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Product and Media are the Leverage of the New Wealth (Listen) | Episode 21

* The most important form of leverage is the idea of products which have no marginal cost of replication (aka product leverage)

* You can replicate your efforts without having to involve other humans

* Ex. – A podcast

* Long ago, to get similar reach, you would have had to give a public lecture

* 30-40 years ago – you would have had to get on TV

* But today, thanks to the internet, anyone can launch a podcast

* Product leverage is how fortunes will be made in the digital age – using things like code or media

* Ex. of people who utilized code-based product leverage – Mark Zuckerberg, Jeff Bezos, Sergey Brin

* Ex. of media-based product leverage – Joe Rogan, PewDiePie

* Combining labor leverage, capital leverage, and product leverage is a magic combination for tech startups (for more on labor and capital leverage, check out these Podcast Notes)

* You use the minimum, highest output labor – engineers and product developers

* You add capital which you can use for marketing, advertising, and scaling

* You then add lots of code, media, and content to get everything out there

* Product and media leverage are permisionless – they don’t require someone else’s permission for you to use them or succeed

* For labor leverage – someone has to decide to follow you

* For capital leverage – someone has to give you money

* But coding, writing tweets, making podcasts, YouTubing – these are permissionless

* The robot revolution has already arrived – we just keep them in data centers/servers

* Think – every great software developer has an army of robots working for him/her at night, while they sleep, after they’ve written the code and they’re just cranking away

* Robots do web searching for you

* Robots handle customer service inquiries

* Over time, this will progress to autonomous vehicles/planes/trucks

* Coding is a superpower because it allows you to speak the language of the robots and tell them what to do

Product Leverage is Egalitarian in its Outputs (Listen) | Episode 22

* Product (both code-based and media-based) leverage is egalitarian in its outputs

* Compare this to labor and capital leverage – which are much less egalitarian

* In general – the more of a human element there is in providing a service, the less egalitarian it is

* “It’s the nature of code and media output that the same product is accessible to everybody…The best products tend to be at the center, at the sweet spot of the middle class, rather than being targeted to the upper class.” – Naval Ravikant

* For example:

* Things like Netflix and Facebook – everybody can use

* Compare this to Rolex watches or a Lamborghini – using/owning them is much more related to status-seeking

* As the forms of leverage have gone from being labor-based and capital-based to being more product/code/media-based – “Most of the goods and services that we consume are becoming much more egalitarian in their consumption”

* Things like food – rich people don’t eat better food

* Technology and media products have amazing scale economies

* “If you care about ethics in wealth creation, it’s better to create your wealth using code and media as leverage. Then those products are equally available to everybody as opposed to trying to create your wealth through labor or capital.” – Naval Ravikant

* “If you’re wealthy today, for large classes of things, you tend to spend your money on signaling goods to show other people that you are wealthy, and you try and convert them to status as opposed to actually consuming the goods for their own sake” – Naval Ravikant

Business Models Have Their Own Leverage (Listen) | Episode 23

* Some business models give you “free leverage” – Examples:

* Scale economies = the more you produce of something, the cheaper it gets to make

* Technology and media products have this great quality where they have zero marginal cost of reproduction

* Thinks like podcasts and YouTube videos

* Ex. – Joe Rogan is working no harder now than he was on podcast #1, but it’s now generating millions more

* Then there are network effects businesses

* A network effect is when each additional user adds value to the existing user base

* Like language – The language becomes more valuable the more people who speak it

* “Long-term, the entire world is probably going to end up speaking English and Chinese” – Naval Ravikant

* It’s thought that the value of a network is proportional to the square of the number of nodes of the network

* A network of size 10 would have a value of 100, while a network of size 100 would have a value of 10,000

* “You want to be in a network effects business” – Naval Ravikant

* Things like Facebook, Uber, Twitter, YouTube, Google

* “You should always be thinking about how your users or customers can add value to each other because that is the ultimate form of leverage” – Naval Ravikant

* When you’re picking a business model, aim to pick one where you can benefit from network effects, low marginal costs, and scale economies

An Example: From Laborer to Real Estate Tech Company (Listen) | Episode 24

* An example from the real estate business

* A day laborer on a construction site, unless you’re in a skilled trade, doesn’t have specific knowledge

* Even if you’re a carpenter or electrician, other people can be trained to do your job – you can probably be replaced

* You don’t have much accountability – “You’re a faceless cog in the construction crew”

* They don’t have much, if any, leverage

* A general contractor, who someone hires to come and fix/repair their house, has a little more accountability

* They’ll make more money than a day laborer, but they take more risk (if the project runs over budget, they’ll eat the loss)

* The accountability gives them more potential income

* They have labor leverage (people working for them)

* A property developer is one level above a general contractor – these are people who go around looking for beaten-down properties which have potential and then buy them to fix them up

* They can make a healthy profit by selling a building for 2-3x what they bought it for

* A developer has more accountability/risk and much more specific knowledge

* They have to know which neighborhoods are worth buying in, which lots are good/bad, and what makes/breaks a specific property

* They have capital leverage and labor leverage

* Beyond the property developer might be a famous architect/developer where just having your name on a property increases its value

* Above that might be a property developer who builds entire communities

* Above that – someone who funds real estate through an investment trust

* Beyond that – someone (or a team of people) who understands the real estate market and the tech business (how to code/recruit developers/build a good product), and knows how to raise money from VCs

* Think – something like Zillow

* This team/individual would have all forms of leverage – labor (people working for him/her), code, capital (money from investors)

* As you climb the chain – You layer in more knowledge which can only be gained on the job, more accountability/risk-taking, more capital, and more labor

Judgment Is the Decisive Skill in an Age of Infinite Leverage (Listen) | Episode 25

* First aim to get leverage, and once you have leverage – your judgment becomes the most important skill

* How do you get leverage?

* Get it permisionlessly – learn to code, create podcasts, become a good writer

* Through permission – get people to work for you, or raise capital

* “All the great fortunes are created through leverage” – Naval Ravikant

* In high leverage positions (like a CEO), most of the time you’re paid based on your judgment ability

* Definitions:

* Wisdom is knowing the long-term consequences of your actions

* Judgment is wisdom on a personal domain (wisdom applied to external problems)

* True judgment ability comes from experience

* “Intellect without any experience is often worse than useless” – Naval Ravikant

* You get the confidence that intellect gives you along with some credibility, but because you had no skin in the game and no real experience….”you’re just throwing darts”

* The people with the best judgment are actually among the least emotional

* “The thing that prevents you from seeing what’s actually happening are your emotions; our emotions are constantly clouding our judgment” – Naval Ravikant

* Let’s sum up:

* First, you’re accountable for your judgment

* Judgment is the exercise of wisdom

* Wisdom comes from experience

* That experience can be accelerated through short iterations

* “Investment books are sort of the worst place to learn about investment”

* To get good at investing, you need broad-based judgment and thinking – the best way to obtain this is to study everything (including a lot of philosophy)

* Philosophy makes you more stoic/less emotional and more likely to make better decisions (so you have better judgment)

* The more outraged somebody gets, the worse their judgment probably is

* “If someone’s constantly tweeting political outrage and seems like an angry person, you don’t want to hand them the keys to your car let alone the keys to your company”

Set and Enforce an Aspirational Hourly Rate (Listen) | Episode 26

* “No one is going to value you more than you value yourself” – Naval Ravikant

* So set a high personal hourly rate and stick to it

* Always factor your time into any decision (as well as your personal hourly rate)

* So if your personal hourly rate is $60, and you estimate it will take you an hour and a half to return a $40 product, it’s not worth it

* You have a finite amount of high-output mental hours each day – “Do you want to use them to run errands and solve little problems or do you want to save them for the big stuff?”

* “You can spend your life however you want, but if you want to get rich, it has to be your number one overwhelming desire” – Naval Ravikant

* This means it has to come before ANYTHING else

* Advice – Look forward to the future and set an aspirational hourly rate

* Way back, Naval’s aspirational hourly rate was $5,000/hour (even though he was only making a fraction of this at the time)

* Today, Naval estimates he’s actually beaten his goal

* “It should seem and feel absurdly high. If it doesn’t, it’s not high enough.” – Naval Ravikant

* If you can outsource something for less than your hourly rate, outsource it

* Even for things like cooking

* Paul Graham has said (directed to Y Combinator startups):

* “You should be working on your product, getting product-market fit, exercising, and eating healthy. That’s it. That’s kind of all you have time for while you’re on this mission.”

Work as Hard as You Can (Listen) | Episode 27

* “If getting wealthy is your goal, you’re going to have to work as hard as you can” – Naval Ravikant

* BUT – “Hard work is absolutely no substitute for who you work with and what you work on”

* The hierarchy of importance:

* “What you work on is probably the most important thing” – Naval Ravikant

* AKA Product-Market-Founder fit (how well you personally are suited to a business”

* Next – Picking the right people to work with

* Third – How hard you work

* But – they’re like 3 legs of a stool, if you shortchange any one of them the whole stool is gonna fall down

* The order of operations when building a business/career:

* First – Figure out what you should be doing

* Is there a market that’s emerging that you’re interested in?

* Is there a product you could build which would fall in line with your specific knowledge?

* Second – Surround yourself with the best people possible

* “No matter how high your bar is, raise your bar” – Naval Ravikant

* “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.” – Naval Ravikant

* A good tip on deciding which startup to work for – Pick the one that will have the best alumni network for you in the future

* Third – Work as hard as you can (AFTER you’ve picked the right thing to work on and the right people to work with)

* “Nobody really works 80-120 hours a week sustainably at high-output with mental clarity” – Naval Ravikant

* Knowledge workers tend to sprint while they’re working on something that they’re inspired/passionate about and then they rest

* Sprint —> Rest —> Re-asses —> Try Again

* (You end up building a marathon of sprints)

* Inspiration is perishable

* When you have the inspiration, act on it right then and there – otherwise you probably won’t do it

* Be impatient with actions and patient with results

* “If I have a problem that I discover in one of my businesses that needs to be solved, I basically won’t sleep until the resolution is in motion” – Naval Ravikant

Be Too Busy to “Do Coffee” (Listen) | Episode 28

* Naval once tweeted – “You should be too busy to do coffee while keeping an uncluttered calendar”

* The ONLY way to stay focused and be able to do the most high-impact work/what you’re most inspired about is to constantly, RUTHLESSLY, decline meetings

* It’s fine to make connections and “do coffee” early in your career when you’re exploring

* But later in your career when you’re exploiting – “You have to ruthlessly cut meetings out of your life”

* If someone wants to have a meeting, suggest a phone call

* If they want a phone call, suggest an email

* When you do have meetings, make it a walking meeting (or a standing meeting), keep them short, and keep them small

* “Any meeting with 8 people in it sitting around a conference table – nothing is getting done in that meeting, you’re literally just dying one hour at a time” – Naval Ravikant

* When you’ve done something important or valuable, busy people will meet with you

* Suggest – “Hey, here’s what I’ve 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.”

* You HAVE to come with a proper calling card

* “Product progress is the resume for the entrepreneur” – Naval Ravikant

* You NEED proof of work to get a meeting with a busy person

* “A busy calendar and a busy mind will destroy your ability to do great things in this world” – Naval Ravikant

* If you want to be able to do great things you need free time and you need a free mind.

Keep Redefining What You Do (Listen) | Episode 29

* Naval tweeted – “Become the best in the world at 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 you’re doing” – Naval Ravikant

* Some of the most successful people in the world get paid for just being “them”

* Oprah, Joe Rogan, etc. – they’re being authentic to themselves

* But – keep changing what you do until you’re number one

* It should be something that aligns with your specific knowledge, skill sets, interest, and capabilities

* You should be thinking:

* “I want to be the best at what I do”

* “What I do is flexible, so that I’m the best at it”

* (It’s not an overnight discovery, it’s a long journey)

* A company should search for product-market fit

* An entrepreneur should search for founder-product-market fit

Escape Competition Through Authenticity (Listen) | Episode 30

* Humans are highly memetic creatures – we tend to copy what everybody else is doing, including our desires

* Very often, you get trapped in the wrong game because you’re competing

* The best way to escape competition is to just be authentic to yourself

* If you’re building and marketing something which is an extension of who you are, no one can compete with you on that

* Think – It’s near IMPOSSIBLE to compete with someone like Joe Rogan or Scott Adams

* This is easiest to see in art, but even entrepreneurs are authentic (the businesses and product they create should be authentic to their desires and means)

* “Authenticity naturally gets you away from competition” – Naval Ravikant

* In entrepreneurship, the masses are never right

* “If the masses knew how to build great things and create great wealth we’d all already be done. We’d all already be rich by now.” – Naval Ravikant

* “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” – Naval Ravikant

* The great founders tend to be authentic iconoclasts

* As Robert Frost said – “Combine your vocation and your avocation” (what you love to do and what you do)

* Long term, if you’re good and successful at what you do, you’ll find you’re pretty much doing your hobbies for a living

* “Ideally you want to end up specializing in being you” – Naval Ravikant

Play Stupid Games, Win Stupid Prizes (Listen) | Episode 31

* When you’re being authentic, competition matters a whole lot less

* Silicon Valley tech industry businesses tend to be winner take all

* When you see competition, this can make you fly into a rage

* You’re often 1 step away from a completely different business, and sometimes you need to take that one step

* But you won’t be able to take it if you’re fighting over a booby prize (aka playing a stupid game), blinded by competition

* A personal example from Naval:

* He was running Epinions (an online product review site independent of Amazon) a while back…

* The space eventually turned into Trip Advisor and Yelp

* “This is where we should have gone. We should have done more local reviews. There’s more value to having a review for a scarce item (like a local restaurant) than some camera which might have 1,000 reviews on Amazon. But before we could get there, we got caught up in the whole comparison shopping game.” – Naval Ravikant

* The whole space went to 0 as Amazon ended up winning the online retail game

* “We should have been looking at what the consumer really wanted, and stayed authentic to ourselves – which is reviews, not price comparison” – Naval Ravikant

* “We should have gone more and more into esoteric items that needed to be reviewed where customers had less and less data and wanted reviews more badly”

* “If we stayed authentic to ourselves, we would have done better” – Naval Ravikant

Eventually, You Will Get What You Deserve (Listen) | Episode 32

* Naval tweeted – “Apply specific knowledge with leverage and eventually you’ll get what you deserve”

* (You could also add to that, apply: judgment or accountability)

* Results take TIME

* “If you’re counting, you’ll run out of patience before it actually arrives” – Naval Ravikant

* Everybody wants results immediately, but you have to put in the hours

* Put yourself in a good position with the specific knowledge, the accountability, the leverage, and your authentic skill set which allows you to be the best in the world at what you do (but you have to enjoy it)

* Then just keep doing it, doing it, and doing it, and don’t keep track, and don’t keep count

* “On a long enough time scale, you do get paid, but it can easily be 10 or 20 years” – Naval Ravikant

* In entrepreneurship, you just have to be right ONCE

* And the good news is you can take as many shots on goal as you want (usually every 3-5 years, 10 at the slowest)

* Nivi has an equation:

* Your eventual outcome = (the distinctiveness of your specific knowledge) x (how much leverage you apply) x (how often your judgment is correct) x (how accountable you are for the outcome) x (how much society values what you’re doing) x (how long you can keep doing it) x (your improvement rate with learning and reading)

* But the thing that matters most – find something you’re good at that the market values

* If you’re good at it – you’ll keep it up, develop the judgment, and eventually take on accountability (all the other variables fall into place)

* “Product-market fit is inevitable if you’re doing something you love to do and the market wants it” – Naval Ravikant

Reject Most Advice (Listen) | Episode 33

* “Avoid people who got rich quickly, they’re just giving you their winning lottery ticket numbers” – Naval Ravikant

* “The best founders I know listen to and read EVERYONE, but then they ignore everyone and make up their own mind” – Naval Ravikant

* They have their OWN internal model of how to apply things to their situation and don’t hesitate to discard information if necessary

* Remember – “If you survey enough people, all the advice will cancel to 0”

* When you hear a piece of advice/information, ask yourself:

* “Is this true?”

* “Is this true outside of the context of what that person applied it in?”

* “Is it true in my context?”

* “Do I want to apply it?”

* Reject most advice, but remember you have to listen to/read enough of it to know what to reject and what to accept

* Here’s how Naval views the purpose of advice:

* “I 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.'” – Naval Ravikant

* “90% of my tweets are just maxims that I carve for myself that are then mental hooks to remind me when I’m in that situation again” – Naval Ravikant

* Like Naval’s tweet – “If you can’t see yourself looking with someone for life, then don’t work with them for a day”

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