Why you should acquire knowledge over monetary compensation first (The era of skills monetization)
Stacking knowledge and skills will bring you better upsides in the long run.
If you’re starting out, chances are, you don’t have a lot to show for yourself. That is what 89.99% of people are facing.
But that’s not the problem.
The problem is:
We want to look for the easiest way to get rich quick.
I’ve done a bit of research and there are four main reasons why this is the case:
Social pressure: We’re bombarded with images of success and wealth through social media, television, and movies, creating a sense of pressure to achieve similar levels of wealth and success at a young age.
Financial instability: We face financial instability, with rising education costs, low wages, and limited job prospects.
High aspirations: We have high aspirations and want to achieve our goals quickly.
Lack of experience: We lack experience in the workforce with ludicrous expectations and may not understand the time and effort it takes to build wealth and success gradually over time. We’re egoistic, let's put it this way.
It's common for us to think that we can take on the world and conquer it all by ourselves.
We may have a limited set of skills and knowledge, but we feel confident that we can handle any challenge that comes our way.
Unfortunately, this can lead to a lot of frustration and disappointment. We may put in a lot of effort and hard work, but we don't see the results we were hoping for.
The truth is it's no longer about the hours put in. It's no longer about being the hardest worker in the room. It's no longer about getting rich fast. After all, what's the point of that if you can't sustain it?
Now...
It's about skills.
Alex Hormozi put it this way: Time + Skills = Value.
If you have the skills, seek leverage and accountability. Income is the product of skills, leverage, and accountability.
So instead of striving to get rich quickly, you should aim to acquire high-demand skills.
These high-demand skills will then open many opportunities for you to earn.
The main focus of this letter is about a skill that you can offer to the world that others can't. A skill that comprises your traits, your upbringing, and your response. A skill that makes you you.
Do you really need money?
Money is an illusion we're chasing. And we know that.
Pursuing money is the killer of creativity (your most creative self).
Once the thought of money overpowers your sense of purpose, you can’t do your best work. Your mind’s stagnant on the paper rather than the reason for doing it.
What we should instead pursue is knowledge, and turn it into a monetizable skill.
Applied accumulated knowledge, in the long run, is far more valuable than chasing money without learning something in depth.
The power of the compounding effect makes this even more valuable.
The point is, in the beginning: Seek skills (knowledge), then leverage, not money.
Acquiring skills to earn leverage
Naval Ravikant names four different classes of leverage (as seen from the diagram above):
Collaboration
Capital
Code
Content
Collaboration (aka labor or people leverage)
The first form of leverage is collaboration or labor leverage. Traditionally, this means you have other people working for you. It is positioned at the bottom of the pyramid as it is considered the 'worst' form of leverage.
It requires tremendous leadership skills and it's not made for everyone. You have to be able to manage a big group of people and be able to articulate your ideas, solutions, and problems well to make sure everything goes as you say.
From a financial perspective, it is difficult for you to weather an economic downturn as you'll need to pay out wages to your workers first.
However, if you're able to hire excellent workers and they're able to generate excellent positive cash flow for you, this form of permissioned leverage could make you wealthy.
Capital (other people's money)
Capital is the next class of leverage. Similar to the collaboration, this is a permissioned leverage. It is positioned above labor leverage in the leverage pyramid.
The traditional finance definition of leverage is borrowed money and if you know how money works, you're able to invest in income-producing assets such as productive businesses to get a significant boost in your returns.
It also means that if the manager makes the right decision, their money will multiply. If a wrong decision is made, they lose more money.
Capital is much more trickier and complex form of leverage to use. However, it's what rich people in the modern world use to generate enormous wealth with their name attached to it.
Capital leverage has probably been the dominant form of leverage in the last century.
Think of Warren Buffet. He is best known for amassing his fortune through a thoughtful value investing strategy. And using capital leverage, he is able to compound his judgment and make right decisions most of the time.
If you're good at managing capital, you can manage more of it and make more of it. It can scale very, very well. And before you know it, you'll already exceeded your financial goals.
Code (machine leverage)
Code, or machine leverage is a form of permissionless leverage. It works for you while you sleep and is now the leverage behind the newly rich.
Think of the advent of new technologies such as blockchain.
It is basically made out of complex code and it's a shared distributed ledger that stores information or data. It's the technology behind Bitcoin and Ethereum, which are applications of that technology.
This form of leverage is brand new—the most democratic form. It is the idea of products with no marginal cost of replication.
They’re great equalizers of leverage. Every great software developer, for example, now has an army of robots working for him at nighttime while he or she sleeps, after they’ve written the code, and it’s cranking away.
Code is probably the most powerful form of permissionless leverage and a great superpower because you can speak the language of robots. All you need is a computer and you don't need anyone’s permission.
Think of Google, Airbnb, Facebook, Instagram, etc. Behind these big companies, there's code that runs the whole system.
Content (media leverage)
Likewise for content, or media leverage, it is the idea of products with no marginal cost of replication and a form of permissionless leverage. It's positioned at the same level with code.
Coding, writing books, recording podcasts, tweeting, and YouTubing—these kinds of things are permissionless. You don’t need anyone’s permission to do them, and that’s why they are very egalitarian.
Media leverage is the content you create that is able to scale through code. For instance, the chance of your content being shown to others is based on code (the algorithm that runs the system).
Anyone with an internet connection can consume the content repeatedly through the code-based application.
If you're able to code, create content (build), and sell, you'll be unstoppable.
As Ravikant explains:
The new generation’s fortunes are all made through code or media. Joe Rogan making $50 million to $100 million a year from his podcast. You’re going to have PewDiePie. I don’t know how much money he’s rolling in, but he’s bigger than the news. And of course, there’s Jeff Bezos, Mark Zuckerberg, Larry Page, Sergey Brin, Bill Gates, and Steve Jobs. Their wealth is all code-based leverage.
Value creation
Let's define value creation.
Value is differentiated. Not commoditized.
Soon knowledge will become commoditized. Then the world will become full of people who think exactly the same, do exactly the same, and talk exactly the same.
If you don't have specific knowledge, you'll ultimately be replaced by robots.
But what is never going to be commoditized? My take is going to be creative and unique ideas at scale.
Most of what makes up specific knowledge is creativity.
Value is extracted from creativity.
Creativity is displayed in art and science.
The Beauty of Art
Art is what you do for its own sake.
– Naval
Art is the expression of your highest becoming.
It goes beyond just drawing and painting.
Playing chess is a form of art.
Writing is a form of art.
Singing is a form of art.
Walking is a form of art.
Art is an attempt by the creator to make the world in sync with him or her. You are your own creator. You can achieve the highest form of self-expression through art.
All these skills are art.
What's missing in the equation is the logic behind it.
The Ingenuity of Science
Beauty is the reflection of pure intelligence at work, seen without motive.
– Naval
Science is the drive to explain experience.
It's your left brain at work.
Perspective is science. Color theory is science. Proportion is science. Anatomy is science. And that’s just the basics.
We use a big chunk of that time to learn “how” and “why” things exist.
For example, in drawing, you'll think "How can I create a piece of art so it turns out the way I envisioned it in my head?"
From that, learn to interpret a piece of art so you'll understand the “why”
Science is the discovery of the world, and art is the reflection of the world.
A Mixture of Art and Science
You're an artist and scientist.
Art is an idea that comes out of someone’s mind and science gives it reason.
Basically, the idea behind this wonderful combination is that after combining science with art we get a logic for our idea, or in other words, the thought or thinking gets a perfect reason for its existence.
That’s what brings art to real existence.
Here we see:
Art + Science = Value
Talk about something you're interested in, plus something you have experience with, plus something that is sustainable (e.g. personal development, philosophy, experience).
Add logic to it (e.g. Ask 'why', value, monetization of art).
Do that for at least six months.
"Combine art (creativity) and science (logic), you'll become unstoppable."
What I've distilled is what you need to know in terms of creating value for your audience. But there's one question that is always asked:
"What if the market is saturated?"
Turn Your Knowledge into Value Creation (Capturing Value)
Building a personal brand is the closest to a non-saturated business. It's hard for any technological advancement to replace you.
You can literally be who you are, talk about what you want, and most importantly, be authentic.
You're your own creative mind. You're your own idea. You're your own inspiration.
As we move ahead, personal branding is the most lucrative and rewarding business out there.
In the end, specific knowledge is not something you pursue. It's a skill that's already in you. You just need to pry all the limitations and self-doubts and look beyond yourself.
Perceive. Process. Perform.
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Top Learnings of the Week
Huawei published a paper on Embodies AI (E-AI): Embodied AI (E-AI) in contrast to traditional internet AI and how E-AI can better align with human values. It explores how E-AI, equipped with perception, action, memory, and learning abilities, could be a step toward achieving Artificial General Intelligence (AGI) (link)
Nvidia launched Chat with RTX: A new AI-powered chatbot designed to operate directly on your personal computer was released by Nvidia. This innovative tool is capable of summarizing or conducting searches through your computer’s documents, as well as YouTube videos and playlists. It is safe and private since it can run on your computer without an internet connection (link)