How to Get Rich(Without getting Lucky)
Author – Naval Ravikant
The strategy of conflict – Thomas Schelling
Fooled by randomness – Taleb
How to get rich – Felix Dennis
Skin in the game – Taleb
The wealth of nations – Adam Smith
Origin of species – Charles Darwin
the Eighth day of creation – Watson and Crick
Six easy pieces – Richard Feynman
books on algorithms – Donald Knuth
lectures on physics – Feynman
Getting rich is not just about luck; happiness is not just a trait we are born with.
These aspirations may seem out of reach, but building wealth and being happy are skills we can learn.
1 : Seek Wealth, Not Money or Status
Wealth is assets that earn while you sleep.
You want wealth because it buys you freedom so you don’t have to waste your life grinding productive hours away into a soulless job that doesn’t fulfill you.
The purpose of wealth is freedom; it’s nothing more than that.
It’s about being your own sovereign individual.
Money is how we transfer wealth.
If I do my job right and create value for society, I get paid.
There are fundamentally two huge games in life that people play: money and status.
Money is not going to solve all of your problems; but it’s going to solve all of your money problems.
Status is your ranking in the social hierarchy.
Wealth is a very positive-sum game. We create things together.
Status, on the other hand, is a zero-sum game. It’s hierarchical: politics, sports.
They play an important role in our society, so we can figure out who’s in charge. But 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, because they make you into an angry combative person.
2 : Make Abundance for the World
Wealth isn’t about taking something from somebody else.
The reality is everyone can be rich.
3 : Free Markets Are Intrinsic to Humans
We use credits and debits to cooperate across genetic boundaries.
Everybody can be wealthy. Everybody can be retired. Everybody can be successful. It is merely a question of education and desire. You have to want it. If you don’t want it, that’s fine. Then you opt out of the game.
4 : Making Money Isn’t About Luck
Become the kind of person who makes money.
4 kinds of luck:
- blind luck
- luck from hustling
- luck from preparation
- luck from your unique character
5 : Make Luck Your Destiny
Build your character in a way that luck becomes deterministic.
Build your character so opportunity finds you.
“Extreme people get extreme results.” – Sam Altman
“You can’t be normal and expect abnormal returns.” – Jeffrey Pfeffer
“Play stupid games win stupid prizes.”
6 : You Won’t Get Rich Renting Out Your Time
You can’t earn nonlinearly when you’re renting out your time.
You are not going to get rich renting out your time. You must own equity, a piece of the business to gain your financial freedom.
Renting out your time means you’re essentially replaceable.
You must own equity to gain your financial freedom.
Usually the real wealth is created by starting your own companies, or by becoming an investor.
You want to look for professions and careers where the inputs and outputs are highly disconnected.
You want to look for things that are leveraged.
7 : Live Below Your Means for Freedom
People busy upgrading their lifestyles just can’t fathom this freedom.
People living below their means have freedom.
People are who living far below their means enjoy a freedom that people busy upgrading their lifestyles just can’t fathom.
Do not upgrade your lifestyle all the time.
“The most dangerous things are heroin, and a monthly salary.” – Nassim Taleb
Ideally you want to make your money in discrete lumps, separated over long periods of time, so that your own lifestyle does not have a chance to adapt quickly.
8 : Give Society What It Doesn’t Know How to Get
Society will pay you for creating what it wants and delivering it at scale.
Society always wants new things.
Figure out what product you can provide and then figure out how to scale it.
If you want to be wealthy, you want to figure out which one of those things you can provide for society that is within your skillset and capabilities.
Then you have to figure out how to scale it so everybody can have one.
The entrepreneur's job is to try to bring the high end to the mass market.
It starts as high end. First it starts as an act of creativity. First you create it just because you want it. You want it, and you know how to build it, and you need it. And so you build it for yourself. Then you figure out how to get it to other people. And then for a little while rich people have it.
It's about distributing what rich people used to have to everybody.
Entrepreneurship is essentially an act of creating something new from scratch. Predicting that society will want it, and then figuring out how to scale it, and get it to everybody in a profitable way, in a self-sustaining way.
9 : The Internet Has Massively Broadened Career Possibilities
The Internet allows you to scale any niche obsession.
The internet is a networking tool. It connects everybody. That is its superpower. So, you want to use that.
You can go out on the internet, and you can find 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.
Escape competition through authenticity. Be yourself.
Don’t imitate. Don’t copy. Just do your own thing. No one can compete with you on being you. It’s that simple.
10 : Play Long-Term Games With Long-Term People
All returns in life come from compound interest in long-term games.
Play long-term games with long-term people.
One should pick an industry where you can play long-term games with long-term people.
Long-term games are good not just for compound interest, they’re also good for trust.
A good leader doesn’t take credit. A good leader basically tries to inspire people, so the team gets the job done. And then things get divided up according to fairness, and who contributed how much, or as close to it as possible, and took a risk.
11 : Pick Partners With Intelligence, Energy and Integrity
You can’t compromise on any of these three: intelligence, energy, and integrity.
In terms of picking people to work with, pick ones that have high intelligence, high energy, and high integrity. This three-part checklist is something you cannot compromise on.
One of the important things for delegation is, delegate to people who are actually good at the thing that you want them to do.
12 : Partner With Rational Optimists
Don’t partner with cynics and pessimists; their beliefs are self-fulfilling.
Essentially, to create things, you have to be a rational optimist.
Just do things.
If you want to be successful in life, creating wealth, or having good relationships, or being fit, or even being happy, you need to have an action bias towards getting what you want.
13 : Arm Yourself With Specific Knowledge
Specific knowledge can be found by pursuing your genuine curiosity.
Building specific knowledge will feel like play to you.
14 : Specific Knowledge Is Highly Creative or Technical
Specific knowledge is on the bleeding edge of technology, art, and communication.
Specific knowledge is often highly creative or technical.
Build specific knowledge where you are a natural.
Whatever you are a natural at, you want to double down on that.
There are probably multiple things you’re natural at because personalities and humans are very complex.
15 : Learn to Sell, Learn to Build
If you can do both, you will be unstoppable.
“Learn to sell, learn to build, if you can do both, you will be unstoppable.”
Building a product is multivariate. It can include design, development, manufacturing, logistics, procurement and operating a service.
Selling doesn’t mean necessarily just mean selling individual customers, but it can mean marketing, communicating, recruiting, raising money, inspiring people, or PR.
The real giants in any field are the people who can both build and sell.
16 : Read What You Love Until You Love to Read
You should be able to pick any book in the library and read it.
The foundation of learning is reading.
“I don’t know a smart person who doesn’t read and read all the time.”
Learn how to educate yourself and the way to educate yourself is to develop a love for reading.
“Read what you love until you love to read.”
The means of learning are abundant; the desire to learn is scarce.
17 : The Foundations Are Math and Logic
Mathematics and logic are the basis of understanding everything else.
It’s better to read a great book slowly than to fly through a hundred books quickly.
If you have practical persuasion and a deep understanding of some complex topic, I think you’ll have a great foundation for learning for the rest of your life.
The 5 most important skills are, of course:
- reading
- writing
- arithmetic
- persuasion = talking
- computer programming
If you’re good with computers, if you’re good at basic mathematics, if you’re good at writing, if you’re good at speaking, and if you like reading, you’re set for life.
18 : There’s No Actual Skill Called ‘Business’
Avoid business schools and magazines.
You will find that basic concepts form game theory, psychology, ethics, mathematics, computers, and logic will serve you much, much better.
It’s the number of iterations that drives the learning curve. So, the more iterations you can have, the more shots on goal you can have, the faster you’re going to learn. It’s not just about the hours put in.
Just have to get very, very comfortable with frequent small failures.
We’re evolved for small victories all the time but that becomes very expensive. That’s where the crowd is. That’s where the herd is. So, if you’re willing to bleed a little bit every day but in exchange you’ll win big later, you will do better.
That is, by the way, entrepreneurship. Entrepreneurs bleed every day.
They’re not making money, they’re losing money, they’re constantly stressed out, all the responsibility is upon them, but when they win they win big. On average they’ll make more.
19 : Embrace Accountability to Get Leverage
Take risks under your own name and society will reward you with leverage.
To get rich you’re going to need leverage: capital, code, or media.
Accountability is quite important, and when you’re working to build a product or you’re working in a team or you’re working in a business/team.
20 : Take Accountability to Earn Equity
If you have high accountability, you’re less replaceable.
Accountability as reputational skin in the game.
21 : Labor and Capital Are Old Leverage
Everyone is fighting over labor and capital.
You want the minimum amount of labor that allows you to use the other forms of leverage.
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.
22 : Product and Media Are New Leverage
Create software and media that work for you while you sleep.
Product leverage is where the new fortunes are made.
This newest form of leverage is where all the new fortunes are made, all the new billionaires.
The last generation, fortunes were made by capital. That was the Warren Buffets of the world.
But the new generation's fortunes are all made through code or media.
The beauty is when you combine all of these three.
Take just the minimum, but highest output labor that you can get, which are engineers, and designers, product developers. Then you add in capital. You use that for marketing, advertising, scaling. You add in lots of code and media and podcasts and content to get it all out there.
23 : Product Leverage is Egalitarian
The best products tend to be available to everyone.
The best products tend to be targeted at the middle class.
The best products tend to be at the center, at the sweet spot, the middle class, rather than being targeted at the upper class.
24 : Pick a Business Model with Leverage
An ideal business model has network effects, low marginal costs and scale economies.
The more you produce something the cheaper it gets to make it = Basic economics 101
In a network effect, each new user adds value to the existing users.
You should always be thinking about how your users, your customers, can add value to each other because that is the ultimate form of leverage.
25 : Example: From Laborer to Entrepreneur
From low to high specific knoweldge, accountability, and leverage.
26 : Judgment Is the Decisive Skill
In an age of nearly infinite leverage, judgment is the most important skill.
The people with the best judgement are actually among the least emotional.
Investment books are the worst place to learn about investment, because investment is a real world activity that is highly multivariate, all the advantages are always being competed away. It’s always on the cutting edge.
What you actually just need is very, very broad-based judgement and thinking. The best way to do that is to study everything, including a lot of philosophy.
Philosophy makes you more stoic, makes you less emotional, and so you can make better decisions; you have better judgment.
27 : Set an Aspirational Hourly Rate
Oursouce takss that cost less than your hourly rate.
“Set and enforce an aspiational hourly rate for yourslef and strive for it.”
Keep in mind that you have limited time for work including mentally high-output work. Do you want to use that time running errands and solving little problems? Or do you want to save it for the big stuff?
The great scientists were terrible at managing their home lives. None of them had an organized room, or made social events on time, or sent their thank-you cards.
You can spend your life however you want. But if you want to get rich, it has to be your top priority. It has to come before anything else, which means you can’t penny-pinch.
Your hourly rate should seem aburdly high.
28 : Work As Hard As You Can
Even though what you work on and who you work with are more important.
You can save a lot of time by picking the right area to work in, picking the right people to work with, and how hard you work.
29 : Be Too Busy to ‘Do Coffee’
Ruthlessly decline meetings.
Be too busy to ‘do coffee’ while keeping an uncluttered calendar.
“I don’t do non-transactional meetings. I don’t do meetings without an agenda. I don’t do meetings unless we absolutely have to.”
“Here’s what I’ve done. Here’s what I can show you. Let’s meet if this is useful to you, and I’ll be respectful of your time.”
A busy calendar and a busy mind will destroy your ability to do great things in this world. If you want to do great things, whether you’re a musician or entrepreneur or investor, you need free time and a free mind.
30 : Keep Redefining What You Do
Become the best in the world at what you do.
Keep redefining what you do until you’re the best at what you do.
Keep changing your objective until it arrives at your specific knowledge, skill sets, position, capabilities, location and interests. Your objective and skills should converge to make you number one.
When searching for what to do, keep 2 foci in mind:
- I want to be the best at what I do.
- What I do is flexible, so that I’m the best at it.
You want to arrive at a comfortable place where you feel: “This is something I can be amazing at, while still being authentic to who I am.”
If you want to be successful in life, you have to get comfortable managing multivariate problems and multiple objective functions at once.
31 : Escape Competition Through Authenticity
Nobody can compete with you on being you.
The best way to escape competition is to be authentic to yourself.
In entrepreneurship, the masses are never right. If the masses knew how to build great things and great wealth, we’d all be rich by now.
If you are successful, in the long-term you’ll find you’re almost doing all of your hobbies for a living, no matter what they are.
32 : Play Stupid Games, Win Stupid Prizes
Competition will blind you to greater games.
33 : Eventually You Will Get What You Deserve
One a long enough timescale, you will get paid.
“Apply specific knowledge, with leverage, and eventually you will get what you deserve.”
“Apply judgement, apply accountability, and apply the skill of reading.”
One thing important about entrepreneurship: You just have to be right once. You get many, many shots on goal. You can take a shot on goal every 3~5 years, maybe every 10 at the slowest. Or once every year at the fastest, depending on how you’re iterating with startups. But you only have to be right once.
What am I really good at, according to observation and people I trust, that the market values.?
34 : Reject Most Advice
Most advice is people giving you their winning lottery ticket numbers.
35 : A Calm Mind, a Fit Body, a House Full of Love
When you’re finally wealthy, you’ll realize it wasn’t what you were seeking in the first place.
A fit body, a calm mind, a house full of love. These things cannot be bought; they must be earned.
You health, your mental health, and your close relationships are things you have to cultivate. They can bring you a lot more peace and happiness than any amount of money ever will.
To me the ultimate purpose of money is so you don't have to be in a specific place, at a specific time, doing anything you don't want to do.
36 : There Are No Get Rich Quick Schemes
Get rich quick schemes are just someone else getting rich off you.
Any time you see somebody who’s gotten rich following some guru’s advice on getting rich, remember that in any random process, if you run it long enough and if enough people participate in it, you will always get every single possible outcome with probability one.
You have to absolutely and completely ignore business journalists and economist academics when they talk about private companies.
Those people have never built anything. They’re professional critics. They don’t know anything about making money. All they know is how to criticize and get pageviews. And you’re literally becoming dumber by reading them. You’re burning neurons.
“To become a philosopher king, start with being a king, not being a philosopher.”
37 : Productize Yourself
Figure out what you’re uniquely good at, and apply as much leverage as possible.
Productize yourself.
Find hobbies that make you rich, fit, and creative.
“Find three hobbies: One that makes you money, one that keeps you fit, and one that makes you creative.”
; or one that makes you smarter.
38 : Accountability Means Letting People Criticize You
You have to stick your neck out and be willing to fail publicly.
Many people live on a dollar a day. Do you? No. You play the hand you’re dealt to the best of your ability. Then you can take the winnings-the pot from that hand-and do whatever you want with it to fix the world.
39 : We Should Eventually Be Working for Ourselves
But we will have to make sacrifices and take on more risk.
This advice is for anybody who wants to be entrepreneurial.
Midlife can be the most fruitful time to apply this advice.
You will do better in a small organization.
The goal is that we are all working for ourselves.
40 : Being Ethical Is Long-Term Greedy
If you cut fair deals, you will get paid in the long run.
Trust leads to compounding relationships.
Once you’ve been in business long enough, you will realize how much of it is about trust.
Acting ethically turns out to be a selfish imperative. You want to be ethical because it attracts other long-term players in the network. They want to do business with ethical people.
In the long-run, being ethical pays off, but it’s the very long run.
You can be ethical simply because you’re long-term greedy.
41 : Envy Can Be Useful, or It Can Eat You Alive
Envy can give you a powerful boost, or it can eat you alive.
Sometimes it takes suffering through the wrong thing to motivate you to find the right thing.
42 : Principal-Agent Problem: Act Like an Owner
If you think and act like an owner, it's only a matter of time until you become an owner.
The difference between a founder and an employee is the difference between a principal and an agent.
“If you want it done, Go. If not, Send.” – Napoleon
If you want to do something right, do it yourself; because other people just don’t care enough.
You want to be generous with your top lieutenants-in terms of ownership and incentives-even if they don’t necessarily realize it; because over time they will and you want them to be aligned with you.
When you do business deals, it’s better to have an aligned partnership where you both have the same incentives than a partnership where you have the advantage in the deal.
If you’re in a role where you’re an agent/employee-then your most important job is to think like a principal. The more you can think like a principal, the better off you’re going to be long-term. Train yourself how to think like a principal, and eventually you will become a principal.
Bigger firms-all other things being equal-are generally worse than small ones.
The accountability is extremely high in small firms.
If you are an agent, the best way to operate is to ask “What would the founder do?” If you think like the owner, it’s only a matter of time until you become the owner.
43 : Kelly Criterion: Avoid Ruin
Don’t ruin your reputation or get wiped to zero.
Kelly criterion: Don’t risk everything. Stay out of jail. Don’t bet anything on one big gamble. Be careful how much you bet each time, so you don’t lose the whole kitty.
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.
44 : Schelling Point: Cooperating Without Communicating
People who can’t communicate can cooperate by anticipating the other person’s actions.
It’s about multiplayer games where people respond based on what they think the other person’s response will be.
Suppose two companies are competing heavily and hold an oligopoly. Let’s say the price fluctuates between 8 12𝑓𝑜𝑟𝑤ℎ𝑎𝑡𝑒𝑣𝑒𝑟𝑡ℎ𝑒𝑠𝑒𝑟𝑣𝑖𝑐𝑒𝑖𝑠.𝐷𝑜𝑛′𝑡𝑏𝑒𝑠𝑢𝑟𝑝𝑟𝑖𝑠𝑒𝑑𝑖𝑓𝑡ℎ𝑒𝑦𝑐𝑜𝑛𝑣𝑒𝑟𝑔𝑒𝑜𝑛10 without ever talking to each other.
45 : Turn Short-Term Games Into Long-Term Games
Improve your leverage by turning short-term relationships into long-term ones.
Pareto superior: something is better in some ways while being equal or better in other ways.
Pareto optimal: the solution is the best it can possibly be and you can’t change it without making it worse in at least one dimension. There is a hard trade-off.
“Negotiations are won by whoever cares less.”
46 : Compounding Relationships Make Life Easier
Life gets a lot easier when you know someone’s got your back.
It’s better to have a few compounding relationships than many shallow ones.
It takes just as much effort to create a small business as a large one.
47 : Price Discrimination: Charge Some People More
You can charge people for extras based on their propensity to pay.
Rich people and large enterprises are willing to pay more.
Price discrimination works because rich people are willing to pay more. You just have to give them the extra little things they need to signal they’re right or that little bit of comfort they want.
48 : Consumer Surplus: Getting More Than You Paid For
People are willing to pay more than what companies charge.
Consumer surplus is the extra value you get when you pay less than you were willing.
49 : Net Present Value: What Future Income Is Worth Today
See what future income is worth today by applying a discount to its future value.
50 : Externalities: Calculating the Hidden Costs of Products
Externalities let you account for the true cost of products by including hidden costs.
Externality: there’s an additional cost imposed by whatever product is being produced or consumed, that’s not accounted for in the price of the product.
Pricing externalities properly is more effective than feel-good measures.
Bonus : Finding Time to Invest in Yourself
If you have a work a “normal job”, take on accountability to build your specific knowledge.
Preferably in a business where society does not yet know how to train people and apprenticeship is the only model.
Try to learn something that people haven’t quite figured out how to teach yet. ie: investing, entrepreneurship, artificial intelligence.
The hardest thing for any founder is finding employees with a founder mentality. This is a fancy way of saying they care enough.
“I encourage people to learn to code or produce media, even if it’s just nights and weekends.”
Timeless specific knowledge usually can’t be taught, and it sticks with you forever. Timely specific knowledge comes and goes; but it tends to have a fairly long shelf life.
Technology is an intellectual frontier for gaining specific knowledge.
“Technology is everything that doesn’t work yet. Technology is around us everywhere. The spoon and fire was technology once.” – Danny Hills
Technology will always be a great field where you can pick up specific knowledge that is valuable to society.
Often the best engineers aren’t the hardest workers.
People need to be able to tell what role you had in the company’s success.