BECOME A KNOWLEDGE ATHLETE

WISDOM ON WEALTH BUILDING FROM NAVAL RAVIKANT

In today’s episode, I’d like to introduce you to a man I’ve come to really enjoy learning from over the years, and he is a name that I find, sadly, very few people have heard of. His name is Naval Ravikant he’s a very successful entrepreneur and investor. He is the co-founder, chairman and former CEO of a company called AngelList, which is a website for start-ups and angel investors to connect and make deals. It’s been called the ‘Match.com’ of startups and seed funding, and Naval has invested in some 200+ startups, many of which would be very familiar to you today. Companies like Uber, FourSquare, Twitter, Poshmark, Thumbtack, Notion, Clubhouse, and the list goes on and on. He’s had 70 successful exits and 10 unicorn companies in their portfolio, which is a company that is privately held and valued at over a billion dollars. His net worth is estimated somewhere between $50 and $100 million dollars, which makes him really rich, but that’s not what makes him special, in my opinion.

I’m not one of those people that uncritically grants rich people automatic respect just for being rich. Being wealthy can certainly signal that there is something special about the person, like higher intelligence, maybe a high tolerance for risk, maybe really good at putting deals together, or whatever else being wealthy might indicate, but it doesn’t make the person a good person or someone automatically deserving of respect or adulation. There are lots of rich people in the world today that are most definitely not making the world a better place or deserving of our respect. However, Naval Ravikant is one of the good guys, in my opinion, as he spends his days now really just offering up his wisdom and insight for free all over the internet. Hopefully, after today’s show, you’ll search out Naval Ravikant on YouTube and start consuming his wisdom. An extremely intelligent gentleman with lots of wisdom on a variety of areas.

What I’ll be sharing in today’s show is some of Ravikant’s wisdom on the difference between money and wealth, and 4 pieces of wisdom he regularly shares on building a business that serves your life versus a life that serves your business. To be clear, that is my description of his wisdom on this topic, I’ve never heard him use those words but it’s the way that I interpret the advice. If you follow what he suggests, not only do the odds of success go way up, your odds of not being a prisoner or victim of your business go way up as well.

The way Ravikant typically talks about wealth versus money is by talking about wealth, money, and status. What he says, by the way, is not much different from many other great teachers over time about wealth, money, and status. I don’t think any of this is groundbreaking views, he just has a really nice way of talking about it that may resonate with a certain type of individual. It certainly resonates with me, which is why we’re talking about it.

What he says, essentially, is that wealth is synonymous with equity, assets, and freedom. Wealth is what most people want when, in fact, they typically talk about money. Wealth is income and freedom generation from assets and equity which removes the ‘work for money’ demands of time, location (or place), and specific tasks. Money, on the other hand, is simply how wealth is transacted and transferred. Money is an I.O.U. for something you did in the past, maybe something you promise to do in the future, and might aid you in accumulating wealth if you apply it appropriately to investment, paying down debt, acquiring true assets, and being smart with the money. He calls money ‘social credits’ as money represents a way that we can move more or less freely throughout society, and also signal to the world around us some perceived level of importance. You can use your money to buy a Cadillac Escalade or a Ferrari, which is supposed to be some kind of social signal of where the owner of that vehicle my reside on a social hierarchy.

However, I’ll shift briefly to echo what famed startup guru and investor, Paul Graham, says about money and wealth. He says, “Wealth is the fundamental thing…You can have wealth without having money. If you had a magic machine that could, on command, make you a car or cook you dinner or do your laundry, or do anything else you wanted, you wouldn’t need money. Whereas, if you were in the middle of Antarctica, where there is nothing to buy, it wouldn’t matter how much money you had.” Ravikant talks in a similar way about the differences between money and wealth. They both talk about wealth including things like health, time, relationships, family, etcetera. You can be wealthy without having any money. The example of living in the middle of Antarctica, where there is nothing to buy, puts it into perspective a bit. It makes money useless, more or less. What good is having lots of money if there is nothing to buy. Money, as we know, can’t solve happiness problems, it can only solve money problems. That doesn’t make it useless, by any means, but we need to put it into proper perspective when talking about what it can and can’t do for us. When you talk about wanting more money, what you are most likely referring to is wanting more wealth, or at least the feeling of wealth.

Alright, we’ve covered the differences between money and wealth, let’s talk about the 4 things Ravikant recommends for creating wealth. The first thing he always says is that you have to provide something that people want, but don’t realize it, at scale. Let me say it again…provide something that people want, that’s kind of a given, but then he adds this very subtle (but vital) statement, ‘but don’t realize it’, at scale. What he means by that is if you’re solving problems people already know they have, there is likely an already established market for that thing. If there is already an established market for that thing, and you want to also solve that thing, you can, for sure, but now you’re in competition with all the other purveyors of that product or service. He refers to this as the ‘playing it safe in the middle’. You see a need, the customer knows they have a need, you see opportunity to make a living so you get some training on that thing and, voila, you’re in business! You’re never going to get rich doing that thing, and that may not be your goal. Your goal may simply be to make a living, and there is nothing wrong with that. The downside of this path is that you’re replaceable. If you’re doing something that somebody else can be taught, you’re replaceable, either by another human being or technology. If a role can be broken down into clear steps, it can now be copied and duplicated at scale. When something can be duplicated at scale, it’s a very appealing candidate for automation, and machines are far better at repetitive tasks than you and I are.

If you’re solving problems people already know they have, there is already an established market for that thing. It is far more effective to operate at a frontier than it is to play it safe in the middle. Stanford business professor, Jeffrey Pfeffer, said, “you can’t be normal and expect abnormal returns.” Our job should always be to challenge, innovate, push the limits, find new frontiers, find problems the market didn’t even realize it had, and develop new ways of solving those problems. One of the things he also says on the problem-solving part is that you have a much better shot at income and wealth creation when you develop more rare and specific knowledge. Specific knowledge is knowledge that can’t be easily copied. Specific knowledge must be taught through things like apprenticeships or self-taught careers because those are things that society still hasn’t figured out how to automate. If the market can figure out how to teach it and automate it, they will. If it’s difficult to learn even from a book, it’s likely difficult for the machine to learn it as well.

The second thing Ravikant recommends for creating wealth is to ‘escape competition with authenticity’. What does he mean? He gives three simple steps for escaping competition with authenticity: step 1, get extreme clarity on, and then refine what your thing is, step 2, surround yourself with amazing people and huge thinkers, and step 3, hustle for 5 to 20 years. “Whaaat! Hustle for 5 to 20 years, Blaine! I thought this was advice for getting rich!” Nope, I never said it was advice for getting rich. This is Naval Ravikant’s advice and experience for creating wealth and escaping the competition. He’s invested in and advised some of the most successful companies on earth and these are the things he has seen consistently among the winners and missing among the losers. With this recommendation, he is simply expressing what he has seen that works in the market for generating something of value and it’s to be genuinely authentic by moving to the edge of knowledge. The edge of knowledge is where general knowledge of something ends and specific knowledge takes over and puts distance between you and the competition. Get clarity, and then refine what it is you’re going to offer to the world, surround yourself with amazing people and big thinkers, and then grind longer than what ordinary people are willing to grind toward success.

The third thing Ravikant says, and we’ve talked about this many times on this show, is that it can be very difficult to get truly wealthy and financially free renting out your time. How do you know if you’re renting out your time? Simply ask yourself if you are still making money when you stop working. If you stop working at 6 o’clock, does your income also stop? If you don’t produce on the weekend, or on vacation, does your income stop? When you get sick and take a few days off to recover, does your income stop? The simple math equation to test if you’re renting out your time is more work equals more money, less work equals less money. If your outputs are very closely related with your inputs, you’re renting out your time, which is the same as saying you’re renting out your life. If you want to reach a point of financial freedom sooner rather than later, you’ve got to own equity in something that produces while you sleep.

Don’t misunderstand this point from Ravikant. He’s not saying that you can never be financially free by working your ass off. I know plumbers and mechanical contractors, business owners, who work very hard at what they do and could likely step away from their companies forever and be set. There are awesome stories out there of people who worked quietly for 20, 30, 40 years or more and diligently saved and invested their money and are worth millions of dollars. There is a whole movement referred to as the FIRE movement, which stands for financial independence, retire early, where the primary philosophy is to maximize your income while greatly minimizing your expenses for some period of time so that you can invest the greatest portion of your income into investment vehicles that will allow you to retire at an early age. Those people are renting out there time too, they’re just looking out into the future and saying, ‘I’ll only rent out my time and life for a period of time until I don’t have to, and I’m going to be very strategic about it’. It’s not that you can’t build wealth and become financially free by renting out your time, it just takes a long time and is one of the more difficult paths to wealth building and financial freedom, unless you have some equity in the thing you’re toiling away at.

At a bare minimum, you’ve got to drive your billable hourly rate as high as it can possibly go, and then be very strategic about how you live your life and invest your rental income. The rental income being your pay for renting out your time and expertise. When Ravikant talks about this point, he’s really referring to getting rich. Since he’s worked with so many startups and founders of unique companies, he’s seen and helped people become really rich, as well as wealthy. What he’s saying is that to get fabulously rich, like the founders of Uber, or Twitter, or Clubhouse, you can’t expect to get there by renting out your time. You’ve got to see the world in a way that allows you to see and create opportunities that didn’t exist previously, and then capitalize on those opportunities and have equity in the thing you’re building.

The fourth recommendation gives to aspiring value creators is ‘long term games with long term people’. Long term games with long term people speaks directly to the relationship over transaction mindset I talk about all the time in coaching calls and on this show. You’ve got to partner with people smarter than you to find and solve big problems in the market and create value as a result. Short terms games with short term people refers to transactional relationships where everyone is trying to get themselves rich. Long term games and people are helping others create wealth too. Long term games with long term people means finding really smart people who want to create value for others and, as a result, will get big rewards in the long term.

I said I’d give you 4 recommendations from Naval Ravikant for getting rich and building wealth, but this podcast is all about creating value, so let me give you a fifth recommendation from him. His fifth piece of advice is simple: get leverage and then scale, scale, scale! We live in an age of almost infinite leverage with the speed of information and technology advancements. You get leverage by having specific knowledge, a unique vision for solving problems the market doesn’t even realize it has (think Uber or AirBnb), surrounding yourself with really big thinkers and very smart people, and then scaling. The way to really earn in the modern world is through knowledge and leverage, not through renting your time. Ravikant has a term that I’ve since adopted, which is the term ‘knowledge athlete’. He’s adamant, as am I, that knowledge is power and specific knowledge is a superpower. You have to develop specific knowledge in an area that can be of value to world and then leverage that knowledge by solving problems that people will happily pay for. I’m also very much for solving big problems in the world that maybe people won’t pay for but can still help the world if they’re solved. Since we’re talking about business, wealth, and financial freedom as taught by Naval Ravikant, we’re primarily talking about leveraging your specific and unique superpowers and knowledge in a way that allows you to build equity and create wealth.

Thank you for investing your two most valuable currencies this week, my friends, your time and attention. I hope I’ve been able to add some value for you again this week and I look forward to doing this all again with you next week. Until then, I’m out…