Ravikant is a complete polymath – so the conversations span physics, angel investing, happiness, microeconomics, and PewDewPie. Ravikant reads/flips through 50+ books at a time. Yet, he has a super grounded sensibility. Strongly recommend you listen to the podcasts yourself (links at the bottom of the post) or read the extended transcript here (lookout: 36,000 words) He definitely has strong opinions, loosely held.
This podcast was entitled. “How to get rich”, but it’s more about the mindset and habits of being a successful entrepreneur. It is not “get rich quick.” It’s about finding your personal edge, using accountability to own equity, finding leverage, then grinding through the work. Direct quotes below in blue italics.
How to get wealthy
Never really thought about the distinction, but Ravikant explains the difference between wealth, money, and status. If you want to get wealthy, do you even know what it means?
Wealth is. . .
Wealth is owning equity (yep, agree with that completely). Wealth gives you freedom; it removes the work-for-money demands of time, place, and task. If you want to get wealthy, then you need to:
- Provide something that people want (but don’t realize it), at scale
- Take more accountability (put your name on it); take risk and own it
- Play long-term games with long-term people
- Get leverage; scale, scale, scale
- Become the best in the world at what you do; be super authentic, be you
Money is. . .
Money is how we transfer wealth. BOOM. This is super simple idea: money is an IOU for something good you did in the past, that you can then apply in the future. Deep. Ravikant calls money “social credits“. Money does not solve all your problems, no way. He declares, “Money [only] solves money problems.” Amen.
Status is. . .
Status is a game that determines social hierarchy. We’ve been playing it for thousands of years. Think politics, sports, BusinessWeek rankings. It’s not about creating more value, it’s about relative position. It’s dividing up a fixed pie. It’s a zero-sum game. In contrast, wealth is a positive-sum game. Wealth creation is a better game.
Ethical wealth creation makes abundance. Everyone can be rich. We can see that by seeing, that in the First World, everyone is basically richer than almost anyone who was alive 200 years ago. 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 yields, where you have corruption, or you have monopolies. – Naval R
1. Provide something that people want (but don’t realize it), at scale
The first half of the sentence is almost trite. Provide something that people want. Of course. Anyone who has sold something, taken a marketing class, or bought something on eBay knows that it’s all supply and demand. Basics.
However, the second half of the sentence is mind-blowing. (but don’t realize it), at scale. This is the part that’s foreign to my MBA-type brain. Many of the readers of this blog (yes, you) are Fortune 500-type people who’ve been successfully providing what companies say they want. What we do fits in a job description, and recruiters know how to find us. Yes, we studied hard, interviewed well. We fit into the corporate hierarchy and proudly make the “top-box” on year-end reviews. Yep, we are good at what we do. Yes, we are high potentials.
If you – like me – are solving problems that people ALREADY know they have, Ravikant points out a few issues:
a) The world is a very efficient place, so, everyone has dug through all the obvious places to dig. It’s much more effective to “operate at a frontier” than play in the safe middle. Strategy students – think red vs. blue ocean.
b) You’re essentially replaceable because you’re now doing a set role. Most set roles can be taught. Okay, this is starting to get uncomfortable – even though he is right. Best practices are easy to copy. If your role can be broken down into discrete process steps, then it can be taught. If it can be taught, then a good algorithm with enough (big) data points will learn how to do this better than you. Let’s remember, machines are better at repetition.
c) Here comes the disappointment. Jeffrey Pfeffer, Stanford professor, said “You can’t be normal and expect abnormal returns.” In the end,we’ve got to challenge ourselves, innovate, and produce new technology.
Escape competition with authenticity
Ravikant – like Sacca – and other investor philosophers, are humanists. A core part of their argument is that each of us is crazy unique. And while there are definitely some entrepreneurial habits and patterns, the main goal is to double-down on who you are. Get super good at “your thing”. To do that 1) you need to clarify/refine what that thing is 2) you need to surround yourself with amazing people 3) you need to hustle for 5-20 years.
Very often specific knowledge is at the edge of knowledge. It’s also stuff that’s just being figured out or is really hard to figure out. Ravikant talks about “specific knowledge” and it echos Cal Newport’s thesis about rare and valuable skills: Be So Good They Cannot Ignore You (affiliate link). This is rare stuff – that’s why it is valuable. This is not copy-cat, written-on-the-job-description stuff.
To some, this seems untenable. After all, what’s my super-duper magic?
Specific knowledge is found much more by pursuing your innate talents, your genuine curiosity, and your passion. So this is more encouraging, personable, and feasible. It’s about digging in, doubling down on myself.
Specific knowledge can be taught through apprenticeships. The best careers are the apprenticeship Or self-taught careers, because those are things society still has not figured out how to train and automate yet. BOOM. This sounds like the consulting apprenticeship model – where you are learning from others, what cannot be taught easily in a book. It’s something that’s difficult for the machine to learn (finally).
2. Take more accountability; get equity in the results
You won’t get rich renting out your time. Professional services folks – yours truly included – are continually pushing our billable rate higher. We add big value, and we (hopefully) get paid big coin. However, this is a time for money trade off. You don’t make money at night, during vacations, or when you are sick. More work = more money. No work = no money. Your outputs are (too) tightly correlated with your inputs.
As employees, we take less risk than the owner. Less risk, and less reward.
As consultants we earn good coin, but it this is revenue, not equity. For Robert Kiyosaki fans, this is like the Cashflow Quandrant argument (affiliate link) from 20 years ago, you want to be a B or a I (business owner or investor), not an employee. You must own equity, a piece of the business to gain your financial freedom.
Accountability is how you’re going to get equity. Love this. The closer you tie yourself to the outcomes, the more equity you deserve. My parents ran a retail clothing store for 30+ years. They were open Monday – Saturday (10-9), and Sunday 1-6pm. For 30+ years. Not to get too entrepreneurs-deserve-their-success about it, but that’s 3500+ hours a year x 30 years = 100,000 hours. Not counting, purchasing, marketing, and payroll, which happened at night. Do they deserve their success. Big-ole Yes.
The more you own up, take the risk, the more equity you will have.
People who can fail in public have a lot of power. Putting yourself out there. With your name. With your face. You are risking failure, humiliation. Yes, that’s risk. This potential for failure gives you credibility. Nice consolation: the downside risks are limited in modern society. You can bounce back. Many people do. Example: No debtors prison, like there was in 1800s Britain.
Build your character so opportunity finds you. 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 offer you a unique deal just because of the integrity and reputation that you have built up.
3. Play long-term games with long-term people
Trust is hard to find. And many of the most challenging, lucrative, and meaningful problems require a team. Many of the single-genius problems have been solved already. So, it’s critical to find a crew of people that you trust and do great work with over and over again. Yes, consulting is also tribal. Now that I’m in my 40s, only want to work with people I like and trust.
Pick business partners with high intelligence, energy and integrity. This does sound like the Match.com profile. Smart, not lazy, and not a cheater.
In a long-term game, it seems that everybody is making each other rich. And in a short-term game, it seems like everybody is making themselves rich. If you are getting rich slowly – and it accumulates – then you want relationships, not transactions.
Ravikant applies this idea of compound interest – not just to money – but also industry experience and relationships. Namely, you don’t want to career-hop industries, and people. It’s just doesn’t compound. You want to stick with 1 industry, or 1 area of focus, and play the game with people you trust.
4. Get leverage; scale, scale, scale
If you want to amplify your returns, use leverage. In the past, this was financial leverage (think: DuPont Method), or people leverage (think: Finders, Minders, Grinders). You can see the limitations immediately. For financial leverage, not everyone can raise $ millions. For people leverage, scaling a business based on people is messy.
New leverage: code and media
Ravikant notes that the new generation’s fortunes are all made through code or media because they have zero marginal costs, and unlimited distribution. If you can layer in network effects, so that every additional person adds to the value of the network. . . BOOM. You have a built-in barrier-to-entry for competitors, and a barrier-to-exit (sadly) for customers.
The Internet allows you to scale any niche obsession. Our work (think: this blog post) is asset light. Each additional reader does not cost me anything, and my reach is wide (hello South Africa). In contrast, think about my childhood collecting comics (circa 1970s, Alabama): I used to mail cash (yes, I was that naive) in envelopes to comic book distributors to get collector X-Men and Daredevil comics. Back then, a ConsultantsMind blog post like this would require 5,000 individually addressed envelopes.
5. Value your time. Become the best
Peter Drucker famously said that time was an executive’s most valuable resource. Everything has an opportunity cost. No one is going to value you more than you value yourself. You just have to set a very high personal hourly rate and you have to stick to it. Basically, outsource anything that you don’t like that is under your hourly rate.
Also, you gotta read. The foundation of learning is reading. I don’t know a smart person who doesn’t read and read all the time. The means of education are endless, it’s all about desire. Basically, no excuses.
Play stupid games win stupid prizes. There are endless ways to play the FOMO game online (Snap, Facebook, Twitter, Instagram, YouTube etc). You’re trying to improve your social standing and you basically win stupid social prizes which are worthless.
Hustle. Impatience with actions and patience with results. Focus on the process. Honestly, you have to put in the time. Ravikant somewhat (too) casually mentions that big wealth, success can easily take 10-20 years. Bezos echoed that when he said every overnight success takes 10 years.
Open to all feedback. What are your thoughts on these maxim? Also, he’s got another interview with Tim Ferriss where he talks almost exclusively about happiness. Stay tuned for that write up.
Two Naval Ravikant podcasts on the ConsultantsMind playlist
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Thanks for the recommendation, Sir! The podcast transcript evokes a lot of thinking, and for someone just starting out his career, it was immensely useful!
Great to hear. During these times of change – huge opportunity to super-learners like you. . . go go go.
I’ve been on a huge Naval binge. His ability to break ideas down to their core and communicate it effectively is unmatched. The Navalmanack LIVES beside my bed and my desk (2 copies)