How To Get Rich | PDF | Luck | Debt

How To Get Rich

Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1of 39

How To Get Rich

Wealth - Wealth is the thing you want. Wealth is assets that


earn while you sleep. Wealth is the computer program running
at night that’s serving other customers. Wealth is money in the
bank that is reinvested into other assets and businesses.
The purpose of wealth is freedom; it’s nothing more than that.
It’s not to buy fur coats, or to drive Ferraris, or to sail yachts, or
to jet around the world in a Gulf Stream. You’re not going to get
that unless you really want it. The entire world wants it, and the
entire world is working hard at it.

Money - Money is how we transfer wealth. If I do my job


right and create value for society, society says, “Oh, thank you.
We owe you something in the future for the work that you did.
Here’s a little IOU. Let’s call that money.”

Status - Status is your rank in the social hierarchy. Status, on


the other hand, is a zero-sum game. It’s hierarchical. Who’s
number one? Who’s number two? Who’s number three? And
for number three to move to number two, number two has to
move out of that slot. So, status is a zero-sum game.
The problem is, to win at a 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 and
elevate yourself and the people you like.
Everyone can be rich - The reality is everyone can be rich.
Everybody can be wealthy. Everybody can be retired. Everybody
can be successful. It is merely a question of education and
desire.

Wealth stacks up one chip at a time, not all at


once - My personal wealth has not been generated by one big
year. It stacks up little bit, chips at a time. More options, more
businesses, more investments, more things that I can do.

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.
There are four kinds of luck-
1. Blind luck
The first kind of luck you might say is blind luck. Where I just got
lucky because something completely out of my control
happened. That’s fortune, that’s fate.
2. Luck from hustling
Then there’s luck that comes through persistence, hard work,
hustle, motion. Which is when you’re running around creating
lots of opportunities, you’re generating a lot of energy, you’re
doing a lot of things, lots of things will get stirred up in the dust.
You’re generating enough force and hustle and energy that luck
will find you.
3. Luck from preparation
A third way is that you become very good at spotting luck. If you
are very skilled in a field, you will notice when a lucky break
happens in that field. When other people who aren’t attuned to
it won’t notice. So, you become sensitive to luck and that’s
through skill and knowledge and work.
4. Luck from your unique character
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, 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 have built up.
Warren Buffett, he gets offered deals, and he gets to buy
companies, and he gets to buy warrants, and bailout banks and
do things that other people can’t do because of his reputation.
But I would say your character, your reputation, these are
things that you can build that then will let you take up
advantage of opportunities that other people may characterize
as lucky but you know that it wasn’t luck.

Do Strange Things - 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 have to be willing to dig deeper than other people do.
You Won’t Get Rich Renting Out Your Time -
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 salaried job, even at one that’s
paying a lot per hour like a 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
on vacation, you’re not earning.
So, everybody who really makes money at some point owns a
piece of a product, or a business, or some kind of IP. But usually,
the real wealth is created by starting your own companies, or by
investing. So, you want to look for professions and careers
where the inputs and outputs are highly disconnected.

Live below your means for freedom - Your lifestyle


shouldn’t get upgraded too fast. And that one basically said,
people who are living far below their means enjoy a freedom
that people busy upgrading their lifestyles just can’t fathom.
And that’s very important, just to not upgrade your lifestyle all
the time. 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 to upgrade that house, and lifestyle, and all that
stuff.
Give society what it does not know how to get -
Society will pay you for creating things that it wants but society
doesn’t yet know how to create those 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
skillset, within your capabilities.
And then you have to figure out how to 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, or billions of
them. So, everybody can have one.
The entrepreneur’s job starts with creation. Entrepreneurship is
essentially an act of creating something new from scratch.
Predicting that society will want it, and then figuring out how to
scale it, and get it to everybody in a profitable way.

The Internet Advantage - The Internet has massively


broadened the possible space of careers. Whatever niche
obsession you have, the internet allows you to scale. 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.

Escape competition through authenticity -


Basically, 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. 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 going to have. So,
you can escape competition through authenticity when you
realize that no one can compete with you on being you.

Play Long-Term Games with Long-Term People -


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 marvellous force, where if you start
out with 1x 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, 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 a very important force.
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 it easier to play the game, and
will let you collect the major rewards, which are usually at the
end of the cycle.

Long-term players make each other rich - 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.
In a long-term game, it’s positive sum. We’re all baking the pie
together. We’re trying to make it as big as possible. And in a
short-term game, we’re cutting up the pie.

Pick Partners with Intelligence, Energy and


Honesty - In terms of picking people to work with, pick ones
that have high intelligence, high energy, and high honesty, I find
that’s the three-part checklist that you cannot compromise on.
You need someone who is smart, or they’ll head 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. You want to partner with people who are naturally
going to do the things that you want them to do.
And then high honesty is the most important because otherwise
if you’ve got the other two, what you have is you have a smart
and hard-working crook, who’s eventually going to cheat you.
So, you have to figure out if the person is high-honesty.

Signals - Reading signals are 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 that socially if someone
treats a waiter, or waitress in a restaurant really badly, then it’s
only a matter of time until they treat you badly.
The more someone is saying that they’re moral, ethical, and
high integrity, the less likely they are to be that way.
It’s very much like status signalling. 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, reliable, and
trustworthy you are, you’re probably not that honest and
trustworthy.

Just Do It - We all know people who are consistently


pessimistic, who will shoot down everything. That person will
not only never do anything great in their lives, they’ll prevent
other people around them from doing something great. They
think their job is to shoot holes in things. Don’t partner with
pessimists.
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 is viable or not is by doing it. At least do the first
step, and the second step, and 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.
You’ve got one life on this planet. Why not try to build
something big? Think big always.
The upside is unlimited, and the downside is limited. So, if you
start the next SpaceX, 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, what’s the big deal?

Specific Knowledge – Knowledge you have about a


particular thing or something you are really good at (e.g.-
investing, judgement, programming, marketing, sales, etc.)
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 a class and learn specific knowledge, then somebody else can
be trained for it too, and then we can mass-produce and mass-
train people. So, if that’s the case, then you’re extremely
replaceable specific knowledge is found much more by pursuing
your innate talents, your genuine curiosity, and your passion.
So, if you’re not 100% into it somebody else who is 100% into it
will outperform you. And they won’t 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 1,000 times leverage and somebody
is right 80% of the time, and somebody else is right 90% of 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 that genuine
curiosity is very important.

Building Specific Knowledge - Specific knowledge can


be taught through apprenticeships (training or job). The best
way is just to follow your own obsession. So, whatever you are a
natural at, you want to double down on that. Everyone is
natural at something or the other.

Learn to Sell & Learn to Build - It’s two broad


categories. One is building the product. Which is hard, and it’s
multivariate. It can include design, it can include development,
it can include manufacturing, logistics, procurement, it can even
be designing and operating a service. It has many, many
definitions.
The other side of it is sales. Selling doesn’t necessarily just mean
selling individual customers, but it can mean marketing, it can
mean communicating, it can mean recruiting, it can mean
raising money, it can mean inspiring people.
So, generally, the Silicon Valley startup model tends to work
best. It’s not the only way, but it is probably the most common
way, when you have two founders, one of whom is world class
at selling, and one of whom is world class at building.
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.

Which One to Pick - When you’re trying to stand out from


the noise building is actually better because there’re so many
hustlers 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 a very
focused task. So, sales skills actually scale better over time.

Read What You Love Until You Love to Read- The


foundation of learning is reading. I don’t know a smart person
who doesn’t read and read all the time. Everybody I know who
reads a lot loves to read, and they love to read because they
read books that they loved. You basically want to start off just
reading wherever you are and then keep building up from there
until reading becomes a habit. It’s better to read a great book
slowly than to fly through a hundred books quickly.

Doing is faster than watching- A lot of people think


they can become really skilled at something by watching others
do it, or even by reading about others doing it. But that’s not
truth, in reality, you’re going to learn a lot more about running a
business by operating your own business.
Doing something new the first time is painful, because you’re
wandering into uncertain territory and high odds are that you
will fail. So, you just have to get very, very comfortable with
frequent small failures.

Repetitions Drives the Learning Curve- Well, if I start


a business where I go in every day and I’m doing the same thing,
let’s say I’m running a retail store down the street where I’m
stocking the shelves with food and liquor every single day, I’m
not going to learn that much because I’m repeating on the
wrong things. If I did repetitions on the right things like
branding, messaging, marketing, then I would have drove
success.
It’s the number of iterations that drives the learning curve. So,
the more iterations you can have, the more shots on goal you
can have, the faster you’re going to learn. It’s not just about the
hours put in.

If you’re willing to bleed a little every day, you


may win big later- Most people want to make little bits of
money every day and in exchange they’ll tolerate lots of risk,
they’ll tolerate going completely bankrupt. If you’re willing to
bleed a little bit every day but in exchange you’ll win big later,
you will 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 the responsibility is upon
them, but when they win, they win big. On average they’ll make
more.

You need to take responsibility to get leverage-


So to get rich, you’re going to need leverage. Leverage comes in
labour, comes in capital, or it can come through code or media.
But most of these, like labour and capital, people have to give to
you. For labour, 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 have to build up credibility and you
have to do those under your own name as much as possible,
which is risky. So, responsibility is a double-edged thing. It
allows you to take credit when things go well and to bear the
brunt of the failure when things go badly. Take business risks
under your name. It’s a high-risk high-return game.

A well-functioning team has clear accountability


for each position- Responsibility is quite important, and
when you’re working to build a product or you’re working in a
team or you’re working in a business, it’s very important.
You can say, “Okay, this person’s responsible for building the
product. This person’s responsible for the messaging. This
person’s responsible for raising money. This person’s
responsible for the pricing strategy and maybe the online
advertising.” So, if somebody screws up, you know exactly
who’s responsible. While at the same time if something goes
really well, you also know exactly who’s responsible.
If you have a small team and you have clearly defined
responsibilities, then you can still keep a very high level of
accountability. Responsibility is really important because when
something succeeds or fails, if it fails, everybody points fingers
at each other, and if it succeeds, everybody steps forward to
take credit.

Failing in public with accountability- Clear


responsibility is important. Without responsibility, you don’t
have incentives. Without responsibility, you can’t build
credibility. But you take risk. You take risk of failure. You take
risk of humiliation. You take risk of failure under your own
name.
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 how you’re going to get equity-


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. If
you have high accountability, that makes you less replaceable.
Then they have to give you equity, which is a piece of the
upside.

Equity: A high risk high return thing- Equity means


you get paid everything after all the people who need
guaranteed money are paid back.
If you look at the hierarchy of capital in a company, the
employees get paid first. They get paid the salary first. The
employees get the most security, but in exchange for that
security, they don’t have as much upside.
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.
Finally, there are the equity holders. These people are actually
going to get most of the upside. 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 and the
debt holders, or if there’s just barely enough to pay off the
salary and the debt holders, which is what happens with most
businesses, most of the times, the equity holders get nothing.
The equity holders take on greater risk, but in exchange, they
get nearly unlimited upside.
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. The time that you’ve put in, the capital that
you’ve put into the company, these are what are at risk.

Labour, Capital & Leverage- The oldest form of leverage


is labour, which is people working for you. Instead of me lifting
rocks, I can have 10 people lift rocks. Then just by my guidance
on where the rock should go, a lot more rocks get moved than I
could do myself. 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 really want to stay out of
labour-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, which I would argue are much more
interesting.
The second type of leverage is capital. Capital is a powerful form
of leverage. It can be converted to labour. It can be converted
to other things. It’s very surgical, very analytical. It scales very,
very well. If you get good at managing capital, you can manage
more and more capital much more easily than you can manage
more and more people.

How To Get Capital- It is a good form of leverage, but to


obtain it you need specific knowledge and accountability. If you
have specific knowledge in a domain and if you’re accountable
and you have a good name in 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.
Product & Media are the new Leverage- The
most interesting and the most important form of leverage is this
idea of products that have no marginal cost of replication. (e.g.-
software, apps, games, e-books, courses, YouTube, etc)
This is the new form of leverage. Now, you can multiply your
efforts without having to involve other humans and without
needing money from other humans.
E.g.- This podcast is a form of leverage. Long ago, I would have
had to sit in a lecture hall and lecture each of you personally. I
would have maybe reached a few hundred people and that
would have been that.

Product Leverage is where the fortunes are


made- This newest form of leverage is where all the new
fortunes are made. The new generation’s fortunes are all made
through code or media. Joe Rogan making 50 to a 100 million
bucks a year from his podcast. You’re going to have PewDiePie,
The Fortnite players. Of course, Jeff Bezos and Mark Zuckerberg
and Larry Page and Sergey Brin and Bill Gates and Steve Jobs.

Combining all three forms of leverage is a magic


combination-The beauty is when you combine all of these
three. That’s where tech startups really excel, where you take
just the minimum, but highest output labour that you can get,
which are engineers, and designers, product developers. Then
you add in capital. You use that for marketing, advertising,
scaling. 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.

Code & The Robot Army- We have this idea that in the
future there’s going to be these robots and they’re going to be
doing everything. 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.
The robot army is already here. The robot revolution has already
happened. robots who are doing web searching for you, for
example, are already here. The ones who are cleaning up your
video and audio and transmitting it around the world are
already here. The ones who are answering many customer
service queries, things that you would have had to call a human
for are already here.
You can use these robots to build your business. It’s a very good
leverage.

Product Leverage Is Egalitarian (same thing to


everyone)- Labour and capital are much less egalitarian. Let’s
say that I need something that humans have to provide like if I
want a massage or if I need someone to cook my food. The
more of a human element there is in providing that service, the
less egalitarian it is.
If you look at the output of code and media, Jeff Bezos doesn’t
get to watch better movies and TV than we do. Jeff Bezos
doesn’t get to even have better computing experience. Google
doesn’t give him some premium, special Google account where
his searches are better. It’s the nature of code and media
output that the same product is accessible to everybody.
If you care about ethics in 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 opposed
to trying to create your wealth through labour or capital.

Scaling Advantage- 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 end up having the largest budget. There’s no
marginal cost of adding another user, and so with the largest
budget, you get the highest quality.

Pick a Business Model with Leverage- An ideal


business model has network effects, low marginal costs and
scale economies.

Scale economies: the more you produce, the


cheaper it gets- One of those is scale economies, which is
the more you produce of something the cheaper it gets to make
it.
You should try and get into a business were making Widget
Number 12 is cheaper than making Widget Number 5, and
making Widget Number 10,000 is a lot cheaper than the
previous ones. This builds up an automatic barrier to entry
against competition and getting commoditized. That’s an
important one.
Zero Marginal cost of reproduction: producing
more is free- Another one is, and 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.
Creating another copy of what you just created is free. 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 u

Network Effect- A network effect is when each additional


user adds value to the existing user base. Your users themselves
are creating some value for the existing users. E.g.-Uber,
Zomato, Blink-it, Facebook, Amazon etc.
The classic example that I think everybody can understand is,
language. Let’s say that there’s 100 people living in the
community and speak 10 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 100 of you spoke the
same language, it would add tremendous value.
The way that community will play out is, 10 people start off
speaking 10 languages, and let’s say one extra person learns
English. Well, now all of a sudden, 11 people know English, so
the next person comes in to learn a new language is probably
going to choose English. At some point, let’s say English gets to
20 or 25 people, it’s done. It’s just going to own the entire
language marketplace, and the rest of the languages will get
competed out.

Zero marginal cost businesses can pivot into


network effect businesses-It’s a 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. Anything that has zero marginal costs of production
obviously has scale economies, and things that have zero
marginal costs of reproduction 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.

Example: From Labour to Entrepreneur- Look at the


real estate business. You could start at the bottom, let’s say
you’re a day labourer. You come in; you fix people’s houses.
You don’t really have specific knowledge. You don’t have any
leverage other than from the tools that you’re using. If you’re
driving a bulldozer that’s better than doing it with your hands.
You don’t have much accountability. You’re a faceless cog in a
construction crew and the owner of the house or the buyer of
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 hires to come and fix and
repair and build up their house.
That general contractor is taking accountability; they’re taking
responsibility. They got the upside. They got the equity but
they’re also taking accountability and risk. If the project runs
over and there’s losses, then they eat the losses. But you see,
just the accountability gives them some form of additional
potential income. Then, they also have labour leverage because
they have a bunch of people working for them.
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 into
business for themselves and they go around looking for beaten
down properties that have potential. They buy them, they
either raise money from investors or front it 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.
There’s more specific knowledge, there’s more accountability
and risk, and now you also have capital leverage because you’re
also putting in money into the project.
One level beyond that might be a famous architect or a
developer, where 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 understand real estate, and I now know enough of the
dynamics of 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.
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.” 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. 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 and how all of that works.”
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, high reward effort attached to
the whole thing, and people would devote their lives to it and
take on significant risk. It would have leverage in code with lots
of developers. It would have capital with investors putting
money in and the founder’s own capital. It would have labour of
some of the highest quality labour that you can find, which is
high quality engineers and designers and marketers who are
working on the company.
As you layer in more and more kinds of knowledge that can only
be gained on the job and aren’t 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-labourer, who might just literally be scrapping on
the ground with their hands, all the way up to somebody who
started a real estate tech company and then took it public.
Summing all of this, we can say the more specific knowledge
you have, the more accountability you take & the more
leverage you use, the more wealth you will create.

Judgement- Judgement means knowing the long-term


consequences of your actions and then making the right
decision to capitalize on that.

Leverage & Judgement-Your first job is to go and obtain


leverage, and you can obtain leverage by getting people to work
for you, or by raising capital.
Or you can get leverage by learning how to code or becoming
good communicator and podcasting, broadcasting, creating
videos, writing, etc.
That’s how you get leverage, but once you have leverage, what
do you do with it? Well, the first part of your career’s spent
hustling to get leverage. Once you have the leverage, then you
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. In an age of infinite leverage, judgment
becomes the most important skill.
Warren Buffett is so wealthy now because of his judgment. Even
if you were to take away all of Warren’s money, tomorrow,
investors would come out of the woodwork and hand him a
$100 billion because they know his judgment is so good, and
they would give him a big chunk of that $100 billion to invest.
The better judgement you take with high accountability, the
more money you will make. E.g.- CEOs of big companies like
apple, google, reliance etc.

Without experience, judgement is useless &


harmful- Judgment is very hard to build up. This is where
both intelligence and experience come in play.
Intelligence without any experience is often worse than useless
because you get the confidence that the intelligence 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.

Lesser the Emotions, better the Judgments- The


people with the best judgment are actually among the least
emotional.
Entrepreneurs have to care about what they’re doing, but they
also have to see very clearly what’s actually happening. The
thing that prevents you from seeing what’s actually happening
are your emotions. Our emotions are constantly clouding our
judgment, and in investing, or in running companies, or in
building products, or being an entrepreneur, emotions really get
in the way.
Emotions are what 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.
The more outraged somebody is, I guarantee you, the worse
their judgment is.

Valuing your Time by setting an hourly rate-No one


is going to value you more than you value you. Set a high
personal hourly rate, and stick to it. Factor your time into every
decision. Say you value your time at $100 an hour. If you decide
to spend an hour driving across town to get something, you’re
effectively throwing away $100. Are you going to do that?

Price your hourly rate very high- Set a very high


aspirational hourly rate for yourself, and stick to it. It should see
and feel absurdly high. If it doesn’t, it’s not high enough.
Whatever you pick, my advice is to raise it.

Getting wealthy must be your first priority- You can


spend your life however you want. But if you want to get rich, it
has to be your top priority. It has to come before anything else.
This is what people don’t understand. If you’re going to create
wealth, it has to be your number-one, overwhelming priority.

Don’t do things less than your hourly rate- If you


don’t want to do something less than your hourly rate, don’t do
it. If you can hire someone to do it for less than your hourly
rate, hire them. That includes things like cooking. You may want
to make your own healthy, home-cooked meals. But if you can
outsource it, do that instead.

People say, “What about the joy of life? What about getting it
right, just your way?” Sure, you can do that. But you’re not
going to be wealthy, because you’ve made something else a
priority.
You should be working on your product and getting product-
market fit, and you should be exercising and eating healthy.
That’s about it. That’s all you have time for while you’re on this
mission.

Work as hard as you can- If getting wealthy is your goal,


you’re going to have to work as hard as you can. But hard work
is no substitute for who you work with and what you work on.
Those are the most important things.

What you work on and with who you work with


are more important- You can save a lot of time by picking
the right area to work in. Picking the right people to work with
is the next most important piece. Third comes how hard you
work. They are like three legs of a stool. If you short-change any
one of them, the whole stool is going to fall. You can’t easily
pick one over the other.
When you’re building a business, or a career, first figure
out: “What should I be doing? Where is a market emerging?
What’s a product I can build that I’m excited to work on, where
I have specific knowledge?”

Surround yourself with the best- Second, surround


yourself with the best people possible. If there’s someone
greater out there to work with, go work with them. Look at the
PayPal mafia—they worked with a bunch of geniuses, so they all
got rich. Pick the people with the highest intelligence, energy
and integrity that you can find.
And no matter how high your bar is, raise it.
Finally, once you’ve picked the right thing to work on and the
right people, work as hard as you can.

Inspiration- Inspiration is perishable. When you have


inspiration, act on it right then and there.
If I’m inspired to write a blog post or publish a tweetstorm, I
should do it right away. Otherwise, it’s not going to get out
there. I won’t come back to it. Inspiration is a beautiful and
powerful thing. When you have it, seize it.

Impatience with actions, patience with results-


People talk about impatience. When do you know to be
impatient? When do you know to be patient? You have to be
“Impatient with action, patience with results.”
Anything you have to do, get it done. Why wait? You’re not
getting any younger.
When you do these things, do them as quickly as you can and
with your full attention so you do them well. Then be patient
with the results because you’re dealing with complex systems
and 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.
Impatience with actions, patience with results.
If I discover a problem in one of my businesses, I won’t sleep
until the resolution is at least in motion. 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 it, right then and there,
and solve it.

Be too busy to do coffee-People want to “do coffee” and


build relationships. That’s fine early in your career, when you’re
still exploring. But later in your career—when you’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.

Ruthlessly Cut Meetings- If someone wants a meeting,


see if they will do a call instead. If they want to call, see if they
will email instead. If they want to email, see if they will text
instead. And you probably should ignore most text messages
unless they’re true emergencies.
You have to be utterly ruthless about dodging meetings. When
you do meetings, make them walking meetings. Do standing
meetings. Keep them short, actionable and small.

Proof of Work- Busy people will take your meeting when


you have something important or valuable. But you have to
come with a proper calling card. It should be: “Here’s what I’ve
done. Here’s what I can show you. Let’s meet if this is useful to
you, and I’ll be respectful of your time.”
You have to build up credibility.
You have to do the work. If you have that and you truly have
something interesting, then you shouldn’t hesitate to put it
together in an email and send it. Even then, when asking for a
meeting, you want to be actionable.
Free your time and mind- If you think you’re going
to “make it” by networking and attending a bunch of meetings,
you’re probably wrong. Networking can be important early in
your career.
When you meet people hoping for that lucky break, you’re
relying on Type One Luck, which is blind luck, and Type Two
luck, which is hustle luck.
But you’re not getting Type Three or Type Four luck, which are
the better kinds. This is where you spend time developing a
reputation and working on something. You develop a unique
point of view and are able to spot opportunities that others
can’t.
A busy calendar and a busy mind will destroy your ability to do
great things in this world. If you want to do great things—
whether you’re a musician or entrepreneur or investor—you
need free time and a free mind.

Keep doing what you do until you become the


best at it- If you really want to get paid in this world, you
want to be number one at whatever you do. It can be niche—
that’s the point. You can literally get paid for just being you.
You want to be number one. And you want to keep changing
what you do until you’re number one.
Keep changing your objective until it arrives at your specific
knowledge, skill sets, position, capabilities, location and
interests. Your objective and skills should converge to make you
number one.
When you’re searching for what to do, you have two different
foci to keep in mind. One is, “I want to be the best at what I do.”
The second is, “What I do is flexible, so that I’m the best at it.”
You want to arrive at a comfortable place where you feel, “This
is something I can be amazing at, while still being authentic to
who I am.” It’s going to be a long journey. But now you know
how to think about it.

Competition will blind you to greater games-


When you see competition, it can make you fly into a
rage. Because it really does endanger everything you’ve built.
Often, businesses that seem to be in direct competition really
aren’t. They end up adjacent or slightly different. You’re one
step away from a completely different business, and sometimes
you need to take that step. You’re not going to take it if you’re
busy fighting over a booby prize.
You’re playing a stupid game. You’re going to win a stupid
prize. It’s not obvious right now because you’re blinded by
competition. But three years from now, it’ll be obvious.
E.g.- One of my first startups was Epinions, an online product
review site that was independent of Amazon. That space
eventually turned into TripAdvisor and Yelp, which is where we
should have gone. Before we could get there, we got caught up
in the comparison-shopping game. We merged with DealTime
and competed with a bunch of price-comparison engines—
mySimon, PriceGrabber, NexTag and Bizrate, which became
Shopzilla. We were caught in fierce competition with each
other.
That whole space went to zero because Amazon won e-tail
completely. There was no need for price comparison. Everyone
just went to Amazon.
We got the booby prize because we were caught up in
competition with a bunch of our peers. We should have been
looking at what the consumer really wanted and being
authentic to ourselves, which was reviews, not price
comparison. We should have gone further into esoteric items
where customers had less data and wanted reviews more badly.
If we stayed authentic to ourselves, we would have done better.

Great things take time- Everybody wants wealth


immediately. But the world is an efficient place. Immediate
doesn’t work. You have to put in the time. You have to put in
the hours. You have to put yourself in that position with specific
knowledge, accountability, leverage and an authentic skill-set in
order to be the best in the world at what you do.
And then you have to enjoy it and keep doing it and doing it and
doing it. Don’t keep track. Don’t keep count. Because if you do,
you will run out of time.
But it can easily be 10 or 20 years. Sometimes it’s five. If it’s five,
or three, and it’s a friend of yours who got there, it can drive
you insane. But those are exceptions. And for every winner,
there are multiple failures.
One thing that’s important in entrepreneurship: You just have
to be right once. You get many, many shots on goal. But you
only have to be right once.
On a long enough time-scale, you will get paid.
What are you really good at that the market
values. Ask yourself: What am I really good at, according to
observation and people I trust, that the market values?
Those two variables alone are probably good enough. If you’re
good at it, you’ll keep it up. You’ll develop the judgment. 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, the other pieces will fall into place.
Product-market fit is inevitable if you’re doing something you
love and the market wants it.

The best founders listen to everyone but make


up their own mind- If you ask a successful person what
worked for them, they often read out the exact set of things
that worked for them, which might not apply to you. They’re
just reading you their winning lottery ticket numbers.
There is something to be learned, but you can’t take their exact
circumstance and map it onto yours. The best founders I know
read and listen to everyone. But then they ignore everyone and
make up their own mind.
You have to reject most advice. But you have to listen to
enough of it, and read enough of it, to know what to reject and
what to accept.

Internal State & Relations- If you have a calm mind and


you’ve already made money, you should have good
relationships. There’s no reason why you shouldn’t. A lot of
divorces happen over money. Unfortunately, that’s just the
reality of it. 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 fewer fights. You’re going to be more loving
without expecting anything in return. That will take care of
things on the external-relationship front.

Develop Yourself- Develop has specific knowledge and


leverage. Yourself has uniqueness and accountability. Yourself
also has specific knowledge.
You want to figure out what you’re uniquely good at—or what
you uniquely are— and apply as much leverage as possible.

Hobbies- Find three hobbies: One that makes you money,


one that keeps you fit, and one that makes you creative.”

Being ethical attracts other long-term players- You


want to be ethical because it attracts other long-term players in
the network. They want to do business with ethical people.
If you build a reputation for being ethical, people eventually will
pay you just to do deals through you. Your involvement will
validate deals and ensure they get done; because you wouldn’t
be involved with low-quality stuff.
In the long-run, being ethical pays off—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 short-term greedy.
Envy can be useful or it can eat you alive- It was the
summer of 1990 or 1991. It was actually really hard to get a job
back then.
I ended up working for a catering company serving Indian food.
One day, I had to serve at a birthday party for a kid in my
school. So, I was out there serving food and drinks to all of my
classmates. 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 that didn’t happen, I probably wouldn’t be as
motivated or as successful. It’s all fine. It was definitely a strong
motivator.
In that sense, envy can be useful. Envy also can eat you alive if
you let it follow you around your entire life. But there are points
in your life when it can be a powerful booster rocket.

When you do deals, it’s better to have the same


incentives- 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 have the advantage in
the deal. Because eventually the other person will figure it and
the partnership will fall apart. Either way, it’s not going to be
one of those things that you can invest in and enjoy the benefits
of compound interest over decades.

Avoid Ruin- Don’t risk everything. Stay out of jail. Don’t bet
everything on one big gamble. Be careful how much you bet
each time, so you don’t lose the whole kitty. Don’t ruin your
reputation or get wiped to zero.
The number one way people get ruined in modern business is
not by betting too much; it’s by cutting corners and doing
unethical or downright illegal things. Ending up in an orange
jumpsuit in prison or having a reputation ruined is the same as
getting wiped to zero—so never do those things.

Turn Short-Term games into Long-Term games-


“Negotiations are won by whoever cares less.” Negotiation is
about not wanting it too badly. If you want something too
badly, the other person can extract more value from you.
If someone is taking advantage of you in a negotiation, your
best option is to turn it from a short-term game into a long-
term game. Try to make it a repeat game. Try to bring
reputation into the negotiation. Try to include other people who
may want to play games with this person in the future.
One way to do that is to say: “Actually, I need two different
projects done. The first project we’ll do together, and based on
that I’ll decide if we do the second project.”
Another way is to say: “I’m going to do this project with you,
and I have three friends who want projects done who are
waiting to see the outcome of this project.”
These are all ways to turn a single-move game into a longer-
term game and get past a position of poor negotiating leverage
and poor information.

Mutual Trust makes it easy to do business-


Relationships offer a good example of compound interest. Once
you’ve been in a good relationship with somebody life gets a lot
easier because you know that person’s got your back. You don’t
have to keep questioning.
If I’m doing a deal with someone, I’ve worked with for 20 years
and there is mutual trust, we don’t have to read the legal
contracts. Maybe we don’t even need to create legal contracts;
maybe we can do it with a handshake. That kind of trust makes
it very easy to do business.
The most under-recognized reason startups fail is because the
founders fall apart.
A startup is so difficult to pull off, so removing potential friction
points between founders can be the difference between success
and failure.

It takes as much effort to create a small business


as a large one- One thing about business that people don’t
realize: it takes just as much effort to create a small business as
it does to create a large one.
Whether you’re Elon Musk or 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.
In one case, you get companies worth $50-$100 billion and
everyone’s adulation. In the other, you might make a little bit of
money and you’ve got some nice restaurants. So, think big.

Price discrimination- It means you can charge people


based on their propensity to pay. Price discrimination works
because rich people are willing to pay more. You just have to
give them the extra little things they need to signal they’re rich
or that little bit of comfort they want.
A lot of enterprise software companies use price discrimination,
especially with freemium products. The free or low-price
version will do almost everything you want. But if you want the
version that’s extra secure or hosted on your site or has
multiple-user administration so the IT person can monitor
everything, you’ll find yourself paying 10 or 100 times more.

Talking about skills- Judgment takes experience. It 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 after you’ve
demonstrated judgment. You can get it faster by learning high-
leverage skills like coding or working with the media. These are
permissionless leverage.
Accountability is something you can take on immediately. You
can say, “Hey, I’ll take charge of this thing that nobody wants to
take charge of.” When you take on accountability, you’re also
publicly putting your neck on the chopping block—so you have
to deliver.
You build specific knowledge by taking accountability for things
that other people don’t know how to do. Perhaps they’re things
you enjoy doing or are naturally inclined towards doing anyway.
If you take on accountability and solve problems on the edge of
knowledge that others can’t solve, people will line up behind
you. The leverage will come.
When you have accountability, you get a lot more credit when
things go right. Of course, the downside is you get hurt a lot
more when things go wrong. When you stick your neck out, you
have to be willing to be blamed, sacrificed and even attacked.
If you’re the kind of person who thrives in a high-accountability
environment, you’re going to end up thick-skinned over time.
You’re going to get hurt a lot. People are going to attack you if
you fail.

You might also like