I’m not an expert on wealth. Far from it. I think I have a better than average understanding on the way money works, but I find myself learning something new every week.
Depending on your definition (let’s assume Wealth is the monetary kind), I don’t think I have achieved it yet. I grew up in a middle class family in the country. We didn’t have a lot growing up, but never went without anything either.
I’m fascinated by Naval Ravikant’s definition. Most of the below is taken from The Almanack of Naval Ravikant. Which is actually a collection of his tweets and other anecdotes.
(1) Wealth doesn’t equal money
(2) Working for your time doesnt equal wealth either
This is a bit disappointing for everyone in a job whose inputs is tied to their outputs. Which is 99% of everyone.
Without ownership, when you are sleeping you are not earning.
Everybody who really makes money at some point owns a piece of product, a business or some IP. Real wealth is created by starting your own companies or even by investing. In an investment firm, they’re buying equity. These are the routes to wealth. It doesn’t come through the hours.
(3) You need to develop specific knowledge, accountability and leverage
According to Naval, specific knowledge is the unique thing that cannot be trained for. It is hard to substitute, outsource or replace.
What is specific knowledge exactly? It is typically something creative, highly technical and unique. It’s that thing you are good at, or want to be good at. It’s that thing that you are better than everyone else at. It feels like play to you, but work to others.
Examples are : Sales skills, musical talent
Specific knowledge is your innate talents, curiosity and your passion. Paul Graham agrees.
Naval also suggests to be the best in the world at what you do. Keep redefining until this is true.
Another mnemonic is to “Productise yourself”.
(4) You need to Embrace Accountability
Take business risks under your own name. Society will reward you with leverage.
(5) You need to create leverage
Leverage is a scaling force multiplier. It comes from (a) capital, (b) people and (c) products with no marginal cost of replication
You can create leverage through Capital, Labor or Permissionless leverage
(a) Capital = Money. Basically this is your money working for you when you sleep.
(b) Labor means people working for you. This is the oldest form of leverage. The people work for you as you sleep. This is how most organisations function. This is also the hardest. Managing other people is incredibly messy, and requires fantastic leadership skills.
Capital and Labour are permissioned leverage. Someone has to give you capital, and people have to want to follow you. You need permission.
(c) Code and Media are permissionless leverage. You can create software and media that works for you as you sleep. You can write blogs, record videos and make podcasts. eg Joe Rogan makes millions from a podcast, Mr Beast, Jeff Bezos, Zuck etc etc
Permissionless leverage is the best kind of leverage
It’s the best kind of leverage. It multiplies your efforts. You don’t need anyone’s permission (permissionless). It can work for you while you sleep.
Wealth is about owning businesses and assets that earn while you sleep. Apply specific knowledge, with leverage, and eventually you will create wealth
(Naval finishes with : When you are finally wealthy, you’ll realise it wasn’t what you were seeking in the first place, but that is for another time )
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