RAVIKANT on CAPITAL
"Survival and replication drive put us on the work treadmill. Hedonic adaptation keeps us there. The trick is knowing when to jump off and play something else instead. The problem with getting good at a game, especially one with big rewards, is you continue playing it long after you should have outgrown it."
- Naval Ravikant
For some, earning money is necessary for survival, and for others, it is a game to be played. This article deals less with the 'why' and more with the 'how' of the capitalism game. Naval Ravikant is the CEO and co-founder of AngelList and has some of the sharpest insights into life, work and greater meaning. More than any other thinker, he has clearly deconstructed the mechanisms of how vast fortunes have been made over the last decade, and hopefully people who are reading this will use his ideas for the greater good. Any interview with him requires extraordinary mental stamina to keep up with his expositions.
On Retirement & Death
Naval has written about the importance of contemplating our own finite time in the grand scheme of the known universe. 70 years of life measured up against 20,000 years of known human history is merely a rounding error. This means that how we spend out time determines the very quality of our life. As the quote that began this article suggests, it's important to see the game and ourselves as clearly as possible.
For some, the idea of a life is to work hard and save up enough for a comfortable retirement. There are a couple of problems with this idea. The first is that we don't really know when we are going to die, we only have a probable estimation of an endpoint based on life expectancy data. The second is that what we can do at 60 or 70 is different from what we can do at 30 or 40. Therefore, some aspirations in retirement can be derailed by physical or psychological limitations.
"Retirement is when you stop sacrificing today for an imaginary tomorrow."
The concept of retirement needs to be re-explored as lifespans increase, particularly in the choice of one's vocation and wealth creation. As Naval formulated his own path towards freedom to be doing what he wants day after day, he came up with 3 potential paths:
"One way is to have so much money saved that your passive income (without you lifting a finger) covers your burn rate."
"A second way is you just drive your burn rate down to zero—you become a monk."
"A third way is you’re doing something you love. You enjoy it so much, it’s not about the money."
The last one is fascinating for most people as the value of their labor may be the greatest asset they have at present. He advises to become the best in the world at what you do and to keep redefining what you do until this is true.
In Naval's view, even if you were earning a high salary in an organization, you are not really wealthy, because you have not tapped into the nature of wealth creation that defines the time we live in presently. At the heart of his idea is a formula, that begins with a proper understanding of the way he defines leverage.
Income = Accountability + Leverage + Specific Knowledge
No one can argue that there has been a concentration of capital over the prevailing decades in many industries. Without casting judgement on the inequality created, Naval writes "Forget rich versus poor, white-collar versus blue. It’s now leveraged versus un-leveraged. A leveraged worker can out-produce a non-leveraged worker by a factor of 1000 or 10,000." The three basic forms of leverage are 1) Labour, 2) Capital and 3) Products with no marginal cost of replication.
"Labor means people working for you. It’s the oldest and most fought-over form of leverage. Labor leverage will impress your parents, but don’t waste your life chasing it. Capital and labor are permissioned leverage. Everyone is chasing capital, but someone has to give it to you. Everyone is trying to lead, but someone has to follow you.
Code and media are permissionless leverage. They’re the leverage behind the newly rich. You can create software and media that works for you while you sleep."
Under this perspective, judgement and clear seeing becomes indispensable. Naval has been an advocate on spending at least an hour a day in silent meditation, as well as leaving large spaces available to think as clearly as possible on as few decisions as possible. Determining the right question to ask is how he spends much of his time.
"With a leveraged worker, the choice of how they make the decision is far more important, their judgment is far more important than how much time they put in or how hard they worked. In fact, a main source of capital is how many “robots”, programmers, and machines you have working for you. Those are the ultimate force multipliers. An army of robots is freely available—it’s just packed in data centers for heat and space efficiency. Use it."
We are all accountable for our actions, and their impact on our lives and the lives of others. Wisdom won through experience can only be fully realised with personal accountability. We make mistakes, but through owning them and doing our best to make it right, we grow a reputation for doing what needs to be done, and excelling wherever possible. Naval writes "Embrace accountability, and take business risks under your own name. Society will reward you with responsibility, equity, and leverage."
Leverage is a force multiplier for your judgment. Judgment requires experience but can be built faster by learning foundational skills.
Specific knowledge is knowledge you cannot be trained for. If society can train you, it can train someone else and replace you. Specific knowledge is often highly technical or creative. It cannot be outsourced or automated. Should feel like play.
Society, business, & money are downstream of tech, which is downstream of science.
Show your craft, practice your craft, and the right people will eventually find you.
If you don’t own a piece of a business, you don’t have a path towards financial freedom.
You’re not going to get rich renting out your time. Equity pays dividends.
Returns in life, in wealth, relationships, or knowledge, come from compound interest.
Give society what it wants but does not yet know how to get. At scale.
Pick an industry where you can play long-term games with long-term people.
The internet has massively broadened the possible space of careers. Most undiscovered. \
Pick business partners with high intelligence, energy, and, above all, integrity.
Don’t partner with cynics and pessimists. Their beliefs are self-fulfilling.
Learn to sell. Learn to build. If you can do both, you will be unstoppable.
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