How to Get Rich (Without Getting Lucky)

What's up, everyone? Welcome back to another episode of Founders Journal. I'm Alex Lieberman, co-founder and executive chairman of Morning Brew. As I've mentioned, with the new and improved Founders Journal, I'm going to act as your startup Sherpa, curating the best content for entrepreneurs in the world, summarizing it so you don't have to read it yourself, and analyzing it so you have actionable takeaways to apply to your business and your life. For today's episode, I'm going to be reading quite possibly the most viral Twitter thread In the world of business ever. In 2018, Naval Ravikant wrote How to Get Rich Without Getting Lucky, which is a 40-tweet thread that covers everything from what wealth is and what it isn't to the power of leverage, to finding your specific knowledge, to the power of optimism. And for those of you who don't know him, Naval is the founder of AngelList as well as a prolific angel investor and writer. I'm going to read through this tweet by tweet. Stop and analyze a select few that struck me as particularly interesting, and then continue on with the thread. So let's dive in. Okay, here we go. How to Get Rich Without Getting Lucky by @Naval, May 31st, 2018. Seek wealth, not money or status. Wealth is having assets that earn while you sleep. Money is how we transfer time and wealth. Status is your place in the social hierarchy. I'm going to dive right into this one. So here's how I think about it. Wealth is ultimately how you have freedom of time. When I think about the greatest gift that selling Morning Brew gave me, it was the freedom to choose how I spend my time. And by the way, having an abundance of time is also not ideal in the equation. For most of us, we need to feel the feeling of growth in our lives. And growth likely means doing things with the time that you have, which is why even though I had freedom of time after stepping out of the CEO role for Morning Brew, I wasn't happy because I didn't have a sense of purpose. And more importantly, I didn't feel like I was growing. In terms of status, the reason you shouldn't seek status is because it makes your happiness dependent on other people. There's a famous quote that the worst part of being famous is not being famous anymore. And I think that's largely Because when you are famous, it is extremely hard to decouple your sense of self-worth from the way in which people treat and perceive you. Said differently, status games are like a drug. They feel really good in the short term, but there's long-term residue that becomes outside of your control. Next tweet. Understand that ethical wealth creation is possible. If you secretly despise wealth, it will elude you. Next. Ignore people playing status games. They gain status by attacking people playing wealth creation games. You're not going to get rich renting out your time. You must own equity, a piece of a business to gain your financial freedom. Okay, I'm going to dive into this one. I think it's important here to understand how Naval is defining rich. What does rich mean to him? My guess is he would define it as having both financial freedom and time freedom. Time freedom being you get to dictate exactly how your calendar is set up. So, for example, if you work as a partner in corporate law for 40 years, you will likely achieve financial freedom, but it will be exceedingly difficult to achieve time freedom until you actually retire. And then you are faced with the terrifying question of, was it all worth it to achieve that financial freedom if you didn't have time freedom until you were in your mid to late 60s? And so then the question becomes, how do you accomplish financial and time freedom? And it's by decoupling your time from your money. And the way you do that is through being an owner of something. By the way, being an owner does not mean you need to be a venture-backed unicorn founder. Actually, if you were to ask me what is the likeliest path to be rich, I wouldn't advocate for that path. Being an owner means having uncapped upside in the profits and equity value of your business and being in control of your calendar. And if you were to ask me what's the best path to be a true owner where you can achieve financial freedom, you have time freedom, and the odds are generally pretty good, I would say it is building a niche internet business that allows you to use software or offshore talent to solve a problem for a very specific audience. So a great example of this is Brett Williams, who built Design Joy. He used to be a designer at a company. He left, and now he runs Design Joy, which is a productized design service. It requires only a few hours of Brett's time per week. But it does well into the 7 figures each year, and it has maybe one full-time employee, but it actually may be fully freelancers. Okay, let's move into the next one. You will get rich by giving society what it wants but does not yet know how to get at scale. Okay, so I have this sneaky suspicion that the largest companies all figured out a way to solve a problem that consumers didn't realize they had because it required too much imagination or too much of a logical leap to arrive at that new reality. And I just want to reread the tweet before I go into the examples. Naval says, you will get rich by giving society what it wants but does not yet know how to get at scale. There's the famous quote that Henry Ford said, which is, if you had asked people at the time what they wanted, they would have said faster horses. And the reason for that is people can only think in terms of the technology that exists today. Consumers can only think one order of magnitude bigger, but But my view is the greatest inventions are typically several orders of magnitude better. The first car, or turning everyone with a car into a taxi driver, a.k.a. Uber, turning everyone with a home into a hotelier, a.k.a. Airbnb, condensing dozens of disparate devices into a single one, the iPhone, getting instant search results via the internet when the analog was a book. These are many orders of magnitude better at solving a problem for customers, But in general, customers can only think about what is one order of magnitude greater and leverages existing technology. Next tweet. Pick an industry where you can play long-term games with long-term people. This one is so important because the world is moving so fast in a way that's making people feel like they need to move faster than they can or they should be. Things take time. Patience is a virtue, and I feel like we're losing sight of that. In this rapid-speed world we live in, thanks to the internet, technology, and social media. So I want to tell you a quick story. I met a man recently who has built a beautiful life for himself and his family. They have multiple homes, multiple cars. He has freedom of time, but he is the definition of a 50-year overnight success that most people in my parents' or grandparents' generation can likely resonate with. But not people who are closer to my age. In the '70s, this man moved to the US from Iran with little to his name. He started a business in the HVAC diagnostic space. And by the way, it just makes you realize how many different ways there are to make money. And over literally 5 decades, he's built a business that has offices around the world. It has 150 employees, and now he's able to pass down this business to his children. In a world where so much media oxygen is given to venture-backed startups that got to a billion-dollar valuation in 2 years, or a founder that got their company to $10 million of ARR in 12 months. The pendulum of success has swung so far in favor of speed, but that's not the game most people should be playing. So my view is there's a 3-step thought experiment that I think most people should go through to think about building wealth through a business over the long term. First question you should ask yourself and answer: What are my 1 to 2 unique skill sets that I'll never delegate from myself? Second, what are the 1 to 2 niches that I know more than most people about? This could be email newsletters, it could be customer success in B2B SaaS, it could be wedding planning. What is your thing? And finally, what is a business in that niche that you answered in question 2 that has already proven success and product-market fit that you can recreate over a decade or 2 and add your own unique spin or value to? To me, that is the best way to have the interest and the idea that will allow you to build something that compounds over 10+ years. And by the way, 10 is on the short end. Let's move on to the next tweet. The internet has massively broadened the possible space of careers. Most people haven't figured this out yet. So if you're interested by what Naval says here, I would just go to the YouTube channel called Starter Story and you will see how many random ways there are to make money and build wealth on the internet. But what I'll also say is I think tons of random careers and businesses have always existed. Just think back to Dirty Jobs, but think back to the story I just told you about the guy who has the HVAC diagnostics business. Random businesses that make a lot of money have always been around, but knowing what they are and how they accomplished what they did has never been easier because of the internet and content platforms. So I think it feels more common than it actually is. Next tweet: Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest. Next one: Pick business partners with high intelligence, energy, and above all, integrity. This is everything to me. Integrity is the most important, and then intelligence and energy are important, but they don't matter if you cannot trust your partner. I think one thing that's missing from Naval's tweet here is complementary skill set. In the early days of a business, you are dividing most of the activities of the business between you and your partner or partners. So having diversity of skills gives you the best odds of covering all the needs of the business in a high enough quality way. Next tweet: Don't partner with cynics and pessimists. Their beliefs are self-fulfilling. Let's go deeper in this one. This one definitely strikes a chord with me personally. I love the quote. Pessimists sound smart. Optimists get rich. For a long time as an entrepreneur, I had a certain insecurity that my natural optimism would make me blind to cracks forming in a business and would make me a bad entrepreneur. I had this story that you need to be cynical and you need to be a bit paranoid to be a successful founder. Now, I still think that having a vigilant mindset is important in building a company. But my current working belief is I wouldn't change my optimism for anything, and I would rather create a habit around asking myself the right important questions like, what could go wrong here? Or what's the second-order effect of this decision? Questions that would allow me to create vigilance in my life rather than being default vigilant or pessimistic. Next tweet: Learn to sell. Learn to build. If you can do both, you will be unstoppable. If you've been listening to Founders Journal for a long time, you know where I stand on this tweet from Naval. But I believe you either need to be great at sales or great at building software if you want to build a great business today. And over time, I also believe that taste and creativity will get more and more important as technology and AI accelerate the pace at which software can be built. or content and stories can be created. And, you know, just to round this out, for me, I focused on my ability to sell and storytell because I can't code for shit. You have to figure out what is going to be your lane. Next tweet: Arm yourself with specific knowledge, accountability, and leverage. Then he says, specific knowledge is knowledge that you cannot be trained for. If society can train you, it can train someone else and replace you. Next tweet. Specific knowledge is found by pursuing your genuine curiosity and passion rather than whatever is hot right now. To go deeper here, specific knowledge, or what Naval calls specific knowledge, to me is synonymous with this idea of zone of genius, which I've talked about in the past, made famous by the Conscious Leadership Group. And zone of genius or specific knowledge is this idea that you have a set of skills. We all do. We all have a set of skills that we are uniquely suited to do. That draws upon our special gifts and strengths that we were born with. And also, when you do these specific skills, you feel like time is melting away. One of your most important jobs in life and in career is figuring out what is your specific knowledge or what is within your zone of genius. For me, those 2 things, or the one or 2 things, is curiosity and storytelling. And so I continue to figure out how can I sharpen the knife that is curiosity and storytelling. You need to figure out what those one or two things are in your life. Make sure you are tripling down on those things. And when you think about your weaknesses, just make sure your weaknesses aren't bad enough to hold you back from really leaning into your zone of genius. Next tweet: Building specific knowledge will feel like play to you, but will look like work to others. Next one: When specific knowledge is taught, it's through apprenticeships, not schools. So just to say a little bit more here, I think the reason that Naval says this, that specific knowledge is taught through apprenticeships, not schools, is because specific knowledge or your zone of genius is not something that you can be trained for. It is pulled out of you through experience. You realize your specific knowledge through watching it spring into action in real life and realizing, hey, I'm pretty damn good at this thing. For example, I didn't realize I was good at sales when I was sitting in a marketing class at the University of Michigan. I realized it when I got on a call as a 22-year-old with a Fortune 50 CMO, and I got them to commit to spending 6 figures with Morning Brew on the spot. You find your specific knowledge, which I think of as unique skills, through experience, and you increase the speed at which you find those skills by expanding your surface area of experiences, by having more and more experiences in the world. Next tweet. Specific knowledge is often highly technical or creative. It cannot be outsourced or automated. Next one. Embrace accountability and take business risks under your own name. Society will reward you with responsibility, equity, and leverage. On to the next. The most accountable people have singular, public, and risky brands. Oprah, Trump, Kanye, and Elon. Next one. Quote, give me a lever long enough and a place to stand, and I will move the earth. From Archimedes. Archimedes. Whoever knows Greek mythology is going to scream at me because I don't know how to pronounce his name. But Archimedes, I'm going to call him. Next one. And this is where we get into leverage. Fortunes require leverage. Business leverage comes from capital, people, and products with no marginal cost of replication, which is code and media. So we're going to spend a little bit of time on this one. This is probably the most important tweet in the entire thread. To be financially independent and time independent, you need to create leverage for yourself. Why? Well, let's use an example. Let's say you put in an hour of work and you get $100 out. And then let's say you put in 2 hours of work and you get $200 out. This is the definition of trading time for money. And there are only 2 ways to increase how much money you make in this equation. You can spend more hours working, but realistically, most people will cap out at 12 hours, and that's generous. Or you can get paid more per hour of work, which is possible. Look at New York City corporate lawyers who bill $5,000 an hour, but there is a ceiling to how much you can make per hour. And also it means you need to spend more time to make more money. Leverage is this magic tool that gives you more than 24 hours in a day, and it comes in 4 forms. Capital, meaning you put $100 into the S&P 500. That money can grow whether or not you're working at all hours of the day. So your money appreciating is not tied at all to the effort you've put in. The next is people. You hire a team or delegate tasks to an offshore executive assistant. And again, you have the ability to free up your time while being able to service more customers. So you are decoupling your time spent efforting with how much money you can make. The third is code. And the next 2 I'm going to share are what Naval, you'll see in a second, calls permissionless leverage. You need permission from people, you need permission to get paid, but you don't need permission from code or content. So code, the example here is you work for 25 hours to create a piece of software once. You can now distribute that same piece of software to billions of people that are connected to the internet without having to spend additional time for each new customer. That is the definition of— and the final is media or content. You create a piece of content. The amount of time it takes to distribute it to the 1 millionth person who's going to read it is no different than the time it took to deliver it to the first person who read it. The example of Morning Brew is Morning Brew's newsletter team is 4 full-time employees at 4.5 million subscribers, which is what we have today. And that is the exact number of full-time employees we had on the newsletter 4 years ago when we had 50,000 subscribers. So you don't need more time put into the thing to get more people to see the thing and ultimately to monetize the thing in a bigger and greater way. So now we're going to go into a few more tweets about leverage that Naval shares. He then says capital means money. To raise money, apply your specific knowledge with accountability and show resulting good judgment. Then he says labor means people working for you. It's the oldest and most fought over form of leverage. Labor leverage will impress your parents, but don't waste your life chasing it. Then he goes into permissionless leverage. He says code and media are permissionless leverage. They are the leverage behind the newly rich. You can create software and media that works for you while you sleep. Next, an army of robots is freely available. It's just packed in data centers for heat and space efficiency. Use it. He then says, if you can't code, write books and blogs, record videos and podcasts, a.k.a. me, because I cannot code. Next up, leverage is a force multiplier for your judgment. Here, what he's saying is basically the extent to which you have good ideas and make thoughtful decisions, leverage will multiply the value or how good those decisions or those ideas are. He then says judgment requires experience but can be built faster by learning foundational skills. Next, he says there is no skill called business. Avoid business magazines and business classes. I generally agree with this, but I would say studying the beliefs and behaviors of business greats through biographies, autobiographies, like the writings of proven entrepreneurs and founders, is a worthy activity, but only after you step into the arena yourself and have the experience of building a business yourself. He then says study microeconomics, game theory, psychology, persuasion, ethics, mathematics, and computers. Then reading is faster than listening. Doing is faster than watching. He then says you should be too busy to, quote, do coffee while still keeping an uncluttered calendar. This may sound confusing or like an oxymoron. What I believe Naval means by this is you should be spending your time on your highest leverage tasks, which likely won't be doing coffee. Now, that doesn't mean you won't have time for coffee. It just means the things you'll likely want to prioritize require deep thought for periods of uninterrupted time, which is why going and doing coffee with someone won't be worthy of your time. I think that's what he's trying to say here. Next, Naval says set and enforce an aspirational personal hourly rate. If fixing a problem will save less than your hourly rate, ignore it. If outsourcing a task will cost less than your hourly rate, outsource it. He then says work as hard as you can, even though who you work with and what you work on are more important than how hard you work. I'll just add a caveat here. Working really hard is really important, but I'd also say it is really important for you to be self-loving and work in the way in which your body is capable. Most entrepreneurs are very self-critical and competitive. I am one of those people. I used to beat myself up for being unfocused and distracted and needing to take frequent breaks while I worked. I don't do that anymore because the way I think about it is my brain is the way that it is, and me needing to say. Only work for 20 minutes and then take a 5-minute break. It sounds ridiculous for some people, but this is a tradeoff for all of the beautiful ways in which my brain works. Of course, I'm always trying to find ways to work better and harder, but I'm using my current state of work as the baseline. So I'm trying to get better from where I am today, and that's my reference point versus in the past my reference point was being competitive with how other people work, and it just wasn't in the realm of possibility for who I am and the way that my brain works. Next up, become the best in the world at what you do. Keep redefining what you do until this is true. He then says there are no get-rich-quick schemes. That's just someone else getting rich off you. Second to last one, he says apply specific knowledge with leverage and eventually you will get what you deserve. And the final tweet, which I just want to share a few thoughts on, he says 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. All I can say to Naval on this last tweet, which I'm going to read again because I think it's so important, is he said, 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. Amen, Naval. After going through exactly what Naval is talking about and not feeling what I thought I'd feel from becoming wealthy, I have boiled down what I believe to be the things that actually have given me happiness. And I just want, for those who don't kind of know my story, just to set the context here. Sold my business in 2020, had a really fortunate financial outcome, thought I would be happy from it, was not happy from it. I've spent a lot of time thinking about what are the things that truly make me happy. There are 4 things. I'm gonna read them to you, and then I'm gonna reflect on them at the end. The first is feeling loved by those that I love deeply. The second is feeling like I'm always growing closer and closer to my full potential. The third is doing the things that I say I'm going to do, a.k.a. having personal integrity. And the fourth is being playful. Now, the hilarious and sad irony of all of this is that I did not need an exit. I did not need to sell my company. I did not need wealth to experience any of the 4 things that I just mentioned that drive my happiness. And so that is How to Get Rich Without Getting Lucky by Naval Ravikant. Now, I would love to hear from you. How do you like this new format? Again, this show is for you all, and I want to keep evolving it in a way that makes it most valuable for the entrepreneur who's continuously trying to be better at building their company. This format is the one where I scour the internet for the top 1% of content for entrepreneurs, and then I summarize it and synthesize it for you so you get the gist without spending all the time on it. But I want to know, is that valuable for you? Are you enjoying it? Shoot me an email to alex@morningbrew.com. Let me know. And as always, thank you so much for listening to Founders Journal, and I'll catch you next episode.