Naval’s Thoughts On How To Get Lucky | The Acquirer's Multiple®

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

Tobias: Yeah, that’s good. I like that. My favorite part of Naval’s tweetstorms– and I think it started off like this one. I really liked it because I’ve been thinking about it quite a lot before it came up. He’s got this how to get lucky. And I have my own thoughts on how to get lucky but let’s talk about Naval’s because Naval’s been a lot luckier or a lot more– I think luck and skill sometimes– guys who are very skillful are very good at getting lucky, that’s been my observation for a lot of people who I’ve known. People who I have worked for good investors, very, very good at getting lucky. What’s the prescription?

Eric: A couple beers and a good line.

Tobias: [laughs]

Eric: Naval breaks down luck into four pieces that I think I can do off the top of my head. But basically, you can cross your fingers and hope is the most basic kind of lottery ticket thing. And then, you get into increasingly how you control your luck or how you create more of it. I think of it like luck surface area. So, you can do some things to increase the odds that luck finds you. So, just building in public, talking about what you’re doing, talking about stuff you’re interested in. All of a sudden, you’ll feel this tailwind of people connecting you with other people who are interested in the same things that you’re interested in or sending you articles or sending you customers, that can go a long way. It’ll feel like luck but really you did something to create that. The most extreme form is to become so unique and so well known as being unique that you are the only person who can unlock certain opportunities. And then, the one Naval says is luck becomes your destiny, which I think is a really interesting.

When you look at the hero’s journey in the Joseph Campbell quests, it’s a contrived story and so it always feels made up, but we each have our own set of unique talents and set of unique challenges that we are the key to a unique lock somewhere out there and life is just about finding that lock that you are the key to, and then it’s going to feel like luck. “Oh my God! My key fits this lock!” but you worked hard to find that lock and to become that key.

Tobias: That’s so funny because there’s that– The Secret ,which is totally woo-woo, it’s totally bullshit, but there’s some truth in the fact that if you start talking about something you do, people who are interested in the same thing or who want that thing or want to help you with that thing, hear you say that and then they get in contact and you do manifest those things. It’s not magic. It’s just the way that things work.

Eric: Yeah. I think it’s like if you need to believe it’s magic, you can believe it’s magic. That’s fine. If you need to believe that it’s generating your own willpower, you can believe that it’s generating your own willpower. I have some very successful friends, usually in the sales world it seems to me, who are pretty diehard manifesters, and they write down very specifically the goals that they’re going to achieve or the outcome that they are going to drive. And I think it’s almost hacking the commitment and consistency bias. If that’s my goal, and you look at it every day, it forces you to look at like, well, what am I doing to reach that goal? Am I working on the most important thing? Can I expect to reach that goal with how I perform today? If not, it just makes you sick to your stomach to look at that gap, and you’re like, “Fuck this, I’m doing something about this.” It’s just forces you to look at the inputs and outputs and try to solve for X.

Tobias: There’s another thing that you said there that I think is really interesting. And this is in investors who I’ve known– and whether a venture capital stage or guys who are investing on the stock market, they seem to have the same attitude. They look for these– It’s a really hackneyed phrase used over and over again, but they look for these asymmetric opportunities where basically I’m going to do this thing and if it doesn’t work, it doesn’t really matter, like the downside’s virtually nil, but the upside payoff is gigantic. And if you put a whole portfolio of those things together, you get enough of these things with these gigantic payoffs that you start looking like you’re actually– there’s something magic going on in the portfolio. You’re not causing any of them to happen. You’re just saying if I put enough of these things in there and I can’t lose on any of them, but I can win big on some of them. That’s basically going to succeed.

And then the destiny part of it is you have to look at it over a really long period of time. And if you start looking like that, then you start thinking, well, I can’t have things– I can’t blow up at any stretch. If I blow up, I go back to zero. But if I can compound this and get lucky from here until kingdom come, then this is a strategy that should work.

Eric: Yeah. And it’s funny hearing you describe that because– Naval in his angel investing is about the opposite of value investing from a mindset. Instead of rule number one, don’t lose money, it’s like rule one, be sure you lose money because if you don’t, you’re missing out on something, you’re not taking enough risk. But from the perspective of my downside is 1X and my upside is 100X and you need one or two things to go huge and then just keep compounding that, you never know what they’re going to be. And you can try to get a little better at it and build more judgment and build some pattern recognition. But at the end of the day, there’s very little information to go on. And there’s so many more unknowns than knowns that you can only control so much. And so, the portfolio effects just gets really, really important.

And there’s not much investing specific stuff in the book, but there is some on the website, and Naval he has done some really cool stuff with spearhead around placing angel investments, and how to portfolio math and those kind of things work.

Tobias: To me, it’s not that angel investing and value investing are so distinct. I think of them all on a very long continuum and it’s just different mixes of frequency and magnitude. So, if your frequency is low, your payoff has to be quite high. And so that’s angel investing. And if that is in fact the case, then you want to have a lot more of those bets on. And I think it’s Y Combinator that does it where they just figured out that we’re going to have– if we got a $10 million portfolio, we’re not going to have 10 $1 million positions, we’re going to have 100 $100,000 positions because if you get those gigantic payoffs, it almost doesn’t matter whether you had 100 grand or a million in it. You just need to make sure that you catch that right tail, that’s what we’re trying to do.

With value, it’s more like the magnitude is not going to be as big, but the frequency is– they are more frequent, so you can afford to be a little bit more concentrated, and you’ve just got to figure out where you are on the spectrum. If you’re angel, you need more positions on. If you’re value, you need fewer positions on.

Eric: Yeah, I think that’s right. And it is a blow to the ego of angel investors that you can’t pick them. You think you can pick them, you can’t. It doesn’t matter what you do, just get a lot of bets out. And if that’s the game you’re playing, that’s the game you’re playing.

Tobias: You just got to get lucky. And there’s a book that tells you how.

[laughter]

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