Ravikant's Guide to Wealth Creation PDF

BACKGROUND I grew up in a single-parent household with my mom working, going to school, and raising my brother and me as latchkey kids. We were very self- su cient from a very early age. There was a lot of hardship, but everyone goes through hardship. It did help me in a number of ways. We were poo...

BACKGROUND I grew up in a single-parent household with my mom working, going to school, and raising my brother and me as latchkey kids. We were very self- su cient from a very early age. There was a lot of hardship, but everyone goes through hardship. It did help me in a number of ways. We were poor immigrants. My dad came to the US—he was a pharmacist in India. But his degree wasn’t accepted here, so he worked in a hardware store. Not a great upbringing, you know. My family split up. My mother uniquely provided, against the background of hardship, unconditional and unfailing love. If you have nothing in your life, but you have at least one person that loves you unconditionally, it’ll do wonders for your self-esteem. We were in a part of New York City that isn’t very safe. Basically, the library was my after-school center. After I came back from school, I would just go straight to the library and hang out there until they closed. Then, I would come home. That was my daily routine. We moved to the US when we were very young. I didn’t have many friends, so I wasn’t very con dent. I spent a lot of time reading. My only real friends were books. Books make for great friends, because the best thinkers of the last few thousand years tell you their nuggets of wisdom. My rst job was with an illegal catering company in the back of a van delivering Indian food when I was fteen. Even when I was younger, I had a paper route and I washed dishes in the cafeteria. I was a totally unknown kid in New York City from a nothing family, an “immigrants trying to survive” situation. Then, I passed the test to get into Stuyvesant High School. That saved my life, because once I had the Stuyvesant brand, I got into an Ivy League college, which led me into tech. Stuyvesant is one of those intelligence lottery situations where you can break in with instant validation. You go from being blue collar to white collar in one move. At Dartmouth, I studied economics and computer science. There was a time when I thought I was going to be a PhD in economics. Today, I’m an investor, personally, in about two hundred companies. Advisor to a bunch. I’m on a bunch of boards. I’m also a small partner in a cryptocurrency fund because I’m really into the potential of cryptocurrencies. I’m always cooking up something new. I always have a bunch of side projects. All that, of course, in addition to being the founder and chairman of AngelList. I was born poor and miserable. I’m now pretty well-o , and I’m very happy. I worked at those. I’ve learned a few things, and some principles. I try to lay them out in a timeless manner, where you can gure it out for yourself. Because at the end of the day, I can’t quite teach anything. I can only inspire you and maybe give you a few hooks so you can remember. Live, on Twitter, it’s Naval (applause ensues…) On May 18th, 2007 PART I PART I: I: WEALTH How to get rich without getting lucky. BUILDING WEALTH Making money is not a thing you do—it’s a skill you learn. UNDERSTAND HOW WEALTH IS CREATED I like to think that if I lost all my money and you dropped me on a random street in any English-speaking country, within ve or ten years I’d be wealthy again because it’s just a skillset I’ve developed that anyone can develop. It’s not really about hard work. You can work in a restaurant eighty hours a week, and you’re not going to get rich. Getting rich is about knowing what to do, who to do it with, and when to do it. It is much more about understanding than purely hard work. Yes, hard work matters, and you can’t skimp on it. But it has to be directed in the right way. If you don’t know yet what you should work on, the most important thing is to gure it out. You should not grind at a lot of hard work until you gure out what you should be working on. I came up with the principles in my tweetstorm (below) for myself when I was really young, around thirteen or fourteen. I’ve been carrying them in my head for thirty years, and I’ve been living them. Over time (sadly or fortunately), the thing I got really good at was looking at businesses and guring out the point of maximum leverage to actually create wealth and capture some of that created wealth. This is exactly what I did my famous tweetstorm about. Of course, every one of these tweets can be extrapolated into an hour’s worth of conversation. The tweetstorm below is a good starting point. The tweetstorm tries to be information-dense, very concise, high-impact, and timeless. It has all the information and principles, so if you absorb these and you work hard over ten years, you’ll get what you want. How to Get Rich (Without Getting Lucky): ↓ 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. ↓ Understand ethical wealth creation is possible. If you secretly despise wealth, it will elude you. ↓ Ignore people playing status games. They gain status by attacking people playing wealth creation games. ↓ You’re not going to get rich renting out your time. You must own equity—a piece of a business—to gain your nancial freedom. ↓ You will get rich by giving society what it wants but does not yet know how to get. At scale. ↓ Pick an industry where you can play long-term games with long-term people. ↓ The internet has massively broadened the possible space of careers. Most people haven’t gured this out yet. ↓ Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest. ↓ Pick business partners with high intelligence, energy, and, above all, integrity. ↓ Don’t partner with cynics and pessimists. Their beliefs are self-ful lling. ↓ Learn to sell. Learn to build. If you can do both, you will be unstoppable. ↓ Arm yourself with speci c knowledge, accountability, and leverage. ↓ Speci c knowledge is knowledge you cannot be trained for. If society can train you, it can train someone else and replace you. ↓ Speci c knowledge is found by pursuing your genuine curiosity and passion rather than whatever is hot right now. ↓ Building speci c knowledge will feel like play to you but will look like work to others. ↓ When speci c knowledge is taught, it’s through apprenticeships, not schools. ↓ Speci c knowledge is often highly technical or creative. It cannot be outsourced or automated. ↓ Embrace accountability, and take business risks under your own name. Society will reward you with responsibility, equity, and leverage. ↓ “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). ↓ Capital means money. To raise money, apply your speci c knowledge with accountability and show resulting good judgment. ↓ 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. ↓ Capital and labor are permissioned leverage. Everyone is chasing capital, but someone has to give it to you. Everyone is trying to lead, but someone has to follow 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. ↓ An army of robots is freely available—it’s just packed in data centers for heat and space e ciency. Use it. ↓ If you can’t code, write books and blogs, record videos and podcasts. ↓ Leverage is a force multiplier for your judgment.  ↓ Judgment requires experience but can be built faster by learning foundational skills. ↓ There is no skill called “business.” Avoid business magazines and business classes. ↓ Study microeconomics, game theory, psychology, persuasion, ethics, mathematics, and computers. ↓ Reading is faster than listening. Doing is faster than watching. ↓ You should be too busy to “do co ee” while still keeping an uncluttered calendar. ↓ Set and enforce an aspirational personal hourly rate. If xing a problem will save less than your hourly rate, ignore it. If outsourcing a task will cost less than your hourly rate, outsource it. ↓ 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. ↓ Become the best in the world at what you do. Keep rede ning what you do until this is true. ↓ There are no get-rich-quick schemes. Those are just someone else getting rich o you. ↓ Apply speci c knowledge, with leverage, and eventually you will get what you deserve. ↓ When you’re nally wealthy, you’ll realize it wasn’t what you were seeking in the rst place. But that is for another day. Summary: Productize Yourself Your summary says “Productize yourself ”—what does that mean? “Productize” and “yourself.” “Yourself” has uniqueness. “Productize” has leverage. “Yourself” has accountability. “Productize” has speci c knowledge. “Yourself” also has speci c knowledge in there. So all of these pieces, you can combine them into these two words. If you’re looking toward the long-term goal of getting wealthy, you should ask yourself, “Is this authentic to me? Is it myself that I am projecting?” And then, “Am I productizing it? Am I scaling it? Am I scaling with labor or with capital or with code or with media?” So it’s a very handy, simple mnemonic. This is hard. This is why I say it takes decades—I’m not saying it takes decades to execute, but the better part of a decade may be guring out what you can uniquely provide. What’s the di erence between wealth and money? Money is how we transfer wealth. Money is social credits. It is the ability to have credits and debits of 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 you did in the past. Here’s a little IOU. Let’s call that money.” Wealth is the thing you want. Wealth is assets that earn while you sleep. Wealth is the factory, the robots, cranking out things. Wealth is the computer program that’s running at night, 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 productivity use of land than some commercial enterprise. So, my de nition of wealth is much more businesses and assets that can earn while you sleep. Technology democratizes consumption but consolidates production. The best person in the world at anything gets to do it for everyone. Society will pay you for creating things it wants. But society doesn’t yet know how to create those things, because if it did, they wouldn’t need you. They would already be stamped out. Almost everything in your house, in your workplace, and on the street used to be technology at one point in time. There was a time when oil was a technology that made J.D. Rockefeller rich. There was a time when cars were technology that made Henry Ford rich. So, technology is the set of things, as Alan Kay said, that don’t quite work yet [correction: Danny Hillis]. Once something works, it’s no longer technology. Society always wants new things. And if you want to be wealthy, you want to gure out which one of those things you can provide for society that it does not yet know how to get but it will want and providing it is natural to you, within your skill set, and within your capabilities. Then, you have to gure out how to scale it because if you only build one, that’s not enough. You’ve got to build thousands, or hundreds of thousands, or millions, or billions of them so everybody can have one. Steve Jobs (and his team, of course) gured out society would want smartphones. A computer in their pocket that had all the phone capability times one hundred and was easy to use. So, they gured out how to build it, and then they gured out how to scale it. FIND AND BUILD SPECIFIC KNOWLEDGE Sales skills are a form of speci c knowledge. There’s such a thing as “a natural” in sales. You run into them all the time in startups and venture capital. When you meet someone who is a natural at sales, you just know they’re amazing. They’re really good at what they do. That is a form of speci c knowledge. Obviously they learned somewhere, but they didn’t learn it in a classroom setting. They learned probably in their childhood in the school yard, or they learned negotiating with their parents. Maybe some is a genetic component in the DNA. But you can improve sales skills. You can read Robert Cialdini, you can go to a sales training seminar, you can do door-to-door sales. It is brutal but will train you very quickly. You can de nitely improve your sales skills. Speci c knowledge cannot be taught, but it can be learned. When I talk about speci c knowledge, I mean gure out what you were doing as a kid or teenager almost e ortlessly. Something you didn’t even consider a skill, but people around you noticed. Your mother or your best friend growing up would know. Examples of what your speci c knowledge could be: Sales skills Musical talents, with the ability to pick up any instrument An obsessive personality: you dive into things and remember them quickly  Love for science ction: you were into reading sci- , which means you absorb a lot of knowledge very quickly Playing a lot of games, you understand game theory pretty well Gossiping, digging into your friend network. That might make you into a very interesting journalist. The speci c knowledge is sort of this weird combination of unique traits from your DNA, your unique upbringing, and your response to it. It’s almost baked into your personality and your identity. Then you can hone it. No one can compete with you on being you. Most of life is a search for who and what needs you the most. For example, I love to read, and I love technology. I learn very quickly, and I get bored fast. If I had gone into a profession where I was required to tunnel down for twenty years into the same topic, it wouldn’t have worked. I’m in venture investing, which requires me to come up to speed very, very quickly on new technologies (and I’m rewarded for getting bored because new technologies come along). It matches up pretty well with my speci c knowledge and skill sets. I wanted to be a scientist. That is where a lot of my moral hierarchy comes from. I view scientists as being at the top of the production chain for humanity. The group of scientists who have made real breakthroughs and contributions probably added more to human society, I think, than any single other class of human beings. Not to take away anything from art or politics or engineering or business, but without science, we’d still be scrambling in the dirt ghting with sticks and trying to start res. Society, business, & money are downstream of technology, which is itself downstream of science. Science applied is the engine of humanity. Corollary: Applied Scientists are the most powerful people in the world. This will be more obvious in the coming years. My whole value system was built around scientists, and I wanted to be a great scientist. But when I actually look back at what I was uniquely good at and what I ended up spending my time doing, it was more around making money, tinkering with technology, and selling people on things. Explaining things and talking to people. I have some sales skills, which is a form of speci c knowledge. I have some analytical skills on how to make money. And I have this ability to absorb data, obsess about it, and break it down—that is a speci c skill that I have. I also love tinkering with technology. And all of this stu feels like play to me, but it looks like work to others. There are other people to whom these things would be hard, and they say, “Well, how do I get good at being pithy and selling ideas?” Well, if you’re not already good at it or if you’re not really into it, maybe it’s not your thing— focus on the thing that you are really into. The rst person to actually point out my real speci c knowledge was my mother. She did it as an aside, talking from the kitchen, and she said it when I was fteen or sixteen years old. I was telling a friend of mine that I want to be an astrophysicist, and she said, “No, you’re going to go into business.” I was like, “What, my mom’s telling me I’m going to be in business? I’m going to be an astrophysicist. Mom doesn’t know she’s talking about.” But Mom knew exactly what she was talking about. Speci c knowledge is found much more by pursuing your innate talents, your genuine curiosity, and your passion. It’s not by going to school for whatever is the hottest job; it’s not by going into whatever eld investors say is the hottest. Very often, speci c knowledge is at the edge of knowledge. It’s also stu that’s only now being gured out or is really hard to gure out. If you’re not 100 percent into it, somebody else who is 100 percent into it will outperform you. And they won’t just outperform you by a little bit—they’ll outperform you by a lot because now we’re operating the domain of ideas, compound interest really applies and leverage really applies. The internet has massively broadened the possible space of careers. Most people haven’t gured this out yet. You can go on the internet, and you can nd 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. The internet enables any niche interest, as long as you’re the best person at it to scale out. And the great news is because every human is di erent, everyone is the best at something—being themselves. Another tweet I had that is worth weaving in, but didn’t go into the “How to Get Rich” tweetstorm, was very simple: “Escape competition through authenticity.” Basically, 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 di erent. Don’t copy. If you are fundamentally building and marketing something that is an extension of who you are, no one can compete with you on that. Who’s going to compete with Joe Rogan or Scott Adams? It’s impossible. Is somebody else going to come along and write a better Dilbert? No. Is someone going to compete with Bill Watterson and create a better Calvin and Hobbes? No. They’re being authentic. The best jobs are neither decreed nor degreed. They are creative expressions of continuous learners in free markets. The most important skill for getting rich is becoming a perpetual learner. You have to know how to learn anything you want to learn. The old model of making money is going to school for four years, getting your degree, and working as a professional for thirty years. But things change fast now. Now, you have to come up to speed on a new profession within nine months, and it’s obsolete four years later. But within those three productive years, you can get very wealthy. It’s much more important today to be able to become an expert in a brand- new eld in nine to twelve months than to have studied the “right” thing a long time ago. You really care about having studied the foundations, so you’re not scared of any book. If you go to the library and there’s a book you cannot understand, you have to dig down and say, “What is the foundation required for me to learn this?” Foundations are super important. Basic arithmetic and numeracy are way more important in life than doing calculus. Similarly, being able to convey yourself simply using ordinary English words is far more important than being able to write poetry, having an extensive vocabulary, or speaking seven di erent foreign languages. Knowing how to be persuasive when speaking is far more important than being an expert digital marketer or click optimizer. Foundations are key. It’s much better to be at 9/10 or 10/10 on foundations than to try and get super deep into things. You do need to be deep in something because otherwise you’ll be a mile wide and an inch deep and you won’t get what you want out of life. You can only achieve mastery in one or two things. It’s usually things you’re obsessed about. PLAY LONG-TERM GAMES WITH LONG-TERM PEOPLE You said, “All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest.” How does one know if they’re earning compound interest? Compound interest is a very powerful concept. Compound interest applies to more than just compounding capital. Compounding capital is just the beginning. Compounding in business relationships is very important. Look at some of the top roles in society, like why someone is a CEO of a public company or managing billions of dollars. It’s because people trust them. They are trusted because the relationships they’ve built and the work they’ve done has compounded. They’ve stuck with the business and shown themselves (in a visible and accountable way) to be high-integrity people. Compound interest also happens in your reputation. If you have a sterling reputation and you keep building it for decades upon decades, people will notice. Your reputation will literally end up being thousands or tens of thousands of times more valuable than somebody else who was very talented but is not keeping the compound interest in reputation going. This is also true when you’re working with individual people. If you’ve worked with somebody for ve or ten years and you still enjoy working with them, obviously you trust them, and the little foibles are gone. All the normal negotiations in business relationships can work very simply because you trust each other—you know it will work out. For example, there’s another Angel in Silicon Valley named Elad Gil who I like to do deals with. I love working with Elad because I know when the deal is being done, he will bend over backward to give me extra. He will always round o in my favor if there’s an extra dollar being delivered here or there. If there’s some cost to pay, he will pay it out of his own pocket, and he won’t even mention it to me. Because he goes so far out of his way to treat me so well, I send him every deal I have—I try to include him in everything. Then, I go out of my way to try and pay for him. Compounding in those relationships is very valuable. Intentions don’t matter. Actions do. That’s why being ethical is hard. When you nd the right thing to do, when you nd the right people to work with, invest deeply. Sticking with it for decades is really how you make the big returns in your relationships and in your money. So, compound interest is very important. 99% of e ort is wasted. Obviously, nothing is ever completely wasted because it’s all a learning moment. You can learn from anything. But for example, when you go back to school, 99 percent of the term papers you did, books you read, exercises you did, things you learned, they don’t really apply. You might have read geography and history you never reuse. You might have studied a language you don’t speak anymore. You might have studied a branch of mathematics you completely forgot. Of course, these are learning experiences. You did learn. You learned the value of hard work; you might have learned something that went deep into your psyche and became a piece of what you’re doing now. But at least when it comes to the goal-oriented life, only about 1 percent of the e orts you made paid o. Another example is all the people you dated until you met your husband or wife. It was wasted time in the goal sense. Not wasted in the exponential sense, not wasted in the learning sense, but de nitely wasted in the goal sense. The reason I say this is not to make some glib comment about how 99 percent of your life is wasted and only 1 percent is useful. I say this because you should be very thoughtful and realize in most things (relationships, work, even in learning) what you’re trying to do is nd the thing you can go all-in on to earn compound interest. When you’re dating, the instant you know this relationship is not going to be the one that leads to marriage, you should probably move on. When you’re studying something, like a geography or history class, and you realize you are never going to use the information, drop the class. It’s a waste of time. It’s a waste of your brain energy. I’m not saying don’t do the 99 percent, because it’s very hard to identify what the 1 percent is. What I’m saying is: when you nd the 1 percent of your discipline which will not be wasted, which you’ll be able to invest in for the rest of your life and has meaning to you—go all-in and forget about the rest. TAKE ON ACCOUNTABILITY Embrace accountability and take business risks under your own name. Society will reward you with responsibility, equity, and leverage. To get rich, you need leverage. Leverage comes in labor, comes in capital, or it can come through code or media. But most of these, like labor and capital, people have to give to you. For labor, somebody has to follow you. For capital, somebody has to give you money, assets to manage, or machines. So to get these things, you have to build credibility, and you have to do it under your own name as much as possible, which is risky. So, accountability is a double-edged thing. It allows you to take credit when things go well and to bear the brunt of the failure when things go badly. Clear accountability is important. Without accountability, you don’t have incentives. Without accountability, you can’t build credibility. But you take risks. You risk failure. You risk humiliation. You risk failure under your own name. Luckily, in modern society, there’s no more debtors’ prison and people aren’t imprisoned or executed for losing other people’s money, but we’re still socially hardwired to not fail in public under our own names. The people who have the ability to fail in public under their own names actually gain a lot of power. I’ll give a personal anecdote. Up until about 2013, 2014, my public persona was entirely around startups and investing. Only around 2014, 2015 did I start talking about philosophy and psychological things and broader things. It made me a little nervous because I was doing it under my own name. There were de nitely people in the industry who sent me messages through the backchannel like, “What are you doing? You’re ending your career. This is stupid.” I kind of just went with it. I took a risk. Same with crypto. Early on, I took a risk. But when you put your name out there, you take a risk with certain things. You also get to reap the rewards. You get the bene ts. In the old days, the captain was expected to go down with the ship. If the ship was sinking, then literally the last person to get o was the captain. Accountability does come with real risks, but we’re talking about a business context. The risk here would be you would probably be the last one to get your capital back out. You’d be the last one to get paid for your time. The time that you put in, the capital you put into the company, these are at risk. Realize that in modern society, the downside risk is not that large. Even personal bankruptcy can wipe the debts clean in good ecosystems. I’m most familiar with Silicon Valley, but generally, people will forgive failures as long as you were honest and made a high-integrity e ort. There’s not really that much to fear in terms of failure, and so people should take on a lot more accountability than they do. BUILD OR BUY EQUITY IN A BUSINESS If you don’t own a piece of a business, you don’t have a path towards nancial freedom. Why is owning equity in a business important to becoming rich? It’s ownership versus wage work. If you are paid for renting out your time, even lawyers and doctors, you can make some money, but you’re not going to make the money that gives you nancial freedom. You’re not going to have passive income where a business is earning for you while you are on vacation. This is probably one of the most important points. People seem to think you can create wealth—make money through work. It’s probably not going to work. There are many reasons for that. Without ownership, your inputs are very closely tied to your outputs. In almost any salaried job, even one paying a lot per hour like a lawyer or a doctor, you’re still putting in the hours, and every hour you get paid. Without ownership, 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 a private practice. The private practice builds a brand, and the brand attracts people. Or they build some kind of a medical device, a procedure, or a process with an intellectual property. Essentially, you’re working for somebody else, and that person is taking on the risk and has the accountability, the intellectual property, and the brand. They’re not going to pay you enough. They’re going to pay you the bare minimum they have to, to get you to do their job. That can be a high bare minimum, but it’s still not going to be true wealth where you’re retired but still earning. Owning equity in a company basically means you own the upside. When you own debt, you own guaranteed revenue streams and you own the downside. You want to own equity. If you don’t own equity in a business, your odds of making money are very slim. You have to work up to the point where you can own equity in a business. You could own equity as a small shareholder where you bought stock. You could also own it as an owner where you started the company. Ownership is really important. Everybody who really makes money at some point owns a piece of a product, a business, or some IP. That can be through stock options if you work at a tech company. That’s a ne way to start. But usually, the real wealth is created by starting your own companies or even by investing. In an investment rm, they’re buying equity. These are the routes to wealth. It doesn’t come through the hours. FIND A POSITION OF LEVERAGE We live in an age of in nite leverage, and the economic rewards for genuine intellectual curiosity have never been higher. Following your genuine intellectual curiosity is a better foundation for a career than following whatever is making money right now. Knowledge only you know or only a small set of people knows is going to come out of your passions and your hobbies, oddly enough. If you have hobbies around your intellectual curiosity, you’re more likely to develop these passions. If it entertains you now but will bore you someday, it’s a distraction. Keep looking. I only really want to do things for their own sake. That is one de nition of art. Whether it’s business, exercise, romance, friendship, whatever, I think the meaning of life is to do things for their own sake. Ironically, when you do things for their own sake, you create your best work. Even if you’re just trying to make money, you will actually be the most successful. The year I generated the most wealth for myself was actually the year I worked the least hard and cared the least about the future. I was mostly doing things for the sheer fun of it. I was basically telling people, “I’m retired, I’m not working.” Then, I had the time for whatever was my highest valued project in front of me. By doing things for their own sake, I did them at their best. The less you want something, the less you’re thinking about it, the less you’re obsessing over it, the more you’re going to do it in a natural way. The more you’re going to do it for yourself. You’re going to do it in a way you’re good at, and you’re going to stick with it. The people around you will see the quality of your work is higher. Follow your intellectual curiosity more than whatever is “hot” right now. If your curiosity ever leads you to a place where society eventually wants to go, you’ll get paid extremely well. You’re more likely to have skills society does not yet know how to train other people to do. If someone can train other people how to do something, then they can replace you. If they can replace you, then they don’t have to pay you a lot. You want to know how to do something other people don’t know how to do at the time period when those skills are in demand. If they can train you to do it, then eventually they will train a computer to do it. You get rewarded by society for giving it what it wants and doesn’t know how to get elsewhere. A lot of people think you can go to school and study for how to make money, but the reality is, there’s no skill called “business.” Think about what product or service society wants but does not yet know how to get. You want to become the person who delivers it and delivers it at scale. That is really the challenge of how to make money. Now, the problem is becoming good at whatever “it” is. It moves around from generation to generation, but a lot of it happens to be in technology. You are waiting for your moment when something emerges in the world, they need a skill set, and you’re uniquely quali ed. You build your brand in the meantime on Twitter, on YouTube, and by giving away free work. You make a name for yourself, and you take some risk in the process. When it is time to move on the opportunity, you can do so with leverage—the maximum leverage possible. There are three broad classes of leverage: One form of leverage is labor—other labor— humans working for you. It is the oldest form of leverage, and actually not a great one in the modern world. I would argue this is the worst form of leverage that you could possibly use. Managing other people is incredibly messy. It requires tremendous leadership skills. You’re one short hop from a mutiny or getting eaten or torn apart by the mob. Money is good as a form of leverage. It means every time you make a decision, you multiply it with money. Capital is a trickier form of leverage to use. It’s more modern. It’s the one that people have used to get fabulously wealthy in the last century. It’s probably been the dominant form of leverage in the last century. You can see this by looking for the richest people. It’s bankers, politicians in corrupt countries who print money, essentially people who move large amounts of money around. If you look at the top of very large companies, outside of technology companies, in many, many large old companies, the CEO job is really a nancial job. It scales very, very well. If you get good at managing capital, you can manage more and more capital much more easily than you can manage more and more people. The nal form of leverage is brand new—the most democratic form. It is: “products with no marginal cost of replication.” This includes books, media, movies, and code. Code is probably the most powerful form of permissionless leverage. All you need is a computer—you don’t need anyone’s permission. Forget rich versus poor, white-collar versus blue. It’s now leveraged versus un-leveraged. The most interesting and the most important form of leverage is the idea of products that have no marginal cost of replication. This is the new form of leverage. This was only invented in the last few hundred years. It started with the printing press. It accelerated with broadcast media, and now it’s really blown up with the internet and with coding. Now, you can multiply your e orts without involving other humans and without needing money from other humans. This book is a form of leverage. Long ago, I would have had to sit in a lecture hall and lecture each of you personally. I would have maybe reached a few hundred people, and that would have been that. This newest form of leverage is where all the new fortunes are made, all the new billionaires. For the last generation, fortunes were made by capital. The people who made fortunes were the Warren Bu etts of the world. But the new generation’s fortunes are all made through code or media. Joe Rogan making $50 million to $100 million a year from his podcast. You’re going to have PewDiePie. I don’t know how much money he’s rolling in, but he’s bigger than the news. And of course, there’s Je Bezos, Mark Zuckerberg, Larry Page, Sergey Brin, Bill Gates, and Steve Jobs. Their wealth is all code- based leverage. Probably the most interesting thing to keep in mind about new forms of leverage is they are permissionless. They don’t require somebody else’s permission for you to use them or succeed. For labor leverage, somebody has to decide to follow you. For capital leverage, somebody has to give you money to invest or to turn into a product. Coding, writing books, recording podcasts, tweeting, YouTubing—these kinds of things are permissionless. You don’t need anyone’s permission to do them, and that’s why they are very egalitarian. They’re great equalizers of leverage. Every great software developer, for example, now has an army of robots working for him at nighttime while he or she sleeps, after they’ve written the code, and it’s cranking away. You’re never going to get rich renting out your time. Whenever you can in life, optimize for independence rather than pay. If you have independence and you’re accountable on your output, as opposed to your input—that’s the dream. Humans evolved in societies where there was no leverage. If I was chopping wood or carrying water for you, you knew eight hours put in would be equal to about eight hours of output. Now we’ve invented leverage—through capital, cooperation, technology, productivity, all these means. We live in an age of leverage. As a worker, you want to be as leveraged as possible so you have a huge impact without as much time or physical e ort. A leveraged worker can out-produce a non-leveraged worker by a factor of one thousand or ten thousand. With a leveraged worker, judgment is far more important than how much time they put in or how hard they work. Forget 10x programmers. 1,000x programmers really exist, we just don’t fully acknowledge it. See @ID_AA_Carmack, @notch, Satoshi Nakamoto, etc. For example, a good software engineer, just by writing the right little piece of code and creating the right little application, can literally create half a billion dollars’ worth of value for a company. But ten engineers working ten times as hard, just because they choose the wrong model, the wrong product, wrote it the wrong way, or put in the wrong viral loop, have basically wasted their time. Inputs don’t match outputs, especially for leveraged workers. What you want in life is to be in control of your time. You want to get into a leveraged job where you control your own time and you’re tracked on the outputs. If you do something incredible to move the needle on the business, they have to pay you. Especially if they don’t know how you did it because it’s innate to your obsession or your skill or your innate abilities, they’re going to have to keep paying you to do it. If you have speci c knowledge, you have accountability and you have leverage; they have to pay you what you’re worth. If they pay you what you’re worth, then you can get your time back—you can be hyper-e cient. You’re not doing meetings for meetings’ sake, you’re not trying to impress other people, you’re not writing things down to make it look like you did work. All you care about is the actual work itself. When you do just the actual work itself, you’ll be far more productive, far more e cient. You’ll work when you feel like it—when you’re high-energy— and you won’t be trying to struggle through when you’re low energy. You’ll gain your time back. Forty hour work weeks are a relic of the Industrial Age. Knowledge workers function like athletes—train and sprint, then rest and reassess. Sales is an example—especially very high-end sales. If you’re a real estate agent out there selling houses, it’s not a great job, necessarily. It’s very crowded. But if you’re a top-tier real estate agent, you know how to market yourself and you know how to sell houses, it’s possible you could sell $5 million mansions in one tenth of the time while somebody else is struggling to sell $100,000 apartments or condos. Real estate agent is a job with input and output disconnected. Building any product and selling any product ts this description. And fundamentally, what else is there? Where you don’t necessarily want to be is a support role, like customer service. In customer service, unfortunately, inputs and outputs relate relatively close to each other, and the hours you put in matter. Tools and leverage create this disconnection between inputs and outputs. The higher the creativity component of a profession, the more likely it is to have disconnected inputs and outputs. If you’re looking at professions where your inputs and your outputs are highly connected, it’s going to be very hard to create wealth and make wealth for yourself in that process. If you want to be part of a great tech company, then you need to be able to SELL or BUILD. If you don’t do either, learn. Learn to sell, learn to build. If you can do both, you will be unstoppable. These are two very broad categories. One is building the product. This is hard, and it’s multivariate. It can include design; it can include development; it can include manufacturing, logistics, procurement; and it can even be designing and operating a service. It has many, many de nitions. But in every industry, there is a de nition of the builder. In our tech industry, it’s the CTO, it’s the programmer, it’s the software engineer or hardware engineer. But even in the laundry business, it could be the person who’s building the laundry service, who is making the trains run on time, who’s making sure all the clothes end up in the right place at the right time, and so on. The other side of it is sales. Again, selling has a very broad de nition. Selling doesn’t necessarily just mean selling to individual customers, but it can mean marketing, it can mean communicating, it can mean recruiting, it can mean raising money, it can mean inspiring people, it could mean doing PR. It’s a broad umbrella category. Earn with your mind, not your time. Let’s talk more about the real estate business. The worst kind of job is someone who’s doing labor to repair a house. Maybe you get paid ten dollars or twenty dollars an hour. You go to people’s houses, your boss demands you’re there at 8:00 a.m., and you repair your piece of the house. Here, you have zero leverage. You have some accountability, but not really, because your accountability is to your boss, not to the client. You don’t have any real speci c knowledge, since what you’re doing is labor lots of people can do. You’re not going to get paid a lot. You’re getting paid minimum wage plus a little bit for your skill and your time. The next level up might be the general contractor working on the house for the owner. They may be getting paid $50,000 to do the whole project, then they’re paying the labor fteen dollars an hour and they’re keeping the di erence. A general contractor is obviously a better place to be. But how do we measure it? How do we know it’s better? Well, we know it’s better because this person has some accountability. They’re responsible for the outcome, they have to sweat at night if things aren’t working. Contractors have leverage through laborers working for them. They also have little bit more speci c knowledge: how to organize a team, make them show up on time, and how to deal with city regulations. The next level up might be a real estate developer. A developer is someone who’s going to buy a property, hire a bunch of contractors, and transform it into something higher value. They probably have to take out a loan to buy a house or go to investors to raise money. They buy the old house, tear it down, rebuild it, and sell it. Instead of $50,000 like the general contractor, or fteen dollars an hour like the laborer, the developer might be able to make a million dollars or half a million dollars in pro t when they sell the house for more than they bought it for, including the expenses of construction. But now, notice what is required from the developer: a very high level of accountability. The developer takes on more risk, more accountability, has more leverage, and needs to have more speci c knowledge. They need to understand fundraising, city regulations, where the real estate market is headed, and whether they should take the risk or not. It is more di cult. The next level up might be someone who’s managing money in a real estate fund. They have an enormous amount of capital leverage. They’re dealing with lots and lots of developers, and they’re buying huge amounts of housing inventory. One level beyond that might be somebody who says, “Actually, I want to bring the maximum leverage to bear in this market and the maximum speci c knowledge.” That person would say, “Well, I understand real estate, and I understand everything from basic housing construction, to building properties and selling them, to how real estate markets move and thrive, and I also understand the technology business. I understand how to recruit developers, how to write code, and how to build a good product, and I understand how to raise money from venture capitalists, how to return it, and how all of that works.” Obviously, not a single person may know this. You may pull a team together to do it where each have di erent skill sets, but that combined entity would have speci c knowledge in technology and in real estate. It would have massive accountability because that company’s name would be a very high- risk, high-reward e ort attached to the whole thing, and people would devote their lives to it and take on signi cant risk. It would have leverage in code with lots of developers. It would have capital with investors putting money in and the founder’s own capital. It would have some of the highest-quality labor you can nd, which is high-quality engineers, designers, and marketers who are working on the company. Then, you may end up with a Trulia, Red n, or Zillow company, and then the upside could potentially be in the billions of dollars, or the hundreds of millions of dollars. Each level has increasing leverage, increasing accountability, increasingly speci c knowledge. You’re adding in money-based leverage on top of labor- based leverage. Adding in code-based leverage on top of money and labor allows you to actually create something bigger and bigger and get closer and closer to owning all the upside, not just being paid a salary. You start as a salaried employee. But you want to work your way up to try and get higher leverage, more accountability, and speci c knowledge. The combination of those over a long period of time with the magic of compound interest will make you wealthy. The one thing you have to avoid is the risk of ruin. Avoiding ruin means stay out of jail. So, don’t do anything illegal. It’s never worth it to wear an orange jumpsuit. Stay out of total catastrophic loss. Avoiding ruin could also mean you stay out of things that could be physically dangerous or hurt your body. You have to watch your health. Stay out of things that could cause you to lose all of your capital, all of your savings. Don’t gamble everything on one go. Instead, take rationally optimistic bets with big upsides. GET PAID FOR YOUR JUDGMENT Choosing what kinds of jobs, careers, or elds you get into and what sort of deals you’re willing to take from your employer will give you much more free time. Then, you don’t have to worry as much about time management. I would love to be paid purely for my judgment, not for any work. I want a robot, capital, or computer to do the work, but I want to be paid for my judgment. I think every human should aspire to being knowledgeable about certain things and being paid for our unique knowledge. We have as much leverage as is possible in our business, whether it’s through robots or computers or what have you. Then, we can be masters of our own time because we are just being tracked on outputs and not inputs. Imagine someone comes along who demonstrably has slightly better judgment. They’re right 85 percent of the time instead of 75 percent. You will pay them $50 million, $100 million, $200 million, whatever it takes, because 10 percent better judgment steering a $100 billion ship is very valuable. CEOs are highly paid because of their leverage. Small di erences in judgment and capability really get ampli ed. Demonstrated judgment—credibility around the judgment—is so critical. Warren Bu ett wins here because he has massive credibility. He’s been highly accountable. He’s been right over and over in the public domain. He’s built a reputation for very high integrity, so you can trust him. People will throw in nite leverage behind him because of his judgment. Nobody asks him how hard he works. Nobody asks him when he wakes up or when he goes to sleep. They’re like, “Warren, just do your thing.” Judgment—especially demonstrated judgment, with high accountability and a clear track record—is critical. We waste our time with short-term thinking and busywork. Warren Bu ett spends a year deciding and a day acting. That act lasts decades. Just from being marginally better, like running a quarter mile a fraction of a second faster, some people get paid a lot more—orders of magnitude more. Leverage magni es those di erences even more. Being at the extreme in your art is very important in the age of leverage. PRIORITIZE AND FOCUS I’ve encountered plenty of bad luck along the way. The rst little fortune I made I instantly lost in the stock market. The second little fortune I made, or should have made, I basically got cheated out of by my business partners. It’s only the third time around that has been a charm. Even then, it has been a slow and steady struggle. I haven’t made money in my life in one giant payout. It has always been a whole bunch of small things piling up. It’s more about consistently creating wealth by creating businesses, creating opportunities, and creating investments. It hasn’t been a giant one- o thing. My personal wealth has not been generated by one big year. It just stacks up a little bit, a few chips at a time: more options, more businesses, more investments, more things I can do. Thanks to the internet, opportunities are massively abundant. In fact, I have too many ways to make money. I don’t have enough time. I literally have opportunities pouring out of my ears, and I keep running out of time. There are so many ways to create wealth, to create products, to create businesses, and to get paid by society as a byproduct. I just can’t handle them all. Value your time at an hourly rate, and ruthlessly spend to save time at that rate. You will never be worth more than you think you’re worth. 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. Even when I was young, I just decided I was worth a lot more than the market thought I was worth, and I started treating myself that way. Always factor your time into every decision. How much time does it take? It’s going to take you an hour to get across town to get something. If you value yourself at one hundred dollars an hour, that’s basically throwing one hundred dollars out of your pocket. Are you going to do that? Fast-forward to your wealthy self and pick some intermediate hourly rate. For me, believe it or not, back when you could have hired me…Which now obviously you can’t, but back when you could have hired me…this was true a decade ago or even two decades ago, before I had any real money. My hourly rate, I used to say to myself over and over, is $5,000 an hour. Today when I look back, really it was about $1,000 an hour. Of course, I still ended up doing stupid things like arguing with the electrician or returning the broken speaker, but I shouldn’t have, and I did a lot less than any of my friends would. I would make a theatrical show out of throwing something in the trash pile or giving it to Salvation Army rather than trying to return it or handing something to people rather than trying to x it. I would argue with my girlfriends, and even today it’s my wife, “I don’t do that. That’s not a problem that I solve.” I still argue that with my mother when she hands me little to-do’s. I just don’t do that. I would rather hire you an assistant. This was true even when I didn’t have money. Another way of thinking about something is, if you can outsource something or not do something for less than your hourly rate, outsource it or don’t do it. If you can hire someone to do it for less than your hourly rate, hire them. That even includes things like cooking. You may want to eat your healthy home cooked meals, but if you can outsource it, do that instead. Set a very high hourly aspirational rate for yourself and stick to it. It should seem and feel absurdly high. If it doesn’t, it’s not high enough. Whatever you picked, my advice to you would be to raise it. Like I said, for myself, even before I had money, for the longest time I used $5,000 an hour. And if you extrapolate that out into what it looks like as an annual salary, it’s multiple millions of dollars per year. Ironically, I actually think I’ve beaten it. I’m not the hardest working person —I’m actually a lazy person. I work through bursts of energy where I’m really motivated with something. If I actually look at how much I’ve earned per actual hour that I’ve put in, it’s probably quite a bit higher than that. Can you expand on your statement, “If you secretly despise wealth, it will elude you”? If you get into a relative mindset, you’re always going to hate people who do better than you, you’re always going to be jealous or envious of them. They’ll sense those feelings when you try and do business with them. When you try and do business with somebody, if you have any bad thoughts or any judgments about them, they will feel it. Humans are wired to feel what the other person deep down inside feels. You have to get out of a relative mindset. Literally, being anti-wealth will prevent you from becoming wealthy, because you will not have the right mindset for it, you won’t have the right spirit, and you won’t be dealing with people on the right level. Be optimistic, be positive. It’s important. Optimists actually do better in the long run. The business world has many people playing zero sum games and a few playing positive sum games searching for each other in the crowd. There are fundamentally two huge games in life that people play. One is the money game. Because money is not going to solve all of your problems, but it’s going to solve all of your money problems. People realize that, so they want to make money. But at the same time, many of them, deep down, believe they can’t make money. They don’t want any wealth creation to happen. So, they attack the whole enterprise by saying, “Well, making money is evil. You shouldn’t do it.” But they’re actually playing the other game, which is the 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.” Status is your ranking in the social hierarchy. Wealth creation is an evolutionarily recent positive-sum game. Status is an old zero-sum game. Those attacking wealth creation are often just seeking status. Status is a zero-sum game. It’s a very old game. We’ve been playing it since monkey tribes. It’s hierarchical. 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 are an example of a status game. To be the winner, there must be a loser. I don’t fundamentally love status games. They play an important role in our society, so we can gure out who’s in charge. But fundamentally, you play them because they’re a necessary evil. The problem is, to win at a status game, you have to put somebody else down. That’s why you should avoid status games in your life—they make you into an angry, combative person. You’re always ghting to put other people down, to put yourself and the people you like up. Status games are always going to exist. There’s no way around it, but realize most of the time, when you’re trying to create wealth and you’re getting attacked by someone else, they’re trying to increase their own status at your expense. They’re playing a di erent game. And it’s a worse game. It’s a zero- sum game instead of a positive-sum game. Play stupid games, win stupid prizes. What is the most important thing to do for younger people starting out? Spend more time making the big decisions. There are basically three really big decisions you make in your early life: where you live, who you’re with, and what you do. We spend very little time deciding which relationship to get into. We spend so much time in a job, but we spend so little time deciding which job to get into. Choosing what city to live in can almost completely determine the trajectory of your life, but we spend so little time trying to gure out what city to live in. Advice to a young engineer considering moving to San Francisco: “Do you want to leave your friends behind? Or be the one left behind?” If you’re going to live in a city for ten years, if you’re going to be in a job for ve years, if you’re in a relationship for a decade, you should be spending one to two years deciding these things. These are highly dominating decisions. Those three decisions really matter. You have to say no to everything and free up your time so you can solve the important problems. Those three are probably the three biggest ones. What are one or two steps you’d take to surround yourself with successf ul people? Figure out what you’re good at, and start helping other people with it. Give it away. Pay it forward. Karma works because people are consistent. On a long enough timescale, you will attract what you project. But don’t measure— your patience will run out if you count. An old boss once warned: “You’ll never be rich since you’re obviously smart, and someone will always o er you a job that’s just good enough.” How did you decide to start your rst company? I was working at this tech company called @Home Network, and I told everybody around me—my boss, coworkers, my friends, “In Silicon Valley, all of these other people are starting companies. It looks like they can do it. I’m going to start a company. I’m just here temporarily. I’m an entrepreneur.” …I didn’t actually mean to trick myself into it. It wasn’t a deliberate, calculated thing. I was just venting, talking out loud, being overly honest. But I didn’t actually start a company. This was in 1996, it was a much scarier, more di cult proposition to start a company then. Sure enough, everyone started saying “What are you still doing here? I thought you were leaving to start a company?” and “Wow, you’re still here…” I was literally embarrassed into starting my own company. Yes, I know some people aren’t necessarily ready to be entrepreneurs, but long-term, where did we come up with this idea the correct logical thing to do is for everybody to work for somebody else? It is a very hierarchical model. FIND WORK THAT FEELS LIKE PLAY Humans evolved as hunters and gatherers where we all worked for ourselves. It’s only at the beginning of agriculture we became more hierarchical. The Industrial Revolution and factories made us extremely hierarchical because one individual couldn’t necessarily own or build a factory, but now, thanks to the internet, we’re going back to an age where more and more people can work for themselves. I would rather be a failed entrepreneur than someone who never tried. Because even a failed entrepreneur has the skill set to make it on their own. There are almost 7 billion people on this planet. Someday, I hope, there will be almost 7 billion companies. I learned how to make money because it was a necessity. After it stopped being a necessity, I stopped caring about it. At least for me, work was a means to an end. Making money was a means to an end. I’m much more interested in solving problems than I am in making money. Any end goal will just lead to another goal, lead to another goal. We just play games in life. When you grow up, you’re playing the school game, or you’re playing the social game. Then you’re playing the money game, and then you’re playing the status game. These games just have longer and longer and longer-lived horizons. At some point, at least I believe, these are all just games. These are games where the outcome really stops mattering once you see through the game. Then you just get tired of games. I would say I’m at the stage where I’m just tired of games. I don’t think there is any end goal or purpose. I’m just living life as I want to. I’m literally just doing it moment to moment. I want to be o the hedonic treadmill. What you really want is freedom. You want freedom from your money problems, right? I think that’s okay. Once you can solve your money problems, either by lowering your lifestyle or by making enough money, you want to retire. Not retirement at sixty- ve years old, sitting in a nursing home collecting a check retirement—it’s a di erent de nition. What is your de nition of retirement? Retirement is when you stop sacri cing today for an imaginary tomorrow. When today is complete, in and of itself, you’re retired. How do you get there? Well, one way is to have so much money saved that your passive income (without you lifting a nger) covers your burn rate. A second is you just drive your burn rate down to zero—you become a monk. A third is you’re doing something you love. You enjoy it so much, it’s not about the money. So there are multiple ways to retirement. The way to get out of the competition trap is to be authentic, to nd the thing you know how to do better than anybody. You know how to do it better because you love it, and no one can compete with you. If you love to do it, be authentic, and then gure out how to map that to what society actually wants. Apply some leverage and put your name on it. You take the risks, but you gain the rewards, have ownership and equity in what you’re doing, and just crank it up. Did your motivation to earn money drop after you become nancially independent? Yes and no. It did in the sense the desperation was gone. But if anything, creating businesses and making money are now more of an “art.” Whether in commerce, science, or politics—history remembers the artists. Art is creativity. Art is anything done for its own sake. What are the things that are done for their own sake, and there’s nothing behind them? Loving somebody, creating something, playing. To me, creating businesses is play. I create businesses because it’s fun, because I’m into the product. I can create a new business within three months: raise the money, assemble a team, and launch it. It’s fun for me. It’s really cool to see what can I put together. It makes money almost as a side e ect. Creating businesses is the game I became good at. It’s just my motivation has shifted from being goal- oriented to being artistic. Ironically, I think I’m much better at it now. Even when I invest, it’s because I like the people involved, I like hanging out with them, I learn from them, I think the product is really cool. These days, I will pass on great investments because I don’t nd the products interesting. These are not 100 percent-or-nothing things. You can start moving more and more toward that goal in your life. It’s a goal. When I was younger, I used to be so desperate to make money that I would have done anything. If you’d shown up and said, “Hey, I’ve got a sewage trucking business, want to go into that?” I would have said, “Great, I want to make money!” Thank God no one gave me that opportunity. I’m glad I went down the road of technology and science, which I genuinely enjoy. I got to combine my vocation and my avocation. I’m always “working.” It looks like work to others, but it feels like play to me. And that’s how I know no one can compete with me on it. Because I’m just playing, for sixteen hours a day. If others want to compete with me, they’re going to work, and they’re going to lose because they’re not going to do it for sixteen hours a day, seven days a week. What was your gure where you thought you were nancially safe? Money is not the root of all evil; there’s nothing evil about it. But the lust for money is bad. The lust for money is not bad in a social sense. It’s not bad in the sense of “you’re a bad person for lusting for money.” It’s bad for you. Lusting for money is bad for us because it is a bottomless pit. It will always occupy your mind. If you love money, and you make it, there’s never enough. There is never enough because the desire is turned on and doesn’t turn o at some number. It’s a fallacy to think it turns o at some number. The punishment for the love of money is delivered at the same time as the money. As you make money, you just want even more, and you become paranoid and fearful of losing what you do have. There’s no free lunch. You make money to solve your money and material problems. I think the best way to stay away from this constant love of money is to not upgrade your lifestyle as you make money. It’s very easy to keep upgrading your lifestyle as you make money. But if you can hold your lifestyle xed and hopefully make your money in giant lump sums as opposed to a trickle at a time, you won’t have time to upgrade your lifestyle. You may get so far ahead you actually become nancially free. Another thing that helps: I value freedom above everything else. All kinds of freedom: freedom to do what I want, freedom from things I don’t want to do, freedom from my own emotions or things that may disturb my peace. For me, freedom is my number one value. To the extent money buys freedom, it’s great. But to the extent it makes me less free, which it de nitely does at some level as well, I don’t like it. The winners of any game are the people who are so addicted they continue playing even as the marginal utility from winning declines. Do I have to start a company to be successf ul? The most successful class of people in Silicon Valley on a consistent basis are either the venture capitalists (because they are diversi ed and control what used to be a scarce resource) or people who are very good at identifying companies that have just hit product/market t. Those people have the background, expertise, and references those companies really want to help them scale. Then, they go into the latest Dropbox or the latest Airbnb. The people who were at Google, then joined Facebook when it was one hundred people, and then joined Stripe when it was one hundred people? When Zuckerberg was just starting to scale his company and panicked, he was like, “I don’t know how to do this.” And he called Jim Breyer [venture capitalist and founder of Accel Partners]. And Jim Breyer said, “Well, I have this really great head of product at this other company, and you need this person.” Those people tend to do the best, risk-adjusted over a long period of time, other than the venture investors themselves. Some of the most successful people I’ve seen in Silicon Valley had breakouts very early in their careers. They got promoted to VP, director, or CEO, or started a company that did well fairly early. If you’re not getting promoted through the ranks, it gets a lot harder to catch up later in life. It’s good to be in a smaller company early because there’s less of an infrastructure to prevent early promotion. For someone who is early in their career (and maybe even later), the single most important thing about a company is the alumni network you’re going to build. Think about who you will work with and what those people are going on to do. HOW TO GET LUCKY Why do you say, “Get rich without getting lucky”? In 1,000 parallel universes, you want to be wealthy in 999 of them. You don’t want to be wealthy in the fty of them where you got lucky, so we want to factor luck out of it. But getting lucky would help, right? Just recently, Babak Nivi, my co-founder, and I were talking on Twitter about how one gets lucky, and there are really four kinds of luck we were talking about. The rst kind of luck is blind luck where one just gets lucky because something completely out of their control happened. This includes fortune, fate, etc. Then, there’s luck through persistence, hard work, hustle, and motion. This is when you’re running around creating opportunities. You’re generating a lot of energy, you’re doing a lot to stir things up. It’s almost like mixing a petri dish or mixing a bunch of reagents and seeing what combines. You’re just generating enough force, hustle, and energy for luck to nd you. A third way is you become very good at spotting luck. If you are very skilled in a eld, you will notice when a lucky break happens in your eld, and other people who aren’t attuned to it won’t notice. So, you become sensitive to luck. The last kind of luck is the weirdest, hardest kind, where you build a unique character, a unique brand, a unique mindset, which causes luck to nd you. For example, let’s say you’re the best person in the world at deep-sea diving. You’re known to take on deep-sea dives nobody else will even dare to attempt. By sheer luck, somebody nds a sunken treasure ship o the coast they can’t get to. Well, their luck just became your luck, because they’re going to come to you to get to the treasure, and you’re going to get paid for it. This is an extreme example, but it shows how one person had blind luck nding the treasure. Them coming to you to extract it and give you half is not blind luck. You created your own luck. You put yourself in a position to capitalize on luck or to attract luck when nobody else created the opportunity for themselves. To get rich without getting lucky, we want to be deterministic. We don’t want to leave it to chance. Ways to get lucky: Hope luck nds you. Hustle until you stumble into it. Prepare the mind and be sensitive to chances others miss. Become the best at what you do. Re ne what you do until this is true. Opportunity will seek you out. Luck becomes your destiny. It starts becoming so deterministic, it stops being luck. The de nition starts fading from luck to destiny. To summarize the fourth type: build your character in a certain way, then your character becomes your destiny. One of the things I think is important to make money is having a reputation that makes people do deals through you. Remember the example of being a great diver where treasure hunters will come and give you a piece of the treasure for your diving skills. If you are a trusted, reliable, high-integrity, long-term-thinking dealmaker, when other people want to do deals but 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 just because of the integrity and reputation you’ve built up. Warren Bu ett gets o ered deals to buy companies, buy warrants, bail out banks, and do things other people can’t do because of his reputation. Of course, he has accountability on the line, and he has a strong brand on the line. Your character and your reputation are things you can build, which will let you take advantage of opportunities other people may characterize as lucky, but you know it wasn’t luck. My co-founder Nivi said, “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.” I think that is a brilliant formulation. In a long-term game, it’s positive sum. We’re all baking the pie together. We’re trying to make it as big as possible. And in a short-term game, we’re cutting up the pie. How important is networking? I think business networking is a complete waste of time. And I know there are people and companies popularizing this concept because it serves them and their business model well, but the reality is if you’re building something interesting, you will always have more people who will want to know you. Trying to build business relationships well in advance of doing business is a complete waste of time. I have a much more comfortable philosophy: “Be a maker who makes something interesting people want. Show your craft, practice your craft, and the right people will eventually nd you.” And once you’ve met someone, how do you determine if you can trust someone? What signals do you pay attention to? If someone is talking a lot about how honest they are, they’re probably dishonest. That is just a little telltale indicator I’ve learned. When someone spends too much time talking about their own values or they’re talking themselves up, they’re covering for something. Sharks eat well but live a life surrounded by sharks. I have great people in my life who are extremely successful, very desirable (like everybody wants to be their friend), very smart. Yet, I’ve seen them do one or two things slightly not great to other people. The rst time, I’ll say, “Hey, I don’t think you should do this to that other person. Not because you won’t get away with it. You will get away with it, but because it will hurt you in the end.” Not in some cosmic, karma kind of way, but I believe deep down we all know who we are. You cannot hide anything from yourself. Your own failures are written within your psyche, and they are obvious to you. If you have too many of these moral shortcomings, you will not respect yourself. The worst outcome in this world is not having self-esteem. If you don’t love yourself, who will? I think you just have to be very careful about doing things you are fundamentally not going to be proud of, because they will damage you. The rst time someone acts this way, I will warn them. By the way, nobody changes. Then I just distance myself from them. I cut them out of my life. I just have this saying inside my head: “The closer you want to get to me, the better your values have to be.” BE PATIENT One thing I gured out later in life is generally (at least in the tech business in Silicon Valley), great people have great outcomes. You just have to be patient. Every person I met at the beginning of my career twenty years ago, where I looked at them and said, “Wow, that guy or gal is super capable—so smart and dedicated”…all of them, almost without exception, became extremely successful. You just had to give them a long enough timescale. It never happens in the timescale you want, or they want, but it does happen. Apply speci c knowledge with leverage and eventually, you will get what you deserve. It takes time—even once you have all of these pieces in place, there is an indeterminate amount of time you have to put in. If you’re counting, you’ll run out of patience before success actually arrives. Everybody wants to get rich immediately, but the world is an e cient place; immediate doesn’t work. You do have to put in the time. You do have to put in the hours, and so I think you have to put yourself in the position with the speci c knowledge, with accountability, with leverage, with the authentic skill set you have, to be the best in the world at what you do. You have to enjoy it and keep doing it, keep doing it, and keep doing it. Don’t keep track, and don’t keep count because if you do, you will run out of time. The most common bad advice I hear is: “You’re too young.” Most of history was built by young people. They just got credit when they were older. The only way to truly learn something is by doing it. Yes, listen to guidance. But don’t wait. People are oddly consistent. Karma is just you, repeating your patterns, virtues, and aws until you nally get what you deserve. Always pay it forward. And don’t keep count. This is not to say it’s easy. It’s not easy. It’s actually really freaking hard. It is the hardest thing you will do. But it’s also rewarding. Look at the kids who are born rich—they have no meaning to their lives. Your real résumé is just a catalog of all your su ering. If I ask you to describe your real life to yourself, and you look back from your deathbed at the interesting things you’ve done, it’s all going to be around the sacri ces you made, the hard things you did. However, anything you’re given doesn’t matter. You have your four limbs, your brain, your head, your skin—that’s all for granted. You have to do hard things anyway to create your own meaning in life. Making money is a ne thing to choose. Go struggle. It is hard. I’m not going to say it’s easy. It’s really hard, but the tools are all available. It’s all out there. Money buys you freedom in the material world. It’s not going to make you happy, it’s not going to solve your health problems, it’s not going to make your family great, it’s not going to make you t, it’s not going to make you calm. But it will solve a lot of external problems. It’s a reasonable step to go ahead and make money. What making money will do is solve your money problems. It will remove a set of things that could get in the way of being happy, but it is not going to make you happy. I know many very wealthy people who are unhappy. Most of the time, the person you have to become to make money is a high-anxiety, high-stress, hard-working, competitive person. When you have done that for twenty, thirty, forty, fty years, and you suddenly make money, you can’t turn it o. You’ve trained yourself to be a high-anxiety person. Then, you have to learn how to be happy. Let’s get you rich rst. I’m very practical about it because, you know, Buddha was a prince. He started o really rich, then he got to go o in the woods. In the old days, if you wanted to be peaceful inside, you would become a monk. You would give up everything, renounce sex, children, money, politics, science, technology, everything, and you would go out in the woods by yourself. You had to give everything up to be free inside. Today, with this wonderful invention called money, you can store it in a bank account. You can work really hard, do great things for society, and society will give you money for things it wants but doesn’t know how to get. You can save money, you can live a little below your means, and you can nd a certain freedom. That will give you the time and the energy to pursue your own internal peace and happiness. I believe the solution to making everybody happy is to give them what they want. Let’s get them all rich. Let’s get them all t and healthy. Then, let’s get them all happy. Amazing how many people confuse wealth and wisdom. BUILDING JUDGMENT There’s no shortcut to smart. JUDGMENT If you want to make the maximum amount of money possible, if you want to get rich over your life in a deterministically predictable way, stay on the bleeding edge of trends and study technology, design, and art—become really good at something. You don’t get rich by spending your time to save money. You get rich by saving your time to make money. Hard work is really overrated. How hard you work matters a lot less in the modern economy. What is underrated? Judgment. Judgment is underrated. Can you de ne judgment? My de nition of wisdom is knowing the long-term consequences of your actions. Wisdom applied to external problems is judgment. They’re highly linked; knowing the long-term consequences of your actions and then making the right decision to capitalize on that. In an age of leverage, one correct decision can win everything. Without hard work, you’ll develop neither judgment nor leverage. You have to put in the time, but the judgment is more important. The direction you’re heading in matters more than how fast you move, especially with leverage. Picking the direction you’re heading in for every decision is far, far more important than how much force you apply. Just pick the right direction to start walking in, and start walking. HOW TO THINK CLEARLY “Clear thinker” is a better compliment than “smart.” Real knowledge is intrinsic, and it’s built from the ground up. To use a math example, you can’t understand trigonometry without understanding arithmetic and geometry. Basically, if someone is using a lot of fancy words and a lot of big concepts, they probably don’t know what they’re talking about. I think the smartest people can explain things to a child. If you can’t explain it to a child, then you don’t know it. It’s a common saying and it’s very true. Richard Feynman very famously does this in “Six Easy Pieces,” one of his early physics lectures. He basically explains mathematics in three pages. He starts from the number line—counting—and then he goes all the way up to precalculus. He just builds it up through an unbroken chain of logic. He doesn’t rely on any de nitions. The really smart thinkers are clear thinkers. They understand the basics at a very, very fundamental level. I would rather understand the basics really well than memorize all kinds of complicated concepts I can’t stitch together and can’t rederive from the basics. If you can’t rederive concepts from the basics as you need them, you’re lost. You’re just memorizing. The advanced concepts in a eld are less proven. We use them to signal insider knowledge, but we’d be better o nailing the basics. Clear thinkers appeal to their own authority. Part of making e ective decisions boils down to dealing with reality. How do you make sure you’re dealing with reality when you’re making decisions? By not having a strong sense of self or judgments or mind presence. The “monkey mind” will always respond with this regurgitated emotional response to what it thinks the world should be. Those desires will cloud your reality. This happens a lot of times when people are mixing politics and business. The number one thing clouding us from being able to see reality is we have preconceived notions of the way it should be. One de nition of a moment of su ering is “the moment when you see things exactly the way they are.” This whole time, you’ve been convinced your business is doing great, and really, you’ve ignored the signs it’s not doing well. Then, your business fails, and you su er because you’ve been putting o reality. You’ve been hiding it from yourself. The good news is, the moment of su ering—when you’re in pain—is a moment of truth. It is a moment where you’re forced to embrace reality the way it actually is. Then, you can make meaningful change and progress. You can only make progress when you’re starting with the truth. The hard thing is seeing the truth. To see the truth, you have to get your ego out of the way because your ego doesn’t want to face the truth. The smaller you can make your ego, the less conditioned you can make your reactions, the less desires you can have about the outcome you want, the easier it will be to see the reality. What we wish to be true clouds our perception of what is true. Su ering is the moment when we can no longer deny reality. Imagine we’re going through something di cult like a breakup, a job loss, a business failure, or a health problem, and our friends are advising us. When we’re advising them, the answer is obvious. It comes to us in a minute, and we tell them exactly, “Oh that girl, get over her, she wasn’t good for you anyway. You’ll be happier. Trust me. You’ll nd someone.” You know the correct answer, but your friend can’t see it, because they’re in the moment of su ering and pain. They’re still wishing reality was di erent. The problem isn’t reality. The problem is their desire is colliding with reality and preventing them from seeing the truth, no matter how much you say it. The same thing happens when I make decisions. The more desire I have for something to work out a certain way, the less likely I am to see the truth. Especially in business, if something isn’t going well, I try to acknowledge it publicly and I try to acknowledge it publicly in front of my co-founders and friends and co-workers. Then, I’m not hiding it from anybody else. If I’m not hiding it from anybody, I’m not going to delude myself from what’s actually going on. What you feel tells you nothing about the facts—it merely tells you something about your estimate of the facts. It’s actually really important to have empty space. If you don’t have a day or two every week in your calendar where you’re not always in meetings, and you’re not always busy, then you’re not going to be able to think. You’re not going to be able to have good ideas for your business. You’re not going to be able to make good judgments. I also encourage taking at least one day a week (preferably two, because if you budget two, you’ll end up with one) where you just have time to think. It’s only after you’re bored you have the great ideas. It’s never going to be when you’re stressed, or busy, running around or rushed. Make the time. Very smart people tend to be weird since they insist on thinking everything through for themselves. A contrarian isn’t one who always objects—that’s a conformist of a di erent sort. A contrarian reasons independently from the ground up and resists pressure to conform. Cynicism is easy. Mimicry is easy. Optimistic contrarians are the rarest breed. SHED YOUR IDENTITY TO SEE REALITY Our egos are constructed in our formative years—our rst two decades. They get constructed by our environment, our parents, society. Then, we spend the rest of our life trying to make our ego happy. We interpret anything new through our ego: “How do I change the external world to make it more how I would like it to be?” “Tension is who you think you should be. Relaxation is who you are.” —Buddhist saying You absolutely need habits to function. You cannot solve every problem in life as if it is the rst time it’s thrown at you. We accumulate all these habits. We put them in the bundle of identity, ego, ourselves, and then we get attached to them. “I’m Naval. This is the way I am.” It’s really important to be able to uncondition yourself, to be able to take your habits apart and say, “Okay, this is a habit I probably picked up when I was a toddler trying to get my parent’s attention. Now I’ve reinforced it and reinforced it, and I call it a part of my identity. Does it still serve me? Does it make me happier? Does it make me healthier? Does it make me accomplish whatever I set out to accomplish?” I’m less habitual than most people. I don’t like to structure my day. To the extent I have habits, I try to make them more deliberate rather than accidents of history. Any belief you took in a package (ex. Democrat, Catholic, American) is suspect and should be re- evaluated from base principles. I try not to have too much I’ve pre-decided. I think creating identities and labels locks you in and keeps you from seeing the truth. To be honest, speak without identity. I used to identify as libertarian, but then I would nd myself defending positions I hadn’t really thought through because they’re a part of the libertarian canon. If all your beliefs line up into neat little bundles, you should be highly suspicious. I don’t like to self-identify on almost any level anymore, which keeps me from having too many of these so-called stable beliefs. We each have a contrarian belief society rejects. But the more our own identity and local tribe reject it, the more real it likely is. There are two attractive lessons about su ering in the long term. It can make you accept the world the way it is. The other lesson is it can make your ego change in an extremely hard way. Maybe you’re a competitive athlete, and you get injured badly, like Bruce Lee. You have to accept being an athlete is not your entire identity, and maybe you can forge a new identity as a philosopher. Facebook redesigns. Twitter redesigns. Personalities, careers, and teams also need redesigns. There are no permanent solutions in a dynamic system. LEARN THE SKILLS OF DECISION-MAKING The classical virtues are all decision-making heuristics to make one optimize for the long term rather than for the short term. Self-serving conclusions should have a higher bar. I do view a lot of my goals over the next few years of unconditioning previous learned responses or habituated responses, so I can make decisions more cleanly in the moment without relying on memory or prepackaged heuristics and judgments. Almost all biases are time-saving heuristics. For important decisions, discard memory and identity, and focus on the problem. Radical honesty just means I want to be free. Part of being free means I can say what I think and think what I say. They’re highly congruent and integrated. Theoretical physicist Richard Feynman famously said, “You should never, ever fool anybody, and you are the easiest person to fool.” The moment you tell somebody something dishonest, you’ve lied to yourself. Then you’ll start believing your own lie, which will disconnect you from reality and take you down the wrong road. I never ask if “I like it” or “I don’t like it.” I think “this is what it is” or “this is what it isn’t.” —Richard Feynman It’s really important for me to be honest. I don’t go out of my way volunteering negative or nasty things. I would combine radical honesty with an old rule Warren Bu ett has, which is praise speci cally, criticize generally. I try to follow this. I don’t always follow it, but I think I follow it enough to have made a di erence in my life. If you have a criticism of someone, then don’t criticize the person—criticize the general approach or criticize the class of activities. If you have to praise somebody, then always try and nd the person who is the best example of what you’re praising and praise the person, speci cally. Then people’s egos and identities, which we all have, don’t work against you. They work for you. Any advice on developing capacity for instinctual blunt honesty? Tell everyone. Start now. It doesn’t have to be blunt. Charisma is the ability to project con dence and love at the same time. It’s almost always possible to be honest and positive. As an investor and CEO of AngelList, you’re paid to be right when other people are wrong. Do you have a process around how you make decisions? Yes. Decision-making is everything. In fact, someone who makes decisions right 80 percent of the time instead of 70 percent of the time will be valued and compensated in the market hundreds of times more. I think people have a hard time understanding a fundamental fact of leverage. If I manage $1 billion and I’m right 10 percent more often than somebody else, my decision-making creates $100 million worth of value on a judgment call. With modern technology and large workforces and capital, our decisions are leveraged more and more. If you can be more right and more rational, you’re going to get nonlinear returns in your life. I love the blog Farnam Street because it really focuses on helping you be more accurate, an overall better decision-maker. Decision- making is everything. The more you know, the less you diversify. COLLECT MENTAL MODELS During decision-making, the brain is a memory prediction machine. A lousy way to do memory prediction is “X happened in the past, therefore X will happen in the future.” It’s too based on speci c circumstances. What you want is principles. You want mental models. The best mental models I have found came through evolution, game theory, and Charlie Munger. Charlie Munger is Warren Bu ett’s partner. Very good investor. He has tons and tons of great mental models. Author and trader Nassim Taleb has great mental models. Benjamin Franklin had great mental models. I basically load my head full of mental models. I use my tweets and other people’s tweets as maxims that help compress my own learnings and recall them. The brain space is nite—you have nite neurons—so you can almost think of these as pointers, addresses, or mnemonics to help you remember deep-seated principles where you have the underlying experience to back it up. If you don’t have the underlying experience, then it just reads like a collection of quotes. It’s cool, it’s inspirational for a moment, maybe you’ll make a nice poster out of it. But then you forget it and move on. Mental models are really just compact ways for you to recall your own knowledge. EVOLUTION I think a lot of modern society can be explained through evolution. One theory is civilization exists to answer the question of who gets to mate. If you look around, from a purely sexual selection perspective, sperm is abundant and eggs are scarce. It’s an allocation problem. Literally all of the works of mankind and womankind can be traced down to people trying to solve this problem. Evolution, thermodynamics, information theory, and complexity have explanatory and predictive power in many aspects of life. INVERSION I don’t believe I have the ability to say what is going to work. Rather, I try to eliminate what’s not going to work. I think being successful is just about not making mistakes. It’s not about having correct judgment. It’s about avoiding incorrect judgments. COMPLEXITY THEORY I was really into complexity theory back in the mid-90s. The more I got into it, the more I understand the limits of our knowledge and the limits of our prediction capability. Complexity has been super helpful to me. It has helped me come to a system that operates in the face of ignorance. I believe we are fundamentally ignorant and very, very bad at predicting the future. ECONOMICS Microeconomics and game theory are fundamental. I don’t think you can be successful in business or even navigate most of our modern capitalist society without an extremely good understanding of supply-and-demand, labor- versus-capital, game theory, and those kinds of things. Ignore the noise. The market will decide. PRINCIPAL-AGENT PROBLEM To me, the principal-agent problem is the single most fundamental problem in microeconomics. If you do not understand the principal-agent problem, you will not know how to navigate your way through the world. It is important if you want to build a successful company or be successful in your dealings. It’s a very simple concept. Julius Caesar famously said, “If you want it done, then go. And if not, then send.” What he meant was, if you want it done right, then you have to go yourself and do it. When you are the principal, then you are the owner—you care, and you will do a great job. When you are the agent and you are doing it on somebody else’s behalf, you can do a bad job. You just don’t care. You optimize for yourself rather than for the principal’s assets. The smaller the company, the more everyone feels like a principal. The less you feel like an agent, the better the job you’re going to do. The more closely you can tie someone’s compensation to the exact value they’re creating, the more you turn them into a principal, and the less you turn them into an agent. I think at a core fundamental level, we understand this. We’re attracted to principals, and we all bond with principals, but the media and modern society spend a lot of time brainwashing you about needing an agent, an agent being important, and the agent being knowledgeable. COMPOUND INTEREST Compound interest—most of you should know it in the nance context. If you don’t, crack open a microeconomics textbook. It’s worth reading a microeconomics textbook from start