All language subtitles for How to Get Rich

Hey, this is Nivee. You're listening to the Naval Podcast. This is one giant mega-sode that collects

every episode we've done on getting rich. All of it based on his tweet storm 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 mega-sodes before, but this one's even bigger.

It's about three and a half hours long. It covers all the tweets from the how to get rich

tweets 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 mega-sode 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 dot com at the end. I hope you enjoy. You probably know Navarro 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, giving the ball 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 Angelis and E. Pignans. He's a prolific tech investor in companies

like Twitter, Uber, and many more. And I'm the co-founder of Angelis with Navarro and I also co-authored

the venture hacks blog with him back in the day. Yeah, we had to get rich tweets during

definitely hit a nerve. A lot of people say it was helpful reach across aisles and people

outside of tech industry, people in all walks of life, people do want to know how to solve their

money problems. And 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?

Well, if there's a thing that you really want, wealth is assets that earn while you sleep.

Well, if the factory, the robots is cranking out things. Well, if the computer program is 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 formal wealth because you can

rent it out, although it's probably a lower use of productivity, but land, and 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 your freedom.

So you don't have to wear a tile like a collar on your neck. So you don't have to wake up at 7 a.m.

and rush to work and sit and commute traffic. So you don't have to waste the way you're

in a real life, grinding all the productive hours into a way to a soulless job that isn't full

value. So the purpose of wealth is freedom. It's nothing more than that. It's not to buy for

coats or dry for raries or sell yachts or jet around the world in your golf screen. 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

is working hard at it. And to some extent, it is competitive. It's a positive, some

game, but there are competitive elements to it. Because there's a five-letter amount of resources

right now in society, and to get the resources, 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 debase because people steal the IOUs,

the government, transfer extra IOUs, people revenge on their IOUs. But really what money is trying to

be is trying to be a reliable IOU from society that you are owed something for something you

or someone who gave you that 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 believed that they can't

make it. They don't want any wealth creation to happen. So they've virtue signal by attacking the

whole enterprise by saying, well, making money is evil. 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 as 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. It's hierarchical. Who's number one? Who's number

two? Who's number three? And for number three, the moved number two, number two has to move out of that slot.

So status is zero-sum game. All it takes 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 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 in their backs. So hunter-gatherers lived entirely in status-based

societies. Farmers started going to wealth-based societies. And the modern industrial economies are

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 journalists represent for people and therefore I am more important. The problem is that by playing

these status games to win the 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 there are

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 the 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 worst game. It's a zero-seven game

instead of a positive sub-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. It's like rooted all

of the back down to money is a root of all evil. People think that the bankers steal our money.

And 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-pray relationship with makers and

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 take with a sword or a gun or taxes or a crony capitalism or

communism or what have you. There's all these different methods to steal. Even in nature,

there are more parasites that there are non-paracetical organisms. You have time to parasites in

you who are living off of you. And the better weather's 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 from creating abundance. Obviously, there's not a

finite number of jobs or a finite amount of wealth. Otherwise, we'll still be sitting on the caves,

figuring out how to divide a piece of the firewood and the occasion with that 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.

That created from hard work. So, this idea that 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 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 could have to work for any of the basics. We didn't have

robotic nurses. We'd have like a machine driven hospitals. We'd have self-driving cars. We'd have

farms that are 100% automated. We'd have clean energy. So, at that point, we could use a 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. But 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 ex-genalities.

It gets hijacked by improper deals where that 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 and every exchange that we have.

When you and I change 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'd 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 co-operate across

genetic boundaries. Most animals don't incorporate. But when they do, they co-operate only

impacts where they co-evolve together and they share blood. So, they have some shared interest.

Humans don't have that. And what lets us co-operate, 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 the 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 individual, secretly, despising wealth, right?

There's countries, groups, political parties that overly despise wealth, are at least same to you.

That's right. And so, what those countries, political parties and groups are reduced,

playing the zero-sum game of status. And the process to destroy wealth creation, they drag

everybody down to their level. Which is why the US is a very popular country for immigrants,

because it's the American dream. Anyone can come here, report 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 virtual citizen's definition of wealth might be

or have to make billions of dollars in a completely done. We're still 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. Well, it may just be a much lower number. It may just be that 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

left-makers, society falls apart, you end up with a communist country, look at Venezuela, right?

They were so busy taking and dividing and re-allocating that people literally starving in the streets

and losing kilograms of body weight every year and just be sheer starvation. Another way

to think about 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 symbiodes like all the mitochondria

in all of our cells that help us resporeate and burn oxygen. These are symbiodes that help

us survive. We can survive without them. But to me, those are partners in the wealth creation

that creates the human body. But if you just fulfill the parasites, if you've got effective

with worms or a virus or bacteria that will 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, again, I'm talking about ethical wealth creation. I'm not talking about

capitalism. I'm not talking about misprice externalities like the environment. I'm talking about

free minds and free markets. Small scale exchange between humans as 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, the 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 the thing that if I lost all my money and if you drop me on a random

street in any English-speaking country within five to ten years, I'd be wealthy again. Because

it's just a skill set that I've developed and I think anyone can develop. In a thousand parallel

universes, you want to be wealthy in 999 of them. You don't want to be wealthy at 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. It's came from a book, P. Marka, Mark Henry's in a world of

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.

You know, 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-dition, seeing what

combines or mixing a bunch of reagents and seeing what combines. You're just generating in a 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 and other people who aren't attuned to it won't notice. So you become sensitive

to luck and that's just 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 dive as nobody else will even attempt to dare. And then by sheer luck, somebody finds

a sunken treasure ship of 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

but find the treasure chest that was blind luck. But then coming to you and asking you to

extract it and having to give you a hack, 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 that you're

disposal, which is a functioning body and a functioning mind. And I haven't counted plenty of bad

luck along the way. First, little fortune that I made, I instantly lost on 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 in the 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,

including opportunities, including investments. It hasn't been like a giant one-off thing.

My personal wealth has not been generated by one of big years. It just stacks up a little bit

chips at a time. More options, more businesses, more investments, more things I can do.

Same way, someone like a Neon, Elisardus, he's building his brand online, he's building videos.

It's not like any one video is going to suddenly shower him with riches overnight.

It's going to be a long lifetime of learning, of reading, of creating. That's just going to compound.

So we're talking about getting wealthy so you can retire. So you have your freedom.

I'm not retired in a sense that you don't do anything. But in the sense that you don't have to be

in a place 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 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 cliché for it.

So for the first three kinds, there is dumb luck or blind luck. That's the first kind of luck.

The second kind of luck is the cliché that fortune favors the bold. That's a person who gets

luck. You 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 cliché 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 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 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 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 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 character

writers is lucky, but you know that it wasn't luck. 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 Desirelli, 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 were a couple other

interesting things about this kind of luck that we're 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 expressed this kind of luck in addition to that Benjamin Desirelli

won 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 Feffer 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 the place to put games

wins to pit 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 unlock. 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 of 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 at one that's paying a lot for our

like lawyer or a doctor, you're still putting in the hours and every hour you get paid. So what that

means is when you're sleeping, you're not earning, when you're retired, you're not earning,

when you're in vacation, you're not earning. And you can't earn non-linearly. If you look at

even doctors who get rich, like a 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 with an 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 due to a 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

tweet story should have been called, how to create wealth is 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 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 into 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

have to be wholesale replaced overnight. It can be replaced a little bit of 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 the 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 part of the start. But usually the real

wealth is created by starting your own companies or by even investors. They're in 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 career or profession where your inputs don't match

your outputs. So if you look at modern society against this little 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 working and have no effect.

For example, look at software engineering. One great engineer can, for example, create Bitcoin

and create billions of dollars with a value. And 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 piece of code, they ship and they're 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 and if you're a lumberjack,

even the best lumberjack in the world assuming they're not working with tools so the inputs

and outputs really connected or just using an axe or a saw. The best lumberjack in the world

maybe 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. There's 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. Computers are tools that software engineers use.

If I'm a lumberjack with both those and automatic robot axes and saws I'm going to be using

tools and have more leverage that someone who's just using is bare hands and try to rip the trees out

by their roots. Tools and leverage are what create this disconnection between inputs and outputs.

Creativity is a 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 you're

inputting 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 where you're somewhere like 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 lifestyle just can't fathom and I think that's very

important like just not upgrade your lifestyle all the time to maintain your freedom and it

just gives your 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 of upgrade that

house and lifestyle and all that stuff. What's the even get a thousand dollars 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 a thousand dollars 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 nothing to let 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 you want to be poor and working and working and working and this is for example how

the tech industry works. Well 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 risks in your bleeding

bleeding bleed and then suddenly in year 11 or year 15 you might have one single big payday. 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 got to hand it all over to us. So it's 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 so you much more creative expression and much less

about money. You're not going to 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 is in your house

in your workplace and on the street you should be technology at one point in time. The time when oil

was technology that made JB Rockefeller rich there's a time when cars were technology that made Henry

Ford rich so technology is just a set of things is Allen case and they don't quite work yet

once something works is 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 a 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 of billions of them

so everybody can have one. Steve Jobs and his team of course figured out that society would point

smartphones computer and their pocket that had all the phone capability times a hundred 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 there are henceily rewarded and Apple is the

most valuable company in the world. The way I tried to put it was that the entrepreneurs 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

just 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 entrepreneurs job

start 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 three

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 broadcasts into them on Twitter

whether it's by posting something in Facebook that they find whether it's by putting the website

they come in access it connects everyone to everyone so the internet is an inter networking tool

it connects everybody that is in 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 nena who's illicit is 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 showing it to people computer or screen or he

would try to get it played with 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 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 collects

snakes so like people who like to ride hotter balloons to people who like to sail around the world

by themselves is one person on a craft or someone who's obsessed with miniature cooking like

there's this whole Japanese major cooking phenomenon or there's a show about a woman goes

and people's houses and tidy is it up right so whatever niche obsession you have the internet allows

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 in this planet the common

atorex 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 maybe just like my life so I can have this other person come in and he's just

like maybe 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

interest 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 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 broad you

esports players people making millions of dollars time for night people creating videos and

upload them in youtube broadcasters bloggers you know a podcast which Joe Rogan I read true or false I

don't know but ever that he's gonna make about a hundred million dollars a year on his podcast and

he's had two billion downloads even Pewdiepie the hilarious tweet that I retweeted the other day Pewdiepie

is the number one trusted main and news this is a kid I think in Sweden and he's got three times

the distribution of the top cable news networks to some his news channels not even on his entertainment channel

the internet enables any niche interest as long as you the best at it to scale out and the great

news is because every human is different everyone is the best at something you 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 easier to remember it easy to hold 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 and over mimetic creatures and Renee Gerard has a whole MMS theory

but it's much easier than that don't imitate 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 gonna 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 industry is 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 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 very important for you have to go 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're looking at prisoners dilemma type games the solution to prisoners dilemma is

tick for tax 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 prison prison

dilemma in other words we play again multiple times so if you're in a situation like for example

you're in Silicon Valley look people 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 and Silicon Valley sometimes people betray each other because they're just like I'm

going to get rich enough of 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 an easy to play

the game and we'll let you collect the major rewards which are usually at the end of the cycle so for

example one buff it was done really well as an investor in the US stock market but the biggest reason

you could do that was because the US stock market has been stable and around and didn't get for

example sees 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 this small geographic area that you figure out over time who you can

work with who you can 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 part of the woodworking industry and suddenly a middle 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 no actually any 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 your built your network you're going

to be starting from scratch you're not going to know who to trust they're not going to trust you

they're also industries in which people are transient by definition draw with 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 is a corruption

but an upside is they actually get deals done with each other because they know the other person's

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 where every time you get like a new incoming freshman

class the house of representatives which turns over every two years the big wave election nothing

gets done because 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 actions 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 and in long-term game it's positive

some we're all baking the pie together we're trying to make it as big as possible and a short-term

game we're cutting up the pie now this is not to excuse the socialist right the socialist

these people who are not involved in baking the pie we show up at the end and say I want to slice

or I want the whole pie they show up at the guns but I think a good leader doesn't take credit

a good leader tries to inspire people so the team gets the job done and then things get divided

up according to fairness and who contributed how much is close to it's possible and to risk

as opposed to just whoever has the longest knife 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 simplest one is getting married to someone having kids and raising children

like that's compound interest right investing in those relationships those relations and

but being invaluable compared to more casual relationships it's true in health and fitness you know

the fitter you are the easier it is to stay fit where it's the more you deteriorate your body the

harder just to come back and claw your way back to a baseline that requires heroic acts

regarding compound interest I think I saw you retweet something a while back maybe it was from

Ed Vladimir it was 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 exactly but I think that was right yeah was that get

traction and don't let go it was a good one yeah in terms of big 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 are wise or really smart but you know

can't get out of bed or lift a finger and 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

prodigy or it's not meant to be like someone smart someone else is stupid but it's more that everyone

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 for example someone might be really unmotivated to go to a

job and sit in an office but there might be really motivated to go paint right well in that case

this 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 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 first is high integrity 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 non-verbal stuff that people do when they think no

be 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 a 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 a higher 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 trying to talk people in the things I was in 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 king what can really the fifth and you're trying to get them to this 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 what I do what you want them to do or what you want to work with them

the 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 when we 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

time before they redefine you from friend to enemy and you feel they're at so angry outrage

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 irrationaly ethical for example I had one

friend of mine who's 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 pivot

seafood personal money in until the company finds 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

know you are 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 would tweet on this figure I read this somewhere else which

is I'm not taking quite a for this but I modified a little bit which is that self esteem is a

reputation that you have with yourself you 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 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 there 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 comment so yeah picking 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 synics and pessimists

beliefs are self fulfilling yeah essentially to create things you have to be a rational

optimist rational in the sense that you have to you'll 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 shoot down everything

everyone in their life has like the helpful critical guy right the things 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 and things and it's okay to shoot holes and

things as long as you come with a solution there's also the classic military line I will 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 things not gonna 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

it rationally there's nothing worse than cylinders is too full-hardy and chasing it's not worth

that's why say rational optimist but you have to be rational know all the pitfalls and know the

downside it's 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 gonna take some 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

but for whatever reason you know education circumstance they didn't get the chance to think as big

so the outcomes not as big so it's just better to think big obviously rationally within your

mean 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 a 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

there's 10000 years 2 people are won with a jungle they hear a tiger one's an optimist he 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 societies 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 the upside is unlimited and the downside is limited so at acting for modern society means

overwriting your pessimism and taking slightly irrationally optimistic bets because the upside is

if you start the next space acts or Tesla or Uber you can make billions of dollars of value for

society and for yourself and change the world and if you fail it'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

actually think the economic benefit opportunities 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 upside 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 start-up

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 did it came 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 pin that acronym at the end of his

articles for a while but Twitter is just like overrun with lit figures and where exactly as you're

pointing out Silicon Valley has learned that the upside is so great that you never looked

down on the sloppy kid who's wearing a hoodie and has like coffee at his shoes and just look like

a slob because you don't know if he's going to be the next marks Zuckerberg or the next

Rehauffman so you've got to treat everybody with respect you've got to look up to every possibility

in opportunity because the upside is so unlimited and the downside is so limited in the modern

world especially with financial assets and instruments 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 all 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 it's 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 learned soft skills which are very,

very hard to teach later on in life or it's something that is brand new so nobody else knows how to do it

or it's true on the job training because you're pattern matching it to highly complex environments

building judgment in a specific domain, classically example is investing but it could be in anything

it could be in judgment and running a fleet of trucks could be judgment and 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 2021-22 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 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

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 evolve into your cost or training plus the return of 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 leverage 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 does the hottest job it's not for going into whatever field investor stays 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 want 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 is else's 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 the engineering 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

which still be scrubbing 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 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 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 that

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 going to go into business and I was like

what my mom's telling me I'm going to be in business I'm going to be an astrophysicist mom doesn't

know 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 of certain way of certain toppings and why their process of ordering was this

way when it should have been that way so she knew that I was just had more of a business curious

mind but then my obsession with science combined to create technology and technology businesses

were 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

society still has not figured out how to train an automate yet the classic line here is that warm

buffet went to Benjamin Graham when he got out of school and Benjamin Graham was the author of the

intelligent investor sort of modernized or created value investing as a discipline and warm

buffet 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 buffet buffet 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 and the bleeding edge of art

on the bleeding edge of communication even today for example there were 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 the example 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 or at least 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 operating

with a leverage of media with periscope and drawing billboard 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

the specific knowledge somehow make more sense for it you know I came up with his framework when

I was really young and we're talking decades and decades it's not 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 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 we talk the single course nor can we program into a single algorithm

speaking of us got atoms 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 it's got atoms observations

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 that I give in think but when you start going the

common aturics 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 the intersection

arrives you've expanded enough from 10,000 through common aturics 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% tile at three or four things that 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 it's something we're all familiar with that phrase a natural oh this person's a

a natural at meeting men or women this person's a natural social like this person's a natural

program or this person's a natural reader so whatever you are a natural at you want to double down

on that 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 a natural at

and combine them so that you automatically just to share 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 multi-variate 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 is the programmer is the software engineer hardware engineer but you know even in like 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 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 be doing

PR so it's a broad umbrella category so generally the silicon valley startup model tends to work

fast it's not the only way but it is probably the most common way when you have two founders

one of whom is a world-class at sales and one of whom is a world-class at building an example

this course Steve Jobs and Steve was in the Acle Apple gates and Allen probably had 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

and users to 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 adventure and technology investors

are almost trained to look for this combo whenever possible it's the magic combination the ultimate

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 is within reasonableness of delivery even Steve Jobs developed in the product skills

and was involved enough in the product that he also operated in both of these domains Larry else

from starters a programmer and I think wrote the first version of Oracle or was actually heavily involved

in it Mark and recent was also in this domain he may not have had enough confidence in the sales

skills but he was the programmer who wrote let's get navigate or 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

the 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

inadly wired to be a good communicator bill gates famously paraphrase 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 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 sales

person that 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 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 let 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 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 sales

person but in a weird way that combination back the Scott Adam's 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 captenic 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 hot slurs and sales people 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 focus 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 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 value the base in the product but if you have a reputation for being a good person

to do business with and your 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 there essentially

there is no skill called business avoid business magazines in business class study micro economics

in 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 as faster than listening doing as 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 from most people's 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 is 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 the science fiction

then you may graduate to nonfiction then you may graduate to science or philosophy 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 now there is

an exception to this which is where I was hinting with what things you actually do when I learned

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 with those things were 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 Species instead of

reading a book on biotech right now then it'd be very advanced I would just pick up the eight

their creation by Watson and Crick instead of reading advanced books on what cosmology and what

Neil deGrasse Tyson's even 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're

sitting in class and we're learning mathematics and it was all logical and all made sense until

one point the class moved too fast and we fell behind and then after that we will have memorizing

equations memorizing concepts without being able to drive them for first principles and at that moment

we were lost because unless your 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 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 because 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

up purely just based on opinions the beauty of the internet is the entire library of Alexandria

timestamp is at your fingertips at all times it's not the means of education or the means of

learning or scarce the means of learning are abundant it's the desire to learn that scares so you really

have to cultivate the desire and it's not even cultivate if they're not losing 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 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 the 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 micro economics is important because macro economics

a lot of memorization a lot of macro bullshit as Nassim Telab says it is easier to macro bullshit

than it is to micro bullshit because macro economics is voodoo complex science meets politics you can't

find two macro economists to agree on anything these days and different macro economists get used

by different politicians to pedal their different pet theories there are even macro economists

out there now peddling something called modern monetary theory which says hey except for this

pesky thing called inflation we can just print out 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 in

the space all day long it's just nonsense but the fact that there are people who have macro

economists in their title and are peddling modern monetary theory just tells you that macro

economics as a so-called science has been corrupted it's a blancher politics so you really want to

focus on the foundations foundation the ultimate foundation are mathematics and logic if you

understand logic and mathematics then you have the basis for understanding 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 which you really are looking for as algorithms

which you're really looking for as understanding it's better to go through a book really slowly

and struggle and stumbled and rewind that is to fly through it quickly and say well now I read 20

books every 30 books every 50 books in the field it's like Bruce Lee said I don't fear the man

who knows a thousand kicks in a thousand punches a few of the men who's practiced one punch

ten thousand times or one kick ten thousand times it's the understanding that comes through

repetition and three usage and through logic and foundations that really makes you a smart thinker

to lay up 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 finance 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 I think I'll expand it a little bit I would say that the five most important skills are of

course reading, writing arithmetic and then as you are adding in persuasion which is talking

and then finally I would add computer programming just because it's an applied form of arithmetic

that just gets you so much leverage for free and 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

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 it distract from them completely but some of the stuff that's

trying 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'll 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 logical serve you much much better so I would focus in the foundations I would

focus with 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 you come to your learning curve if you want to optimize your learning curve one of the reasons

why 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 of fast reader and I can read very fast but I

can only listen at a certain speed I know people listen at 2x3x 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 skill that's

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 in the mental models these days

right you go to farm them street you go to poor char these almond act and you can learn all the

different mental models but which ones matter more which ones do you apply more often which ones

matter 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 it read prisoner jelema is the piece of game theory that has worth

knowing the most you can literally almost put down the game theory book after that by the best

way to learn game theories to play that's a 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

and there were 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 it to all kinds of corner cases 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

with Sam running the retail store down the street where I'm stalking the shelves with food and

liquor every single day I'm not gonna 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 learning curve is across iterations so

if I was trying new marketing experiments the store all the time I was constantly changing

at the inventory I was constantly changing at the branding and the messaging I was constantly

changing the sign I was constantly changing the online channels that I was used to drive for 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 gonna 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 or that you will fail so you just have to get

very very comfortable with frequent small failures you know and I seem to have talked about this

also he made his fortune his wealth by being a trader who relied upon black swans the same

telebed 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 where's most people

want to make little bits of money every day and it exchange they'll tolerate lots of bloat wrists

they'll tolerate going completely bankrupt we're not involved 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 an exchange you will win big later you'll do

better 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 their responsibilities 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 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-edge 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 you know 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 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 there are a lot of voters just went 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 as 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 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 next 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

to 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 price strategy and then maybe the online advertising so if somebody

screws up you know exactly who's responsible what the same time something goes really well you

also know exactly who's responsible so if you have a small team and you have clearly

doing it in the 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 each other and if it succeeds everybody steps forward 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 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 in 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 but took a risk same with crypto early on it 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 the

paid the salary first like in illegal 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 lend 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 510 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 in the debt holders or if there's just enough

to pay off the salary in 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 you know 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

not a lot more accountability than they actually are is accountability actually fragile or

do you really just mean that we're hard-wired not to fail in public so it just feels like it's

a fragile thing I think it could actually be fragile like an example of accountability is

even airplane pilot but 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 litter blame it on anyone else you can't

blame it on the steward of the stewardess you can't blame it on the copilot 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 you kept it with respect to go down with the ship if the ship was syncing

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 the new names on it that's not as bad

as if it's turned out to be an integrity issue like your Bernie made off for example made off

investments that name is never going to be good again in the investment community you could be

Bernie made off's great great great great grandson you are not going to go into the investment

business because you ruin 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 Tala Braille against CEOs who get

rewards without accountability yeah I mean Tala Skinner the game is required reading

if you want to get anywhere in modern life and understand how modern systems work then a

skin of the game would be near top my list to read but yes accountability skin of the game these

concepts go very closely handed hand I think of accountability as reputational skin of the game

it's putting your personal reputation on the line asking in the game accountability is a simple

concept the only part of accountability that maybe 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 Mark and Medis 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.

Leverages critical the reason I stuck in our community is 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

more 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 and I could do

myself everybody understands this because we're evolved to understand the labor of formal

leverage and so what happens is society over-value 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 an 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 communist and Marxism is all

about the battle between capital and labor does capital out and does 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 with a

shower are you 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 the last few hundred to few

thousand years they're not involved with us from hundreds of thousands of years so we understand

them a little bit less well they're 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 is for modern

it's the one that people have used to get fabulously wealthy in the last centuries probably

been the dominant form of leverage in the last century and you can see this by a whole the richest

people it's bankers politicians and 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 and as imagine can put a pleasant face on

it so you get a worn buffet 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 in

past across generations and suddenly seems to result in people having gargantris amounts of money

with nobody else kind of around them or necessarily sharing in it that said capital is a powerful

formal 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 give a billion dollars and you can make a

30% return with it where 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

managing capital you can manage more and more capital much more easy they can manage more and more

people so it is a good form of leverage but the hard part of capital is how do you obtain it and that's

why I talked about specific knowledge and accountability first if you have specific knowledge and

a domain and if you're accountable and you have a good name and 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 is only

invented in the last few hundred years it's 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 thirty years ago I would have to be lucky to get on TV which is somebody else's leverage

they would have distorted the message that would take in the economics out of it or charge me for it

they would have muddled the message and I would have been lucky to get that form of leverage 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 fortnight players of course Jeff

Bezos and Mark Zuckerberg and Larry Page and Sergey Brandon 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 text 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 use that for marketing advertising

scaling 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 outsize 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 their permissionless they don't require somebody else's permission for you to use

them or succeed for labor leverage somebody has 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 YouTube being 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 abroad casters 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 got this

clip this is a little overused but and this is why it tells people learn to code right it's that

we have this idea then 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 the majority of the robot revolution has already happened

the robots are already here and there are way more robots than their 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 it's a 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 night time while he or she sleeps

after they've written the code and it's just cranking away so the robots 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 airplane and autonomous ships and maybe autonomous trucks and

you know they're delivery bots and Boston dynamics robots and all that but robots 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 like 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 and 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 in 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 products to 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 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 Rolex is 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 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 worst car in 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 is an amazing car

the new Toyota Corolla is a really nice car but because it's mainstream the technology has

amortized the cost of production over the large 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 Marge

societies as the forms of leverage have gone from being human based labor based and being capital

based to be 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 again they 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 halves and the have not it's getting smaller

so if you care about ethics and 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 a

post you 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 an

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 thrown 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 rich people

to be different they have to fly to Sundance and watch a documentary because you and I aren't

gonna fly to Sundance because you know that's something that board 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 is 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 diffused form of labor for example mark Zuckerberg has

a billion people doing work for him by using the Facebook and instead of going to raise capital

from someone who's rich now we have crowdfunding so you can raise millions and billions 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 the old fashion way we 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 for pursuing a business that has

brand effects or other choices of business model that people could manipulate that just give you free

leverage yeah there's some really good micro economic concepts that are important to understand

one of those is scale economies which is the more you produce of something the cheaper it gets to

make but that's something 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 5 and making widget number 10000

is a lot cheaper than the previous ones and this builds up an automatic sort of bear 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 which is 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 in podcast number one but on podcast number 1100 he's

making a million dollars for the podcast where's for the previous one he probably lost money for the

that's an example of zero marginal cost and then the most subtle but the most important is

a side of network effects and it comes from computer networking bob metcaf who created ethernet

famously coin metcaf'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

size 100 would have a value of 10000 it's not just 10x more it's 100x more because the square

so the difference is the square so you want to be in a network effects 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 your

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 dried sharing tends towards one

winner take all system like Uber will always have better economics than lift as long as it's

moving more drivers and more riders around something like Google there's the only one viable search engine

I do like duct.go 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 micro blocking even YouTube has a

week network effects but they're still powerful enough there's really no number two site that you go to

to consume your video in a regular basis it even turns out in detail Amazon Prime and convenient

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 a hundred people

live in the community and speak ten 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 hundred of you

spoke the same language it would add tremendous value and so the way that community will play out

is ten people start off speaking ten languages let's say one extra person limb English well now

of a sudden 11 people know English so that the next person comes into learn new language

probably gonna choose English at some point let's say English gets a 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 at long term the entire world is probably gonna end up speaking English in 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 and 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 in network effect 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 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 the beach of the Bahamas or you're sleeping

at night and your customers are adding value to each other the tweet storm is very abstract it's

deliberately meant to be broadly applicable to all kinds of different domains and disciplines

in 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

your day labor you come in you fix people's houses someone orders you around tells you break that piece

of rock send that piece of wood put that thing over there there's just all these

menial jobs that go on a construction site if you're working one of those jobs unless you're

skilled trade like say a carpenter or electrician you don't really have specific knowledge and even

carpenter electricians 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 dollars 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 your faceless cog in the construction

crew and the owner of the house or the buyer 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

hired 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 to the job sorry I'm

using bury a price so we'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 it 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

in 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 in a 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 front to 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're

more specific knowledge because now you have to know which neighborhoods are worth buying

and which lots are actually good and which lots are bad what makes or breaks is 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

in risk and now you also have capital leverage because you're also putting money into the project

but conceivably you could buy you know 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 I understand real estate and I now know enough of the dynamics

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

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 of 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 now

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 higher award 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 a company and then you may end up

with a trulio or redfin or a zillio 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 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 scrambling on the ground

with their hands all the way up to somebody who started a real estate tech company and then

took a 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 in 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 and 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 has been 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. Orn Buffett is so wealthy now

because of his judgment even if you were to take away all of Warren's money tomorrow investor

would come out of the woodwork and hand them $100 billion because they know his judgment is so good

and they would give him a big chunk of that $100 billion to invest. So ultimately everything else

that you do is actually setting you up to apply your judgment. One of the big things that people

rail on a 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's certain CEOs who definitely are

underkey 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 persons. Society will literally pay

you hundreds of millions of dollars more because you're steering a hundred billion dollar ship.

If you're on course 10 or 20% of the time more often the other person the compounding results on

that hundreds of bills of dollars you're managing will be so large that your CEO pay will be

dwarfed in comparison. So demonstrated judgment, credibility 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.

Did 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 it's 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 when they seem to have lebrils against them is because they have no skin in the game.

They have no real world experience. 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

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 would 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 entrepreneur emotions really get in the way. Emotions

are where 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 would 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 Graham Family, 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. 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 multi-variate. All the advantages are always been competed

away. It's always in 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 that 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 outrage somebody is, I guarantee you the worst 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 these person to the keys to your car, little on 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 value in 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?

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.

This 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 want to use them to run errands and solve little problems? Or do you want to 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 you know made all their social events on time or sent their thank you cards.

You can spend your life however you want. But if you want to 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 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 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 nutrition 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 solved. I still argue that with my mother when she hands me like little too do's,

I just don't do that. I would rather hire you in a system. And this was true even when I didn't

have money. Another way of thinking about something is 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, if you

may want to eat your healthy home cook 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 why commentator startups he said,

you should be working on your product and getting product market fit and you should be exercising

in eating healthy. Like that's about it. 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,

I might advise to you would be raised it. Like I said, for myself, even before I had money for a

longest time, I used $5,000 an hour. And if you extrapolate that out into what looks like

as annual salary, it's multiple millions of dollars per year, ironically, I actually think I've

beaten it. But 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 really motivated with something. So if I actually

look at how much I've earned per actual hour that I've put in, it's probably quite a bit higher than that.

Let's talk about hard work. There's this battle that happens in Twitter a lot but we should

you work hard and should you not. Like David Houseers on there saying, it's like you're slave driving

people and Keith Roboy 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. 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 market and reasons definition. He came 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 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. Then third comes how hard you

work. But they're like three legs of a stool. If you're short-changing 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 started 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 hours a week. A lot of that's just status signaling. It's showing off. Nobody really works

80, 220 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 run and running. So you sprint. Then you rest, you reassess,

and then you try again. In which you end up doing is you end up building a marathon of

sprint. And maybe 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.

This I had the ones that are already out there, but sometimes it just has its hate 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 going to get out there. I won't

come back to it. So inspiration is a beautiful and powerful thing and when you have it just sees 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. You're like this 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 do complex systems. You do

a lot 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. So impatience with actions, patience with results and as NIV said inspiration is

perishable. So when you have inspiration act on it right then and there. If I have a problem

that I discover 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 feeling. 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 then 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

unclettered 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're 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

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 we'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 an email, see if they can

do 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 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 in a conference table, nothing is

getting done in that meeting. Your little league is dying one hour at a time. Doing coffee reminds

me of an old quote, I think, from Steve Jobs when they asked him, hey, why does an 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 strict agenda. I don't do meetings unless we absolutely have to. Maybe you used to do this.

It would email people when they would ask, maybe an eye for a meeting, like coffee meeting it to

know you. He would say, we don't do meetings unless it's life in death urgent. And then the person

has to be the spot. Yeah, it's life in 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'm 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 of rich people saying, hey,

if I could just get one meeting with you and they're vague about it, they're not going to 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 want to see is they

want to see some evidence of product progress. They don't just want to even see a slide deck.

They want to see product progress. Because the product progress is the resume for the entrepreneur.

It is the unshakable, unfaicable 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 there's

I even if you yourself haven't made it yet, if you think you're going to make it by going out

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 certain dipitus 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.

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 a 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 of what you do, keep redefining what you do

until this is true. If you really want to get paid in this world, you want to 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. 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 your number one.

You can't just pick something arbitrary. You can't say, I'm going to be the fastest runner in the

world and now you've got to beat the same vote. 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 companies 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 multi-variable

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. We're looking back at

what we've done is a better indicator of who we are. Peter Teele 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 careful when you get caught up in these status

games that you end up competing over things that aren't worth competing over. Peter Teele 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. It's somebody else going to come along

and write a better deal. But no, it's someone going to compete with Bill Waterson and create

a better Calvin and Hobbs. No, they're being authentic. This is easiest to see an art,

artists are by definition all naturally authentic. But even entrepreneurs are authentic. Who's

going to be Elon Musk is going to be Jack Dorsey? These people are authentic and the businesses

and products 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. In saying as it seems that's the one he's said 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's just isn't that much

of a market for that even with YouTube videos. So you've got to adjust that somehow until you find

product market fit. But at least lean towards authenticity towards getting away from competition

and competition automatically leads to what is copycating 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 journalist 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 already be done. We'd 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, 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 Adam 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. 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 what 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, combine your

vocation and your evocation, 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 gotten multiple skills.

We aren't all one-dimensional creatures, even though that's how we have to portray ourselves

and our online profiles to get employed. You meet somebody in this say, I'm a banker, I'm a bartender,

or I'm a barber, what have you, all the bees. But people are multi-variate. They have a lot of

skills. One banker might be good at finance. Another one might be good at sales. The 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 co-workers and your smart investors will realize,

okay, you're really world-class in this thing. We 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 inspire 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 winter-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

saying 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 going to be able to take it if you're busy fighting over a booby prize.

Kind of you're playing a stupid gaming and a stupid prize and 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 Appendians, 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 their local restaurant that is of an item like a camera which was going to

have a thousand reviews in 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

my Simon and Bizred, which became Shopzilla 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 retail 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 in

that 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 applied 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 up 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 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 in 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 a return 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

and getting 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 as a math equation, but it's

obviously different context. And then people will say, well, you say that desire is suffering. It'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 informing 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. Your 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 the Scott Adam systems not goals. If you ask a specific person what work 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 reading your their winning lottery ticket numbers. It's a little

clip. 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 the zero. So you do have to have your own point of view

and when something is set your way, you have to very quickly decide is that true is that true

outside of the context of what that person applied it and 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 going

to be someone that I'm going to be working with 10 years from now, then I have to start educating

myself on 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.

You know, the brain space is finite. You'll find it in neurons. So you can almost think of these

as pointers, addresses, nemonics 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's just

read the collection of quotes. It's like it's cool. It's inspirational for a moment. Maybe

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 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 say, well, what's the point of getting rich? Because there are a lot of

people who just like the 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 a 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 MS. 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 that is that

a calm mind of fit body and a household 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 in 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've met.

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 a hundred tweets on it. It's just very hard to say anything on the topic

without getting attacked from 50 different directions, especially these days in 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. There are two focus on the

external. And that's fine. There's nothing wrong with that. They should do that. And that's who

how to get rich tweet storm 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 is 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

common internal state. Just a set of understandings, realizations, have truths and truths that

if you were to invite them properly. And again, these are just pointers to 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.

They're plenty of good people and Twitter who are better 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. She's 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

through a list. 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. If 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 Max and magazine, Bill and your 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 Go Daddy founder Bob Parsons or say Andrew Carnegie, you read stuff by people who are

ready very wealthy and they're clearly made their wealth in other fields, not by selling the

how to get rich line. They have a 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. 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 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.

And 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 you're 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

and 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 gurus 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 want 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 the same teleb 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 the teleb 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

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, product ties yourself. Product ties and yourself. Your self

has uniqueness. Product ties has leverage. Your self has accountability. Product ties has

specific knowledge. Your self 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 a 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 nemonic.

I mean, what is this podcast? Is the podcast called the volume? 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 fine 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 is 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 as 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 support 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 successful. The 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 in Twitter lately is because every tweet summons an army of knit pickers 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

95 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 part should be the ones that you

disagree with. 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 I would cause me to say, oh yeah,

I got that one wrong. Think another place where people get it 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 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 pot 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 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 their 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

be-corp, which has a dual mission. A lot of non-profit 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 realize their philanthropic visions

by running a business. Who is this advice targeted to? Is it for my lift 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 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 at it for the long haul. Certainly if you're 80 years old

retired running out of energy, you should probably just stay retired. But there are 80 years

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 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 today. But that's where it can

actually be the most fruitful. It may be the most difficult pivot. You have a 9 to 5 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 yourself

reeducation 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 peace meals, these principles can directly 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's 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. 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, set it as part of a fancy Latin

words for 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 small company to working

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 or 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 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

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 realize 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

some Roman and Greek text but that's not going to certainly make you ethical. There's the golden rule

right? Do unto others as you would have them do unto you or there's nothing to let silver rule which

is don't do unto others which 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 so about trust because you

want to compound interest. You want to be able to work for a long period of time with trust

worthy people without having to re-evaluate every discussion with that and rethink each time

and without having to constantly look over your shoulder. And so over time you gravitate to

work 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 locality 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 a lie that you told you 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

things. 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 scrambling 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 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 ended up doing deals through you. A lot of wisdom is just

realizing 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 brak thing. There

was some thread going around 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 held a bunch of menial jobs. There were people who had worse than me, people who had a better

than me. There was one point where I was washing dishes in the school cafeteria and I said,

if this I hate this, I can't do this anymore. And I sweet talk my way to a computer science

prof of helping TA his CS class and 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 using that back in the day. This is before

the internet was a big thing. Use net 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 in a suit and I had to hang

out in the conference room with a lawyer and he had a photo copies. I would make photo copies.

And the meantime I would be bored out of my skull. This is pre-iphone. Thank God to Steve

Chauves 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 my new 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 recommended 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've been 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 a summer of 1991 time frame. So this was

the Bush Senior Recession, if anyone who's alive back then remembers it 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 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. And that sense and

we can be useful and we can also each you alive if you let a follow 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 and what 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 it 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 PAL not PLE. So it's not a principal that you follow. It's a principal who is a person.

A principal isn't 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 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 principals incentives are different than the agents 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 with the ownership of the public company is distributed so widely

that there's no principal remaining. So nobody owns more than one person in the company. The CEO

takes charge and stuffs the board with their buddies and then starts issuing themselves low price

stock options or doing a lot of stock buy-back because their compensation is based directly tied

to the stock price. So agents have a way of hacking systems. This is what make 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 instant 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 normally problem

the principal agent problem is. What I would say to you is if you are a principal, you essentially want to

spend a lot of your time thinking about this problem. What that means is you want to take your

top litonants 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 there'll be misaligned in 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 an 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 had to be a principal long-term and eventually you will become a principal. It's also

going to align you with the 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 weighed deep down thinks like a principal. So if you can hack

your way through the principal agent problem, you're 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 a smallest

firms possible. So for example, when I'm hiring a lawyer or a banker or even a accountant to work

on my deals, one of the things that I become very cognizant about is the bigger firms, all those 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 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 no way to run. The accountability

is extremely high. If you're an agent, the best way to operate is just to 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 a 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.

Now, see him till that famously talks about our goodity, 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 a hundred 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 billion. It's going to end up worth zero. And so risk taking

especially when the averages are calculated across large populations is not all of his 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-jump-sudent prison or having a reputation ruin

is the same as getting wiped to zero. So, never do those things.

Let's talk about the shelling point. It's a game theory concept made famous by Thomas Shelling

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 responses. 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 anymore 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 your rational person and smart and educated, 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 years. And what time, midnight or 12 o'clock, 1 am,

and where will we meet? What is a big meeting point? Well, if we're Americans, it's probably

in 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 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 in the price fluctuates between eight bucks and 12 bucks for whatever the service is.

Don't be surprised if they both converge on 10 bucks without ever talking to each other.

Do you want to talk about Predo Optable?

Predo Optimal is another concept from game theory along with Predo Superior. Predo 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, Predo Superior to where it was before, you will always do that.

Predo Optimal is when the solution is the best that it can possibly be. Then you can't change it

without making it worse than 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 one by whoever cares less. Negotiation at the end of the day is about not wanting it too

badly. If you want something too badly than 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 of 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 that a low information buyers. It's a very expensive transaction. Historically,

it's been very hard to find good contractors and the contractors know choice on what a good home

owner is. You try to go through friends. You try to go through reputation. And what you're

basically doing 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 will do together and then based on that,

all the side, 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 right then 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

interests, 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. He

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

even need to create legal contracts, maybe we can actually do it on hand shakes. That kind of

trust makes it very, very easy to do business. If Nivie 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 and 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 different

means of success and failure. I think the number one most under-recognized reason startups fail

is because the founders fall apart. There's a couple not 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 not 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 $1,500,000 and the Agilation 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 micro-economic concepts outside of zero marginal

costs 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 a large, 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 ten 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 their 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're suddenly find yourself paying $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 price the same for everybody. I get a lot of joy out of my morning coffee.

Obviously, I've made some money. If my coffee costs $20, I would pay $20, 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 business

is 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'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 a price that is worth

today and that's the price that which a venture capitalist would invest in the company today.

So if that founder just raised around $10 million dollars and that company's only worth

1% of what the founders are using, 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's an additional cost that is imposed by whatever product is being

producer 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 a 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 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 return into 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 and 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 take off the answer with one of the tweets from the cutter 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 get 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,

warm buffet and try to work for Benjamin Graham straight to school to learn how to be a

value investor and you offer to work for a free and Ben Graham said you're overpriced. This

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. 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

job that's come up in Silicon Valley in the last half decade or so is being a cheap of staff

for 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

there 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, the atrics, innovation and

knowledge that can only come from being next to the entrepreneur. Because the entrepreneurs

will have to do anything in everything to make their company successful and the chief of staff

was a company and then 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

in a 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 and new

responsibilities, find the part of the job that has a steepest learning curve. What you're

really trying to avoid is repetitive, repitative, dreadiary 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. This is 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 and wants you to demonstrate in your judgment. Unless you

learn a code or you become good with media, with these are provisionless 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 can 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

factories always stressed out about and if you notice this and you're like, I'm good at balancing my

checkbook and I'm good ahead for numbers and I'm good at watching money but I haven't really

raised money before you offer your help and to come be on a 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 cutter 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 were genuinely intellectually curious, you will acquire the knowledge ahead of others.

Real technologies 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, 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 pretty much 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 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 through through my genuine

intellectual interest and I bet my career on it will do really well. But 20 years from now,

machine learning may be second half. 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,

combine with understanding, for example, semiconductor production lines and now all of a sudden

you're of 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. Then there are timeless specific knowledge skills which come

and go, but even those tend to have fairly long shelf lives of decade or two, decade or three decades.

So technologies could place to find those specific skill sets. If you can bring in a more generic

specialized knowledge skill sets, the other tweet from the cutting room floor was related to

accountability and companies. It said companies don't know how to measure outputs so they measure

inputs instead. We're 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 non-linear. One good investment decision

can make a company 10 or 100 million dollars. One good product feature can be

differently in product market fit and complete failure. So judgment and accountability matter

much much more. You want the accountability because sometimes the best engineers or the best sales

people or the ones who don't work very hard, but then they'll ship that one critical product.

They're 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 stump 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 output it, 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 persons working within the organization. At that point, you may not have visibility

to the top people in the organization, but you may be hidden behind a screen. That's just a

tradeoff that you're making and exchange for your independence of the 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, sacrifice, and even attack. 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 skin over time.

You're going to get hurt a lot. People 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 tweet storm

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. The flip side of this is that if you

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 going

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 they're office hours when they actually

bring in the deals, and they talk to us about specific deals. And it turns out that the classes

that talk to a 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 with your

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 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 they 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 dawn of one of the families. It's a complicated business.

Tony Supronos said, I'm a businessman who has to enforce my own contracts. Very complicated business.