Today we have some solid gold from Naval Ravikant’s twitter feed.
For those of you that have not come across Naval, he’s a remarkable individual.
He started off as a penniless Indian immigrant and ended up a wealthy American tech entrepreneur / investor in San Francisco.
He’s the founder of AngelList and invested at an early stage in several of the Silicon Valley “unicorns” like Twitter etc. So he’s not just financially independent, he’s loaded. But interestingly, although he still works, he doesn’t seem that interested in money anymore. He’s more like a philosopher king than a tycoon.
Naval ranges widely over many topics but doesn’t talk about frugality much. He emphasises earning and entrepreneurship over watching the pennies. Remember that Naval has an immigrant background so frugality would have come naturally to him. He’s a producer not a consumer.
This post will be valuable for people planning their career. It summarises a rich person’s mindset so its priceless for people that don’t yet earn their full potential. There’s only so much spending you can cut, but there’s no limit on your income. Remember, earning more is not cheating.
In between each gold nugget from Naval, I’ve tried to explain in italics what I think he means…or at least what it means to me.
The Escape Artist
- Seek wealth, not money or status. Wealth is having assets that earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy.
Money must be saved and invested to be converted to wealth. Wealth provides passive income. The desire for status comes from ego. Status depends on what other people think of you…so its subjective and fleeting. Wealth is more objective and can provide lasting freedom.
- Understand that ethical wealth creation is possible. If you secretly despise wealth, it will elude you.
To get to financial independence, your beliefs, thoughts, feelings and actions must be aligned (congruent). If you have any guilt or shame about having money, you will find ways to remove it from your life. You need to understand your money blueprint.
- Ignore people playing status games. They gain status by attacking people playing wealth creation games.
This is why I don’t do political debates or allow point scoring in the comments (and I block trolls). We are learning the wealth creation game (in its broadest sense) here.
- 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.
In a job, you trade your time for their money. That’s fine to get started. But, to escape, you need passive income. Owning a slice of the stockmarket provides passive income. Owning your own business (if done right) can provide both financial freedom and professional / creative freedom.
- You will get rich by giving society what it wants but does not yet know how to get. At scale.
High wages (or profit margins) are a sign that you are giving other people what they want. For example, plumbers and electricians get paid well because they are in demand. The rewards available to good software engineers can be even higher because their work is scalable: it can help millions of other people.
- Pick an industry where you can play long term games with long term people.
City traders and salesmen (guys in their 20s chasing the big bonus payday) are short term people playing short term games…so they often “blow up”. Any business where reputation matters (most of them) rewards playing the game with a long term view.
- The Internet has massively broadened the possible space of careers. Most people haven’t figured this out yet.
Thanks to the internet, the world is your lobster. You can learn and teach almost anything, anywhere.
- Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest.
Compound interest doesn’t just apply to your money. It also applies to career development, fitness and relationships. You learn by continuing to play and continuing to get better. The longer you play, the better you get.
- Pick business partners with high intelligence, energy, and, above all, integrity.
Don’t shortcut on ethics. You have to trust your gut on this. No contract can save you from the car crash that comes when you work with dishonest or lazy people.
- Don’t partner with cynics and pessimists. Their beliefs are self-fulfilling.
Avoid cynics. There’s a big difference between realism and cynicism. Cynics and pessimists create their own dismal reality. See explanation here.
- Learn to sell. Learn to build. If you can do both, you will be unstoppable.
Learning to sell can feel uncomfortable at first. But you have to learn how to persuade / influence / sell. Its not enough to be good at your job…other people need to know that you’re good at your job. Own it.
- Arm yourself with specific knowledge, accountability, and leverage.
In So Good They Can’t Ignore You, Cal Newport writes about how to build career capital…how to gain more industry specific knowledge, influence and autonomy.
- Specific knowledge is knowledge that you cannot be trained for. If society can train you, it can train someone else, and replace you.
Look for jobs that pay you to learn, that invest in you (and allow you to invest in yourself) and where there is a path to mastery.
- Specific knowledge is found by pursuing your genuine curiosity and passion rather than whatever is hot right now.
You don’t have to be passionate about your job always (I was an accountant!) but you do have to be interested in it and want to be good at it.
- Building specific knowledge will feel like play to you but will look like work to others.
Find ways to enjoy the process…not just the outcome. If you achieve a flow state in your work, you will be hard to beat.
- When specific knowledge is taught, it’s through apprenticeships, not schools.
School and college teaches obedience and book smarts. You need mentors to learn real world street smarts and valuable skills that can make you money.
- Specific knowledge is often highly technical or creative. It cannot be outsourced or automated.
Robots can’t do creativity and problem solving. Avoid jobs that a robot can do.
- Embrace accountability, and take business risks under your own name. Society will reward you with responsibility, equity, and leverage.
I’m Barney Whiter (The Escape Artist is my
imaginary friend alter ego). It took me a couple of years to pluck up the courage to let go of internet anonymity. But people then trust you more. Increased trust brings increased opportunities.
- The most accountable people have singular, public, and risky brands: Oprah, Trump, Kanye, Elon.
Errrr….don’t think I’m quite in this league.
- “Give me a lever long enough, and a place to stand, and I will move the earth.” – Archimedes. Fortunes require leverage. Business leverage comes from capital, people, and products with no marginal cost of replication (code and media).
You don’t need leverage to become financially independent. You can get to FI via hard work, frugality and time. But to make a fortune takes leverage. And to spread your message widely requires some form of media coverage.
Capital means money. To raise money, apply your specific knowledge, with accountability, and show resulting good judgement.
Hhhmmmm. Naval is a venture capital investor. Ideally you should work for businesses that do not require external funding. Even better, start your own business without external funding.
- Labor means people working for you. It’s the oldest and most fought-over form of leverage. Labor leverage will impress your parents, but don’t waste your life chasing it.
Managing other people is tricky. Having lots of employees is over-rated. Better to have a lifestyle business…or someone running the operations for you.
- Code and media are permissionless leverage. They’re the leverage behind the newly rich. You can create software and media that works for you while you sleep.
Barney sleeps 8 hours a night. The Escape Artist blog can be read 24/7/365.
- An army of robots is freely available – it’s just packed in data centers for heat and space efficiency. Use it.
- If you can’t code, write books and blogs, record videos and podcasts.
- Leverage is a force multiplier for your judgement.
- Judgement requires experience, but can be built faster by learning foundational skills.
Foundational skills include: basic maths, the ability to use spreadsheets, negotiation, persuasion, sales, writing,
- There is no skill called “business.” Avoid business magazines and business classes.
MBAs can be useful to get higher paid jobs but are often over-rated for starting a business. Check out The Pop Up Business School for real world business start-up skills.
- Study microeconomics, game theory, psychology, persuasion, ethics, mathematics, and computers
Learn stuff that matters in the real world. Computer studies > media studies.
- Reading is faster than listening. Doing is faster than watching.
Reading the right books is the ultimate life hack but you have to take action. If you read a great book and don’t action the learning points then you didn’t really get it.
- You should be too busy to “do coffee,” while still keeping an uncluttered calendar.
Avoid meetings with timewasters. Be busy… but have time to respond to opportunities.
- Set and enforce an aspirational personal hourly rate. If fixing a problem will save less than your hourly rate, ignore it. If outsourcing a task will cost less than your hourly rate, outsource it.
Time is the ultimate non-renewable resource. You need to value your time highly. In my coaching, I only work with people that understand value vs. price.
- Work as hard as you can. Even though who you work with and what you work on are more important than how hard you work.
Every rich person that I’ve ever met works hard. Hard work is necessary but not sufficient. It helps to be working at the right things. And a bit of luck also helps.
Aim high. Remember The Magic of Thinking Big.
- There are no get rich quick schemes. That’s just someone else getting rich off you.
You can get rich slowly though. It takes 18 or 19 years from broke to financially independent saving 50% of your income.
- Apply specific knowledge, with leverage, and eventually you will get what you deserve.
Hhmmm. Good and bad luck tends to even out over the long term….but that doesn’t mean that the world is always fair…it isn’t. We can’t ignore the role that luck plays in where you are born and your genetic inheritance. All you can do is play the hand you are dealt.
- When you’re finally wealthy, you’ll realize that it wasn’t what you were seeking in the first place. But that’s for another day.
Naval finishes with a truth-bomb. Ultimately, financial independence is not about the money.