I finally carved out 3.5 hours to listen to the full audio of “How to Get Rich” by Naval Ravikant.
Here are the full transcript and full audio if you want to read and listen at the same time for extra impact:
As you may or may not know, it’s based on this epic tweetstorm, but also includes some extra content. According to Naval, the tweetstorm should have been called “How to Create Wealth,” but “How to Get Rich” was a more catchy title.
How to Get Rich (without getting lucky):— Naval (@naval) May 31, 2018
- All content is from Naval Ravikant unless otherwise stated. In most cases, I’ve paraphrased multiple similar quotes to condense them.
- I’ve added my own bold text throughout for emphasis.
- I’ve organized all content in my own order/themes.
Summary Contents: Click a link to jump to a section below
Money & Wealth:
- Mythbusting Traditional Work
- Human Cooperation & Exchange
- Wealth Creation
- Compound Interest
- Freedom & “Retirement”
- Beyond Wealth
- Entrepreneurship in a Nutshell
- Founder-Product-Market Fit
- Wealth as a Byproduct
- Inspiration-Sprint-Rest Cycles
- What is Leverage?
- Forms of Leverage (Labor, Capital, Code, Media)
- Scale of the Internet
- Specific Knowledge
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“How to Get Rich (without getting lucky)” by Naval Ravikant (Summary & Infographic)
Everyone wants to know how to solve their money problems, but most don’t have a good set of principles for wealth.
- “In this tweetstorm I put down the minimum-viable principles.”
- “(Wealth creation is) a skill set that I’ve developed and I think anyone can develop.”
If you want to be wealthy and free:
- “It is merely a question of education and desire.“
- “You can penny-pinch your way to basic sustenance. You can keep expenses low and maybe retire early. That’s perfectly valid. But we’re here to talk about wealth creation.“
Who is this for?
- “I think it’s good for anybody who wants to be entrepreneurial. Anybody who wants to control their own life. Anybody who wants to deterministically and reliably improve their ability to create wealth over time, is patient, and is looking at the long haul.”
- “There are many different ways to participate. It should apply to almost everybody who has a complete body, sound mind, and is looking to work.”
Let’s dive in.
Money & Wealth
Mythbusting Traditional Work:
This is probably one of the absolute most important points. You’re probably not going to create wealth through work. There are many reasons for that, but the most basic is because your inputs are very closely tied to your outputs. You can’t earn non-linearly.
- You’re not going to get rich renting out your time.
- You really just want a job, career, or profession where your inputs don’t match your outputs. The higher the creativity component, the more likely it is to have disconnected inputs and outputs. This is another way of saying that you want to look for things that are leveraged.
- Tools and leverage are what create the disconnection between inputs and outputs.
Human Cooperation & Exchange:
The notion of exchange, and keeping track of credits and debits, this is built into us as flexible social animals.
- We are the only animals in the animal kingdom that cooperate across genetic boundaries.
- I strongly believe that it is innate to the human species, and we are going to create more and more wealth and abundance for everybody.
- It 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 until we have massive wealth creation for anybody who wants it.
My definition of wealth is oriented toward businesses and assets that can earn while you sleep.
- Wealth is a very positive-sum game. I think fundamentally everybody can be wealthy.
- Money is how we transfer wealth. Money is social credits; it’s the ability to have credits and debits of other people’s time.
- Money is not going to solve all of your problems; but it’s going to solve all of your money problems.
- Understand that ethical wealth creation is possible. If you secretly despise wealth, it will elude you.
- Some great founders realize their philanthropic visions by running a business.
All the benefits in life come from compound interests—relationships, making money, learning, etc.
- A long lifetime of learning, reading, and creating is going to compound.
- Consistently create wealth by creating businesses, including opportunities and creating investments.
- You have to enjoy it and keep doing it and doing it and doing it. On a long enough timescale, you will get paid. But it can easily be 10 or 20 years. Sometimes it’s five.
- My personal wealth has not been generated in one giant payout (e.g. one big year). It stacks up little bit, chips at a time—a whole bunch of small things piling up. More options, more businesses, more investments, more things that I can do.
Freedom & “Retirement”:
The purpose of wealth is freedom; it’s nothing more than that. The ultimate 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. It’s about being your own sovereign individual.
- You must own equity—a piece of a business—to gain your financial freedom. Everybody who really makes money owns a piece of a product, or a business, or some kind of IP.
- We’re talking about getting wealthy so you can retire, so you have your freedom. “Retire” in the sense that you don’t have to be any place you don’t want to be, you don’t have to do anything you don’t want to do, you can wake up when you want, you can sleep when you want, you don’t have a boss. That’s freedom. You have much more creative expression, and it’s much less about money.
- People who are living far below their means enjoy a freedom that people busy upgrading their lifestyles just can’t fathom. Maintain your freedom instead of upgrading your lifestyle.
When you’re finally wealthy, you’ll realize that it wasn’t what you were seeking in the first place.
- 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.
- A fit body (health), a calm mind (mental health), a house full of love (close relationships). These things cannot be bought—they must be earned. Even if you have all the money in the world, you can’t buy those three things. You have to cultivate them. They can bring you a lot more peace and happiness than any amount of money ever will.
Entrepreneurship in a Nutshell:
Entrepreneurship is essentially an act of:
– Creating something new from scratch
– Predicting that society will want it
– Figuring out how to scale it and get it to everybody in a profitable, self-sustaining way
To make it even simpler: What am I really good at that the market values?
- Those two variables alone are probably good enough. If you’re good at it, you’ll keep it up. You’ll develop the judgment. If you’re good at it and you like to do it, eventually people will give you the resources and you won’t be afraid to take on accountability. So the other pieces will fall into place.
- “Productize” has specific knowledge and leverage. “Yourself” has uniqueness and accountability.
- Ideally, you want to end up specializing in being you. You can literally get paid for just being you. Making money should be a function of your identity and what you like to do. If you are building and marketing something that’s an extension of who you are, no one can compete with you.
Babak Nivi, Naval’s co-founder at AngelList, summed it all up in this equation: Eventual Outcome =
- 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
The combination of the three should be your overwhelming goal. The most important thing for any entrepreneur is to find founder-product-market fit, where you are naturally inclined to build the right product for a market (taking into account how well a founder is personally suited to the business). It’s inevitable if you’re doing something you love and the market wants it.
What am I obsessed with?
- You’ll find you gravitate towards the things you’re good at, which by definition are the things you enjoy doing.
- If you are successful, in the long-term you’ll find you’re almost doing all of your hobbies for a living.
- Somewhere in the back of your mind, you can realize that you like this obsession and then keep an eye out for the commercial aspects of it.
Where am I a natural? Is this authentic to me?
- You do want to pick things where you are a natural. Everyone is a natural at something. So, whatever you are a natural at, you want to double down on that.
- The more authentic you are to who you are, and what you love to do, the less competition you’re going to have. So, you can escape competition through authenticity when you realize that no one can compete with you on being you.
Where is my unique combination / intersection?
- There are probably multiple things you’re natural at because personalities and humans are very complex. Take the things that you are natural at and combine them so that you automatically, just through sheer interest and enjoyment, end up top 25% or top 10% or top 5% at a number of things.
- Each person has different skillsets, different interests, different obsessions. It’s that diversity that becomes a creative superpower. Each person can be creatively superb at their own unique thing.
What feedback have I received from others?
- Other people will push you towards the things you’re good at, too. Because your smart bosses, co-workers and investors will realize you are world-class in this one thing.
What would I create just because I need / want it?
- First you create it just because you want it. You want it, and you know how to build it, and you need it. And so you build it for yourself. Then you figure out how to get it to other people. It feels like play to me, but it looks like work to others.
What’s a product I can build that I’m excited to work on, where I have specific knowledge?
- Figure out which one of those things you can provide for society that it does not yet know how to get (but it will want).
When you’re searching for what to do, you have two different foci to keep in mind. 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.”
- “I want to be the best at what I do.”
- “What I do is flexible, so that I’m the best at it.”
Become the best in the world at what you do.
- Keep redefining what you do until this is true. Your objective and skills should converge to make you number one. Keep changing your objective until it arrives at your specific knowledge, authentic skillsets, position, capabilities, location and interests.
Where is a market emerging?
- Pick an industry where you can play long-term games with long-term people.
Does the product have no marginal cost of reproduction?
- Technology and media products where creating another copy of what you just created is free.
Am I utilizing network effects?
- 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. Network effects are a very powerful concept, and when you’re picking a business model, it’s a really good idea to pick a model where you can benefit from network effects, low marginal costs, and scale economies; and these tend to go together.
Am I scaling it (with labor or capital or code or media)?
- Figure out how to scale it so everybody can have one. If you want to make money you have to get paid at scale. Anything that has zero marginal costs of production obviously has scale economies, and things that have zero marginal costs of reproduction very often tend to have network effects. 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.
Wealth as a Byproduct:
Society will pay you for creating things that it wants. You will get rich by giving society what it wants but does not yet know how to get. At scale.
- There are so many ways to create products, to create businesses, to create opportunities, and as a byproduct get paid by society.
- 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.
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. You reassess and then you try again. You end up building a marathon of sprints.
- Impatience with actions, patience with results. I think that’s a good philosophy for life.
- Inspiration is perishable. When you have inspiration, act on it right then and there.
- People who say they work 80-hour weeks, or even 120-hour weeks, often are just status signaling. It’s showing off. 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.
- A busy calendar and a busy mind will destroy your ability to do great things in this world. If you want to do great things…you need free time and a free mind.
- You should be too busy to ‘do coffee,’ while still keeping an uncluttered calendar. First, I keep a very clean calendar. I have almost no meetings on it. Second, I’m busy all the time. I’m always doing something.
What is Leverage?
We are now living in an age of nearly infinite leverage, and all the great fortunes are created through leverage.
- To get rich, you’re going to need leverage.
- I think what our brains aren’t really well-evolved to comprehend is how much leverage is possible in modern society and what the newest forms of leverage are.
- Technology drives leverage. 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.
- Business leverage comes from capital, people, and products with no marginal cost of replication (code and media).
Forms of Leverage:
Labor Leverage (Permission-Based):
- The oldest form of leverage is labor, which is people working for you. I would argue that this is the worst form of leverage that you could possibly use. You really want to stay out of 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, which I would argue are much more interesting.
Capital Leverage (Permission-Based):
- Capital is a powerful form of leverage that can be converted to labor and other things (e.g. marketing, advertising, scaling). It’s very surgical, very analytical. For capital leverage, somebody has to give you money to invest or to turn into a product. To raise money, apply your specific knowledge, with accountability, and show resulting good judgment.
Code & Media Leverage (Permissionless):
- This is the new form of leverage. The most interesting and the most important form of leverage is this idea of products that have no marginal cost of replication. Now, you can multiply your efforts without having to involve other humans and without needing money from other humans. If you can’t code, write books and blogs, record videos and podcasts. You don’t need anyone’s permission to do them. They’re great equalizers of leverage.
Scale of the Internet:
The fundamental property of the internet is it connects every human to each other human on the planet. You can now reach everyone.
- The internet is an inter-networking tool. It connects everybody. That is its superpower. So, you want to use that. You can go out on the internet, and you can find your audience.
- You can build a business, and create a product, and build wealth, and make people happy just uniquely expressing yourself through the internet.
- The internet enables any niche interest, as long as you’re the best at it to scale out. And the great news is because every human is different, everyone is the best at something. Being themselves.
Accountability is important because that’s how you’re going to get leverage. That’s how you’re going to get credibility. It’s also how you’re going to get equity / a piece of the business.
- Embrace accountability and take business risks under your own name. I think of accountability as reputational skin in the game. It’s putting your personal reputation on the line as skin in the game.
- If you take on accountability and solve problems on the edge of knowledge that others can’t solve, people will line up behind you. Society will reward you with responsibility, equity, and leverage.
- Accountability is something you can take on immediately. Judgment and leverage tend to come later.
Once you have leverage, what do you do with it? Well, the first part of your career’s spent hustling to get leverage. Once you have the leverage, then you want to slow down a bit, because your judgment really matters.
- In an age of infinite leverage, judgment becomes the most important skill.
- Leverage is a force multiplier for your judgement.
- Leverage is something that society gives you after you’ve demonstrated judgment. You can get it faster by learning high-leverage and foundational skills (e.g. permissionless leverage).
- Judgement requires experience. You have to put yourself in positions where you can exercise judgment. That’ll come from taking on accountability.
Wisdom is knowing the long-term consequences of your actions and then making the right decision to capitalize on that.
- Wisdom is just judgment on a personal domain.
- The longer your time horizon, the wiser you’re going to seem to everybody around you.
Building specific knowledge will feel like play to you but will look like work to others.
- Specific knowledge is found much more by pursuing your innate talents, your genuine curiosity, and your passion. It can only be built as part of a larger obsession, interest, and time spent in that domain.
- Specific knowledge is knowledge that you cannot be trained for, and it cannot be outsourced or automated (often highly technical or creative).
- Found by observation. You almost have to look back on your own life and see what you’re actually good at.
- You build specific knowledge by taking accountability for things that other people don’t know how to do. Perhaps they’re things you enjoy doing or are naturally inclined towards doing anyway.
- There are two forms of specific knowledge: timely and timeless. 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.
5 Most Important Skills:
If you’re good with computers, if you’re good at basic mathematics, if you’re good at writing, if you’re good at speaking, and if you like reading, you’re set for life.
- Persuasion (which is talking)
- Computer Programming (an applied form of arithmetic that just gets you so much leverage for free in any domain that you operate in)
Learn to Sell, Learn to Build:
If you can do both, you will be unstoppable.
- 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.
The most important thing is just to learn how to educate yourself and the way to educate yourself is to develop a love for reading.
- The foundation of learning is reading. I don’t know a smart person who doesn’t read and read all the time.
- Read what you love until you love to read.
- The beauty of the internet is the entire library of Alexandria times 10 is at your fingertips at all times. It’s not the means of education or the means of learning are scarce, the means of learning are abundant. It’s the desire to learn that’s scarce. So, you really have to cultivate the desire.
Focus on the foundations. The ultimate foundations are mathematics and logic.
- If you understand logic and mathematics, then you have the basis for understanding the scientific method. Once you understand the scientific method, then you can understand how to separate truth from falsehood in other fields and other things that you’re reading.
- It’s the number of iterations that drives the learning curve. So, the more iterations you can have, the more shots on goal you can have, the faster you’re going to learn. It’s not just about the hours put in.
- Study microeconomics, game theory, psychology, persuasion, ethics, mathematics, and computers.
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.
- The best founders I know read and listen to everyone. But then they 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. If you survey enough people, all of the advice will cancel to zero. You have to have your own point of view.
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