Naval Ravikant - The 6 Biggest Middle Class Habits Keeping You in the Rat Race
by Julio Froment
Hey friend!
In today’s article, I bring you some insightful nuggets from Naval Ravikant and Mohnish Pabrai on common middle class habits that keeps people working on a 9-5 job until they are sufficiently old to retire.
Even if you are not in the rat race, these nuggets are still very insightful as they provide a solid bedrock for personal growth, agency and freedom.
Hope you find it valuable :)
👨 People
Naval Ravikant — Co-founder of AngelList and co-author of Venture Hacks. He has invested (early-stage) in companies like Uber, Twitter and FourSquare.
Mohnish Pabrai — Entrepreneur and investor. He sold his first business for 20M$. He founded the NGO "Dakshana" in India, and has a close friendship with Charlie Munger.
📝 Notes
Habit #1 — Thinking Wealth is Zero-sum
There is the general notion that making money is evil.
“Money is the root of all evil”
And this is partly true, as it incentivizes theft and corruption. And indeed, this is negative-sum (for someone to get richer they make others poorer). But this is different from true wealth creation — the kind of wealth that is positive-sum! Meaning that you don’t have to make someone poor to make yourself rich, and in fact you are not only making yourself richer but also the entire Society!
“With the rise of the middle class, wealth stopped being a zero sum game. Jobs and Wozniak didn’t have to make us poor to make themselves rich. Quite the opposite: they created things that made our lives materially richer. They had to, or we wouldn’t have paid for them. But since for most of the world’s history the main route to wealth was to steal it, we tend to be suspicious of rich people. Idealistic undergraduates find their unconsciously preserved child’s model of wealth confirmed by eminent writers of the past. It is a case of the mistaken meeting the outdated.” - Paul Graham (Hackers and Painters)
“Understand ethical wealth creation is possible. If you secretly despise wealth, it will elude you.” - Naval Ravikant
And although all of today’s wealth has been created by playing positive-sum games, most people focus on the negatives of wealth. Why is that?
Positive-sum wealth creation games are pretty recent. Before the Industrial Revolution most people got rich by stealing or bribing.
“For most of human history the usual way to accumulate
a fortune was to steal it: in pastoral societies by cattle
raiding; in agricultural societies by appropriating others’ estates
in times of war, and taxing them in times of peace.” - Paul Graham (Hackers and Painters)
There is a natural tendency in humans to be pessimistic.
It feels better in the short-term to blame anyone (who is not you) about your circumstances and your future. And is not hard to fall in this trap as it is the entire business of politics — their goal is always to victimize you from the rival political parties. Even when there are no real issues, they will come up with anything and make it matter to you!
Habit #2 — Playing Status Games
You want to avoid Status Games because these are Zero-sum games — To be a winner, there must be a loser. The more you focus on these games, the more competitive and angry you become and the less wealth you will be capable of creating.
Some examples of Zero-sum games:
Politics
Sports
Moral Signaling
“Ignore people playing status games. They gain status by attacking people playing wealth creation games.” - Naval Ravikant
Materialistic Signaling (next habit)
Habit #3 — Materialistic Signaling
Upgrading your lifestyle every time you make more money leads to imprisonment — it makes you increasingly more dependent on your income source, and if that source is a 9-5 job then it will trap you there!
“The three most harmful addictions are heroin, carbohydrates and a monthly salary” - Nassim Taleb
We often upgrade our lifestyle because of:
the so called “hedonic treadmill”.
and the phenomenon of “keeping up with the Joneses”.
“Envy makes the world go around” - Naval Ravikant
“It is not greed that drives the world, but envy” - Warren Buffet
How can we overcome it?
Get use to ignoring your peers.
“People who live far below their means enjoy a freedom that people busy upgrading their lifestyles can't fathom.” - Naval Ravikant
"Survival and replication drive put us on the work treadmill. Hedonic adaptation keeps us there. The trick is knowing when to jump off and play instead.” - Naval Ravikant (The Almanack of Naval Ravikant)
Habit #4 — Being Tracked on Your Work
Escaping the 9-5 grind is actually VERY DIFFICULT. Your time and energy is chewed up by that job, so how are you supposed to work on anything else (in order to escape it)?
Well, one thing that definitely helps is to gravitate towards a career in which your input and your outputs are disconnected — that means that your time / effort is detached from your results.
Most Jobs: Inputs and Outputs are closely connected
In most jobs, inputs and outputs are closely connected. A good example (just to illustrate it) might be someone cutting wood or on a support role such as Customer Service.
In this case, the amount of hours put in matters! In this situation, the job will truly chew up all of your time and energy.
Solution
The key is trying to find a Career / Job / Education where you’ll end up in a business where the inputs and the outputs are disconnected.” - Naval Ravikant
The reality is… customers don’t care about how much time and effort you put in. They only care about the outcome! So if you can find a job in which you are directly involved in the building and selling of a product and you use some kind of leverage, you will be able to detach your time / effort from the results! It will free up your time!
Let’s look at some examples:
Programmers. They can build products, and they use coding leverage. A good developer can write a piece of software that adds disproportionate economic value to a business. On the other hand, a bad developer can write code all day long and not add any value to the business.
Real Estate Agent. This is not necessarily a good job, given the ton of competition out there, but it is a good example to illustrate this concept of input-output detachment. If you are selling high-end Real Estate, you can spend the same time and effort as someone selling low-end Real Estate, but you will make much more money! This is because you are getting a commission from the sale and you have capital leverage! (the more capital, the bigger the gains regardless of your time and effort input).
Habit #5 — Believing in Shortcuts
People selling get-rich-quick advice for 20$… that’s all complete non-sense! There are NO get-rich-quick schemes. That’s just somebody else trying to get rich off of you.
It is surprising to see how many people fall for these things.
Why do people fall for it?
Most people are desperate for making money.
Most people don’t know how to truly create wealth.
“But the truth is that making money is a by-product of learning!”
Habit #6 — Stop Learning after School
[Mohnish Pabrai]
“Many people die at twenty five and aren't buried until they are seventy five.” - Benjamin Franklin
What does it mean? “It means that from age 26 - 75 -> Is just a living corpse.”
“What happens with a lot of humans is that they stop learning when they finish school. It means that at 25, they stop growing and stop learning.”
Even people who went to elite universities don’t go very far in life, because they are not learning machines. They just learned what they were taught in school.
[Naval Ravikant]
“If you are a perpetual learning machine, you will never be out of options on how to make money” - Naval Ravikant
“I would say that the most important skill to getting rich… is becoming a perpetual learner. You have to be able to learn anything that you want to learn.”
No book in the library should scare you!
Some books will be challenging… but that’s OK. Go back and re-read them. The pain of confusion when you are not understanding something leads to mental growth, just like the pain in the gym leads to muscle growth!
Picking Nuggets Reflection:
“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.” - Charlie Munger
“If you're a perpetual learning machine, you will never be out of options for how to make money. You can always see what's coming up in society, what the value is, where the demand is, and you can learn to come up to speed.” - Naval Ravikant
Ultimately, the most common way to escape the rat race is to be an entrepreneur and build businesses. And there’s never been a better time to be an entrepreneur! In words of Shopify’s President:
“Remember that the cost of failure, right now, is the lowest it’s ever been in the history of the world” - Harley Finkelstein (President of Shopify and Entrepreneur)
And the reason for this is that in today’s world you have free leverage at your disposal. Your website, app or media content are essentially assets that can earn while you sleep.
"An army of robots is already here. The bottleneck is just figuring out intelligent and interesting things to do to them" - Naval Ravikant
And the way out of this bottleneck is to become a perpetual learner!
"Ultimate advice for young would-be startup founders: Just Learn” - Paul Graham (Speech at Stanford)
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The mark of a great (non-fiction) author:
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-Friedrich Nietzsche
Wishing you a lovely week!!
Julio ❣️
P.S. If you liked this article, you'll definitely enjoy my free 80-page ebook. It’s packed with 23 big ideas (from top influential doers and entrepreneurs) to become better, richer and wiser. Download your copy here!