“How to Get Rich without Relying on Luck? Navar’s Wealth Philosophy (Part One)
Construction has a broad definition. Building a product/service may involve design, development, manufacturing, logistics, procurement, and operations. In every industry, there are definitions of “builders.” In the tech industry, builders could be the Chief Technology Officer (CTO), programmers, software or hardware engineers. In the laundry industry, builders may be responsible for constructing laundry services, ensuring smooth laundry processes, ensuring all clothes arrive at the right place at the right time, and so on.
On the other hand, there’s sales. Sales also have a very broad definition. Sales doesn’t necessarily mean selling to individual customers, it can refer to marketing, communication, recruiting, fundraising, motivating others, or even public relations. It’s a broad category.
Overall, the startup model in Silicon Valley usually works best. Typically, in a startup with two founders, one excels in sales on a world-class level, while the other excels in product development on a similar level. This is a magical combination, and startup investors and tech investors are always trying to find this combination.
When someone possesses both, they have “superpowers,” being able to create an entire industry, like Elon Musk and Steve Jobs.
When you’re just starting out, focusing on building skills is more important when striving for recognition. Because building products/services is an area where it’s hard for a salesperson to transition into later in their career, as it requires a significant amount of focused time. But builders can transition into sales work later in their careers, especially if they naturally possess good communication skills. Bill Gates once said, “I’d rather teach an engineer sales and marketing, than try to teach sales and marketing people how to engineer.”
Not all knowledge can be taught. In fact, the most profound things are often unteachable, but everything is learnable. Learning in a specific area often stems from some innate traits in your genes, or soft skills learned in childhood that are difficult to acquire later in life, or learning new things that others don’t know how to do, or learning through professional training, making pattern matches in highly complex environments, and developing judgment in specific fields.
A classic example is investment, but expertise can exist in any field. It can be judgment in managing a truck fleet or judgment in weather forecasts.
Expertise is the knowledge you focus on. Especially as you enter the latter part of life, like after your twenties, you can hardly choose the specific knowledge you hold. Instead, you can only continue building on the knowledge you’ve accumulated up to that point.
Expertise is obtained more through following your talents, internal curiosity, and love for things. It’s not through learning the most popular professions at school, or by entering fields investors think are popular.
If you’re not 100% passionate about something, individuals with 100% passion for it will surpass you by far, as in the domain of knowledge and ideas, the power of compounding and the leverage effect truly apply.
If someone uses 1000x leverage, and one person is right 80% of the time while another is right 90% of the time, the person who is correct 90% of the time will gain returns hundreds of times higher than the other person due to leverage, compounding effects, and correctness. Therefore, you really need to ensure you excel in the field you’re involved in, and have a strong desire for knowledge.
Navar stated that he once aspired to be a great scientist, but when he looked back on what he was truly good at and where he invested his time, it revolved more around making money, researching technology, sales, and communicating with people. These skills came naturally to him, feeling like a game.
He said the first one to point out his true expertise was his mother, who casually mentioned it in the kitchen. At about fifteen or sixteen, he told a friend he wanted to be an astrophysicist, but his mother said, “No, you’ll go into business.”
Because she noticed that every time they walked down the street, Navar would comment on why the local pizza shop sells pizza slices a certain way, why they use certain toppings, why the ordering process is this way and not that.
Therefore, his mother knew Navar had a strong interest in business, and later his fascination with science combined with it, ultimately led him to venture into the tech business field.
So, your expertise is often observed by others, especially those who know you, and it manifests in specific situations.
Regarding imparting expertise, it is mainly achieved through on-the-job training, accomplished through apprenticeship. This is why the best professions are often based on apprenticeship or self-taught talent, as these domains are areas where society has not found effective training and automation yet.
Warren Buffett sought out Benjamin Graham after graduating. Graham was the author of “The Intelligent Investor,” which had a profound impact on the development of value investing theory.
At that time, Buffett said he would work for Graham for free, but Graham replied, “In truth, you’re overpriced, free is too expensive.”
Navar stated that Graham was entirely correct. For the valuable knowledge that a master like Graham was to pass on to Buffett, he should have paid him a substantial sum.
Expertise is usually at the forefront of technology, art, and communication.
Navar believes Scott Adams is a good example. Through compelling arguments and videos, he accurately predicts outcomes, making him one of the most trusted figures in the world.
And all of this is the specialized knowledge he has accumulated over the years, as his fascination with hypnosis in his youth taught him to communicate through comics. He adopted the Periscope live video platform early on, conducting numerous conversation practices. He read all relevant books and applied that knowledge in his daily life.
This is an example of someone accumulating specific knowledge in their career. It’s highly creative, contains technical elements, and never will be automated. No one can take away Adams’ expertise and advantage, he can create wealth through his personal brand.
To become wealthy, achieve scalable income, you need to leverage. Leveraging can come from labor, capital, or through code or media. However, most, such as labor and capital, require others to provide them. With labor, someone must follow you. With capital, someone must give you money, assets to manage, or machines.
To acquire these things, you must build a reputation, and as much as possible, act in your own name, which is risky. Therefore, accountability is a double-edged sword. It allows you to receive praise when things go well and take on the main responsibility when things fail.
Those who put their name on things are not foolish; they are just confident. If you look at people like Oprah Winfrey, Donald Trump, Elon Musk, and more, these individuals can become wealthy solely through their name, as their name itself is a powerful brand. At the same time, they are responsible for their personal brand, risking failure and humiliation in public.
In modern society, there are no debtor’s prisons, and people are not imprisoned or executed for losing others’ money. However, we are deeply ingrained with the concept of being unwilling to fail in public under our own name. Those who are capable of failing publicly under their own name actually gain significant power. While taking risks, they also reap great rewards.
Being accountable is your path to leverage, reputation, and equity.
When negotiating with others and determining how to reward you, this decision will be based on how easily you can be replaced. If you assume a lot of responsibility, it makes it difficult to replace you. Then, they will have to give you equity to share in the growth of the business.
Equity holders take on greater risk than employees and creditors, but in return, they can access almost unlimited potential returns. The same logic can be applied to all jobs. Essentially, being accountable for your actions is akin to holding equity in all jobs. You take on greater downside risk for the chance of greater upside potential.
Moreover, accountability is crucial when working on building products, within a team, or in a business. A truly efficient team is small but precise, with each part having clear responsibilities.
You can say, “This person is responsible for product development, that person is responsible for marketing communication, another person is responsible for fundraising, and one more is in charge of pricing strategy and online advertising.” This way, if mistakes are made, you clearly know whose responsibility it was. At the same time, if things progress smoothly, you also know who deserves credit.
Without accountability, there is no incentive mechanism. Without accountability, you cannot establish reputation.
Archimedes once said, “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.”
We all know what leverage is when using a seesaw or lever. We understand its physical principles, but the vast majority of people do not understand the potential of leverage in modern society and what the latest forms of leverage are.
The oldest form of leverage is labor, that is, people working for you. Instead of moving stones alone, I can hire 10 people to move stones. Just by directing where the stones should go, many stones can be moved. Everyone understands leverage in the form of labor to an extent, so society overly emphasizes labor as a form of leverage.
That’s why when you get promoted and have a large number of subordinates, your parents are pleased. Also, when you present your company to many naive people, they ask, “How many employees work in your company?” They gauge how much leverage and influence you actually have based on this.
Navar believes that labor is the worst form of leverage you can use. Managing others is extremely complicated, requiring exceptional leadership. You’re just a step away from revolt or being devoured by others.
Moreover, this is a highly competitive form of leverage. Entire civilizations have been destroyed due to struggles like these. For instance, communism and Marxism are essentially struggles between capital and labor. It’s a trap to an extent.
Therefore, Navar suggests avoiding reliance on labor-based leverage as much as possible. You need to work with as few people as possible to leverage other forms of leverage.
The second form of leverage is capital, which we don’t understand as deeply as labor. Capital leverage might require more intelligence to use correctly, and how we use it is constantly changing. Management skills from a century ago may still hold reference value today, but stock investment skills from a century ago may no longer be applicable in today’s markets.
Capital is a more complex form of leverage, the major tool people have used over the past century to amass immense wealth. It has likely been the dominant form of leverage over the past century.
You can understand this by looking at the wealthiest people. They are bankers, corrupt politicians printing money, essentially those manipulating vast amounts of funds.
Many people are averse to capital as a form of leverage, as they see it as unfair. This intangible asset can accumulate and be inherited across generations, ultimately leading to some individuals owning vast wealth, while others cannot share.
However, capital is a powerful form of leverage. It can be transformed into labor or other things. It’s precise and analytical.
Capital also has excellent scalability. If you excel at managing capital, you can more easily manage increasingly more capital, while managing more people is much more difficult.
Capital is a good form of leverage, but the challenge lies in how to obtain it. This is why Navar mentioned expertise and embracing accountability earlier.
If you have expertise in a field and are willing to take responsibility, have a good reputation in that field, people will provide you with capital and you can use capital leverage to gain more capital.
The most interesting and significant form of leverage is products with zero marginal costs. This is the new form of leverage.
This form only emerged in the last few hundred years. It started with the printing press, accelerated with the advent of broadcast media, and now truly explodes with the push of the internet and programming technology.
Now, you can program, write books, do podcasts, write tweets, blog, produce YouTube content, and more without needing others’ help or their funds. And you can amplify your results exponentially.
A podcast is a form of leverage. Long ago, a host needed to sit in a hall, speak in front of an audience, reaching maybe a few hundred people. But nowadays, a single episode of a podcast by Joe Rogan can reach tens of millions.
Three or four decades ago, someone might need luck to appear on TV, which was another’s leverage. They could manipulate information, enjoy economic benefits from programs, or charge you. Even so, being able to access this form of leverage was deemed lucky.
Today, thanks to the internet, all you need is to buy a cheap microphone, connect it to a laptop or iPad, and people can hear your voice.
This latest form of leverage is the source of new wealth and the birthplace of new millionaires. Previous wealth was mainly based on capital leverage, like in Buffett’s world.
The next generation of wealth is entirely based on code or media. Individuals like Oprah Winfrey, Donald Trump, Elon Musk, Larry Page, and Mark Zuckerberg, use code leverage.
Tech products, especially media products, have a significant feature: their marginal costs are zero. Creating another copy is cost-free.
Having one more person watching your video or listening to your podcast incurs no additional cost to you, but increases revenue. These zero marginal cost things take time to start because the money you earn per user initially is minimal, but with time, their accumulative effect can be astounding.
The effort Joe Rogan puts into his current podcast is as much as he put into his first, but in the latest episode, he might earn millions, whereas in the first, he might have lost money. This is an example of zero marginal costs.
By blending labor, capital, and code/media together perfectly, you can create miracles. This is where startups in tech really stand out, using a small but efficient labor force – engineers, designers, and product developers; adding capital for marketing, advertising, and scaling; and incorporating a wealth of code, media, podcasts, and network content to spread it all.
This is a magical combination, and this is why you see tech startups suddenly rise, achieving tremendous returns through immense leverage.
Navar recommends people to learn coding. Because he believes the robot revolution has already occurred. Robots are here, and their numbers far exceed humans; it’s just that for now, we keep them centralized in data centers for heat dissipation and efficiency. We put them in servers. They exist inside computers, and it’s these robot “brains” that perform all tasks.
For example, every exceptional software developer now has an army of robots working for them while they sleep. Once they’ve coded, these robots keep running.
The robot army has arrived. We are in the midst of the robot revolution. Today, we are gradually adding hardware components, becoming more familiar with concepts like self-driving cars, planes, ships, delivery robots, Boston Dynamics robots, and more.
But robots that conduct your internet searches already exist. Those that clean your video and audio and transmit them worldwide exist. Those that offer customer service, answering numerous questions, exist.
The robot army is here. They are inexpensive. The bottleneck is coming up with intelligent and engaging tasks for them to perform.
Fundamentally, you can command this army. Commands must be issued in computer language, the language they can understand.
These robots aren’t intelligent. They must be precisely instructed on what to do and how. Programming is a superpower, as now you can communicate with them in their language and tell them what to do.
(To be continued)”