How to Get Rich (without getting lucky)
Contrary to popular belief, Twitter’s platform is more than simply a neverending clash between anonymous users on the web. Occasionally, public figures who’ve amassed significant success in their careers, share some meaningful advice via Twitter Threads 🧵
Unfortunately, even the best of advice gets lost in the depths of the Twitter-verse. Fear not, for content curation is here! I’ve decided to create a series of articles outlining some of the interesting threads I’ve found. I’ll share the raw tweets, then follow up with some well-needed context that may have been overlooked.
Today’s Twitter Thread, titled “How to Get Rich (without getting lucky)”, is authored by Naval Ravikant. He’s an entrepreneur and investor, well-known as being the co-founder and former CEO of AngelList, a venture capital investment platform targetting lucrative startups.
It’s all about capital allocation. To acquire assets, it’s reasonable to assume that having some liquidity or know-how with leveraging debt is necessary, in the first place. Seeking money short-term may actually be a better option if you have none, to begin with. He doesn’t specify the liquidity of the asset class, but let’s assume he’s referring to the spectrum between real estate and ETFs. The reason why acquiring assets can lead to this passive stream of wealth is an increase in market demand or limited supply. Alternatively, an asset could be as abstract as an automated logistics operation that processes and fulfills orders “while you sleep”.
Your time doesn’t scale. The only variable you can reasonably modulate is your earnings rate per unit of time spent working, which is bound by the market. You may very well be an expert consultant, however, if you charge $7000/hr when the high-end market rate is $1000/hr, you’ll find it exceedingly difficult to find paying clients for your services. This is known as scaling vertically — allocating efforts towards gaining a greater depth of expertise in your craft. While expertise can get you far, you’re constrained by the hours in a day.
Always validate market needs. Often, entrepreneurs will focus with intense tunnel vision on providing society with what it does not know how to get, without ever considering whether it’s of value, to begin with. Pick a domain, talk closely with people in your target market, then objectively clarify the market need (deriving a solution comes next)! Naval mentions “At scale” — this refers to the distribution of a good or service. If you’re selling an online course, global distribution can be easily achieved by leveraging the use of several digital channels; Udemy is a great example of this. If you’re selling artwork, achieving global distribution could involve outsourcing fulfillment to a local warehouse that boasts impressive lead times.
Choosing a business partner is arguably one of the most important decisions you can make as an entrepreneur. Your work environment will either empower or erode your energy, passion, and wallet. Successful companies are led by solid leadership, period. Partnering with pessimists and cynics destabilizes leadership teams, whose effects propagate down the chain of command to the workers. Who suffers the most? The customers.
Hustling is at the intersection between talk and work. If you build great products and/or services but can’t sell them, your efforts may have well been in vain. Here’s a simple fact: people love to buy, they do not like to be sold. Selling shouldn’t be synonymous with aggressive persuasion, sprinkled with excessive bravado, but instead be an invitation for prospective customers to discover possibilities — solutions to problems they don’t need convincing.
As Naval describes later in the thread,
“Specific knowledge is knowledge that you cannot be trained for. If society can train you, it can train someone else, and replace you.”
Specific knowledge is bred through passion and curiosity to research a particular domain in greater detail than what’s widely available. It’s about learning through failure and success, hands-on, by virtue of experience and/or mentorships — guided by individuals who possess knowledge and traits, uncommon in combination with one another. For instance, expertise in real estate, complemented by a strong background in property law is specific knowledge that can distinguish you from your competitors in the market.
In the statement “with no marginal cost of replication”, Naval may be referring to (1) operating within a domain with a high barrier of entry to compete and/or (2) possessing a well-built, non-trivial company infrastructure. Either option is considered leverage to qualify a company as being valuable.
Leverage isn’t primitive. Having a pool of incredibly talented employees is leverage. Drafting exclusivity contracts with suppliers is leverage. Harnessing an abundance of investment capital to grow a business is leverage. The idea here is that leverage is a vector whose components can push a company to be perceived as valuable if the combination & magnitude of each component cannot be easily replicated by competitors.
Experience tends to be the outcome of procedural repetition and experimentation. Having experience instills industry standards and relevant know-how that qualifies individuals to craft well-defined judgment calls. Learning foundational skills streamlines the trial-and-error phase in providing clarity in identifying common pitfalls to avoid.
Thoughts? I’m open to discussion ✍️
Thanks to Naval Ravikant for the insightful thread!
Twitter: https://twitter.com/naval
