Naval Ravikant on Wealth

Wealth, Money and Status Are Different Games

Naval Ravikant is an angel investor, creator of AngelList and a philosopher of entrepreneurship. His conversations span physics, investing, happiness and microeconomics with a grounded, direct sensibility. His podcast "How to Get Rich" is less about quick schemes and more about the mindset and habits of successful entrepreneurs. It is about finding your personal edge, using accountability to own equity, finding leverage and grinding through the work.

Wealth is owning equity that gives you freedom. It removes the work-for-money demands of time, place and task. Money is how we transfer wealth, an IOU for something good you did in the past that you can apply in the future. Ravikant calls money social credits and declares that money solves money problems. Status is a game that determines social hierarchy, a zero-sum contest about relative position rather than value creation.

Wealth creation is a positive-sum game. Ethical wealth creation makes abundance possible, and everyone can be rich. In the First World, nearly everyone lives better than almost anyone alive 200 years ago. Capitalism gets hijacked through improper pricing of externalities, corruption and monopolies, but the underlying mechanism remains sound. 1 lays out the principles for building wealth deliberately.

Provide What People Want but Do Not Realize

The first half of the wealth equation sounds trite. Provide something that people want. Anyone who has sold anything knows supply and demand basics. The second half is mind-blowing: provide something people want but do not realize, at scale. This is foreign to the corporate mindset where professionals solve problems companies already know they have.

The world is efficient, so everyone has dug through the obvious places. It is more effective to operate at a frontier than play in the safe middle. If your role can be broken into discrete process steps, it can be taught. If it can be taught, an algorithm with enough data will learn to do it better than you. Jeffrey Pfeffer, a Stanford professor, said you cannot be normal and expect abnormal returns. You must challenge yourself, innovate and produce new technology.

Escape Competition With Authenticity

Ravikant and other investor philosophers are humanists who argue that each person is uniquely valuable. The main goal is to double down on who you are and get exceptionally good at your thing. You need to clarify what that thing is, surround yourself with amazing people and hustle for years.

Specific knowledge lives at the edge of knowledge, the stuff just being figured out or difficult to figure out. 2 echoes this thesis about rare and valuable skills. Specific knowledge is found through pursuing your innate talents, genuine curiosity and passion. It can be taught through apprenticeships, because society has not yet figured out how to train and automate it. The consulting apprenticeship model is a real-world example where you learn from others what cannot be taught in a book.

Take Accountability and Own Equity

You will not get wealthy renting out your time. Professional services professionals push their billable rates higher, but this is a time-for-money trade-off. You do not earn money at night, during vacations or when you are sick. Your outputs correlate too tightly with your inputs.

As employees, we take less risk than the owner and receive less reward. Consultants earn revenue, not equity. 3 argued 20 years ago that you want to be a business owner or investor, not an employee. You must own equity, a piece of the business, to gain financial freedom.

Accountability is how you earn equity. The closer you tie yourself to outcomes, the more equity you deserve. People who can fail in public have power because putting yourself out there with your name and face risks failure and humiliation. That risk gives you credibility. The downside is limited in modern society because you can bounce back.

Play Long-Term Games With Long-Term People

Trust is scarce and many challenging problems require a team. Most single-genius problems have been solved already. Find a crew of people you trust and do great work with them repeatedly. Pick business partners with high intelligence, energy and integrity.

In a long-term game, everyone makes each other rich. In a short-term game, everyone makes themselves rich. If wealth accumulates slowly, you want relationships rather than transactions. Ravikant applies compound interest to money, industry experience and relationships. Career-hopping industries and people does not compound. Stick with one area of focus and play the game with people you trust.

Get Leverage Through Code and Media

Leverage amplifies your returns. In the past, leverage meant financial capital or people. Financial leverage requires raising millions, and people leverage is messy to scale. The new generation's fortunes are made through code or media because they have zero marginal cost and unlimited distribution.

Network effects mean every additional person adds value to the network, creating a barrier to entry for competitors. The internet allows you to scale any niche obsession. Asset-light work means each additional reader costs nothing, and your reach is wide. In contrast, distributing content decades ago required thousands of individually addressed envelopes. Code and media are egalitarian forms of leverage available to anyone with a laptop and an internet connection.

Value Your Time and Become the Best

Peter Drucker said time was an executive's most valuable resource and everything has an opportunity cost. Set a high personal hourly rate and stick to it. Outsource anything you dislike that falls below your rate. Reading is the foundation of learning, and no smart person exists who does not read constantly. The means of education are endless, so there are no excuses.

Avoid stupid games that win stupid prizes. Endless social media platforms tempt you to improve your social standing for worthless rewards. Impatience with actions and patience with results defines the hustle. Ravikant casually notes that big wealth can take 10 to 20 years. Jeff Bezos echoed that every overnight success takes 10 years. Commit to the process, focus on your craft and let compounding do its work.

• 1Naval Ravikant's How to Get Rich podcast
• 2Cal Newport's So Good They Can't Ignore You
• 3Robert Kiyosaki's Cashflow Quadrant