Nivi: We covered the skills you need to get rich. They included specific knowledge, accountability, leverage, judgment and life-long learning. Let’s talk about the importance of working hard and valuing your time.
Naval: No one is going to value you more than you value you. Set a high personal hourly rate, and stick to it. When I was young, I decided I was worth a lot more than the market thought I was worth. And I started treating myself that way.
Factor your time into every decision. Say you value your time at $100 an hour. If you decide to spend an hour driving across town to get something, you’re effectively throwing away $100. Are you going to do that?
Say you buy something from Amazon and they screw it up. Is it worth your time to return it? Is it worth the mental hassle? Keep in mind that you will have less time for work, including mentally high-output work. Do you want to use that time running errands and solving little problems? Or do you want to save it for the big stuff?
The great scientists were terrible at managing their home lives. None of them had an organized room, or made social events on time, or sent their thank-you cards.
You can’t penny pinch your way to wealth
You can spend your life however you want. But if you want to get rich, it has to be your top priority. It has to come before anything else, which means you can’t penny-pinch. This is what people don’t understand.
You can penny-pinch your way to basic sustenance. You can keep expenses low and maybe retire early. That’s perfectly valid. But we’re here to talk about wealth creation. If you’re going to create wealth, it has to be your number-one, overwhelming priority.
My aspirational rate was $5,000/hr
Fast-forward to your wealthy self and pick an intermediate hourly rate. Before I had any real money and you could hire me, I set an aspirational rate of $5,000 an hour.
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 of it my friends. I would make a theatrical show out of throwing something in the trash or giving it to Salvation Army, rather than returning it or trying to fix it.
I would argue with girlfriends, “I don’t do that. That’s not a problem that I solve.” I still argue that today with my wife and with my mother, when she hands me little to-do’s. I say, “I would rather hire you an assistant.” This was true even when I didn’t have money.
If you can outsource something for less than your hourly rate, do it
Another way to think about this: If you can outsource something—or not do something—for less than your hourly rate, outsource it or don’t do it. If you can hire someone to do it for less than your hourly rate, hire them. That includes things like cooking. You may want to make your own healthy, home-cooked meals. But if you can outsource it, do that instead.
People say, “What about the joy of life? What about getting it right, just your way?” Sure, you can do that. But you’re not going to be wealthy, because you’ve made something else a priority.
Paul Graham said it 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 all you have time for while you’re on this mission.
Your hourly rate should seem absurdly high
Set a very high aspirational hourly rate for yourself, and stick to it. It should seem and feel absurdly high. If it doesn’t, it’s not high enough. Whatever you pick, my advice is to raise it.
For the longest time, I used $5,000 an hour. If you extrapolate that out as an annual salary, it’s multiple millions of dollars per year. I actually think I’ve beaten it, which is interesting given that I’m not the hardest worker. I work through bursts of energy when I’m motivated to work on something.