Naval’s Thoughts On Building Wealth | The Acquirer's Multiple®

During his recent interview with Tobias, Eric Jorgenson, author of The Almanack Of Naval Ravikant discussed Naval’s thoughts on Building Wealth. Here’s an excerpt from the interview:

Tobias: Let’s give folks what they want first out of the gate. What have you learned from synthesizing all this information? And can you take us through the building wealth? I’m going to take you through it bit by bit, but generally what’s building wealth about?

Eric: Yeah, building wealth is an interesting take, because it’s really looking at the principles around it. There’s not a lot of tactics in there. It’s really dissecting the process of building wealth into its component pieces, which is something like applying leverage.

Understanding that your judgment is actually what is building wealth, not your work. So, separating time as an input from your hourly earnings, using stuff like capital and products and labor to apply leverage. So, I’m sure most of the investors that you are talking to are very capital leveraged and very judgment focused. And you see some of the wealthiest people on the planet come out of that. Warren Buffett’s judgment is paramount. And he gets a lot of capital behind that because every extra dollar has no marginal cost, his judgment is just better. And so, value accrues to him in a way that it doesn’t to anyone else.

Tobias: Let’s start with the first one here. How is wealth created?

Eric: Yeah, Naval says, “Wealth is created by assets that earn while you sleep.” Separating wealth from money, where money is a tool that we use to exchange value. And wealth is this extensive leverage that works while you sleep. So, the money keeps making money. The property keeps getting rented. The software keeps serving customers. And that out running, outpacing your own effort with that wealth creation tools, those machines, those processes, those other people who learn the same things that you learn and can apply them on your behalf. Wealth doesn’t come out of the one-for-one exchange, it comes out of finding a way to get 10 for 1 or 100 for 1 or 1000 for 1.

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