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Notes from the Naval Podcast

Below are my notes from listening the the Naval Podcast, you can find the full podcast here

Fundamental property of the internet is it connects everyone with everyone

  • Give society what it wants but doesn’t know how to get => figure out how to scale it

Escape competition through authenticity

  • You are a unique combinatorics of cells, do your own thing. No one can compete with you on being you

Long term games are good for compound interest and trust

  • Trust => do right by each other because they know people will be around for the next game

  • Who can you trust over a long period of time?

  • Compound interest and high trust can make you collect rewards at the end of the cycle

  • Trust comes from network of people in a small geographic area

  • Every time you reset you start from scratch. Some industries people are transient going in and out. Like politicians with high turnover.

  • Long term game we are baking the pie together, short term game is slicing up the pie

  • Playing iterated games means you can trust them more

Pick partners with intelligence, energy, integrity

  • Intelligence => need to be going right direction

  • Everyone smart at different things, find people smart at things you care about

  • Energy => world is full of smart, lazy people

  • Integrity => figure out through signals (what they do when they think nobody else is looking)

  • Read signals (what people do, despite what they say)

Build specific knowledge

  • Can’t be taught but can be learned

  • Built through apprenticeship

  • You can’t be trained for it as others would train for it too

  • Often at the edge of knowledge (hard to figure out)

  • Often technical and highly creative

Learn to sell and build => you’ll be unstoppable

  • Harder to pick up building later than life

Cultivate a desire to learn => more not losing it, children have this innate desire

  • Education and ways children are raised, replaces curiosity with compliance

  • Results in great factory workers but not great creative people

Humans need two things to be successful in modern society

  • 1. Practical persuasion

  • 2. Deep understanding of one particular complex topic

  • Other skills: reading, writing, arithmetic, persuasion, computer programming

Business is learnt on the job, not through studying case studies

  • You have a deeper understanding in the middle of the action

Accountability is important

  • If something goes right or wrong you know exactly who is responsible

  • Without accountability you don’t have incentive, can’t build credibility

  • But take risk of failure on your own name

  • Risk = reaping the rewards

  • How you are getting leverage and equity

  • Compensation based on how easily replaced you are

  • You will be rewarded directly and proportionately to your accountability

Forms of leverage in society

  • Oldest form of leverage is labor: having more people move rocks for you

  • This is currently overvalued in society as it is easy to understand

  • Second type of leverage is capital: can be powerful form of leverage as it can be converted, very surgical and analytical

  • Less hardwired into us, invented recently

  • We dislike it as it seems unfair

  • Hard part is how you obtain it? Specific knowledge and accountability in a domain

  • Most interesting new form of leverage: products that don’t have a marginal cost

  • Example: podcasting, software

  • New fortunes are made here

  • Only permission less form of leverage

  • Tech startups combine all these three, phenomenal results

  • They use massive leverage and have outsized returns

Principle agent problem drives so much in the world: principles incentives not aligned with agents incentives.

We are not evolved to bleed everyday, but losing a bit everyday and waiting for the big win means bigger payoffs. This is entrepreneurship, on average they will win more.

Labor and capital less egalitarian in output and input

  • More of a human element less egalitarian it is

  • For code and media output, product is equal for everyone.

  • Other goods like Rolex are a signaling good and a zero sum game

  • If everyone had rolexes no one would wear rolexes

  • Most goods and services we consume in tech are becoming more egalitarian in their consumption

  • Technology oriented goods lessen the gap between the haves and have nots

  • Technology and media products have such amazing scale economies that it becomes available to everyone

  • Wealthy people spend money on signaling goods instead of consuming goods for their own stake

  • People and capital negative externality as a form of leverage. Code and media has positive externality attached to them.

  • I don't buy signaling goods because I don't care about signal in terms of wealth or status

Business models have their own leverage

  • Economies of scale: more you produce the cheaper it is - builds up automatic barriers to entry

  • Technology and media products have 0 marginal cost of reproduction

  • Network effects: Metcalfe's law - number 1 in network effects win everything - create natural monopolies - lots of SV businesses are natural monopolies

  • Network effects is when each additional user adds value to the existing user-base - classic example is language

Leverage is a force multiplier for judgment

  • First job get leverage: capital, coding etc.,

  • Once you have leverage slow down to practice judgement

  • In an age of infinite leverage, judgement becomes the ultimate skill

  • Judgement: knowing long term consequences of your action

  • Intellect without skin in the game is useless (academics)

  • Best investors read everything including philosophy and avoid investment books, to be the best investor need to understand everything

Work as hard as you => if getting wealthy is your goal

  • Who you work with and what you work on is more important

  • Save a lot of time by picking the right area and who you work with

  • If theres somewhere with greater people go out there and work on that

  • Sprint and rest, not marathon a sprint (end up with marathon of sprints)

  • Inspiration is perishable => when you have inspiration, do it

  • Impatience with actions, patience with results

Working for the long term

  • Must be #1 in the world at what you do => get paid for being you

  • Keep changing what you do until you’re number one

  • When changing for what you do:

  • Be the best at what you do

  • What you do is flexible so you can be the best at it

Escape competition through authenticity

  • Humans are mimetic: we copy those around us

  • Be careful not to get caught up in these status games that don’t actually matter

  • Sometimes get caught in the wrong game because you are just competing

  • Escape this through authenticity

  • Easy to see in art

  • Especially in entrepreneurship, the masses are never right

  • Competition is a negative signal

  • End up specializing in being you

Play stupid games, win stupid prizes

  • Tech tends to be winner take all market

Eventually you get what you deserve

  • Apply specific knowledge, get leverage

  • eventual outcome = distinctiveness of your specific knowledge x how much leverage you apply x how often your judgement is correct x how singularly responsible for outcome x how much society values what you are doing

Systems not goals

  • What works for others may not work for you, can’t map it exactly (map is not the territory)

  • Listen and read from everyone, but ignore everyone

When you are finally wealthy, you’ll realize its not what you are looking for…

  • When you have a bunch of money you’ll realize you are the same person

  • A calm mind, a fit body, a house full of love

  • These things can’t be bought, need to work for

There are no get rich quick schemes: the world is efficient, its probably already exploited

Modern life diseases are diseases of abundance not scarcity

  • Most of modern life - all of our diseases are diseases of abundance not scarcity. Old times starved, sugar was good, gossip was interesting, entertainment was good

  • Now disease of abundance - over exposed to everything. Way to survive society is be an ascetic, to retreat from society. Too much society everywhere you go. Society on your phones in your ears, only solution is to turn it off.

Fundamental illusion is there is no goal => nothing out there will make you happy and fulfilled forever except death.

  • Retirement is when you stop sacrificing today for some imaginary tomorrow. When today is complete in and of itself.

Everyman has two lives. The second starts when he realizes he has just one.

Find out who you are.

Accountability means letting people criticize you.

© 2020 by Wing Vasiksiri