How to Get Rich (Platform: Youtube)

Nivi

Hey, this is Nivi, you’re listening to the Naval podcast. This is one giant mega-sode that collects every episode we’ve done on getting rich, all of it based on his tweetstorm of how to get rich without getting lucky. I’ve collected them all here, because we’re going to switch topics to the new topic of happiness. On the next episode, we’ve published one of these giant mega episodes before, but this one’s even bigger. It’s about three and a half hours long. It covers all the tweets from the how to get rich tweet storm, plus all the q&a that we did after that, plus 10 minutes of bonus material at the very end, but we’ve never released, the overall sound quality of this mega sewed improves a lot after the first hour, you can find a link to a clean transcript in the show notes. Or if you go to the website, nav.al. There’s no .com at the end, I hope you enjoy. You probably know Naval from his Twitter account. And we’re going to be talking about his epic tweet storm on how to get rich without getting lucky. We’re going to go through most of the tweets in detail, give Naval a chance to expand on them and just generally riff on the topic, you’ll probably throw in some ideas that he hasn’t even published before. He’s also the co-founder of Angellist, and he opinions. He’s a prolific tech investor in companies like Twitter, Uber, and many more. And I’m the co founder Angellist with Naval. And I also co authored the venture hacks blog with him back in the day.

Naval

Yeah, the how to get rich tweetstorm definitely hit a nerve. And a lot of people say it was helpful reach across aisles and people outside of tech industry, people in all walks of life. People do want to know how to solve their money problems. And everyone vaguely knows that they want to be wealthy, but they don’t have a good set of principles to do it by

Nivi

what’s the difference between wealth, money and status.

Naval

Wealth is the thing that you really want. Wealth is assets that earn while you sleep wealth is the factory that with robots is cranking out things wealth is the computer program that’s running at night that’s serving other customers, wealth is even money in the bank, that is being reinvested into other assets and into other businesses, even a house can be a form of wealth, because you can rent it out, although that’s probably a lower use of productivity, but land and actually doing some commercial enterprise. So my definition of wealth is much more businesses and assets that can earn while you sleep. But really, the reason you want wealth is because it buys you freedom. So you don’t have to wear a tie or like a collar on your neck. So you don’t have to wake up at 7am and rush to work and sit and commute traffic. So you don’t have to waste away your entire life grinding all the productive hours into a way to a soulless job that doesn’t fulfill you. So the purpose of wealth is freedom. It’s nothing more than that. It’s not to buy fur coats or drive Ferraris, or sail yachts or jet around the world or Gulf Stream, that stuff gets really boring and really stupid really fast. It’s really just so that you are your own sovereign individual, you’re not going to get that unless you really want it. And the entire world wants it. And the entire world is working hard at it. And to some extent it is competitive. It’s a positive sum game, but there are competitive elements to it. Because there’s a finite amount of resources right now in society and to get the resources to do what you want. You have to stand out. Money is how we transfer wealth. Money is social credits, it is the ability to have credits and debits and other people’s time if I do my job, right, if I create value for society, society says, Oh, thank you, we owe you something in the future for the work that you did in the past. Here’s a little IOU, let’s call that money. And that money gets debased because people steal the IOU, the government prints extra IO use people renege on their IO use. But really what money is trying to be is is trying to be a reliable IOU from society that you are owed something for something you or someone who gave you the money did in the past, and we can transfer these values around. So really, money is how we transfer wealth. There are fundamentally two huge games in life that people play. One is the money game, because money is not going to solve all your problems, but it’s going to solve all your money problems. So I think that people know that they realize that they want to make money, but at the same time, many of them deep down believe that they can’t make it. They don’t want any wealth creation to happen. So this virtue signal by attacking the whole enterprise by saying, well, making money is evil, you shouldn’t do it, blah, blah, blah. But what they’re trying to do is they’re actually playing the other game, which is a status game. They’re trying to be high status in the eyes of other people watching by saying, Well, I don’t need money, we don’t want money. And then status is just your ranking in the social hierarchy. So wealth is not a zero sum game. Everybody in the world can have a house because you have a house doesn’t take away from my ability to have a house. If anything, the more houses that are built, the easier it becomes to build houses, the more we know about building houses and the more people that can have houses. So wealth is a very positive sum game. We create things together, we’re starting this endeavor to create this hopefully piece of art that explains what we’re doing. At the end of it something brand new will be created. The positive sum game status, on the other hand is a zero sum game. It’s a very old game, we’ve been playing it since monkey tribes, and it’s hierarchal who’s number one, who’s number two, who’s number three. And for number three, to move to number two, number two has to move out of that slot. So status is a zero sum game. Politics is an example of a status game. Even sports is an example of a status game to be the winner, there must be a loser. I don’t put them into the love status games, they play an important role in our society. So we figure out who’s in charge. But fundamentally, you play them because they’re a necessary evil. The problem isn’t evolutionary basis. Like if you go back 1000s of years status is a much better predictor of survival than wealth is, you couldn’t have wealth before the farming age before farmers because you couldn’t store things. hunter gatherers carried everything on their backs. So hunter gatherers lived entirely and status based societies, farmers started going to wealth based societies and the modern industrial economies are much more heavily wealth based societies. But there’s always a subtle competition going on between status and wealth. For example, when journalists attack which people or they attack the technology industry, they’re really bidding for status. They’re saying, No, the people are more important. And I am a journalist represents the people and therefore I am more important. The problem is that by playing these status games, to win the status game, you have to put somebody else down. That’s why you should avoid status games in your life, because they make you into an angry, combative person, you’re always fighting to put other people down to put yourself and the people that you like up. And they’re always going to exist, there’s no way around it. But just realize that most of the times when you’re trying to create wealth, you’re actually getting attacked by someone else. And they’re trying to look like a goody two shoes. But really what they’re doing is they’re trying to up their own status at your expense. They’re just playing a different game. And it’s a worse game. It’s a zero sum game, instead of a positive sum game.

Nivi

One thing you mentioned before the interview that stuck with me was the idea that you think everyone can become rich, and that perhaps some of the ways of getting rich or the idea of wealth is vilified by some people in other countries say, do you want to expand on that a little bit?

Naval

Yeah, I think there’s this notion that making money is evil, right? It’s like routed all the way back down to money is the root of all evil. People think that the bankers steal our money. And you know, it’s somewhat true in that in a lot of the world, there’s a lot of theft going on all the time. The history of the world, in some sense, is this predator prey relationship between makers and takers, there are people who go out and create things and build things and work hard on things. And then there are people who come along and play with a sword or a gun or taxes or crony capitalism, or communism, or what have you. There’s all these different methods of skill, even in nature, that are more parasites that there are non parasitical organisms, you have ton of parasites in you who are living off of you, and the better whether symbiotic or giving something back, but there are a lot that are just taking, that’s just the nature of how any complex system is built. But what I am focused on is true wealth creation, it’s not about taking money, it’s not about taking something from somebody else. But it’s from creating abundance. Obviously, there’s not a finite number of jobs or a finite amount of wealth, otherwise, we will still be sitting around in caves, figuring out how to divide up pieces of firewood, and you know, the occasional dead deer. So most of the wealth and civilization, in fact, not most all of it has been created. And it got created from somewhere it got created from people they got created from technology, it could have been productivity got credit from hard work. So this idea that it’s stolen is I think, this horrible, zero sum game, that people who are trying to gain status play, but the reality is, everyone can be rich. And we can see that by seeing that in the first world. Everyone is richer than almost anyone who was alive 200 years ago, 200 years ago, nobody had any biotics nobody had cars, nobody had electricity, nobody had the iPhone. So all of these things are inventions that have made us wealthier as a species. Today, I would rather be a poor person in a first world country than be a rich person in Louie the 14th. France, I’d rather be a poor person today than aristocrat back then. And that’s just because of wealth creation. The engine of technology is science that is applied for the purpose of creating abundance. So I think fundamentally, everybody can be wealthy. And the thought experiment I want you to think through is imagine if everybody had the knowledge of a good software engineer and a good hardware engineer, if you could go out there. And you could build robots and computers and bridges and program them. Let’s say every human knew how to do that. What do you think society would look like in 20 years? My guess is what what happens is we would build robots, machines, software and hardware to do everything, and we would all be living in massive abundance. We would essentially be retired in the sense that none of us would have to work for any The basics. We don’t even have robotic nurses. We have like machine driven hospitals, we’d have self driving cars, we’d have farms that are 100% automated with a clean energy. So at that point, we could use technology breakthroughs, to get everything that we wanted. And if anyone is still working at that point, they’re working as a form of expressing their creativity. They’re working because it’s in them to contribute and to build and design things. But I don’t think capitalism is evil. Capitalism is actually good. It’s just that it gets hijacked. It gets hijacked by improper pricing of externalities, it gets hijacked by improper deals where that you have corruption, or you have monopolies. Overall, capitalism is intrinsic to the human species. Capitalism is not something we invented. Capitalism is not even something we discovered. It is innate to us in every exchange that we have. When you and I exchanged information, I want some information back from you, I give you information, you give me information. If we weren’t having a good information exchange, you go talk to somebody else. So the notion of exchange and keeping track of credits and debits, this is built into us as flexible social animals, we’re the only animals in the animal kingdom that cooperate across genetic boundaries, most animals don’t cooperate. But when they do, they cooperate only impacts where they co evolved together, and they share blood. So they have some shared interest. Humans don’t have that. And what lets us cooperate, it’s because we can keep track of debits and credits, who put in how much work who contributed how much. That’s all free market capitalism is. So 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. Everybody can be wealthy, everybody can be retired, everybody can be successful, it is merely a question of education, and desire, you have to want it, if you don’t want it, that’s fine, then you opt out of the game. But don’t try and put down the people who are playing the game. Because that’s the game that keeps you in a comfortable warm bed at night. That’s the game that keeps a roof over your head. That’s a game that keeps your supermarket stock, that’s the game that keeps the iPhone buzzing in your pocket. So it is a beautiful game that is worth playing ethically, rationally, morally, socially, for the human race. And it’s going to continue to make us all richer and richer, until we have massive wealth creation for anybody who wants it.

Nivi

And it’s not just individuals secretly despising wealth, right? There’s countries groups, political parties that overtly

Naval

despise wealth, or at least seem to. That’s right. And so what those countries political parties and groups are reduced, playing the zero sum game of status and the process to destroy wealth creation, they drag everybody down to their level, which is why the US is a very popular country for immigrants, because it’s the American dream. Anyone can come here be poor, and then work really hard and make money and get wealthy, but even just make some basic money for their lives. Obviously, the definition of wealth is different for different people, a first world citizens definition of wealth might be Oh, I have to make millions of dollars. And I’m completely done. Whereas to a third world poor immigrant just entering the country, and we were poor immigrants who came here, when I was fairly young to the United States, wealth may just be a much lower number, it may just be like, I don’t have to work a manual labor job for the rest of my life that I don’t want to work. But groups that despise it will essentially bring the entire group down to that level. If you get too many takers and not enough makers, society falls apart, you end up with a communist country. Luckily, Venezuela right there were so busy taking and dividing and reallocating that people literally starving in the streets and losing kilograms of body weight every year just through sheer starvation. Another way Think about it, imagine an organism that has too many parasites, you actually need some small number of parasites to stay healthy. And you need a lot of symbiotes like all the mitochondria in all of our cells that help us respirate and burn oxygen. These are symbiotes that help us survive, we can survive without them. But to me, those are partners in the wealth creation that creates the human body. But if you just were filled with parasites, if you got infected with worms or a virus or bacteria that were purely parasitical, you would die. So any organism can only withstand a small number of parasites and when the parasitic element gets too far out of control, you die. So you know that again, I’m talking about ethical wealth patient and the type of monopolies in the form of crony capitalism. I’m not talking about mispriced externalities, like the environment. I’m talking about free minds and free markets, small scale exchange between humans is voluntary and doesn’t have an outsized impact on others. But I think that kind of wealth creation, if a society does not respect it, if a group does not respect it, that society will plunge into ruin and darkness. Obviously, we want to be wealthy, and we want to get there in this lifetime without having to rely on luck. A lot of people think making money is about luck. It’s not, it’s about becoming the kind of person that makes money. You know, I like to think that if I lost all my money, and if you dropped me on a random street in any English speaking country, within 510 years, I’d be wealthy again, right because Just a skill set that I’ve developed. And I think anyone can develop, you know, in 1000, parallel universes, you want to be wealthy in 909, nine of them, you don’t want to be wealthy, the 50 of them where you got lucky. So we want to factor luck out of it, there’s really four kinds of luck that we were talking about this came from a book P. Marc. Marc Andreessen wrote a blog post about it. But there’s different kinds of luck. The first kind of luck, you might just say is like blind luck, where I just got lucky, because something completely out of my control happen, you know, that’s fortune, that’s fate, etc, then there’s luck that comes through persistence, hard work, hustle motion, which is when you’re just running around creating lots of opportunities, you’re generating a lot of energy, you’re doing a lot of things, lots of things will just get stirred up in the dust. It’s almost like mixing a petri dish and seeing what combines or mixing a bunch of reagents and seeing what combines and you’re just generating enough force and hustle and energy that luck will find you. The third way is that you just become very good at spotting luck. So if you are very skilled in a field, you will notice when a lucky break happens in that field and other people who aren’t attuned to it won’t notice. So you become sensitive to luck. And that’s your skill and knowledge and work. And then the last kind of luck is the weirdest hardest kind. But that’s what we want to talk about, which is where you build a unique character, a unique brand, a unique mindset, where then luck finds you. For example, let’s say that you’re the best person in the world, at deep sea underwater diving, and you’re known to like take on deep sea underwater divers that nobody else will even attempt to dare. And then by sheer luck, somebody finds a sunken treasure ship off the coast, they can’t get it, well, their luck just became your luck, because they’re gonna come to you to get that treasure, and you’re gonna get paid for it. Now, that’s an extreme example. But it’s just showing how like, the person who got lucky but find the treasure chest, that was blind luck, but them coming to you and asking you to extract it and having to give you half that’s not luck, you created your own luck, you put yourself in a position to be able to capitalize on that luck, or to attract that luck when nobody else has created that opportunity for themselves. So when we talk about without getting lucky, we want to be deterministic. We don’t want to leave it to chance.

Nivi

Do you want to elaborate a little bit more on the idea that in 1000 parallel universes you want to get rich and 999 of them? I think some people are going to see that and say that sounds impossible. Sounds like it’s too good to be true.

Naval

No, I don’t think it’s impossible, I think that you may have to work a little bit harder at it given your starting circumstances. I mean, remember, I started as a poor kid in India, right. So if I can make it anybody can in that sense. Now, obviously, I had all my limbs and I had my mental faculties and I did have an education. So there are some prerequisites you can’t get past. But if you’re listening to this video or podcast, you probably have the requisite means at your disposal, which is a functioning body and a functioning mind. And I’ve encountered plenty of bad luck along the way. First little fortune that I made, I instantly lost in the stock market. The second little fortune that I made, or I should have made, I got cheated by my business partners. It’s only the third time around has been a charm. And even then it has been a slow and steady struggle.

Naval

And I haven’t

Naval

made money in my life in one giant payout. It’s always been a whole bunch of small things piling up. So it’s more about consistently creating wealth by creating businesses, including opportunities, including investments, and it hasn’t been like a giant one off thing. My personal wealth has not been generated by one big year. It just stacks up little bit chips at a time, more options, more businesses, more investments, more things, I can do the same way someone like and then on the other service. He’s building his brand online, he’s building videos. And it’s not like any one video is going to suddenly shower him with riches overnight, it’s going to be a long lifetime of learning of reading of creating, this is going to compound. So we’re talking about getting wealthy so you can retire. So you have your freedom and not retire the sense that you don’t do anything. But in the sense that you don’t have to be anyplace you don’t want to be you don’t have to do anything you don’t want to do. And you can wake up when you want, you can sleep and you want you don’t have a boss, that’s freedom. So we’re talking about enough wealth to get to freedom. And especially thanks to the internet these days. those opportunities are massively abundant. I in fact, have too many ways to make money. I don’t have enough time. I literally have opportunities pouring out of my ears and the thing I keep running out of his time. There’s just so many ways to create wealth, to create products to create businesses to create opportunities, and to as a byproduct, get paid by society that I just can’t even handle it all.

Nivi

I think it’s pretty interesting that the first three kinds of luck that you described, there are very common cliches for them that everybody knows. And then for that last kind of luck that comes to you out of the unique way that you act. There’s no real cliche for it. So For the first three kinds, there’s dumb luck or blind luck. That’s the first kind of luck. The second kind of luck, there’s the cliche that Fortune favors the bold, that’s a person who gets lucky just by stirring the pot and acting on the third kind of luck. People say that chance favors the prepared mind. But for the fourth kind of luck, there is not really a common cliche out there that matches the unique character of your action, which I think is interesting, and perhaps an opportunity. And it also just shows that people aren’t necessarily taking advantage of that kind of luck the way they should be.

Naval

I think also at that point, it starts becoming so deterministic, that it stops being luck. So the definition starts fading from luck to more destiny. So I would characterize that fourth one is you build your character in a certain way, and then your character becomes your destiny. And one of the things I think that is important to making money, if you want the kind of reputation that makes people do deals through you, you know, I use the example of like, if you’re a great diver than treasure hunters will come and give you a piece of the treasure for your diving skills. If you’re a trusted, reliable, high integrity, long term thinking deal maker, then when other people want to do deals, but they don’t know how to do them in a trustworthy manner with strangers, they will literally approach you and give you a cut of the deal or offering you a unique deal, just because of the integrity and reputation that you built up. Warren Buffett, he gets offered deals and he gets to buy companies and he gets to buy warrants and bail out banks and do things that other people can’t do because of his reputation. But of course that’s fragile. It has accountability on the line. It has a strong brand and the line. And as we will talk about later that comes with accountability attached. But I would say your character, your reputation, these are things that you can build, that then will let you take advantages of opportunities that other people may characterize as lucky. But you know that it wasn’t

Nivi

luck. You said that this fourth kind of luck is more or less a destiny. There’s a quote from that original book that was in Mark’s blog posts from Benjamin Disraeli, who I think was the former prime minister of the UK. The quote to describe this kind of luck was we make our fortunes and we call them fate. There were a couple other interesting things about this kind of luck that were mentioned in the blog post, I think it’ll be good for the listeners to hear about is that this fourth kind of luck can almost come out of East centric ways that you do your things. And that he centricity is not necessarily a bad thing in this case. In fact, it’s a good thing.

Naval

Yeah, absolutely. Because the world is a very efficient place. So everyone has dug through all the obvious places to dig. And so to find something that’s new and novel and uncovered, it helps to be operating on a frontier, where right there you have to be a little eccentric to be out on the frontier by yourself. And then you just have to be willing to dig deeper than other people do. Deeper than seems irrational just because you’re interested.

Nivi

Yeah, the two quotes that I’ve seen that expressed this kind of luck, in addition to that Benjamin Disraeli, one or this one from Sam Altman, where he said extreme people get extreme results. I think that’s pretty nice. And then there’s this other one from Jeffrey Pfeffer, who is a professor at Stanford, and that you can’t be normal and expect abnormal returns. I’ve always enjoyed that one, too. Yeah.

Naval

And one quote that I like, which is the exact opposite of that is play stupid games win stupid prizes. Right, a lot of people spend a lot of their time playing social games, like on Twitter, where you’re just trying to improve your social standing, and you basically win stupid social prizes, which are worthless.

Nivi

I guess the last thing that I have from this blog post is just the idea that by pursuing these kinds of luck, especially the last one, basically everything but dumb luck, by pursuing them, you essentially run out of unlock. So if you just keep stirring the pot and stirring the pot, that alone you will run out of unlock,

Naval

yeah, or it could just be reversion to the mean, right. So then you at least neutralize luck so that it’s your own talents that come into play.

Nivi

Next, you go into more specific details on how you can actually get rich and how you can’t get rich. The first point was about how you’re not going to get rich, you’re not going to get rich renting out your time, you must own equity, a piece of business to gain your financial freedom.

Naval

This is probably one of the absolute most important points. People seem to think that you can create wealth and make money through work and it’s probably not going to work. There are many reasons for that. But the most basic is just that your inputs are very closely tied to your outputs in almost any salaried job. Even at one that’s paying a lot per hour like lawyer or a doctor. You’re still putting in the hours and every hour, you get paid. So what that means is when you’re sleeping, you’re not earning when you’re retired, you’re not earning when you’re on vacation, you’re not earning and you can’t earn nonlinearly. If you look at even doctors who get rich, like really rich, it’s because they open a business, they open like a private practice, and that private practice builds a brand. And that brand attracts people or they build some kind of a medical device or a procedure or process with intellectual property. So essentially, you’re working for somebody else. And that person is taking on the risk and has the accountability and the intellectual property and the brand. So they’re just not going to pay you enough, they’re going to pay you the bare minimum that they have to to get you to do the job. And that can be a high bare minimum, but it’s still not going to be true wealth, where you’re retired. And then finally, you’re actually just not even creating that much original for society. Like I said, this tweetstorm should have been called How to create wealth is how to get rich with a more catchy title. But you’re not creating new things for society, you’re just doing things over and over. And you’re essentially replaceable. Because you’re now doing a set role. Most set roles can be taught, if they can be taught like in a school, then eventually, you’ll be competing with someone who’s got more recent knowledge has been taught and is coming in to replace you, you’re much more likely to be doing a job that can be eventually replaced by a robot, or by an AI. And it doesn’t even have to be wholesale replaced overnight, it can be replaced a little bit of a time, and that eats into your wealth creation, and therefore your earning capability. So fundamentally, your inputs are matched to your outputs, you’re replaceable, and you’re not being creative. I just don’t think that that is the way that you can truly make money. So everybody who really makes money at some point owns a piece of a product or a business, or some kind of IP, that can be through stock options. So if you can be working at a tech company, that’s a fine way to start. But usually, the real wealth is created by starting your own companies or by you know, even investors, their investment firm and their buying equity. So these are much more the routes to wealth, it doesn’t come to the hours, you really just want a job or a career or profession where your inputs don’t match your outputs. So if you look at modern society against this little the tweetstorm. businesses that have high creativity and high leverage, tend to be ones where you can do an hour of work, and it can have a huge effect. Or you can do 1000 hours of work and have no effect. For example, look at software engineering, one great engineer can, for example, create Bitcoin and create billions of dollars worth of value. An engineer who’s working on the wrong thing are not quite as good or just not as creative or thoughtful, or whatever can work for an entire year. And every piece of code, they ship ends up not getting used. customers don’t want it that is an example of a profession where the input and the outputs are highly disconnected. It’s not based on the number of hours that you put in. Whereas on the extreme other end, if you’re a lumberjack, even the best lumberjack in the world, assuming they’re not working with tools to the inputs and outputs really connected and just using an axe or saw the best lumberjack in the world, maybe like three x better than one of the worst lumberjacks, right? It’s not going to be a gigantic difference. So you want to look for professions and careers where the inputs and the outputs are highly disconnected. There’s another way of saying that you want to look for things that are leveraged. And by leverage, I don’t mean financial leverage alone, like Wall Street uses, and that has a bad name. I’m just talking about tools, we’re using tools. Computer is a tool that software engineers use. If I’m a lumberjack with bulldozers and automatic robot axes and saws, I’m going to be using tools and have more leverage than someone who’s just using his bare hands. And try to rip the trees out by the roots, tools and leverage or what create this disconnection between inputs and outputs creativity. So the higher the creativity component of a profession, the more likely it is to have disconnected inputs and outputs. So I think that if you’re looking at professions where your inputs and your outputs are highly connected, it’s going to be very, very, very hard to create wealth and make wealth for yourself in that process.

Nivi

Any other big things you should avoid other than renting out your time? Yeah, there

Naval

are two tweets that I put out that are related. So the first one is talking about, like how your lifestyle you know, has to upgrade shouldn’t get upgraded too fast. And that one said, people who are living far below their means enjoy a freedom that people busy upgrading their lifestyle, it’s just can’t fathom. And I think that’s very important. Like just to not upgrade your lifestyle all the time to maintain your freedom. And it just gives you a freedom of operation. Once you make a little bit of money, you still want to be living like your old self. So that’s just the worry goes away. So don’t want to upgrade the house and lifestyle and all that stuff. Let’s say you’re getting paid $1,000 an hour. The problem is that when you go into a work lifestyle like that, you don’t just suddenly go from making $20 an hour to making $1,000 an hour. That’s a progression over a long career. And as that happens, one subtle problem is that you upgrade your lifestyle as you make more and more money and that upgrading of the lifestyle ups what you consider to be wealth and you stay in this wage slave trap. So I forget who said it, maybe it was Nassim Taleb but he said, you know, the most dangerous things are heroin and a monthly salary. Right, because they’re highly addictive. The way you want to get wealthy is you want to be poor and working and working and working. And this is, for example, how the tech industry works, where you don’t make any money for 10 years. And then suddenly, in year 11, you might have a giant payday, which is what By the way, one reason why these very high marginal tax rates for the so called wealthy are flawed, because the highest risk taking most creative professions literally lose money for a decade of your life, while you take massive risks, and you bleed and bleed and bleed. And then suddenly, in year 11, or year 15, you might have one single big payday. But then, of course, Uncle Sam show up and say, Hey, you know what, you just made a lot of money this year, therefore, you’re rich, therefore, you’re evil, and you got to hand it all over to us. So it just destroys those kinds of creative risk taking professions. But ideally, you want to 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 can say, Okay, now I’m done. Now I’m retired, now I’m free, I’m still going to work because you got to do something with your life. But I’m going to work on only the things that I want when I want and still be much more creative expression, and much less about money,

Nivi

you’re not going to get rich renting out your time. But you say that you will get rich by giving society what it wants, but does not yet know how to get

Naval

at scale. That’s right. So essentially, as we talked about before, money is I owe us from society saying you did something good in the past. Now, here’s something that we owe you for the future. And so society will pay you for creating things that it wants. But society doesn’t yet know how to create those things. Because if it did, it would need you they would already be stamped out big time. Almost everything is in your house, in your workplace and on the street used to be technology at one point in time, the time when oil was technology that made JD Rockefeller rich, it was a time when cars were technology that made Henry Ford rich. So technology is just the set of things as Alan Kay said, that don’t quite work yet, once something works is no longer technology. So society always wants new things. And if you want to be wealthy, you want to figure out which one of those things you can provide for society that it does not yet know how to get, but it will want that’s natural to you within your skill set within your capabilities. And then you have to figure out how to scale it. Because if you just build one of it, that’s not enough, you got to build 1000s, or hundreds of 1000s, or millions or billions of them. So everybody can have one, Steve Jobs. And his team, of course, figured out that society would want smartphones computer in their pocket that had all the phone capability times 100, and be easy to use. So they figured out how to build that. And then they figured out how to scale it. And they figured out how to get one into every first world citizens pocket, and eventually every third world citizen too. And so because of that they’re handsomely rewarded. And Apple is the most valuable company in the world.

Nivi

The way I tried to put it was that the entrepreneurs job is to try to bring the high end to the mass market,

Naval

it starts as high end at first, it starts as an act of creativity. 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. And then for a little while rich people have it. Like, for example, rich people had chauffeurs. And then they had black town cars. And then Uber came along and everyone’s private driver, it was available to everybody. And now you can even see Uber pools that are replacing shuttle buses because it’s more convenient. And then you get scooters, which are even further down market of that. So you’re right. It’s about distributing what rich people used to have to everybody. But the entrepreneurs jobs start even before that, which is creation. Entrepreneurship is essentially an act of creating something new from scratch, predicting the society will want it and then figuring out how to scale it and get it to everybody in a profitable way in a self sustaining way.

Nivi

Let’s look at this next tweet, which I thought was cryptic, and also super interesting about the kind of job or career that you might have. You said the Internet has massively broaden the possible space of careers. Most people haven’t figured this out yet.

Naval

The fundamental property of the internet, more than any other single thing is it connects every human to each other human on the planet. You can now reach everyone, whether it’s by emailing them personally, whether it’s by broadcasting to them on Twitter, whether it’s by posting something in Facebook that they find, whether it’s by putting up a website, they can access it connects everyone to everyone. So the internet is an inter networking tool. It connects everybody that is a superpower. So you want to use that what that helps you figure out is that the internet means that you can find your audience for your product or your talent and skill no matter how far away they are. For example, ninad who’s illustrators? If he was in these videos, pre internet, how would we get the message out there? It would just be what we He would run around where he lives in his neighborhood, showing it to people on a computer or a screen, or he would try to get it played at a local movie theater, it was impossible, it only works because he can put it on the internet. And then how many people in the world are really interested in it or even interested in what we’re talking about are really going to absorb it right, it’s going to be a very small subset of humanity, the key is being able to reach them. So what the internet does is allows any niche obsession, which could be just the weirdest thing, it could be like people who collect snakes to like people who like to ride hot air balloons to people who like to sail around the world by themselves just one person, not a craft, or someone who’s obsessed with miniature cooking, like there’s this whole Japanese major cooking phenomenon, or there’s a show about a woman goes into people’s houses and tidying it up, right. So whatever niche obsession you have, the internet allows you to scale. Now that’s not to say that what you build will be the next Facebook will reach billions of users. But if you just want to reach 50,000, passionate people like you, there’s an audience out there for you. So the beauty of this is that we have 7 billion human beings on this planet, the combinatorics of human DNA are incredible. Every one is completely different. You’ll never meet any two people who are even vaguely similar to each other that can substitute for each other. If not, you can say well maybe just left my life so I can have this other person come in. And he’s just like, maybe, and I get the same feelings, the same responses. And the same ideas. No, there are no substitutes for people, people are completely unique. So given that each person has different skill sets, different interests, different obsessions, and it’s that diversity that becomes a creative superpower. So each person can be creatively superb at their own unique thing. But before that didn’t matter, because if you were living a little fishing village in Italy, like your fishing village didn’t necessarily need your completely unique skill. And you had to conform to just the few jobs that were available. But now today, you can be completely unique. You can go out on the internet and you can find your audience and you can build a business and create a product and build wealth and make people happy just uniquely expressing yourself through the internet space of careers has been so broaden eSports players, people making millions of dollars playing fortnight, people creating videos and uploading them YouTube broadcasters, bloggers, you know, a podcasters Joe Rogan I read true or false, I don’t know. But I read that he’s gonna make about $100 million a year on his podcast. And he’s like 2 billion downloads, even Pewdiepie is a hilarious tweet that I retweeted the other day. Pewdiepie is the number one trusted name in news. This is a kid I think in Sweden. And he’s got three times the distribution of the top cable news networks just on his news channels, but even on his entertainment channel, 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, every one is the best at something you being themselves. Another tweet I have that is worth weaving in but didn’t go into this tweet storm was a very simple one. I like things when they can compress them down because they’re easy to remember and easy to hold on to. But that one was escape competition through authenticity. So when you’re competing with people, it’s because you’re copying them. It’s because you’re trying to do the same thing. But every human is different. Don’t copy I know, we’re mimetic creatures. And Rene Girard has an old nemesis theory. But it’s much easier than that don’t imitate, don’t copy, just do your own thing. No one can compete with you on being you. It’s that simple. And so 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 can be with you and being you. And normally that would have been useless advice, pre internet, post internet, you can turn that into a career.

Nivi

Talk a little bit about what industries you should think about working in what kind of job you should have, and who you might want to work with. So you said one should pick an industry where you can play long term games with long term people. Why?

Naval

Yeah, this is an insight into what makes Silicon Valley work and what makes high trust societies work. Essentially, all the benefits in life come from compound interests, whether it’s in relationships, or making money or in learning. So compound interest is a marvelous force where it’s like, you know, you start out with one x what you have. And then if you increase 20%, a year for 30 years, it’s not that you got 30 years times 20% added on, it was compounding. So it just grew and grew and grew until you suddenly got a massive amount of whatever it is, whether it’s goodwill or love or relationships or money. So I think compound interest is very important for so you have to be able to play a long term game and long term games are good not just for compound interest. They’re also good for trust. If you’re looking at Prisoner’s Dilemma type games. The solution to prisoner’s dilemma is tit for tat, which is I’m just going to do to you what you did last time to me with some forgiveness in case there was a mistake made, but that only works in an iterated prisoner’s dilemma. In other words, we play the game multiple times. So if you’re in a situation like for example, you’re in Silicon Valley, where people are doing business with each other and they know each other, they trust each other than they do right by each other because they know this person We’ll be around for the next game. And of course, that doesn’t always work. Because you can make so much money in one move in Silicon Valley. Sometimes people betray each other, because they’re just like, I’m going to get rich enough of this, that I don’t care. So there can be exceptions to all these circumstances. But essentially, if you want to be successful, you have to work with other people. And you have to figure out who can you trust. And who can you trust over a long, long period of time that you can just keep playing the game with them. So that compound interest in high trust will make it easy to play the game and would let you collect the major rewards, which are usually at the end of the cycle. So for example, Warren Buffett has done really well as an investor in the US stock market. But the biggest reason you could do that was because the US stock market has been stable and around and didn’t get, for example, seized by the government during a bad administration, or the US didn’t plunge in some war, the underlying platform didn’t get destroyed. So in his case, he was playing a long term game, and the trust came from the US stock market stability. in Silicon Valley. The trust comes from the network of people in this small geographic area that you figure out over time, who you can work with who you can’t, if you keep switching locations, you keep switching groups, let’s say you started out in the woodworking industry, and you build up a network there and you’re working hard, you’re trying to build a product and woodworking industry. And then suddenly another industry comes along, that’s adjacent but different, but you don’t really know anybody in it, and you want to dive in and make money there. If you keep hopping from industry, no, actually, I need to open a line of electric car stations for electric car refueling, that might make sense, it might be the best opportunity. But every time you reset, every time you wander out of where you build your network, you’re gonna be starting from scratch, you’re not gonna know who to trust, they’re not gonna trust you. They’re also industries in which people are transient, by definition, they’re always coming in and going out. Politics is an example of that, right? In politics, new people being elected. You see in politics, that when you have a lot of old timers like the Senate, people have been around for a long time, and they’ve been career politicians. And a lot of downside to career politicians is that corruption, but an upside is they actually get deals done with each other because they know the other person is going to be in the same position 10 years from now. And they got to keep dealing with them. So they might as well learn how to cooperate where every time you get like a new incoming freshmen class in the House of Representatives, which turns over every two years, the big wave election, nothing gets done, because a lot of fighting, because I just got here, I don’t know you, I don’t know if you’re going to be around why should I work with you, rather than just trying to do whatever I think is, right. So it’s important to pick an industry where you can play long term games, and with long term people. So those people have to signal that they’re going to be around for a long time that their ethical and their ethics are visible to their action.