This article is an excerpt from the Shortform book guide to "The Almanack of Naval Ravikant" by Eric Jorgenson. Shortform has the world's best summaries and analyses of books you should be reading.
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Who’s Naval Ravikant? What wisdom does he have to share about building wealth and happiness in life?
Many everyday people strive for wealth and happiness, but most of us struggle along the way and very few seem to achieve both. Still fewer share their insights about how to get there. Entrepreneur Naval Ravikant has become known for doing this online, via Twitter, podcasts, interviews, and blog posts. The Almanack of Naval Ravikant is a collection of those insights on wealth and happiness compiled by business blogger Eric Jorgenson.
Keep reading for an overview of The Almanack of Naval Ravikant by Eric Jorgenson.
The Almanack of Naval Ravikant
Born to poor parents in India, Ravikant moved with them to New York as a child. From those humble origins, he eventually achieved tremendous business and financial success as a Silicon Valley entrepreneur in the early 2000s. He’s a founder of several highly-valued companies, including Epinions, Vast.com, The Hit Forge, and AngelList, and he’s also an angel investor in companies such as Uber and Twitter, having provided both with significant start-up capital in exchange for equity early on.
The Almanack of Naval Ravikant by Eric Jorgenson has two parts: advice on how to build wealth and advice on how to build happiness.
Part 1: Principles of Building Wealth
Ravikant makes a distinction between wealth and money, and he outlines several principles he sees as critical for building wealth.
Focus on Building Wealth, Not Money
Ravikant distinguishes wealth from money. To him, wealth is owning assets that grow over time without further inputs from you. Money, by contrast, is merely the means of distributing wealth and time. The equity you own in a growing landscaping company is wealth; the cash people pay you for mowing their lawn is money. According to Ravikant, it’s more important to focus on generating wealth than on generating money.
Passive Income Is the Way to Build Wealth
Ravikant argues that the key to achieving financial freedom is having passive income. This is income that earns money with minimal effort from you. According to Ravikant, the best way to earn this income is by owning assets: For example, selling an easily reproducible product—such as a popular album of original music—is a source of passive income. Similarly, owning equity in a growing company provides passive income: As the company grows, the value of your equity grows. This type of income contrasts with active income, which people typically get as wages for work.
Leverage is the ability to multiply effort. In the context of building passive income, this is helpful because any investment (effort) you put into an opportunity can be magnified by the leverage applied to it. Ravikant distinguishes three types of leverage: labor, money, and products that can be replicated without further inputs.
Ravikant believes that, to create products or attract money, you have to specialize in something. Specifically, you should develop a deep understanding of something technical or creative. Expertise in these areas is especially useful for developing products.
To develop a specialization, Ravikant offers two pieces of advice: First, learn the basics of math and communication. Second, figure out what you’re truly interested in—what you’d learn and practice just for fun.
Another important skill for developing products and attracting capital is good judgment. If you develop a reputation for good judgment, investments will follow, both because you’ll be able to identify good investment opportunities and because people will invest in you when they trust your insights.
According to Ravikant, developing good judgment requires seeing reality clearly. To see reality clearly, Ravikant believes you have to first get rid of your faulty assumptions about the world. Once you’ve rid yourself of faulty assumptions, Ravikant suggests that you have to continuously work on building a more accurate understanding of the world. The best way to do this is to read a lot and constantly learn. In particular, read about science, philosophy, and basic math.
Build Long-Term Business Relationships
Good relationships are invaluable for building wealth because working with people is far more productive and efficient than going solo. For Ravikant, building relationships in business isn’t a matter of short-term networking: It’s a matter of identifying capable and ethical people and building long-term relationships with them.
The above principles are critical to building wealth, but wealth creation doesn’t happen overnight: Be patient. Ravikant encourages you to simply stick to the practices of developing and leveraging your skills and cultivating deep, trusting relationships with good people. If you give it enough time, these things will pay off.
Part 2: How to Build Happiness
Next, we’ll consider Ravikant’s ideas about building happiness. True happiness, as he understands it, comes from being at peace—another way to express this is: True happiness is fulfillment. When you have this happiness, you don’t long for anything more, and you feel your life is complete.
(Shortform note: Research on happiness suggests that focusing on being happy may actually undermine your ability to achieve the fulfillment Ravikant describes. Researchers have found that those who highly value happiness have difficulty feeling happy under conditions that should make them feel that way. They suggest this is caused by people feeling disappointed in their experience of their emotions—they may not feel as great as they expected. Paradoxically, then, one important part of learning to be happy may be not making happiness a high priority.)
In this section, we’ll consider how you might arrive at this place of fulfillment. While Ravikant believes that being wealthy can help you get there, happiness isn’t dependent on external circumstances—it’s a choice. Making that choice is a matter of practicing the right habits.
Decide to Be Happy by Practicing the Right Habits
The first thing you have to do is simply decide to be happy. You can’t wait for external circumstances to become what you want or seek to change them—you need to be OK with them as they are. This isn’t easy to do, but Ravikant believes that by cultivating the right habits you can make it easier.
The Habit of Acceptance
One habit Ravikant advocates is acceptance. Acceptance is simply being content with a circumstance no matter what—it’s a kind of freedom. As he sees it, it’s freedom from things like frustration, expectation, desire, and so on. Practicing acceptance will help you find contentment. In particular, practice the habit of acceptance in two areas of life: (1) accept yourself as you are, and (2) accept circumstances as they are.
The Habit of Self-Care
The second type of habit Ravikant suggests is self-care. This type of habit encompasses several practices that can help keep your body and mind conditioned to support your happiness: care for your body (eat well, exercise, condition your immune system, and say no to too much sugar, alcohol, etc.) and care for your mind (meditate, learn, maintain social contact, and live in the present).
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Here's what you'll find in our full The Almanack of Naval Ravikant summary:
- Millionaire Naval Ravikant's advice on how to build wealth and happiness
- The three types of leverage you'll need to become successful
- The habits to adopt that will lead to happiness