not that large….so there’s not really that much to fear in terms of failure. People should be taking on a lot more accountability than they actually are.” – Naval Ravikant
    • In a business sense, people generally forgive failures as long as you’re honest and made a high integrity effort
    • These days – accountability risk happens more around integrity than it does around economic failure
      • As long as you’re honest, you’ll be fine
  • Accountability is reputational skin in the game

Labor and Capital Are Older Forms of Leverage (Listen) | Episode 20

  • “Give me a lever long enough, and a place to stand, and I will move the Earth” Archimedes
    • “Fortunes require leverage. Business leverage comes from capital, people, and products with no marginal cost of replication.” – Naval Ravikant
  • Labor is the oldest form of leverage
    • Ex. – Having X amount of people work under you
    • But society overvalues labor as a form of leverage – why?
      • Mainly – managing other people is messy and requires tons of leadership skills
    • Aim to instead have the minimum amount of people working for you which will allow you to use the other forms of leverage (below)
  • Capital is a more preferable, and probably the most powerful, form of leverage
    • But how do you obtain capital?
      • “If you have specific knowledge in a domain, are accountable, and have a good name in that domain – people are going to give you capital as a form of leverage which you can use to then go get more capital” – Naval Ravikant

Product and Media are the Leverage of the New Wealth (Listen) | Episode 21

  • The most important form of leverage is the idea of products which have no marginal cost of replication (aka product leverage)
    • You can replicate your efforts without having to involve other humans
    • Ex. – A podcast
      • Long ago, to get similar reach, you would have had to give a public lecture
      • 30-40 years ago – you would have had to get on TV
      • But today, thanks to the internet, anyone can launch a podcast
  • Product leverage is how fortunes will be made in the digital age – using things like code or media
  • Combining labor leverage, capital leverage, and product leverage is a magic combination for tech startups (for more on labor and capital leverage, check out these Podcast Notes)
    • You use the minimum, highest output labor – engineers and product developers
    • You add capital which you can use for marketing, advertising, and scaling
    • You then add lots of code, media, and content to get everything out there
  • Product and media leverage are permisionless – they don’t require someone else’s permission for you to use them or succeed
    • For labor leverage – someone has to decide to follow you
    • For capital leverage – someone has to give you money
    • But coding, writing tweets, making podcasts, YouTubing – these are permissionless
  • The robot revolution has already arrived – we just keep them in data centers/servers
    • Think – every great software developer has an army of robots working for him/her at night, while they sleep, after they’ve written the code and they’re just cranking away
    • Robots do web searching for you
    • Robots handle customer service inquiries 
    • Over time, this will progress to autonomous vehicles/planes/trucks
  • Coding is a superpower because it allows you to speak the language of the robots and tell them what to do

Product Leverage is Egalitarian in its Outputs (Listen) | Episode 22

  • Product (both code-based and media-based) leverage is egalitarian in its outputs
    • Compare this to labor and capital leverage – which are much less egalitarian
    • In general – the more of a human element there is in providing a service, the less egalitarian it is
    • “It’s the nature of code and media output that the same product is accessible to everybody…The best products tend to be at the center, at the sweet spot of the middle class, rather than being targeted to the upper class.” – Naval Ravikant
      • For example:
        • Things like Netflix and Facebook – everybody can use
        • Compare this to Rolex watches or a Lamborghini – using/owning them is much more related to status-seeking
  • As the forms of leverage have gone from being labor-based and capital-based to being more product/code/media-based – “Most of the goods and services that we consume are becoming much more egalitarian in their consumption”
    • Things like food – rich people don’t eat better food
  • Technology and media products have amazing scale economies
    • “If you care about ethics in wealth creation, it’s better to create your wealth using code and media as leverage. Then those products are equally available to everybody as opposed to trying to create your wealth through labor or capital.” – Naval Ravikant
  • “If you’re wealthy today, for large classes of things, you tend to spend your money on signaling goods to show other people that you are wealthy, and you try and convert them to status as opposed to actually consuming the goods for their own sake” – Naval Ravikant

Business Models Have Their Own Leverage (Listen) | Episode 23

  • Some business models give you “free leverage” – Examples:
    • Scale economies = the more you produce of something, the cheaper it gets to make 
    • Technology and media products have this great quality where they have zero marginal cost of reproduction
      • Thinks like podcasts and YouTube videos
      • Ex. – Joe Rogan is working no harder now than he was on podcast #1, but it’s now generating millions more
    • Then there are network effects businesses
      • A network effect is when each additional user adds value to the existing user base
        • Like language – The language becomes more valuable the more people who speak it
        • “Long-term, the entire world is probably going to end up speaking English and Chinese” – Naval Ravikant
      • It’s thought that the value of a network is proportional to the square of the number of nodes of the network
        • A network of size 10 would have a value of 100, while a network of size 100 would have a value of 10,000
      • “You want to be in a network effects business” – Naval Ravikant
        • Things like Facebook, Uber, Twitter, YouTube, Google
      • “You should always be thinking about how your users or customers can add value to each other because that is the ultimate form of leverage” – Naval Ravikant
  • When you’re picking a business model, aim to pick one where you can benefit from network effects, low marginal costs, and scale economies

An Example: From Laborer to Real Estate Tech Company (Listen) | Episode 24

  • 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

Judgment Is the Decisive Skill in an Age of Infinite Leverage (Listen) | Episode 25

  • First aim to get leverage, and once you have leverage – your judgment becomes the most important skill
    • How do you get leverage?
      • Get it permisionlessly – learn to code, create podcasts, become a good writer
      • Through permission – get people to work for you, or raise capital
    • “All the great fortunes are created through leverage” – Naval Ravikant
  • In high leverage positions (like a CEO), most of the time you’re paid based on your judgment ability
  • Definitions:
    • Wisdom is knowing the long-term consequences of your actions
    • Judgment is wisdom on a personal domain (wisdom applied to external problems)
  • True judgment ability comes from experience
    • “Intellect without any experience is often worse than useless” – Naval Ravikant
      • You get the confidence that intellect gives you along with some credibility, but because you had no skin in the game and no real experience….”you’re just throwing darts”
  • The people with the best judgment are actually among the least emotional
    • “The thing that prevents you from seeing what’s actually happening are your emotions; our emotions are constantly clouding our judgment”  – Naval Ravikant
  • Let’s sum up:
    • First, you’re accountable for your judgment
    • Judgment is the exercise of wisdom
    • Wisdom comes from experience
    • That experience can be accelerated through short iterations
  • “Investment books are sort of the worst place to learn about investment”
    • To get good at investing, you need broad-based judgment and thinking – the best way to obtain this is to study everything (including a lot of philosophy)
      • Philosophy makes you more stoic/less emotional and more likely to make better decisions (so you have better judgment)
  • The more outraged somebody gets, the worse their judgment probably is
    • “If someone’s constantly tweeting political outrage and seems like an angry person, you don’t want to hand them the keys to your car let alone the keys to your company”

Set and Enforce an Aspirational Hourly Rate (Listen) | Episode 26

  • “No one is going to value you more than you value yourself” – Naval Ravikant
    • So set a high personal hourly rate and stick to it
  • Always factor your time into any decision (as well as your personal hourly rate)
    • So if your personal hourly rate is $60, and you estimate it will take you an hour and a half to return a $40 product, it’s not worth it
    • You have a finite amount of high-output mental hours each day – “Do you want to use them to run errands and solve little problems or do you want to save them for the big stuff?”
  • “You can spend your life however you want, but if you want to get rich, it has to be your number one overwhelming desire” – Naval Ravikant
    • This means it has to come before ANYTHING else
  • Advice – Look forward to the future and set an aspirational hourly rate
    • Way back, Naval’s aspirational hourly rate was $5,000/hour (even though he was only making a fraction of this at the time)
      • Today, Naval estimates he’s actually beaten his goal
    • “It should seem and feel absurdly high. If it doesn’t, it’s not high enough.” – Naval Ravikant
  • If you can outsource something for less than your hourly rate, outsource it
    • Even for things like cooking
  • Paul Graham has said (directed to Y Combinator startups):
    • “You should be working on your product, getting product-market fit, exercising, and eating healthy. That’s it. That’s kind of all you have time for while you’re on this mission.”

Work as Hard as You Can (Listen) | Episode 27

  • “If getting wealthy is your goal, you’re going to have to work as hard as you can” – Naval Ravikant
    • BUT – “Hard work is absolutely no substitute for who you work with and what you work on”
  • The hierarchy of importance:
    • “What you work on is probably the most important thing” – Naval Ravikant
      • AKA Product-Market-Founder fit (how well you personally are suited to a business”
    • Next – Picking the right people to work with
    • Third – How hard you work
    • But – they’re like 3 legs of a stool, if you shortchange any one of them the whole stool is gonna fall down
  • The order of operations when building a business/career:
    • First – Figure out what you should be doing
      • Is there a market that’s emerging that you’re interested in?
      • Is there a product you could build which would fall in line with your specific knowledge?
    • Second – Surround yourself with the best people possible
      • “No matter how high your bar is, raise your bar” – Naval Ravikant
      • “You can never be working with other people who are great enough. If there’s someone greater out there to work with, you should go work with them.” – Naval Ravikant
      • A good tip on deciding which startup to work for – Pick the one that will have the best alumni network for you in the future
    • Third – Work as hard as you can (AFTER you’ve picked the right thing to work on and the right people to work with)
  • “Nobody really works 80-120 hours a week sustainably at high-output with mental clarity” – Naval Ravikant
    • Knowledge workers tend to sprint while they’re working on something that they’re inspired/passionate about and then they rest
    • Sprint —> Rest —> Re-asses —> Try Again
      • (You end up building a marathon of sprints)
  • Inspiration is perishable
    • When you have the inspiration, act on it right then and there – otherwise you probably won’t do it
  • Be impatient with actions and patient with results
    • “If I have a problem that I discover in one of my businesses that needs to be solved, I basically won’t sleep until the resolution is in motion” – Naval Ravikant

Be Too Busy to “Do Coffee” (Listen) | Episode 28

  • Naval once tweeted“You should be too busy to do coffee while keeping an uncluttered calendar”
  • The ONLY way to stay focused and be able to do the most high-impact work/what you’re most inspired about is to constantly, RUTHLESSLY, decline meetings
  • It’s fine to make connections and “do coffee” early in your career when you’re exploring
    • But later in your career when you’re exploiting – “You have to ruthlessly cut meetings out of your life”
  • If someone wants to have a meeting, suggest a phone call
    • If they want a phone call, suggest an email
  • When you do have meetings, make it a walking meeting (or a standing meeting), keep them short, and keep them small
    • “Any meeting with 8 people in it sitting around a conference table – nothing is getting done in that meeting, you’re literally just dying one hour at a time” – Naval Ravikant
  • When you’ve done something important or valuable, busy people will meet with you
    • Suggest – “Hey, here’s what I’ve done. Here’s what I can show you. Let’s meet and I’ll be respectful of your time if this is useful to you.”
    • You HAVE to come with a proper calling card
    • “Product progress is the resume for the entrepreneur” – Naval Ravikant
    • You NEED proof of work to get a meeting with a busy person
  • “A busy calendar and a busy mind will destroy your ability to do great things in this world” – Naval Ravikant
    • If you want to be able to do great things you need free time and you need a free mind.

Keep Redefining What You Do (Listen) | Episode 29

  • Naval tweeted – “Become the best in the world at what you do. Keep redefining what you do until this is true.”
    • “If you really want to get paid in this world, you want to be number one at whatever it is you’re doing” – Naval Ravikant
  • Some of the most successful people in the world get paid for just being “them”
    • Oprah, Joe Rogan, etc. – they’re being authentic to themselves
  • But – keep changing what you do until you’re number one
    • It should be something that aligns with your specific knowledge, skill sets, interest, and capabilities
  • You should be thinking:
    • “I want to be the best at what I do”
    • “What I do is flexible, so that I’m the best at it”
      • (It’s not an overnight discovery, it’s a long journey)
  • A company should search for product-market fit
    • An entrepreneur should search for founder-product-market fit

Escape Competition Through Authenticity (Listen) | Episode 30

  • Humans are highly memetic creatures – we tend to copy what everybody else is doing, including our desires
  • Very often, you get trapped in the wrong game because you’re competing
  • The best way to escape competition is to just be authentic to yourself
    • If you’re building and marketing something which is an extension of who you are, no one can compete with you on that
      • Think – It’s near IMPOSSIBLE to compete with someone like Joe Rogan or Scott Adams
      • This is easiest to see in art, but even entrepreneurs are authentic (the businesses and product they create should be authentic to their desires and means)
    • “Authenticity naturally gets you away from competition” – Naval Ravikant
  • In entrepreneurship, the masses are never right
    • “If the masses knew how to build great things and create great wealth we’d all already be done. We’d all already be rich by now.” – Naval Ravikant
  • “Generally, most people will make the mistake of paying too much attention to the competition and being too much like the competition and not being authentic enough” – Naval Ravikant
  • The great founders tend to be authentic iconoclasts
  • As Robert Frost said – “Combine your vocation and your avocation” (what you love to do and what you do)
    • Long term, if you’re good and successful at what you do, you’ll find you’re pretty much doing your hobbies for a living
  • “Ideally you want to end up specializing in being you” – Naval Ravikant

Play Stupid Games, Win Stupid Prizes (Listen) | Episode 31

  • When you’re being authentic, competition matters a whole lot less
  • Silicon Valley tech industry businesses tend to be winner take all 
    • When you see competition, this can make you fly into a rage
  • You’re often 1 step away from a completely different business, and sometimes you need to take that one step
    • But you won’t be able to take it if you’re fighting over a booby prize (aka playing a stupid game), blinded by competition
  • A personal example from Naval:
    • He was running Epinions (an online product review site independent of Amazon) a while back…
      • The space eventually turned into Trip Advisor and Yelp
        • “This is where we should have gone. We should have done more local reviews. There’s more value to having a review for a scarce item (like a local restaurant) than some camera which might have 1,000 reviews on Amazon. But before we could get there, we got caught up in the whole comparison shopping game.” – Naval Ravikant
          • The whole space went to 0 as Amazon ended up winning the online retail game
      • “We should have been looking at what the consumer really wanted, and stayed authentic to ourselves – which is reviews, not price comparison” – Naval Ravikant
        • “We should have gone more and more into esoteric items that needed to be reviewed where customers had less and less data and wanted reviews more badly”
      • “If we stayed authentic to ourselves, we would have done better” – Naval Ravikant

Eventually, You Will Get What You Deserve (Listen) | Episode 32

  • Naval tweeted – “Apply specific knowledge with leverage and eventually you’ll get what you deserve”
    • (You could also add to that, apply: judgment or accountability)
  • Results take TIME
    • “If you’re counting, you’ll run out of patience before it actually arrives” – Naval Ravikant
    • Everybody wants results immediately, but you have to put in the hours
  • Put yourself in a good position with the specific knowledge, the accountability, the leverage, and your authentic skill set which allows you to be the best in the world at what you do (but you have to enjoy it)
    • Then just keep doing it, doing it, and doing it, and don’t keep track, and don’t keep count
  • “On a long enough time scale, you do get paid, but it can easily be 10 or 20 years” – Naval Ravikant
  • In entrepreneurship, you just have to be right ONCE
    • And the good news is you can take as many shots on goal as you want (usually every 3-5 years, 10 at the slowest)
  • Nivi has an equation:
    • Your eventual outcome = (the distinctiveness of your specific knowledge) x (how much leverage you apply) x (how often your judgment is correct) x (how accountable you are for the outcome) x (how much society values what you’re doing) x (how long you can keep doing it) x (your improvement rate with learning and reading)
  • But the thing that matters most – find something you’re good at that the market values
    • If you’re good at it – you’ll keep it up, develop the judgment, and eventually take on accountability (all the other variables fall into place)
    • “Product-market fit is inevitable if you’re doing something you love to do and the market wants it” – Naval Ravikant

Reject Most Advice (Listen) | Episode 33

  • “Avoid people who got rich quickly, they’re just giving you their winning lottery ticket numbers” – Naval Ravikant
  • “The best founders I know listen to and read EVERYONE, but then they ignore everyone and make up their own mind” – Naval Ravikant
    • They have their OWN internal model of how to apply things to their situation and don’t hesitate to discard information if necessary
    • Remember – “If you survey enough people, all the advice will cancel to 0”
  • When you hear a piece of advice/information, ask yourself:
    • “Is this true?”
    • “Is this true outside of the context of what that person applied it in?”
    • “Is it true in my context?”
    • “Do I want to apply it?”
  • Reject most advice, but remember you have to listen to/read enough of it to know what to reject and what to accept
  • Here’s how Naval views the purpose of advice:
    • “I view it as helping me have anecdotes and maxims that I can then later recall when I have my own direct experience and say, ‘Ah, that’s what that person meant.'” – Naval Ravikant
  • “90% of my tweets are just maxims that I carve for myself that are then mental hooks to remind me when I’m in that situation again” – Naval Ravikant
    • Like Naval’s tweet – “If you can’t see yourself looking with someone for life, then don’t work with them for a day”
    • “I use my tweets and other people’s tweets as maxims that help compress my own learnings and be able to recall them”
  • All pieces of advice are really just compact ways for you to recall your own knowledge
    • If you don’t have the direct experience, advice just reads like an inspirational quote

A Calm Mind, a Fit Body, a House Full of Love (Listen) | Episode 34

  • The last tweet in Naval’s famous “How to get rich (without getting lucky)” tweetstorm:
    • “When you’re finally wealthy, you’ll realize that it wasn’t what you were seeking in the first place”
  • Money solves your money problems, but it doesn’t get you everywhere
    • “The first thing you realize when you make a bunch of money is that you’re still the same person” – Naval Ravikant
      • If you’re happy, you’ll still be happy
      • If you’re unhappy, you’ll still be unhappy
  • Naval’s personal favorite tweet of his – “A calm mind, a fit body, and a house full of love. These things cannot be bought – they must be earned.”
    • Even with all the money in the world, you can’t buy those things
    • “Those three things (your health, your mental health, and your close relationships) are things that you have to cultivate and can probably bring you a lot more peace and happiness than any amount of money ever will” – Naval Ravikant
  • Naval is planning a new tweet storm about how to create a calmer internal state
    • He says he has about 100 tweets already written
  • If you have a calm mind and you’ve already made money, you probably already have good relationships
  • Many external battles in life happen because your internal state isn’t optimized
    • When you’re internally peaceful, you’re going to pick less fights
  • “Money solves your money problems, buys you freedom in the material world, and lets you not do the things that you don’t want to do” – Babak Nivi
    •  “The ultimate purpose of money is so that you do not have to be in a specific place at a specific time doing anything you don’t want to do” – Naval Ravikant

There Are No Get Rich Quick Schemes (Listen) | Episode 35

  • “There are no get rich quick schemes. That’s just someone else getting rich off you.” – Naval Ravikant
    • Most of the time when someone’s selling you a “here’s how to get rich” product, that’s just the other person making money off you
  • Credibility is important when producing a “how to get rich” based product 
    • Try to only read things on this topic by people who have made their wealth in other fields, not by selling “how to get rich” products
  • When Naval was younger, one of his favorite books was How to Get Rich by Felix Dennis 
  • At some level, every founder has to lie to every employee of the company. They have to convince them that it’s better to work for the company than it is to do what the founder did and work for themselves.
  • If anyone is giving advice on how to get rich and they’re also making money off of it, they should have made their money elsewhere” – Naval Ravikant
    • You don’t want to learn how to get rich from a poor person, how to be fit from a fat person, or how to be happy from a depressed person
  • Just remember that in any random process, if you run it long enough and if enough people participate in it, you will always get every single possible outcome
    • To learn more about randomness, check out the highly recommended book – Fooled By Randomness by Nassim Taleb

Productize Yourself (Listen) | Episode 36

  • The whole How to Get Rich tweetstorm can be summed up with the phrase “productize yourself”
    • Productize = leverage + specific knowledge
    • Yourself = uniqueness + accountability + specific knowledge
  • Whenever you’re doing anything in business, if you’re looking towards the long-term of getting wealthy, you should ask yourself:
    • “Is this authentic to me?”
    • “Is it myself that I’m projecting? Am I productizing it?”
    • “Am I scaling it with labor or with capital or with code or with media?”
  • “You want to figure out what you’re uniquely good at, or what you uniquely are, and apply as much leverage as possible”Babak Nivi
  • “Making money should be a function of your identity and what you like to do” – Naval Ravikant
  • There’s a tweet Naval really likes – “Find three hobbies: one that makes you money, one that keeps you fit, and one that makes you creative”
    • (Or one that makes you money, one that makes you fit, and one that makes you smarter)
    • Naval’s hobbies:
      • Reading
      • Working with startups (investing in them, creating them, etc.)
      • Yoga

Accountability Means Letting People Criticize You (Listen) | Episode 37

  • Common failure modes and misunderstandings when applying advice from Naval’s “How to Get Rich (without getting lucky)” tweetstorm
    • Accountability does not mean being successfully accountable – it means you have to stick your neck out and be willing to fail publicly and let people hate on you
    • You don’t need to be an entrepreneur to apply leverage and specific knowledge – you can start by applying them in your existing career
    • This tweetstorm does NOT only apply to tech entrepreneurs
      • “It’s just the nature of leverage that technology drives leverage, so I’m going to push you in a technology direction to get the free leverage available in tech” – Naval Ravikant
  • “90% of people are dead. There are a lot of people who are living on a dollar a day. Do you live on a dollar a day? No. It’s up to you to play the hand that you’re dealt the best of your ability.” – Naval Ravikant
  • Wealth creation is NOT fundamentally at odds with an environmentally safe and healthy planet
  • “A lot of nonprofit efforts would actually be better served by for-profit companies because then they wouldn’t have to go begging for grants all the time. They would be financially sustainable.” – Naval Ravikant
    • Great founders realize their philanthropic visions by running a business
  • “One of the reasons I’m less active on Twitter lately is because every tweet summons an army of nitpickers and haters and it gets exhausting, but on the other hand, you have to learn how to ignore them” – Naval Ravikant

We Should Eventually Be Working For Ourselves (Listen) | Episode 38

  • Naval’s How to Get Rich tweetstorm (and podcast) is for anyone who wants to be entrepreneurial and control their own life yet realizes there are no shortcuts – creating wealth will take a long time
    • You HAVE to be patient and be in it for the long-haul
  • It may seem like the things covered in this podcast are far too idealistic, but maybe they can inform:
    • Your weekend projects
    • Your self re-education you do at night on the internet
    • What roles you take on at the company you work for (ideally ones closer to points of leverage + judgment and things you’re naturally good at)
  • People often think about moving up the corporate ladder – but that mostly just involves managing more people
    • “What you really want to be doing is managing more capital, products, media and community” Babak Nivi
    • OR instead – move to a different organization/create your own organization to get more leverage
  • “In general… you will do better in a smaller organization than a larger one” – Naval Ravikant
    • You’ll have more accountability (and it’ll be more visible)
    • You’re more easily able to try multiple things to see what you’re good at
    • You’ll have more flexibility
    • There will be more authenticity as to how the company operates
  • A good progression for a career – start out in a large company and then progressively move to smaller and smaller ones
    • Larger companies are certainly more stable but are more about politics and lack innovation
  • “The goal, long-term, is, if we are all wealthy, that we are all working for ourselves” – Naval Ravikant
    • And the people who will be working for will be robots
      • Today that’s software robots executing code
      • Tomorrow it could be delivery robots or mechanical robots carrying things around
  • “The best relationships are peer relationships” – Naval Ravikant
    • “If there’s someone above you, then that’s someone to learn from. If you’re not learning from them and improving, then there shouldn’t be anybody above you.”
    • “If there’s somebody below you, it’s because you’re teaching them and enabling them. If you’re not teaching them and enabling them, then get a robot underneath. You don’t need a human being below you.”
  • “In the not-too-distant future, anybody who wants to work for themselves will be able to work for themselves” – Naval Ravikant
    • You may have to make other sacrifices and take on more risks – but we’re moving towards a future where it’s more and more doable

Being Ethical is Long-term Greedy (Listen) | Episode 39

  • People should also think about ethics (in addition to studying programming, sales, reading, writing, and arithmetic)
  • There’s the Golden Rule – “Do unto others as you would have them do unto you.”
    • And there’s Nassim Taleb’s Silver Rule – “Don’t do unto others what you don’t want them doing unto you.”
  • “Once you’ve been in business long enough, you will realize how much of business is about trust” – Naval Ravikant
    • Why? – Compound interest
      • You want to work for long periods of time with trustworthy people without having to constantly look over your shoulder
    • Over time, ethical people gravitate towards working with each other
      • Being ethical, therefore, attracts other ethical people in it for the long-term
      • “And if you build a good enough reputation for being ethical, people will eventually pay just to do deals through you”
  • In the VERY long run, being ethical pays off
    • But in the short run, being unethical pays off (which is why so many people do this)
  • Being honest leaves you with a clear mind, free of lies running through your head which you’re forced to keep track of
    • This gives you more energy to think about what actually matters
    • By being honest, you’re also pushing people out of your network who only want to hear the pretty lies, creating room for the people who like you exactly the way you are
  • “A lot of wisdom is just realizing the long-term consequences of your actions. The longer-term you’re willing to look, the wiser you’re going to seem to everybody around you.” – Naval Ravikant

Envy Can Be Useful, or It Can Eat You Alive (Listen) | Episode 40

  • What menial jobs has Naval held in the past?
    • Naval used to wash dishes in his college cafeteria until he got sick of it and sweet-talked his way into a teaching assistant job for a computer science professor (even though he was completely unqualified)
      • “The job forced me to learn computer algorithms, so I could TA the rest of the course” – Naval Ravikant
    • He had a prestigious internship at a NYC law firm and got fired for surfing Usenet
      • Naval says the job was extremely boring (this was pre-iPhone – “Thank God for Steve Jobs for saving us all from unending boredom”)
      • On being fired: “I was unhappy… for all of an hour. Ultimately, it’s one of the best things that ever happened to me. Otherwise, I would have ended up a lawyer. Not that I have anything against lawyers; it’s just not what I was meant to do.” – Naval Ravikant
    • In high school, Naval worked for an Indian food catering company
      • One day, he had to serve at a birthday party for a kid in his class & a bunch of his classmates
        • “That was incredibly embarrassing. I wanted to hide away and die right there.” – Naval Ravikant
  • Sometimes it takes the suffering of doing the wrong work to motivate you enough to do the right work
  • “Envy can be useful, but envy can also eat you alive if you let it follow you around your entire life. But there are points in your life when it can be a powerful booster rocket.” – Naval Ravikant

Principal-Agent Problem: Act Like an Owner (Listen) | Episode 41

  • If you want something done right, do it yourself
  • Almost all human behavior can be explained by incentives
  • Incentives must be aligned in order to get people to behave correctly
  • Think like a business owner in order to become a business owner

Kelly Criterion: Avoid Ruin (Listen) | Episode 42

  • The Kelly criterion is a mathematical formulation of a simple concept:
    • “Don’t risk everything. Stay out of jail. Don’t bet everything on one big gamble, just be very careful how much you bet each time so you don’t lose the whole kitty.” – Naval Ravikant
  • Similarly – Nassim Taleb talks about ergodicity
    • What does ergodicity mean? – What’s true for 100 people on average isn’t the same as one person averaging that same thing 100 times
    • As an example, if 6 people play Russian Roulette and each winner gets $1 billion – 1 person ends up dead and 5 people now have $1 billion
      • But 1 person who plays Russian Roulette with the same gun 6 times is never going to end up a billionaire (on average)
  • In business, people get ruined by cutting corners and doing the unethical/illegal
    • Having your reputation ruined is very much the same as getting wiped to 0

Schelling Point: Cooperating Without Communicating (Listen) | Episode 43

  • The Schelling point is a game theory concept made famous by Thomas Schelling in his book, The Strategy of Conflict (which Naval recommends)
    • It addresses the question – How do you get people who cannot communicate with each other to coordinate?
    • For example – if two Americans wanted to meet, but could not communicate any more information, they’d utilize social norms to converge onto a Schelling Point
      • So perhaps the best chance for the meeting would be at midnight on New Years in New York City, somewhere like Grand Central or the Empire State Building
  • A simple example:
    • Imagine two companies are competing heavily with each other
    • Let’s say the price fluctuates between $8 and $12 for whatever the service they offer is – don’t be surprised if they converge to $10 without ever talking to each other

Negotiations Are Won by Whoever Cares Less (Listen) | Episode 44

  • Naval had a past tweet – “Negotiations are won by whoever cares less”
    • “Negotiation is about not wanting it too badly. If you want something too badly, the other person can extract more value from you.” – Naval Ravikant
  • If you do care more about something and someone is taking advantage of you in a negotiation then your best is to turn it from a short-term game into a long-term game
    • Said another way – try to make it a repeat game (you’re converting a single-move game with a high probability of cheating on both sides into a multi-move game)
      • Ex.: If you’re negotiating with a contractor over the price of a home renovation, you might say – “Actually, I need two different projects done. The first project we’ll do together, and based on that I’ll decide if we do the second project.”
      • OR say – “I’m going to do this project with you, and I have three friends who want projects done who are waiting to see the outcome of this project.”

Pre-Tax Compounding Beats Post-Tax Compounding (Listen) | Episode 45

  • Compound interest can be an extremely powerful force – this point has been beaten to death
  • In the financial realm, pre-tax compounding is very powerful compared to post-tax compounding
    • The compounding that results from paying taxes every year is much less than the compounding that results from paying taxes just one time at the end
    • A Roth IRA is set up so you pay taxes once before putting your money into the fund (and you never have to pay taxes ever again) – it just keeps compounding

Compounding Relationships Make Life Easier (Listen) | Episode 46

  • Relationships are a good example of compound interest
    • Once you’ve been in a good relationship with somebody for a while, whether it’s business or romantic, life gets that much easier
      • Trust makes it MUCH easier to do business 
  • “I think the number one most under-recognized reason why startups fail is because the founders fall apart” – Naval Ravikant
    • Removing the frictional mechanisms of struggling relationships can be the difference between success and failure of a startup
  • Remember – Most of the benefits of compounding come at the end of the compounding, so you may not necessarily see huge benefits upfront
  • “I think it’s better to have a few deep compounding relationships with people instead of a large number of non-compounding relationships” – Babak Nivi
  • “I think one of the under-realized things in business is that it takes just as much effort to create a small business as it does to create a large business” – Naval Ravikant
    • So you might as well THINK BIG 
      • A successful tech startup can make millions or billions
      • A successful restaurant on the other hand…

Price Discrimination: Charge Some People More (Listen) | Episode 47

  • You can charge people differently based on their propensity to pay
    • But – You’re legally not allowed to do this without offering them something extra
  • Business class seats usually cost 5-10x an economy seat, but it probably only costs the airline 2-3x provide it
  • Rich people are more willing to pay
    • All you have to is provide them with the “extra” which allows them to signal their wealthiness or gives them an added level of comfort
  • Price discrimination gets used a lot in enterprise software
    • The free version does almost everything the version you have to pay for does

Consumer Surplus: Getting More Than You Paid For (Listen) | Episode 48

  • Consumer surplus is the excess value that somebody gets from a purchase
    • Even though certain individuals may be willing to pay more, the product is priced the same for everyone 
    • For example – Take coffee
      • Some people (like Naval) would probably pay $20 for their morning cup of coffee at Starbucks (but Starbucks doesn’t know that)
  • All businesses generate consumer surplus
    • Amazon probably generates trillions of dollars worth of consumer surplus based on the amount of convenience they provide for people

Net Present Value: What Future Income is Worth Today (Listen) | Episode 49

  • NPV = Net present value 
    • NPV answers the question – “That stream of payments I’m going to get in the future—what’s it worth today?”
  • An example:
    • You’re joining a startup and get 0.1% equity as part of your offer
    • The founder claims the company will one day be worth ~$1 billion, equating your 0.1% to $1 million worth of future value
    • BUT – you have to figure out what it’s ACTUALLY worth (after accounting for the massive risk startups face)
      • So, if the founder just raised a $10 million round, your 0.1% is really only worth $10,000 today
  • Get very comfortable doing net present value calculations in your head

Externalities: Calculating the Hidden Costs of Products (Listen) | Episode 50

  • An externality is an additional cost imposed by whatever product is being produced or consumed that is not accounted for in the price of the product
    • This cost then be thrown back into the price. For example:
      • If people are polluting the environment, perhaps they should be charged for what it costs to clean up the pollution and return the environment to a pristine state
      • If the price is high enough, pollution will stop
  • Compare the above to encouraging people not to take showers during a drought or banning plastic bags
    • It’d be much better to raise the price of freshwater – the average consumer would pay pennies more, but the almond farmers (who consume tons of water) would cut back severely
    • “Properly pricing externalities can save resources in a tremendous way. It’s a good framework to use when you want to do things like save the environment, rather than doing feel-good things that won’t actually amount to anything.” – Naval Ravikant