Deconstructing Naval Ravikant’s ‘How To Get Rich’ Series
This is the second post on Naval Ravikant after unpacking his ideas on learning and education. Today we move into his famous Tweet storm-turned-podcast series ‘How to Get Rich (Without Getting Lucky)’ which is also dissected over a series of episodes on the With Joe Wehbe Podcast.
This blog post corresponds to those episodes (circa #217-#226) and unpacks the ideas in written form. Enjoy!
Naval on the role of money
Naval’s Tweet-storm and podcast is called ‘How to Get Rich Without Getting Lucky’. He prefaces this — he thought it would be a controversial discussion but everyone was interested. We live in a weird society where everyone pretends they’re not interested in money but they do want to make it.
He has a disclaimer — ‘money buys you freedom in the material world — it won’t make you happy’. I actually think as a one-liner that’s oversimplified, and it’s what I’ve seen. I know people who have accumulated money but have not managed to create freedom in the material world, because you can’t separate the psychology from the experience. The system one thinking (referring to Daniel Kahneman) is this idea that freedom has a price-tag, but as Jordan Peterson says, so many high power CEO’s have less control of their time than the average person.
Money can also entrench you psychologically into higher perceived necessary costs. This is why I place emphasis on the MVL — I thought I needed $X a year to be free, especially from the material world, but actually a reframing superseded that need. I would say it precedes the need to get rich, which is why the Exponential Career starts with psychological freedom from money before we dig into cultivating how you make money.
One way to ruin someone’s life — give them a lot of money very quickly that they haven’t gone through a bumpy road to cultivate. Look at young sport stars and celebrities. We can’t unpack ‘financial freedom from the material world’ and discuss it in a vacuum, like it’s not connected to these other parts of life and psychological realities.
I think Naval is very aware of that, and you see in this series beautiful ideas about the future and modern life, but it’s a disclaimer for anyone who goes into the series with the wrong expectations.
Wealth vs. money vs. status
Naval seems to define wealth as the idea of earning while you sleep, and this is attached to a sense of freedom. We’ll dissect this later.
Money on the other hand is how we transfer wealth. It’s trying to be a reliable IOU from society. ‘Money will solve all your money problems’, but a lot of people who reject money attack it and play status games instead.
Wealth is a positive-sum game
For example owning a house.
Status is a zero-sum game, examples include politics and sports. One thing I hadn’t thought of (because I’m very critical of status as a motivator and career driver) was that it is a zero-sum game. This means that not everyone can win, unlike a positive-sum game.
‘Status is a much better predictor of survival than money is’ when you look back.
You should avoid status games in life because it involves putting others down, and others putting you down. The idea of positive-sum games have really advanced my thinking and sense of possibilities, so I’m very grateful to Naval for this.
Anyway, over time, we are getting better and better — Naval says you’d rather be a ‘poor person’ today than a rich aristocrat in Louis XIV’s France. Back then they had no antibiotics or other modern comforts.
Future of an abundant world
Capitalism isn’t bad, but it gets hijacked.
If we’re all technologically sophisticated, we’ll all be essentially retired and we’ll only ‘work’ i.e. do things as a means of expression. I think you can also add to that the desire to affect change in the world.
We’ll build machines to do everything else.
Markets are innate to human beings
What sets us apart is that we can track credits and debits.
‘Don’t criticise the people who play the game’ — it is worth playing is his argument, and people who complain take for granted that that game built their comfortable lifestyle, beds, houses grocery stores.
If I could introduce a contrarian viewpoint here, it would be Alan Watts, who taught us that we should let people quit the game.
I’d love to give Naval an opportunity to revisit this thought and see if his thinking has changed at all — we’ll come to this when we unpack startup culture later in the next series, how it is a domain where the ego hides itself in the higher self.
I don’t think you can say conclusively that the game is worth playing — there is a deep lack of awareness on what our game is built on and how much of a deceptive diversion it is from the creation and exchange of true value.
I think players of the capitalistic game have moved society forward ‘despite’ many, many shortcomings, and there is capacity to revolutionise the pace and manner at which it improves things.
It depends on what he’s saying here though.
My caveat is a trancendence of games, which is a sneak peak to what comes ahead and a future book idea I have. Life is a casino and most of the people we worship and revere, perhaps all of them except the practical non-wanky philosophers, have not been able to transcend this. We should all attempt to play the games instead of letting the games play us.
When I think about it, the whole tweet storm is built on his idea of wealth
For example, I’d argue a wealth of social connections is way more valuable than assets that earn while you sleep.
Making money isn’t about luck
It’s not about luck in my opinion, but it involves luck, controlling for luck. He introduces four kinds of luck.
- Blind luck
- Persistence — which stirs things up
- Good at spotting luck — e.g. watching a particular field like an investor
- Build a unique character, brand and mindset where luck finds you
I think idea number four is so under-rated. As was the case when we were unpacking Nassim Taleb, these higher order concepts are unfortunately exclusive because it is difficult for people to understand them, but they are so much more valuable than the things people usually deploy as their strategies. In the podcast episodes, we unpack examples of building a brand and mindset where luck finds you.
You won’t get rich renting out your time
There’s not a lot of leverage to be ad when you rent out your time. Even doctors can’t earn non-linearly because it’s all manual work. Think about an engineer placing themselves in the wrong place — you can be an engineer at one small company or can make Bitcoin and spread impact everywhere. You’re not necessarily working harder or longer hours when working on Bitcoin.
Live below your means
That’s like MVL, it’s a gradual progression. He cites Taleb, the most dangerous things are heroine and a monthly salary!
Give society what it doesn’t know how to get
Something natural to you, that fits your skills! For example, Steve Jobs and Apple, smart phone in your pocket. No one would have asked for this — they couldn’t imagine it.
The other idea is bringing the high-end to the mass market — most new innovations like health technology and breakthroughs start off as luxury goods reserved for the wealthy.
The internet has massively broadened career possibilities (but most people are still unaware)
You can connect with anyone now, you can find a market or collaborators no matter how far away they are.
Whatever your niche is, the internet enables you to scale, instead of running around your town or selling door-to-door like Nike started.
Naval tells us that this enables more authenticity, ‘no one can be more you than you’ which is true thanks to the internet. Wasn’t necessarily true before.
Long-term games with long-term people
The power of compounding… all great returns come from compound interest.
Find people who are going to be around long-term — in a long-term game, things are positive-sum, whereas short-term games are zero-sum.
But this doesn’t exclude the socialists, whose strategy is to show up at the end and say ‘I want a piece’.
Arm yourself with specific knowledge
‘We have this idea that everything can be taught (in schools)’. He says this is not true, but everything can be learned.
If you can be trained to do it, it means others can be trained to do it which means you’re in a bottle-neck with everyone else — we just need to pay you as much as everyone else.
People with a lot of interest will massively outperform you. Genuine curiosity is very important. ‘It’s not something you sit down and you reason about, it’s more done by observation, you have to look back on your life and see what you’re actually good at’ — his example is science. He wanted to be a scientist so that’s why he views them at the top, his whole value system was built around it.
When he follows this logic he goes down the Cal Newport way of thinking. He said he was going to be an astrophysicist but his Mum said ‘you’re going to be in business’. She observed what he did, not what he said. This is the Audience-of-None.
Specific Knowledge is highly creative or technical
Things are best learnt on the job through apprenticeships — Naval says the best careers are apprenticeship careers.
For example, Benjamin Graham told Warren Buffett that Buffett should pay Graham to work for and thus learn from him.
Being the best? Just follow your own obsession. If you’re too goal-oriented you won’t pick the thing you love to do and therefore won’t go deep enough into it.
You can’t pick things too deliberately, because you do want to pick things where you are a natural.
There’s diminishing returns with getting the top percentiles but if you’re in the top 25% for three things, which fits the Scott Adams approach, that’s probably easier and smarter.
Everyone’s a natural at something. You want to double-down on that — there’s probably multiple things and you want to combine them, so just through sheer interest you end up in the top 25% of something that matters to you.
Learn to sell, learn to build
Both are broad categories, sure, it could be someone in a laundry service or a software engineer.
Selling could be in recruiting, marketing, etc.
In Silicon Valley you typically have this split, e.g. Steve Jobs and Steve Wozniak.
The best is someone who can do both — Steve Jobs had enough product skills to tick this box.
Naval argues that it’s easier for a builder to pick up selling than a salesman to pick up building.
As an example, you can build up writing skills to the point you’re effective at online communication and leverage that. This highlights the power of sales and writing skills.
Long-term, this is unstoppable.
Sales skills by contrast scale more over time as they can be transferred to anything.
Read what you love until you love to read
“Reading is faster than listening” and “doing is faster than watching”.
I’ve referenced this quote on the podcast before, ‘it’s not what you’re interested in but when you’re interested in it’. Interests are linked.
Naval urges us to read foundational books.
The problem with classes is you get to a point where, if you can’t keep up, you rely on memorisation instead of a steel foundation of understanding. The foundations are ultra-important.
The desire to learn is scarce, not the means of learning (internet, thank you very much). But we need to stop losing the desire to learn.
There’s no actual skill called business
Business is bottom of the barrel, because everything else is so foundational.
In business school they throw a lot of things called case studies at you — but it’s really just anecdotes.
Foundational math and logic, as well as game theory are much better according to Naval. Better to play lots of games and be in lots of challenging situations than to read books on game theory.
‘It’s the number of iterations that drives the learning curve… not just the amount of hours you put in’.
The world enables us to do the same thing over and over again, but we’d be better off if we could have variety.
Doing something new the first time is always painful, the risk of failing is high (Joe’s insertion, failure is a myth). Here he cites Taleb who emphasises this philosophy — Taleb made his money through Black Swans, when the majority of people were wrong and he bet against them.
We didn’t evolve to bleed every day, most people want to win a little every day instead but then tolerate going bankrupt. If you can bleed every day, you’ll be better off in the long-run. It’s the reverse.
You need to embrace accountability — put your name on things. Trump, Operah and Kanye have created names that are valuable.
Equity comes with risk.
Society over-values labor as a form of leverage, which is why people ask about how many people work at a company or are impressed by a promotion. But it’s a terrible form of leverage, managing people is messy.
You want the minimal amount of people working with you.
Capital is used by bankers to create leverage, CEOs are mainly financial roles allocating capital. Society doesn’t like this form of leverage because it feels like this invisible thing that can be passed across generations.
Product and media are the new leverage. You can multiply your efforts without labor from other humans — example of a podcast, you don’t have to rely on or pay media or television gatekeepers to spread a message.
Whilst Buffett made money through capital, Joe Rogan has leverage through media. Bezos, Zuckerburg etc. leverage code.
Startups combine all three — technology, capital and media to get things out there.
Permission-less — these new forms do not require permission. This is interesting to think about, just like Web 2 vs. Web 3.
There are already an army of robots in society, they’re just hidden in data centres. You can take advantage of that right now.
He suggests choosing a business that has leverage and network effects. Scale economies are where the more you build, things get cheaper to build.
Technology and media products have zero marginal costs on production — for example, Joe Rogan is not working any harder on his podcasts today than he did on his first podcast.
He also discusses the power of network effects, where the network gets more and more powerful the more people join them. The winner of a network effect creates a monopoly. A network effect is where each additional member to the network adds value to the network.
The examples of network effects that are most powerful are language and money — to participate in a lot of industries and do something technical you often need to know English!
The ultimate example he gives is going from laborer to real estate tech — this is a high quality example of doing the highest leverage thing you can do. This is what my family has essentially done:
- Start at the bottom as a laborer, but you don’t have much ‘specific knowledge’, just tool leverage at best.
- Then you’ve got a contractor, a general contractor who takes accountability and risk.
- The property developer is above that, perhaps a contractor who did a bunch of jobs and built up the capacity to go around and invest in lots, potentially by raising through investors. Leverage and risk goes way up.
- Still going up, a famous architect or developer, like Trump.
- Up again, massive scale developer building large communities
- To escape managing people in property and real estate, you can go into the capital game and establish a REIT (Real Estate Investment Trust) but this is more financially complex and requires higher level management of capital.
We live in an age of almost infinite leverage, and you can get it through either coding or performing well in media.
Judgement becomes the most valuable skill — Warren Buffett gets paid for his judgement. Warren Buffett has incredible credibility, no one asks him how hard he works or when he wakes up or sleeps.
Naval defines wisdom as knowing the long-term consequences of your actions and making decisions based on that. Here he discusses the problem with ivory tower intellectuals and why Nassim Taleb rails against them so hard — for their lack of ‘Skin in the Game’.
‘Intellect without any experience is often worse than useless’ because you get the confidence and the credibility but without the real world experience and competency. The world is always more complex than a human being can intellectualise.
This is why great investors and entrepreneurs can be a bit ‘robotic’ — because they need to see quite clearly and the thing that hurts your judgement is being emotional.
Wisdom comes from experience, and experience can be accelerated through short innovations.
Investors don’t read investing books, and why you need philosophy
Buffett and Bury don’t read investment books and sound like philosophers, ‘investment is a real world activity that is highly multivariate’ and so what is needed is a broad understanding, as it’s always happening on the cutting edge.
Philosophy helps people be more stoic and less emotional, but also ground their judgement. That’s why so many notable investors are also quite philosophical.
Escape Competition Through Authenticity
Peter Thiel got into business because he got rejected from his law aspirations. Great leaders are so authentic you can’t compete with or replace them, but you just need to redefine what you do until there’s product-market fit.
Not in a robotic way! But these two words summarise the entire thinking. I would unpack this further as ‘leverage yourself for others’. In my thinking, the I only do what only I can do creates a powerful way for reflecting on life.
It begs us to question what we can do on a powerful and scalable level (if scaling is appropriate for the benefit we provide). The internet creates new and powerful ways to do this.
Podcasts. Online Writing. Streaming. Scalable businesses. Apps that demonstrate some powerful version of what you do or care about.
Honestly this is a huge point but I really go into it on the podcast episodes and applying it to young people.
Where I’d change the emphasis of Naval’s ‘How To Get Rich’
Firstly — Broaden the definition of wealth. This is not a criticism of Naval but he has certain circumstances which shape his quite narrow definition of wealth. I call this the Rags to Riches Narrative — where someone who grew up materially poor or desperate strove to work hard and achieve financial freedom as a very strong goal in their life. Though these people still end up creating well-balanced and holistic lives, they overvalue the role of financial and material wealth in their life.
They are too generous in the attribution of money to their happiness, undervaluing (without ignoring) factors like relationships, inner peace, stoicism, health. Naval is incredibly introspective, has a holistic perspective, but his definition of wealth is tied to assets that earn while you sleep. I wouldn’t exclude that from a definition of wealth, I’d expand it.
Because a lack of money was such a pain for so long, carrying a deep burden and hold on the mind, its relief associates the other benefits of life one can focus on with the money by secondary conditioning. ‘Look at all these relationships I have now!’ for example. But it is true that, without money, you can have more of the things that would lead to a higher quality of life, and let’s not forget, there are hippies and hobos who have more freedom than Silicon Valley entrepreneurs.
Secondly — ensure there isn’t a septic focus when you look at the series. There is always a trade-off with titles, you might think of his friend Tim Ferriss and the ‘4 Hour Work Week’ as a similar example. Yes, you want a title that gets attention, but there are trade-offs when it suggests that this idea in the title is the ultimate goal.
Naval does a beautiful job here of connecting the ability to obtain and use leverage with joy and playfulness, the title just doesn’t suggest it. Obviously getting rich for richness’ sake is a foolish goal. Things like that normally get too deliberate, which he calls out too — I think it’s Scott Adams who is mentioned, who suggests people should try to be in the top 25% for three skills to advance their career.
Thirdly — define the ideal of a high quality of life today, before you go on the journey. How the hell does someone do that? More often by looking backwards before going forwards. Human beings are pattern recognition machines, so what are the patterns in your past?
What are the highlights and memories in your life that stick out to you?
What are the things you’ve done for an Audience-of-None?
What activities do you do that lock you in a state of peace, where you lose track of time?
What itch keeps gnawing away at you? What impulses or curiosities haven’t gone away? This probably means something.
Fourthly — Consider this, ‘How To Get Opportunity’. I think that’s a more accurate summary! Part of that opportunity is financial gain, as it should be, and it’s why I toy with the idea of the ‘Exponential Career’.
Fifth — Apply the ‘I only do what only I can do’ principle. The reason for this is that it trumps a lot of the filtering and decision-making here around opportunity. I don’t think you get to make an argument around how people should interpret something, only that you’d like them to interpret something in a particular way.
So it’s hard to approach this without the posture of ‘how do I build this empire of wealth’ because of the title — though he emphasises the importance of playfulness, I personally think people should think about opportunity for impact a lot — especially the younger generation.