Here is part four of the Naval’s expanded points from his viral tweetstorm, “How To Get Rich Without Getting Lucky” (Read summarised post here).

Labor and Capital Are Old Leverage

“Give me a lever long enough, and a place to stand, and I will move the earth.”
— Archimedes

Our brains aren’t evolved to comprehend new forms of leverage

Leverage is critical. The reason I stuck in Archimedes quote in there is… normally I don’t like putting other people’s quotes in my Twitter. That doesn’t add any value. You can go look up those people’s quotes. But this quote I had to put in there because it’s just so fundamental. I read it when I was very, very young and it had a huge impression on me.

We all know what leverage is when we use a seesaw or a lever. We understand how that works physically, but I think what our brains aren’t really well-evolved to comprehend is how much leverage is possible in modern society and what the newest forms of leverage are.

Society overvalues labor leverage

The oldest form of leverage is labor, which is people working for you. Instead of me lifting rocks, I can have 10 people lift rocks. Then just by my guidance on where the rock should go, a lot more rocks get moved than I could do myself. Everybody understands this because we’re evolved to understand the labor form of leverage, so what happens is society overvalues labor as a form of leverage.

This is why your parents are impressed when you get a promotion and you have lots of people working underneath you. This is why when a lot of naive people, when you tell them about your company, they’ll say, “How many people work there?” They’ll use that as a way to establish credibility. They’re trying to measure how much leverage and impact you actually have.

Or when someone starts a movement, they’ll say how many people they have or how big the army is. We just automatically assume that more people is better.

You want the minimum amount of labor that allows you to use the other forms of leverage

I would argue that 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.

It’s incredibly competed over. Entire civilizations have been destroyed over this fight. For example, communism, Marxism, is all about the battle between capital and labor, das kapital and das labor. It’s kind of a trap.

You really want to stay out of labor-based leverage. You want the minimum amount of people working with you that are going to allow to use the other forms of leverage, which I would argue are much more interesting.

Capital has been the dominant form of leverage in the last century

The second type of leverage is capital. This one’s a little less hardwired into us because large amounts of money moving around and being saved and being invested in money markets, these are inventions of human beings in the last few hundred to few thousand years. They’re not evolved with us from hundreds of thousands of years.

We understand them a little bit less well. They probably require more intelligence to use correctly, and the ways in which we use them keep changing. Management skills from a hundred years ago might still apply today, but investing in the stock market skills from a hundred years ago probably don’t apply to the same level today.

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.

You can see this by who are the richest people. It’s bankers, politicians in corrupt countries who print money, essentially people who move large amounts of money around.

If you look at the top of very large companies, outside of technology companies, in many, many large old companies, the CEO job is really a financial job. They’re really financial asset managers. Sometimes, an asset manager can put a pleasant face on it, so you get a Warren Buffet type.

But deep down, I think we all dislike capital as a form of leverage because it feels unfair. It’s this invisible thing that can be accumulated and passed across generations and suddenly seems to result in people having gargantuan amounts of money with nobody else around them or necessarily sharing in it.

That said, capital is a powerful form of leverage. It can be converted to labor. It can be converted to other things. It’s very surgical, very analytical.

If you are a brilliant investor and give $1 billion and you can make a 30% return with it, whereas anybody else can only make a 20% return, you’re going to get all the money and you’re going to get paid very handsomely for it.

It scales very, very well. If you get good at managing capital, you can manage more and more capital much more easily than you can manage more and more people.

You need specific knowledge and accountability to obtain capital

It is a good form of leverage, but the hard part with capital is how do you obtain it? That’s why I talked about specific knowledge and accountability first.

If you have specific knowledge in a domain and if you’re accountable and you have a good name in that domain, then people are going to give you capital as a form of leverage that you can use to then go get more capital.

If you have specific knowledge in a domain and if you’re accountable and you have a good name in that domain, then people are going to give you capital as a form of leverage that you can use to then go get more capital.

Capital also is fairly well understood. I think a lot of the knocks against capitalism come because of the accumulation of capital.

Summary:

• Wealth requires leverage. Labor and capital are older forms of leverage that everyone is fighting over.
• Our brains aren’t evolved to comprehend new forms of leverage and just how much leverage is possible in modern society.
• Society overvalues labor leverage, which is people working for you. It is incredibly messy and competitive.
• You want the minimum amount of labor that allows you to use the other forms of leverage.
• Capital has been the dominant form of leverage in the last century. It scales very well: you can manage more capital much more easily than you can manage people.
• If you have specific knowledge in a domain and if you’re accountable, people will give you capital as a form of leverage.

Product and Media are New Leverage

Fortunes require leverage. Business leverage comes from capital, people, and products with no marginal cost of replication (code and media). Code and media are permissionless leverage. They’re the leverage behind the newly rich. You can create software and media that works for you while you sleep. An army of robots is freely available—it’s just packed in data centers for heat and space efficiency. Use it. If you can’t code, write books and blogs, record videos and podcasts.

Product and media are the new leverage

The most interesting and the most important form of leverage is this idea of products that have no marginal cost of replication. This is the new form of leverage.

This was only invented in the last few hundred years. It got started with the printing press. It accelerated with broadcast media, and now it’s really blown up with the Internet and with coding.

Now, you can multiply your efforts without having to involve other humans and without needing money from other humans.

This podcast is a form of leverage. Long ago, I would have had to sit in a lecture hall and lecture each of you personally. I would have maybe reached a few hundred people and that would have been that.

Then 40 years ago, 30 years ago, I would have to be lucky to get on TV, which is somebody else’s leverage. They would have distorted the message. They would taken the economics out of it or charged me for it. They would have muddled the message, and I would have been lucky to get that form of leverage.

Today, thanks to the Internet, I can buy a cheap microphone, hook it up to a laptop or an iPad, and there you are all listening.

Product leverage is where the new fortunes are made

This newest form of leverage is where all the new fortunes are made, all the new billionaires. The last generation, fortunes were made by capital. That was the Warren Buffets of the world.

But the new generation’s fortunes are all made through code or media. Joe Rogan making 50 to a 100 million bucks a year from his podcast. You’re going to have a PewDiePie. I don’t know how much money he’s rolling in, but he’s bigger than the news. The Fortnite players. Of course Jeff Bezos and Mark Zuckerberg and Larry Page and Sergey Brin and Bill Gates and Steve Jobs. That is all code-based leverage.

Combining all three forms of leverage is a magic combination

Now, the beauty is when you combine all of these three. That’s where tech startups really excel, where you take just the minimum, but highest output labor that you can get, which are engineers, and designers, product developers. Then you add in capital. You use that for marketing, advertising, scaling. You add in lots of code and media and podcasts and content to get it all out there.

That is a magic combination, and that’s why you see technology startups explode out of nowhere, use massive leverage and just make huge outsize returns.

Product and media leverage are permissionless

Probably the most interesting thing to keep in mind about the 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, these are permissionless. You don’t need anyone’s permission to do them, and that’s why they are very egalitarian. They’re great equalizers of leverage.

As much as people may rail on Facebook and YouTube, they’re not going to stop using it because this permissionless leverage, where everyone can be a broadcaster, is just too good.

The same way you can rail upon Apple for having a slightly closed ecosystem in the iPhone, but everyone’s writing apps for it. As long as you can write apps for it, you can get rich or reach users doing that, why not?

The robot army is already here—code lets you tell them what to do

I think of all the forms of leverage, the best one in modern society… This is glib. This is a little overused. This is why I tell people learn to code. It’s that we have this idea that in the future there’s going to be these robots and they’re going to be doing everything.

That may be true, but I would say that the majority of the robot revolution has already happened. The robots are already here and there are way more robots than there are humans, it’s just that we pack them in data centers for heat and efficiency reasons. We put them in servers. They’re inside the computers. All the circuits, it’s robot minds inside that’s doing all the work.

Every great software developer, for example, now has an army of robots working for him at nighttime, while he or she sleeps, after they’ve written the code and it’s just cranking away.

The robot army is already here. The robot revolution has already happened. We’re about halfway through it. We’re just adding in much more of the hardware component these days as we get more comfortable with the idea of autonomous vehicles and autonomous airplanes and autonomous ships and maybe autonomous trucks. There’re delivery bots and Boston Dynamics robots and all that.

But robots who are doing web searching for you, for example, are already here. The ones who are cleaning up your video and audio and transmitting it around the world are already here. The ones who are answering many customer service queries, things that you would have had to call a human for are already here.

An army of robots is already here. It’s very cheaply available. The bottleneck is just figuring out intelligent and interesting things to do to them.

Essentially you can order this army of robots around. The commands have to be issued in a computer language, in a language that they understand.

These robots aren’t very smart. They have to be told very precisely what to do and how to do it. Coding is such a great superpower because now you can speak the language of the robot armies and you can tell them what to do.

Summary:

• Product and media are the new leverage.
• Product leverage is where the new fortunes are made.
• Combining all three forms of leverage is a magic combination.
• Product and media leverage are permissionless.
• The robot army is already here—code lets you tell them what to do.

Product Leverage is Egalitarian

Capital means money. To raise money, apply your specific knowledge, with accountability, and show resulting good judgment. Labor means people working for you. It’s the oldest and most fought-over form of leverage. Labor leverage will impress your parents, but don’t waste your life chasing it. Capital and labor are permissioned leverage. Everyone is chasing capital, but someone has to give it to you. Everyone is trying to lead, but someone has to follow you.

Product leverage is a positive sum game

Labor and capital are much less egalitarian, not just in the inputs, but in their outputs.

Let’s say that I need something that humans have to provide like if I want a massage or if I need someone to cook my food. The more of a human element there is in providing that service, the less egalitarian it is. Jeff Bezos probably has much better vacations than most of us because he has lots of humans running around doing whatever he needs to do.

If you look at the output of code and media, Jeff Bezos doesn’t get to watch better movies and TV than we do. Jeff Bezos doesn’t get to even have better computing experience. Google doesn’t give him some premium, special Google account where his searches are better.

It’s the nature of code and media output that the same product is accessible to everybody. It turns into a positive sum game where if Jeff Bezos is consuming the same product as a thousand other people, that product is going to be better than the version that Jeff would consume on his own.

Status goods are limited to a few people

Whereas with other products, that’s not true. If you look at something like buying a Rolex, which is no longer about telling time. It’s a signaling good. It’s all about showing off, “I have a Rolex.” That’s a zero sum game.

If everybody in the world is wearing a Rolex, then people don’t want to wear Rolexes anymore because they no longer signal. It’s canceled out the effect.

Rich people do have an advantage in consuming that product. They’ll just price it up until only they can have Rolexes. Then poor people can’t have Rolexes and Rolexes resume their signaling value.

The best products tend to be targeted at the middle class

Something like watching Netflix or using Google or using Facebook or YouTube or even frankly modern day cars. Rich people don’t have better cars. They just have weirder cars.

You can’t drive a Lamborghini on the street at any speed that makes sense for a Lamborghini, so it’s actually a worse car in the street. It just turned into a signaling good at that point. Your sweet spot, where you want to be, is somewhere like a Tesla Model 3 or like a Toyota Corolla is an amazing car.

A new Toyota Corolla is a really nice car, but because it’s mainstream, the technology has amortized the cost of production over the largest number of consumers possible.

The best products tend to be at the center, at the sweet spot, the middle class, rather than being targeted at the upper class.

Creating wealth with product leads to more ethical wealth

I think one of the things that we don’t necessarily appreciate in modern societies is as the forms of leverage have gone from being human-based, labor-based and being capital-based to being more product and code and media-based, that most of the goods and services that we consume are becoming much more egalitarian in their consumption.

Even food is becoming that way. Food is becoming cheap and abundant, at least in the first world, too much so to our detriment. Jeff Bezos isn’t necessarily eating better food. He’s just eating different food or he’s eating food that’s prepared and served theatrically, so it’s almost like more of again the human element of performance.

But the labor element out of food production has gone down massively. The capital element has gone down massively. Even food production itself has become more technology-oriented, and so the gap between the haves and the have-nots is getting smaller.

If you care about ethics in wealth creation, it is better to create your wealth using code and media as leverage because then those products are equally available to everybody as opposed to trying to create your wealth through labor or capital.

You want to use the product that is used by the most people

What I’m referring to here is scale economies. Technology products and media products have such amazing scale economies that you always want to use the product that is used by the most people. The one that’s used by the most people ends up having the largest budget. There’s no marginal cost of adding another user, and so with the largest budget, you get the highest quality.

The best TV shows are actually not going to be some obscure ones just made for a few rich people. They’re going to be the big budget ones, like the Game of Thrones or the Breaking Bad or Bird Box, where they have massive, massive budgets. They can just use those budgets to get to a certain quality level.

Then rich people, to be different, they have to fly to Sundance and watch a documentary. You and I aren’t going to fly to Sundance because that’s something that bored rich people do to show off. We’re not going to watch a documentary because most of them just aren’t actually even that good.

Again, if you’re wealthy today, for large classes of things, you spend your money on signaling goods to show other people that you’re wealthy, then you try and convert them to status. As opposed to actually consuming the goods for their own sake.

Capital and labor are becoming permissionless

I think that capital and labor are also starting to become a little more permissionless or at least the permissioning is diffuse because of the Internet. Instead of labor, we have community now, which is a diffused form of labor. For example, Mark Zuckerberg has a billion people doing work for him by using Facebook.

Instead of going to raise capital from someone who’s rich, now we have crowdfunding. You can raise millions and millions of dollars for a charity, for a health problem or for a business. You can do it all online.

Capital and labor are also becoming permissionless, and you don’t need to necessarily do it the old fashioned way, where you have to go around and ask people for permission to use their money or their time.

Summary:

• Product leverage is a positive-sum game.
• Status goods are limited to a few people.
• The best products tend to be targeted at the middle class.
• Creating wealth with product leads to more ethical wealth.
• You want to use the product that is used by the most people.
• Capital and labor are becoming permissionless.

Example: From Laborer to Entrepreneur

Laborers get paid hourly and have low accountability

The tweetstorm is very abstract. It’s deliberately meant to be broadly applicable to all kinds of different domains and disciplines and time periods and places. But sometimes it’s hard to work without a concrete example. So let’s go concrete for a minute.

Look at the real estate business. You could start at the bottom, let’s say you’re a day laborer. You come in, you fix people’s houses. Someone orders you around, tells you, “Break that piece of rock. Sand that piece of wood. Put that thing over there.”

There’s just all these menial jobs that go on, on a construction site. If you’re working one of those jobs, unless you’re a skilled trade, say, a carpenter or electrician, you don’t really have specific knowledge.

Even a carpenter or an electrician is not that specific because other people can be trained how to do it. You can be replaced. You get paid your $15, $20, $25, $50, if you’re really lucky, $75 an hour, but that’s about it.

You don’t have any leverage other than from the tools that you’re using. If you’re driving a bulldozer that’s better than doing it with your hands. A day laborer in India makes a lot less because they have no tool leverage.

You don’t have much accountability. You’re a faceless cog in a construction crew and the owner of the house or the buyer of the house doesn’t know or care that you worked on it.

General contractors get equity, but they’re also taking risk

One step up from that, you might have a contractor, like a general contractor who someone hires to come and fix and repair and build up their house. That general contractor is taking accountability; they’re taking responsibility.

Now let’s say they got paid $250,000 for the job. Sorry, I’m using Bay Area prices, so maybe I’ll go rest of the world prices, $100,000 for the job to fix up a house, and it actually costs the general contractor, all said and done, $70,000. That contractor’s going to pocket that remaining $30,000.

They got the upside. They got the equity but they’re also taking accountability and risk. If the project runs over and there’s losses, then they eat the losses. But you see, just the accountability gives them some form of additional potential income.

Then, they also have labor leverage because they have a bunch of people working for them. But it probably tops out right there.

Property developers pocket the profit by applying capital leverage

You can go one level above that and you can look at a property developer. This might be someone who is a contractor who did a bunch of houses, did a really good job, then decided to go into business for themselves and they go around looking for beaten down properties that have potential.

They buy them, they either raise money from investors or front it themselves, they fix the place up, and then they sell it for twice what they bought it for. Maybe they only put in 20% more, so it’s a healthy profit.

So now a developer like that takes on more accountability, has more risk. They have more specific knowledge because now you have to know: which neighborhoods are worth buying in. Which lots are actually good or which lots are bad. What makes or breaks a specific property. You have to imagine the finished house that’s going to be there, even when the property itself might look really bad right now.

There’s more specific knowledge, there’s more accountability and risk, and now you also have capital leverage because you’re also putting in money into the project. But conceivably, you could buy a piece of land or a broken-down house for $200,000 and turn it into a million dollar mansion and pocket all the difference.

Architects, large developers and REITs are even higher in the stack

One level beyond that might be a famous architect or a developer, where just having your name on a property, because you’ve done so many great properties, increases its value.

One level up from that, you might be a person who decides, well, I understand real estate, and I now know enough of the dynamics of real estate that rather than just build and flip my own properties or improve my own properties, I’m gonna be a massive developer. I’m going to build entire communities.

Now another person might say, “I like that leverage, but I don’t want to manage all these people. I want to do it more through capital. So I’m gonna start a real estate investment trust.” That requires specific knowledge not just about investing in real estate and building real estate, but it also requires specific knowledge about the financial markets, and the capital markets, and how real estate trusts operate.

Real estate tech companies apply the maximum leverage

One level beyond that might be somebody who says, “Actually, I want to bring the maximum leverage to bear in this market, and the maximum specific knowledge.” That person would say, “Well, I understand real estate, and I understand everything from basic housing construction, to building properties and selling them, to how real estate markets move and thrive, and I also understand the technology business. I understand how to recruit developers, how to write code and how to build good product, and I understand how to raise money from venture capitalists and how to return it and how all of that works.”

Obviously not a single person may know this. You may pull a team together to do it where each have different skill sets, but that combined entity would have specific knowledge in technology and in real estate.

It would have massive accountability because that company’s name would be a very high risk, high reward effort attached to the whole thing, and people would devote their lives to it and take on significant risk.

It would have leverage in code with lots of developers. It would have capital with investors putting money in and the founder’s own capital. It would have labor of some of the highest quality labor that you can find, which is high quality engineers and designers and marketers who are working on the company.

Then you may end up with a Trulia or a RedFin or a Zillow kind of company, and then the upside could potentially be in the billions of dollars, or the hundreds of millions of dollars.

As you layer in more and more kinds of knowledge that can only be gained on the job and aren’t common knowledge, and you layer in more and more accountability and risk-taking, and you layer in more and more great people working on it and more and more capital on it, and more and more code and media on it, you keep expanding the scope of the opportunity all the way from the day-laborer, who might just literally be scrappling on the ground with their hands, all the way up to somebody who started a real estate tech company and then took it public.

Summary:

• The continuum from laborer to real estate tech company entrepreneur goes from low to high specific knowledge, accountability and leverage.
• Laborers get paid hourly. The owner of the house doesn’t know who they are and they can be replaced by machines or newly trained hires.
• General contractors pocket the profits of a job but they also eat the losses. They have laborers working for them and know how to organize projects.
• Property developers use loans to build new homes and sell them at a profit. They know where to buy, how much to spend, and what customers want. Their reputation is on the line if the project fails.
• Architects and REITs apply even more accountability, specific knowledge and leverage.
• Real estate tech companies like Opendoor, Trulia or Redfin apply the maximum leverage by combining all of the lower layers of the stack with a new product.

Judgment Is the Decisive Skill

Leverage is a force multiplier for your judgement. Judgement requires experience, but can be built faster by learning foundational skills.

In an age of infinite leverage, judgment becomes the most important skill

We are now living in an age of nearly infinite leverage, and all the great fortunes are created through leverage. Your first job is to go and obtain leverage, and you can obtain leverage through permission by getting people to work for you,or by raising capital.

Or you can get leverage permissionlessly by learning how to code or becoming good communicator and podcasting, broadcasting, creating videos, writing, etc.

That’s how you get leverage, but once you have leverage, what do you do with it? Well, the first part of your career’s spent hustling to get leverage. Once you have the leverage, then you wanna slow down a bit, because your judgment really matters.

It’s like you’ve gone from steering your sailboat around to now you’re steering an ocean liner or a tanker. You have a lot more at risk, but you have a lot more to gain as well. You’re carrying a much higher payload. In an age of infinite leverage, judgment becomes the most important skill.

Warren Buffett is so wealthy now because of his judgment. Even if you were to take away all of Warren’s money, tomorrow, investors would come out of the woodwork and hand him a $100 billion because they know his judgment is so good, and they would give him a big chunk of that $100 billion to invest.

Everything else you do is setting you up to apply judgment

Ultimately, everything else that you do is actually setting you up to apply your judgment. One of the big things that people rail on is CEO pay. For sure there’s crony capitalism that goes on where these CEOs control their boards and the boards give them too much money.

But, there are certain CEOs who definitely earned their keep because their judgment is better. If you’re steering a big ship, if you’re steering Google or Apple, and your judgment is 10 or 20 percent better than the next person’s, society will literally pay you hundreds of millions of dollars more, because you’re steering a $100 billion ship.

If you’re on course 10 or 20 percent of the time more often than the other person, the compounding results on that hundreds of billions of dollars you’re managing will be so large that your CEO pay will be dwarfed in comparison.

Demonstrated judgment, credibility around the judgment, is so critical. Warren Buffett wins here because he has massive credibility. He’s been highly accountable. He’s been right over and over in the public domain. He’s built a reputation for very high integrity, so you can trust him.

A person like that, people will throw infinite leverage behind him because of his judgment. Nobody asks him how hard he works; nobody asks him when he wakes up or when he goes to sleep. They’re like, “Warren, just do your thing.”

Judgment, especially demonstrated judgment, with high accountability, clear track record, is critical.

Judgment is knowing the long-term consequences of your actions

My definition of wisdom is knowing the long term consequences of your actions, so they’re not all that different. Wisdom is just judgment on a personal domain.

Wisdom applied to external problems I think is judgment. They’re highly linked. But, yes, it’s knowing the long term consequences of your actions and then making the right decision to capitalize on that.

Without experience, judgment is often less than useless

Judgment is very hard to build up. This is where both intellect and experience come in play.

There are many problems with the so-called intellectuals in the ivory tower, but one of the reasons why Nassim Taleb rails against them is because they have no skin in the game. They have no real-world experience, so they just apply purely intellect.

Intellect without any experience is often worse than useless because you get the confidence that the intellect gives you, and you get some of the credibility, but because you had no skin in the game, and you had no real experience, and no real accountability, you’re just throwing darts.

The real world is always far, far more complex than we can intellectualize. Especially all the interesting, fast-moving edge domains and problems, you can’t get there without experience. If you are smart and you iterate fast, it’s not even you put 10,000 hours into something, but you take 10,000 tries at something.

The people with the best judgment are among the least emotional

If you are smart and you have a lot of quick iterations, and you try to keep your emotions out of it, the people with the best judgment are actually among the least emotional. A lot of the best investors are considered almost robotic in that regard, but I wouldn’t be surprised if even the best entrepreneurs often come across as unemotional.

There is sort of this archetype of the passionate entrepreneur, and yeah, they have to care about what they’re doing, but they also have to see very clearly what’s actually happening. The thing that prevents you from seeing what’s actually happening are your emotions. Our emotions are constantly clouding our judgment, and in investing, or in running companies, or in building products, or being an entrepreneur, emotions really get in the way.

Emotions are what prevent you from seeing what’s actually happening, until you can no longer resist the truth of what’s happening, until it becomes too sudden, and then you’re forced into suffering; which is sort of a breaking of this fantasy that you had put together.

A lot of the top investors often sound like philosophers

And the reason why a lot of the top investors, a lot of the value investors, like if you read Jeremy Grantham, or you read Warren Buffet, or you read up on Michael Burry, these people sound like philosophers, or they are philosophers, or they’re reading a lot of history books or science books.

Like what are they doing, shouldn’t they be reading investment books. No. Investment books are the worst place to learn about investment, because investment is a real-world activity that is highly multi-variate, all the advantages are always being competed away. It’s always on the cutting-edge.

What you actually just need is very, very broad-based judgment and thinking. The best way to do that is to study everything, including a lot of philosophy. Philosophy also makes you more stoic, makes you less emotional, and so you make better decisions; you have better judgment.

The more outraged someone is, the worse their judgment

One simple thing is I see… I go out on Twitter and it seems like half of Twitter is outraged at something at all times. You can go within someone’s Twitter feed and get at least some semblance of what it must be like to be in their head all the time.

The more outraged somebody is, I guarantee you, the worse their judgment is. If someone’s constantly tweeting political outrage, and just see like an angry person getting into fights, you don’t want to hand this person the keys to your car, let alone the keys to your company.

Summary:

• Judgment is knowing the long-term consequences of your actions. In an age of infinite leverage, judgment is the most important skill.
• Once you have leverage, you want to slow down because correct decisions really matter. If you’re correct 10-20% more often than the other person, the compounding effects of your leverage will dwarf the competition.
• The people with the best judgment are among the least emotional. Emotions prevent you from seeing what’s really happening, until you can no longer resist the truth and you’re forced into suffering.
• A lot of the top investors often sound like philosophers because investing is a real-world multi-variate activity. So they need to study everything, not just investment books whose advantages have already been competed away.
• The more outraged someone is, the worse their judgment. You don’t want to hand them the keys to your car, let alone the keys to your company.

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