How to get rich (without getting lucky) by Naval - Deep Summary Notes

NAVAL - HOW TO GET RICH (without getting lucky)

Source: https://www.youtube.com/watch?v=1-TZqOsVCNM&feature=youtu.be

A good set of PRINCIPLES for Money

Wealth is passive income in the form of a Computer program running at night/Asset/business/factory/property/etc., producing income while you sleep and "not work." Gives you freedom.?

You have to stand out. You have to want it.?

Money is how you 'transfer' wealth. It's a positive sum game with competitive elements.?

Be your sovereign individual.?

Money = IOUs

Status is a zero-sum game - for a winner, there must be a loser. Avoid status games because you're trying to put others down to bring yourself up. BE HAPPY FOR SOMEONE ELSE'S SUCCESS!!!! Never envy.?

Create Abundance is real wealth, a positive sum. Productivity. EVERYONE CAN BE RICH!

"Work" as a form of creative expression - not because you have to. Work because you get to and must do - because of inspiration.?

EDUCATION + DESIRE to get real wealth. Play the game ethically, rationally, and beautifully.?

BECOME the kind of person that makes money. It's a skillset.?

Four types of 'luck.'

Blind Luck, Persistence/Hustle, Skilled in Seeing Opportunities, Build an outstanding reputation where luck finds you.??

(Everything is an imprint in your mind - it's more dependent on your 'consciousness' in imprinting or seeing unconscious imprints coming to fruit)

Consistently creating wealth - it's not just a one-off thing - it stacks up - it compounds! "The snowball" - a lifetime of planting imprints (learning, helping, working, hustling, investing, etc.)?

Build your character in a certain way, and it becomes your destiny.?Build an excellent reputation that people come to do deals with you.?

Dig deeper than most rational people would because of your extreme level of interest.?

Own EQUITY is a KEY - you cannot get there just by 'renting' your time. You have to EARN non-linearly - it must be exponentially. Brand, IP, Risk-taking. Building a business.?

You want to make money Asymmetrically.?

The rewards for entertaining (NBA, NFL, etc.) or allocating capital (Warren Buffett), or writing valuable software (Microsoft) are disproportion and extraordinary.?

LIVE BELOW YOUR MEANS - maintains your freedom of operations. Do not upgrade so fast. Break the wage slave cycle. (The rich buy their luxuries with passive income generated by their assets, not from "earned" income)

Give what society wants at scale - to dine with the classes and serve the masses.

Build millions/billions of products to sell them to everyone. (iPhone)?

Build for yourself, then serve 'rich' people, then to 'middle class,' then everyone else - PROFITABLY.

The INTERNET connects anything/everyone to EVERYONE. Any niche obsession you can reach that audience.?

Be the best at being yourself and scale it through the internet. Don't copy because then you're competing. No one can compete with you on being you!!! Escape competition through AUTHENTICITY.?

COMPOUND INTEREST - play long-term games with long-term people: relationships, trust, performance, reputation, money, distribution, innovation, gardening.?

Significant rewards are at the 'end of the cycle.'?

Woodworking industry - you have lots of network trust here. Everything you get out of where you built your network, they don't know whom to trust, and they don't know if they can trust you - I know who's the trustworthy network in woodworking, and they know I am trustworthy.?

People whose ethics are visible through their actions.?

A leader inspires the team to get it done - and dives up rewards based on fairness to those who contributed.?

Pick people with intelligence, energy, and honesty - three must-haves.?

Signals - what people do, not what they say. How they behave when no one is looking.?

Find intrinsically motivated people. What do people do besides what they say???

Don't partner with cynics and skeptics because they become self-fulfilling prophecies. It's ok to shoot holes if you come up with a solution. We do not want anyone who is just there to tell you how something cannot be done.?

Action-bias, rational optimists. Know the pitfalls and still go after them. THINK BIG!

THINKING BIGGER LEADS TO BIGGER OUTCOMES

THE UPSIDE IS UNLIMITED!?

Avoid ruin (however, Elon put all his money into saving SpaceX and Telsa - ultimate risk + ultimate upside + ultimate leadership + ultimate commitment)

Get paid at scale (Specific knowledge, leverage) - not everything can be taught, but everything can be learned - building JUDGEMENT in a specific domain (inventing woodworking tools, investing), looking at what you've built, and building on top of it.?

Pursue your innate talents, your genuine passion, and your true curiosity. Be true to thyself.?

Observe yourself and see what you're really good at.?

It feels like play to you and looks like work to others.?

Top 25% of 2-3 key things. Vs. Being the best at one thing. (Follow your own obsession and keep aware of the commercial aspects of it "business hat")

1. Learn to Build 2. Learn to Sell

Two founders - world-class builder and world-class seller

CEO + CTO

When one person can do both - it is the ultimate superpower (Elon Musk)?

Builders can pick up selling skills - but learning how to build when you sell is very difficult.

When you start building is better. Later on, when you sell is more advantageous because it scales over time.

There is no skill called 'business.'?

Reading is faster than listening. Foundation of learning. Read all the time. Develop a love for reading. Read what you love until you love to read.?

Read foundational "original books" - Adam smith's wealth of nations, Darwin's origin of species, Richard Feynman - 6 easy pieces,?

First principles learning. Build on a steel frame of understanding.?

Deep-seated PRINCIPLE with solid foundations based on logic and mathematics.?

Practical persuasion + technical ability

Top 5 Skills

1. Reading
2. Writing
3. Arithmetic
4. Computer Programing
5. Speaking/Persuasion/Communication?

Optimize your learning curve - consume your information faster (reading > watching) (doing > reading) (being > doing)?

The prisoner's dilemma is the most valuable part of "game theory."?

Iterate - constantly changing the inventory, branding, store hours, how other businesses run their operation, more shots on goal, etc.?

+ long hours devoted to your goal.

Get familiar with frequent small failures. Bleed a little each day to make a big win in the end. (Slight edge)

You need LEVERAGE (capital, code, media, equity) to get rich. ACCOUNTABILITY gives your CREDIBILITY, which builds your REPUTATION for being RELIABLE.?

NAMES are powerful BRANDING (Trump, Elon Musk, Buffett, Naval, Oprah, Bill Gates) instant VALIDATOR??

Be a part of a TEAM. Small team and clear accountability. Messaging, building products, raising money, pricing strategy, and online advertising.?

Take a RISK with your Name because you can reap the benefits.

Your compensation is determined by how 'replaceable' you are. Employees get more 'security' because they get paid first, debt holders get paid before profit, and owners get paid last and get most of the upside (net profit after what you pay debt holders and staff).

People generally forgive failure "bankruptcy" if you're honest and really gave it a worthy shot.?

Talib - Skin in the Game (required reading)

People working for you is the oldest form of LEVERAGE (an overvalued form of leverage), requires tremendous leadership skills, and can be very competitive (ideally, stay away from labor-based leverage).?

CAPITAL is 2nd form of leverage.?The dominant form of leverage in the last century.?CEO is a financial manager. But seems unfair. Can be converted to labor. Very analytical. Scales very well. You can manage more capital easier than more people.?

PRODUCTS WITH NO MARGINAL COST OF REPLICATION is a new form of leverage (i.e., CODE); you don't need labor or capital with other humans because you can do it directly to the audience through the internet. (i.e., podcast) new fortunes, new billionaires. Code and Media are the new age forms of leverage.?

Minimum but high output LABOR (engineers) + CAPITAL + CODE/MEDIA/CONTENT = magically new leverage combination?

The best form of leverage is CODE (robots) in the modern day. Every great software developer has an army of robots working for them at night. Issue commands in the LANGUAGE they understand specifically to follow those instructions explicitly.

Rolex is a signaling game of status. Other goods can signal quality, tribe associations,?

BUSINESS MODEL/PRODUCT - scale economies, Technology/media products with zero marginal cost of replication, network effects (computer networking, Metcalfe's law - nodes in the network) be #1 in a network effect business (Facebook, google, uber, YouTube, LinkedIn, Instagram, prime),

NETWORK EFFECT - each additional user adds more value to the existing user base (language, fax machines, money) (still until it becomes an actual commodity)?

How will our customers add value to each other?

Contractor —> Property Developer - buy, fix, and sell for 2X - takes on more risk, more specific knowledge (lots are good, what makes or breaks a deal, imagine a finished property), capital leverage, and pocket the difference —> famous architect - brand name put on the property —> massive developer building communities —> REIT (financial markets) —> max leverage knowing all the specific knowledge in this domain + raising money through VC + technology and hiring developers (high-risk, high reward, building a team with all this accumulated specific knowledge, high-quality engineers and marketers) becoming a 'Zillow.'?

Gaining uncommon knowledge through experience and following your joy and layering in more capital, leverage, technology, and expanding the opportunity.?

Obtain leverage - learn to code, become a communicator and content creator, hustle to get leverage, then become a better judgment maker - move slow to go fast. Steering a big ship, and if your judgment is 10-20%, better people will pay your?$100M?because your value creation with massive leverage is so great.?

Buffett - massive credibility, integrity, performance-proven, high judgment, demonstrated judgment.

Being able to predict the long-term consequences of your decisions

Intellect + experience. You need to have skin in the game.?

Master your emotions. Emotions can cloud your judgment.?

Study: Philosophy, history, study, stoics?

Set a very high personal hourly rate?

Is it worth your time to do this work? Save your time for the big stuff.?

The way to wealth = is industriousness and frugality.?

If you can outsource for less than your hourly rate, do it!?

Build a multi-billion dollar company - have to do everything right - working hard as you can, picking the right ideas, picking the right people, getting the best reputation, having the best judgment, obtaining the maximum leverage, having the utmost integrity, Surrounding yourself the best people you can work with that will have you back! Highest intelligence, energy, and integrity people you can find!?

Marathon of sprints.

SEIZE INSPIRATION! RIGHT AWAY!

Solve problems as soon as possible - only work on something else once you solve it!

Keep a very clean calendar. But work on the most high-impact thing. Ruthlessly decline meetings.?

Spot opportunities others cannot. Build reputation. Build a great product. Build a unique point of view.?

Get paid for being you. Be you, and that is all. Be truly authentic to yourself. Be the best at being you.?

Founder / Product Fit

Product / Market Fit

Find the product you are uniquely advantageous to build/sell and find the market this product will best serve at scale.

Authentic to your desires. Gets you away from the competition.?

Red Ocean - too much competition?

Blue Ocean - too blue may not have a market

50% of your income will result from your communication - Warren Buffett - you can have the best idea in the world, but you must transfer that information to other people and inspire them to action.

Epinions should have pivoted to TripAdvisor/yelp because amazon was the winner takes all in the online product review/shopping comparison game.

You have to put in the time. 3-5-10-20 years

You only have to be right once.?

Outcome = specific knowledge X leverage X how often judgment correct X accountability X value from society compounded by time and learning.?

Beware of false precision.?

More estimated variables, the more error-prone the model. Pick the 1-2 biggest things - what you are really good at based on observation and what's really valuable to the marketplace.

Listen to everyone, read everything, ignore everyone, and make a decision from within.?

Write down your principles.?

You are still the same person even when you make a lot of money - money only makes you more of what you are.

Before you're rich, cut wood and carry water. After you're rich, cut wood and carry water.

All truths are half-truths.?

Fitness / Love & Household / Good Relationships / Calm Mind and Internal Peace

There are no get-rich-quick schemes. It's a long journey.

Bob Parson, Andrew Carnegie.

Productize yourself - leverage, specific knowledge, accountability, credibility, and reputation. Scaling with labor, capital, code, and media.?

Fit, rich, smarter. Fitter, richer, smarter - hobbies

Teach and enable those beneath you

Learn from those above you?

Ethics, Programming, Sales,?

Business is about trust—long-term games with long-term people.?

Wisdom - realizing the long-term consequences of your decisions/actions

I wanted to make money and earn a living through mental activities, not physical ones.

TEACH YOUR AGENTS HOW TO THINK LIKE PRINCIPLES AND ALIGN THEIR INCENTIVES, SO THEIR REWARDS ARE ALIGNED WITH YOU AS THE PRINCIPLE.

Deal with small firms to avoid the principal-agent problem.?

In smaller firms, you're closer to the principle where their incentive is to deliver better work in the long-term, whereas bigger firms have more agents whose incentives are set up to not give you as great of service (i.e., Bank of America and PPP - bigger commissions go to the bigger PPP loan)

Incentives are the single biggest challenge in management.?

Don't bet everything on one big gamble?(however, Elon put all his eggs in two baskets, Space X and Telsa; Warren is concentrated in Berkshire bc Berkshire has a focused portfolio of durable companies)

Let's say you have a?51-to-49 edge. Every gambler knows not to bet the whole kitty on that 51-to-49 edge—because you could lose everything and won't get to come back to the average. (MARGIN OF SAFETY is key)

Ruining your reputation is the same as getting wiped to zero (it takes?30 years to build a reputation and 5 minutes to ruin it) Get the best reputation you can. The reputation you get is usually the one you deserve.?

The number one way people get ruined in modern business is not by betting too much; it's by cutting corners and doing unethical or downright illegal things.?(DO BUSINESS HONESTLY)

Company Values - how do you get a group of people to make close enough decisions without having to watch every decision they make??

Convert single-move games to multi-move games -?instead of having a contractor only do one big expensive contract where their incentive is to maximize the value of that one transaction and have less accountability for the future - try to make it a multiple project contract where there's an incentive to behave well in the long-term or bring in their repeat and multiple project clients as a referral where now their reputation is accountable to a big customer they don't want to lose.?

THINK BIG HUGE AUDACIOUS - because it takes just as much effort to build a successful small business as it does to build a hugely successful business (but it takes a different skillset and mindset!)

Intrinsic value = future discounted cashflows (applying a discount rate or an interest rate)

Finding Time to Invest in Yourself

take on accountability to build your specific knowledge

Try to learn something that people still need to figure out how to teach. That can happen if you work in a new and quickly expanding field.?

Finding employees with a founder mentality is a fancy way of saying they?care enough.?

Keep the outputs visible and measurable. (Everyone has an output; every company has an output; every dept has a result). Judgment and accountability matter much more.?

High Autonomy, High Accountability, High Responsibility, High Performance.

Scale your specific knowledge with apprentices