The Book in Three Sentences
In this summary of The Almanack of Naval Ravikant, you’ll learn ten years’ worth of teachings from interviews, podcasts, and tweets. Naval Ravikant is an investor, philosopher, and entrepreneur who has written extensively about building wealth and creating long-lasting happiness. Unlike most books about these topics, The Almanack of Naval Ravikant isn’t a how-to guide, since it teaches you to pave your path toward a wealthier and happier life through Naval’s words.
The Almanack of Naval Ravikant Summary
The Almanack of Naval Ravikant is a book that Eric Jorgenson wrote out of transcripts, tweets, blog posts, podcasts, and talks from Naval Ravikant. This book is unique in the sense that you can read anything that catches your attention and ignore everything that doesn’t. Although the book is divided into two parts and follows a logical structure that revolves around the central themes of wealth and happiness, Jorgenson describes it as non-narrative.
Although Naval Ravikant was a poor Indian immigrant, he is now famous in Silicon Valley and the entrepreneur world. He founded numerous successful companies and he also invested in early companies like Uber and Twitter. While he talked extensively about his financial success, Naval also attracted readers and listeners after sharing his philosophy on happiness. This book is a collection of all the pieces of wisdom Naval has shared on those topics.
Part I: Wealth
Becoming wealthy is a skill anyone can develop. Although most people believe that becoming wealthy involves hard work, that hard work has to be channeled in the right direction. In other words, before you can focus your hard work, you should first figure out what you should be working hard on. For this purpose, Naval wrote a series of principles to get rich without getting lucky.
- Seek wealth. These are assets that make money while you sleep.
- You can’t get rich by renting out your time. The only path to financial freedom is owning a piece of business.
- To get rich, you must give society what it wants but doesn’t yet have and you must provide that at scale.
- You want to play long-term games with long-term people.
- Compound interest is a powerful concept because you keep getting returns the more time you put in. This is true for capital, relationships, and knowledge. When you find the right thing or people, invest in them deeply. When something feels “off” move on because you’re wasting your time.
- To be unstoppable, you should learn to sell and build.
- Develop specific knowledge, accountability, and leverage. Specific knowledge comes from doing things you find enjoyable, therefore it can’t be taught. Once you’ve gained specific knowledge you’re irreplaceable. Also, don’t copy, or in other words, be authentic.
- The best forms of leverage are code and media.
- If you want to expand your knowledge focus on microeconomics, game theory, psychology, persuasion, ethics, and computers.
- Set a personal hourly rate. Outsource or ignore problems that cost less than your hourly rate.
- Work until you become the best in the world at your niche.
This process takes decades, not because it’s hard to execute, but because figuring out the unique things you can provide is time-consuming. Becoming a perpetual learner is an important skill if you want to get rich. The best skill you can learn is how to learn the things you want to learn. To do this, study the foundations of certain fields to the point you can understand any book you grab. Achieve mastery in the few things you’re obsessed with and ignore everything else.
When you have a salaried job, you earn linearly. This means you only make money when you work. What you want though is ownership because it makes you money all the time, even when you’re asleep, retired, or on vacation. When you work for somebody else, they pay you the minimum. The best routes to wealth involve starting your own companies or investing.
Nowadays, we have infinite leverage and there are high rewards for those who follow their intellectual curiosity. What you want to find is something that will entertain you forever, otherwise it’s a distraction. Also, do things for their own sake, not for some external reward. This is where your best work will come from and how you get to success. The less you pursue success, that’s when you’re more likely to achieve it. Your goal in life is to be in control of your time.
You want to be paid for your judgment, not for your time. You want robots, capital, or computers to do the heavy lifting for you, but you want to be responsible for making decisions. Having better judgment makes a big difference and you’ll be paid well for it. Once you prove you’ve been right again and again, that level of credibility will give you a great reputation. For this purpose, take as much time to decide as possible because the ripple effects of that action will last decades. The opposite of this is short-term thinking and busy work.
Chances are you won’t make a fortune overnight and in one big payoff. Generally speaking, personal wealth takes time because it’s the result of small investments that pile up. With this in mind, consider your time whenever you make decisions. Don’t solve problems that cost more than the hourly rate you set for yourself. The number you pick is probably too low, so raise it.
The most important decisions you make when you’re young are where you live, who you’re with, and what you do. Spend as much time as possible making those decisions because they’ll change the trajectory of your life. Say no to everything to free up your time and focus on solving those problems if you have to.
Back when humans were hunter-gatherers, we used to work for ourselves. That changed with the advent of agriculture and the Industrial Revolution. Thanks to the internet, we can go back to working for ourselves again. We should find something that feels like play. Failing as an entrepreneur is better than succeeding as something else because a failed entrepreneur learns valuable skills that help them make it on their own.
Make money out of necessity and when that stops being the case, stop caring about it. If you care about making money once you’ve made enough, you start a game that never ends. Psychologists refer to this as the hedonic treadmill. The ultimate goal should be to make money but to be free.
To retire, you need to have a passive income that covers your burn rate. What you don’t want to do is compete with someone else. You escape competition by being authentic. By definition, no one can be better than yourself at being yourself. When the work you do feels like play to you but work to others, no one can compete with you.
We’re obsessed with money because we tend to upgrade our lifestyle as we make more of it. To avoid this trap, don’t upgrade your lifestyle. The best thing money can get you is freedom: the freedom to do what you want and with who you want for as long as you want. If you value freedom more than you value money, you’ll think twice before upgrading your lifestyle.
To get there, you must be patient. We all want to be successful and we all want it as soon as possible, but it takes time. The interesting things you remember when you’re old are the personal sacrifices you made. Ultimately, making money is one of the hardest things you’ll do, but luckily, the tools are readily available. Money, as important as it is, will not bring you happiness, it won’t make you healthy, it won’t buy you great relationships, and it won’t make you calm. Money solves external problems, not internal words. Once you have money though, you can focus wholeheartedly on trying to achieve peace and happiness.
To make as much money as possible, you need judgment which Naval defines as “knowing the long-term consequences of your actions.” The direction in which you’re heading is more important than how much force you use and how fast you move.
What you want is to think clearly, not to be smart. To think clearly, you want to be able to explain ideas to a child. Otherwise, you don’t fully understand what you’re explaining. This involves using simple words and understanding the basics well. To make good judgments and to think clearly, you need free time. Great ideas happen when you’re bored, not when you’re busy or stressed.
Decision-making is one of the most important skills you can develop. Even if you’re marginally better than someone else at making decisions, you’ll be compensated significantly more. A good way to make good decisions is by collecting mental models. As you learn these principles, turn them into maxims and save them where you can remember them. What you don’t want is a collection of motivational quotes without the underlying experience to back them up.
Some examples of mental models include:
- Evolution: modern society can be explained through evolution
- Inversion: eliminate what won’t work instead of trying to explain what will work.
- Complexity theory: understand the limits of your knowledge and the limits of your prediction capability.
- Economics: to navigate our capitalist society, you need a basic understanding of concepts like supply and demand, labor-versus-capital, and game theory.
- Principal-agent problem: when you’re the owner, you care bout the business and you’ll do a good job as a result. This is a concept from microeconomics.
- Compound interest: this refers to receiving exponential returns over time. This concept affects not just finance, but everything in life.
- Basic maths: to make money, you need a good understanding of basic math. Naval recommends you start with arithmetic, probability, and statistics.
- Black Swans: this new branch of probability statistics deals with tail events.
- Calculus: the principles of calculus involve measuring the change in small continuous events.
- Falsifiability: this shows the predictive power of scientific facts.
- If you can’t decide, the answer is no: this heuristic helps you make difficult choices. This is a way to narrow down seemingly endless options.
- Run uphill: when you’re stuck on a decision, take the more difficult path in the short term. Paths with short-term pain have long-term gains. Examples include reading difficult books, eating healthy food, meditating, and exercising.
To develop new mental models, read. A genuine love for reading is one of the most valuable skills you can acquire because it’s so rare. You want to read for its own sake, so the content isn’t important. The fact that you’re doing it is. Also, read slowly because you want to absorb ideas. Likewise, it’s better to read fewer books that form a strong foundation of your knowledge than more books that form a weak foundation. By reading for one to two hours every day, you’ll get ahead of most people. The best books are the ones that make you excited because you want to make it a habit. To learn, teach what you know to others.
Read to the point that no book scares you, confusion is a good sign, it means, you’re building mental muscles. Reading the wrong things in the wrong order is not going to make you smart, though. Pursue timeless knowledge because this is your foundation and it’s very important. When in doubt, start with the source and explore from there.
Treat the books you read as blog posts or tweets which means you should feel no obligation to finish them once you start. Also, when someone recommends you a book, just buy it. This is important because there’s timeless wisdom in books. Older problems have been solved already and the solutions are in books. The older the book, the better because it means it went through a lot of people and that its principles are likely to be correct.
Part II: Happiness
Happiness is a skill you can learn. The term means something different to everyone and exploring your definition is worth it. Naval defines happiness as “the state when nothing is missing”. This involves embracing the present moment and letting go of the past and future. You improve your happiness the same way you improve your fitness: slowly and methodically. To be happy, meditate, read philosophy, value your time, and ignore everything that doesn’t matter.
We believe external things are going to bring us happiness. That said, trying to solve internal problems with external solutions is delusional. There’s no external thing that will make you happy forever. Naturally, we all want things, but we should choose one desire carefully and accept that it will bring us suffering.
To build the skill of happiness, you must develop good habits. Bad habits make you happy in the short run, but make you unhappy in the long run. Examples include drinking alcohol, eating unhealthy food, using social media, or playing video games. When you commit to happiness, you start replacing bad habits with good ones. Additionally, you should surround yourself with positive people. With this in mind, stay away from difficult relationships because they’re unsustainable. Ultimately, to get to a place of happiness, it should become your top priority.
Naval has a series of habits that make him happy almost immediately:
- Meditation
- Having self-awareness
- Getting sunlight
- Questioning your desires
- Not drinking caffeine
- Working out every day
- Telling everyone you’re happy
- Using these apps less: phone, calendar, alarm clock
- Never keeping secrets
- Doing things out of interest, not obligation
- Being optimistic
We must accept the things we can’t change. The most important one is death because by accepting death, life becomes a game which means we get to have fun more often. Enjoy life while it lasts because it’s not that long. Think about death often and whatever you do, don’t deny it. Similarly, your health should be your top priority because without it everything else falls apart. Exercise and meditate daily.
Time is all you have, so value it. You want to spend your time doing what you love. Spending your time trying to make others happy isn’t a good idea. Everyone is in charge of their own happiness. To make others happy, you must be happy yourself, but ultimately, their happiness is not your responsibility.