Notes on Naval's Money

Who is Naval?

Naval Ravikant is a founder and current Chairman of AngelList. I’ve known of him for quite some time, but the first time I watched an extended interview was on Joe Rogan’s podcast back in June. He has a great Twitter account and you can read more about him at https://nav.al/about.

What is this post about?

Naval posted a Twitter thread with his philosophy on wealth creation. His cofounder interviewed him about the thread, and together the clips form a nearly THREE HOUR long podcast (link).

I listened to the episode so many times, I thought it might be worth sharing my notes.

On Wealth and Status

You’re not going to get rich renting out your time. You must own equity - a piece of a business - to gain your financial freedom. — Naval (@naval) May 31, 2018

Wealth is assets that earn while you sleep. Its purpose is freedom. Wake, eat, and sleep on your own schedule.

Wealth is not a zero-sum game. The standard of living has risen over time. Everyone now is better off than cavemen were. 200 years ago, no one had penicillin, iPhones, or the internet.

Status - who is #1, #2, #3. For there to be a winner, there has to be a loser. Status was more evolutionarily important before farming revolution.

These two games (wealth and status) compete in society regularly.

Pure capitalism is not evil, it's an information exchange using an IOU system (money).

Capitalism is a system that helps us to collaborate. It's the game that keeps supermarkets stocked, a roof over your head, and the iPhone buzzing in your pocket.

Capitalism occasionally gets hijacked by bad governments, corruption, and human nature. This commonly looks like monopolies, mispriced externalities, or crony capitalism.

Capitalism played morally, ethically, and responsibly is a positive force.

Wealth creation is not based on taking and short term goals, it's about long term surplus creation.

Too many takers and not enough creators in a system destroys the system. Too many parasites in your body will kill you.

How NOT to build wealth

Renting out your time

• Inputs coupled with outputs

• Your set role has competition

• No equity in the upside potential

Lifestyle inflation

• Your raise gets eaten by new items

How you CAN build wealth

• Find areas where creativity and leverage matter

• Inputs and outputs disconnected

• Don't upgrade your lifestyle

• Take risk

• Take accountability for your actions

Give society what it wants, but doesn't know how to get, at scale.

On Luck

This section seems heavily influenced by Nassim Taleb. Marc Andreessen's blog also makes an appearance.

• Fooled by Randomness by Nassim Taleb

• Antifragile by Nassim Taleb

• The Black Swan by Nassim Taleb

• Luck and the Entrepreneur by Marc Andreessen

You want to be the type of person who knows how to become wealthy, not just be a wealthy person.

You want to be rich in 999/1000 parallel universes. It's handy to use Taleb's thought experiment of “alternative histories” in Fooled by Randomness. Check it out in this Farnam Street post.

There are four kinds of luck:

• Blind

• Hustle

• Preparation (pattern recognition)

• Uniqueness (luck finds you)

This reminds me a lot of Seth Godin's intro to The Dip - “Being the best is in the world is seriously underrated.”

Steady creation is key. Put in the work. It helps you build assets and build a reputation as a consistent person.

On finding your niche

Become the best in the world at what you do. Keep redefining what you do until this is true. — Naval (@naval) May 31, 2018

You want to be number one, but you need to change what you're doing until you're number one. Don't pick something arbitrary.

Scott Adams (creator of Dilbert) work influences this section heavily. I recently read How to Fail at Almost Everything and Still Win Big. I can't recommend it enough.

Since everyone is connected via the internet, find an audience that fits your natural skill set. Escape competition through authenticity.

Pivot what you are working on until you are best in the world at it.

It's a search of who you are and a recognition. Be careful not to let your ego influence your niche selection.

Lean towards authenticity to get away from the competition.

Career advice

Pick an industry where you can play long term games with long term people. — Naval (@naval) May 31, 2018

Work with intelligent, energetic, ethical people. This is necessary to go quickly and the right direction and not get cheated at the end.

Find a career where you can play long term games with long term people. In long term games, you're building the pie together. In short term games, you're dividing up the pie.

All benefits come from compound interest.

Be a rational optimist and avoid pessimists who shoot things down constantly. Naval references Matt Ridley's book The Rational Optimist several times on why being optimistic makes sense.

Have an action bias. It's the quickest way to figure out if something works. You'll learn faster by opening a lemonade stand than by reading case studies.

Get comfortable solving multivariate functions.

You will gravitate towards things you're good at, and your good coworkers will push you towards what you're good at.

Specific knowledge

• You can't be replaced

• Your natural skills

• Maximalize your personal energy (Scott Adams) is

• Feels like play to you, but seems like work to everyone else

Work on high functioning teams with clear accountability.

Skill Stack

Becoming top 25% in three things, stacked, gets you in the top one percent of those three things in combination. Scott Adams analyzes Trump using the Skill Stack in a 2016 blog post.

Be careful, though, don't assemble skills to deliberately. Combine things you are a natural at.

Selling vs. building

Your business needs both skill sets. This can be through either a partnership or a highly skilled individual who can do both.

Builders can pick up selling, but it's hard to transition from selling to building. This comes from the amount of time investment it takes to become a good builder. The best sellers are “naturals.”

Sell with your strengths

• Content marketing (Writing)

• Direct sales (In-person 1-on-1s)

• Conference talks (public speaking)

Building is an exhausting process. Sales skills scale better due to reputation.

Skills you need to get rich

Learning

Read as much as you can. Start with the things you enjoy.

Don't memorize. Try to understand the underlying principle.

The means of learning are abundant, the desire to learn is scarce.

Pay attention to what is true - algorithms, principles, etc. These things are foundational. Here are Naval's personal algorithms he posted back in 2008.

Learning is across iterations. Avoid repetition when possible. Take more shots on goal to learn fastest.

Accountability

Take risks under your own name. This is how you gain leverage.

Without accountability, there are no incentives and you can't build credibility.

Because humans are hardwired not to fail in public, failing gives you a lot of upside potential.

The downside of failing is limited, especially when we are talking about the business world.

Leverage

We are accustomed to old types of leverage (labor & capital) and don't understand the newest types (media, product, & code).

Managing people is hard.

Capital leverage is more simple to scale but harder to obtain.

Media scales without involving other humans.

• Podcasts

• Blogs

• Software