How to Get Rich （完整中文版）Naval Podcast

Hey, this is Nive. You're listening to

the Naval Podcast. This is one giant

mega episode that collects every episode

we've done on getting rich. All of it

based on his tweet storm of how to get

rich without getting lucky. I've

collected them all here because we're

going to switch topics to the new topic

of happiness on the next episode. We've

published one of these giant megas

episodes before, but this one's even

bigger. It's about three and a half

hours long. It covers all the tweets

from the How to Get Rich Tweet Storm,

plus all the Q&A that we did after that,

plus 10 minutes of bonus material at the

very end that we've never released. The

overall sound quality of this mega

episode improves a lot after the first

hour. You can find a link to a clean

transcript in the show notes or if you

go to the website

nav.al. There's no.com at the end. I

hope you enjoy.

You probably know Naval from his Twitter

account and we're going to be talking

about his epic tweet storm on how to get

rich without getting lucky. We're going

to go through most of the tweets in

detail, give Naval a chance to expand on

them and just generally riff on the

topic. He'll probably throw in some

ideas that he hasn't even published

before. He's also the co-founder of

Angel List and Opinions. He's a prolific

tech investor in companies like Twitter,

Uber and many more. And I'm the

co-founder of Angel List with Nibal and

I also co-authored the venture hacks

blog with him back in the day. Yeah, the

how to get rich storm definitely hit a

nerve and a lot of people say it was

helpful reach across aisles and people

outside of the tech industry, people in

all walks of life. People do want to

know how to solve their money problems

and everyone vaguely knows that they

want to be wealthy but they don't have a

good set of principles to do it by.

What's the difference between wealth,

money, and status? Wealth is the thing

that you really want. Wealth is assets

that earn while you sleep. Wealth is the

factory that with the robots that's

cranking out things. Wealth is the

computer program that's running at night

that's 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

use of productivity in the land than

actually doing some commercial

enterprise. So my definition of wealth

is much more businesses and assets that

can earn while you sleep. But really the

reason you want wealth is because it

buys your freedom. So you don't have to

wear a tie like a collar around your

neck. So you don't have to wake up at 7

am and rush to work and sit in commute

traffic. So you don't have to waste away

your entire life grinding all the

productive hours into a way into a

soulless job that doesn't fulfill you.

So the purpose of wealth is freedom.

It's nothing more than that. It's not to

buy fur coats or drive Ferraris or sail

yachts or jet around the world in your

Gulf Stream. That stuff gets really

boring and really stupid really fast.

It's really just so that you are your

own sovereign individual. You're not

going to get that unless you really want

it. And the entire world wants it and

the entire world is working hard at it.

And to some extent it is competitive.

It's a positive sum game but there are

competitive elements to it because

there's a finite amount of resources

right now in society and to get the

resources to do what you want you have

to stand out. Money is how we transfer

wealth. Money is social credits. It is

the ability to have credits and debits

on 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

that you did in the past, here's a

little IOU. Let's call that money." And

that money gets debased because people

steal the IUs. The government prints

extra IUS, people rege on their IUs. But

really what money is trying to be is

it's trying to be a reliable IOU from

society that you are owed something for

something you or someone who gave you

the money did in the past and we can

transfer these IUs around. So really

money is how we transfer wealth. There

are fundamentally two huge games in life

that people play. One is the money game

because money is not going to solve all

your problems but it's going to solve

all your money problems. So I think that

people know that they realize that. So

they want to make money. But at the same

time, many of them deep down believe

that they can't make it. They don't want

any wealth creation to happen. So they

virtue signal by attacking the whole

enterprise by saying, "Well, making

money is evil and you shouldn't do it."

Blah, blah, blah. But what they're

trying to do is they're actually playing

the other game, which is a 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." And then status is just your

ranking in the social hierarchy. So

wealth is not a zero- sum game.

Everybody in the world can have a house.

Because you have a house doesn't take

away from my ability to have a house. If

anything, the more houses that are

built, the easier it becomes to build

houses, the more we know about building

houses and just the more people that can

have houses. So wealth is a very

positive sum game. We create things

together. We're starting this endeavor

to create this hopefully piece of art

that explains what we're doing. At the

end of it, something brand new will be

created. It's a positive sum game.

Status, on the other hand, is a zero-

sum game. It's a very old game. We've

been playing it since Monkey Tribes, and

it's hierarchal. 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 zero sum game. Politics is

an example of a status game. Even sports

is 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 figure out who's in

charge, but fundamentally you play them

because they're a necessary evil. The

problem is on an evolutionary basis,

like if you go back thousands of years,

status is a much better predictor of

survival than wealth is. You couldn't

have wealth before the farming age

before farmers because you couldn't

store things. Hunter gatherers carried

everything in their backs. So hunter

gatherers lived entirely in statusbased

societies. Farmers started going to

wealth-based societies. And the modern

industrial economies are much more

heavily wealth-based societies. But

there's always a subtle competition

going on between status and wealth. For

example, when journalists attack rich

people or that attack the technology

industry, they're really bidding for

status. They're saying, "No, the people

are more important and I, the journalist

represents the people and therefore I am

more important." The problem is that by

playing these status games, to win that

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. You're always fighting to put

other people down, to put yourself and

the people that you like up and they're

always going to exist. There's no way

around it. But just realize that most of

the times when you're trying to create

wealth, you're actually getting attacked

by someone else and they're trying to

look like a goodie two shoes, but really

what they're doing is they're trying to

up their own status at your expense.

They're just playing a different game

and it's a worse game. It's a zero sum

game instead of a positive sum game. One

thing you mentioned before the interview

that stuck with me was the idea that you

think everyone can become rich and that

perhaps some of the ways of getting rich

or the idea of wealth is vilified by

some people in other countries. Do you

want to expand on that a little bit?

Yeah, I think there's this notion that

making money is evil, right? It's like

rooted all the way back down to money is

the root of all evil. People think that

the bankers steal our money. And you

know, it's somewhat true in that in a

lot of the world, there's a lot of theft

going on all the time. The history of

the world in some sense is this predator

prey relationship between makers and

takers. There are people who go out and

create things and build things and work

hard on things. Then there are people

who come along and take with a sword or

a gun or taxes or crony capitalism or

communism or what have you. There's all

these different methods to steal. Even

in nature, there are more parasites than

there are non-parasitical organisms. You

have ton of parasites in you who are

living off of you. And the better ones

are symbiotic. They're giving something

back, but there are a lot that are just

taking. That's just the nature of how

any complex system is built. But what I

am focused on is true wealth creation.

It's not about taking money. It's not

about taking something from somebody

else, but it's from creating abundance.

Obviously, there's not a finite number

of jobs or a finite amount of wealth.

Otherwise, we would still be sitting

around in caves figuring out how to

divide up pieces of firewood and you

know the occasional dead deer. So most

of the wealth in civilization in fact

not most. All of it has been created and

it got created from somewhere. It got

created from people. It got created from

technology. It got created from

productivity. It got created from hard

work. So this idea that it's stolen is I

think this horrible zero sum game that

people who are trying to gain status

play. But the reality is everyone can be

rich. And we can see that by seeing that

in the first world, everyone is richer

than almost anyone who was alive 200

years ago. 200 years ago, nobody had

antibiotics, nobody had cars, nobody had

electricity, nobody had the iPhone. So

all of these things are inventions that

have made us wealthier as a species.

Today, I would rather be a poor person

in a first world country than be a rich

person in Louis the 14th, France. I'd

rather be a poor person today than an

aristocrat back then. And that's just

because of wealth creation. The engine

of technology is science that is applied

for the purpose of creating abundance.

So I think fundamentally everybody can

be wealthy. And the thought experiment I

want you to think through is imagine if

everybody had the knowledge of a good

software engineer and a good hardware

engineer. If you could go out there and

you could build robots and computers and

bridges and program them. Let's say

every human knew how to do that. What do

you think society would look like in 20

years? My guess is what would happen is

we would build robots, machines,

software, and hardware to do everything

and we would all be living in massive

abundance. We would essentially be

retired in the sense that none of us

would have to work for any of the

basics. We'd even have robotic nurses.

We'd have like machine-driven hospitals.

We'd have self-driving cars. We'd have

farms that are 100% automated. We'd have

clean energy. So at that point we could

use technology breakthroughs to get

everything that we wanted. And if anyone

is still working at that point, they're

working as a form of expressing their

creativity. They're working because it's

in them to contribute and to build and

design things. But I don't think

capitalism is evil. Capitalism is

actually good. It's just that it gets

hijacked. It gets hijacked by improper

pricing of externalities. it gets

hijacked by improper deals where that

you have corruption or you have

monopolies. Overall, capitalism is

intrinsic to the human species.

Capitalism is not something we invented.

Capitalism is not even something we

discovered. It is innate to us in every

exchange that we have. When you and I

exchange information, I want some

information back from you. I give you

information. You give me information. If

we weren't having a good information

exchange, you go talk to somebody else.

So the notion of exchange and keeping

track of credits and debits, this is

built into us as flexible social

animals. We are the only animals in the

animal kingdom that cooperate across

genetic boundaries. Most animals don't

even cooperate, but when they do, they

cooperate only in packs where they

co-evolve together and they share blood.

So they have some shared interest.

Humans don't have that. And what lets us

cooperate? It's because we can keep

track of debits and credits. Who put in

how much work, who contributed how much.

That's all free market capitalism is. So

I strongly believe that it is innate to

the human species and we are going to

create more and more wealth and

abundance for everybody. 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. But don't try and put

down the people who are playing the game

because that's the game that keeps you

in a comfortable, warm bed at night.

That's the game that keeps a roof over

your head. That's a game that keeps your

supermarket stocked. That's the game

that keeps the iPhone buzzing in your

pocket. So, it is a beautiful game that

is worth playing ethically, rationally,

morally, socially for the human race.

And it's going to continue to make us

all richer and richer until we have

massive wealth creation for anybody who

wants it. And it's not just individuals

secretly despising wealth, right?

There's countries, groups, political

parties that overtly despise wealth or

at least seem to. That's right. And so

what those countries, political parties,

and groups are reduced to playing the

zero sum game of status. And in the

process, they destroy wealth creation.

They drag everybody down to their level.

Which is why the US is a very popular

country for immigrants because it's the

American dream. Anyone can come here, be

poor, and then work really hard and make

money and get wealthy, but even just

make some basic money for their lives.

Obviously, the definition of wealth is

different for different people. A first

world citizen's definition of wealth

might be, oh, I have to make billions of

dollars and I'm completely done. Whereas

to a third world poor immigrant just

entering the country, and we were poor

immigrants who came here when I was

fairly young to the United States,

wealth may just be a much lower number.

It may just be like I don't have to work

a manual labor job for the rest of my

life that I don't want to work. But

groups that despise it will essentially

bring the entire group down to that

level. If you get too many takers and

not enough makers, society falls apart.

You end up with a communist country.

Look at Venezuela, right? They were so

busy taking and dividing and

reallocating that people are literally

starving in the streets and losing

kilograms of body weight every year just

through sheer starvation. Another way to

think about it is imagine an organism

that has too many parasites. You

actually need some small number of

parasites to stay healthy. And you need

a lot of symbiotes. Like all the

mitochondria in all of our cells that

help us respirate and burn oxygen. These

are symbiots that help us survive. We

couldn't survive without them. But to

me, those are partners in the wealth

creation that creates the human body.

But if you just were filled with

parasites, if you got infected with

worms or a virus or bacteria that were

purely parasitical, you would die. So

any organism can only withstand a small

number of parasites. And when the

parasitic element gets too far out of

control, you die. So you know that again

I'm talking about ethical wealth

creation. I'm not talking about

monopolies. I'm not talking about crony

capitalism. I'm not talking about

mispriced externalities like the

environment. I'm talking about free

minds and free markets, smallcale

exchange between humans that's voluntary

and doesn't have an outsized impact on

others. But I think that kind of wealth

creation if a society does not respect

it, if a group does not respect it, that

society will plunge into ruin and

darkness. Obviously, we want to be

wealthy and we want to get there in this

lifetime without having to rely on luck.

A lot of people think making money is

about luck. It's not. It's about

becoming the kind of person that makes

money. You know, I like to think that if

I lost all my money and if you dropped

me on a random street in any

English-speaking country, within 5 10

years, I'd be wealthy again. Right?

Because it's just a skill set that I've

developed and I think anyone can

develop. You know, in a thousand

parallel universes, you want to be

wealthy in 999 of them. You don't want

to be wealthy in the 50 of them where

you got lucky. So, we want to factor

luck out of it. There's really four

kinds of luck that we were talking

about. This came from a book PRA uh Mark

Andre wrote a blog post about it. But

there's different kinds of luck. The

first kind of luck you might just say is

like blind luck where I just got lucky

because something completely out of my

control happened. You know that's

fortune, that's fate, etc. Then there's

luck that comes through persistence,

hard work, hustle, motion, which is when

you're just running around creating lots

of opportunities. You're generating a

lot of energy. You're doing a lot of

things. Lots of things will just get

stirred up in the dust. It's almost like

mixing a a petri dish and seeing what

combines or or mixing a bunch of

reagents and seeing what combines.

you're just generating enough force and

hustle and energy that luck will find

you. A third way is that you just become

very good at spotting luck. So if you

are very skilled in a field, you will

notice when a lucky break happens in

that field when other people who aren't

attuned to it won't notice. So you

become sensitive to luck and that's

through skill and knowledge and work.

And then the last kind of luck is the

weirdest, hardest kind, but that's what

we want to talk about, which is where

you build a unique character, a unique

brand, a unique mindset where then luck

finds you. For example, let's say that

you're the best person in the world at

deep sea underwater diving and you're

known to like take on deep sea

underwater dives that nobody else will

even attempt to dare. And then by sheer

luck, somebody finds a sunken treasure

ship off the coast they can't get at.

Well, their luck just became your luck

because they're going to come to you to

get that treasure and you're going to

get paid for it. Now, that's an extreme

example, but it's just showing how like

the person who got lucky by finding the

treasure chest, that was blind luck. But

them coming to you and asking you to

extract it and having to give you half,

that's not luck. You created your own

luck. you put yourself in a position to

be able to capitalize on that luck or to

attract that luck when nobody else has

created that opportunity for themselves.

So when we talk about without getting

lucky, we want to be deterministic. We

don't want to leave it to chance. Do you

want to elaborate a little bit more on

the idea that in a thousand parallel

universes you want to get rich in 999 of

them? I think some people are going to

see that and say that sounds impossible.

Sounds like it's too good to be true.

No, I don't think it's impossible. I

think that you may have to work a little

bit harder at it given your starting

circumstances. I mean remember I started

as a poor kid in India, right? So if I

can make it, anybody can in that sense.

Now obviously I had all my limbs and I

had my mental faculties and I did have

an education. So there are some

prerequisites you can't get past. But if

you're listening to this video or

podcast, you probably have the requisite

means at your disposal, which is a

functioning body and a functioning mind.

And I've encountered plenty of bad luck

along the way. The first little fortune

that I made, I instantly lost in the

stock market. The second little fortune

that I made or I should have made, I got

cheated by my business partners. It's

only the third time around has been a

charm. And even then, it has been a slow

and steady struggle. And I haven't made

money in my life in one giant payout.

It's always been a whole bunch of small

things piling up. So, it's more about

consistently creating wealth by creating

businesses and creating opportunities

and creating investments. It hasn't been

like a giant one-off thing. My personal

wealth has not been generated by one big

year. It just stacks up little bit chips

at a time. More options, more

businesses, more investments, more

things I can do. Same way someone like

Adlertis, he's building his brand

online. He's building videos. It's not

like any one video is going to suddenly

shower him with riches overnight. It's

going to be a long lifetime of learning,

of reading, of creating that's just

going to compound. So, we're talking

about getting wealthy so you can retire.

So, you have your freedom. Not retire in

the sense that you don't do anything,

but in the sense that you don't have to

be any place you don't want to be. You

don't have to do anything you don't want

to do. And you can wake up when you

want. You can sleep when you want. You

don't have a boss. That's freedom. So,

we're talking about enough wealth to get

to freedom. And especially thanks to the

internet these days, those opportunities

are massively abundant. I in fact have

too many ways to make money. I don't

have enough time. I literally have

opportunities pouring out of my ears.

And the thing I keep running out of is

time. There's just so many ways to

create wealth, to create products, to

create businesses, to create

opportunities, and to as a byproduct get

paid by society that I just can't even

handle it all. I think it's pretty

interesting that the first three kinds

of luck that you described, there are

very common cliches for them that

everybody knows. And then for that last

kind of luck that comes to you out of

the unique way that you act, there's no

real cliche for it. So for the first

three kinds, there's dumb luck or blind

luck. That's the first kind of luck. The

second kind of luck, there's the cliche

that fortune favors the bold. That's a

person who gets lucky just by stirring

the pot and acting. The third kind of

luck, people say that chance favors the

prepared mind. But for the fourth kind

of luck, there is not really a common

cliche out there that matches the unique

character of your action, which I think

is interesting and perhaps an

opportunity. And it also just shows that

people aren't necessarily taking

advantage of that kind of luck the way

they should be. I think also at that

point it starts becoming so

deterministic that it stops being luck.

So the definition starts fading from

luck to more destiny. So I would

characterize that fourth one is you

build your character in a certain way

and then your character becomes your

destiny. One of the things I think that

is important to making money. You want

the kind of reputation that makes people

do deals through you. You know I use the

example of like if you're a great diver

then treasure hunters will come and give

you pieces of treasure for your diving

skills. If you're a trusted, reliable,

high integrity, long-term thinking

dealmaker, then when other people want

to do deals, but they don't know how to

do them in a trustworthy manner with

strangers, they will literally approach

you and give you a cut of the deal or

offer you a unique deal just because of

the integrity and reputation that you've

built up. Warren Buffett, he gets

offered deals and he gets to buy

companies and he gets to buy warrants

and bail out banks and do things that

other people can't do because of his

reputation. But of course that's

fragile. It has accountability on the

line. It has a strong brand on the line.

And as we will talk about later, that

comes with accountability attached. But

I would say your character, your

reputation. These are things that you

can build that then will let you take

out advantages of opportunities that

other people may characterize as lucky,

but you know that it wasn't luck. You

said that this fourth kind of luck is

more or less a destiny. There's a quote

from that original book that was in

Mark's blog post from Benjamin Draeli

who I think was the former prime

minister of the UK. The quote to

describe this kind of luck was we make

our fortunes and we call them fate.

There were a couple other interesting

things about this kind of luck that were

mentioned in the blog post. I think

it'll be good for the listeners to hear

about is that this fourth kind of luck

can almost come out of eccentric ways

that you do your things and that

eccentricity is not necessarily a bad

thing in this case. In fact, it's a good

thing. Yeah, absolutely. Because the

world is a very efficient place. So,

everyone has dug through all the obvious

places to dig. And so to find something

that's new and novel and uncovered, it

helps to be operating on a frontier

where right there you have to be a

little eccentric to be out on the

frontier by yourself. And then you just

have to be willing to dig deeper than

other people do, deeper than seems

irrational just because you're

interested. Yeah. The two quotes that

I've seen that express this kind of luck

in addition to that Benjamin Draeli one

are this one from Sam Alman where he

said extreme people get extreme results.

I think that's pretty nice. And then

there's this other one from Jeffrey

Feffer who's a professor at Stanford

that you can't be normal and expect

abnormal returns. I've always enjoyed

that one too. Yeah. And the one quote

that I like which is the exact opposite

of that is play stupid games, win stupid

prizes, right? A lot of people spend a

lot of their time playing social games

like on Twitter where you're just trying

to improve your social standing and you

basically win stupid social prizes which

are worthless. I guess the last thing

that I have from this blog post is just

the idea that by pursuing these kinds of

luck, especially the last one, basically

everything but dumb luck, by pursuing

them, you essentially run out of unluck.

So if you just keep stirring the pot and

stirring the pot, that alone you will

run out of unlock. Yeah. Or it could

just be reversion to the mean, right? So

then you at least neutralize luck so

that it's your own talents that come

into play. Next you go into more

specific details on how you can actually

get rich and how you can't get rich. The

first point was about how you're not

going to get rich. You're not going to

get rich renting out your time. You must

own equity, a piece of a business to

gain your financial freedom. This is

probably one of the absolute most

important points. People seem to think

that you can create wealth and make

money through work and it's probably not

going to work. There are many reasons

for that, but the most basic is just

that your inputs are very closely tied

to your outputs. In almost any salary

job, even a one that's paying a lot per

hour, like a lawyer or a doctor, you're

still putting in the hours and every

hour you get paid. So what that means is

when you're sleeping, you're not

earning. When you're retired, you're not

earning. When you're in 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

like a private practice and that private

practice builds a brand and that brand

attracts people or they build some kind

of a medical device or a procedure or a

process where they have intellectual

property. So essentially, you're working

for somebody else and that person is

taking on the risk and has the

accountability and the intellectual

property and the brand. So they're just

not going to pay you enough. They're

going to pay you the bare minimum that

they have to to get you to do the job.

And that can be a high bare minimum, but

it's still not going to be true wealth

where you're retired. And then finally,

you're actually just not even creating

that much original for society. Like I

said, this tweettor storm should have

been called how to create wealth. It's

just how to get rich was a more catchy

title, but you're not creating new

things for society. You're just doing

things over and over and you're

essentially replaceable because you're

now doing a set role. Most set roles can

be taught. If they can be taught like in

a school, then eventually you're going

to be competing with someone who's got

more recent knowledge, who's been

taught, and is coming in to replace you.

You're much more likely to be doing a

job that can be eventually replaced by a

robot or by an AI. And it doesn't even

have to be wholesale replaced overnight.

It can be replaced a little bit of a

time. And that eats into your wealth

creation and therefore your earning

capability. So fundamentally, your

inputs are matched to your outputs. You

are replaceable and you're not being

creative. I just don't think that that

is a way that you can truly make money.

So, everybody who really makes money at

some point owns a piece of a product or

a business or some kind of IP. That can

be through stock options. So, if you can

be working at a tech company, that's a

fine way to start. But usually the real

wealth is created by starting your own

companies or by, you know, even

investors, they're in an investment firm

and they're buying equity. So, these are

much more the routes to wealth. It

doesn't come to the hours. You really

just want a job or a career or

profession where your inputs don't match

your outputs. So if you look at modern

society, I'll get into this later in the

tweet storm, businesses that have high

creativity and high leverage tend to be

ones where you could do an hour of work

and it can have a huge effect or you can

do a thousand hours of work and it can

have no effect. For example, look at

software engineering. One great engineer

can, for example, create Bitcoin and

create billions of dollars worth of

value. an engineer who's working on the

wrong thing or not quite as good or just

not as creative or thoughtful or

whatever can work for an entire year and

every piece of code that they ship ends

up not getting used. Customers don't

want it. That is an example of a

profession where the input and the

outputs are highly disconnected. It's

not based on the number of hours that

you put in. Whereas on the extreme other

end, if you're a lumberjack, even the

best lumberjack in the world, assuming

they're not working with tools, so the

inputs and outputs are pretty connected.

they're just using an axe or a saw. The

best lumberjack in the world may be like

3x better than one of the worst

lumberjacks, right? It's not going to be

a gigantic difference. So, you want to

look for professions and careers where

the inputs and the outputs are highly

disconnected. This is another way of

saying that you want to look for things

that are leveraged. And by leveraged, I

don't mean financial leverage alone like

Wall Street uses, and that has a bad

name. I'm just talking about tools.

We're using tools. Computer is a tool

that software engineers use. If I'm a

lumberjack with bulldozers and automatic

robot axes and saws, I'm gonna be using

tools and have more leverage than

someone who's just using his bare hands

and trying to rip the trees out by their

roots. Tools and leverage are what

create this disconnection between inputs

and outputs. Creativity. So, the higher

the creativity component of a

profession, the more likely it is to

have disconnected inputs and outputs. So

I think that if you're looking at

professions where your inputs and your

outputs are highly connected, it's going

to be very very very hard to create

wealth and make wealth for yourself in

that process. Any other big things you

should avoid other than renting out your

time? Yeah, there are two tweets that I

put out that are related. So the first

one was talking about where I was

talking about like how your lifestyle,

you know, has to upgrade shouldn't get

upgraded too fast. And that one said,

"People who are living far below their

means enjoy a freedom that people busy

upgrading their lifestyles just can't

fathom." And I think that's very

important like just to not upgrade your

lifestyle all the time to maintain your

freedom. And it just gives you freedom

of operation. Once you make a little bit

of money, you still want to be living

like your old self so that just the

worry goes away. So don't run out to

upgrade that house and lifestyle and all

that stuff. Let's say you're getting

paid $1,000 an hour. The problem is that

when you go into a work lifestyle like

that, you don't just suddenly go from

making $20 an hour to making $1,000 an

hour. That's a progression over a long

career. And as that happens, one subtle

problem is that you upgrade your

lifestyle as you make more and more

money. And that upgrading of the

lifestyle ups what you consider to be

wealth and you stay in this wage slave

trap. So I forget who said it, maybe it

was Nasim Tale, but he said, you know,

the most dangerous things are heroin and

a monthly salary, right? Because they're

highly addictive. The way you want to

get wealthy is you want to be poor and

working and working and working. And

this is, for example, how the tech

industry works where you don't make any

money for 10 years and then suddenly in

year 11, you might have a giant payday.

Which is why, by the way, one reason why

these very high marginal tax rates for

the so-called wealthy are flawed.

Because the highest risk-taking, most

creative professions literally lose

money for a decade of your life while

you take massive risk and you bleed and

bleed and bleed. And then suddenly in

year 11 or year 15, you might have one

single big payday, but then of course,

Uncle Sam show up and say, "Hey, you

know what? You just made a lot of money

this year. Therefore, you're rich,

therefore you're evil, and you got to

hand it all over to us." So it just

destroys those kinds of creative

risk-taking professions. But 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. And then

you can say, "Okay, now I'm done. Now

I'm retired. Now I'm free. I'm still

going to work because you got to do

something with your life, but I'm going

to work on only the things that I want

when I want." And it's going to be much

more creative expression and much less

about money. You're not going to get

rich renting out your time, but you say

that you will get rich by giving society

what it wants, but does not yet know how

to get at scale. That's right. So

essentially, as we talked about before,

money is I use from society saying you

did something good in the past. Now

here's something that we owe you for the

future. And so society will pay you for

creating things that it wants. But

society doesn't yet know how to create

those things because if it did, it would

need you. They would already be stamped

out big time. 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 technology that made JD Rockerfeller

rich. There was a time when cars were

technology that made Henry Ford rich. So

technology is just a set of things as

Alan K said that don't quite work yet.

Once something works, it's no longer

technology. So society always wants new

things. And if you want to be wealthy,

you want to figure out which one of

those things you can provide for society

that it does not yet know how to get,

but it will want that's natural to you

and within your skill set, within your

capabilities. And then you have to

figure out how to scale it. Because if

you just build one of it, that's not

enough. You 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

figured out that society would want

smartphones computer in their pocket

that had all the phone capability times

100 and be easy to use. So they figured

out how to build that and then they

figured out how to scale it and they

figured out how to get one into every

first world citizen's pocket and

eventually every third world citizen

too. And so because of that they're

handsomely rewarded and Apple is the

most valuable company in the world. The

way I tried to put it was that the

entrepreneurs'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. Like

for example, rich people had chauffeers

and then they had black town cars and

then Uber came along and everyone's

private driver. It was available to

everybody and now you can even see Uber

pools that are replacing shuttle buses

because it's just more convenient. And

then you get scooters which are even

further down market of that. So you're

right, it's about distributing what rich

people used to have to everybody. But

the entrepreneurs job starts even before

that which is creation. 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. Let's look at this

next tweet, which I thought was cryptic

and also super interesting about the

kind of job or career that you might

have. You said, "The internet has

massively broadened the possible space

of careers. Most people haven't figured

this out yet." The fundamental property

of the internet more than any other

single thing is it connects every human

to each other human on the planet. You

can now reach everyone. Whether it's by

emailing them personally, whether it's

by broadcasting to them on Twitter,

whether it's by posting something on

Facebook that they find, whether it's by

putting up a website they come and

access, it connects everyone to

everyone. So the internet is an inter

networking tool. It connects everybody.

That is its superpower. So you want to

use that. What that helps you figure out

is that the internet means that you can

find your audience for your product or

your talent and skill no matter how far

away they are. For example, Ninad who is

illertus if he was in these videos pre-

internet how would he get the message

out there? It would just be what would

he do? He would run around where he

lives in his neighborhood sharing it to

people on a computer or a screen or he

would try to get it played at his local

movie theater. It was impossible. It

only works because he can put it on the

internet. And then how many people in

the world are really interested in it or

even interested in what we're talking

about are really going to absorb it,

right? It's going to be a very small

subset of humanity. The key is being

able to reach them. So what the internet

does is allows any niche obsession,

which could be just the weirdest thing.

It could be like people who collect

snakes to like people who like to ride

hot air balloons to people who like to

sail around the world by themselves,

just one person on a craft or someone

who's obsessed with miniature cooking.

Like there's this whole Japanese

miniature cooking phenomenon. or there's

a show about a woman who goes into

people's houses and tidies it up, right?

So, whatever niche obsession you have,

the internet allows you to scale. Now,

that's not to say that what you build

will be the next Facebook or reach

billions of users, but if you just want

to reach 50,000 passionate people like

you, there's an audience out there for

you. So, the beauty of this is that we

have 7 billion beings in this planet.

The combinatorics of human DNA are

incredible. Everyone is completely

different. You'll never meet any two

people who are even vaguely similar to

each other that can substitute for each

other. It's not you can say, "Well,

Nivei just left my life so I can have

this other person come in and he's just

like Nivi and I get the same feelings,

the same responses and the same ideas."

No, there are no substitutes for people.

People are completely unique. So given

that each person has different skill

sets, different interests, different

obsessions and it's that diversity that

becomes a creative superpower. So each

person can be creatively superb at their

own unique thing. But before that didn't

matter because if you were living in a

little fishing village in Italy, like

your fishing village didn't necessarily

need your completely unique skill and

you had to conform to just the few jobs

that were available. But now today you

can be completely unique. 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. Space of careers has been so

broadened. Essports players, people

making millions of dollars playing

Fortnite, people creating videos and

uploading them, YouTube broadcasters,

bloggers, you know, podcasters. Joe

Rogan, I read, true or false, I don't

know, but I read that he's going to make

about a hundred million dollars a year

on his podcast and he's had two billion

downloads. Even PewDiePie, this is a

hilarious tweet that I retweeted the

other day. PewDiePie is the number one

trusted name in news. This is a kid I

think in Sweden and he's got three times

the distribution of the top cable news

networks just on his news channel. It's

not even on his entertainment channel.

The internet enables any niche interest

as long as you're the best at it to

scale out. And the great news is because

every human is different. Everyone is

the best at something being themselves.

Another tweet I had that is worth

weaving in but didn't go into this tweet

storm was a very simple one. I like

things when I can compress them down

because they're easy to remember and

easy to hook on to. But that one was

escape competition through authenticity.

So 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 different.

Don't copy. I know we're mimemetic

creatures and Rene Gerard has a whole

mimes theory but it's much easier than

that. Don't imitate. Don't copy. Just do

your own thing. No one can compete with

you on being you. It's that simple. And

so the more authentic you are to who you

are and what you love to do, the less

competition you're gonna have. So you

can escape competition through

authenticity when you realize that no

one can compete with you on being you.

And normally that would have been

useless advice pre- internet. Post

internet you can turn that into a

career. talk a little bit about what

industries you should think about

working in, what kind of job you should

have, and who you might want to work

with. So, you said one should pick an

industry where you can play long-term

games with long-term people. Why? Yeah,

this is an insight into what makes

Silicon Valley work and what makes high

trust societies work. Essentially all

the benefits in life come from compound

interest whether it's in relationships

or making money or in learning. So

compound interest is a marvelous force

where it's like you know you start out

with 1x what you have and then if you

increased 20% a year for 30 years it's

not that you got 30 years times 20%

added on. It was compounding. So it just

grew and grew and grew until you

suddenly got a massive amount of

whatever it is whether it's goodwill or

love or relationships or money. So I

think compound interest is a very

important force. So you have to be able

to play a long-term game. And long-term

games are good not just for compound

interest, they're also good for trust.

If you look at prisoner's dilemma type

games, the solution to prisoners dilemma

is tit fortat, which is I'm just going

to do to you what you did last time to

me with some forgiveness in case there

was a mistake made. But that only works

in an iterated prisoner's dilemma. In

other words, if we play the game

multiple times. So if you're in a

situation like for example, you're in

Silicon Valley where people are doing

business with each other and they know

each other. they trust each other, then

they do right by each other because they

know this person will be around for the

next game. Now, of course, that doesn't

always work because you can make so much

money in one move in Silicon Valley.

Sometimes people betray each other

because they're just like, I'm going to

get rich enough of off this that I don't

care. So there can be exceptions to all

these circumstances but essentially if

you want to be successful you have to

work with other people and you have to

figure out who can you trust and who can

you trust over a long long period of

time that you can just keep playing the

game with them so that compound interest

and high trust will make it easier to

play the game and will let you collect

the major rewards which are usually at

the end of the cycle. So for example,

Warren Buffett has done really well as

an investor in the US stock market. But

the biggest reason he could do that was

because the US stock market has been

stable and around and didn't get, for

example, seized by the government during

a bad administration or the US didn't

plunge into some war. The underlying

platform didn't get destroyed. So in his

case, he was playing a long-term game

and the trust came from the US stock

market stability. In Silicon Valley, the

trust comes from the network of people

in the small geographic area that you

figure out over time who you can work

with and who you can't. If you keep

switching locations, you keep switching

groups. Let's say you started out in the

woodworking industry and you built up a

network there and you're working hard.

You're trying to build a product in

woodworking industry and then suddenly

another industry comes along that's

adjacent but different, but you don't

really know anybody in it and you want

to dive in and make money there. If you

keep hopping from industry, no, actually

I need to open a line of electric car

stations for electric car refueling,

that might make sense. It might be the

best opportunity, but every time you

reset, every time you wander out of

where you built your network, you're

going to be starting from scratch.

You're not going to know who to trust,

they're not going to trust you. There

are also industries in which people are

transient by definition. They're always

coming in and going out. Politics is an

example of that, right? In politics, new

people are being elected. You see in

politics that when you have a lot of

old-timers like the Senate, people

who've been around for a long time and

they've been career politicians. Yeah,

there's a lot of downside to career

politicians like corruption. But an

upside is they actually get deals done

with each other because they know the

other person is going to be in the same

position 10 years from now and they're

going to have to keep dealing with them.

So, they might as well learn how to

cooperate. Whereas, every time you get

like a new incoming freshman class in

the House of Representatives, which

turns over every two years, a big wave

election, nothing gets done because

there's a lot of fighting. because I

just got here. I don't know you. I don't

know if you're going to be around. Why

should I work with you rather than just

trying to do whatever I think is right?

So, it's important to pick an industry

where you can play long-term games and

with long-term people. So, those people

have to signal that they're going to be

around for a long time, that they're

ethical, and their ethics are visible

through their actions. In a long-term

game, it seems that everybody is making

each other rich. And in a short-term

game, it seems like everybody's making

themselves rich. I think that is a

brilliant formulation. Yeah. 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. In

a short-term game, we're cutting up the

pie. Now, this is not to excuse the

socialists, right? The socialists are

the people who are not involved in

baking the pie who show up at the end

and say, "I want a slice or I want the

whole pie." They show up with the guns.

But I think a good leader doesn't take

credit. A good leader 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 risk

as opposed to just whoever has the

longest knives the sharpest knives at

the end. So these next two tweets are

play iterated games all returns in life

whether in wealth relationships or

knowledge come from compound interest.

Yeah. When you've been doing business

with somebody or you've been friends

with somebody for 10 years, 20 years, 30

years, it just gets better and better

because you trust them so easy that the

friction goes down. You can do bigger

and bigger things together. For example,

you know, the simplest one is getting

married to someone, having kids, and

raising children. Like that's compound

interest, right? Investing in those

relationships. Those relationships end

up being invaluable compared to more

casual relationships. It's true in

health and fitness. You know, the fitter

you are, the easier it is to stay fit.

Whereas the more you deteriorate your

body, the harder it is to come back and

claw your way back to a baseline. It

requires heroic acts. Regarding compound

interest, I think I saw you retweet

something a while back. Maybe it was

from Ed Latimore. It went something

along the lines of get some traction,

get purchase, and don't lose it. So the

idea was to gain some initial traction

and never fall back. Just keep

ratcheting up and up. I don't remember

it exactly, but I think that was right.

Yeah, I was like get traction and don't

let go. It was a good one. Yeah. In

terms of pick people to work with that

have high intelligence, high energy, and

high integrity. I find that's the

three-part checklist that you cannot

compromise on. You need someone who's

smart or they're heading in the wrong

direction and you're not going to end up

in the right place. You need someone

high energy because the world is full of

smart, lazy people. We all know people

in our lives who are really smart, but

you know, can't get out of bed or lift a

finger. And we also know people who are

very high energy, but not that smart. So

they work hard but they're running in

the wrong direction. And smart it's not

a projorative. It's not meant to be like

someone's smart someone else is stupid

but it's more that everyone's smart at

different things. So depending on what

you want to do well you have to find

someone who's smart at that thing. And

then energy. A lot of times people are

unmotivated for a specific thing but

they're not motivated for other things.

For example, someone might be really

unmotivated to go to a job and sit in an

office but they might be really

motivated to go paint. Right? Well in

that case they should be a painter. they

should be putting art up on the internet

trying to figure out how to build a

career out of that rather than wearing a

collar around their neck and going to a

dreary job. And then high integrity is

the most important because otherwise if

you got the other two, what you have is

you have a smart and hardworking crook

who's eventually going to cheat you. So

you have to figure out if the person's

high integrity and as we talked about

the way you do that is through signals.

And signals is what they do not what

they say. It's all the non-verbal stuff

that people do when they think nobody's

looking. With respect to the energy,

there was this interesting thing from

Sam Alman a while back where he was

talking about delegation and he was

saying one of the important things for

delegation is delegate to people who are

actually good at the thing that you want

them to do. It's the most obvious thing

but it seems like you want to partner

with people who are naturally going to

do the things that you want them to do.

Yeah. I almost won't start a company or

hire a person or work with somebody if I

just don't think they're into what I

want them to do. When I was younger, I

used to try and talk people into things.

I was in this idea that you can sell

someone into doing something, but you

can't. You can't keep them motivated.

You can get them inspired initially. It

might work if you're a king like Henry

the 5th and you're trying to get them to

just charge into battle and then they'll

figure it out. But if you're trying to

keep someone motivated for the long

term, that motivation has to come

intrinsically. You can't just create it.

nor can you be the crutch for them if

they don't have that intrinsic

motivation. So you have to make sure

people actually are high energy and want

to do what you want them to do or what

you want to work with them. Reading

signals is very very important. Signals

are what people do despite what they

say. So it's important to pay attention

to subtle signals. We all know this

socially. If someone treats a waiter or

waitress in a restaurant really badly,

then it's only a matter of time until

they treat you badly. If somebody screws

over an enemy and is vindictive towards

them, well, it's only a matter of time

before they redefine you from friend to

enemy and you feel their wrath. So,

angry outraged vindictive short-term

thinking people are essentially that way

in many interactions in their life.

People are oddly consistent. It's one of

the things you'll learn about them. So,

you want to find long-term people. You

want to find people who seem

irrationally ethical. For example, I had

one friend of mine whose company I

invested in and the company failed and

he could have wiped out all the

investors, but he kept putting more and

more personal money in. Through three

different pivots, he put personal money

in until the company finally succeeded.

And in the process, he never wiped out

the investors. And I was always grateful

to him for that. I said like, "Wow,

that's amazing that you know, you were

so good to your investors. You didn't

wipe them out." And he got offended by

that. He said, "I didn't do it for you.

I didn't do it for my investors. I did

it for me. It's my own self-esteem. It's

what I care about. That's how I live my

life. That's the kind of person you want

to work with. Another quote that I like,

I have a tweet on this. I think I read

this somewhere else recently. So, I'm

not taking credit for this, but I

modified a little bit, which is that

self-esteem is a reputation that you

have with yourself. You'll always know.

So good people, moral people, ethical

people, easy to work with people,

reliable people tend to have very high

self-esteem because they have very good

reputation with themselves and they

understand that it's not ego.

Self-esteem and ego are different things

because ego can be undeserved. But

self-esteem, at least you feel like you

lived up to your own internal moral code

of ethics. And so it's very hard to work

with people who end up being low

integrity. And it's hard to figure out

who's high integrity and low integrity.

Generally, the more someone is saying

that they're moral and ethical and high

integrity, the less likely they're to be

that way. It's very much like status

signaling. If you overtly bid for

status, if you overtly talk about being

high status, that is a low status move.

If you openly talk about how honest and

reliable and trustworthy you are, you're

probably not that honest and

trustworthy, that is a characteristic of

conmen. So, yeah, pick an industry in

which you can play long-term games with

long-term people. Let's do this last

tweet. You said, "Don't partner with

cynics and pessimists. Their beliefs are

self-fulfilling." Yeah. Essentially, to

create things, you have to be a rational

optimist. Rational in the sense that you

have to be able to see the world for

what it really is. And yet, you have to

be optimistic about your own

capabilities and your capability to get

things done. We all know people who are

consistently pessimistic who will shoot

down everything. Everyone in their life

has like the helpful critical guy,

right? he thinks he's being helpful, but

he's actually being critical and he's a

downer on everything. That person will

not only never do anything great in

their lives, they'll prevent other

people around them for doing something

great. They think their job is to shoot

holes in things. And it's okay to shoot

holes in things as long as you come up

with a solution. There's also the

classic like military line, either lead,

follow, or get out of the way. And these

people want a fourth option where they

don't want to lead, they don't want to

follow, but they don't want to get out

of the way. They want to tell you why

the thing's not going to work. And all

the really successful people I know have

a very strong action bias. They just do

things. The easiest way to figure out if

something's viable or not, is by doing

it. At least do the first step and the

second step and the third and then

decide. So 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. And you

have to be optimistic about it. Not

irrationally. There's nothing worse than

someone who's just like foolhardy and

chasing it's not work. That's why I say

rational optimist. But you have to be

rational. Know all the pitfalls, know

the downsides, but still keep your chin

up. I mean, you've got one life on this

planet. Why not try to build something

big? This is the beauty of Elon Musk and

why I think he inspires so many people

is just because he takes on really,

really big audacious tasks and he

provides an example for people to think

big and it takes a lot of work to build

even small things. I don't think the

corner grocery store owner is working

any less hard than Elon Musk or pouring

any less sweat and toil into it. Maybe

even more. But for whatever reason, you

know, education circumstance, they

didn't get the chance to think as big.

So the outcome's not as big. So it's

just better to think big. Obviously

rationally within your means to stay

optimistic. The cynics and the

pessimists, what they're really saying

and fortunate, but they're saying, "I've

given up. I don't think I can do

anything." And so the world to me just

looks like a world where nobody can do

anything. And so why should you go do

something? Because if you fail then I'm

right, which is great. But if you

succeed, then you just make me look bad.

Yeah. It's probably better to be

irrational optimist than it is to be a

rational cynic. Yeah. There's a

completely rational frame on why you

should be an optimist. Historically, if

you go back 2,000 years, 5,000 years,

10,000 years, two people are wandering

through a jungle. They hear a tiger.

One's an optimist and says, "Oh, it's

not Heather our way." The other one

says, "I'm a pessimist. I'm out of

here." And the pessimist runs and

survives. And the optimist gets eaten.

So, we're descended from pessimists.

We're genetically hardwired to be

pessimists. But modern society is far

far safer. There are no tigers wandering

down the street. It's very unlikely that

you will end up in total ruin, although

you should avoid total ruin. Much more

likely that the upside is unlimited and

the downside is limited. So adapting for

modern society means overriding your

pessimism and taking slightly

irrationally optimistic bets because the

upside is unlimited. If you start the

next SpaceX or Tesla or Uber, you can

make billions of dollars of value for

society and for yourself and change the

world. And if you fail, what's the big

deal? You lost a few million dollars of

investor money and they've got plenty

more. And that's the bet they take the

chances that you will succeed. It made

sense to be pessimistic in the past. It

makes sense to be optimistic today,

especially if you're educated and living

in a first world country, even a third

world country. I actually think the

economic opportunities in third world

countries are much larger. The one thing

you have to avoid is the risk of ruin.

Ruin means stay out of jail. So don't do

anything that's illegal. It's never

worth it to wear an orange jumpsuit. And

stay out of total catastrophic loss.

That could mean that you stay out of

things that could be physically

dangerous, hurt your body. You have to

watch your health and stay out of things

that can cause you to lose all of your

capital, all of your savings. It'll

gamble everything at one go, but you

take rationally optimistic bets with big

upside. I think there's people that will

try and build up your ideas and build on

your ideas no matter how far-fetched

they might seem. And then there are

people who will list out all the obvious

exceptions no matter how obvious they

are. And fortunately in the startup

world, I don't even really get exposed

to the people that are giving you the

obvious exceptions and all the reasons

it's not going to work. I barely get

exposed to that anymore. That's what

Twitter is for. Scott Adams got so

annoyed by this that he came up with a

phrase, an acronym, which is but of

course there are obvious exceptions, B O

C T A, and he used to like pin that

acronym at the end of his articles for a

while. But Twitter is just like overrun

with nitpickers. And where exactly as

you're pointing out, Silicon Valley has

learned that the upside is so great that

you never look down on the slobby kid

who's wearing a hoodie and has like

coffee on his shoes and just looks like

a slob because you don't know if he's

going to be the next Mark Zuckerberg or

the next Reed Hoffman. So, you got to

treat everybody with respect. You got to

look up to every possibility and

opportunity because the upside is so

unlimited and the downside is so limited

in the modern world especially with

financial assets and instruments. Do you

want to talk a little bit about the

skills that you need in particular

specific knowledge,

accountability, leverage and judgment?

So the first tweet in this area is arm

yourself with specific knowledge,

accountability and leverage. And I'll

throw in judgment as well. I don't think

you covered that in that particular

tweet. If you want to make money, you

have to get paid at scale. And why you?

That's accountability. At scale, that's

leverage. And just you getting paid as

opposed to somebody else getting paid.

That's specific knowledge. So specific

knowledge is probably the hardest thing

to get across in this whole tweet storm.

And it's probably the thing that people

get the most confused about. The thing

is that we have this idea that

everything can be taught. Everything can

be taught in school. And it's not true

that everything can be taught. In fact,

the most interesting things cannot be

taught. But everything can be learned.

And very often that learning either

comes from some innate characteristics

in your DNA or it could be through your

childhood where you learn soft skills

which are very very hard to teach later

on in life. or it's something that is

brand new so nobody else knows how to do

it either or it's true on the job

training because you're pattern matching

into highly complex environments

building judgment in a specific domain

classic example is investing but it

could be in anything it could be in

judgment in running a a fleet of trucks

could be judgment in weather forecasting

so specific knowledge is the knowledge

that you care about especially if you're

later in life let's say you're post

202122 two, you almost don't get to

choose which specific knowledge you

have. Rather, you get to look at what

you have already built by that point in

time and then you can build on top of

it. The first thing to notice about

specific knowledge is that you can't be

trained for it. If you can be trained

for it, if you can go to a class and

learn specific knowledge, then somebody

else can be trained for it, too. And

then we can massproduce and mass train

people. Heck, we can even program

computers to do it. And eventually, we

can program robots to walk around doing

it. So if that's the case, then you're

extremely replaceable and all we have to

pay you is the minimum wage that we have

to pay you to get you to do it when

there are lots of other takers who can

be trained to do it. So really your

returns just devolve into your cost of

training plus the return on investment

on that training. So you really want to

pick up specific knowledge. You need

your schooling, you need your training

to be able to capitalize on the best

specific knowledge, but the part of it

that you'll get paid for is the specific

knowledge. For example, someone who goes

and gets a degree in psychology and then

becomes a salesperson. Well, if they

were already a formidable salesperson,

had great salesmanship to begin with,

then a psychology degree is leverage. It

arms them and they do much better at

sales. But if they were always an

introvert, never very good at sales, and

they're trying to use psychology to

learn sales, they're just not going to

get that great at it. Specific 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 for going into whatever field

investors say is the hottest. Very often

specific knowledge is at the edge of

knowledge. It's also stuff that's just

being figured out or is really hard to

figure out. So if you're not 100% into

it, somebody else who is 100% 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. So if you're

operating with a thousand times leverage

and somebody is right 80% of the time

and somebody is else is right 90% of the

time, the person who's right 90% of the

time will literally get paid hundreds of

times more by the market because of the

leverage and because of the compounding

factors and being correct. So you really

want to make sure you're good at it. So

your genuine curiosity is very

important. So very often it's not

something you sit down and you reason

about. It's more found by observation.

You almost have to look back on your own

life and see what you're actually good

at. For example, I wanted to be a

scientist and that is where a lot of my

moral hierarchy comes from. I view

scientists at the top of the production

chain for humanity. And the group of

scientists who have made real

breakthroughs and contributions have

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 the science, you

know, we'd still be scrabbling in the

dirt, fighting with sticks and trying to

start fires. 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, talking to

people. So I have some sales skills

which is a form of specific knowledge

that I have. I have some analytical

skills around how to make money and I

have this ability to absorb data, obsess

about it and break it down and that is a

specific skill that I have. I also just

love tinkering with technology and all

of this stuff feels like play to me but

it looks like work to others. So there

are other people to whom these things

would be hard. They say like well how do

I get good at being pathy 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. This is

ironic, but the first person to actually

point out my real specific knowledge was

my mother and she did it as an aside

talking from the kitchen and she said it

when I was like 15 or 16 years old. I

was telling a friend of mine that I

wanted to be an astrophysicist and she

said, "No, you're going to go into

business." And 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 what

she's talking about." But mom knew

exactly what she was talking about. She

had already observed that every time we

walked down the street, I would critique

the local pizza parlor on why they were

selling their slices a certain way with

certain toppings and why their process

of ordering was this way when it should

have been that way. So she knew that I

was just had more of a business curious

mind. But then my obsession with science

combined to create technology and

technology business is where I found

myself. So very often your specific

knowledge is observed and often observed

by other people who know you well and

revealed in situations rather than

something that you come up with. To the

extent that specific knowledge is

taught, it's on the job. It's through

apprenticeships. And that's why the best

businesses, the best careers are the

apprenticeship careers because those are

things society still has not figured out

how to train and automate yet. The

classic line here is that Warren Buffett

went to Benjamin Graham when he got out

of school and Benjamin Graham was the

author of the intelligent investor and

sort of modernized or created value

investing as a discipline and Warren

Buffett went to Benjamin Graham and

offered to work for him for free and

Graham said actually you're overpriced

free is overpriced and Graham was

absolutely right that when it comes to a

very valuable apprenticeship like the

type that Graham was going to give

Buffett Buffett should have been paying

him a lot of money and That right there

tells you that those are skills worth

knowing. Specific knowledge also tends

to be technical and creative. So on the

bleeding edge of technology, on the

bleeding edge of art, on the bleeding

edge of communication. Even today, for

example, there are probably meme lords

out there on the internet who can create

incredible memes that will spread the

idea to millions of people or are very

persuasive. Like for example, Scott

Adams is a good example of this. He's

essentially becoming one of the most

credible people in the world by making

accurate predictions through persuasive

arguments and videos. And that is

specific knowledge that he has built up

over the years because he got obsessed

with hypnosis when he was young. He

learned how to communicate through

cartooning. He embraced Periscope early.

So, he's been practicing lots of

conversation. He's read all the books on

the topic. He's employed it in his

everyday life. If you look at his

girlfriend, she's like this beautiful

young Instagram model. That is an

example of someone who has built up a

specific knowledge over the course of

his career. It's highly creative. It has

elements of being technical in it and

it's something that is never going to be

automated. No one's going to take that

away from him because he's also

accountable under one brand as Scott

Adams and he's operating with the

leverage of media with Periscope and

drawing Dilbert cartoons and writing

books. He has massive leverage on top of

that brand and he can build wealth out

of it if he wanted to build additional

wealth beyond what he already has.

Should we be calling it unique knowledge

or does specific knowledge somehow make

more sense for it? You know, I came up

with this framework when I was really

young and we're talking decades and

decades. It's now probably over 30 years

old and so at the time just specific

knowledge stuck with me. So that is how

I think about it. The reason I didn't

try and change it is because every other

term that I found for it was overloaded

in a different way. At least specific

knowledge isn't that used. I can rebrand

it. The problem with unique knowledge is

yeah maybe it's unique but if I learn it

from somebody else it's no longer unique

then we both know it. So it's not so

much that it is unique it's that it is

highly specific to the situation. It's

specific to the individual. It's

specific to the problem and it can only

be built as part of a larger obsession

interest and time spent in that domain.

It can't just be read straight out of a

single book nor can be taught in a

single course. nor can it be programmed

into a single algorithm. Speaking of uh

Scott Adams, he's got a blog post on how

to build your career by getting in, say,

the top 25 percentile at three or more

things. And by doing that, you become

the only person in the world who can do

those three things in the 25th

percentile. So instead of trying to be

the best at one thing, you just try to

be very very good at three or more

things. Is that a way of building

specific knowledge? I actually think the

best way is just to follow your own

obsession and somewhere in the back of

your mind you can realize that hey

actually this obsession like I'll keep

an eye out for the commercial aspects of

it. But I think if you go around trying

to build it a little too deliberately if

you become too goal oriented on the

money then you won't pick the right

thing. You won't actually pick the thing

that you love to do. So you won't go

deep enough into it. Scott Adams's

observation is a good one. It's

predicated on statistics. Let's say

there's 10,000 areas that are valuable

to the human race today in terms of

knowledge to have and the number one in

those 10,000 slots is taken, right?

Someone else is likely to be the number

one each of those 10,000 unless you

happen to be one of the 10,000 most

obsessed people in the world at a given

thing. But when you start going the

combinatorics of combining well number

3,728 with top-notch sales skills and

really good writing skills and someone

who understands accounting and finance

really well when the need for that

intersection arrives you've expanded now

from 10,000 through cominatorics to

millions or tens of millions. So it just

becomes much less competitive. Also

there's diminishing returns. So, it's

much easier to be top 75 percentile at

three or four things than it is to be

literally the number one at something. I

think it's a very pragmatic approach,

but I think it's important that one not

start assembling things too deliberately

because you do want to pick things where

you are a natural. Everyone is a natural

at something. We're all familiar with

that phrase, a natural. Oh, this

person's a a natural at meeting men or

women. This person's a natural

socialite. This person's a natural

programmer. This person's a natural

reader. So whatever you are a natural

at, you want to double down on that. And

then there are probably multiple things

you are natural at because personalities

and humans are very complex. So we want

to be able to take the things that you

are natural at and combine them so that

you automatically just through sheer

interest and enjoyment end up top 25 or

top 10 or top 5% at a number of things.

Talking about combining skills, you said

that you should learn to sell, learn to

build. If you can do both, you will be

unstoppable. You know, this is a very

broad category now, but it's two broad

categories. One is building the product,

which is hard, and it's multivariat.

That can include design, that can

include development, that can include

manufacturing logistics procurement.

It could even be designing and operating

a service. It has many many definitions

but in every industry there is a

definition of the builder. In our tech

industry that's the CTO, it's the

programmer, it's the software engineer,

hardware engineer but you know even in

like a 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 the right time

and so on. Then the other side of it is

the sales side. Again selling has a very

broad definition. Selling doesn't

necessarily just mean selling individual

customers, but it could mean marketing.

It could mean communicating. It could

mean recruiting. It could mean raising

money. It could mean inspiring people.

It could mean doing PR. So, it's a broad

umbrella category. So, generally, the

Silicon Valley startup model tends to

work best. It's not the only way, but it

is probably the most common way when you

have two founders, one of whom is world

class at sales and one of whom is world

class at building. An example is of

course Steve Jobs and Steve Waznjak with

Apple. Gates and Allen probably had

similar responsibility early on with

Microsoft. Larry and Sergey, you know,

probably broke down along those lines,

although it's a little different there

because that was a very technical

product delivered to end users through a

simple interface. But generally, you

will see this pattern repeated over and

over. There's a builder and there's a

seller. There's a CEO and CTO combo. And

venture and technology investors are

almost trained to look for this combo

whenever possible. It's the magic

combination. The ultimate is when one

individual can do both. That's when you

get true superpowers. That's when you

get people who can create entire

industries. The living example is Elon

Musk. He may not necessarily be building

the rockets himself, but he understands

enough that he actually makes technical

contributions. He understands the

technology well enough that no one's

going to snow him on it. And he's not

running around making claims that he

doesn't think he can eventually deliver.

He may be optimistic in the timelines

but he thinks it's within reasonleness

of delivery. Even Steve Jobs developed

enough product skills and was involved

enough in the product that he also

operated in both of these domains. Larry

Ellison started as a programmer and I

think wrote the first version of Oracle

or was actually heavily involved in it.

Mark Andre was also in this domain. He

may not have had enough confidence in

the sales skills but he was the

programmer who wrote Netscape Navigator

a big chunk of it. So I think the real

giants in any field are the people who

can both build and sell. And usually the

building is a thing that like a

salesperson can't pick up building later

in life. It requires too much focused

time, but a builder can pick up selling

a little bit later, especially if they

were already inately wired to be a good

communicator. Bill Gates famously

paraphrased this as I would rather teach

an engineer marketing than a marketer

engineering. I think if you start out

with a building mentality and you have

building skills and it's still early

enough in your life or you have enough

focus time that you think you can learn

selling and you have some natural

characteristics where you're a good

salesperson then you can double down on

those. Now your sales skills could be in

a different than traditional domain. So

for example let's say you're a really

good engineer and then people are saying

well now you need to be good at sales.

Well, you may not be good at

hand-to-hand sales, but you may be a

really good writer. And writing is a

skill that can be learned much more

easily than say in-person selling. And

so, you may just cultivate writing

skills until you become a good online

communicator. And then you use that for

your sales. On the other hand, it could

just be that you're a good builder and

you're bad at writing and you don't like

communicate to mass audiences, but

you're good one-on-one. So then you

might use your sales skills for

recruiting or for fundraising, which are

more one-on-one kinds of endeavors. This

is pointing out that if you're at the

intersection of these two, don't despair

because you're not going to be the best

technologist and you're not going to be

the best salesperson, but in a weird

way, that combination, back to the Scott

Adams skill stack, that combination of

two is unstoppable. Long-term people who

understand the underlying product and

how to build it and can sell it. These

are catnip investors. These people can

break down walls if they have enough

energy and they can get almost anything

done. If you could only pick one to be

good at, which one would you pick? When

you're trying to stand out from the

noise, building is actually better

because there's so many hustlers and

salespeople who have nothing to back

them up. When you're starting out, when

you're trying to be recognized, building

is better. But much later down the line,

building gets exhausting because it is a

focused job and it's hard to stay

current because there's always new

people, new products coming up who have

newer tools and frankly more time

because it's very intense. It's very

focused task. So sales skills actually

scale better over time. Like for

example, if you have a reputation for

building a great product, that's good.

But when you ship your new product, I'm

going to evaluate it based on the

product. But if you have a reputation

for being a good person to do business

with and you're persuasive and

communicative, then that reputation

almost becomes self-fulfilling. So I

think if you only had to pick one, you

kind of start with building and then

transition to selling. This is a copout

answer, but I think that is actually the

right answer. Before we go and talk

about accountability and leverage and

judgment, you've got a few tweets

further down the line that I would put

in the category of continuous learning.

They're essentially there is no skill

called business. Avoid business

magazines and business class. Study

microeconomics, game theory, psychology,

persuasion ethics mathematics and

computers. There's one other comment

that you made in a Periscope that was

you should be able to pick up any book

in the library and read it. And the last

tweet in this category was reading is

faster than listening. Doing is faster

than watching. Yeah. The most important

tweet on this I don't even have in here

unfortunately which is the foundation of

learning is reading. I don't know a

smart person who doesn't read and read

all the time. And the problem is what do

I read? How do I read? Cuz for most

people it's a struggle. It's a chore. So

the most important thing is just to

learn how to educate yourself. And the

way to educate yourself is to develop a

love for reading. So the tweet that is

left out, the one that I was hinting at

is read what you love until you love to

read. It's that simple. Everybody I know

who reads a lot loves to read and they

love to read because they read books

that they loved. It's a little bit of a

catch 22, but you want to start off just

reading wherever you are and then keep

building up from there until reading

becomes a habit. And then eventually you

will just get bored of the simple stuff.

So you may start off reading fiction,

then you might graduate to science

fiction, then you may graduate to

non-fiction, then you may graduate to

science or philosophy or mathematics or

whatever it is. But take your natural

path and just read the things that

interest you until you understand them

and then you'll naturally move to the

next thing and the next thing and the

next thing. Now there is an exception to

this which is where I was hinting with

what things you actually do want to

learn which is at some point there's too

much out there to read and even reading

is full of junk. There are actually

things you can read especially early on

that will program your brain a certain

way and then later things that you read

you will decide whether those things are

true or false based on the earlier

things. So it is important that you read

foundational things and foundational

things I would say are the original

books in a given field that are very

scientific in their nature. So for

example instead of reading a business

book pick up Adam Smith's the wealth of

nations. Instead of reading a book on

biology or evolution that's written

today I would pick up Darwin's origin of

the species. Instead of reading a book

on biotech right now that may be very

advanced I would just pick up the eighth

day of creation by Watson and Crick.

Instead of reading advanced books on

what cosmology and what Neil deGrasse

Tyson and Stephen Hawking have been

saying, you can pick up Richard Fineman

six easy pieces and start with basic

physics. If you understand the basics,

especially in mathematics and physics

and sciences, then you will not be

afraid of any book. All of us have that

memory of when we're sitting in class

and we're learning mathematics and it

was all logical and all made sense until

at one point the class moved too fast

and we fell behind. And then after that

we were left memorizing equations,

memorizing concepts without being able

to derive them from first principles.

And at that moment we were lost because

unless you're a professional

mathematician, you're not going to

remember those things. All you're going

to remember are the techniques, the

foundations. So you have to make sure

that you're building on a steel frame of

understanding because you're putting

together a foundation for a skyscraper

and you're not just memorizing things

because if you're just memorizing

things, you're lost. So the foundations

are ultra important and the ultimate the

ultimate is when you walk into a library

and you look at it up and down and you

don't fear any book. You know that you

can take any book off the shelf, you can

read it, you can understand it, you can

absorb what is true, you can reject what

is false and you have a basis for even

working that out that is logical and

scientific and not purely just based on

opinions. The beauty of the internet is

the entire library of Alexandria x times

10 is at your fingertips at all times.

It's not the means of education or the

means of learning are scarce. The means

of learning are abundant. It's the

desire to learn that's scarce. So you

really have to cultivate that desire.

And it's not even cultivated. You have

to not lose it. Children have a natural

curiosity. If you go to a young child

who's first learning language, they're

pretty much always asking what's this?

What's that? Why is this? Who's that?

They're always asking questions. But one

of the problems is that schools and our

educational system and even our way of

raising children replaces curiosity with

compliance. And once you replace the

curiosity with the compliance, you get

an obedient factory worker, but you no

longer get a creative thinker. And you

need creativity. You need that ability

to feed your own brain to learn whatever

you want. And to me, foundational things

are principles. They're algorithms.

their deep-seated logical understanding

where you can defend it or attack it

from any angle and that's why

microeconomics is important because

macroeconomics a lot of memorization a

lot of macro as Nasim Taleb

says it is easier to macrobullshit than

it is to microbullshit because

macroeconomics is voodoo complex science

meets politics you can't find two

macroeconomists to agree on anything

these days and different macroeconomists

get used by different politicians to

pedal their different pet theories there

are even macroeconomists out there now

pedal ling something called modern

monetary theory which says hey except

for this pesky thing called inflation we

can just print all the money that we

want. Yes, except for this pesky thing

called inflation. That's like saying

instead of limited energy, we can fire

rockets off into space all day long.

It's just nonsense. But the fact that

there are people who have

macroeconomists in their title and are

pedalling modern monetary theory just

tells you that macroeconomics as a

so-called science has been corrupted.

It's a blanch of politics. So you really

want to focus on the foundations

foundation the ultimate foundations are

mathematics and logic. If you understand

logic and mathematics then you have the

basis for understanding scientific

method. Once you understand the

scientific method then you can

understand how to separate truth from

falsehood in other fields and other

things that you're reading. So, be very

careful about reading other people's

opinions. And even be careful about

reading facts because so-called facts

are often just opinions, but you know,

with a veneer around them. What you

really are looking for is algorithms.

What you're really looking for is

understanding. It's better to go through

a book really slowly and struggle and

stumble and rewind than it is to fly

through it quickly and say, "Well, now

I've read 20 books. I've read 30 books.

I've read 50 books on the field." It's

like Bruce Lee said, "I don't fear the

man who knows a thousand kicks and a

thousand punches. I fear the man who's

practiced one punch 10,000 times or one

kick 10,000 times." It's the

understanding that comes through

repetition and through usage and through

logic and foundations that really makes

you a smart thinker. To lay a foundation

for learning for the rest of your life,

I think you need two things if I was

going to try and sum it up. one

practical persuasion and two you need to

go deep in some technical category

whether it's abstract math or you want

to read Donald Kuth's books on

algorithms or you want to read Fineman's

lectures on physics 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.

Yeah, if I could expand that a little

bit, I would say that the five most

important skills are of course reading,

writing, arithmetic, and then as you are

adding in persuasion, which is talking,

and then finally, I would add computer

programming just because it's an applied

form of arithmetic that just gets you so

much leverage for free in any domain

that you operate in. 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. So,

in that sense, business to me is bottom

of the barrel. There's no actual skill

called business. It's too generic of a

thing. It's like a skill called

relating, like relating to humans.

That's not a skill. It's too broad. So,

a lot of what goes on in business

schools, and there's some very

intelligent stuff taught in business

schools. I don't mean to detract from

them completely, but some of the stuff

that's taught in business school is

essentially just anecdotes. They call it

case studies, but it's just anecdotes.

And they're trying to help you pattern

match by throwing lots of data points at

you, but the reality is you'll never

understand them fully until you're

actually in that position yourself. Even

then, you will find that basic concepts

from game theory and psychology and

ethics and mathematics and computers and

logic will serve you much much better.

So, I would focus on the foundations. I

would focus with a science bent. I would

develop a love for reading, including by

reading so-called junk food that you're

not supposed to read. You don't have to

read the classics. That is the

foundation for your self-education. What

did you mean when you said that doing is

faster than watching? When it comes to

your learning curve, if you want to

optimize your learning curve, one of the

reasons why I don't love podcasts, even

though I'm a generator of podcasts, is

that I like to consume my information

very quickly. And now I'm a good reader,

a fast reader, and I can read very fast,

but I can only listen at a certain

speed. I know people listen to 2x, 3x,

but everyone sounds like a chipmunk. And

it's hard to go back. It's hard to

highlight. It's hard to pinpoint

snippets and save them in your notebook

and so on. Similarly, a lot of people

think they can become really skilled at

something by watching others do it or

even by reading about others doing it.

And going back to business school case

studies, that's a classic example. You

know, they study other people's

businesses. But in reality, you're going

to learn a lot more about running a

business by operating your own lemonade

stand or equivalent or even opening a

little retail store down the street.

That is how you're going to learn on the

job because a lot of the subtleties

don't express themselves until you're

actually running the business. For

example, everyone's now into mental

models these days, right? You go to

Farnum Street, you go to poor Charlie's

Almanac, and you can learn all the

different mental models, but which ones

matter more? Which ones do you apply

more often? Which ones matter in which

circumstances? That's actually the hard

part. For example, my personal learning

has been that the principal agent

problem drives so much in this world.

It's an incentives problem. You know,

I've learned that tit for tat it

prisoners dilemma is the piece of game

theory that is worth knowing the most.

You can literally almost put down the

game theory book after that. By the way,

the best way to learn game theory is to

play lots of games. I never even read

game theory books. I consider myself

extremely good at game theory. I've

never opened up a game theory book and

found a result in there where I was

like, "Oh yeah, that's common sense to

me because the reason is I just grew up

playing all kinds of games and I ran

into all kinds of corner cases with all

kinds of friends and so it's just second

nature to me." So you can always learn

better by doing on the job, but the

doing is a subtle thing that we're doing

encapsulates a lot. So for example,

let's say I want to learn how to run a

business. Well, if I start a business

where I go in every day and I'm doing

the same thing. Let's say I'm running

the retail store down the street where

I'm stocking the shelves with food and

liquor every single day, I'm not going

to learn that much because I'm repeating

things a lot. So, I'm putting in

thousands of hours, but they're

thousands of hours doing the same thing.

Whereas, if I was putting in thousands

of iterations, that would be different.

So, the learning curve is across

iterations. So, if I was trying new

marketing experiments in the store all

the time, I was constantly changing out

the inventory. I was constantly changing

out the branding and the messaging. I

was constantly changing the sign. I was

constantly changing the online channels

that I was used to drive foot traffic

in. I was experimenting with being open

at different hours. If I even had the

ability to walk around and talk to other

store owners and get in their books and

figure out how they're running their

business. It's the number of iterations

that drives a 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. It's actually a

combination of the two. But I think just

the way we're built and the way that the

world presents itself, the world offers

us very easily the opportunity to do the

same thing over and over and over again.

But really, we'd be better served if we

went off and found ways to do new things

from scratch. And doing something new

the first time is painful because you're

wandering into uncertain territory and

high odds are that you will fail. So you

just have to get very very comfortable

with frequent small failures. You know

Nasim Taleb talks about this also. He

made his fortune his wealth by being a

trader who relied upon black swans.

Nasim Taleb made money by essentially

losing little bits of money every day

and then once in a blue moon he would

make a lot of money when the unthinkable

happened for other people. Whereas most

people want to make little bits of money

every day and in exchange they'll

tolerate lots of blowup risk. They'll

tolerate going completely bankrupt.

We're not evolved to bleed a little bit

every day. If you're out in the natural

environment and you get a cut and you're

literally bleeding a little bit every

day, you will eventually die. You have

to stop that cut. 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'll 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

responsibilities upon them, but when

they win, they win big. On average,

they'll make more. So why don't we jump

into accountability, which I thought was

pretty interesting, and I think you have

your own unique take on it. So the first

tweet on accountability was embrace

accountability and take business risks

under your own name. Society will reward

you with responsibility, equity, and

leverage. Yeah. So to get rich, you

know, you're going to need leverage. And

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

or assets to manage or machines. So to

get these things you to build up

credibility and you have to do those

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. So in that sense, you

know, people who are stamping their

names on things aren't foolish. They're

just confident. Maybe it turns out to be

foolish in the end, but if you look at a

Kanye or an Oprah or a Trump or an Elon

or anyone like that, these people can

get rich just off their name because

their name is such powerful branding.

You know, regardless of what you think

of Trump, you have to realize that the

guy was among the best in the world at

just branding his name. Why would you go

to Trump Casino? Used to be because

Trump. Why would you go to Trump Tower?

Because of Trump. When it came time to

vote, I think there are a lot of voters

who just went in and said Trump. They

recognized the name. So the name

recognition paid off. Same thing with

Oprah. She puts her brand on something,

her name on something, and it flies off

the shelves, and it's like instant

validator. But these people also take

risks for putting their name out there.

Obviously, Trump is now probably hated

by half or more than half of the country

and by a big chunk of the world. He

sticks his name out there. By putting

your name out there, you become a

celebrity. And fame has many, many

downsides. It's better to be anonymous

and rich than to be poor and famous. But

even famous and rich has a lot of

downsides associated with it. you're

always in the public eye. So

accountability is quite important when

you're working to build a product or

you're working in a team or you're

working in a business. We are constantly

drumed into our heads how important it

is to be part of a team and absolutely

agree with that. A lot of our training

socially is telling us to not stick our

necks out of the crowd. There's a saying

that I hear from Australian friends that

like the tall puppy gets cut, right?

Don't stick your neck out. But I would

say that actually a really really well

functioning team is small and has clear

accountability for each of the different

portions like so you can say okay this

person's responsible for building the

product this person's responsible for

the messaging this person's responsible

for raising money this person

responsible for the pricing strategy and

and maybe the online advertising. So if

somebody screws up you know exactly

who's responsible while at the same time

something goes really well you also know

exactly who's responsible. So if you

have a small team and you have clearly

delineated responsibilities, then you

can still keep a very high level of

accountability. And accountability is

really important because when something

succeeds or fails, if it fails,

everybody points fingers at each other.

And if it succeeds, everybody steps

forward to take credit. And we've all

had that experience when we were in

school and we got like a group

assignment to do. And there were people

in there, there were probably a few

people in there who did a lot of the

work and then there were a few people

who just did a lot of grandstanding or

positioning to do the work. So we're all

familiar with this from a childhood

sense, but it is uncomfortable to talk

about. But clear accountability is

important. Without accountability, you

don't have incentives. Without

accountability, you can't build

credibility. But you take risk. So you

take risk of failure. You take risk of

humiliation. You take risk of failure

under your own name, which you know,

luckily in modern society, there's no

more debtors prison. And people don't go

to jail or get executed for losing other

people's money. But we're still socially

hardwired to not fail in public under

our own names. And the people who have

the ability to fail in public under

their own names actually gain a lot of

power. For example, I'll give a personal

anecdote. Up until about 2013 2014, my

public persona was entirely around

startups and investing. And only around

2014 2015 did I start talking about

philosophy and psychological things and

broader things. And it made me a little

nervous cuz I was doing it under my own

name. And there were definitely people

in the industry who sent me messages

through the back channel like, "What are

you doing? You're ending your career.

This is stupid." And I 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 benefits.

Accountability is important because

that's how you're going to get leverage.

That's how you're going to get

credibility. It's also how you're going

to get equity. You're going to get a

piece of the business when you're

negotiating with other people.

Ultimately, if someone else is making a

decision about how to compensate you,

that decision will be based on how

replaceable you are. And if you have

high accountability, that makes you less

replaceable. And then they have to give

you equity, which is a piece of the

upside. But equity itself is a good

example because equity is also a

riskbased instrument. Equity means you

get paid everything after all the people

who need guaranteed money are paid back.

So if you look at the hierarchy of

capital in a company, the employees get

paid first. They get to pay the salary

first. Like in the legal proceedings,

you know, the salaries are sacrosanked.

If you are a board member and the

company spends too much money and has

back salaries to pay, the government

will go after you personally to pay back

the salaries. So the employees get the

most security, but in exchange for that

security, they don't have as much

upside. Then next in line would be the

debt holders who are maybe the bankers

who lend money to the company for

operations and they need to make their

fixed coupon every month or every year

but they don't get much more upside

beyond that. Now they might be making 5

10 15 20 25% a year but that's where

their upside is limited to and then

finally are the equity holders and these

people are actually going to get most of

the upside. So once the debt holders are

paid off and the salaries are paid off,

whatever remains goes to them. But if

there isn't enough money to pay off the

salaries and the debt holders or if

there's just enough to pay off the

salary and the debt holders, which is

what happens with most businesses most

of the times, the equity holders get

nothing. So the equity holders take on

greater risk, but then they take on in

exchange they get nearly unlimited

upside. And you can do the same with all

of your work. So essentially taking

accountability for your actions is the

same as taking an equity position in all

of your work. You're essentially taking

greater downside risk and greater upside

risk. But realize that in modern society

the downside risk is not that large. You

know 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 are honest and made a

high integrity effort. So there's not

really that much to fear in terms of

failure. And so people should be taking

on a lot more accountability than they

actually are. Is accountability actually

fragile or do you really just mean that

we're hardwired not to fail in public?

So it just feels like it's a fragile

thing. I think it could actually be

fragile. Like example of accountability

is you're an airplane pilot. As a

captain, you're taking on accountability

for the entire plane. Let's say that

something goes wrong with the aircraft.

You can't later blame it on anyone else.

You can't blame it on the steward or the

stewardist. You can't blame it on the

co-pilot. You're the captain. You're

responsible for the ship. And if you

screw up, you crash the ship and there

are immediate consequences. In the old

days, you know, captain was expected to

go down with the ship. If the ship was

sinking, literally the last person who

got to get off was the captain. So yeah,

I think accountability does come with

real risks, but we're talking about in a

business context. So the risk here would

be that 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. So, you know, the time that you

put in, the capital that you put in into

the company, these are what are at risk.

Even if a business fails and your name's

on it, that's not as bad as if it's

turns out to be an integrity issue. Like

you're Bernie Maidoff, for example, Maid

Off investments, that name is never

going to be good again in the investment

community. You could be Bernie Maidoff's

great great grandson. You are not going

to go into the investment business cuz

he ruined the family name. So I think

these days the accountability risk with

the name happens more around integrity

rather than it does around purely

economic failure. The big takeaway for

me on accountability is that you will be

rewarded directly in proportion with

your accountability. I also think this

is why people like Talb rail against

CEOs who get rewards without

accountability. Yeah. I mean, TB's skin

of the game is required reading. If you

want to get anywhere in modern life and

understand how modern systems work, then

skin of the game would be near top of my

list to read. But yes, accountability,

skin of the game, these concepts go very

closely handinand. I think of

accountability as reputational skin of

the game. It's putting your personal

reputation on the line as skin in the

game. Accountability is a simple

concept. The only part of accountability

that may be a little counterintuitive is

that we're currently socially

brainwashed to not take on

accountability. Not in a visible way,

but I think there are ways to take on

accountability where every member of a

team can take on accountability for

their portion. And that is how you get a

well functioning team while still

putting credits and losses in the

correct columns. So, why don't we talk a

little bit about leverage? The first

tweet in the storm was a famous quote

from Archimedes which was give me a

lever long enough and a place to stand

and I will move the earth. The next

tweet was fortunes require leverage.

Business leverage comes from capital,

people and products with no marginal

cost of replication. Leverage is

critical. The reason I stuck an

Archimedia's quote in there is normally

I don't like putting other people's

quotes in my Twitter. Like that doesn't

add any value. You can go look up those

people's quotes, but this quote I had to

put in there because it's just so

fundamental. I read it when I was very,

very young and it had a huge impression

on me. And we all know what leverage is

when we use a seessaw or a lever. We

understand how that works physically.

But I think what our brains aren't

really well evolved to comprehend is how

much leverage is possible in modern

society and what the newest forms of

leverage are. And so the oldest form of

leverage is labor, which is people

working for you. So instead of me

lifting rocks, I can have 10 people lift

rocks. Then just by my guidance on where

the rocks should go, a lot more rocks

get moved than I could do myself.

Everybody understands this because we're

evolved to understand the labor form of

leverage. And so what happens is society

overvalues labor as a form of leverage.

This is why your parents are impressed

when you get a promotion and you have

lots of people working underneath you.

This is why when a lot of naive people

when you tell them about your company,

they'll say, "How many people work

there?" They'll use that as a way to

establish credibility. They're trying to

measure how much leverage and impact you

actually have. Or when someone starts a

movement, they'll say how many people

they have or how big the army is. We

just automatically assume that more

people is better. But I would argue that

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. It's

incredibly competed over. Entire

civilizations have been destroyed over

this fight. For example, communism,

Marxism is all about the battle between

capital and labor. Das capital and das

labor, right? So, it's a trap. So, you

really want to stay out of laborbased

leverage. You want the minimum amount of

people working with you that are going

to allow you to use the other forms of

leverage, which I would argue are much

more interesting. The second type of

leverage is capital. And this one's a

little less hardwired into us because

large amounts of money moving around and

being saved and being invested in money

markets. These are inventions of human

beings in the last few hundred to few

thousand years. They're not evolved with

us from hundreds of thousands of years.

So we understand them a little bit less

well. They probably require more

intelligence to use correctly and the

ways in which we use them keep changing.

Management skills from 100 years ago

might still apply today, but investing

in the stock market skills from 100

years ago probably don't apply to the

same level today. So 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. And you can see this by who are

the richest people. That's bankers,

politicians in corrupt countries who

print money. Essentially, people who

move large amounts of money around. And

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

financial job. They're really financial

asset managers. Now, sometimes an asset

manager can put a pleasant face on it,

so you get a Warren Buffett type. But

deep down, I think we all dislike

capital as a form of leverage because it

feels unfair. Because it's this

invisible thing that can be accumulated

and passed across generations and

suddenly seems to result in people

having gargantuous amounts of money with

nobody else kind of around them or

necessary sharing in it. That said,

capital is a powerful form of leverage.

It can be converted to labor. It can be

converted to other things. It's very

surgical, very analytical. If you are a

brilliant investor and you have a

billion dollars and you can make a 30%

return with it whereas anybody else can

only make a 20% return, you're going to

get all the money and you're going to

get paid very handsomely for it. It

scales very very well. If you get good

at managing capital, you can manage more

and more capital much more easily. You

can manage more and more people. So, it

is a good form of leverage. But the hard

part with capital is how do you obtain

it? And that's why I talked about

specific knowledge and accountability

first. If you have specific knowledge in

a domain and if you're accountable and

you have a good name in that domain,

then people are going to give you

capital as a form of leverage that you

can use to then go get more capital. So,

but capital also is fairly well

understood and I think a lot of the

knocks against capitalism come because

of the accumulation of capital. The most

interesting and the most important form

of leverage is this 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 got started

with the printing press. It accelerated

with broadcast media and now it's really

blown up with the internet and with

code. So now you can multiply your

efforts without having to involve other

humans and without needing money from

other humans. This podcast is a form of

leverage. Long ago I would have had to

sit in a lecture hall and lecture each

of you personally and I would have maybe

reached a few hundred people and that

would have been that. 30 years ago I

would have to be lucky to get on TV

which is somebody else's leverage. they

would have distorted the message. They

would have taken the economics out of it

or charged me for it. They would have

muddled the message and I would have

been lucky to get that form of leverage.

But today, thanks to the internet, I can

buy a cheap microphone, hook it up to a

laptop or an iPad and there you are all

listening. So this newest form of

leverage is where all the new fortunes

are made. So all the new billionaires,

so the last generation fortunes were

made by capital. That was the Warren

Buffetts of the world. But the new

generation fortunes are all made through

code or media. Joe Rogan making 50 to

100 million bucks a year from his

podcast. PewDiePie, I don't know how

much money he's rolling in, but he's

bigger than the news, right? The

Fortnite players, of course, Jeff Bezos

and Mark Zuckerberg and Larry Page and

Sergey Brin and Bill Gates and Steve

Jobs. That is all codebased leverage.

Now, the beauty is when you combine all

of these three. That's where tech

startups really excel where you take

just the minimum but highest output

labor that you can get which is

engineers and designers product

developers and then you add in capital.

You use that for marketing, advertising,

scaling and you add in lots of code and

media and podcast and content to get it

all out there. That is a magic

combination and that's why you see

technology startups explode out of

nowhere, use massive leverage and just

make huge outsiz returns. Do you want to

talk a little bit about permissioned

versus permissionless? Probably the most

interesting thing to keep in mind about

the 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. But coding, writing books,

recording podcasts, tweeting, youtubing,

these kinds of things, these are

permissionless. You don't need anyone's

permission to do them. And that's why

they're very egalitarian. They're great

equalizers of leverage. And as much as

people may rail on Facebook and YouTube,

they're not going to stop using it

because this permissionless leverage

where everyone can be a broadcaster is

just too good. The same way, you know,

you can rail upon Apple for having a

slightly closed ecosystem in the iPhone,

but everyone's writing apps for it. So,

as long as you can write apps for it,

you can get rich or reach users doing

that. Why not? I think of all the forms

of leverage, the best one in modern

society, and people going to this is

glib. This is a little overused, but and

this is why I tell people learn to code,

right? It's that we have this idea that

in the future there's going to be these

robots and they're going to be doing

everything. And that may be true, but I

would say the majority of the robot

revolution has already happened. The

robots are already here and there are

way more robots than there are humans.

It's just that we pack them in data

centers for heat and efficiency reasons.

We put them in servers. They're inside

the computers, all the circuits. It's a

robot mind inside that's doing all the

work. And so 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 just cranking

away. So the robots army is already

here. The robot revolution has already

happened. We're about halfway through

it. We're just adding in much more of

the hardware component these days. As we

get more familiar, we get more

comfortable with the idea of autonomous

vehicles and autonomous airplanes and

autonomous ships and maybe autonomous

trucks and you know there's delivery

bots and Boston Dynamics robots and all

that. But robots who are doing web

searching for you for example are

already here. You know, the ones who are

like cleaning up your video and audio

and transmitting around the world are

already here. The ones who are answering

many customer service queries, things

that you would have had to call a human

for are already here. So, an army of

robots is already here. It's very

cheaply available. And the bottleneck is

just figuring out intelligent and

interesting things to do to them. And

essentially, you can order this army of

robots around. Just the commands have to

be issued in a computer language, in the

language that they understand. So, these

robots aren't very smart. they have to

be told very precisely what to do and

how to do it. So coding is such a great

superpower because now you can speak the

language of the robot armies and you can

tell them what to do. And I think at

this point actually people are not only

commanding the army of robots within

servers through code. They're actually

manipulating the movement of trucks of

other people just ordering a package on

Amazon. You're manipulating the movement

of many people and many robots to get a

package delivered to you. people are

doing the same things to build

businesses now. So there's the army of

robots within servers and then there's

also an army of actual robots and people

that are being manipulated through

software. Labor and capital are much

less egalitarian not just in their

inputs but in their outputs. Let's say

that I need something that humans have

to provide like if I want a massage or

if I need like someone to cook my food.

The more of a human element there is in

providing that service the less

egalitarian it is. Jeff Bezos probably

has much better vacations than most of

us, right? Because he has lots of humans

running around doing whatever he needs

to do. But if you look at the output of

code in media, Jeff Bezos doesn't get to

watch better movies and TV than we do.

Jeff Bezos doesn't get to even have a

better computing experience. Like Google

doesn't give him some premium special

Google account where his searches are

better. It's the nature of code and

media output that the same product is

accessible to everybody and it turns

into a positive sum game where if Jeff

Bezos is consuming the same product as a

thousand other people, that products to

be better than the version that Jeff

would consume on his own. Whereas with

other products, that's not true. If you

look at something like buying a Rolex,

which is no longer about telling time,

it's a signaling good. It's all about

showing off I have a Rolex. That's a

zero sum game. If everybody in the world

is wearing a Rolex, then people don't

want to wear Rolexes anymore because

they no longer signal. It's canceled out

the effect. And so rich people do have

an advantage in consuming that product.

They'll just price it up till only they

can have Rolexes. And then poor people

can't have Rolexes and Rolexes resume

their signaling value. But something

like watching Netflix or using Google or

using Facebook or YouTube or even

frankly modern day cars, like rich

people don't have better cars, they just

have weirder cars. You can't drive a

Lamborghini on the street at any speed

that makes sense for a Lamborghini. So,

it's actually a worse car in the street.

It just turned into a signaling good at

that point. Your sweet spot where you

want to be is somewhere like a Tesla

Model 3 or like a Toyota Corolla is an

amazing car. A new Toyota Corolla is a

really nice car, but because it's

mainstream, the technology has

amvertised the cost of production over

the largest number of consumers

possible. and the best products tend to

be at the center at the sweet spot of

the middle class rather than being

targeted the upper class. So I think one

of the things that we don't necessarily

appreciate in modern society is as the

forms of leverage have gone from being

humanbased labor based and being capital

based to being more product and code and

media based that most of the goods and

services that we consume are becoming

much more egalitarian in their

consumption. Even food is becoming that

way like food is becoming cheap and

abundant at least in the first world too

much so to our detriment. Jeff Bezos

isn't necessarily eating better food.

He's just eating different food or he's

eating like food that's prepared and

served theatrically. So, it's almost

like more of again the human element

performance. But the labor element out

of food production has gone down

massively. The capital element has gone

down massively. And so, even food

production itself has become more

technologyoriented. And so, the gap

between the halves and the have nots is

getting smaller. So if you care about

ethics in wealth creation, it is better

to create your wealth using code and

media as leverage because then those

products are equally available to

everybody as opposed to trying to create

your wealth through labor or capital.

Because what I'm referring to here is

scale economies. Technology products and

media products have such amazing scale

economies that you always want to use

the product that is used by the most

people. the one that's used by the most

people ends up having the largest

budget. There's no marginal cost of

adding another user. And so with the

largest budget, you get the highest

quality. So the best TV shows are

actually not going to be some obscure

ones just made for a few rich people.

They're going to be the big budget ones

like the Game of Thrones or the Breaking

Bad or Bird Box where they have massive,

massive budgets. They can just use those

budgets to get to a certain quality

level. And then the rich people to be

different, they have to fly to Sundance

and watch a documentary because you and

I aren't going to fly to Sundance

because, you know, that's something that

bored rich people do to show off. And

we're not going to watch a documentary

because most of them just aren't

actually even that good. Right? Again,

if you're wealthy today for large

classes of things, you spend your money

on signaling goods to show other people

that you're wealthy, and you try and

convert them to status as opposed to

actually consuming the goods for their

own sake. People and capital as a form

of leverage have a negative externality

and code and product have a positive

externality attached to them. If I was

going to sum up your point, uh I think

that capital and labor are also starting

to become a little more permissionless

or at least the permissioning is diffuse

because of the internet. So instead of

labor, we have community now which is

diffused form of labor. For example,

Mark Zuckerberg has a billion people

doing work for him by using Facebook.

And instead of going to raise capital

from someone who's rich, now we have

crowdfunding. So you can raise millions

and millions of dollars for a charity,

for a health problem, or for a business.

You can do it all online. So capital and

labor are also becoming permissionless.

And you don't need to necessarily do it

the old-fashioned way where you have to

go around and ask people for permission

to use their money or their time. One

more question about leverage. Do you

think a choice of business model or a

choice of product can also bring a kind

of leverage to it? For example, pursuing

a business that has network effects,

pursuing a business that has brand

effects or other choices of business

model that people could manipulate that

just give you free leverage. Yeah.

There's some really good microeconomic

concepts that are important to

understand. One of those is scale

economies, which is the more you produce

of something, the cheaper it gets to

make. But that's something that a lot of

businesses have basic economics 101. And

you should try and get into a business

where making widget number 12 is cheaper

than making widget number five and

making widget number 10,000 is a lot

cheaper than the previous ones. And this

builds up an automatic sort of barrier

to entry against competition and getting

commoditized. So that's an important

one. Another one, this is along the same

lines, but technology products

especially and media products have this

great quality where they have zero

marginal cost of reproduction. So

creating another copy of what you just

created is free. So when somebody

listens to this podcast or watches a

YouTube video about this, it doesn't

cost me anything for the next person who

shows up. Those zero marginal cost

things, they take a while to get going

because you make very little money per

user, but over time they can really,

really add up. So Joe Rogan is working

no harder on his current podcast than he

was on podcast number one. But on

podcast number 1100, he's making a

million dollars for the podcast. Whereas

for the previous one, he probably lost

money for the first one. That's an

example of zero marginal cost. And then

the most subtle but the most important

is this idea of network effects. And it

comes from computer networking. Bob

Metaf who created Ethernet famously

coined Metaf's law which is the value of

a network is proportional to the square

of the number of nodes in the network.

So if a network of size 10 would have a

value of 100, network of a size 100

would have a value of 10,000. It's not

just 10x more, it's 100x more because

it's a square. So the difference is in

the square. So you want to be in a

network effect business assuming you're

not number two. If you're number one in

a network effect business, you win

everything. So example if you look at

Facebook right your friends and family

social networking protocol who's their

competitor nobody because they want

everything through network effects which

is why when people say well I can just

switch away from Facebook they don't

realize that network effects create

natural monopolies they're very very

powerful things and one of the dirty

secrets of Silicon Valley is that a lot

of the winning businesses are natural

monopolies even ride sharing tends

towards one winner take all system like

Uber will always have better economics

than as long as it's moving more drivers

and more writers around something like

Google. There's the only one viable

search engine. I do like Duck.Go, you

know, privacy reasons, but they're just

always going to be behind because of

network effects. Twitter, right? Where

else would you go for microblogging?

Even YouTube has weak network effects,

but they're still powerful enough.

There's really no number two site that

you go to to consume your video on a

regular basis. It even turns out in

retail, Amazon, Prime, and convenience

stored credit cards and information

creates a powerful network effect. So

what is a network effect? Let's just

define it precisely. A network effect is

when each additional user adds value to

the existing user base. So your users

themselves are creating some value for

the existing users. The classic example

that I think everybody can understand is

language. Let's say that there's 100

people live in the community and speak

10 different languages and each person

just speaks one of those 10. Well,

you're having to translate all the time.

It's incredibly painful. But if all

hundred of you spoke the same language,

it would add tremendous value. And so

the way that community will play out is

10 people start out speaking 10

languages. Let's say one extra person

learns English. Well, now all of a

sudden 11 people know English. So the

next person comes in to learn new

language. Probably going to choose

English. At some point, let's say

English gets to 20 or 25 people, it's

done. It's just going to own the entire

language marketplace and the rest of the

languages will get competed out. Which

is why long term the entire world is

probably going to end up speaking

English and Chinese. China is closed off

on the internet but the internet itself

is a great leveler and people who want

to communicate on the internet are

forced to speak English because the

largest community of people on the

internet speaks English. I always feel

bad for my colleagues who grew up

speaking foreign languages in foreign

countries because you don't have access

to so many books. So many books just

haven't been translated into other

languages. So if you only spoke French

or you only spoke German or you only

spoke Hindi for example, you would be at

a severe disadvantage in a technical

education. Invariably if you go and get

a technical education, you have to learn

English just because you have to read

these books that have this data that has

not been translated. So languages are

probably the oldest example of network

effect. Money is another example. We

should all probably be using the same

money except for the fact that

geographic and regulatory boundaries

have created these artificial islands of

money. But even then the world tends to

use a single currency as the reserve

currency at most times. Currently the US

dollar. So network effects are very

powerful concept. When you're picking a

business model, it's really good idea to

pick a model where you can benefit from

network effects, low marginal costs and

scale economies. And these tend to go

together. Like anything that has zero

marginal cost of production obviously

has scale economies. And things that

have zero marginal cost of reproductions

very often tend to have network effects

because it doesn't cost you anything

more to stamp out the thing. So then you

can just create little hooks for users

to add value to each other. So 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. You're in the beach in

the Bahamas or you're sleeping at night

and your customers are adding value to

each other. The tweet storm is very

abstract. It's deliberately meant to be

broadly applicable to all kinds of

different domains and disciplines and

time periods and places. But sometimes

it's hard to work without concrete

example. So let's go concrete for a

minute. Look at the real estate

business. You could start at the bottom.

Let's say you're a day laborer. You come

in, you fix people's houses. Someone

orders you around, tells you, "Break

that piece of rock, sand that piece of

wood, put that thing over there."

There's just all these menial jobs that

go on a construction site. If you're

working one of those jobs, unless you're

a skilled trade, like say a carpenter or

electrician, you don't really have

specific knowledge. And even carpenter,

electrician is not that specific because

other people can be trained how to do

it. So you can be replaced. So you get

paid your 15, 20, 25, 50. If you're

really lucky, $75 an hour, but that's

about it. You don't have any leverage

other than from the tools that you're

using. So if you're driving a bulldozer,

that's better than doing it with your

hands. So day labor in India makes a lot

less because they have no tool leverage.

You don't have much accountability.

you're a faceless cog in the

construction crew and the owner of the

house or the buyer of the house doesn't

know or care that you worked on it. One

step up from that, you might have a

contractor like a general contractor who

someone hires to come and fix and repair

and build up their house. That general

contractor is taking accountability.

They're taking responsibility. So now if

let's say they got paid $250,000 for the

job, sorry, I'm using barrier prices. So

maybe I'll go rest the world prices.

$100,000 for the job to fix up a house

and it actually cost the general

contractor all said and done $70,000.

Well, that contractor is going to pocket

that remaining 30. So, they got the

upside, they got the equity, but they're

also taking accountability and risk. So,

if the project runs over and there's

losses, then they eat the losses, but

you see the just the accountability

gives them some form of additional

potential income. And then they also

have labor leverage because they have a

bunch of people working for them. But it

probably tops out right there. You can

go one level above that and you can look

at a property developer. This might be

someone who is a contractor who did a

bunch of houses, did a really good job,

then decided to go into business for

themselves and they go around looking

for beaten down properties that have

potential. They buy them. They either

raise money from investors. They're

fronted themselves. They fix the place

up and then they sell it for twice what

they bought it for. Maybe they only put

in 20% more. So it's a healthy profit.

So now a developer like that takes on

more accountability, has more risk, they

have more specific knowledge because now

you have to know which neighborhoods are

worth buying in, which lots are actually

good and which lots are bad, what makes

or breaks a specific property. You have

to imagine the finished house that's

going to be there even when the property

itself might look really bad right now.

So there's more specific knowledge.

There's more accountability and risk.

And now you also have capital leverage

because you're also putting money into

the project. But conceivably, you could

buy, you know, a piece of land or a

broken down house for $200,000 and turn

it into a million- dollar mansion and

pocket all the difference. One level

beyond that might be a famous architect

or a developer where just having your

name on a property because you've done

so many great properties increases its

value. One level up from that, you might

be a person who decides, well, I I

understand real estate and I now know

enough of the dynamics of real estate

that rather than just build and flip my

own properties or improve my own

properties, I'm going to be a massive

developer. I'm going to build entire

communities. Another person might say, I

like that leverage, but I don't want to

manage all these people. I want to do it

more through capital. So, I'm going to

start a real estate investment trust.

And that requires specific knowledge not

just about investing in real estate and

building real estate but also requires

specific knowledge about the financial

markets and the capital markets and how

real estate trusts operate. 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 specific knowledge. And so 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. So I understand how to recruit

developers, how to write code and how to

build good product. And I understand how

to raise money from venture capitalists

and how to return it and how all of that

works." And obviously not a single

person may know this. You may pull a

team together to do it where each have

different skill sets. But that combined

entity would have specific 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 effort attached to the

whole thing and people would devote

their lives to it, take on significant

risk. And then it would have leverage in

code with lots of developers. It would

have capital with investors putting

money in and the founders own capital.

and it would have labor of some of the

highest quality labor that you can find

which is high-quality engineers and

designers and marketers who are working

on the company and then you may end up

with a Trullia or a Red Fin or a Zillow

kind of company and then the upside

could potentially be in the billions of

dollars or the hundreds of millions of

dollars. So as you layer in more and

more kinds of knowledge that can only be

gained on the job and aren't common

knowledge and you layer in more and more

accountability and risk-taking and you

layer in more and more great people

working on it and more and more capital

on it and more and more code and media

on it. You keep expanding the scope of

the opportunity all the way from the day

laborer who might just literally be

scrappling on the ground with their

hands all the way up to somebody who

started a real estate tech company and

then took it public. We spoke about

specific knowledge. We talked about

accountability. We talked about

leverage. The last skill that Naval

talks about in his tweet storm is

judgment where he says that leverage is

a force multiplier for your judgment. We

are now living in an age of nearly

infinite leverage and all the great

fortunes are created through leverage.

So your first job is to go and obtain

leverage and you can obtain leverage

through permission by taking risks and

getting people to work for you or by

raising capital or you can get leverage

permissionlessly by learning how to code

or becoming good communicator in

podcasting broadcasting creating

videos, writing etc. So that's how you

get leverage. But once you have

leverage, what do you do with it? Well,

the first part of your career is spent

hustling to get leverage. Once you have

the leverage, then you want to slow down

a bit because your judgment really

matters. It's like you've gone from

steering your sailboat around to now

you're steering an ocean liner or a

tanker. You have a lot more at risk, but

you have a lot more to gain as well.

You're carrying a much higher payload.

So, in an age of infinite leverage,

judgment becomes the most important

skill. Warren Buffett is so wealthy now

because of his judgment. Even if you

were to take away all of Warren's money,

tomorrow investors would come out of the

woodwork and hand him hundred billion

dollars because they know his judgment

is so good and they would give him a big

chunk of that hundred billion to invest.

So ultimately everything else that you

do is actually setting you up to apply

your judgment. One of the big things

that people rail on is CEO pay. And for

sure there's crony capitalism that goes

on where these CEOs control their boards

and the boards give them too much money.

But there are certain CEOs who

definitely earn their keep because their

judgment is better. If you're steering a

big ship, if you're steering Google or

Apple and your judgment is 10 or 20%

better than the next person's, society

will literally pay you hundreds of

millions of dollars more because you're

steering a hundred billion dollar ship.

If you're on course 10 or 20% of the

time more often than the other person,

the compounding results on that hundreds

of billions of dollars you're managing

will be so large that your CEO pay will

be dwarfed in comparison. So

demonstrated judgment, credibility

around the judgment is so critical.

Warren Buffett 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. So a person like

that, people will throw infinite

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." So,

especially demonstrated judgment with

high accountability, clear track record

is critical. Let's define judgment. I

would define it as knowing the long-term

effects of your decisions or being able

to predict the long-term effects of your

decisions. It's funny, my definition of

wisdom is knowing the long-term

consequences of your actions. So,

they're not all that different. Wisdom

is just judgment on a personal domain.

wisdom applied to external problems I

think is judgment. So they're they're

highly linked. But yes, it's knowing the

long-term consequences of your actions

and then making kind of the right

decision to capitalize on that. Judgment

is very hard to build up. This is where

both intellect and experience come in

play. There are many problems with the

so-called intellectuals in the ivory

tower. But one of the reasons why nim

taleb rails against them is because they

have no skin in the game. They have no

real world experience. Right? So they

just apply purely intellect and

intellect without any experience is

often worse than useless because you get

the confidence that the intellect gives

you and you get some of the credibility

but because you had no skin in the game

and you had no real experience and no

real accountability you're just throwing

darts. The real world is always far far

more complex than we can intellectualize

and especially all the interesting

fastmoving edge domains and problems you

can't get there without experience. So

if you are smart and you iterate fast,

so it's not even you put 10,000 hours

into something, but you take 10,000

tries at something, if you are smart and

you have a lot of quick iterations and

you try to keep your emotions out of it,

the people with the best judgment are

actually among the least emotional. A

lot of the best investors are considered

almost robotic in that regard. But I

wouldn't be surprised if even the best

entrepreneurs often come across as

unemotional. There is this archetype of

the passionate entrepreneur. And yeah,

they have to care about what they're

doing, but they also have to see very

clearly what's actually happening. And

the thing that prevents you from seeing

what's actually happening are your

emotions. Our emotions are constantly

clouding our judgment. And in investing

or in running companies or in building

products or being an entrepreneur,

emotions really get in the way. Emotions

are what prevent you from seeing what's

actually happening until you can no

longer resist the truth of what's

happening, until it becomes too sudden.

and then you're forced into suffering

which is a breaking of this emotional

fantasy that you had put together. To

try and connect some of these concepts I

would say that first you're accountable

for your judgment. Judgment is the

exercise of wisdom. Wisdom comes from

experience and that experience can be

accelerated through short iterations.

And the reason why a lot of the top

investors, a lot of the value investors,

if you read Jeremy Grantham or you read

Warren Buffett, you know, you read up on

Michael Bur, these people sound like

philosophers or they are philosophers or

they're reading a lot of history books

or science books. Like what what are

they doing? Shouldn't they be reading

investment books? No, investment books

are the worst place to learn about

investment because investment is a real

world activity that is highly

multivaried. All the advantages are

always being competed away. It's always

on the cutting edge. So what you

actually just need is very very

broad-based judgment and thinking and

the best way to do that is to study

everything including a lot of philosophy

and philosophy also makes you more stoic

makes you less emotional and so you make

better decisions you have better

judgment one simple thing is I see I go

out on Twitter and it seems like half of

Twitter is outrageous something at all

times you can go within someone's

Twitter feed and get at least some

semblance of what it must be like to be

in their head all the time and the more

outraged somebody is I guarantee to you,

the worse their judgment is. If

someone's constantly tweeting political

outrage and seems like an angry person

getting into fights, you don't want to

hand this person the keys to your car,

let alone the keys to your company. So,

we covered the skills that you need to

get rich. That was specific knowledge,

accountability leverage judgment and

lifelong learning. Let's talk a little

bit about the importance of working hard

and valuing your time. So, no one is

going to value you more than you value

yourself. So, you just have to set a

very high personal hourly rate and you

have to stick to it. So, even since when

I was young, I just decided that I was

worth a lot more than the market thought

I was worth. But I started treating

myself that way. So, always factor your

time into every decision. How much time

does it take? Oh, it's going to take me

an hour to get across town to get this

thing. Well, I value myself at $100 an

hour. That's throwing $100 out of my

pocket. Am I going to do that? You buy

something from Amazon, they screwed it

up. You have to return it. Is it worth

your time to return it? Is it worth the

mental hassle? Keep in mind that you

have less work hours. You have less

mentally high output hours. Do you want

to use them to run errands and solve

little problems or do you want to save

them for the big stuff? All the great

scientists were terrible at managing

their household life. None of them had a

clean, organized room or, you know, made

all their 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

number one overwhelming desire, which

means that it has to come before

anything else, which means you can't be

penny pinching. This is what people

don't understand. You can penny pinch

your way to a basic sustenance. You can

keep your expenses low, maybe retire

early, and not spend too much, and

that's perfectly valid. But we're here

to talk about wealth creation. And if

you're going to do that, then that has

to be your number one overwhelming

priority. So, 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, and 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, it's $5,000 an hour.

Today, when I look back, really, it was

about $1,000 an hour. And 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 it a lot less

than any of my friends would. And 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 fix it.

I would argue with my girlfriends and

even today to my wife like, I don't do

that. That's not a problem that I solve.

I still argue that with my mother when

she hands me like little todos. I just

don't do that. I would rather hire you

an assistant. And this was true even

when I didn't have money. Another way of

thinking about something is that if you

can outsource something or not do

something for less than your hourly

rate, outsource it or don't do it. So if

you can hire someone to do it for less

than your hourly rate, hire them. That

even includes things like cooking. Now

you may want to eat your healthy

home-cooked meals, but if you can

outsource it, do that instead. And I

know some people will say, "Well, what

about the joy of life and what about

getting it right just your way?" Sure,

you can do that, but you're not going to

be wealthy because now you've made

something else a priority. Paul Graham

said it pretty well for Ycom that are

startups. He said you should be working

on your product and getting product

market fit and you should be exercising

and eating healthy. Like that's about

it. That's kind of all you have time for

while you're on this mission. So set a

very high hourly aspirational rate for

yourself and stick to it. And it should

seem and feel absurdly high. If it

doesn't, it's not high enough. And

whatever you picked, my advice to you

would be 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 annual salary, it's

multiple millions of dollars per year.

Ironically, I actually think I've beaten

it when I look back because I'm not the

hardest working person. I'm actually

kind of a lazy person. So, I work

through bursts of energy where I'm

really motivated with something. So, 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.

Let's talk about hard work. There's this

battle that happens on Twitter a lot

between should you work harder and

should you not? Like David Hower's on

there saying it's like you're slaved

driving people and Keith Ro boy is

always on there saying like no all the

great founders work their fingers to the

bone and they're talking past each

other. First of all they're talking

about two different things. David is

talking about employees in a lifestyle

business which is fine. Your number one

thing in life if you're doing that is

not getting wealthy. You have a job. You

also have your family. You also have

your life. But Keith is talking about

the Olympics of startups. He's talking

about the person going for the gold

medal and trying to build a

multi-billion dollar public company.

That person has to get everything right.

They have to have great judgment. They

have to pick the right thing to work on.

They have to recruit the right team and

they have to work crazy hard because

they're basically engaged in a

competitive sprint. So, if getting

wealthy is your goal, you are going to

have to work as hard as you can. But

hard work is absolutely no substitute

for who you work with and what you work

on. What you work on is probably the

most important thing. Finding product,

market, founder fit. To expand on Mark

Andre's definition, he came up with

product market fit, but I would add

product market founder fit, which is how

well you are personally suited to that

business. The combination that three,

that should be your overwhelming goal.

And you can save yourself a lot of time

if you pick the right area to work in.

Picking the right people to work with is

the next most important piece. And then

third comes how hard you work. But

they're like three legs of a stool. If

you short change on any one of them, the

whole stool is going to fall down. So

it's not like you can pick one over the

other that easily. So the order of

operations when you're building a

business is or even building your career

is first figure out what should I be

doing? What is something where there is

a market that is emerging? There's a

product that I can build that I'm

excited to work on and something where I

have specific knowledge and I'm really

into it. And then second surround

yourself with the best people possible.

And no matter how high your bar is,

raise your bar because you can never be

working with other people who are great

enough. If there's someone greater out

there to work with, you should go work

with them. I advise a lot of people who

are looking at which startup to join in

Silicon Valley. I say basically pick the

one that's going to have the best alumni

network for you in the future. Look at

the PayPal mafia. They work with a bunch

of geniuses. So they all got rich. So

just try and pick based on the highest

intelligence, energy, and integrity

people that you can find. And then

finally, once you've picked the right

thing to work on and the right people to

work with, then you work as hard as you

can. This is where the mythology gets a

little crazy. People will work 80 120

hour weeks. A lot of that's just status

signaling. It's showing off. Nobody

really works 80 to 120 hours a week

sustained at high output with mental

clarity. Your brain breaks down. You

just won't have good ideas. So really

the way people tend to work most

effectively, especially in knowledge

work, is they sprint as hard as they can

while they're working on something and

they're inspired and they're passionate

and then they rest. They take long

breaks. It's more like a lion hunting

and much less like a marathon runner

running. So you sprint, then you rest,

you reassess, and then you try again.

And what you end up doing is you end up

building a marathon of sprints. Nibby

just made the point to me on the side

that inspiration is perishable, which is

a very good point. When you have your

inspiration, do it right then and there.

This happens to me a lot with my tweet

storms. I've actually come up with a

whole bunch of additional tweets storms

besides the ones that are already out

there. But sometimes I just hesitate or

I just pause and then it just dies. And

what I've learned is if I'm inspired to

write a blog post or to publish a tweet

storm, I should probably do it right

away. Otherwise, it's not going to get

out there. I won't come back to it. So

inspiration is a beautiful and powerful

thing. And when you have it, just seize

it. So people talk about impatience.

When do you know to be impatient? When

do you know to be patient? My glib tweet

on this was impatience with actions and

patience with results. And I think

that's actually a good philosophy for

life. Anything you have to do, just get

it done. Why wait? You're not getting

any younger. your life is slipping away.

You don't want to spend it waiting in

line. You don't want to spend it

traveling back and forth. You don't want

to spend it doing things that you know

ultimately aren't part of your mission.

And when you do them, you want to do

them as quickly as you can while you do

them well with your full attention. But

then you just have to give up on the

results. You have to be patient with the

results because you're dealing with

complex systems. You're dealing with

lots of people. It takes a long time for

markets to adopt products. It takes time

for people to get comfortable working

with each other. It takes time for great

products to emerge as you polish away,

polish away, polish away. So impatience

with actions, patience with results. And

as Nivia said, inspiration is

perishable. So when you have

inspiration, act on it right then and

there. If I have a problem that I

discover in one of my businesses that

needs to be solved, I won't sleep until

at least the resolution is in motion.

And this is just a personal failing. But

if I'm on the board of a company, I'll

call the CEO. If I'm running the

company, I'll call my reports. If I'm

responsible, I'll get on there right

then and there and solve it. If I don't

solve a problem the moment it happens or

I don't start moving towards solving it

the moment it happens, I have no peace.

I have no rest. I have no happiness

until that problem is solved. So solve

it as quickly as possible. I literally

won't sleep until it's solved. Maybe

that's a personal characteristic, but

it's worked out well in business. We

squander our time with a death of a

thousand cuts. So, another tweet I had

was, "You should be too busy to do

coffee while still keeping an

uncluttered calendar." People who know

me know that I'm famous for

simultaneously doing two things. One is

having a very clean calendar. I have

almost no meetings on it. And there are

people that I meet with when they see my

calendar, they almost weep while at the

same time, I am busy all the time. I'm

always doing something. And it's usually

quote unquote workrelated. But it is

whatever the highest impact thing is

that needs to be done at that time and

that I'm most interested, inspired

about. But the only way to do that is to

constantly ruthlessly decline meetings.

People want to do coffee and build

relationships. And that's fine early in

your career when you're still exploring,

but later in your career when you're

exploiting and there are more things

coming at you than you have time for.

You have to ruthlessly cut meetings out

of your life. If someone wants to do a

meeting, see if you can do it with a

phone call instead. If they want to do a

phone call, see if they can do it with

an email instead. If they want to do it

with email, see if they can do with a

text message instead. If they're text

messaging, you should probably be

ignoring most text messages unless

they're true emergencies. So, one has to

be utterly ruthless about dodging

meetings. When you do do meetings, do

walking meetings, do standing meetings,

keep them short, keep them actionable,

keep them small. Any meeting with eight

people in it sitting on a conference

table, nothing is getting done in that

meeting. You're literally just dying one

hour at a time. Doing coffee reminds me

of an old quote I think from Steve Jobs

when they asked him, "Hey, why doesn't

Apple come to conventions or why don't

you come to my convention?" And his

response was, "Well, then because we

wouldn't be here working." Yeah. I used

to have a tough time turning people down

for meetings, but now I just tell them

outright. I just say, "Look, I don't do

non-transactional meetings. I don't do

meetings without a strict agenda. I

don't do meetings unless we absolutely

have to." Nive used to do this. He would

email people when they would ask Nib and

I for a meeting like coffee meeting get

to know you. He would say we don't do

meetings unless it says life and death

urgent. And then that person has respond

yeah it's life and death urgent or

there's no meeting. When you have

something important or something

valuable other busy interesting people

will meet with you. Your calling card

has to be hey here's what I'm done.

Here's what I can show you. Let's meet

and I'll be respectful of your time if

this is useful to you. And I find that

there are very busy important people who

will take your meeting, but you have to

come with a proper calling card. All the

people who tweet and who email famous or

rich people saying, "Hey, if I could

just get one meeting with you," and

they're vague about it, they're not

going to get anywhere in life. You have

to build up the credibility. When, for

example, an investor in the tech

business, in the venture business, looks

at a startup, the first thing they want

to see is they want to see some evidence

of product progress. They don't just

want to even see a slide deck. They want

to see product progress because the

product progress is the resume for the

entrepreneur. It is the unshakable,

unfakable resume. So, you have to do the

work. To use a crypto analogy, you have

to have proof of work. If you have proof

of work and you truly have something

interesting, then you shouldn't hesitate

to put it together in an email and send

it to somebody. But even then, when

you're asking for a meeting, you want to

be super actionable about it. But I

would say even the other side, even if

you yourself haven't made it yet, if you

think you're going to make it by going

out and networking and doing a whole

bunch of meetings, you're probably

incorrect. Yes, networking can be

important early in your career. And yes,

you can get serendipitous with meetings,

but the odds are pretty low. And as we

spent time talking about earlier, when

you are just meeting people and hoping

to get that lucky break, you're relying

on type one luck, which is blind luck,

and type two luck, which is hustle luck.

But what you're not getting is type

three or type four luck, which are the

better kinds, where you spend time

developing a reputation, working on

something, developing a unique point of

view, and being able to spot

opportunities that others can't. A busy

calendar and a busy mind will destroy

your ability to do great things in this

world. If you want to be able to do

great things, whether you're a musician

or whether you are a entrepreneur or

whether you're an investor, you need

free time and you need a free mind. We

just finished talking about the

importance of working hard and valuing

your time. Next, there's a few tweets on

the topic of working for the long term.

The first tweet is, "Become the best in

the world at what you do, keep

redefining what you do until this is

true. If you really want to get paid in

this world, you want to be number one at

whatever it is that you're doing." And

it can be niche. That's the point. It

can literally be you're getting paid for

just being you. You know, at this point,

some of the more successful people in

the world are that way. Oprah gets paid

for being Oprah. Joe Rogan gets paid for

being Joe Rogan. And they're being

authentic to themselves. So, what this

tweet is trying to say simultaneously is

that you want to be number one, but you

want to keep changing what you do until

you're number one. You can't just pick

something arbitrary. You can't say, "I'm

going to be the fastest runner in the

world, and now you got to beat the same

bolt." That's too hard of a problem. But

what you can do is you can keep changing

what your objective is until it arrives

to your specific knowledge, your skill

sets, your position, your capabilities,

your location, your interests, and then

converges to making you number one. So

when you're searching for what to do,

you actually have two different fosi

that you have to keep in mind at all

points. And one of those is I want to be

the best at what I do. And the second is

what I do is flexible so that I am the

best at it until you arrive at a

comfortable place where you're like,

"Yes, this is something I can be amazing

at while still being authentic to who I

am." And this is not going to be an

overnight discovery. It's going to be a

long journey, but at least you know how

to think about it. The most important

thing for a company is to find product

market fit. I would say the most

important thing for an entrepreneur is

to find founder product market fit where

you are naturally inclined to build the

right product which has a market and

that's a three focus problem which is

you got to make all three of those work

at once. If you want to be successful in

life you just have to get comfortable

managing multivari problems multiple

objective functions at once and this is

one of those cases where you have to map

at least two or three at once. This

reminds me of your tweet about escaping

competition through authenticity. It

sounds like part of this is a search for

who you are. It's both a search and a

recognition because sometimes when we

search our egos, we want to be something

that we aren't. And our friends and

family are better at telling us actually

who we are or looking back at what we've

done is a better indicator of who we

are. Peter Teal talks a lot about how

competition is besides the point. It's

counterproductive. We're highly

mimemetic creatures. We copy what

everybody else is doing around us. We

copy our desires from them. Everyone

around me is a great artist, I want to

be an artist. If everyone around me is a

great business person, I want to be a

business person. Everybody around me is

a social activist, I want to be a social

activist. That's where my self-esteem

will come from. You have to be a little

careful when you get caught up in these

status games that you end up competing

over things that aren't worth competing

over. So, Peter Teal talks about how he

was going to be a law clerk because he

was in law school and everybody around

him wanted to be a law clerk for a

Supreme Court justice or some famous

judge and he got rejected and that's

what made him go into business. So, it

helped him break out of a lesser game

into a greater game. So sometimes you

just get trapped in the wrong game

because you're competing. And the best

way to escape competition to get away

from the spectre of competition, which

is not just stressful and

nerve-wracking, but will often drive you

to just the wrong answer. The way to

escape competition is to just be

authentic to yourself. If you are

fundamentally building and marketing

something that is just 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 Wat and

create a better Calvin and Hobbs? No.

They're being authentic. This is easiest

to see in art. Artists are by definition

all naturally authentic. But even

entrepreneurs are authentic. Who's going

to be Elon Musk? Who's going to be Jack

Dorsey? These people are authentic and

the businesses and products that they

create are authentic to their desires

and their means. If somebody else came

along and started launching rockets, I

don't think it would phase Elon one bit.

He's still going to get to Mars because

that's his mission. You know, insane as

it seems, that's the one he set for

himself and he's going to accomplish it.

So, authenticity naturally gets you away

from competition. It doesn't mean that

you necessarily want to be authentic to

the point where there's no product

market fit. It may turn out you're the

best juggler on a unicycle, but maybe

there just isn't that much of a market

for that even with YouTube videos. So

you got to adjust that somehow until you

find product market fit, but at least

lean towards authenticity, towards

getting away from competition. And

competition automatically leads towards

copycatting and often towards just

playing completely the wrong game.

Especially in entrepreneurship, the

masses are never right. If you see a lot

of people tweeting about what a great

market to enter is, or you see

journalists talking about a company is

terrible, they don't know anything. If

the masses knew how to build great

things and create great wealth, we'd all

already be done. We'd all already be

rich by now. So, in a sense, when you

see a lot of competition, sometimes that

indicates to you that the masses are

already here. So, it's already competed

over too much and there's nothing here

or it's in the wrong trend to begin

with. On the other hand, if it's

completely empty, if the whole market is

empty and no one's there, that can also

be a warning indicator that you've gone

too authentic and not enough on the

product market fit part of founder

product market fit. So, there's a

balance. You have to find it. But

generally, most people will make the

mistake of paying too much attention to

the competition and being too much like

the competition and not being authentic

enough. And the great founders tend to

be authentic iconoclasts. I hate to

bring up the Scott Adams skill stack one

more time, but I'll still bring it up.

Do you think one way of getting to

authenticity is not necessarily adding

some random skills that you think might

be important, but just really finding

five or six various skills that you

already authentically do and just

stacking them on top of each other. And

not even in any purposeful way. If you

are expressing who you are, you're going

to be expressing all these little five

or six different skills. Anyway, that's

really where life is going to lead you

anyway. Long term, if you are good and

successful at what you do, you will find

that whatever your hobbies were, you're

almost doing them for a living. As

Robert Frost said, you know, combine

your vocation and your avocation, what

you love to do and what you do do. So, I

think you'll find yourself there anyway.

And you're right about the skill stack

and that everyone's got multiple skills.

We aren't all one-dimensional creatures,

even though that's how we have to

portray ourselves in our online profiles

to get employed. You meet somebody and

they say, "I'm a banker or I'm a

bartender or I'm a barber or what have

you." All the bees. But people are

multivariate. They have a lot of skills.

One banker might be good at finance.

Another one might be good at sales. A

third one might be just good at

macroeconomic trends and have a feel for

the markets. Another one might be really

good at picking individual stocks. You

know, another one might just be good at

maintaining relationships rather than

selling new relationships. So,

everyone's going to have their various

niches, and you're going to have

multiple niches. It's not going to be

just one. So over time you will find as

you go through your career both you will

gravitate towards the things that you're

good at which by definition are almost

the things you enjoy doing otherwise you

wouldn't be good at them. You wouldn't

have put in the time and other people

will push you towards the things that

you're good at because your smart bosses

and your smart co-workers and your smart

investors will realize okay you're

really world class in this thing we can

recruit somebody else for that other

thing. So ideally you want to end up

specializing in being you. I think when

you're being authentic, you don't really

mind competition that much. Yeah, it

pisses you off and it inspires some fear

and jealousy and all the other emotions

that come along with it, but also you

don't really mind because you're more

oriented towards the goal and the

mission. And worst case, you get some

ideas from them. And there's often ways

to work with the competition in a

positive way and it ends up increasing

the size of the market for you. Yeah.

Sometimes it depends on the nature of

the business. Silicon Valley tech

industry businesses tend to be winner

take all, at least the good ones. And so

when you see competition, it can make

you fly into a rage because it really

does endanger everything you've built.

Whereas if I was opening a restaurant

and a more interesting version of the

same restaurant opens up in a different

town, that's fantastic. I'm just going

to lift from them what's working and

drop what I can see that they have

already figured out is not working. So

it does depend to some extent on the

nature of the business. That said, even

the businesses that seem like that they

are often in direct competition really

aren't. They can end up adjacent or

slightly different. You're one step away

from a completely different business.

And sometimes you need to take that one

step. And you're not going to be able to

take it if you're busy fighting over a

booby prize. Kind of you're playing a

stupid game and you're going to win a

stupid prize. It's not obvious right now

because you're blinded by competition,

but 3 years from now it'll be obvious.

To give a simple example, when I was

first starting companies, one of my

first ones was called Epinions, which

was an online product review site for

all the products out there that was

independent of Amazon. And that space

eventually turned into Trip Advisor and

Yelp, which is where we should have

gone. We should have done more local

reviews because there's more value to

having a review of a scarce item like in

your local restaurant than it is of an

item like a camera, which is going to

have a thousand reviews on Amazon. But

before we could get there, we got caught

up in the whole comparison shopping

game. And so we ended up merging with

Deal Time and we competed with My Simon

and Bizrade, which became Shopzilla and

Price Grabber and Nexttag and a whole

bunch of these price comparison engines.

And we're all caught in fierce

competition with each other. And that

whole space went to zero because it

turns out Amazon won completely. So

there was no need for price comparison.

Everyone just went to Amazon. But we got

the booby prize because we were caught

in a competition with a bunch of our

peers. When really we should have been

looking at what the consumer really

wanted and being authentic to ourselves,

which was reviews and not price

comparison and gone more and more into

more and more esoteric items that needed

to be reviewed where customers had less

and less data and wanted reviews more

badly. So if we'd stayed authentic to

ourselves, we would have done better.

We're still talking about working for

the long term. The next tweet on that

topic is apply specific knowledge with

leverage and eventually you will get

what you deserve. I would also add to

that apply judgment, apply

accountability and apply the skill of

reading. This one is just a glib way of

saying that it takes time. Even once you

have all of these pieces in place, there

is an indeterminate amount of time that

you're going to have to put in. And if

you're counting, you will run out of

patience before it actually arrives. So

you just have to make sure that you give

these things a proper time. Life is

long. Charlie Mer had some line on this.

Somebody asked him about making money

and he reinterpreted that and he said,

"What the questioner is actually asking

is how do I get rich like you but faster

before I end up as an old guy." And

everybody wants it immediately, but the

world is an efficient 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 just have to put

yourself in the position with the

specific knowledge, with the

accountability, with the leverage, with

the authentic skill set that you have to

be the best in the world at what you do.

And then you have to enjoy it and just

keep doing it and keep doing it and keep

doing it and don't keep track and don't

keep count because if you do, you will

run out of time. I can look back at my

career and the people two decades ago

that I had identified as brilliant and

hardworking but hadn't thought much more

about it. They're all successful now,

almost without exception. On a long

enough time scale, you do get paid, but

it can easily be 10 or 20 years.

Sometimes it's five. And if it's five or

three and a friend of yours got there,

it can drive you insane. But those are

exceptions. And for every winner,

there's multiple failures. One thing

that's important in entrepreneurship is

you just have to be right once. You get

many, many shots on goal. You can take a

shot on goal every 3 to 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

really only have to be right once. My

little equation is that your eventual

outcome will be equal to something like

the distinctiveness of your specific

knowledge times how much leverage you

can apply to that knowledge times how

often your judgment is correct times how

singularly accountable you are for the

outcome times how much society values

what you're doing. And then you compound

all of that with how long you can keep

doing it and how long you can keep

improving it through reading and

learning. That's actually a really good

way to summarize it. It's probably worth

even trying to sketch that equation out.

That said, people try to then apply

mathematics to what is really

philosophy. So I've seen this happen in

the past where I say one thing and then

I say another thing that seems

contradictory if you treat as a math

equation, but it's obvious in a

different context. And then people will

say, well, you say that desire is

suffering. That's the Buddhist saying.

And then you say that all greatness

comes from suffering. So does that mean

all greatness comes from desire? It's

like well this isn't math people. You

can't just start carrying variables

around and forming absolute logical

outputs. You have to know when to apply

things. So I think that is very useful

to understand but at the same time one

can't get too analytical about it. It's

what a physicist would call false

precision. When you take two madeup

estimates and you multiply them together

and then you get four degrees of

precision. those decimal points don't

actually count. You don't have that

data. You don't have that knowledge. In

a model, the more estimated variables

you have, the greater the error in the

model. So, just adding more and more

complexity to your decision-m process

actually gets you a worse answer. You're

better off just picking the single

biggest thing or two. For example, what

am I really good at according to

observation and according to people that

I trust that the market values? Like

that alone, those two variables alone

are probably good enough because if

you're good at it, you'll keep it up and

if you're good at it, you'll develop the

judgment. And if you're good at it and

you like to do it, eventually people

will give you the resources and you

won't be afraid to take on

accountability. So all the other pieces

will fall in place. Product market fit

is inevitable if you're doing something

you love to do and the market wants it.

Regarding the guy that gets rich in five

years, one of the tweets that you had on

the cutting room floor was avoid people

who got rich quickly. They're just

giving you their winning lottery ticket

numbers. This is generally true of

advice anyway, which is it's back to

Scott Adams systems, not goals. If you

ask a specific person what worked for

them, very often it's just like they're

reading out the exact set of things that

work for them, which may not be

applicable for you. They're just reading

your winning lottery ticket numbers.

It's a little glip. There is something

to be learned from them. But you can't

just take their exact circumstance and

map it onto yours. The best founders I

know, they listen and read to everyone,

but then they ignore everybody and they

make up their own mind. They have their

own internal model of how to apply

things to their situation and they do

not hesitate to discard information. If

you survey enough people, all the advice

will cancel the zero. So you do have to

have your own point of view. And when

something is sent your way, you have to

very quickly decide, is that true? Is

that true outside of the context of what

that person applied in? Is it true in my

context? And then do I want to apply it?

You have to reject most advice, but you

have to listen to and read enough of it

to know what to reject and what to

accept. Even in this podcast, you should

examine everything. If something does

not feel true to you, put it down. Set

it aside. If too many things seem

untrue, delete this podcast. I think the

most dangerous part of taking advice is

that the person that gave it to you is

not going to be around to tell you when

it doesn't apply any longer. Yeah. I

view the purpose of advice as a little

different than most people. I just view

it as helping me have anecdotes and

maxims that I can then later recall when

I have my own direct experience and say,

"Ah, that's what that person meant." 90%

of my tweets are actually just maxims

that I carve for myself that are then

little mental hooks to remind me when

I'm in that situation again. Like, oh,

I'm the one who tweeted, "If you can't

see yourself working with someone for

life, then don't work with them for a

day." So, as soon as I know that this

person is not going to be someone that

I'm going to be working with 10 years

from now, then I have to start

extricating myself in that relationship

or just not investing that much more

effort into it. So I use my tweets and

other people's tweets as maxims that

help compress my own learnings and be

able to recall them because you know the

brain space is finite. You have finite

neurons. So you can almost think of

these as pointers, addresses, pneumonics

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 like it's cool. It's inspirational

for a moment. Maybe you make a nice

poster out of it, but then you forget it

and move on. So, all of these are really

just compact ways for you to recall your

own knowledge. The last tweet on the

topic of working for the long term is

that when you're finally wealthy, you'll

realize that it wasn't what you were

seeking in the first place, but that's

for another day. That's a multi-hour

topic in of itself. First of all, I just

thought it was a really clever way to

end the whole thing because it disarms a

whole set of people who say, "Well, you

know, what's the point of getting rich

because there are a lot of people who

just like the status signal, virtue

signal against the idea of wealth

creation or making money." So, it was

just a good way to disarm all of them.

But it's also true in that the things

that you really want in life, yes, money

will solve all your money problems, but

it doesn't get you everywhere. The first

thing you'll realize when you've made a

bunch of money is that you're still the

same person. If you're happy, you're

happy. If you're unhappy, you're

unhappy. If you're calm and fulfilled

and peaceful, you're still that same

person. I know lots of very rich people

who are extremely out of shape. I know

lots of rich people who have really bad

family lives. I know lots of rich people

who are internally a mess. So, I would

lean on another tweet that I put out,

which is actually when I think back on

it, I think it's my favorite tweet of

mine. It's not necessarily the most

insightful. It's not necessarily the

most helpful. It's not even the one I

think about the most, but I just when I

look at it, there's just such a certain

truth in there that it just resonates.

And that is that a calm mind, a fit

body, and a house full of love. These

things cannot be bought. They must be

earned. Even if you have all the money

in the world, you can't have those three

things. Jeff Bezos still has to work

out. He still has to work in his

marriage or whatever his next

relationship is. And his internal mental

state is still going to be very much not

controlled by external events. It's

going to be based on how calm and

peaceful he's inside. So I think those

three things, your health, your mental

health, and your close relationships are

things that you have to cultivate and

can probably bring you a lot more peace

and happiness than any amount of money

ever will. So that's what I meant. Now,

how to get there is actually a tweet

storm that I still need to put out. I've

been working on it. I have probably a

100 tweets on it. It's just very hard to

say anything on the topic without

getting attacked from 50 different

directions, especially these days on

Twitter. So, I've been hesitant to do it

because I want to target it for a very

specific kind of person. There's a bunch

of people who don't believe that working

on your internal state is useful.

They're too focused on the external. And

that's fine. There's nothing wrong with

that. They should do that. And that's

who the how to get rich tweet storm is

for. There's a bunch of people who

believe that the only thing worth

working on is complete liberation. Like

you become the Buddha and they'll attack

anything in the middle is being useless.

That's fine, too, but most people aren't

there. So what I want to do is to create

a tweet storm that is just very

practical advice for everyday people who

want to have a calmer internal state.

just a set of understandings,

realizations, have truths and truths

that if you were to embibe them properly

and again these are just pointers to

ideas that you already have and

experiences that you already have that

if you keep these top of mind slowly but

steadily, it will help you with certain

realizations that will lead you to a

calmer internal state. That's what I

want to work on. Fitness is another big

one. I'm just not the expert there.

There are plenty of good people on

Twitter who are better at fitness than

me. And I think loving household and

relationships actually automatically

falls out of the other things. If you

have a calm mind and if you've already

made money, you should have good

relationship. There's no reason why you

shouldn't. A lot of divorces actually

happen over money. Unfortunately, that's

just the reality of it. So having money

removes that part of it. A lot of

external battles happen because your

internal state is not good. When you're

naturally internally peaceful, you're

going to pick less fights. going to be

more loving without expecting anything

in return. And that will take care of

things on the external relationship

front. So, money solves your money

problems. Money buys you freedom in the

material world. I think that was a tweet

from your cutting room floor. And money

lets you not do the things that you

don't want to do. Yeah. To me, the

ultimate purpose of money is so that you

do not have to be in a specific place at

a specific time doing anything you don't

want to do. We skipped one tweet because

I wanted to cover all of the tweets on

the topic of the long term. And the

tweet that we skipped was, "There are no

get-rich quick schemes. That's just

someone else getting rich off you." This

goes back to the world being an

efficient place. If there's an easy way

to get rich, it's already been

exploited. And there are a lot of people

who will sell you ideas and schemes on

how to make money, but they're just

always selling you some $79.95 course or

some audio book or some seminar, which

is fine. Everyone needs to eat. People

need to make a living. They might

actually have really good tips. But if

they're giving you actionable,

highquality advice that acknowledges

that it's a difficult journey and will

take a lot of time, then I think that's

realistic. But if they're selling you

some get-richqu scheme, whether it's

crypto or whether it's an online

business or seminar, they're just making

money off you. That's their get-richqu

scheme. It's not going to necessarily

work for you. One of the things about

this whole tweettorm and podcast is that

we don't have ads on here. We don't

charge for anything. We don't sell

anything. Not because I don't want to

make more money. It's always nice to

make more money. We're doing work here.

but because it would completely destroy

the credibility of the enterprise. If

I'm saying, "Hey, I know how to get rich

and I'm going to sell that to you." It

ruins it. When I was young and I was

kind of studying up on the topic, one of

my favorite books on the topic was

actually called How to Get Rich by Felix

Dennis, the founder of Maxim Magazine,

billionaire who passed away. And he had

a lot of crazy stuff in there, but he

had some really good insights, too. But

whenever I read something by him or by

the GoDaddy founder Bob Parsons or say

Andrew Carnegie, you read stuff by

people who are already very wealthy and

they're clearly made their wealth in

other fields, not by selling the how to

get rich line. They have credibility.

You just trust them and they're not

trying to make money off of you. They

are obviously trying to win some status

and some ego, right? You always have to

have a motivation for doing something.

But at least that is a cleaner reason

why they're probably not lying. They're

probably not fooling you. they're not

snowing you. At some level, every

founder has to lie to every employee of

the company that they have where they

have to convince them that it's better

for you to work for me than it is to do

what I did and go work for yourself. So,

I've always had a hard time with that,

which is why the only honest whiff in my

companies, I've recruited entrepreneurs.

And I tell them, you're going to get to

be entrepreneurial in this company. And

the day you're ready to go start your

own next thing, I'm going to support

you. never going to get in the way of

you starting a company. But this can be

a good place for you to learn how to

build a good team and build a good

culture, how to find product market fit

to perfect your skills and meet some

amazing people while you figure out

exactly what it is you're going to do.

Because positioning, timing,

deliberation are very important when

starting a company. But what I've never

been able to do is look them in the face

and say, "You must be at your desk by 8

a.m. because I'm not going to be at my

desk by 8 a.m. I want my freedom." or

say to them that you're great at being a

director today and you'll be a VP

tomorrow, you know, putting them into

that career path track because I don't

believe in it myself. If anyone is

giving advice on how to get rich and

they're also making money off of it,

they should have made their money

elsewhere. Like, you don't want to learn

how to be fit from a fat person. You

don't want to learn how to be happy from

a depressed person. So, you don't want

to learn how to be rich from a poor

person, but you also don't want to learn

how to be rich from somebody who makes

their money by telling people how to be

rich. It's suspect. Anytime you see

somebody who's actually gotten rich

following some guru's advice on getting

rich, just 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. There's a

lot of random error in there. And then

also, this is why you have to absolutely

and completely ignore business

journalists and economist academics when

they talk about private companies. I

won't even name names, but like when a

famous economist rails on Bitcoin or

when a business journalist attacks the

latest company that's IPOing, it's

complete nonsense. 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 page

views. And you are literally becoming

dumber by reading them. You are burning

neurons. I'll leave you with a quote

from Nasim Taleb that I liked where he

said, "If you want to be a philosopher

king, first become a king and then

become a philosopher." not first become

a philosopher and then become a king.

I'm glad you brought up Talb because I

was going to finish this by saying just

remember the title of his first book

which is fooled by randomness. One of

the reasons why we're a little vague in

this podcast is because we're trying to

lay down principles that are timeless as

opposed to just giving you the winning

lottery ticket numbers from yesterday.

You summarized this entire tweet storm

with two words. Productize yourself.

productize and yourself. Yourself has

uniqueness. Productize has leverage.

Yourself has accountability. Product

ties has specific knowledge. Yourself

also has specific knowledge in there. So

all of these pieces, you can combine

them into these two words. Whenever

you're doing anything in business, if

you're looking towards a long term of

getting wealthy, you should ask

yourself, is this authentic to me? Is it

myself that I'm 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 pneummonic. I mean, what is

this podcast? This is a podcast called

Naval. I'm literally productizing myself

with a podcast. You want to figure out

what you're uniquely good at or what you

uniquely are and apply as much leverage

as possible. So, making money isn't even

something you do. It's not a skill. It's

who you are stamped out a million times.

Making money should be a function of

your identity and what you like to do.

Another tweet that I really liked was

this was not mine. Somebody else put

this up. They said find three hobbies.

One that makes you money, one that keeps

you fit, and one that makes you

creative. I would change that slightly.

So I would say one that makes you money,

one that makes you fit, and one that

makes you smarter. So in my case my

hobbies would be reading making money is

I love working with startups either

investing in them brainstorming them

starting them I just love that ideiation

and initial creation phase around

startups and then on the hobby that

keeps you fit I don't really have one

closest thing I have is yoga but that's

where it fell apart and I think people

who early in life discover something

like surfing or swimming or tennis or

some sport that they continue doing

throughout most of their life are very

lucky because they found a hobby that'll

make them fit.

We've finished discussing the tweet

storm and we're going to spend some time

on Q&A and discussing some of the tweets

on the cutting room floor that didn't

make it into the tweet storm. My first

question is, do you think there are some

common failure modes or typical things

that people do wrong when they're trying

to apply this advice? A lot of people

don't understand what specific knowledge

really is or how to quote unquote obtain

it. People don't understand what

accountability really entails. They

think that accountability means being

successfully accountable. No, it means

that you have to stick your neck out and

fail with your name out there publicly

and be willing to let people hate on

you. One of the reasons I'm less active

on Twitter lately is because every tweet

summons an army of nitpickers and haters

and it gets exhausting. But on the other

hand, you have to learn how to ignore

them. Otherwise, you can't survive on

Twitter. A lot of people try to

reconcile it with like should I quit my

9to-ive job or not. That can be a very

hard decision. I don't think you need to

go that extreme. You can start applying

accountability and leverage and specific

knowledge even within your existing

career. It doesn't have to necessarily

be fork off and do something else

completely. A lot of people will use it

as a way to agree and disagree with

their existing biases. They'll say, "Oh

yeah, I agree with that part or that

part. You're completely wrong." The most

interesting parts should be the ones

that you disagree with because clearly

I've proven that I know a few things. So

if you disagree with it, then maybe that

is an area where you can improve your

thinking. I've definitely improved my

thinking all the time, but I will tell

you that in this tweet storm, I put down

the minimum viable principles. I did not

put down the whole universe of what I

know about how to make money because 90%

of it is suspect. I put down the

bedrock, the stuff that I'm pretty

solidly sure about. And I have not yet

seen a tweet that has successfully

contradicted anything in this tweet

storm that would cause me to say, "Oh,

yeah, I got that one wrong." I think

another place where people get a little

bit off is they look at this and they

say, "Well, this only applies to tech

entrepreneurs." I disagree. The example

that I gave about real estate was a good

one in that regard. It's just the nature

of leverage that technology drives

leverage. So I'm going to push you in a

tech direction to get the free leverage

that is available in tech. And obviously

this message is being delivered through

the internet. So it's going to have a

pro- internet bias. There are also

people who believe that is unfair to the

people who don't have these

opportunities to do anything with the

opportunities that they do have. With

that defeist attitude, why even get out

of bed in the morning? 90% of people are

dead. There's a lot of people who are

living on a dollar a day. Do you live on

a dollar a day? No. It's up to you to

play the hand that you're dealt to the

best of your ability. And then you can

take the winnings, the pot from that

hand and do whatever you want with it to

fix the world. But saying that you

should not do things just because others

can't do things is living in denial.

It's an excuse to not do anything. There

are also people who believe that wealth

creation is fundamentally at odds with

an environmentally safe and healthy

planet and they view the whole thing as

a giant zero sum game. That's a false

narrative as well. Elon Musk is not

playing a zero- sum game with the

environment. And there are plenty of

entrepreneurs who are not. If anything,

there is a word that environmentalists

love, which is sustainability, and

for-profit businesses are at least

financially sustainable if nothing else.

You can do a BC Corp, which has a dual

mission. A lot of nonprofit efforts

would actually be better served by

for-profit companies because then they

wouldn't have to go begging for grants

all the time. They would be financially

sustainable. Some great founders realize

their philanthropic visions by running a

business. Who is this advice targeted

to? Is it for my lift driver? Is it for

an internet entrepreneur? Is it for

somebody who wants to start a YouTube

channel? Because it comes from someone

who's steeped in Silicon Valley and tech

companies. It's always going to have a

bias towards that. But I think it's good

for anybody who wants to be

entrepreneurial, anybody who wants to

control their own life, anybody who

wants to deterministically and reliably

improve their ability to create wealth

over time, is patient, and looking at

for the long haul. And certainly, if

you're 80 years old, retired, running

out of energy, you should probably just

stay retired. But there are 80-year-olds

who have a lot of energy and want to do

new things and live for the future. It

can obviously apply very easily to a

young person. I would say 9 10 years old

and up. The most difficult one is

probably middle-aged because when we're

in our 30s, 40s, 50s, we already have a

lot invested. We have a lot of

obligations because those are the years

where we're earning and people are

relying upon us. We don't want to change

because we don't want to admit defeat in

what we've been doing to date. But

that's where it can actually be the most

fruitful. It may be the most difficult

pivot. You have a 9 toive job. You have

a family relying upon you. And so it may

seem like the things in this podcast are

far too idealistic, but maybe it can

inform your weekend projects. Maybe it

can inform your self-reeducation that

you do at night on the internet. Maybe

it can inform what roles you take on in

the company that you're at because they

move you closer and closer to points of

leverage, points of judgment, or points

where you're naturally good at and

you're authentic. It might cause you to

take on more accountability. even

applied peace meals. These principles

can directionally guide you regardless

of what stage you are at in life short

of retirement. And if you're in

retirement, just test them to see if

they're true and then teach them to your

kids or your grandkids. There's many

different ways to participate. It should

really apply to almost everybody who has

a complete body, sound mind, and is

looking to work. I think one way to

apply the advice is to look at who is

getting the leverage off of the work

that you're doing. Look up the value

chain. Look at who's above you and who's

above them and see how they are taking

advantage of the time and the work that

you're doing and how they're applying

leverage to it. People do that naturally

in that they want to move up the

corporate ladder, but that's mostly

about managing other people. And what

you really want to be doing is managing

more capital, products, media, and

community. People think about moving up

the ladder in their organization, but

they don't think that often about moving

to a different organization or creating

their own organization to get more

leverage. In general, set parabus, fancy

Latin words, all other things equal. You

will do better in a smaller organization

than a larger one. You will have more

accountability. It'll be more visible.

You are more likely to be able to try on

multiple things to find out the thing

that you're uniquely good at. People are

more likely to give you leverage through

battlefield promotions. You're going to

have more flexibility. There'll be more

authenticity to how the company

operates. A good progression for a

career is start out in a large company

and then progressively move to smaller

and smaller ones. It's very hard to go

from a small company to work in a larger

company. Larger companies tend to be

more about politics and less about

merit. They're more stable, but they're

less innovative situations. The goal

long term is if we are all wealthy is

that we're all working for ourselves and

the people who are working for us are

essentially robots and today that's

software robots in data centers

executing code. Tomorrow it could be

delivery bots, flying bots, mechanical

bots that are carrying things around.

This goes back to this idea of the best

relationships are peer relationships. If

there's someone above you, then that's

someone to learn from. If you're not

learning from them and improving, then

there shouldn't be anybody above you. If

there's somebody below you, it's because

you're teaching them and enabling them.

If you're not teaching them and enabling

them, then get a robot underneath. You

don't need a human being below you. This

is utopian and it's a long ways off. But

in the not tooistant future, anybody who

wants to work for themselves will be

able to work for themselves. You may

have to make other sacrifices. You may

have to take on more risk. You may take

on more accountability. You may have

less steady income. But more and more, I

think the younger generation is

realizing that if they're going to work,

they're going to work for themselves. In

one of your tweets, you listed out some

of the things you should study like

programming sales reading writing

arithmetic. One of the items that ended

up on the cutting room floor was that

you should also study ethics. I was

originally going to put that out there

as a concession to people who believe

that making money is evil and that the

only way to make it is evil. But then I

realized ethics is not necessarily

something you study. It's something you

think about and it's something you do.

Every one of us has a personal moral

code. And where you got that moral code

from is different for everybody. It's

not like I can point you to a textbook.

Sure, I could point you some Roman and

Greek text, but that's not going to

suddenly make you ethical. There's the

golden rule, right? do unto others as

you would have them do unto you. Or

there's Nasim Talb's silver rule, which

is don't do unto others what you don't

want them doing unto you. Once you've

been in business long enough, you will

realize how much of business is about

trust. And it's about trust because you

want to compound interest. You want to

be able to work for long periods of time

with trustworthy people without having

to re-evaluate every discussion, without

having to rethink each time, and without

having to constantly look over your

shoulder. And so over time you gravitate

towards working with certain kinds of

people and similarly those people will

gravitate towards working with other

ethical quote unquote people. So being

ethical turns out to be a selfish

imperative. You want to be ethical

because it attracts the other long-term

players in the network and then they

want to do business with you. And if you

build a good enough reputation for being

ethical, eventually people will pay you

just to do deals through you because

you're the one who will validate and

ensure the deals by your presence

because you wouldn't be involved with

lowquality stuff. So being ethical

actually pays off in the long run, but

it's the very long run. In the short

run, being unethical pays off, which is

why so many people go for it. It's a

greedy algorithm. But you can be ethical

simply because you're long-term greedy.

And I can even outline a framework for

different parts of so-called ethics just

based on the idea of long-term

selfishness. For example, you want to be

honest because it leaves you with a

clear mind. You don't have two threads

running in your head. One is the lies

that you told you to keep track of and

the other one is what you're saying. You

just have to think about one thing at a

time so you have more energy to think

about that thing. So you're a clearer

thinker. Also, by being honest, you're

rejecting the people who only want to

hear the pretty lies. So you force those

people out of your network. and

sometimes is painful like friends and

family but long-term you create room for

the people who like you exactly the way

that you are. So that is a selfish

reason to be honest. For example, in

negotiations, if you're the kind of

person who always tries to get the best

deal for yourself, you will win a lot of

very early deals and it'll feel very

good. But on the other hand, there are a

few people who will recognize that

you're always scrabbling and not acting

fairly, and they will tend to avoid you.

Over time, those people end up being the

dealmakers in the network cuz people go

to them for a fair shake or to figure

out what's fair. And so, if you are

cutting people fair deals, you don't get

paid in the short term, but in the long

term, everybody wants to deal with you

and you end up being a market hub. You

have more information, you have trust,

you have reputation, and people end up

doing deals through you. A lot of wisdom

is just realizing the long-term

consequences of your actions. And so the

longer term you're willing to look, the

wiser that you're going to seem to

everybody around you. Do you want to

tell us about some of the jobs that you

had as a youth and the specific job that

kicked off your fanatical obsession with

creating wealth? This gets a little

personal and I don't want to do the

humble brag thing. There was some thread

going around on Twitter about like name

five jobs you've held and every rich

person on there was trying to signal how

they held like normal jobs. So I don't

want to play that game. I've held a

bunch of menial jobs. There are people

who have had it worse than me, people

who had it better than me. There was one

point where I was washing dishes in the

school cafeteria and I said, "F this. I

hate this. I can't do this anymore." And

I sweet talked my way to a computer

science prof of helping TA his CS class

in algorithms when I myself was

completely unqualified for that. And so

it forced me to learn computer science

algorithms so I could TA the rest of the

course. But that desire came out of the

suffering of washing dishes in the

college cafeteria which is not to say

there's anything wrong with that.

There's nothing wrong with anything

really. But it was just not for me. I

did not enjoy it. I had an active mind

and I wanted to make my money and earn

my living through mental activities, not

through physical activities. But

sometimes it takes the suffering of

doing the wrong thing to motivate you

enough to do the right thing. I worked

at a law firm for a while, a big

prestigious law firm in New York City. I

had a big internship there and I

basically got fired for surfing Usenet

back in the day. This is before the

internet was a big thing. Usenet was the

news groups and it was the only way for

me to stay from being completely bored.

And I was an overpaid guy wearing a tie

and a suit and I had to hang out in the

conference room. When the lawyers needed

photo copies, I would make photocopies.

And in the meantime, I would be bored

out of my skull. This is pre iPhone.

Thank God to Steve Jobs for saving us

all from unending boredom. But I used to

read the Wall Street Journal or anything

that I could get my hands on. I would

have read the back of a brochure just to

keep from going insane because listening

to a bunch of corporate lawyers discuss

how to optimize minute details in a big

contract is really dull. and they got

mad at me because they wanted me to sit

there quietly and not read the Wall

Street Journal. They said, "That's rude.

That's misbehavior." So, I got called up

and reprimanded a bunch of times. And

then I was finally terminated. And I was

sent home in shame early from my very

prestigious internship, destroying my

chance of going to law school. And I was

unhappy for all of an hour. But

ultimately, it's one of the best things

that ever happened to me cuz then I

would have ended up as a lawyer. Not

that I have anything against lawyers,

but it's not what I was meant to do. You

mentioned a catering job that you had a

while back that really kicked off the

whole obsession. That was an envy thing.

When I was in high school, I had to make

some money to pay for my first semester

of college and I had to get a job. It

was the summer of 1990 1991 time frame.

So this was the Bush senior recession if

anyone who was alive back then remembers

it. So it was actually really hard to

get a job. So I ended up working for an

Indian food catering company and I ended

up having to serve at a birthday party

for a kid who was actually in my school.

So I saw my classmates and I was out

there serving food and drinks to them

and that was incredibly embarrassing. I

wanted to hide away and die right there.

But you know what? It's all part of the

plan. It's all part of the motivation.

If I hadn't had that happen, I probably

wouldn't be as motivated and I wouldn't

be as successful. So it's all fine. But

it was definitely a very strong

motivator. In that sense, envy can be

useful. Envy can also eat you alive if

you let it follow you your entire life.

But there are points in your life where

it can be a very powerful booster

rocket. We spoke earlier about picking a

business model that has leverage from

scale economies, network effects, zero

marginal cost of replication. There were

a few other ideas on the cutting room

floor that I want to go through with

you. The first one was the principal

agent problem. So mental models are all

the rage. Everyone's trying to become

smarter by adopting mental models. I

think mental models are interesting, but

I don't think explicitly in terms of a

mental model checklist. I know Charlie

Munger does, but that's just not how I

think. Instead, I tend to focus on the

few lessons that I've learned in life

over and over that I think are

incredibly important and seem to apply

almost universally. One that keeps

coming up from microeconomics because as

we've established macroeconomics is not

really worth spending time on is what's

called the principal agent problem.

Principle in this case is principle with

a P A L not PL. So it's not a principle

that you follow. It's a principle who is

a person. A principal is an owner and an

agent is the person who works for the

owner. So you can think of it as an

employee. The difference between a

founder and an employee. I can summarize

this by a famous quote that either was

said by Napoleon or by Julius Caesar.

It's generally attributed to either one

but he said if you want it done then go

if not then send which is saying if you

want to do something right do it

yourself because other people just don't

care enough. Now the principal agent

problem pops up everywhere. In

microeconomics, the way that they try to

characterize it is that the principal's

incentives are different than the agents

incentives. So, the owner of the

business wants what is best for the

business and will make the most money.

The agent generally wants whatever will

look good to the principal or might make

them the most friends in the

neighborhood or in the business or might

make them personally the most money. You

see this a lot with hired gun CEOs

running public companies where the

ownership of the public company is

distributed so widely that there's no

principle remaining. So nobody owns more

than 1% of the company. The CEO takes

charge, stuffs the board with their

buddies and then starts issuing

themselves lowpric stock options or

doing a lot of stock buybacks because

their compensation is based directly

tied to the stock price. So agents have

a way of hacking systems. This is what

make incentive design so difficult. As

Charlie Munger says, if you can be

working on incentives, don't work on

anything else. Almost all human behavior

can be explained by incentives. The

study of signaling and signals is seeing

what people do despite what they say.

People are much more honest with their

actions than they are with their words.

You have to get the incentives right to

get people to behave correctly. It's a

very, very difficult problem because the

good people aren't purely coin operated.

They're not just looking for money.

They're also looking for other things

like status or meaning in what they do.

Principal agent problem is the one that

as a business owner, you're always going

to be trying to figure out how do I make

this person think like me? How do I

incent them? How do I give them founder

mentality? And I think you have to truly

have been a founder to fully appreciate

how important this founder mentality

thing is and what a difficult and gnarly

problem the principal agent problem is.

What I would say to you is if you are a

principal, you essentially want to spend

a lot of your time thinking about this

problem. What that means is you want to

take your top lieutenants and you want

to be very generous with them 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 in how they operate.

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 got the advantage

in the deal. You negotiated in such a

way that you've got the better end of

the transaction because eventually the

other person will figure it out or

they'll be misaligned and the

partnership will fall apart. Either way,

it's not going to be one of those things

that you can invest into with the

benefits of compound interest over

decades. Finally, if you're in a current

role where you're an agent, you're an

employee, 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 because

it's training you how to be a principal

long term and eventually you will become

a principal. It's also going to align

you with the principle and a good

principle will then promote you or

empower you or give you accountability

or leverage way out of proportion to

what might be your menial role. I'm

always very impressed by founders who

will promote up very very young people

through the ranks having them skip

multiple levels despite their experience

and invariably it happens because this

agent who's way deep down thinks like a

principal. So if you can hack your way

through the principal agent problem,

you've probably solved half of what it

takes to run a company. The reason I

asked about this one first is because I

feel like I personally never see the

principal agent problem in my work. I

tend to work in small teams where

everybody is highly economically aligned

and the people have been filtered for a

commitment to the mission and everybody

else who doesn't work out moves on to

another role elsewhere. These are all

heruristics that you have designed to

avoid having to deal with the single

biggest problem in management. Another

example of a heristic you can have that

helps you route around the principal

agent problem is to deal with the

smallest firms possible. So for example,

when I'm hiring a lawyer or a banker or

even accountant to work on my deals, one

of the things that I've become very

cognizant about is the bigger firms, all

other things equal, are generally worse.

Yes, they have more experience. Yes,

they have more people. Yes, they have a

bigger brand. But what you'll find is

that the principal and the agent are

highly separated. And very often the

principal will sell you and convince you

to work with a firm, but then all the

work will be done by an agent who simply

doesn't care as much. And you can end up

getting substandard service. So I prefer

to work with boutiques. And my ideal law

firm to work with is a law firm of one.

my ideal banker to work with is a solo

banker. Now, you're making other

sacrifices and trade-offs in terms of

that person's resources, and you are

betting big on that person, but you've

got one throat to choke. There's no one

else to point fingers to. There's

nowhere to run. The accountability is

extremely high. If you're an agent, the

best way to operate is just say, "What

would the founder do?" If you think like

the owner and you act like the owner,

it's only a matter of time until you

become the owner.

Let's chat about the Kelly criterion.

The Kelly criterion is a very

popularized

mathematical formulation of a simple

concept. And the simple concept is don't

risk everything. Stay out of jail. Don't

bet everything on one big gamble. Just

be very careful how much you bet each

time so you don't lose the whole kitty.

The Kelly criterion mathematically

formulates if you're a gambler, even

when you have an edge, how much should

you gamble per hand? Because even when

you have an edge, you can still lose. So

let's say you have 5149 edge, every

gambler knows not to bet the whole kitty

on that 5149 edge cuz you could just

lose everything and you don't get to

come back to the average. Nasim Taleb

famously talks about erodicity which is

a fancy word for the simple concept that

what is true for a 100 people on average

isn't the same as one person averaging

that same thing 100 times. The easiest

way to see that is by playing Russian

roulette. Six people who play Russian

roulette once each and then each winner

gets a billion dollars. One person ends

up dead. Five people have a billion

dollars versus one person who plays

Russian roulette with the same one gun

six times is never going to end up a

billionaire is going to end up worth

zero. And so risk-taking, especially

when the averages are calculated across

large populations, is not always

rational. The Kelly criterion helps you

avoid ruin. The number one way in which

people get ruined in modern business is

not by betting too much, but it's by

cutting corners and doing unethical

things or downright illegal things.

Ending up in an orange jumpsuit in

prison or having a reputation ruined is

the same as getting wiped to zero. So

never do those things. Let's talk about

the shelling point is a game theory

concept made famous by Thomas Shelling

in the book called Strategy of Conflict

which I do recommend reading. It's about

multiplayer games where other people are

responding based on what they think your

responses. What he came up with was the

mathematical formalization of how do you

get people who cannot communicate with

each other to coordinate. Suppose that I

want to meet with you but I don't tell

you where and I don't tell you when. We

both want to meet but we cannot

communicate any more information to each

other. That would sound like an

impossible problem to solve. We're done.

We can't do it. Not quite. Because I

know that you're a rational person and

smart and educated and you know I'm a

rational person who's smart. We're going

to start thinking if we have to pick an

arbitrary date, we're probably going to

pick New Year's. And what time? Midnight

or 12:01 a.m. And where would we meet?

What is a big meeting point? Well, if

we're Americans, it's probably New York

City. It's the most important city. And

where in New York City will we meet at

midnight? Probably Grand Central Station

under the clock. Maybe you end up at the

Empire State Building, but not likely.

You can just use social norms to

converge onto a shelling point. There

are many times in many games where you

can look at the game itself, whether

it's business or art or politics, and

you can find the convergent shelling

point within the context of that game.

You can cooperate with the other person.

Here's a simple example. Let's suppose

that you have two companies that are

competing heavily with each other and

they hold an oligopoly. Let's say that

they're competing right now and the

price fluctuates between 8 bucks and 12

bucks for whatever the service is. Don't

be surprised if they both converge on 10

bucks without ever talking to each

other.

Do you want to talk about parto optimal?

Parto optimal is another concept from

game theory along with paro superior.

Parto superior means that something is

better in some ways while being equal or

better in the other ways. It's not worse

off in any way. This is an important

concept when you're negotiating with

somebody. If you can make a solution

paro superior to where it was before,

you will always do that. Paro optimal is

when the solution is the best that it

can possibly be. Then you can't change

it without making it worse in at least

one dimension. There is a hard trade-off

from this point forward. These are

important concepts to understand when

you're involved in a big negotiation. In

negotiation though, I would generally

say that this is a tweet that I have.

Negotiations are won by whoever cares

less. Negotiation at the end of the day

is about not wanting it too badly. If

you want something too badly, then the

other person will be able to extract

more price from it. If you do care more

about something than the other person

and they are taking advantage of you in

a negotiation, then your best way to

deal with that is to turn it from a

short-term game into a long-term game.

Try to make it into a repeat game. Try

to bring reputation into line. Try to

bring other people in who may have a say

in the future or may want to play games

with this person in the future. An

example of a very high cost, lowin

information single move game is having

your house renovated. Contractors are

notorious for over booking, ripping

people off, being unaccountable. I'm

sure contractors have their own side of

it. The homeowner has unreasonable

demands. We found problems. The

homeowner doesn't want to pay for it.

They don't understand. They're low

information buyers. It's a very

expensive transaction. Historically,

it's been very hard to find good

contractors and the contractors no

choice on what a good homeowner is. You

try to go through friends. You try to go

through reputation. And what you're

basically doing there is you're trying

to convert a single move expensive game

with a high probability of cheating on

both sides into a multi-move game. One

way to do that say well actually I need

two different projects done. So the

first project we'll do together and then

based on that I'll decide if we do the

second project. You can split your work

up into two projects. Another way might

be, I'm going to do this project with

you and then I have three friends who

want projects done and they're waiting

to see the outcome of these projects.

Another one might be the same person

operating within the same community and

having a reputation in the community to

protect. Another one could be you write

them a Yelp review or a Thumbtac review.

These are all ways of turning a single

move game into a longerterm game and

helping get past a position of poor

negotiating leverage and poor

information.

We talked about compounding and

compounding interest, but we didn't

really dig into it that much.

Relationships are a good example of

compound interest. Once you've been in a

good relationship with somebody for a

while, whether it's business or it's

romantic, life gets a lot easier because

you know that person's got your back.

You don't have to keep questioning. If

I'm doing a deal with someone that I've

dealt with for 20 years and I trust them

and they trust me, we don't have to read

the legal contracts. Maybe we don't even

need to create legal contracts. Maybe we

can actually do it on handshakes. That

kind of trust makes it very, very easy

to do business. If Nive and I start

another company, I know that if things

aren't working out, we're both going to

be extremely reasonable about how to go

about it, how to exit out of it, how to

shut it down, or even if we're scaling

it, how to bring in new people. At this

point, we have mutual trust and that

allows us to start businesses more

easily and almost compounds the effect,

especially when you're dealing with

something like a startup, which is so

difficult to pull off. Removing these

frictional mechanisms can actually often

be the difference between success and

failure. I think the number one most

underrecognized reason startups fail is

because the founders fall apart. There's

a couple non-intuitive things about

compounding. The first one is that most

of the benefits of compounding comes at

the end of the compounding. So you may

not necessarily see huge benefits of it

up front. There was a good quote from an

article that Sam Alman wrote where he

said, "I always want it to be a project

that if successful will make the rest of

my career look like a footnote." Again,

that just goes back to the idea that

most of the benefits of compounding come

at the end. The other thing that's a

little non-intuitive about compounding

is that I think it's better to have a

few deep compounding relationships with

people instead of a large amount of

non-compounding relationships. One of

the underrealized things in business is

that it takes just as much effort to

create a small business as it does to

create a large business. Whether you're

Elon Musk or whether you're the guy

running three Italian restaurants in

town, you're working 80 hours a week.

You're sweating bullets. You're hiring

and firing people. You're trying to

balance the books. It's highly stressful

and it takes years and years of your

life. But in one case, you get companies

that are worth 50 hundred billion

dollars and the agilation of everybody

and the other hand you might make a

little bit of money and you've got some

nice restaurants. So think big. Are

there any other microeconomic concepts

outside of zero marginal cost of

replication and scale economies that are

important for people to understand?

Price discrimination is an important

thing to understand. What it means is

that you can charge people different

things based on their propensity to pay.

Now, you're not allowed to charge

different people different things just

because you don't like them. You have to

offer them a little something extra, but

it has to be something that rich people

care about. Business class seats will

routinely cost five or 10 times what an

economycl class seat does, but it

probably cost the airline just two,

maybe 3x to provide that. It's just the

rich person is more willing to pay. So

you have to give them the little things

that they need extra to either signal

they're rich or that little bit of

comfort that they want. Price

discrimination gets used a lot in

enterprise software where you have a

premium product. The free version will

do almost everything. But then if you

want the version that's a little extra

secure or hosted on your site or has

multi-user administration so the IT

person can monitor everything that's

going on, you're suddenly find yourself

paying 10, 100 or infinite times as much

as you go from a free product to a price

product. Another good concept is

consumer surplus and producer surplus,

which is the excess value that somebody

gets. Even though they were willing to

pay more, the product was priced the

same for everybody. I get a lot of joy

out of my morning coffee. Obviously,

I've made some money. If my coffee cost

$20, I would pay $20 for my morning

coffee. But Starbucks doesn't know that.

It can't price the coffee at $20 just

for me cuz it's selling the exact same

product. So, I'm getting a lot of

consumer surplus out of the coffee. And

all businesses generate consumer

surplus. It's a good thing to keep in

mind when someone's harping about how

evil companies are. Amazon might be a

trillion dollar company, but I will bet

you they're generating trillions of

dollars in consumer surplus through

convenience and willingness to pay.

There are a lot of people who are

willing to pay more than what Amazon

charges them for all their services.

Let's talk about NPV. NPV is just the

net present value of something. It's

when you say that stream of payments I'm

going to get in the future, what is that

worth today? So a common example of this

is you're joining a startup company and

you're getting stock options and the

founder says well this company is going

to be worth a billion dollars and I'm

giving you.1% of the company therefore

you're getting a million dollars worth

of stock. What he's or she's arguing is

what it's going to be worth in the

future. You have to discount that back

to today. You have to figure out what is

that worth today and you have to apply a

discount rate or an interest rate that

takes into account the massive risk that

startups face. What you'll end up with

is a price that it's worth today and

that's the price at which a venture

capitalist would invest in the company

today. So if that founder just raised

around at $10 million and that company's

only worth 1% of what the founder is

arguing, your million-doll package is

actually worth $10,000. So NPV

calculations at a very rough level you

should be very comfortable doing in your

head. What's a mispriced externality?

You mentioned that at some point during

our podcast. An externality is when

there is an additional cost that is

imposed by whatever product is being

produced or consumed that is not

accounted for in the price of the

product. Sometimes you can fix that by

putting the price back into the product.

One of the most ardent ways people

attack capitalism these days is that

it's destroying the environment. And if

you throw away capitalism because it's

destroying the environment, then guess

what? We're all headed back to

pre-industrial times. It's not going to

be a good thing. So rather there's an

externality because the environment is

finite. The environment is precious and

we have to price it properly and fold it

back in. If people are wasting water or

putting hydrocarbons in the atmosphere

or polluting things, you want to charge

them what it costs to clean up that

pollution, return it to a pristine

state. Perhaps that price has to be

very, very, very high. If you raise that

price high enough, you knock out

pollution. It's much better than

feel-good measures where we're just

going to ban plastic bags and we're

going to say don't take showers on

Saturdays and Sundays when we're having

a drought. California likes to run

declarations and ads to scare you into

not taking showers on times when there's

a drought when it would be just much

better to raise the price of fresh

water. Your average consumer might pay a

few pennies more for a shower, but then

the almond farmers who consume a lot of

the water will cut back on using fresh

water and almond farming may move to a

part of the country where water is more

abundant. Properly pricing externalities

can save resources in a tremendous way.

It's a good framework to think about how

to be effective when you want to do

things like save the environment rather

than feel good things that won't

actually amount to anything.

One of the most common questions we get

from people is, "How do I get the time

to start investing in myself? I have a

job." I'll kick off the answer with one

of the tweets from the cutting room

floor where you said, "You will need to

rent your time to get started. This is

only acceptable when you are learning

and saving. Preferably in a business

where society does not yet know how to

train people and apprenticeship is the

only model. You're going to have to work

starting out, unless you happen to be

born rich, in which case you probably

won't have the motivation to make money

in the first place. If you're going to

do the work, join a business where

apprenticeship matters. You know, Warren

Buffett went and tried to work for

Benjamin Graham straight out of school

to learn how to be a value investor and

he offered to work for free and Ben

Graham said, "You're overpriced." It's

true in that these apprenticeship

businesses, you're probably making a

sacrifice in terms of short-term career

to work there. But try to learn

something where people haven't quite

figured out how to teach it yet. And

that can happen if you're working in a

field that is brand new and quickly

expanding. So, no one has figured it

out. Or it's a field that's very

circumstantial where the details really

matter and it's always moving. For

example, fund investments or investing

in general is one of those skills.

Entrepreneurship is one of those skills.

One of the most coveted jobs that's come

up in Silicon Valley in the last half

decade or so is being a chief of staff

or an entrepreneur where the brightest

young kids will follow the CEO or the

entrepreneur around and do whatever that

person needs them to do. And many cases,

they're way overqualified for the

position. You may have someone who has

two graduate degrees essentially running

the CEO's laundry for that day because

that's the most important thing that

needs to be done, but at the same time,

they're also going to be sitting in all

the highest end staff meetings. They're

going to be privy to all the venture

fundraising decks and all the stress and

drama, theatrics, innovation and

knowledge that can only come from being

next to the entrepreneur because the

entrepreneur is willing to do anything

and everything to make their company

successful and the chief of staff is

accompanying them and learning. Now,

obviously this is very Silicon Valley

tech company advice. If you are

currently stuck in a normal job and you

don't have the opportunity to learn in

an apprenticeship model and you need to

make money, then go ahead and do that

job. But even within the context of that

job, try to be innovative. Sign up to

take on new challenges, new

responsibilities. Find the part of the

job that has the steepest learning

curve. What you're really trying to

avoid is repetitive drudgery. Repetitive

drudgery doesn't serve anybody. then

you're essentially just counting the

time until your job is automated away.

Even if you're a barista at the coffee

shop, try to figure out how to make

connections with the customers. Try to

figure out how to innovate on what

you're offering them on your basic

service to delight the customer. And

what will happen is managers, founders,

owners, they notice. The hardest thing

for any founder is to find people who

will work with them who have founder

mentality. That's just a fancy way of

saying they care enough. And what most

people will say, well, I'm not the

founder. I'm not being paid enough to

care. Actually, you are. The knowledge

and the skills that you gain by having

founder mentality set you up to be a

founder down the line. And it pays you

in that sense. You can get a lot out of

almost any position. You just have to

put a lot into it. If I'm working a job

and I want to figure out if I should get

accountability judgment specific

knowledge, leverage, it sounds like

you're saying the one thing to optimize

for is specific knowledge out of all

those things if you can. Judgment takes

experience, takes a lot of time to build

up. You have to put yourself in

positions where you can exercise

judgment. That'll come from taking on

accountability. Leverage is something

that society gives you much later. Once

you've demonstrated your judgment,

unless you learn a code or you become

good with media, then these are

permissionless leverage. Leverage kind

of comes later. Judgment comes later.

Accountability you can take on

immediately. You can say, "Hey, I'll

take charge of this thing that nobody

wants to take charge of." So

accountability is where you can step up,

but then you're publicly putting your

neck on the chopping block. So you have

to deliver. specific knowledge gets

built up by taking on accountability for

things that other people don't know how

to do and that perhaps you enjoy doing

or you're naturally inclined towards

doing. You could be working in a factory

and it may turn out that the hardest

thing in the factory is knowing how to

raise capital to keep the factory

running. And that's what the owner of

the factory is always stressed out

about. And if you notice this and you're

like, I'm good at balancing my checkbook

in a good head for numbers and I'm good

at watching money, but I haven't really

raised money before. You offer your help

and become the owner's sidekick in that

regard. You help solve their biggest

problem. You'll become the air parent

early on. Find things where you have any

interest and take on accountability.

Don't worry about short-term

compensation. If you dive into the edge

of knowledge, which nobody knows how to

solve, and you solve the hard problems,

taking on accountability, people will

line up behind you. The leverage will

come. There are a couple other related

tweets to this topic from the cutting

room floor that I'll read out. First,

the technology industry is a great place

to acquire specific knowledge. The

frontier is always moving forward. If

you are genuinely intellectually

curious, you will acquire the knowledge

ahead of others. Real technologies

around us everywhere. The spoon was

technology once. Fire was technology

once, but once we figured out how to

make it work, it disappeared in the

background, became part of our everyday

lives. So technology is by definition

the intellectual frontier. It's taking

the things that are recent from science

or from culture that we have not yet

figured out how to massproduce and it's

figuring out how to commercialize it,

how to make it available to everybody.

So technology will always be where you

can pick up specific knowledge that is

valuable to society that doesn't quite

understand yet. For example, if I become

a world-class expert in machine learning

just when machine learning is starting

to take off and I got there through my

genuine intellectual interest and I bet

my career on it, I'm going to do really

well. But 20 years from now, machine

learning may be second hat. There are

also timeless forms of specific

knowledge. For example, if you're good

at persuading people, it's probably a

skill that you picked up early on in

life, it's always going to apply because

persuading people is always going to be

valuable. This is one of those skills

that's generic. It probably alone is not

enough to build a career on. It needs to

be combined a skill stack. You might

combine persuasion with accounting

combined with understanding for example

semiconductor production lines and now

all of a sudden you're the best

semiconductor salesperson that becomes

the best semiconductor company CEO.

There are timeless specific knowledge

skills. Those are skills I would say

that can pretty much never be taught.

And then there are timely specific

knowledge skills which come and go but

even those tend to have fairly long

shelf lives of decade or two decades or

three decades. So technology is a good

place to find those specific skill sets

and if you can bring in a more generic

specialized knowledge skill sets. The

other tweet from the cutting room floor

was related to accountability in

companies. It said companies don't know

how to measure outputs so they measure

inputs instead. Work in a way that your

outputs are visible and measurable. If

you don't have accountability do

something different. The entire

structure of rewarding people comes from

the agricultural and industrial age

where your inputs and your outputs

matched up very closely. The amount of

hours that you put into doing something

was a good rough proxy for what kind of

output you were going to get. Today it's

extremely nonlinear. One good investment

decision can make a company 10 or $100

million. One good product feature can be

difference between product market fit

and complete failure. So judgment and

accountability matter much much more.

And you want the accountability because

sometimes the best engineers or the best

salespeople are the ones who don't work

very hard but then they'll ship that one

critical product at just the right time

or they'll make that one huge sale or

that one huge deal that will make the

company or at least make the numbers for

the quarter. It's very important that

people are able to tell that you had a

role in that. That doesn't mean that you

stomp all over your team. Humans are

extremely sensitive to people who take

too much credit. So, you do want to be

the kind of person that is always giving

out credit. But the smart people will

know who was responsible. There are jobs

where you're not customerf facing enough

where you're kind of a cog in the

machine and you sacrifice accountability

to some degree. An example is when

you're a consultant. As a consultant,

often you're giving the best ideas and

the best outcome, but it's being

delivered through some person who's

working within the organization. At that

point, you may not have visibility to

the top people in the organization. So,

you may be hidden behind a screen, and

that's just a trade-off that you're

making in exchange for your independence

as a consultant because you're not

willing to play the corporate rat race

or the corporate ladder game. Realize

that with accountability, you can get a

lot more credit when things go right. Of

course, the downside is you get hurt a

lot more when things go wrong. You stick

your neck out. You have to be willing to

be blamed, sacrificed, and even

attacked. So, if you're the kind of

person that thrives in a high

accountability environment, you're

naturally also going to end up very

thick skinned over time. You're going to

get hurt a lot. People are going to

attack you if you fail. If you're

working a job, I think you can apply a

lot of the principles of the tweet storm

inside the job like we just discussed,

including other ones like partnering

with rational optimists. You can find

people in the organization who are

optimistic and rational that have

energy, integrity, and intelligence. And

the flip side of this is that if you

once you get some specific knowledge,

one way to scale it is to start training

apprentices that you can then outsource

some of your tasks to. For example, I

made a bunch of good investments and I

figured out a little bit here and there

about the venture business and I could

keep doing that. I could keep just

investing as an investor, but instead I

co-founded this project called Spearhead

where we train up andcoming young

founders to also become angel and

venture investors. And we give them a

checkbook. It's an apprenticeship model.

They come to us with specific deals that

they're looking at and we help them

think through every unique situation.

And we basically apprentice them under

us to learn the venture business and

it's much more scalable. We have classes

and talks where we kind of tell them

what we know and then their office hours

when they actually bring in the deals

and they talk to us about specific deals

and it turns out the classes and talks

are largely worthless. You can give all

the generic advice you need to give in

about an hour and then after that all

the additional advice is so

circumstantial that essentially cancels

to zero if you try to give it in some

top down fashion. But the office hours

are incredibly useful. It just

reinforces that this is one of those

skills that can only be learned on the

job. And when you find a skill that can

only be learned on the job by doing it,

that is a good indicator that you're

dealing with specific knowledge. Another

good indicator that you're dealing with

specific knowledge is when you ask the

person who's doing it, what do you do

every day? And they can't give you a

straight answer or it's something along

the lines of, well, every day is

different based on what's going on.

That's a good indicator you're learning

specific knowledge. The thing is so

complicated and it's so dependent upon

circumstances that it can't be boiled

down into a textbook form or

communicated by a make money consultant.

The mafia figured out this

apprenticeship model a long time ago.

The best way to end up running one of

the families was to become the driver

for the dawn of one of the families.

It's a complicated business. Tony

Soprano said, "I'm a businessman who has

to enforce my own contracts." Very

complicated business.