How to become rich (without relying on luck)
Wealth and money
Wealth is what works while you sleep. It could be a program, money in the bank, or even a house. It gives you freedom. Wealth is a positive play because we create things and there is no limit to the creation of new things. Status, on the other hand, is a zero-sum game: to be a winner, the other must
Creating abundance for the world – everyone can be rich. Most people today are wealthier than people were 200 years ago. You have access to antibiotics, heating, etc.
You won't get rich by renting out your time. — rich doctors become rich because they create a brand, have a private practice with a team, etc. You perform a given role, and most of these roles can be trained. You are always competing with people with new knowledge. Wealth does not come from hours.
Live below your means for freedom – do not improve your standard of living by earning more money; this will lead you into a trap.
In the end you will get what you deserve – by applying specific knowledge with leverage (more on that later, interesting framework), judgment, responsibility and the ability to learn, you will get what you deserve. It will take time. It may take 10-20 years, if you are lucky – 3-5 years; you can try every 3 years or so, but you only need to be right once to succeed.
Making money is not a matter of luck – There are several types of luck. Fortune is not what we need. Another kind of luck is working hard, trying to find something in the dark through action. The third type is the ability to notice luck. The last and most difficult type is when you build a unique character and way of thinking, and luck finds you – for example, you are an excellent programmer or diver. Being unique is the best magnet for good luck.
Knowledge and training
Arm yourself with specific knowledge — you must get paid at scale. This is the hardest part. The most interesting things cannot be taught, especially after 21-22 years. Look at what you've already created. Specific knowledge is about following your innate talents and interests. This is not a pursuit of the most in-demand areas. He really enjoys science, but has found that he is best in technology and business, sales and data analysis. It's a game for him. As I understand it, the point here is that you need to find as early as possible a stack of knowledge and skills that you are interested in working with and in which everything works for you literally on a subconscious level.
Specific knowledge in highly creative or technical fields – Apprenticeship is where special skills are acquired. Buffett came to Graham and asked to work for free, but Graham said that he was overrated, Buffett should be paid to work with him because apprenticeship is the best way to gain specialized knowledge. These are mainly creative and/or technical skills.
Be in the top 25% in three areasand you will be unique instead of trying to be the best at one thing. Follow your obsession. Choose what comes naturally to you
Read what you love until you love reading. – the basis of learning is reading, so just read what you like, and then you will read more complex books.
The basics are mathematics and logic. It is especially important to build a strong foundation in mathematics, physics and science in general, then any other book will not be a problem. But you must understand, not memorize. Always ask questions, do not replace curiosity with obedience. There is a lot of macro nonsense, but less micro nonsense, so try to break the item down into micro parts. For example, microeconomics is better than macroeconomics.
Work and time management
Set your desired hourly rate – no one will value you as much as you do, so set your hourly rate much higher than the market rate. Consider your time with every decision. Is making this poster in 1 hour worth your $5,000/hour rate? Is it worth the time to return a broken item to Amazon, or is that time better spent working on important tasks? If you can outsource something that is cheaper than your hourly rate, outsource it. Paul Graham said: you should work on your startup, exercise and eat right. That's it. That's all you have time for while you're on a mission.
Work as hard as you can – but what you work on is the most important (product-market-foundet fit). The most effective is to sprint, rest, reassess, then do it again. Be impatient in action and patient in results.
Be too busy to meet for coffee – this is good in the early stages of your career, but when you reach the point where you are not exploring but exploiting, cut back on meetings and keep a calendar. If you need a meeting, have it while walking, standing.
Partnerships and relationships
Play long-term games with long-term people — compound interest works here (if you grow at 20% over 10 years, it makes a huge difference). It's also good from a trust point of view. To be successful, you need to work with other people and decide who you can trust in the long run. Work in an industry that allows you to play the long game with people who demonstrate their trustworthiness through their actions.
Choose partners with intelligence, energy and integrity – there are a lot of smart lazy people, a lot of not very smart energetic people, but when a person is smart, energetic and, very importantly, honest with you, this is the best partner. If someone treats a waiter badly, he will eventually treat you badly. Find irrationally ethical people.
Collaborate with rational optimists — working with pessimistic cynics is not the best option; they prevent other people from doing great things.
Judgment is a critical skill — Buffett is rich because of his judgment. To develop this skill, you need to study everything, including philosophy, in order to make better decisions. The more indignant you become, the more stupid your judgment becomes. Don't be an angry Twitter fool, people like that run companies poorly. (Here we can again recall Graham's essay “Keep your identity small“).
Complex relationships make life easier — one of the most popular reasons why startups fail is because the founders grow apart. This is also the reason why great results come over time. It is better to have strong relationships with some people than superficial ones with many. Gradual progress is good.
Ethics and Personal Development
A calm mind, a healthy body, a home full of love – no amount of money will bring you this, and it is also much more important for well-being. So thinking about it and working on your inner state is crucial. But money allows you to avoid doing things you don't want to do.
There are no get rich quick schemes — reading the book “How to Get Rich” from a person who got rich is fine, but don’t trust people who can only teach, but don’t have a real business behind them. Also, don't listen to some business journalists and economists about practical things.
Being Ethical Is Long-Term Greed – Each of us has a personal moral code. You have to be ethical, this attracts other long-term players, they will want to do business with you. Also, be honest – this will turn off people who like to hear nice lies.
Envy can be healthy, or it can eat you alive. – he washed dishes in a cafe, but he hated it so much because he made money through mental effort, so he studied computer science to teach. Sometimes it takes suffering to get you where you want to go. This story about working in a cafe is even more interesting – he served his classmates at a birthday party, and he was very embarrassed, but still helped him become who he is now.
Entrepreneurship and Business Strategies
Labor and capital – old forms of leverage – “Give me a lever long enough and I will move the Earth” – Archimedes. Labor is an old form of leverage: you hire people to do the work for you, but it's the worst form of leverage. it is the worst form of leverage: managing people is very difficult, requires enormous leadership skills and involves risks. Capital is the next form of leverage to become dominant in the last century. It is less intuitive because large sums of money and investing are relatively new concepts for humanity. Capital is more difficult to use correctly, and the way it is used is constantly changing. Although many people have become incredibly wealthy through capital, this form of leverage is often perceived as unfair.
New levers — these days there are new levers such as code and media. They are no-margin for replication. A conditional application made on a laptop can be used by millions of people around the world. You take a minimum number of highly qualified engineers and add capital and media. New levers don't require permission and allow you to use them yourself
Choose a business model with network effects — Facebook, Twitter, YouTube, even language have a network effect. Each new user makes it stronger and creates a monopoly.
From employee to entrepreneur (an example of leverage) — Let's say you work in real estate. You start with manual labor with a maximum rate of $75 per hour. Then you can move up by becoming a contractor: people pay $100k to renovate a house, you know the cost is $70k, so you charge $30k, but you also take on the risk. Then he becomes a developer. At this level, the name and reputation of the specialist themselves add value to the project. The participation of such a professional can significantly increase the value of real estate. People use their brand as a lever to attract customers and investments.
Make yourself a product — his podcast is called Naval, and he's turning his name into a product. Being yourself is the best thing you can do. Find 3 hobbies: one that makes you money, one that keeps you fit, one that makes you smarter and more creative. For him, this is reading, working with startups, yoga.
Leverage and responsibility
Accept responsibility to gain leverage. – Taking responsibility is important. If you have the ability to publicly fail under your own name, you gain more power. Most people are afraid to take on the burden of responsibility.
Responsibility means allowing people to criticize you — you need to risk your name. In smaller organizations, you can get more responsibility and work on different things to try out what you're best at.
We ultimately have to work for ourselves — the long-term goal is to work for yourself. And the people who work for us are essentially robots. The best form of working relationships is peer relationships, that is, you are equal, but if there is someone higher than you in the hierarchy, then you must learn something from him, but if you do not learn anything and do not improve your skills. If there is someone under you, it is because you are teaching him and giving him opportunity. If you don't then buy a robot, you don't need someone shorter than you.
The Principal-Agent Problem: Act Like an Owner – The principal is the owner, the agent is the employee. If you want something done, then go ahead. If you solve this problem, you've done half the work of running a company. He also says he tries to hire people from smaller firms. For example, lawyers and marketers from large firms tend to do worse because the principal and agent are so separated. Agents don't care about this. He prefers to work with small companies. (Here again we can make an analogy with a robot, of which there seem to be more of them in corporations)
Kelly Criterion: Avoid going broke – don't risk everything. What is true for 100 people on average is not the same as 1 person repeating it 100 times. It's like Russian roulette: if one person plays it 6 times in a row, he will never win. It's not just about the money, it's also about bending the rules, doing unethical, illegal things.
Market Dynamics and Economic Concepts
Free markets are inherent to people People are social creatures, they exchange information.
Price discrimination: Charge some people more
Consumer surplus: getting more than you paid – he would pay even $20 for Starbucks, but they don't know him to charge more personally. Therefore he receives consumer surplus.
Externalities: calculating the hidden costs of products – it must take into account externalities in the price. If a company pollutes the air, we must charge them the cost of cleaning up that pollution. The price must be very high. This saves resources in the long run.
Self-development and authenticity
Constantly redefine what you do — keep changing your goal until it matches your specific knowledge, abilities, interests and leads you to #1.
Avoid competition through authenticity – sometimes our ego tries to lead us to be something we are not, and our family and friends are better able to recognize your true talents. So don't try to be the best programmer because it's cool, but instead use your imagination to develop and be creative. Authenticity leads to a lack of competition; no one can compete with you in being you.
Reject most advice – Avoid people who get rich quick. They simply give you their winning lottery number. This is true for advice as well: what works for one person probably won't work for another. Have your own point of view.
Make yourself a product – this has already been talked about, but he often focuses on new levers
Additional Reading: Finding Time to Invest in Yourself
You will need to rent out your time to get started. Join a business where apprenticeship matters (like that Buffett example). Especially in areas that are completely new and not usually taught. A repetitive routine serves no one. For founders, the biggest challenge is finding people with a founder's mindset. Responsibility is something you can get right away. Specific knowledge needs to be accumulated. Find something you're interested in and what you're good at, add responsibility, and don't worry about compensation. The leverage will come. A good indicator of specific knowledge is something you can learn on the job or by doing different things every day; it cannot be reduced to a textbook.
