How to get wealthy with Naval Ravikant on Clubhouse | Feb 2021

Yeah, on getting wealthy, look, I use the provocative title 'How to Get Rich' because it grabs people's attention, but we're really talking about wealth. Wealth is assets, right? And the goal here is to get out of a nine-to-five. Nine-to-five is just modern slavery. Now, obviously, it's not the real horrific slavery that people's ancestors experienced, but it is a modern, trimmed-down form of slavery. It's wage slavery, right? You basically have to—you don't choose when you wake up, you have to go to your drudgery job, you have to punch in the clock, punch in the hours as if we're living in factory times, as if input has anything to do with output. Well, we live in the age of infinite leverage. With your mind, you can move mountains if you knew the right things to do. Elon Musk doesn't have more hours in the week than anybody else; he just spends it better, or he has the knowledge to apply it better. Omniscience at some level implies omnipotence. If you were a God and if you had infinite knowledge, you wouldn't actually need to do anything. But if you wanted to do something, you would literally just flick one particle of sand and you just knew that the way was going to hit all the other particles that whatever you wanted to have happened would happen because you just knew how everything connected to everything. So knowledge is literally power. So the way to earn in the modern world is through knowledge and leverage, it's not through work. And so you want to be a knowledge athlete if you want to earn, not a physical athlete. Physical athletes, you know, we put them in showrooms like the Olympics so they can show off, or we do it for fun or for health, but it's not the way that you actually create and gain wealth. So to create wealth requires a couple of principles. Many of these are obvious, but it sort of helps to kind of put them together. The place where I kind of create a framework around it, I say there are three things that you really need to do. The first is you need to have some specific knowledge, the second is you need to take on accountability, and the third is you need to have leverage. Those are the three key components. Specific knowledge is knowing something, knowing how to do something that other people don't know how to do and you can't be trained to do it. So then it begs the question: how do you learn it? What is specific knowledge? Examples of specific knowledge could be the artificial intelligence field is just coming up and I'm really deep into it, or I have a really deep understanding of crypto, or I know how to sell very difficult, large objects like I know how to sell houses that are broken down and in need of repair. Specific knowledge could be, you know, I'm the most entertaining gamer on the planet, I can play games on Twitch in such a way that people just love talking to me. It could even just be I'm a great Clubhouse speaker but on a certain kind of topic that other people just don't understand. So how do you gain specific knowledge? It's almost a catch-22. Specific knowledge is built up by you through your passions. So when they say 'follow your passion,' that's kind of what they mean. It doesn't always lead to money, but it can because if you're obsessive about something and you're learning it for your own genuine intellectual curiosity, not to get a degree, not to make money, not to impress your friends, you're going to end up being better at it than anybody else. So I really believe that you should only read and engage in activities that you genuinely enjoy, and you should cultivate your intellectual obsessions without any goal. But you may be surprised when you look back and connect the dots later that one of them developed into a goal. And one of the hallmarks of specific knowledge is that it will feel like play to you, but it will look like work to others. So that is specific knowledge. Second, I would say you develop accountability. Accountability means taking on risks, branding it with your own name. Famous companies like, you know, the Oprah company or whatever. Whatever you may think of him, like before he became president, Trump was all about this. He would stamp his name on everything. Kanye West, right? Jay-Z, Elon Musk—these people use their names everywhere they go. But that means the accountability comes with downsides. That means that when you do something stupid or horrible, you're tagged forever. If you screw up, you screw up in public. So use your name, use accountability. And I know we live in an age of teamwork, and obviously a lot of great work is done by teams, but even within a company like a startup, founders and managers are always looking for people who will take on accountability. So accountability is a big piece of it. You're never going to get paid what you're worth if you don't take on accountability. And then finally, leverage. Leverage is the most important because leverage is increasing without bound in our society. And there's basically three forms of leverage. There's labor, which is people working for you. That's been around forever, and your parents know it, which is why when you used to tell them I've got a job, they ask, 'Well, how many people are working for you?' or 'How big is the company?' It sounds impressive. In reality, labor is the shittiest form of leverage. It takes too much effort to manage people. You're basically playing psychiatrist or babysitting. There's a lot of politics and emotions involved. It's just very hard to do. That said, if you want to build the biggest fortunes or the most wealth, it has to be in your repertoire. There's a lot of misconceptions that go on with labor leverage. One example is people say, 'Well, you know, there's no such thing as a 10x engineer.' Of course there is. There's 100x engineers, there's 1,000x engineers in intellectual disciplines. There's massive variance. It's power-law distributed, not normal distributed, for those of you who know the distribution curves. But another one is 'hire people who are smarter than you.' That's another piece of nonsense. Why are people who are smarter than you going to work for you? Nobody has a good answer to that one. So there is an answer, it's not a great one, which is you hire them when they're really young and you exploit them for a year or two before they figure out they're smarter than you and move on. So you can do some short-term opportunities, or you can invest in people who are smarter than you, but you also have to be really good at what you do, otherwise good people aren't going to work for you anyway. That's labor. Then next is capital. You can use capital. You make a trade, let's say make a good trade on the stock market, whether it's a trade you make with $100 or a million dollars makes a huge difference, even though it took the same brain power to come up with the trade. Now you're magnified in the latter case by a factor of 10,000. How did you do that? That's leverage, right? That's capital leverage. The problem with capital leverage and labor leverage is that they're permissioned. Somebody has to give you the money, somebody has to agree to work with you. They take time to get, they take effort to get. With the capital leverage, there's often risk involved, especially if it's your own capital. So that brings us to the last form of leverage, and this is the most powerful form of leverage and is behind all the newly rich, and that is product leverage. Product leverage comes from building a product, and if the product has no marginal cost of replication—in other words, you can stamp out more copies without having to incur costs—that is the best form of leverage. Product leverage ranges from code, where you create applications like Clubhouse. We're all on Paul Davidson's piece of code here, and he's massively leveraged. Paul's not here right now, he's not running this conversation, we're all working for him. It also comes from media, like creating content, like Joe Rogan creates a podcast and gets it stamped out. It can come from a book. It can come from even products like, you know, someone sells you a pill. It could be a happy pill, a sugar pill, whatever. A pill is 98% intellectual property. The actual physical cost of what went in there is very low. So fundamentally, what you want to do is you want to put yourself in a situation where you take your specific knowledge that you've developed over the years without even trying, the things that you're good at that other people are naturally bad at, that you got by following your own intellectual obsessions. You add that to accountability, put your name on it, take some risks. You employ every form of leverage possible: capital, labor, and products and code, preferably the permissionless ones because those you can get access to when you're younger. And the net result is you productize yourself. What you end up doing is you end up selling a product that is simply an extension of who you uniquely are, and nobody can beat you at that because it's just you. And this can take a while to set up, but once you set this thing up, it will be a flood, a tsunami of money that will keep you flush for the rest of your life, and then you can figure out how to...