Naval is one of those internet voices who I’ve come across intermittently on a podcast, on Twitter, and by third-party reference. He was not someone I was supremely familiar with, but who, every time I heard him speak, said something of interest. I picked this book up to see if the goods were really there.
The “Navalmanack” was easy to read and concise, which is as fine a compliment as can be bestowed to a book of this sort. Rather than my highlights being burdensome paragraphs, they turned out to almost all be nuggets of wisdom contained in a sentence or two.
I’ve compiled my notes below, most of which are direct quotes or paraphrases of the text. My personal notes are italicized.
On Personal Wealth and Investing
- 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.
- Wealth creation is an evolutionarily recent positive-sum game. Status is an old zero-sum game. Those attacking wealth creation are often just seeking status. Status is a very old game. We’ve been playing it since monkey tribes. It’s hierarchical. Who’s number one? Who’s number two? For number three to move to number two, number two has to move out of that slot. So, status is a zero-sum game.
- Ethical wealth creation is possible. If you secretly despise wealth, it will elude you.
- I thought this was a fairly unique and counterintuitive thought. Normally, people praise foregoing wealth in place of going into public service, or some other such “status” game. Naval proposes just the opposite, and I agree with him. Edison, Ford, Gates, Musk—these people are creating more value in wealth creation than most public servants have done their entire lives. – Jasper
- Getting rich is about knowing what to do, who to do it with, and when to do it.
- What to do:
- If you don’t know yet what you should work on, the most important thing is to figure it out. You should not grind at a lot of hard work until you figure out what you should be working on.
- 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.
- Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest.
- Who to do it with:
- Pick an industry where you can play long-term games with long-term people.
- Compound interest also happens in your reputation. If you have a sterling reputation and you keep building it for decades upon decades, people will notice. Your reputation will literally end up being thousands or tens of thousands of times more valuable than somebody else who was very talented but is not keeping the compound interest in reputation going.
- To me, the principal-agent problem is the single most fundamental problem in microeconomics. If you do not understand the principal-agent problem, you will not know how to navigate your way through the world.
- When to do it:
- You will get rich by giving society what it wants but does not yet know how to get. At scale.
- What to do:
- The more you know, the less you diversify.
- Value your time at an hourly rate, and ruthlessly spend to save time at that rate. You will never be worth more than you think you’re worth.
- Back when you could have hired me, my hourly rate, I used to say to myself over and over, is $5,000 an hour. Today when I look back, really it was about $1,000 an hour. Of course, I still ended up doing stupid things like arguing with the electrician or returning the broken speaker, but I shouldn’t have, and I did a lot less than any of my friends would.
- I thought this was a useful heuristic for deciding when and how to spend your time. My only hesitation with valuing my time that high, is that it only applies when I’m spending it being productive. Deciding against returning a speaker for example, and saving an hour but losing $500, would only worth it if I spent that hour working rather than, say, mindlessly browsing the internet.
- I think people have a hard time understanding a fundamental fact of leverage. If I manage $1 billion and I’m right 10 percent more often than somebody else, my decision-making creates $100 million worth of value on a judgment call. With modern technology and large workforces and capital, our decisions are leveraged more and more.
- One form of leverage is labor—other humans working for you. It is the oldest form of leverage, and actually not a great one in the modern world.
- I would argue this is the worst form of leverage that you could possibly use. Managing other people is incredibly messy. It requires tremendous leadership skills. You’re one short hop from a mutiny or getting eaten or torn apart by the mob.
- Money is good as a form of leverage. It means every time you make a decision, you multiply it with money. Capital is a trickier form of leverage to use. It’s more modern. It’s the one that people have used to get fabulously wealthy in the last century. It’s probably been the dominant form of leverage in the last century.
- The final form of leverage is brand new—the most democratic form. It is: “products with no marginal cost of replication.” This includes books, media, movies, and code. Code is probably the most powerful form of permissionless leverage. All you need is a computer—you don’t need anyone’s permission.
- Probably the most interesting thing to keep in mind about new forms of leverage is they are permissionless. They don’t require somebody else’s permission for you to use them or succeed. For labor leverage, somebody has to decide to follow you. For capital leverage, somebody has to give you money to invest or to turn into a product. Coding, writing books, recording podcasts, tweeting, YouTubing—these kinds of things are permissionless.
- How do you get to retirement?
- Well, one way is to have so much money saved that your passive income (without you lifting a finger) covers your burn rate.
- A second is you just drive your burn rate down to zero—you become a monk.
- A third is you’re doing something you love. You enjoy it so much, it’s not about the money. So there are multiple ways to retirement.
- I think macroeconomics, because it doesn’t make falsifiable predictions (which is the hallmark of science), has become corrupted. You never have a counterexample when studying the economy. You can never take the US economy and run two different experiments at the same time.
- Specific knowledge is knowledge you cannot be trained for. If society can train you, it can train someone else and replace you. Specific knowledge is found by pursuing your genuine curiosity and passion rather than whatever is hot right now.
- When specific knowledge is taught, it’s through apprenticeships, not schools. Specific knowledge is often highly technical or creative. It cannot be outsourced or automated.
- If you can’t code, write books and blogs, record videos and podcasts.
- Technology democratizes consumption but consolidates production. The best person in the world at anything gets to do it for everyone.
- To include products. Billionaires and people like you or me have the same phones, the same cars (generally), the same quality news networks, etc.
- Society, business, & money are downstream of technology, which is itself downstream of science. Science applied is the engine of humanity. Corollary: Applied Scientists are the most powerful people in the world. This will be more obvious in the coming years.
- It’s much more important today to be able to become an expert in a brand-new field in nine to twelve months than to have studied the “right” thing a long time ago.
- Embrace accountability and take business risks under your own name. Society will reward you with responsibility, equity, and leverage.
- My website used to be operated under a pseudonym. The reason I now operate under my own name is after comments like this from people I respect. When you have your own name on the line, you have skin in the game. If you say something brilliant you can reap the rewards and if you say something heinous you may pay the price.
- We waste our time with short-term thinking and busywork. Warren Buffett spends a year deciding and a day acting. That act lasts decades.
- Ways to get lucky:
- Hope luck finds you: The first kind of luck is blind luck where one just gets lucky because something completely out of their control happened. This includes fortune, fate, etc.
- Hustle until you stumble into it: There’s luck through persistence, hard work, hustle, and motion. This is when you’re running around creating opportunities. You’re generating a lot of energy, you’re doing a lot to stir things up. It’s almost like mixing a petri dish or mixing a bunch of reagents and seeing what combines. You’re just generating enough force, hustle, and energy for luck to find you.
- Prepare the mind and sensitive to chances others miss: A third way is you become very good at spotting luck. If you are very skilled in a field, you will notice when a lucky break happens in your field, and other people who aren’t attuned to it won’t notice. So, you become sensitive to luck.
- Become the best at what you do. Refine what you do until this is true. Opportunity will seek you out. Luck becomes your destiny: The last kind of luck is the weirdest, hardest kind, where you build a unique character, a unique brand, a unique mindset, which causes luck to find you.
- What is the most important thing to do for younger people starting out? Spend more time making the big decisions. There are basically three really big decisions you make in your early life: where you live, who you’re with, and what you do.
- If you’re going to live in a city for ten years, if you’re going to be in a job for five years, if you’re in a relationship for a decade, you should be spending one to two years deciding these things. These are highly dominating decisions. Those three decisions really matter.
- When you’re young, you have time. You have health, but you have no money. When you’re middle-aged, you have money and you have health, but you have no time. When you’re old, you have money and you have time, but you have no health. So the trifecta is trying to get all three at once.
- A contrarian isn’t one who always objects—that’s a conformist of a different sort. A contrarian reasons independently from the ground up and resists pressure to conform.
- Any belief you took in a package (ex. Democrat, Catholic, American) is suspect and should be re-evaluated from base principles.
- To be honest, speak without identity. I used to identify as libertarian, but then I would find myself defending positions I hadn’t really thought through because they’re a part of the libertarian canon. If all your beliefs line up into neat little bundles, you should be highly suspicious.
- Charisma is the ability to project confidence and love at the same time. It’s almost always possible to be honest and positive.
- If I’m faced with a difficult choice, such as: Should I marry this person? Should I take this job? Should I buy this house? Should I move to this city? Should I go into business with this person? If you cannot decide, the answer is no.
- My notetaking is Twitter. I read and read and read. If I have some fundamental “ah-ha” insight or concept, Twitter forces me to distill it into a few characters. Then I try and put it out there as an aphorism.
- Commit externally to enough people. For example, if you want to quit smoking, all you have to do is go to everybody you know and say, “I quit smoking. I did it. I give you my word.”
- I don’t believe in specific goals. Scott Adams famously said, “Set up systems, not goals.”
- I think almost everything that people read these days is designed for social approval. I know people who have read one hundred regurgitated books on evolution and they’ve never read Darwin. Think of the number of macroeconomists out there. I think most of them have read tons of treatises in economics but haven’t read any Adam Smith.
- I only want to be around people I know I’m going to be around for the rest of my life. I only want to work on things I know have long-term payout.
- If wisdom could be imparted through words alone, we’d all be done here.