“You are not going to get rich renting out your time. You must own equity, a piece of the business to gain your financial freedom.” Naval calls this the most important point. Your hours are scarce. True wealth compounds infinitely.
“Everybody who really makes money at some point owns a piece of a product, or a business, or some kind of IP.” Silicon Valley programmers get stock options. But “usually the real wealth is created by starting your own companies, or by even investors” buying equity positions.
Equity sits at the bottom of the capital stack. This is pure game theory. “Equity means you get paid everything after all the people who need guaranteed money are paid back.” Employees get salaries first. Debt holders get guaranteed returns. Equity holders get what remains.
“The equity holders take on greater risk, but in exchange, they get nearly unlimited upside.”
This is asymmetric betting in its purest form. The principal-agent problem dissolves when you become the principal.
“Accountability is how you’re going to get equity.” Take public responsibility for outcomes. Build leverage through irreplaceable skills. “They have to give you equity, which is a piece of the upside.”
Modern twist: create equity in yourself. “Taking accountability for your actions is the same as taking an equity position in all of your work.” Build reputation around specific knowledge. Productize yourself into scalable assets. This requires the same mental ownership you practice inwardly.
Naval demonstrates through angel investing: “I can identify great trends as they’re emerging, invest in those companies or help start those companies, own equity in those things.” His judgment compounds through decades of pattern recognition. Network effects amplify each successful bet. Market timing requires patience.
“Have ownership and equity in what you do and then just crank it up.” Find what you love. Map it to what society wants. Take the risks. Gain the rewards.