You probably have come across the viral “How To Get Rich” tweetstorm from Naval—he’s kinda famous on Twitter, and also he’s the co-founder of AngelList. He’s a prolific tech investor in companies like Twitter, Uber, and many more.

Here is part one of the Naval’s expanded points from his tweetstorm in detail (Read summarised post here).

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 is assets that earn while you sleep

Wealth is the thing that you really want. Wealth is assets that earn while you sleep. Wealth is the factory, the robots that’s cranking out things. Wealth is the computer program that’s running at night, that’s serving other customers. Wealth is… even money in the bank that is being reinvested into other assets, and into other businesses. Even a house can be a form of wealth because you can rent it out, although that’s probably a lower use of productivity of land than actually doing some commercial enterprise. So, my definition of wealth is much more businesses and assets that can earn while you sleep.

But really the reason you want wealth is because it buys you your freedom. So, you don’t have to wear a tie like a collar around your neck. So, you don’t have to wake up at 7:00 AM, and rush to work, and sit in commute traffic. So, you don’t have to waste away your entire life grinding all the productive hours away into a soulless job that doesn’t fulfill you.

So, the purpose of wealth is freedom. It’s nothing more than that. It’s not to buy fur coats, or drive Ferraris, or sale yachts, or jet around the world in your Gulfstream. That stuff gets really boring, and really stupid really fast. It’s really just so that you are your own sovereign individual. You’re not gonna get that unless you really want it. And the entire world wants it. And the entire world is working hard at it. And to some extent it is competitive. It’s a positive sum game, but there are competitive elements to it. Because there’s a finite amount of resources right now in society. And to get the resources to do what you want, you have to stand out.

Money is how we transfer wealth

Money is how we transfer wealth. Money is social credits. It is the ability to have credits and debits of other people’s time. If I do my job right, if I create value for society, society says, “Oh, thank you. We owe you something in the future for the work that you did in the past. Here’s a little IOU. Let’s call that money.”

And that money gets debased because people steal the IOUs. The government prints extra IOUs. People renege on their IOUs. But really what money is trying to be, it is trying to be a reliable IOU from society that you are owed something for something you, or someone who gave you the money did in the past. And we can transfer these IOUs around. So, really money is how we transfer wealth.

Status is your rank in the social hierarchy

There are fundamentally two huge games in life that people play. One is the money game. Because money is not gonna solve all of your problems, but it’s gonna solve all of your money problems. So, I think that people know that. They realize that, so they want to make money.

But at the same time many of them deep down believe that they can’t make it. They don’t want any wealth creation to happen. So, they sort of virtue signal by attacking the whole enterprise by saying, “Well, making money is evil. You shouldn’t do it. Blah, blah, blah.”

But what they’re trying to do is they’re actually playing the other game, which is the status game. They’re trying to be high status in the eyes of other people watching by saying, “Well, I don’t need money. We don’t want money.”

And then status is just your ranking in the social hierarchy. So, wealth is not a zero-sum game. Everybody in the world can have a house. Because you have a house doesn’t take away from my ability to have a house. If anything the more houses that are built, the easier it becomes to build houses, the more we know about building houses, and just the more people that can have houses. So, wealth is a very positive sum game. We create things together. We’re starting this endeavor to create this hopefully piece of art that explains what we’re doing. At the end of it something brand new will be created. It’s a positive sum game.

Status on the other hand is a zero sum game. It’s a very old game. We’ve been playing it since monkey tribes. And it’s hierarchical. Who’s number one? Who’s number two? Who’s number three? And for number three to move to number two, number two has to move out of that slot. So, status is a zero-sum game.

Politics is an example of a status game. Even sports is an example of a status game. To be the winner, there must be a loser. I don’t fundamentally love status games. They play an important role in our society, so we figure out who’s in charge. But fundamentally you play them because they’re a necessary evil.

The problem is in an evolutionary basis, like if you go back thousands of years, status is a much better predictor of survival than wealth is. You couldn’t have wealth before the farming age, before farmers because you couldn’t store things. Hunter-gatherers carried everything on their backs. So, hunter-gatherers lived in entirely status based societies. Farmers started going to wealth-based societies. And the modern industrial economies are much more heavily wealth-based societies.

People creating wealth will always be attacked by people playing status games

But there’s always a subtle competition going on between status and wealth. For example, when journalists attack rich people. Or like attack the technology industry, they’re really bidding for status. They’re saying, “No, the people are more important. And I the journalist represents the people, and therefore I am more important.”

The problem is that by playing these status games, to win at a status game you have to put somebody else down. That’s why you should avoid status games in your life because they make you into an angry combative person. You’re always fighting to put other people down, to put yourself and the people which you like up. And they’re always gonna exist.

There’s no way around it, but just realize that most of the times when you’re trying to create wealth, you’re actually getting attacked by someone else, and they’re trying to look like a goody-two shoes. But really what they’re doing is they’re trying to up their own status at your expense. They’re just playing a different game. And it’s a worse game. It’s a zero-sum game instead of a positive sum game.

Summary:

• Wealth is assets that earn while you sleep: businesses, products, media, robots, investments, land. Wealth is for freedom, not conspicuous consumption.
• Money is how we transfer wealth; it’s the social credits and debits of other people’s time. Money isn’t going to solve all your problems, but it’s going to solve your money problems.
• Status is your rank in a social hierarchy like politics or sports. It’s a zero-sum game: to be a winner, there must be a loser. Status is an old game that predicted survival in the hunter-gatherer days, before we had technologies for creating wealth.
• People creating wealth will always be attacked by people still playing status games.

Understand that ethical wealth creation is possible (Make Abundance for the World)

If you secretly despise wealth, it will elude you.

Ethical wealth creation makes abundance for the world

I think there is this notion that making money is evil, right? It’s like rooted all the way back down to money is the root of all evil.

People think that the bankers steal our money. And it’s somewhat true in that in a lot of the world there’s a lot of theft going on all the time.

The history of the world in some sense is this predator/prey relationship between makers and takers. There are people who go out and create things, and build things, and work hard on things.

Then there are people who come along with a sword, or a gun, or taxes, or crony capitalism, or Communism, or what have you. There’s all these different methods to steal.

Even in nature there are more parasites then there are non-parasitical organisms. You have a ton of parasites in you who are living off of you. And the better ones are symbiotic, they’re giving something back.

But there are a lot that are just taking. That’s just the nature of how any complex system is built.

But what I am basically focused on is true wealth creation. It’s not about taking money. It’s not about taking something from somebody else. But it’s from creating abundance.

Obviously, there’s not a finite number of jobs, or finite amount of wealth, otherwise we would still be sitting around in caves, figuring out how to divide up pieces of fire wood, and the occasional dead deer. So, most of the wealth in civilization, in fact not most, basically all of it has been created.

And it got created from somewhere. It got created from people. It got created from technology. It got created from productivity. It got created from hard work. So, this idea that it’s stolen is I think this horrible zero-sum game that people who are trying to gain status play.

Everyone can be rich

But the reality is everyone can be rich. And we can see that, by seeing that in the First World, everyone is basically richer than almost anyone who was alive 200 years ago.

200 years ago nobody had antibiotics. Nobody had cars. Nobody had electricity. Nobody had the iPhone. So, all of these things are inventions that have made us wealthier as a species.

Today, I would rather be a poor person in a First World country, than be a rich person in Louis the XIV’s France. I’d rather be a poor person today than aristocrat back then. And that’s just because of wealth creation.

The engine of technology is science that is applied for the purpose of creating abundance. So, I think fundamentally everybody can be wealthy.

And this thought experiment I want you to think through is imagine if everybody had the knowledge of a good software engineer, and a good hardware engineer. If you could go out there, and you could build robots, and computers, and bridges, and program them. Let’s say every human knew how to do that. What do you think society would look like in 20 years?

My guess is what would happen is we would build robots, machines, software and hardware to do everything. And we would all be living in massive abundance.

We would essentially be retired, in the sense that none of us would have to work for any of the basics. We’d even have robotic nurses. We’d have like machine driven hospitals. We’d have self-driving cars. We’d have farms that are 100% automated. We’d have clean energy.

So, at that point we can use technology breakthroughs to get everything that we wanted. And if anyone is still working at that point, they’re working as a form of expressing their creativity. They’re working because it’s in them to contribute, and to build and design things.

But I don’t think capitalism is evil. Capitalism is actually good. It’s just that it gets hijacked. It gets hijacked by improper pricing of externalities. It gets hijacked by improper yields, where that you basically have corruption, or you have monopolies.

Summary:

• Wealth isn’t about taking something from somebody else—it’s about creating abundance for the world.
• Everyone can be rich: if wealth were finite, we would still be sitting around in caves.
• In the first world, it’s better to be poor today than it was to be the richest man 200 years ago.
• Thought experiment: if everyone today was an engineer, in 20 years, children would be retired in riches from the moment they were born.

Free Markets Are Intrinsic to Humans

Free markets are intrinsic to the human species

Overall capitalism [meaning free markets] is intrinsic to the human species. Capitalism is not something we invented. Capitalism is not even something we discovered. It is in it to us in every exchange that we have.

When you and I exchange information, I want some information back from you. I give you information. You give me information. If we weren’t having a good information exchange, you’d go talk to somebody else. So, the notion of exchange, and keeping track of credits and debits, this is built into us as flexible social animals.

We are the only animals in the animal kingdom that cooperate across genetic boundaries. Most animals don’t even cooperate. But when they do, they cooperate only in packs where they co-evolve together, and they share blood, so they have some shared interests.

Humans don’t have that. I can cooperate with you guys. One of you is a Serbian. The other one is a Persian by origin. And I’m Indian by origin. We have very little blood in common, basically none. But we still cooperate.

And what lets us cooperate? It’s because we can keep track of debits, and credits. Who put in how much work? Who contributed how much? That’s all free market capitalism is. So, I strongly believe that it is innate to the human species, and we are going to create more, and more wealth, and abundance for everybody.

Everybody can be wealthy. Everybody can be retired. Everybody can be successful. It is merely a question of education, and desire. You have to want it. If you don’t want it, that’s fine. Then you opt out of the game.

But don’t try to put down the people who are playing the game. Because that’s the game that keeps you in a comfortable warm bed at night. That’s the game that keeps a roof over your head. That’s the game that keeps your supermarkets stocked. That’s the game that keeps the iPhone buzzing in your pocket.

So, it is a beautiful game that is worth playing ethically, rationally, morally, socially for the human race. And it’s going to continue to make us all richer, and richer until we have massive wealth creation for anybody who wants it.

Too many takers and not enough makers will plunge a society into ruin

That’s right. And so what those countries, political parties, and groups are reduced to playing the zero-sum game of status. In the process to destroy wealth creation, they drag everybody down to their level.

Which is why the U.S. is a very popular country for immigrants because of the American dream. Anyone can come here, be poor, and then work really hard and make money, and get wealthy. But you know even just make some basic money for their life.

Obviously, the definition of wealth is different for different people. A First World citizen’s definition of wealth might be, “Oh, I have to make millions of dollars, and I’m completely done.”

Whereas to a Third World poor immigrant just entering the country, and we were poor immigrants who came here when I as fairly young, to the United States, wealth may just be a much lower number. It may just be like, “I don’t have to work a manual labor job for the rest of my life that I don’t want to work.”

But groups that despise it will essentially bring the entire group to that level. If you get too many takers, and not enough makers, society falls apart. You end up with a communist country.

Look at Venezuela, right? They were so busy taking, and dividing, and reallocating, that people are literally starving in the streets, and losing kilograms of body weight every year just from sheer starvation.

Another way to think about it is imagine an organism that has too many parasites. You actually need some small number of parasites to stay healthy. And you need a lot of symbiotes. Like, all the mitochondria in all of our cells that help us respirate, and burn oxygen. These are symbiotes that help us survive. We couldn’t survive without them.

But to me those are partners in the wealth creation that creates the human body. But if you just were filled with parasites, if you got infected with worms, or a virus, or bacteria that were purely parasitical, you would die.

So, any organism can only withstand a small number of parasites. And when the parasitic element gets too far out of control, you die. Again I’m talking about ethical wealth creation. I’m not talking about monopolies. I’m not talking about crony capitalism. I’m not talking about mispriced externalities like the environment.

I’m talking about free minds, and free markets. Small-scale exchange between humans that’s voluntary, and doesn’t have an outsized impact on other.

But I think that kind of wealth creation, if a society does not respect it, if the group does not respect it, then society will plunge into ruin, and darkness.

Summary:

• Free markets are intrinsic to the human species. We’re the only animals who cooperate across genetic boundaries.
• One way we cooperate is by keeping track of credits and debits in voluntary exchanges.
• Free markets like this are beautiful games that keep food on our shelves—and can make us all wealthier and wealthier.
• But too many takers and not enough makers will plunge a society into ruin.
• Takers attack wealth creation with status games that drag everyone down to their level.

You’re not going to get rich renting out your time.

Own equity—a piece of a business—to gain your financial freedom.

You won’t get rich renting out your time

This is probably one of the absolute most important points. People seem to think that you can create wealth, and make money through work. And it’s probably not going to work. There are many reasons for that.

But the most basic is just that your inputs are very closely tied to your outputs. In almost any salaried job, even at one that’s paying a lot per hour like a lawyer, or a doctor, you’re still putting in the hours, and every hour you get paid.

So, what that means is when you’re sleeping, you’re not earning. When you’re retired, you’re not earning. When you’re on vacation, you’re not earning. And you can’t earn non-linearly.

If you look at even doctors who get rich, like really rich, it’s because they open a business. They open like a private practice. And that private practice builds a brand, and that brand attracts people. Or they build some kind of a medical device, or a procedure, or a process with an intellectual property.

So, essentially you’re working for somebody else, and that person is taking on the risk, and has the accountability, and the intellectual property, and the brand. So, they’re just not gonna pay you enough. They’re gonna pay you the bare minimum that they have to, to get you to do their job. And that can be a high bare minimum, but it’s still not gonna be true wealth where you’re retired.

Renting out your time means you’re essentially replaceable

And then finally you’re actually just not even creating that much original for society. Like I said, this tweetstorm should have been called “How to Create Wealth.” It’s just “How to Get Rich” was a more catchy title. But you’re not creating new things for society. You’re just doing things over and over.

And you’re essentially replaceable because you’re now doing a set role. Most set roles can be taught. If they can be taught like in a school, then eventually you’re gonna be competing with someone who’s got more recent knowledge, who’s been taught, and is coming in to replace you.

You’re much more likely to be doing a job that can be eventually replaced by a robot, or by an AI. And it doesn’t even have to be wholesale replaced over night. It can be replaced a little bit at a time. And that kind of eats into your wealth creation, and therefore your earning capability.

So, fundamentally your inputs are matched to your outputs. You are replaceable, and you’re not being creative. I just don’t think that, that is a way that you can truly make money.

You must own equity to gain your financial freedom

So everybody who really makes money at some point owns a piece of a product, or a business, or some kind of IP. That can be through stock options, so you can be working at a tech company. That’s a fine way to start.

But usually the real wealth is created by starting your own companies, or by even investors. They’re in an investment firm, and they’re buying equity. These are much more the routes to wealth. It doesn’t come through the hours.

You want a career where your inputs don’t match your outputs

You really just want a job, or a career, or a profession where your input is don’t match your outputs. If you look at modern society, again this is later in the tweetstorm. Businesses that have high creativity and high leverage tends to be ones where you could do an hour of work, and it can have a huge effect. Or you can do 1,000 hours of work, and it can have no effect.

For example, look at software engineering. One great engineer can for example create bitcoin, and create billions of dollars worth of value. And an engineer who is working on the wrong thing, or not quite as good, or just not as creative, or thoughtful, or whatever, can work for an entire a year, and every piece of code they ship ends up not getting used. Customers don’t want it.

That is an example of a profession where the input and the outputs are highly disconnected. It’s not based on the number of hours that you put in.

Whereas on the extreme other end, if you’re a lumberjack, even the best lumberjack in the world, assuming you’re not working with tools, so the inputs and outputs are clearly connected. You’re just using an ax, or a saw. You know, the best lumberjack in the world may be like 3x better than one of the worst lumberjacks, right? It’s not gonna be a gigantic difference.

So, you want to look for professions and careers where the inputs and outputs are highly disconnected. This is another way of saying that you want to look for things that are leveraged. And by leveraged I don’t mean financial leveraged alone, like Wall Street uses, and that has a bad name. I’m just talking about tools. We’re using tools.

Computer is a tool that software engineers use. If I’m a lumberjack with bulldozers, and automatic robot axes, and saws, I’m gonna be using tools, and have more leverage than someone who is just using his bare hands, and trying to rip the trees out by the roots.

Tools and leverage are what create this disconnection between inputs and outputs. Creativity, so the higher the creativity component of a profession, the more likely it is to have disconnected inputs and outputs.

So, I think that if you’re looking at professions where your inputs and your outputs are highly connected, it’s gonna be very, very, hard to create wealth, and make wealth for yourself in that process.

Summary:

• You won’t get rich renting out your time, because your inputs are too closely tied to your outputs. You’re not earning while you’re sleeping.
• Renting out your time means someone else will get the wealth from your time. They’re going to pay you the bare minimum to do your job.
• Renting out your time also mean you’re replaceable and not as creative as you could be. So you must own equity to gain your financial freedom.
• You get equity for work where your inputs don’t match your outputs. You could do an hour of work and it could have a huge effect—or you could do 1,000 hours of work and it could have no effect.
• You must have high creativity and leverage to decouple your inputs and outputs.

You will get rich by giving society what it wants but does not yet know how to get—at scale.

Give society what it wants, but doesn’t know how to get—at scale

That’s right. So, essentially as we talked about before, money is IOUs from society saying, “You did something good in the past. Now here’s something that we owe you for the future.” And so society will pay you for creating things that it wants.

But society doesn’t yet know how to create those things because if it did, they wouldn’t need you. They would already be stamped out big time.

Almost everything that’s in your house, in your workplace, and on the street used to be technology at one point in time. There was a time when oil was a technology, that made J.D. Rockefeller rich. There was a time when cars were technology, that made Henry Ford rich.

So, technology is just the set of things, as Alan Kay said, that don’t quite work yet. Once something works, it’s no longer technology. So, society always wants new things.

Figure out what product you can provide and then figure out how to scale it

And if you want to be wealthy, you want to figure out which one of those things you can provide for society, that it does not yet know how to get, but it will want, that’s natural to you, and within your skillset, within your capabilities.

And then you have to figure out how to scale it. Because if you just build one of it, that’s not enough. You’ve got to build thousands, or hundreds of thousands, or millions, or billions of them. So, everybody can have one.

Steve Jobs, and his team of course figured out that society would want smartphones. A computer in their pocket that had all the phone capability times 100, and be easy to use. So, they figured out how to build that, and then they figured out how to scale it.

And they figured out how to get one into every First World citizen’s pocket, and eventually every Third World citizen too. And so because of that they’re handsomely rewarded, and Apple is the most valuable company in the world.

Entrepreneur’s job is to try to bring the high end to the mass market

It starts as high end. First it starts as an act of creativity. First you create it just because you want it. You want it, and you know how to build it, and you need it. And so you build it for yourself. Then you figure out how to get it to other people. And then for a little while rich people have it.

Like, for example rich people had chauffeurs, and then they had black town cars. And then Uber came along, and everyone’s private driver is available to everybody. And now you can even see Uber pools that are replacing shuttle buses because it’s more convenient. And then you get scooters, which are even further down market of that. So, you’re right. It’s about distributing what rich people used to have to everybody.

But the entrepreneur’s job starts even before that, which is creation. Entrepreneurship is essentially an act of creating something new from scratch. Predicting that society will want it, and then figuring out how to scale it, and get it to everybody in a profitable way, in a self-sustaining way.

Summary:

• Give society what it wants, but doesn’t know how to get—at scale.
• Figure out what new product or technology you can provide that’s natural to you.
• Then figure out how to scale it so everyone on the planet can have your product.

References: image, nav.al/; extensive explanations are gotten from the podcasts on “Wealth” between Naval and Nivi podcast, link: here.