Naval: It’s both a search and a recognition. Sometimes when we search our egos, we want to be something that we’re not. Our friends and family are actually better at telling us who we are. 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 memetic creatures. We copy everybody around us. We copy our desires from them.
Work as hard as you can. Even though what you work on and who you work with are more important.
Work as hard as you can
Naval: Let’s talk about hard work. There’s a battle that happens on Twitter a lot. Should you work hard or should you not? David Heinemeier Hansson says, “It’s like you’re slave-driving people.” Keith Rabois says, “No, all the great founders worked their fingers to the bone.”
They’re talking past each other.
First of all, they’re talking about two different things. David is talking about employees and a lifestyle business. If you’re doing that, your number one priority is not getting wealthy. You have a job, a family and also your life.
Keith is talking about the Olympics of startups. He’s talking about the person going for the gold medal and trying to build a multi-billion dollar public company. That person has to get everything right. They have to have great judgment. They have to pick the right thing to work on. They have to recruit the right team. They have to work crazy hard. They’re engaged in a competitive sprint.
If outsourcing a task will cost less than your hourly rate, outsource it.
Set and enforce an aspirational hourly rate
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?
Everything we’ve discussed so far has been setting you up to apply judgment.
In an age of infinite leverage, judgment becomes the most important skill
Nivi: We spoke about specific knowledge, we talked about accountability, we talked about leverage. The last skill that Naval talks about in his tweetstorm is judgment, where he says, that “Leverage is a force multiplier for your judgment.”
Naval: We are now living in an age of nearly infinite leverage, and all the great fortunes are created through leverage. Your first job is to go and obtain leverage, and you can obtain leverage through permission by 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 and podcasting, broadcasting, creating videos, writing, etc.
That’s how you get leverage, but once you have leverage, what do you do with it? Well, the first part of your career’s spent hustling to get leverage. Once you have the leverage, then you wanna slow down a bit, because your judgment really matters.
The continuum from laborer to real estate tech company goes from low to high specific knowledge, accountability and leverage.
Laborers get paid hourly and have low accountability
Naval: 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 a concrete example. So let’s go concrete for a minute.
Look at the real estate business. You could start at the bottom, let’s say you’re a day laborer. You come in, you fix people’s houses. Someone orders you around, tells you, “Break that piece of rock. Sand that piece of wood. Put that thing over there.”
There’s just all these menial jobs that go on, on a construction site. If you’re working one of those jobs, unless you’re a skilled trade, say, a carpenter or electrician, you don’t really have specific knowledge.
Labor and capital are limited to the people who control those resources. But products reach global markets.
Product leverage is a positive sum game
Naval: Labor and capital are much less egalitarian, not just in the 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 because he has lots of humans running around doing whatever he needs to do.
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 better computing experience. Google doesn’t give him some premium, special Google account where his searches are better.
Product and media are the leverage of new wealth. Create software and media that work for you while you sleep.
Product and media are the new leverage
Naval: The most interesting and the most important form of leverage is this idea of products that have no marginal cost of replication. This is the new form of leverage.
This was only invented in the last few hundred years. It got started with the printing press. It accelerated with broadcast media, and now it’s really blown up with the Internet and with coding.
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. I would have maybe reached a few hundred people and that would have been that.