Naval How to get Rich
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Hey, this is Nivi. You're listening to the Naval Podcast. This is one giant megasode that collects every episode we've done on getting rich. All of it based on his tweetstorm 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 megasodes before, but this one's even bigger. It's about three and a half hours long. It

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 Megasode 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 AngelList and ePinions. He's a prolific tech investor in companies like Twitter, Uber, and many more.

And I'm the co-founder of AngelList with Naval, and I also co-authored the Venture Hacks blog with him back in the day. Yeah, the how to get niche tweetstorm definitely hit a nerve. A lot of people say it was helpful to 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.

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, 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 you 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 7:00 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 to 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 near 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 IOUs, the government prints extra IOUs, people renege on their IOUs. 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 IOUs 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 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 hierarchical. 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 a 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 on their backs. So hunter-gatherers lived entirely in status-based societies. Farmers started going to wealth-based societies, and the modern industrial economies are more

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 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 at a status game, you have to put somebody else down. That's why you should avoid status games in your life, because they make you into an angry, combative person. 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 goody 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, and then there are people who come along and play 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 a 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 when 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 a piece of the firewood and the occasional dead deer. So most of the wealth and 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 electricians.

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 XIV's France. I'd rather be a poor person today than 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 percent automated. We'd have cleaners.

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.

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 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 interests. 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 stock. 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 is 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 U.S. 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 millions 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 due to 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 symbiotes 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, small scale 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. I like to think that if I lost all my money and if you drop me on a random street in any English-speaking country with

within five to 10 years, I'd be wealthy again, right? Because it's just a skillset 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, P. Marka, Mark Andreessen 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. That's fortune, that's fate, et cetera. 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 petri dish and seeing what combines 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 take on deep sea underwater dives that nobody else will even attempt to dare to

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 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. 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 a Nenad, he's building his brand online, he's building videos. It's not like any one video is going to suddenly change

shower him with riches overnight, it's going to be a long lifetime of learning, of reading, of creating as

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 anyplace 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 lose

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

when 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 a piece of the treasure for your diving skills. If you're a trusted, reliable, high integrity, long-term thinking deal maker, 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 don't.

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 lucky.

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 Disraeli, 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 are 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 Disraeli one are this one from Sam Altman where he said, "Extreme people get extreme results." I think that's pretty nice. And then there's this other one from Jeffrey Pfeffer who is a professor at Stanford that, "You can't be normal and expect abnormal returns." I've always enjoyed that one too.

Yeah. And one quote that I like, which is the exact opposite of that is play stupid games, win stupid prizes.

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 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

So, what that means is when you're sleeping, you're not earning. When you're retired, you're not earning. When you're on vacation, you're not earning. And you can't earn non-linearly. 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 tweetstorm 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

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'll 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 at a time

and that eats into your wealth creation and therefore your earning capability. So fundamentally, your inputs are matched to your outputs, you're 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 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 a profession where your inputs don't match your outputs. So if you look at modern society, again, this is 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.

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

every piece of code 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, 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 three X better than one of the worst lumberjacks. 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 leverage, 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 going to 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 is talking about how your lifestyle 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 a 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 going to pay the $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 Nassim Taleb, 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

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, 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

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've 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 gonna work because you gotta do something with your life, but I'm gonna work on only the things that I want when I want. And it's gonna be much more creative expression and much less about money. - You're not gonna 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 IOUs 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 J.D. Rockefeller rich.

There was a time when cars were technology that made Henry Ford rich. So technology is just a set of things, as Alan Kay 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've 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 entrepreneur's job is to try to bring the high end to the mass market.

It starts as high end. First, it starts as an act of creativity. First, you create it just because you want it. You want it and you know how to build it and you need it. And so you build it for yourself. Then you figure out how to get it to other people. And then for a little while, rich people have it. Like, for example, rich people had chauffeurs and then they had black town cars. And then Uber came along and everyone's private driver was available to everybody. And now you can even see Uber pools that are replacing shuttle buses because it's 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 entrepreneur's job starts even before that, which is creation. Entrepreneurship is essentially an act of creating something new from scratch, predicting the society will want it, and then figuring out how to scale it and get it to everybody in a profitable way and 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, Nenad, who is ill-asserted, 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

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 seven billion beings on 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 like you can say, well, Nivi 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. Esports players, people making millions of dollars playing Fortnite.

People creating videos and uploading them, YouTube broadcasters, bloggers, podcasters. Joe Rogan, I read, true or false, I don't know, but I read that he's going to make about $100 million a year on his podcast, and he's had 2 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 have that is worth weaving in but didn't go into this tweet storm was a very simple one. I like things that 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 mimetic creatures and Renee Gerard has a whole mimesis theory, but it's much easier than that. Don't imitate. Don't

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 going to 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 interests, 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

one X what you have. And then if you increase 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. 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 Prisoner's Dilemma is tit for tat, 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 business dilemma. In other words, 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 all 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

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 the 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 to, 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,

work, 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 have 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 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, the 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 to their action. In a long term game, it seems that everybody is making each other rich. And in a short term game, it seems like everybody is 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 that the team gets the job done.

And then things get divided up according to fairness and who contributed how much or as close to it as possible and took a risk 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, 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. 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. 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, it 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 are really smart but can't get out of bed or lift a finger. 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 pejorative. 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. So 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've 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 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 nonverbal stuff that people do when they think nobody's looking.

With respect to the energy, there was this interesting thing from Sam Altman 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 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 V 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 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,

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 are 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 con men. 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 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 in the second step in 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 them, it's not worth. 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. It's 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 an 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 2000 years, 5000 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 headed 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 could make

billions of dollars of value for society and for yourself and change the world. And if you fail, that's a 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 opportunity 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 upsides.

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 the phrase, an acronym, which is, but of course there are obvious exceptions, B-O-C-T-A-O-E. 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 Reid Hoffman. So you've got to treat everybody with respect. You've 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

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 fleet of trucks.

It 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-20, 21, 22. 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 mass produce 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 the psychology degree is leveraged. 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 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

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 having 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 pithy 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 gonna go into business." And I was like, "What? "My mom's telling me I'm gonna be in business? "I'm gonna 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 just had more of a business-curious mind,

But then my obsession with science combined to create technology and technology businesses 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 that 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 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

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 be programmed into a single algorithm.

- Speaking of 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' 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 to 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're

You've expanded now from 10,000 through combinatorics 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 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

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 multivariate. 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 even in 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 at 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 Wozniak with Apple. Gates and Allen probably had a 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

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 gonna 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 reasonableness 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. Marc Andreessen was also in this domain. He may not have had enough confidence in his sales skills, but he was the programmer who

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 focus time, but a builder can pick up selling a little bit later, especially if they were already innately 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 focused 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 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 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 to 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 up 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 a 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 can start with building and then transition to selling. This is a cop-out 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? Because 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 nonfiction, 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 Feynman's "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 were 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

that you're building on a steel frame of understanding because you're putting together a foundation for skyscraper and you're not just memorizing things 'cause 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 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

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. They're 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 bullshit, as Nassim Taleb says, it is easier to macro bullshit than it is to micro bullshit 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 peddle their different pet theories. There are even macroeconomists out there now peddling 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 peddling 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. The ultimate foundation are mathematics and logic. If you understand logic,

mathematics, then you have the basis for understanding the 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

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 in 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 Knuth's books on algorithms, or you want to read Feynman'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're adding in persuasion, which is talking, and then finally, I would add computer programming, just because it

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 distract 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 will 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 study, 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 Farnham Street, you go to Port 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, iterated prisoner's 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 there are 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, Nassim Taleb talks about this also. He made his fortune, his wealth, by being a trader who relied upon black swans. Nassim 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 blow-up 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 will win big later, you will do better. That

That is, by the way, entrepreneurship. Entrepreneurs bleed every day. They're not making money. They're losing money. They're constantly stressed out. All the responsibility is upon them. But when they win, they win big. On average, they'll make more.

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 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 have 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, 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 that a lot of voters just went in and said, Trump, they recognize 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 because 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 on a team or you're working in a business, we are constantly drummed 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. This is saying that I hear from Australian friends that the tall poppy 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 is responsible for building the product. This person is responsible for the messaging. This person is responsible for raising money. This person is responsible for the pricing strategy and maybe the online advertising.

So if somebody screws up, you know exactly who's responsible while at the same time, if 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 because 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

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 risk-based 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 sacrosanct.

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 lent 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. 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.

The 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 stewardess. 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, the 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 turns out to be an integrity issue. Like your Bernie Madoff, for example, Madoff Investments, that name is never going to be good again in the investment community. You could be Bernie Madoff's great, great, great grandson. You're not going to go into the investment business because you 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 Taleb rail against CEOs who get rewards without accountability.

Yeah, I mean, Taleb'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 hand in hand. I think of accountability as reputational Skin of the Game. It's putting your personal reputation on the line as Skin of 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 in Archimedes 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 seesaw 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 and 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 Kapitalau and das Labor, right? So it's a trap.

So you really want to stay out of labor-based 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. It'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 gargantuan amounts of money with nobody else kind of around them or necessarily 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. They 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 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

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 Buffett's 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 are...

Of course, Jeff Bezos and Mark Zuckerberg and Larry Page and Sergey Brin and Bill Gates and Steve Jobs. That is all code-based 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 are engineers and designers, product developers, and then you add in capital. You use that for marketing, advertising, scaling, and

And you add in lots of code and media and podcasts 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 outsized 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 are going to, this is glib, this is a little overused, but, and this is why I tell people learn to code, right?

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 that 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 that the 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 robot's 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, their delivery bots and Boston Dynamics robots and all that. But robots who,

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 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 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 and 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 product would 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 on 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. It's an amazing car. A new Toyota Corolla is a really nice car, but because it's mainstream, the technology has amortized 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,

the middle class rather than being targeted at 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 human-based, 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 technology oriented. And so the gap between the haves 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.

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 a 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.

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 something, the cheaper it gets to make it. 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 Metcalf, who created Ethernet, famously coined Metcalf'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 a square. So you want to be in a network effect business, assuming you're not number two. If you're number one in 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 Lyft as long as it's moving more drivers and more riders around. Something like Google, there's only one viable search engine. I do like DuckDuckGo, 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 e-tail, 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 who 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 100 of you spoke the same language, it would add tremendous value.

And so the way that community will play out is 10 people start off speaking 10 languages. So let's say that one extra person learns English. Well, now all of a sudden, 11 people know English. So the next person comes in to learn a new language, probably gonna choose English. At some point, let's say English gets to 20 or 25 people, it's done. It's just gonna 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 a network of

fact. 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 a 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 on the beach in the Bahamas or you're sleeping at night and your customers are adding value to each other.

The tweetstorm 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 and 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 the 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 price $100,000 for the job to fix up a house.

And it actually costs the general contractor all said and done $70,000. Well, that contract 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 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. We're 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 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 Trulia or a Redfin 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 are in common knowledge, and you layer in more and more accountability and risk-taking,

And you'll 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 $100 billion because they know his judgment is so good and they would give him a big chunk of that $100 billion to invest.

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 $100 billion 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.

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 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 Nassim 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, fast moving edge domains and problems. You can't get there without experience. So if you are smart and you iterate fast, 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 yet 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 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 Burry, these people sound like philosophers or they are philosophers or they're reading a lot of history books or science books. Like, 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 multivariate. 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 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 wanna use them to run errands and solve little problems or do you wanna 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 made all their social events on time or sent their thank you cards. You can spend your life however you want, but if you wanna 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 the 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 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 to-dos. 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 Y Combinator startups. He said, you should be working on your product and getting product market fit, and you should be exercising and eating healthy. That's about it. That's

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 looks like his 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 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 hard and should you not? Like David Houser's on there saying, it's like you're slave driving people. And Keith Raboy 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 and

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 Andreessen'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 of 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 shortchange 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 as they 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, you

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. Nivi 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 tweet 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 gonna 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 the 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 Nivi 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 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. Well, at the same time, I am busy all the time. I'm always doing something.

and it's usually quote unquote work related, but it is whatever the highest impact thing is that needs to be done at that time and that I'm most interested and 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 it 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 messaging.

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 the 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. Nivi used to do this, he would email people when they would ask Nivi and I for a meeting, like coffee meeting, get to know you, he would say, we don't do meetings unless it's life and death urgent. And then that person has to 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've 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 gonna get anywhere in life. You have to build up the credibility. When, for example, an investor in the tech business and the venture business looks at a startup, the first thing they wanna see is they wanna see some evidence of product progress. They don't just wanna even see a slide deck, they wanna 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 an 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 wanna get paid in this world, you wanna 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're going 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

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 foci 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 the 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 multivariate 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 Thiel talks a lot about how competition is besides the point. It's counterproductive. We're highly mimetic 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 Thiel 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 specter 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 gonna come along and write a better Dilbert? No. Is someone gonna compete with Bill Watterson and create a better Calvin and Hobbes? 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 gonna be Elon Musk? Who's gonna 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. 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 gotta 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.

And 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 Bs. 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. 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, 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 coworkers 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 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 gonna be able to take it

If you're busy fighting over a booby prize, kind of you're playing a stupid game, you're going to win a stupid prize. It's not obvious right now because you're blinded by competition. But three 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 TripAdvisor 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 a 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 MySimon and Bizrate, which became Shopzilla and PriceRate.

and price grabber and next tag 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 ETL 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 Munger 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 a really 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 three to five 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 it as a math equation, but it's obviously 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? And 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 made-up estimates and you multiply them together and 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-making 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 beating you. They're 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 to 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 it 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 gonna be someone that I'm gonna be working with 10 years from now, then I have to start extricating myself from 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 the brain space is finite, you have finite neurons. So you can almost think of these as pointers, addresses,

mnemonics 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 and 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'd say, "Well, what's the point of getting rich?" Because there are a lot of people who just like to 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

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 on 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 by

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 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 how to get rich Tweetstorm 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 as 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 imbibe them properly, and again, these are just pointers to understanding

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. You're 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, high quality 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 rich quick 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-rich-quick scheme. It's not going to necessarily work for you. One of the things about this whole tweet storm 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've 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 is to do what i did and go work for yourself so

So I've always had a hard time with that, which is why the only honest way 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. I'm 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 is 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 wouldn'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're literally becoming dumber by reading them.

You're burning neurons. I'll leave you with a quote from Nassim 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 Taleb 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. Productize 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 the long term of getting wealthy, you should ask yourself, is this authentic to me? Is it myself that I am 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 mnemonic. 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 as I love working with startups, either investing in them, brainstorming them, starting them. I just love that ideation 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 I 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 will 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 nine to five 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 it is unfair to the people who don't have these opportunities to do anything with the opportunities that they do have. With that defeatist 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 positives,

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 B 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 realized their philanthropic visions by running a business.

Who is this advice targeted to? Is it for my Lyft 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

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 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 nine to five 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-re-education 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 piece 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 is 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.

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, ceteris paribus, fancy Latin words for 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 are 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, 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 working 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 long ways off, but in the not too distant 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 have to 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 to 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 Nassim Taleb'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 reevaluate 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 low quality 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 it 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 it's 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 deal makers in the network because 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 had to hang out in the conference room. When the lawyers needed photocopies, 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 because 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 the 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 at college and I had to get a job.

It was the summer of 1990, 1991 timeframe. So this was the Bush senior recession, if anyone who was alive back then remembers this. 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. Principal in this case is principal with a P-A-L, not P-L-E, so it's not a principal that you follow. It's a principal 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 agent's 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 principal 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 low-priced 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 makes 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-agent,

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 negotiate 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 a principal and a good principal 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 heuristics that you have designed to avoid having to deal with the single biggest problem in management. Another example of a heuristic 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

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, but

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 51.49 edge. Every gambler knows not to bet the whole kitty on that 51.49 edge because you could just lose everything and you don't get to come back to the average. Nassim Taleb famously talks about ergodicity.

which is a fancy word for the simple concept that what is true for 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 your reputation ruined is the same as getting wiped to zero. So never do those things.

Let's talk about the Schelling point. It's a game theory concept made famous by Thomas Schelling 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 response is. 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.

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 and $12 for whatever the service is. Don't be surprised if they both converge on $10 without ever talking to each other. Do you want to talk about Pareto Optimal?

Pareto optimal is another concept from game theory along with Pareto superior. Pareto 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 Pareto superior to where it was before, you will always do that. Pareto 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, low information, single move game is having your house renovated. Contractors are notorious for overbooking, 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 contractor has 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 Thumbtack review. These are all ways of turning a single move game into a longer term 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 Nivi 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 under-recognized 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 Altman 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 under-realized 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, $100 billion and the adulation 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 economy class seat does, but it probably costs the airline just two, maybe three X 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 freemium 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'll 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 because 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 0.1% of the company, therefore you're getting a million dollars worth of stock.

what he 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 the 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, then that company's only worth 1% of what the founder is arguing. Your million dollar 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 with

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 and 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 and 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 were overqualified for the position. You may have someone who has two graduate degrees who is 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 in learning. Now, obviously, this is very Silicon Valley centric tech company advice.

If you are currently stuck in a normal job and you don't have the opportunity to learn 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. 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

If you notice this and you're like, I'm good at balancing my checkbook and 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 heir apparent. 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 Cuddy 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 technology is 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 and 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 mass produce 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 dollars.

one good product feature can be different 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 sales people 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 is responsible.

There are jobs where you're not customer 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, and 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 tweetstorm 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 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 and coming 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 there are 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 when 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 on 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 don 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.