How to Get Rich

Introduction

This is a 33-page distillation of Naval’s 100-page blog post which is a transcript from a podcast that expands on his tweetstorm on this topic. It covers building wealth and many important adjacent topics.

You can find a Google Doc version with a Table of Contents here.

Naval is an American entrepreneur and investor. He is the co-founder, chairman and former CEO of AngelList. He has invested early-stage in over 200 companies including Uber, Twitter, and FourSquare, with over 70 total exits and 10+ Unicorns worth a total of 5 billion dollars. Naval’s Twitter

Edited by Eric Niehaus, ericsniehaus@gmail.com, 30 Jul 24

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Seek Wealth, Not Money or Status

Wealth is assets that earn while you sleep

1. Wealth is assets that earn while you sleep
2. Robots, computer program, money that's reinvested into other assets, etc.
3. Wealth buys your freedom
4. You want wealth so you don’t have to wear a tie like a collar; so you don’t have to wake up to rush to work in traffic; so you don’t have to waste your life in a soulless job.
5. The purpose of wealth is freedom; the stuff money buys gets really boring and stupid fast
6. You won't get that unless you really want it. The whole world wants it. To get the resources to do what you want, you have to stand out.
7. Money is how we transfer wealth
8. Money is social credits; it’s the ability to have credits and debits of other people’s time.
9. If I create value for society, society says, “Oh, thank you. We owe you something in the future for the work that you did. Here’s a little IOU. Let’s call that money.”
10. We transfer these IOUs around; money is how we transfer wealth.
11. Status is your rank in the social hierarchy
12. People play two games in life: the money game and the status game
13. Status is where you rank in the eyes of others and enslaves you to them
14. Wealth is a positive-sum game, not a zero-sum game
15. Status is a very old game
16. Status is a zero-sum game: for #2 to move to #1,, #1 has to move out of that slot
17. Status games are very old and hierarchical; they play an important role in our society to figure out who’s in charge. But you play them because they’re a necessary evil.
18. Status used to better predict survival than wealth since you couldn’t have wealth before the farming age since you couldn’t store things. Farmers started going to wealth-based societies and the modern industrial economies are wealth-based societies.
19. People creating wealth will always be attacked by people playing status games
20. Status and wealth compete; status people attack wealth people
21. To win at a status game you have to put somebody else down which makes you an angry and combative person.

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Make Abundance for the World

Wealth isn’t about taking something from somebody else

1. Ethical wealth creation makes abundance for the world
2. There are people who make and people who take
3. True wealth creation isn't about taking money; it's about creating abundance.
4. All of the wealth in civilization has been created. It was created by people, technology, productivity, hard work.
5. Everyone can be rich
6. Everyone is basically richer than almost anyone who was alive 200 years ago: nobody then has antibiotics, cars, electricity, etc. We became wealthier as a society.
7. You'd rather be a poor person today than aristocrat back then because of wealth creation

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Free Markets Are Intrinsic to Humans

We use credits and debits to cooperate across genetic boundaries

1. Free markets are intrinsic to the human species
2. We didn't invent capitalism (free markets); it's in every exchange we have, e.g. exchanging information: if you give me bad info, I'd go somewhere else
3. Humans can cooperate because we can keep track of debits and credits of who contributed how much
4. Capitalism is a beautiful game that is worth playing ethically, rationally, morally, socially for the human race. It’s going to continue to make us all richer and richer
5. Too many takers and not enough makers will plunge a society into ruin
6. The US is a very popular country for immigrants because of the American dream: anyone can come here, be poor, and then work really hard and make money, and get wealthy
7. Takers are parasites. If you just were filled with parasites, you would die.
8. The society that doesn't respect free minds and free markets will plunge into ruin.

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Making Money Isn’t About Luck

Become the kind of person who makes money

1. Making money isn’t about luck
2. We want to be wealthy in this lifetime without having to rely on luck
3. Making money is not about luck; it’s about becoming the kind of person that makes money
4. If you take rich people's money, they'd be rich again in 5-10 years because of their skill set
5. 1. Blind luck
6. The first kind of luck is blind luck: something good and out of my control happened
7. 2. Luck from hustling
8. Some luck comes through persistence, hard work, hustle, motion. This is when you’re running around creating lots of opportunities, you’re generating a lot of energy, you’re doing a lot of things, lots of things will get stirred up in the dust; luck will find you.
9. 3. Luck from preparation
10. Here, you get very good at spotting luck: you notice when a lucky break happens in a field
11. You become sensitive to luck and that’s through skill and knowledge and work
12. 4. Luck from your unique character
13. This is the weirdest, hardest kind. Here, you build a unique character, a unique brand, a unique mindset, where then luck finds you.
14. e.g. you’re the best person in the world at deep sea underwater diving. You’re known to take on deep sea underwater dives that nobody else will even attempt to dare. When someone finds a sunken treasure ship off the coast but can't get it, they call you.
15. You create your own luck and put yourself in a position to capitalize on that luck. Or to attract that luck when nobody else has created that opportunity for themselves.
16. At this point it starts becoming so deterministic that it stops being luck: you build your character in a certain way and then your character becomes your destiny.
17. In 1,000 parallel universes, you want to be wealthy in 999 of them
18. I haven’t made money in my life in one giant payout. It’s always been a whole bunch of small things piling up. It’s more about consistently creating wealth by creating businesses, including opportunities and creating investments.
19. Wealth stacks up one chip at a time, not all at once
20. My personal wealth has not been generated by one big year. It stacks up little bit, chips at a time. More options, more businesses, more investments, more things that I can do.
21. There are so many ways, especially with the internet, to create wealth, to create products, to create businesses, to create opportunities, and to, as a byproduct, get paid by society

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Make Luck Your Destiny

Build your character in a way that luck becomes deterministic

1. Build your character so opportunity finds you
2. Have the kind of reputation that makes people do deals through you
3. If you’re a trusted, reliable, high-integrity, long-term thinking deal maker, then less experienced people will approach you and give you a cut of the deal or offer you a unique deal
4. You can build your character and reputation to take advantage of opportunities that other people may characterize as luck
5. You have to be a little eccentric to be out on the frontier by yourself
6. The world is very efficient, so all the obvious places to dig have been dug, so to find something new, it helps to operate on a frontier
7. “Extreme people get extreme results” (Sam Altman)
8. “You can’t be normal and expect abnormal returns.” (Jeffrey Pfeffer)
9. “Play stupid games, win stupid prizes” e.g. social games on Twitter
10. By pursuing luck types 2-4, you essentially run out of unluck

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You Won’t Get Rich Renting Out Your Time

You can’t earn non-linearly when you’re renting out your time

1. You won’t get rich renting out your time
2. You must own equity, a piece of the business to gain your financial freedom
3. In renting our your time, your inputs are very closely tied to your outputs. So, if you're not working you're not earning. And you can’t earn non-linearly.
4. If you work for someone, you won't earn enough, because they own everything and will pay you the bare minimum that they have to.
5. Renting out your time means you’re essentially replaceable
6. Renting out your time isn't creative
7. Set roles are replaceable and can be taught, so you'll compete with people better than you or robots cheaper than you
8. You must own equity to gain your financial freedom
9. To build wealth you need to own a piece of a product, business, or IP (e.g. stock options)
10. You usually get real wealth by starting your own companies or by investors who buy equity
11. You want a career where your inputs don’t match your outputs
12. Do leveraged work where inputs (hours) don’t match your outputs (impact)
13. Tools and leverage are what create this disconnection between inputs and outputs
14. The more creative the profession, the more likely it has disconnected inputs and outputs

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Live Below Your Means for Freedom

People busy upgrading their lifestyles just can’t fathom this freedom

1. People living below their means have freedom
2. To maintain your freedom, don't upgrade your lifestyle too fast; living far below your means will let you enjoy a freedom that people busy upgrading their lifestyles can’t fathom
3. Once you make some money, still live like your old self, so that just the worry goes away
4. The most dangerous things are heroin and a monthly salary
5. Continually upgrading your lifestyle as you make more money continually raises your perception of wealth, causing you to stay in that wage slave trap to earn more
6. You want to get wealthy by being poor and working, working, working
7. Ideally, you’ll make your money in discrete lumps
8. You don’t make any serious money for years and then suddenly have a giant payday
9. Ideally you'll make your money in discrete lumps, separated over long periods of time, so that your own lifestyle does not have a chance to adapt quickly, and then you basically say, “Okay, now I’m done. Now I’m retired. Now I’m free. I’m still gonna work because you got to do something with your life, but I’m gonna work on only the things that I want, when I want.” And so you have much more creative expression, and much less about money.

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Give Society What It Doesn’t Know How to Get

Society will pay you for creating what it wants and delivering it at scale

1. Give society what it wants, but doesn’t know how to get—at scale
2. Society pay you for creating things that it wants
3. If society knew how to create all the things it wants, then it wouldn't need you
4. Figure out what product you can provide and then figure out how to scale it
5. To be wealthy, figure out what you can provide for society that it wants but does not yet know how to get, that’s natural to you, and within your skillset, within your capabilities
6. Then figure out how to scale it. Building one won't be enough. You need to build thousands, or hundreds of thousands, or millions, or billions. So, everybody can have one.
7. The entrepreneur’s job is to try to bring the high end to the mass market
8. First you create it because you want or need it and know how to build it. So you build it for yourself. Then you figure out how to get it to other people.
9. Entrepreneurship is an act of creating something new from scratch. Predict that society will want it and then figure out how to scale it and get it to everybody profitably

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The Internet Has Massively Broadened Career Possibilities

The Internet allows you to scale any niche obsession

1. The Internet has massively broadened the possible space of careers
2. The internet has massively broadened the possible space of careers. Most people haven’t figured this out yet.
3. The internet connects every human to every other human on the planet. You can now reach everyone. It's an inter-networking tool. That is its superpower you should use.
4. You can find your audience or customers no matter how far away they are
5. The Internet allows you to scale any niche obsession
6. The internet allows any niche to scale
7. People are completely unique. So, each person can be creatively superb at their own unique thing. You don't have to conform to locally available jobs.
8. Escape competition through authenticity
9. Because every human is different, everyone is the best at something: being themselves
10. “Escape competition through authenticity.”
11. No one can compete with you on being you. You are IP. Be good IP.
12. The more authentic you are and with what you love to do, the less competition you’ll have. Pre-internet that would have been useless advice; post-internet it can be a career.

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Play Long-Term Games With Long-Term People

All returns in life come from compound interest in long-term games

1. Play long-term games with long-term people
2. This is is what makes high trust societies (and Silicon Valley) work
3. All the benefits in life — in relationships, money, learning — come from compound interests
4. Long-term games are good not just for compound interest but also trust
5. In Silicon Valley (and elsewhere) where people work together time and time again, people do right by each other because they know this person will be around for the next game
6. To be successful, you have to work with other people. Figure out who can you trust so you can keep playing the game with them. The trust makes it easier to play and win.
7. When you switch industries, you’re starting over from scratch
8. In Silicon Valley, the trust comes from the network of people in the small geographic area, that you figure out over time who you can work with, and who you can’t.
9. If you keep switching locations, you keep switching groups and have to start from scratch and won't know who to trust, and they won't know to trust you. And that slows you down.
10. Pick an industry where you can play long-term games, and with long-term people.
11. Long-term players make each other rich
12. In long-term games, everybody is making each other rich (baking a bigger pie together); in short-term games, everybody is making themselves rich (cutting up the pie)
13. A good leader inspires the team to get the job done. And then things get divided up fairly
14. Returns come from compound interest in iterated games
15. The longer you've known and trusted someone, there's less friction and it's easier to go bigger and bigger things
16. “Get traction, and don’t let go.” (in whatever realm: work, fitness, house cleanliness)

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Pick Partners With Intelligence, Energy and Integrity

You can’t compromise on any of these three

1. Pick business partners with high intelligence, energy and integrity
2. Work with people who have high intelligence, high energy, and high integrity
3. If they aren't smart they’ll head in the wrong direction and you'll end up in the wrong place
4. People are smart at different things, so find people who are smart at what you're doing
5. People are motivated by different things, so find people who are motivated by your thing
6. High integrity is the most important. Otherwise you're working with a smart, hard-working crook who will eventually cheat you.
7. Motivation has to come intrinsically
8. “One of the important things for delegation is, delegate to people who are actually good at the thing that you want them to do.” (Sam Altman)
9. Don't work with someone (co-founder, employee) who isn't into what you want them to do
10. Don't talk people into things; long-term motivation must come intrinsically
11. Integrity is what someone does, despite what they say they do
12. You want to find people who seem irrationally ethical
13. Signals are what people do despite what they say, e.g. how they treat a waiter
14. People are oddly consistent. Angry, vindictive, short-term thinking people are that way in many interactions in real life.
15. “Self-esteem is the reputation that you have with yourself.” You’ll always know.

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Partner With Rational Optimists

Don’t partner with cynics and pessimists; their beliefs are self-fulfilling

1. Don’t partner with pessimists
2. To create things, you have to be a rational optimist. You have to see the world for what it really is and yet believe in your capability to get things done
3. It’s okay to shoot holes in things as long as you come up with a solution
4. “Either lead, follow, or get out of the way.” Pessimists want a fourth option, where they just tell you why the thing is not going to work
5. Really successful people have a very strong action bias. They just do things. The easiest way to figure out if something is viable or not is by doing it. At least do the first step, and the second step, and the third, and then decide.
6. To be successful in life, you need to have an action bias towards getting what you want
7. Partner with rational optimists
8. Know all the pitfalls. Know the downsides, but still keep your chin up.
9. You’ve got one life on this planet. Why not try to build something big?
10. It takes a lot of work to build small things, maybe even more; so it’s better to just think big
11. We descended from pessimists
12. It’s probably better to be an irrational optimist, then it is to be a rational cynic
13. We’re descended from pessimists, because pessimism helped us survive by avoiding danger. But modern society is far safer. The upside is unlimited, and the downside is limited. So, adapting for modern society means overriding your pessimism.
14. It made sense to be pessimistic in the past. It makes sense to be optimistic today, especially if you’re educated and living in a First World country.
15. It's not a big deal if you fail. Investors have plenty of money and that's their bet
16. But avoid the risk of ruin, i.e. jail. Don’t do anything illegal. It’s never worth it.
17. Watch your health. And stay out of things that can cause you to lose all of your savings. Don't gamble everything on one go, but take rationally optimistic bets with big upside.
18. BOCTAOE
19. BOCTAOE: “but of course there are obvious exceptions” (Scott Adams)
20. Silicon Valley has learned that the upside is so great that you never look down on the kid who’s wearing a hoodie and has coffee on his shoes.
21. So, you’ve got to treat everybody with respect. You’ve got to look up to every possibility, and opportunity because the upside is so unlimited, and the downside is so limited in the modern world, especially with financial assets and instruments.

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Arm Yourself With Specific Knowledge

Specific knowledge can be found by pursuing your genuine curiosity

1. Arm yourself with specific knowledge
2. To make money you have to get paid at scale
3. Specific knowledge is the knowledge that you care about. If you’re later in life (post-22), you almost don’t get to choose which specific knowledge you have. Rather, you look at what you have already built by that point in time, and then you can build on top of it.
4. Specific knowledge can’t be trained
5. If it could be trained it could be mass produced, making you extremely replaceable and then all we have to pay you is the minimum wage since lots of others can do it
6. So, you really want specific knowledge, and you need your schooling and training to capitalize on the best specific knowledge. But you'll be paid for the specific knowledge.
7. Specific knowledge is found by pursuing your curiosity
8. e.g. someone with a degree in psychology then becomes a salesperson
9. Specific knowledge is found by pursuing your innate talents, your genuine curiosity, and your passion, not by going into whatever other people say is the hottest
10. Specific knowledge is very often at the edge of knowledge. It’s also stuff that’s just being figured out or is really hard to figure out.
11. So, if you’re not 100% into it somebody else who is will outperform you. And they won’t just outperform you by a little bit, they’ll outperform you by a lot because now we’re operating the domain of ideas, compound interest really applies and leverage really applies.
12. If you’re operating with 1,000x leverage and PersonA is right 80% of the time while PersonB is right 90% of time, PersonB will get paid hundreds of times more because of the leverage and because of the compounding factors and being correct.
13. Building specific knowledge will feel like play to you
14. Very often, it’s found not by sitting down and reasoning but by observation. You almost have to look back on your own life and see what you’re actually good at.
15. Do stuff that feels like play to you but looks like work to others

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Specific Knowledge Is Highly Creative or Technical

Specific knowledge is on the bleeding edge of technology, art and communication

1. Specific knowledge can be taught through apprenticeships
2. To the extent that specific knowledge is taught, it’s on the job, through apprenticeships; those are things society still has not figured out how to train and automate yet
3. Specific knowledge is often highly creative or technical
4. Specific knowledge tends to be technical and creative, on the bleeding edge of its field
5. Specific knowledge is specific to the individual and situation
6. It’s not so much that the knowledge is unique, it’s that it is highly specific to the situation, to the individual, and to the problem. And it can only be built as part of a larger obsession, interest, and time spent in that domain.
7. It can’t just be read straight out of a single book, nor can it be taught in a single course, nor can it be programmed into a single algorithm. It's accumulated (wisdom, synthesis)
8. You can’t be too deliberate about assembling specific knowledge
9. Scott Adams argues that you can build your career by getting in, say, the top 25 percentile at three or more things, and then you become the only person in the world who can do those three things in the 25th percentile.
10. The best way is to follow your obsession and keep an eye out for its commercial aspects
11. If you become too goal-oriented on the money, then you won’t pick the right thing. You won’t actually pick the thing that you love to do, so you won’t go deep enough into it.
12. It’s much easier to be top 5% at 3-4 things than it is to be the number one at something
13. Build specific knowledge where you are a natural
14. Pick things where you are a natural and double down on that
15. Combine the things you're natural at so that you automatically, through sheer interest and enjoyment, end up top 25% or top 10% or top 5% at a number of things.

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Learn to Sell, Learn to Build

If you can do both, you will be unstoppable

1. Learn to sell, learn to build
2. Building the product is hard and multivariate. Every industry has the builder, e.g. CTO
3. The other side is sales (marketing, communicating, recruiting, raising, inspiring, PR)
4. The Silicon Valley model is a builder and seller
5. The best way is to have two founders: one builds and one sells. Both world-class.
6. If you can do both you will be unstoppable
7. The ultimate is when one individual can do both. That’s when you get true superpowers. That’s when you get people who can create entire industries, e.g. Elon Musk
8. I’d rather teach an engineer marketing than a marketer engineering
9. A seller usually can't learn to build, but a builder can learn to sell
10. If you’re at the intersection of building and selling, don’t despair that you won't be the best builder or salesperson. Again, that combination of two skills is unstoppable.
11. When you’re starting out, when you’re trying to be recognized, building is better
12. Sales skills actually scale better over time
13. If you only had to pick one, start with building and then transition to selling

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Read What You Love Until You Love to Read

You should be able to pick up any book in the library and read it

1. Read what you love until you love to read
2. The foundation of learning is reading. Smart people read all the time.
3. Read what you love until you love to read
4. Reading is faster than listening, doing is faster than watching.
5. There is no skill called business. Avoid business magazines and class. Study microeconomics, game theory, psychology, persuasion, ethics, mathematics and computers.
6. You should be able to pick up any book in the library and read it.
7. Read the original scientific books in a field
8. At some point there’s too much out there to read. There's a lot of junk.
9. What you read, especially early on, will program your brain a certain way, and then you'll decide if the new things you read are true or false based on the earlier things.
10. So, read foundational things: the original books in a field that are very scientific in nature
11. Don’t fear any book
12. If you understand the basics, especially in mathematics and physics and sciences, then you will not be afraid of any book.
13. Then after that we were left memorizing equations, memorizing concepts without being able to derive them from first principles. And at that moment, we’re lost, because unless you’re a professional mathematician, you’re not going to remember those things.
14. The means of learning are abundant; the desire to learn is scarce
15. The means of learning, especially with the internet, are almost limitless. It’s the desire to learn that’s scarce. So, you really have to cultivate the desire.
16. We're all naturally curious but then stop wondering; you need to protect that curiosity.

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The Foundations Are Math and Logic

Mathematics and logic are the basis for understanding everything else

1. The ultimate foundations are math and logic
2. Focus on the foundations: 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, then you can understand how to separate truth from falsehood in other fields and other things that you’re reading.
3. It’s better to read a great book slowly than to fly through a hundred books quickly
4. Be very careful about reading other people’s opinions and even when reading facts because so-called facts are often just opinions with a veneer of pseudoscience around them
5. Look for algorithms, understanding. It's better to go through a book really slowly and struggle than it is to finish it quickly, read a bunch of books, and not change your brain
6. Smart thinkers have a deep understanding, cultivated through repetition, usage, and logic
7. Learn persuasion and programming
8. To lay a foundation for learning for the rest of your life you need two things: practical persuasion and to go deep in some technical category
9. The five most important skills are reading, writing, arithmetic, persuasion/talking, and computer programming because it’s an applied form of arithmetic that just gets you so much leverage for free in any domain that you operate in.

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There’s No Actual Skill Called ‘Business’

Avoid business schools and magazines

1. There’s no actual skill called ‘business’
2. There’s no actual skill called business, it’s too generic.
3. Case studies are just anecdotes. They try to help you pattern match but the reality is that you will never understand them fully until you’re actually in that position yourself.
4. Basic concepts from game theory, psychology, ethics, mathematics, computers, and logic will serve you much, much better.
5. Doing is faster than watching
6. You’ll learn a lot more about running a business by operating your own lemonade stand
7. The number of ‘doing’ iterations drives the learning curve
8. Thousands of hours doing the same thing <<< thousands of iterations
9. The number of iterations drives the learning curve. The more iterations, the faster you learn. It’s not just about the hours put in.
10. If you’re willing to bleed a little every day, you may win big later
11. Doing something new the first time is painful: you’re wandering into uncertain territory and you'll probably fail. So you just have to get comfortable with frequent small failures.
12. We’re evolved for small victories all the time but that becomes very expensive. That’s where the crowd is. That’s where the herd is. So, if you bleed a little every day but in exchange you’ll win big later, you'll do better.
13. That's entrepreneurship. Entrepreneurs bleed every day. They’re not making money, they’re losing money, they’re constantly stressed out, all the responsibility is upon them, but when they win they win big.

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Embrace Accountability to Get Leverage

Take risks under your own name and society will reward you with leverage

1. You need accountability to get leverage
2. To get rich you need leverage: labor, capital, code, media. But most of these, like labor and capital, people have to give to you.
3. To get these things, you have to build up credibility under your name, which is risky. Accountability lets you to take credit when things go well but also own the failure.
4. Take business risks under your own name
5. People like Elon, Oprah, Kanye, and Trump can get rich just off their name because their name is such powerful branding. It is an instant validator.
6. A well-functioning team has clear accountability for each position
7. A really well-functioning team is small and has clear accountability for each portion. So you always know who's responsible for failures/successes and can respond accordingly.
8. People who can fail in public have a lot of power
9. Without accountability, you don’t have incentives and can't build credibility. But you take risk: failure, humiliation, etc.
10. We’re wired to not fail in public under our own names; those willing to gain a lot of power
11. When you put your name out there, you take a risk but you also get to reap the rewards

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Take Accountability to Earn Equity

If you have high accountability, you’re less replaceable

1. Accountability is how you’re going to get equity
2. You need accountability to get leverage, credibility, and equity
3. Your compensation is tied to how replaceable you are. High accountability makes you less replaceable, so they have to give you equity
4. Taking accountability is like taking equity in all your work
5. Equity means you get paid everything after all the people who need guaranteed money are paid back. Employees get paid first but in exchange for that security, they don’t have as much upside. Next in line are debt holders (e.g. bankers who lend money to the company); they might make 5-25% a year but that's limited. Finally there are the equity holders, who get most of the upside. Once the debt holders are paid off and the salaries are paid off, whatever remains goes to them.
6. But if there isn’t enough money to pay off the salaries and the debt holders, or if there’s just barely enough to pay off the salary and the debt holders, which is what happens with most businesses, the equity holders get nothing.
7. In modern society, the downside risk is not that large. Even personal bankruptcy can wipe the debts clean in good ecosystems. Generally people will forgive failures as long as you were honest and made a high integrity effort.
8. There’s not really that much to fear in terms of failure, and so people should be taking on a lot more accountability than they actually are.
9. Integrity issues are worse than failing, e.g. Bernie Madoff. That's the biggest risk.
10. Accountability is reputational skin in the game
11. You will be rewarded directly in proportion with your accountability

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Labor and Capital Are Old Leverage

Everyone is fighting over labor and capital

1. Our brains aren’t evolved to comprehend new forms of leverage
2. “Give me a lever long enough and a place to stand and I will move the Earth.” (Archimedes)
3. “Fortunes require leverage. Business leverage comes from capital, people and products with no marginal costs of replication.”
4. Society overvalues labor leverage
5. The oldest form of leverage is labor, which is people working for you. Naive people think this is they best and which is why they ask how many people work for/with you.
6. You want the minimum amount of labor that allows you to use the other forms of leverage
7. Labor is the worst form of leverage that you could possibly use: it's hard, messy, unreliable, and highly competitive
8. Avoid labor-based leverage. You want the minimum amount of people working with you that are going to allow you to use the other forms of leverage (Joe Rogan)
9. Capital has been the dominant form of leverage in the last century
10. The second type of leverage is capital, which we understand less well and require more intelligence to use correctly. And the ways in which we use them keep changing.
11. Capital is a powerful form of leverage. It can be converted into other things, e.g. labor, and it scales very, very well
12. You need specific knowledge and accountability to obtain capital
13. The hard part with capital is how to obtain it. If you have specific knowledge in a domain and if you’re accountable and you have a good name in that domain, then people are going to give you capital as a form of leverage that you can use to then go get more capital.

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Product and Media Are New Leverage

Create software and media that work for you while you sleep

1. Product and media are the new leverage
2. The most interesting/important leverage is products with no marginal cost of replication
3. This is new: printing press, broadcast media, Internet, coding
4. You can now multiply your efforts without other humans or other people's money
5. Product leverage is where the new fortunes are made
6. This newest form of leverage (code, media) makes all the new fortunes (Zuck, Rogan)
7. Combining all three forms of leverage is a magic combination
8. The beauty is when you combine all three. That's where tech startups excel: you take the minimum, highest output labor that you can get (engineers, designers, product devs), add capital for marketing, advertising, and scaling.
9. Product and media leverage are permissionless
10. These new kinds of leverage — coding, writing books, recording podcasts, tweeting, YouTubing — don’t require somebody else’s permission to use them or succeed
11. They are very egalitarian. They’re great equalizers of leverage.
12. The robot army is already here—code lets you tell them what to do
13. There are way more robots than there are humans; they're just in servers, computers
14. Every great software developer has an army of robots working for him while he sleeps
15. An army of robots is here and very cheaply available; the bottleneck is figuring out intelligent and interesting things to do to them (since the robots aren't very smart)

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Product Leverage is Egalitarian

The best products tend to be available to everyone

1. Product leverage is a positive-sum game
2. Labor and capital are much less egalitarian in their inputs and outputs
3. The more of a human element there is in providing that service, the less egalitarian it is
4. If you look at the output of code and media, Jeff Bezos doesn’t get to watch better movies and TV than we do. Jeff Bezos doesn’t get to even have better computing experience.
5. It’s the nature of code and media output that the same product is accessible to everybody. It turns into a positive sum game. If everyone consumes the same product, that product is going to be better than the version that Jeff would consume on his own.
6. Status goods are limited to a few people
7. Status goods like Rolex are a zero-sum game: their value decreases with more owners
8. The best products tend to be targeted at the middle class
9. The best products tend to be at the center rather than being targeted at the upper class
10. Something like watching Netflix or using Google or using Facebook or YouTube
11. Creating wealth with product leads to more ethical wealth
12. It is better ethically to create your wealth with code and media because those products are equally available to everybody, as opposed to creating your wealth via labor or capital
13. You want to use the product that is used by the most people
14. Biggest audience ➝ biggest budget ➝ best quality
15. The wealthy, for most things, spend to signal status, not because they goods are better
16. Capital and labor are becoming permissionless
17. Capital and labor are also starting to become more permissionless, e.g. Zuck has a billion people doing work for him by using Facebook
18. With crowdfunding you can raise millions online for a charity, health problem, or business

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Pick a Business Model with Leverage

An ideal business model has network effects, low marginal costs and scale economies

1. Scale economies: the more you produce, the cheaper it gets
2. Get into a business where making Widget #12 is cheaper than making Widget #5, etc
3. This creates a barrier to entry against competition and getting commoditized
4. Zero marginal cost of reproduction: producing more is free
5. Tech and media products have zero marginal cost of reproduction
6. Zero marginal cost things take a while to get going because you make very little money per user, but over time they can really, really add up, e.g. Joe Rogan
7. Network effects: value grows as the square of the customers
8. The most subtle and important idea is network effects, which comes from computer networking. Metcalfe’s Law: the value of a network is proportional to the square of the number of nodes in the network: a network of size 10 has a value of a 100, while a network of a size 100 would have a value of 10,000. It’s not just 10 times more, it’s 100 times more.
9. You want to be in a network effects business, assuming you’re not number two. If you’re number one in network effect business, you win everything. They're natural monopolies
10. Network effect businesses are natural monopolies
11. Silicon Valley secret: a lot of the winning businesses are natural monopolies
12. In a network effect, each new user adds value to the existing users
13. A network effect is when each additional user adds value to the existing user base. Your users themselves are creating some value for the existing users, e.g. Language
14. This is why, globally, we'll all likely speak English/Chinese and use the same money.
15. Zero marginal cost businesses can pivot into network effect businesses
16. Pick a model where you can benefit from network effects, low marginal costs, and scale economies; these tend to go together.
17. You should always be thinking about how your users, your customers, can add value to each other because that is the ultimate form of leverage: they add value while you sleep

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Example: From Laborer to Entrepreneur

From low to high specific knowledge, accountability and leverage

1. Laborers get paid hourly and have low accountability
2. As a laborer, you don’t have any leverage other than from the tools that you’re using. You don’t have much accountability. You’re a faceless cog in a construction crew and the owner of the house or the buyer of the house doesn’t know or care that you worked on it.
3. General contractors get equity, but they’re also taking risk
4. One step up from that might be a contractor, who has accountability, responsibility
5. They get the upside. They got the equity but they’re also taking accountability and risk. If the project runs over and there’s losses, then they eat the losses.
6. Then, they also have labor leverage because they have a bunch of people working for them. But it probably tops out right there.
7. Property developers pocket the profit by applying capital leverage
8. You can go one level above that and be a property developer.
9. They buy them, raise money from investors or front it themselves, fix the place up, and then they sell it for twice what they bought it for
10. So now a developer like that takes on more accountability, has more risk. They have more specific knowledge because now you have to know: which neighborhoods are worth buying in, which lots are actually good, what makes or breaks a specific property, etc.
11. There’s more specific knowledge, there’s more accountability and risk, and now you also have capital leverage because you’re also putting in money into the project. But conceivably, you could buy a piece of land or a broken-down house for $200,000 and turn it into a million dollar mansion and pocket all the difference.
12. Architects, large developers and REITs are even higher in the stack
13. One level beyond that might be a famous architect or a developer, where just having your name on a property, because you’ve done so many great properties, increases its value
14. One level up from that, a massive developer or someone who starts a REIT
15. Real estate tech companies apply the maximum leverage
16. Then you may end up with a Trulia or a RedFin or a Zillow kind of company, and then the upside could potentially be in the billions of dollars, or the hundreds of millions of dollars

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Judgment Is the Decisive Skill

In an age of nearly infinite leverage, judgment is the most important skill

1. In an age of infinite leverage, judgment becomes the most important skill
2. “Leverage is a force multiplier for your judgment.”
3. We live in an age of nearly infinite leverage. But once you have leverage, what do you do with it? Then you want to slow down, because your judgment really matters
4. You have a lot more at risk, but you have a lot more to gain as well. You’re carrying a much higher payload. In an age of infinite leverage, judgment becomes the most important skill.
5. Warren Buffett is so wealthy now because of his judgment. Even if you were to take away all of Warren’s money, tomorrow, investors would come out of the woodwork and hand him a $100 billion because they know his judgment is so good, and they would give him a big chunk of that $100 billion to invest.
6. Everything else you do is setting you up to apply judgment
7. If you’re steering a big ship and your judgment is 10% better than the next person’s, society will literally pay you hundreds of millions of dollars more
8. Demonstrated judgment, with high accountability, clear track record, is critical
9. Judgment is knowing the long-term consequences of your actions
10. Judgment is knowing or predicting the long-term effects of your decisions
11. Wisdom applied to external problems is judgment, plus then making the right decision to capitalize on that
12. Without experience, judgment is often less than useless
13. Judgment is very hard to build up: it requires both intellect and experience
14. Ivory tower intellectuals have no real-world experience. Confidence without accountability
15. The real world is always far, far more complex than we can intellectualize
16. The people with the best judgment are among the least emotional
17. The best investors and entrepreneurs can come across as robotic and unemotional
18. Entrepreneurs have to care about what they’re doing but they also to see very clearly what’s actually happening.
19. Emotions prevent you from seeing what’s actually happening until you can no longer resist the truth of what’s happening. And then you’re forced into suffering
20. Top investors often sound like philosophers
21. Investment books are the worst place to learn about investment, because investment is a real-world activity that is highly multi-variate, all the advantages are always being competed away. What you actually just need is very, very broad-based judgment and thinking. The best way to do that is to study everything, including a lot of philosophy. Philosophy also makes you more stoic, makes you less emotional, and so you make better decisions; you have better judgment.
22. The more outraged someone is, the worse their judgment
23. You can go within someone’s Twitter feed and get at least some semblance of what it must be like to be in their head all the time.
24. The more outraged somebody is, the worse their judgment is.

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Set an Aspirational Hourly Rate

Outsource tasks that cost less than your hourly rate

1. Set and enforce an aspirational hourly rate
2. No one is going to value you more than you do. Set a high personal hourly rate, and stick to it. Treat your that way — you'll force yourself to live up to it
3. Factor your time into every decision. Say you buy something from Amazon and they screw it up. It's not worth your time to return it: reserve your time/mind for the big stuff
4. You can’t penny pinch your way to wealth
5. If you want to get rich, it has to be your top priority. It has to come before anything else, which means you can’t penny-pinch.
6. You can penny-pinch your way to basic sustenance. You can keep expenses low and maybe retire early. But if you’re going to create wealth, it has to be your priority.
7. My aspirational rate was $5,000/hr
8. Fast-forward to your wealthy self and pick an intermediate hourly rate
9. “I don’t do that. That’s not a problem that I solve.” / “I would rather hire an assistant.”
10. If you can outsource something for less than your hourly rate, do it
11. “What about the joy of life? What about getting it right, just your way?” Sure, you can do that. But you’re not going to be wealthy, because you’ve made something else a priority.
12. Paul Graham: you should work on your product and getting product-market fit, and you should be exercising and eating healthy. That’s about it. That’s all you have time for.
13. Your hourly rate should seem absurdly high
14. Set a very high aspirational hourly rate for yourself, and stick to it. It should feel absurdly high. If it doesn’t, it’s not high enough. Whatever you pick, my advice is to raise it.
15. I work through bursts of energy when I’m motivated to work on something.

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Work As Hard As You Can

Even though what you work on and who you work with are more important

1. Work as hard as you can
2. If you’re doing a lifestyle business, your number one priority is not getting wealthy.
3. If you're trying to build a multi-billion dollar public company, you have to get everything right: great judgment, work on the right thing, recruit the right team, work crazy hard. They’re engaged in a competitive sprint.
4. If wealth is your goal, you have to work as hard as you can. But hard work is no substitute for who you work with and what you work on. Those are the most important things.
5. What you work on and who you work with are more important
6. “product-market-founder fit,” i.e. how well a founder is personally suited to the business. The combination of the three should be your overwhelming goal.
7. You can save a lot of time by picking the right area to work in. Picking the right people to work with is the next most important piece. Third comes how hard you work.
8. When you’re building a business, or a career, first figure out: “What should I be doing? Where is a market emerging? What’s a product I can build that I’m excited to work on, where I have specific knowledge?”
9. No matter how high your bar is, raise it
10. Second, surround yourself with the best people possible. If there’s someone greater out there to work with, go work with them. “Pick the one that’s going to have the best alumni network for you in the future,” people with the highest intelligence, energy, and integrity
11. And no matter how high your bar is, raise it.
12. Once you’ve picked the right thing to work on and the right people, work as hard as you can
13. Nobody really works 80 hours a week
14. Nobody really works 80 to 120 hours a week at high output, with mental clarity. Your brain breaks down. You won’t have good ideas.
15. The way people tend to work most effectively, especially in knowledge work, is to sprint as hard as they can while they feel inspired to work, and then rest. They take long breaks.
16. It’s more like a lion hunting and less like a marathoner running. You sprint and then you rest. You reassess and then you try again. You end up building a marathon of sprints.
17. Inspiration is perishable
18. Inspiration is perishable. When you have inspiration, act on it right then and there.
19. Impatience with actions, patience with results
20. Anything you have to do, get it done. Why wait? You’re not getting any younger.
21. Do these things as quickly as you can and with your full attention so you do them well. Then be patient with the results because you’re dealing with complex systems and people
22. It takes a long time for markets to adopt products. It takes time for people to get comfortable working with each other. It takes time for great products to emerge

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Be Too Busy to ‘Do Coffee’

Ruthlessly decline meetings

1. Be too busy to ‘do coffee’ while keeping an uncluttered calendar
2. I’m always doing something. It’s usually work-related, whatever high-impact thing that needs to be done or that I’m most inspired to do.
3. The only way to do that is to constantly, and ruthlessly, decline meetings.
4. It's fine to build relationships early in your career when you’re still exploring. But later in your career—when you’re exploiting, and there are more things coming at you than you have time for—you have to ruthlessly cut meetings out of your life.
5. Ruthlessly cut meetings
6. If someone wants a meeting, see if they will do a call instead. If they want to call, see if they will email instead. If they want to email, see if they will text instead. And you probably should ignore most text messages—unless they’re true emergencies.
7. “I don’t do non-transactional meetings. I don’t do meetings without a strict agenda. I don’t do meetings unless we absolutely have to.”
8. People will meet with you when you have proof of work
9. Busy people will take your meeting when you have something important or valuable. But you have to come with a proper calling card. It should be: “Here’s what I’ve done. Here’s what I can show you. Let’s meet if this is useful to you, and I’ll be respectful of your time.”
10. You have to build up credibility. For example, when a tech investor looks at a startup, the first thing they want to see is evidence of product progress. They don’t just want to see a slide deck. Product progress is the entrepreneur’s resume. It’s an unfake-able resume.
11. If you truly have something interesting, then put it together in an email and send it. Even then, when asking for a meeting, you want to be actionable.
12. Free your time and mind
13. You probably won't “make it” by networking and attending a bunch of meetings
14. When you meet people hoping for that lucky break, you’re relying on Types I/II luck

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Keep Redefining What You Do

Become the best in the world at what you do

1. Keep redefining what you do until you’re the best at what you do
2. To really get paid, be number one at whatever you do. It can be niche—that’s the point. You can literally get paid for just being you.
3. Keep changing what you do until you’re number one. Keep changing your objective until it arrives at your specific knowledge, skill sets, position, capabilities, location and interests. Your objective and skills should converge to make you number one.
4. When searching for what to do, you have two different foci to keep in mind. One is, “I want to be the best at what I do.” The second is, “What I do is flexible, so that I’m the best at it.”
5. You want to arrive at a comfortable place where you feel, “This is something I can be amazing at, while still being authentic to who I am.”
6. It’s going to be a long journey. But now you know how to think about it.
7. Find founder-product-market fit
8. The most important thing for any company is to find product-market fit. But the most important thing for any entrepreneur is to find founder-product-market fit, where you are naturally inclined to to build the right product for a market. That’s a three-foci problem. You have to make all three work at once.

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Escape Competition Through Authenticity

Nobody can compete with you on being you

1. Competition will trap you in a lesser game
2. Sometimes when we search our egos, we want to be something that we’re not. Our friends and family are actually better at telling us who we are. Looking back at what we’ve done is a better indicator of who we are.
3. Competition is besides the point. It’s counterproductive. We’re highly memetic creatures. We copy everybody around us. We copy our desires from them: If everyone around me is a great businessperson, I want to be a businessperson.
4. Sometimes you get trapped in the wrong game because you’re competing. The best way to escape competition is to be authentic to yourself.
5. No one can compete with you on being you
6. If you're building/marketing an extension of who you are, no one can compete with you.
7. Authenticity naturally gets you away from competition. Does it mean that you want to be authentic to the point where there’s no product-market fit? It may turn out that you’re the best juggler on a unicycle. But maybe there isn’t much of a market for that, even with YouTube videos. So you have to adjust until you find product-market fit.
8. At least lean towards authenticity, towards getting away from competition. Competition leads to copy-catting and playing the completely wrong game.
9. In entrepreneurship, the masses are never right
10. If the masses knew how to build great things and create great wealth, we’d all be rich
11. When you see a lot of competition, sometimes that indicates the masses have already arrived. It’s already competed over too much. Or it’s the wrong trend to begin with.
12. On the other hand, if the whole market is empty, that can be a warning indicator. It can indicate you’ve gone too authentic and should focus more on the product-market part of founder-product-market fit.
13. There’s a balance you have to find. Generally, people will make the mistake of paying too much attention to the competition. The great founders tend to be authentic iconoclasts.
14. Combine your vocation and avocation
15. If you are successful, in the long-term you’ll find you’re almost doing all of your hobbies for a living, no matter what they are. As Robert Frost said, “my goal in life is to unite my avocation with my vocation.” That’s really where life is going to lead you anyway.
16. Specialize in being you
17. You'll have multiple niches. It’s not going to be just one.
18. As you go through your career, you’ll find you gravitate towards the things you’re good at, which by definition are the things you enjoy doing.
19. Ideally, you want to end up specializing in being you.

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Play Stupid Games, Win Stupid Prizes

Competition will blind you to greater games

1. Businesses that seem like they’re in direct competition really aren’t
2. When you’re being authentic, you don’t mind competition that much. It pisses you off and inspires some fear, jealousy and other emotions. But you don’t really mind because you’re oriented towards the goal and the mission. Worst-case, you might get some ideas from them. And often there are ways to work with the competition in a positive way that ends up increasing the size of the market for you.
3. Though it depends on the nature of the business. The best Silicon Valley tech industry businesses tend to be winner-take-all. When you see competition, it can make you fly into a rage. Because it really does endanger everything you’ve built.
4. You’re playing a stupid game. You’re going to win a stupid prize. It’s not obvious right now because you’re blinded by competition. But three years from now, it’ll be obvious.
5. My first company got caught in the wrong game
6. We got the booby prize because we were caught up in competition with a bunch of our peers. We should have been looking at what the consumer really wanted and being authentic to ourselves, which was reviews, not price comparison.
7. If we stayed authentic to ourselves, we would have done better.

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Eventually You Will Get What You Deserve

On a long enough timescale, you will get paid

1. On a long enough time scale, you will get paid
2. “Apply specific knowledge, with leverage, and eventually you will get what you deserve.”
3. Also: apply judgment, accountability, and the skill of reading
4. Once you have all of the pieces in place, there’s still an indeterminate amount of time you have to put in. And if you’re counting, you’ll run out of patience before it arrives.
5. You have to make sure you give these things time. Life is long.
6. Everybody wants it immediately. But the world is an efficient place. Immediate doesn’t work. You have to put in the time.
7. And then you have to enjoy it and keep doing it and doing it and doing it. Don’t keep track. Don’t keep count. Because if you do, you will run out of patience.
8. On a long enough timescale, you will get paid. But it can easily be 10 or 20 years. Sometimes it’s five. If it’s five, or three, and it’s a friend of yours who got there, it can drive you insane. But those are exceptions. And for every winner, there are multiple failures.
9. One thing that’s important in entrepreneurship: You just have to be right once. You get many, many shots on goal. You can take a shot on goal every three to five years, maybe every 10 at the slowest. Or once every year at the fastest, depending on how you’re iterating with startups. But you only have to be right once.
10. What are you really good at, that the market values?
11. Your outcome will be equal to something like the distinctiveness of your specific knowledge; times how much leverage you can apply to that knowledge; times how often your judgment is correct; times how singularly accountable you are for the outcome; times how much society values what you’re doing. Then you compound that with how long you can keep doing it and how long you can keep improving it through reading and learning.
12. Adding more complexity to your decision-making process gets you a worse answer. You’re better off picking the single biggest thing or two. Ask yourself: What am I really good at, according to observation and people I trust, that the market values?
13. Product-market fit is inevitable if you’re doing something you love and the market wants it.

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Reject Most Advice

Most advice is people giving you their winning lottery ticket numbers

1. The best founders listen to everyone but make up their own mind
2. “Avoid people who got rich quickly. They’re just giving you their winning lottery ticket numbers.”
3. Scott Adams: systems, not goals
4. The best founders read and listen to everyone but then ignore everyone and make up their own mind. They have their own internal model of how to apply things to their situation. And they do not hesitate to discard information.
5. If you survey enough people, all of the advice will cancel to zero.
6. You have to reject most advice. But you have to listen to enough of it, and read enough of it, to know what to reject and what to accept.
7. Advice offers anecdotes to recall later, when you get your own experience
8. 90% of Naval's tweets are maxims that become mental hooks to remind him when I’m in that situation again. These are compact ways for you to recall your own knowledge.
9. If you can’t see yourself working with someone for life, then don’t work with them for a day

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A Calm Mind, a Fit Body, a House Full of Love

When you’re finally wealthy, you’ll realize it wasn’t what you were seeking in the first place

1. When you’re wealthy, you’ll realize it wasn’t what you were seeking
2. Money will solve all your money problems. But it doesn’t get you everywhere.
3. The first thing you realize when you’ve made a bunch of money is that you’re still the same person. If you’re happy, you’re happy. If you’re unhappy, you’re unhappy. If you’re calm and fulfilled and peaceful, you’re still that same person. I know lots of very rich people who are extremely out of shape. I know lots of rich people who have really bad family lives. I know lots of rich people who are internally a mess.
4. A calm mind, a fit body and a house full of love must be earned
5. You can’t buy those three things; you have to cultivate them
6. They can bring you a lot more peace and happiness than any amount of money ever will
7. A lot of divorces happen over money, a lot of battles happen over internal anger
8. I think a loving household and relationships actually fall naturally out of the other things. If you have a calm mind and you’ve already made money, you should have good relationships.A lot of divorces happen over money. Having money removes that part of it.
9. A lot of external battles happen because your internal state is not good. When you’re naturally internally peaceful you'll pick fewer fights. You’ll be more loving without expecting anything in return. That will take care of things on the external-relationship front.
10. The purpose of money is so you don’t have to be in a specific place, at a specific time, doing anything you don’t want to do.

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There Are No Get Rich Quick Schemes

Get rich quick schemes are just someone else getting rich off you

1. There are no get rich quick schemes
2. If there’s an easy way to get rich, it’s already been exploited.
3. If they’re selling you a get rich quick scheme, they’re just making money off you; that's their get rich quick scheme
4. Every founder has to lie to every employee
5. Entrepreneurs have to lie to their employees by convincing them that “It’s better for you to work for me than to do what I did and go work for yourself.”
6. Tell the entrepreneurs you recruit: “You’re going to be entrepreneurial in this company, and the day you’re ready to start your own next thing, I’m going to support you. I’m never going to get in the way of you starting a company. But this can be a good place for you to learn how to build a good team and build a good culture; how to find product-market fit; how to perfect your skills; and to meet some amazing people while you figure out exactly what it is you’re going to do. Because positioning, timing and deliberation are very important when starting a company.”
7. Anyone giving advice on how to get rich should have made their money elsewhere
8. You don’t want to learn how to be fit from a fat person.
9. “To become a philosopher king, start with being a king, not being a philosopher.”

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Productize Yourself

Figure out what you’re uniquely good at, and apply as much leverage as possible

1. Figure out what you’re uniquely good at and apply as much leverage as possible
2. Productize has specific knowledge and leverage. Yourself has uniqueness, accountability, and specific knowledge. You can combine all of these pieces into "productize yourself"
3. If you’re looking towards the long-term, you should ask yourself, “Is this authentic to me? Is it myself that I’m projecting?” And then, “Am I productizing it? Am I scaling it? Am I scaling with labor or capital or code or media?”
4. You want to figure out what you’re uniquely good at—or what you uniquely are— and apply as much leverage as possible. So making money isn’t even something you do. It’s not a skill. It’s who you are, stamped out a million times.
5. Find hobbies that make you rich, fit and creative
6. Making money should be a function of your identity and what you like to do
7. “Find three hobbies: One that makes you money, one that keeps you fit, and one that makes you smarter/creative.”

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Accountability Means Letting People Criticize You

You have to stick your neck out and be willing to fail publicly

1. Accountability means letting people criticize you
2. People think accountability means being successfully accountable. No—it means you have to stick your neck out and fail publicly. You have to be willing to let people criticize you.
3. Get the free leverage that’s available in tech
4. Technology drives leverage— a tech direction gets your that free leverage
5. Don’t refuse to do things just because others can’t do them
6. Some people believe it’s unfair to do anything with the opportunities they have because others don’t have the same opportunities. With a defeatist attitude like that, why even get out of bed in the morning? Ninety percent of people are dead.
7. If you refuse to do things just because others can’t do them, you are living in denial. It’s an excuse to do nothing.
8. Realize your philanthropic vision by running a business
9. There is a word environmentalists love: sustainability. If nothing else, for-profit businesses are financially sustainable.
10. Many non-profit efforts would be better off as for-profit companies. They wouldn’t have to beg for grants. They would be financially sustainable.

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We Should Eventually Be Working for Ourselves

But we will have to make sacrifices and take on more risk

1. This advice is for anybody who wants to be entrepreneurial
2. This advice comes from someone who’s steeped in Silicon Valley and tech companies, so it's biased towards that. But it’s good for anybody who wants to be entrepreneurial.
3. Midlife can be the most fruitful time to apply this advice
4. The most difficult one is likely midlife. We already have a lot invested. People rely on us.
5. But that’s when it actually can be the most fruitful: improves your life and theirs, too
6. Look up the value chain to find leverage
7. Look at who is getting leverage off of the work that you’re doing. Look at who’s above you and see how they're taking advantage of the time and work you’re doing
8. You will do better in a small organization
9. All other things equal, you will do better in a smaller organization than a larger one
10. You will have more accountability, and your work will be more visible. You’re more likely to be able to try different things, which can help you discover the thing you are uniquely good at. People will be more likely to give you leverage through battlefield promotions. You’ll have more flexibility. There will be more authenticity in how the company operates.
11. Here is a good career progression: Start in a large company and progressively move to smaller and smaller ones. It’s very hard to go from a small company to a larger company. Larger companies tend to be more about politics than merit; more stable, less innovative
12. The goal is that we are all working for ourselves
13. The long-term goal is that we are all wealthy and working for ourselves. The people working for us are essentially robots.
14. This goes back to the idea that the best relationships are peer relationships. If there’s someone above you, that’s someone to learn from. If you’re not learning from them and improving, nobody should be above you.
15. If there’s somebody below you, it’s because you’re teaching them and enabling them. If you’re not doing that, then get a robot; you don’t need a human below you.
16. In the not-too-distant future anybody who wants to work for themself will be able to do it
17. You may have to make sacrifices and take on more risk. You may have to take on more accountability and live with less steady income.

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Being Ethical Is Long-Term Greedy

If you cut fair deals, you will get paid in the long run

1. Ethics isn’t something you study; it’s something you do
2. Ethics is something you think about and do
3. Everyone has a personal moral code. Where we get our moral code differs for everybody.
4. “Do unto others as you would have them do unto you.”
5. “Don’t do unto others what you don’t want them doing unto you.”
6. Trust leads to compounding relationships
7. Once you’ve been in business long enough, you will realize how much of it is about trust. It’s about trust because you want to compound interest. You want to work with trustworthy people for long periods of time without having to reevaluate every discussion or constantly look over your shoulder.
8. Over time you will gravitate to working with certain kinds of people. Similarly, those people will gravitate to working with other ethical people.
9. Being ethical attracts other long-term players
10. Acting ethically turns out to be a selfish imperative. You want to be ethical because it attracts other long-term players in the network who want to do business with ethical people
11. If you build a reputation for being ethical, people eventually will pay you just to do deals through you. Your involvement will validate deals and ensure they get done; because you wouldn’t be involved with low-quality stuff.
12. In the long-run, being ethical pays off—but it’s the very long run. In the short-run, being unethical pays off, which is why so many people go for it. It’s short-term greedy.
13. Being ethical is long-term greedy
14. You can be ethical simply because you’re long-term greedy
15. You want to be honest because it leaves you with a clear mind: you only have to think about one thing at a time, which frees up mental energy and makes you a clearer thinker
16. By being honest you reject people who only want to hear pretty lies. You force those people out of your network and create room for the people who like you as you are.
17. If you cut fair deals, you will get paid in the long run
18. If you always try to get the best deal for yourself, you'll win a lot of early deals & feel good
19. But people will recognize that and they'll avoid you. Over time those are the people who end up being the dealmakers in the network.
20. If you cut people fair deals, you won’t get paid in the short-term. But over the long-term, everybody will want to deal with you. You end up being a market hub. You have more information, trust, and reputation. And people end up doing deals through you in the long-run.
21. A lot of wisdom involves realizing long-term consequences of your actions. The longer your time horizon, the wiser you’re going to seem to everybody around you.

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Envy Can Be Useful, or It Can Eat You Alive

Envy can give you a powerful boost, or it can eat you alive

1. Suffering through the wrong thing can motivate you to find the right thing
2. So my desire to learn computer algorithms came out of the suffering I experienced washing dishes—not that there’s anything wrong with washing dishes; it just wasn’t for me.
3. Sometimes you need to suffer through the wrong thing to motivate you to find the right thing
4. Being a lawyer was not what I was meant to do
5. Naval got fired from being a lawyer because he was doing unrelated tasks because he was bored. He was unhappy for all of an hour. Ultimately, it was one of the best things that ever happened to him. Otherwise, I would have ended up a lawyer.
6. Envy can be useful or it can eat you alive
7. Envy can be useful, can motivate and drive you. Envy also can eat you alive if you let it follow you around your entire life.

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Principal-Agent Problem: Act Like an Owner

If you think and act like an owner, it’s only a matter of time until you become an owner

1. A principal is an owner; an agent is an employee
2. A principal is an owner. An agent works for the owner, i.e. an employee. The difference between a founder and an employee is the difference between a principal and an agent.
3. A principal’s incentives are different than an agent’s incentives
4. “If you want it done, Go. If not, Send.” (Julius Caesar), i.e. if you want to do something right, do it yourself; because other people just don’t care enough
5. If you can work on incentives, don’t work on anything else
6. Agents have a way of hacking systems. This is what make incentive design so difficult.
7. "Show me the incentives, and I'll show you the outcome.” (Charlie Munger)
8. People are much more honest with their actions than they are with their words. You have to get the incentives right to get people to behave correctly.
9. As a business owner you are always going to be dealing with the principal-agent problem. You’re always going to be trying to figure out: How do I make this person think like me? How do I incent them? How do I give them founder mentality?
10. Only founders can fully appreciate the importance of a founder mentality and just how difficult and gnarly principal-agent problem is.
11. When you do deals, it’s better to have the same incentives
12. Be generous with your top lieutenants (ownership, incentives), even if they don’t necessarily realize it, because over time they will and you want them to be aligned with you.
13. It’s better to have an aligned partnership where you both have the same incentives than a partnership where you have the advantage in the deal, because eventually the other person will figure it and the partnership will fall apart. Either way, you won't be able to invest in it for the long-run and enjoy the benefits of compound interest over decades.
14. If you’re an employee, your most important job is to think like a principal
15. If you’re an agent, then your most important job is to think like a principal. The more you can think like a principal, the better off you’re going to be long-term. Train yourself how to think like a principal, and eventually you will become a principal.
16. If you solve the principal-agent problem, you’ll solve half of what it takes to run a company
17. Deal with small firms to avoid the principal-agent problem
18. Another way to avoid the principal-agent problem is to deal with the smallest firms possible. Bigger firms—all other things being equal—are generally worse than small ones, because the principal and the agent are highly separated: principal sells, agent does.
19. Boutiques (law firm, banker) are best because there's extremely high accountability
20. If you think like the owner and you act like the owner, it’s only a matter of time until you become the owner.

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Kelly Criterion: Avoid Ruin

Don’t ruin your reputation or get wiped to zero

1. Don’t bet everything on one big gamble
2. Don’t risk everything. Stay out of jail. Don’t bet everything on one big gamble. Be careful how much you bet each time, so you don’t lose the whole kitty.
3. Ergodicity: what is true for 100 people on average isn’t the same as one person averaging that same thing 100 times.
4. Ruining your reputation is the same as getting wiped to zero
5. Risk-taking—especially when the averages that are calculated across large populations—is not always rational.
6. The Kelly criterion helps you avoid ruin. The number one way people get ruined in modern business is not by betting too much; it’s by cutting corners and doing unethical or downright illegal things. Ending up in an orange jumpsuit in prison or having a reputation ruined is the same as getting wiped to zero—so never do those things.

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Schelling Point: Cooperating Without Communicating

People who can’t communicate can cooperate by anticipating the other person’s actions

1. Use social norms to cooperate when you can’t communicate
2. The Schelling Point is about multiplayer games where people respond based on what they think the other person’s response will be. He came up with a mathematical formalization to answer: How do you get people who cannot communicate with each other to coordinate?
3. Suppose I want to meet with you, but I don’t tell you where or when to meet. You also want to meet with me, but we can’t communicate. You can use social norms to converge on a Schelling point. I know you’re rational and educated. And you know I’m rational and educated. When will we meet? If we have to pick an arbitrary date, we’ll probably pick New Year’s Eve. What time will we meet? Midnight or 12:01 a.m. Where will we meet? If we’re Americans, the big meeting spot is probably New York City, the most important city. Where in New York City will we meet? Probably under the clock at Grand Central Station. Maybe you end up at the Empire State Building, but not likely.
4. You can find Schelling points in business, art and politics
5. There are many games (business, art, politics) where you can find a Schelling point. So you can cooperate with the other person, even when you can’t communicate, e.g two companies are competing heavily and hold an oligopoly. Let’s say the price fluctuates between $8 and $12 for whatever the service is. Don’t be surprised if they converge on $10 without ever talking to each other.

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Turn Short-Term Games Into Long-Term Games

Improve your leverage by turning short-term relationships into long-term ones

1. Pareto optimal solutions require a trade-off to improve any criterion
2. Pareto superior means something is better in some ways while being equal or better in other ways. It’s not worse in any way.
3. Pareto optimal is when the solution is the best it can possibly be and you can’t change it without making it worse in at least one dimension.
4. Negotiations are won by whoever cares less
5. “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.
6. If someone is taking advantage of you in a negotiation, your best option is to turn it from a short-term game into a long-term game. Try to make it a repeat game. Try to bring reputation into the negotiation. Try to include other people who may want to play games with this person in the future.
7. Convert single-move games to multi-move games
8. For contractors, you go through friends. You try to find people with good reputations. You’re converting an expensive single-move game with a high probability of cheating on both sides into a multi-move game.
9. One way to do that is to 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.”
10. Another way is to 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.”
11. Another way is to write a Yelp or Thumbtack review—especially if the contractor operates within a community and wants to protect their reputation in that community.

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Compounding Relationships Make Life Easier

Life gets a lot easier when you know someone’s got your back

1. Mutual trust makes it easy to do business
2. Relationships offer 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 a lot easier because you know that person’s got your back.
3. If I’m doing a deal with someone I’ve worked with for 20 years and there is mutual trust, we don’t have to read the legal contracts. Maybe we don’t even need to create legal contracts; maybe we can do it with a handshake. That trust makes it very easy to do business.
4. The most under-recognized reason startups fail is because the founders fall apart.
5. A startup is so difficult to pull off, so removing potential friction points between founders can be the difference between success and failure.
6. It’s better to have a few compounding relationships than many shallow ones
7. Most of compounding benefits come at the end, so you may not see big benefits up front
8. “I always want it to be a project that, if successful, will make the rest of my career look like a footnote.” (Sam Altman)
9. It’s better to have a few deep compounding relationships than many shallow, non-compounding relationships.
10. It takes just as much effort to create a small business as a large one
11. Both Elon Musk and the guy running three Italian restaurants are working 80 hours a week
12. In one case, you get companies worth $50-$100 billion and everyone’s adulation. In the other, you make a little bit of money and you’ve got some nice restaurants. So think big.

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Price Discrimination: Charge Some People More

You can charge people for extras based on their propensity to pay

1. Price discrimination is a technique for charging certain people more
2. You can’t charge people different amounts just because you don’t like them. You have to offer them something extra. But it has to be something rich people care about, e.g. business-class seats cost 5-10x more but only costs the airline 2-3x more to provide them.
3. Rich people and large enterprises are willing to pay more
4. Price discrimination works because rich people are willing to pay more. You just have to give them the extra things they need to signal they’re rich or the extra comfort they want.

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Consumer Surplus: Getting More Than You Paid For

People are willing to pay more than what companies charge

1. Consumer surplus is the extra value you get when you pay less than you were willing
2. Naval would pay $20 for his Starbucks but Starbucks doesn't know that and can't price the coffee at $20 just for him, because they’re selling the exact same product to others. So he gets a lot of consumer surplus out of the coffee.
3. All businesses generate consumer surplus. Amazon is a trillion-dollar company but they generate trillions of dollars in consumer surplus through people’s willingness to pay for convenience. A lot of people are willing to pay more than what Amazon charges.

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Net Present Value: What Future Income Is Worth Today

See what future income is worth today by applying a discount to its future value

1. Figure out what future income is worth today by applying a discount rate
2. “That stream of payments I’m going to get in the future—what’s it worth today?”
3. e.g. you join a startup and get stock options, and the founder says, “This company is going to be worth $1 billion, and I’m giving you 0.1% of the company; therefore, you’re getting $1 million worth of stock.”
4. The founder is negotiating based on what it’s going to be worth in the future. You have to figure out what it’s worth today by applying a discount rate, or an interest rate, that accounts for the massive risk startups face.
5. You’ll end up with the amount the company is actually worth today. That’s the price at which a venture capitalist would invest in the company.
6. If the founder recently raised a round at a $10 million valuation, then the company’s only worth 1% of what the founder says it will be worth. So your $1 million package is actually worth $10,000. You should get very comfortable doing rough net present value calculations in your head.

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Externalities: Calculating the Hidden Costs of Products

Externalities let you account for the true cost of products by including hidden costs

An externality is where there’s an additional cost imposed by whatever product is being produced or consumed, that’s not accounted for in the price of the product, e.g. environmental impact

1. Pricing externalities properly is more effective than feel-good measures
2. Because the environment is finite and precious, we have to price it properly and fold that back into the cost of products and services.
3. Properly pricing externalities can save resources in a tremendous way
4. 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.

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Bonus: Finding Time to Invest in Yourself

If you have to work a “normal job,” take on accountability to build your specific knowledge

1. You have to rent your time to get started
2. This is only acceptable when you are learning and saving. Preferably in a business where society does not yet know how to train people and apprenticeship is the only model.
3. Try to learn something that people haven’t quite figured out how to teach yet.
4. Chief of staff for a founder is one of the most coveted jobs for young people starting out in Silicon Valley. The brightest kids will follow an entrepreneur around and do whatever he or she needs them to do. That person gets to attend the most important meetings. They are privy to all the stress and theatrics, the fundraising decks and the innovation—knowledge that can only come from being in the room.
5. Find the part of the job with the steepest learning curve
6. If can’t learn in an apprenticeship model because you need to make money, be innovative in the context of your job. Take on new challenges and responsibilities. Find the part of the job with the steepest learning curve.
7. Avoid repetitive drudgery—that’s just biding time until your job is automated away.
8. If you’re a barista at the coffee shop, figure out how to make connections with the customers. Figure out how to innovate the service you offer and delight the customer. Managers, founders and owners will take notice.
9. Develop a founder mentality
10. The hardest thing for any founder is finding employees with a founder mentality. This is a fancy way of saying they care enough.
11. People will say, “Well, I’m not the founder. I’m not being paid enough to care.” Actually, you are: The knowledge and skills you gain by developing a founder mentality set you up to be a founder down the line; that’s your compensation.
12. You can get a lot out of almost any position. You just have to put a lot into it.
13. Accountability is something you can take on immediately
14. Judgment takes experience. It takes a lot of time to build up. You have to put yourself in positions where you can exercise judgment. That’ll come from taking on accountability.
15. Society gives you leverage after you’ve demonstrated judgment. You can get it faster by learning high-leverage skills like coding or working with the media. These are permissionless leverage. This is why I encourage people to learn to code or produce media, even if it’s just nights and weekends.
16. If you take on accountability and solve problems on the edge of knowledge that others can’t solve, people will line up behind you. The leverage will come.
17. Specific knowledge can be timely or timeless
18. There are two forms of specific knowledge: timely and timeless.
19. If you become a world-class expert in machine learning just as it takes off and you got there through genuine intellectual interest, you’re going to do really well. But 20 years from now, machine learning may be second hat; the world may have moved on to something else. That’s timely knowledge.
20. If you’re good at persuading people, it’s probably a skill you picked up early on in life. It’s always going to apply, because persuading people is always going to be valuable. That’s timeless knowledge.
21. Timeless specific knowledge usually can’t be taught, and it sticks with you forever. Timely specific knowledge comes and goes; but it tends to have a fairly long shelf life.
22. Technology is a good place to find those timely skills sets. If you can bring in a more generic specialized knowledge skill set from the outside, then you’ve got gold.
23. Technology is an intellectual frontier for gaining specific knowledge
24. “The technology industry is a great place to acquire specific knowledge. The frontier is always moving forward. If you are genuinely intellectually curious, you will acquire the knowledge ahead of others.”
25. Technology is everything that doesn’t work yet (Danny Hillis). Technology is around us everywhere. The spoon was technology once. When we figured out how to make them work, they disappeared in the background and became part of our everyday lives.
26. Technology is, by definition, the intellectual frontier. It’s taking things from science and culture that we have not figured out how to mass produce or create efficiently and figuring out how to commercialize it and make it available to everybody.
27. Technology will always be a great field where you can pick up specific knowledge that is valuable to society.
28. If you don’t have accountability, do something different
29. The entire structure of rewarding people based on inputs (hours worked) comes from the agricultural and industrial ages, when inputs and outputs matched up closely. The amount of hours you put into doing something was a reliable proxy for your output
30. Today, it’s extremely nonlinear. One good investment decision can make a company $10 million or $100 million. One good product feature can be the difference between product-market fit and complete failure.
31. As a result, judgment and accountability matter much more. Often the best engineers aren’t the hardest workers. Sometimes they don’t work very hard at all, but they dependably ship that one critical product at just the right time. It’s similar to the salesperson who closes the huge deal that makes the company’s numbers for the quarter.
32. People need to be able to tell what role you had in the company’s success. That doesn’t mean stomping all over your team—people are extremely sensitive to others taking too much credit. You always want to be giving out credit. Smart people will know who was responsible.
33. Some jobs are too removed from the customer for this type of accountability. You’re just a cog in a machine, e.g. consulting
34. You’ll develop thick-skin if you take on accountability
35. When you have accountability, you get a lot more credit when things go right. Of course, the downside is you get hurt a lot more when things go wrong. When you stick your neck out, you have to be willing to be blamed, sacrificed and even attacked.
36. If you’re the kind of person who thrives in a high-accountability environment, you’re going to end up thick-skinned over time. You’re going to get attacked and hurt a lot.
37. Scale your specific knowledge with apprentices
38. Once you get some specific knowledge, you can scale it by training your own apprentices and outsourcing tasks to them.
39. Specific knowledge comes on the job, not in a classroom
40. Investing is one of those skills that can only be learned on the job. When you find a skill like that, you’re dealing with specific knowledge.
41. Another good indicator of specific knowledge is when someone can’t give a straight answer to the question: “What do you do every day?” Or you get an answer along the lines of, “Every day is different based on what’s going on.” The thing is so complicated and dependent upon circumstances that it can’t be boiled down into a textbook form.
42. The mafia figured out this apprenticeship model a long time ago. The best way to end up running one of the families was to become the driver for the Don.

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Further Reading

• Seek Wealth, Not Money or Status
• A Calm Mind, a Fit Body, a House Full of Love
• Accountability Means Letting People Criticize You
• https://pmarchive.com/luck_and_the_entrepreneur.html
• https://www.amazon.com/How-Get-Rich-Greatest-Entrepreneurs-ebook/dp/B0017SUYY6
• https://medium.com/incerto/the-logic-of-risk-taking-107bf41029d3