Entrepreneurship is a tricky business. It is a journey filled with rewards, failures, and uncertainties alike.
If you own a business, you would agree that you are always on the lookout for the best ways to achieve success.
Who better to show you the way who has traveled the same road, far and wide?
So, here I am with nuggets of business wisdom from one of the most celebrated entrepreneurs of recent times, Naval Ravikant.
Who is Naval Ravikant?
Naval Ravikant is an entrepreneur and an active angel investor based out of Silicon Valley. He is considered one of Silicon Valley’s legends.
He is best known for creating AngelList, a website for startups, angel investors, and startup job seekers.
He is also the founder of many successful startups – Epinions (now Shopping.com), Vast.com, Venture Hacks, The Hit Forge, MetaStable, Spearhead – to name a few.
Along with building many successful ventures himself, he also invested early-stage in over 200 startups, many of which today are unicorns.
Some of his notable investments include Twitter, Facebook, Uber, Stack Overflow, Neuralink, Notion, Gumroad, and Udemy.
Coming from his business and life experiences, he proactively shares thought-provoking advice through his Twitter account and podcasts.
His tweetstorm “How to Get Rich (without getting lucky)” reflects profound advice on building wealth, wrapped within a series of 140 characters.
Brace up for some powerful lessons from Naval Ravikant that can help you achieve greater success in your business and beyond.
Create value for society and they will pay you
Your business means nothing if enough people don’t find it useful or are not ready to pay for your product or service.
Naval, through this tweet, points out the very foundation of a business – the society, its wants, and fulfillment of those wants.
“Society will pay you for creating things it wants. But society doesn’t yet know how to create those things, because if it did, they wouldn’t need you. They would already be stamped out.”
Businesses exist because people don’t have solutions to each and everything. If you can find solutions to those problems, people see value in that and thus, will be willing to pay you.
Moreover, you need to be able to provide this value to many people if you want to generate more wealth through your business.
To build a successful business, you need to figure out what people (or your potential customers) want, create a solution to satisfy that want, and make it available to all the people who want it.
Create abundance for the world to create true wealth
If you started a business, obviously it is to make money and get richer. But, it is important to have the right mindset to become a successful entrepreneur. Otherwise, you’re just a businessperson.
The notion of money being the root of all evil, on the one hand, prevents people from finding ways to attract more wealth. To businesses, on the other hand, it gives the perception that they have to pick others’ pockets to make money.
“Most of the wealth in civilization, in fact all of it, has been created. It got created from somewhere. It got created from people. It got created from technology. It got created from productivity. It got created from hard work.”
Naval dismisses this notion and brings to light the fact that it is possible to create wealth ethically. You don’t have to take something from someone else. What you need to do is build something that creates abundance for others.
For example, if you create a design software, you are creating an avenue for others to express their creativity. The people who find value in it will pay you for your creation.
Investing long-term in the right things (and people) brings compounded returns
In the business world, it is a norm to look for shorter paths and quicker gains. Nowadays, entrepreneurs often underestimate the importance of steady and long-hauls of things.
If you want your business to thrive and bring you long-term returns, Naval’s concept of “compound interest” is something to ponder.
For entrepreneurs, compound interest is a simple yet incredibly important lesson in persistence and thinking long-term.
You can apply this concept to all facets of your business – be it the efforts to keep your customers or to forge business relationships.
Furthermore, you have to keep doing the right things repeatedly to see its compound effect. It not only builds your reputation but also helps you get direct or indirect monetary returns in the long run.
For example, if you keep treating your employees well, they’ll want to keep working with you and be willing to invest their time and efforts to grow your business.
“When you find the right thing to do, when you find the right people to work with, invest deeply. Sticking with it for decades is really how you make the big returns in your relationships and in your money. So, compound interest is very important.”
Internet is the best enabler
Even if you are a physical product or service-based business, your presence on the internet is critical to your business growth.
You can appreciate the power of the internet in Naval’s following statement.
“You can go on the internet, and you can find your audience. And you can build a business, and create a product, and build wealth, and make people happy just uniquely expressing yourself through the internet.”
Businesses tend to use the internet primarily to find and convert customers, along with using tools to run the business efficiently.
However, the internet is a much bigger playground that you must explore to find unique ways to expand your business.
From building products to making yourself and others happy – everything is possible through the internet. You can not only find new avenues for revenue but also create much more value for society through your business using the internet.
Authenticity is the weapon to escape competition
Competition seems to be an inevitable aspect of a business. Businesses spend a lot of time and energy trying to find ways to beat competitors. It becomes a never-ending struggle.
But why is there competition in the first place? Let’s try to understand it in the words of Naval.
“ Basically, when you’re competing with people, it’s because you’re copying them. It’s because you’re trying to do the same thing. But every human is different. Don’t copy. ”
If your business is doing the same things as other existing businesses, why would people even choose you?
You are selling the same product or service as many others. What options do you have then?
Well, you can always be authentic. And, how to be authentic?
“If you are fundamentally building and marketing something that is an extension of who you are, no one can compete with you on that.”
Your business becomes authentic if it reflects your passion and interests.
Along with being authentic, you must also find the product-market fit or service-market fit, for that matter. The key is to keep adjusting your approach while staying authentic.
Embracing accountability brings greater rewards
When you as an entrepreneur, build and scale a product into a successful business, you don’t only own its successes but its failures as well.
But, it is not uncommon to take credit for your success and shift the blame for your failures onto other people or circumstances.
“Clear accountability is important. Without accountability, you don’t have incentives. Without accountability, you can’t build credibility. But you take risks. You risk failure. You risk humiliation. You risk failure under your own name.”
As a business owner and even otherwise, you must take accountability for all your actions and their results. You need to be ready to take risks. It brings bigger rewards later – in the form of credibility and power.
If you are credible, customers will choose you, VCs will be willing to invest in your business, and others will want to work with you.
Basically, people value integrity and sincere efforts. So, even if you fail but have demonstrated accountability, people will be ready to give you chances.
Building and selling combination is a business superpower
A product (or service) and its sales are the fundamental components of a business. Hence, knowing how to build the product or service and how to sell is crucial for the business.
Naval mentions that “building” and “selling” are two very broad categories and is difficult for an individual to be skilled at both. But, those who can do both have true business superpowers.
The definition of building varies from industry to industry. A builder might be a programmer or someone who creates systems. Similarly, selling can include hiring, raising money, inspiring others, and many such things.
As a business owner, it is valuable for you to develop both skills. However, finding someone who has complementary skills can work just fine. Steve Jobs and Steve Wozniak of Apple are a classic examples of such a combination.
“You will see this pattern repeated over and over. There’s a builder and there’s a seller. There’s a CEO and CTO combo. And venture and technology investors are almost trained to look for this combo whenever possible. It’s the magic combination.”
A business model with network effects, low marginal costs, and scale economies are ideal.
Naval Ravikant often talks about different leverages for a business including capital, labor, and technology. He also sheds light on what an ideal business model looks like in present times.
He talks about microeconomics principles of network effects, low marginal costs, and scale economies.
Firstly, let’s try to understand what these terms mean.
The network effect is a phenomenon where an increased number of participants increases the value of a good or service. For example, a social media product or an event.
Marginal cost refers to the cost incurred in producing one more unit of a product or service.
And, scale economies are the per-unit cost reduction when you increase production. In simple words, the more you produce the product, the cheaper it gets.
If your business model considers all these three factors, you have a greater edge over others, especially if you have a technology product.
If you don’t have a technology product, you can still figure out how you can take advantage of network effects, marginal costs, and scale economies in your business.
“Anything that has zero marginal costs of production obviously has scale economies, and things that have zero marginal costs of reproduction very often tend to have network effects, because it doesn’t cost you anything more to stamp out the thing. So then you can just create little hooks for users to add value to each other.”
Pick the right people to work with
Entrepreneurship can sometimes become extremely lonely. Partnerships are critical and often necessary for any business – whether it’s your co-founder or your employees.
People you work with are integral to business execution and problem-solving. Hence, the importance of picking the right ones cannot be stressed enough.
Naval’s checklist for picking people to work with includes high intelligence, energy, and integrity.
These traits essentially mean the people you work with should have the right knowledge that helps your business. They should be motivated to work, be reliable, and ethical.
These kinds of people you can work long-term with and thus, drive business success.
“People are oddly consistent. That’s one of the things you learn about them. So, you want to find long-term people. You want to find people who seem irrationally ethical.”
Dissociate yourself from your ego to see realities
Our identity is constructed upon our conditioning over the years. Our brains develop many biases in the run which obstruct us from seeing the realities.
Founder bias is too common. You tend to ignore signs where your business is not as good as it seems to you. Hence, it is critical to avoid the illusions cast by your ego, if you want to take your business to heights.
“The hard thing is seeing the truth. To see the truth, you have to get your ego out of the way because your ego doesn’t want to face the truth. The smaller you can make your ego, the less conditioned you can make your reactions, the less desires you can have about the outcome you want, the easier it will be to see the reality .”
Moreover, Naval says, it is important to acknowledge publicly when things are not going well with your business. When you are not hiding things from others, you are not misleading yourself away from the real situation.
Focus on foundations to think clearly and find solutions
Naval Ravikant regards reading highly, especially the basics. Reading is crucial to building strong foundations of knowledge.
Knowledge is a powerful tool that helps you think clearly, judge effectively, and make better business decisions.
Besides, the basics are where you find solutions to problems.
Complex concepts are derived from basic principles only. Basic principles of maths, science, economics, and language help you develop a fundamental understanding of how things work.
“The ultimate foundations are mathematics and logic. If you understand logic and mathematics, then you have the basis for understanding the scientific method. Once you understand the scientific method, then you can understand how to separate truth from falsehood in other fields and other things that you’re reading.”
Naval stresses reading the originals first. For example, reading Charles Darwin to understand evolution or Adam Smith to learn macroeconomics.
Reading others’ interpretations before learning the basics can lead to false or biased notions.
Decision-making is everything regarding business. All the business outcomes depend on your moment-to-moment decision-making. Hence, your decisions have to be effective and efficient.
According to Naval, the more your decisions are right, and rational, the higher you will be compensated in the market.
To make effective decisions, you can mull over Naval’s following advice:
- Deal with the reality of things. Don’t make decisions based on your emotional response or your preconceived notions.
- Be radically honest.
- Build mental models/compact ways to recall your own knowledge.
- Build correct judgment by trying to ignore what’s not going to work.
- If you can’t decide on something. It’s a no.
- If you have two equal choices in front of you, choose the one with a difficult path. It will cause short-term pain but give long-term gains.
Success requires patience
In this fast-paced world, we want to achieve things faster. As they say “there’s no shortcut to success,” it is as true as steel even today.
We see products exploding and becoming the talk of the town, overnight. But, those overnight successes are backed by years of effort and skills.
Naval backs it up from his experience and advises you to keep doing your thing without keeping the count of time.
“It takes time—even once you have all of these pieces in place, there is an indeterminate amount of time you have to put in. If you’re counting, you’ll run out of patience before success actually arrives.”
Free your mind to get good ideas for your business
When you own a business, you want to make every minute count. Therefore, you are always busy, rushing, and stressing out.
Naval suggests you take some time out in a week, away from stress, to just think.
When you have space to think only then you’ll be able to come up with good ideas for your business.
“It’s only after you’re bored you have the great ideas. It’s never going to be when you’re stressed, or busy, running around or rushed. Make the time.”
It’s better to be a failed entrepreneur than never try.
“Entrepreneurial efforts often fail. But good entrepreneurs don’t fail because they stay at it.”
In one of his podcasts, Naval says, he would rather be a failed entrepreneur than someone who never tried.
Building a business is a journey worth taking, no matter what the outcome. You develop skills sets to make it on your own. You also learn a lot about yourself and your life.
Just keep doing your thing and you’ll ultimately emerge as a winner.
Thanks for reading!
To dive deeper into Naval Ravikant’s ideas, you can listen to his podcasts and follow him on Twitter. His ideas are also condensed and elaborated in a book called the Almanack of Naval Ravikant by Eric Jorgenson.
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