Four Kinds of Luck


This post is by naval from Startup Boy


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This is a transcript of How to Get Rich: 4 Kinds of Luck.

Naval: Let’s just start with getting lucky. Obviously, we want to be wealthy and we want to get there in this lifetime without having to rely on luck. A lot of people think making money is about luck. It’s not, it’s about becoming the kind of person that makes money.

I like to think that if I lost all my money and if you drop me on a random street in any English-speaking country, within five to ten years I’d be wealthy again because it’s just a skill set that I’ve developed and I think anyone can develop. 

And in a thousand parallel universes you want to be wealthy in 999 of them. You don’t want to be wealthy in the 50 of them where you got lucky, so we want to factor luck out of .

Just recently Nivi you and I were talking on Twitter about how does one get lucky and there’s really four kinds of luck that we were talking about this came from a book and pmarca, Marc Andreessen, wrote a blog post about it.

The first kind of luck you might just say is  blind luck where I just got lucky because something completely out of my control happened. You know, that’s fortune, that’s fate, etc. 

Then there’s luck that comes through persistence, hard work, hustle, motion, which is when you’re just running around creating lots of opportunities you’re generating a lot of energy you’re doing a lot of things, lots of things will just get stirred up in the dust. It’s almost like mixing a petri dish and seeing what combines or mixing a bunch of reagents and seeing what combines. But you’re just generating enough force and hustle and energy that luck will find you. 

And our group, you could argue got together because of that, Nenad had put up these great videos online. I saw them on Twitter and so in that sense generated his own luck by just creating videos until people like me keep finding him.

A third way is that you just become very good at spotting luck. So if you are, very skilled in a field you will notice when a lucky break happens in that field and other people who aren’t attuned to it won’t notice. So you become sensitive to luck.

And then the last kind of luck is the weirdest hardest kind but that’s what we want to talk about which is where you build a unique character, a unique brand, a unique mindset, where then luck finds you.

For example, let’s say that you’re the best person in the world at deep sea underwater diving and you’re known to take on deep sea underwater dives that nobody else will even attempt to dare. And then by sheer luck, somebody finds a sunken treasure ship off the coast they can’t get at well their luck just became your luck because they’re going to come to you to get that treasure and you’re gonna get paid for it.

Now that’s an extreme example, but it’s just showing how, the person who got lucky by finding the treasure chest that was blind luck, but them coming to you and asking you to extract it and having to give you half that’s not luck. You created your own luck, you put yourself in a position to be able to capitalize on that luck, or to attract that luck when nobody else has created that opportunity for themselves. So when we talk about without getting lucky we want to be deterministic. We don’t want to leave it to chance. 

Nivi:  Do you want to elaborate a little bit more on the idea that in a thousand parallel universes you want to get rich in 999 of them? I think some people are going to see that and say that sounds impossible. Sounds like it’s too good to be true.

Naval: It might seem like it’s impossible to get rich in 999 out of a thousand universes, but no, I don’t think it’s impossible. I think that you just you may have to work a little bit harder at it given your starting circumstances.  

Remember I started as a poor kid in India, right? So if I can make it anybody can in that sense. Now obviously I had all my limbs and I had my mental faculties and I did have an education. So there are some prerequisites you can’t get past. But if you’re listening to this video or podcast you probably have the requisite means at your disposal which is a functioning body and a functioning mind.

And I’ve encountered plenty of bad luck along the way. The first little fortune that I may die instantly lost in stock market. The second little fortune that I made, or I should have made, I basically got cheated by my business partners and it’s only the third time around has been a charm. 

And even then it has been in the slow and steady struggle and I haven’t made money in my life in one giant payout. It’s always been a whole bunch of small things piling up. So it’s more about consistently creating wealth, by creating businesses, including opportunities and creating investments. It hasn’t been a giant one-off thing. My personal wealth has not been generated by one big year. It just stacks up little bit chips at a time: more options, more businesses, more investments, more things I can do.

Same way someone like a Nenad, Illacertus, he’s building his brand online, he’s building videos. It’s not like any one video is going to suddenly shower him with riches overnight. It’s going to be a long lifetime of learning, of reading, of creating that’s just going to compound. 

So we’re talking about getting wealthy so you can retire right? So you have your freedom. Not retire in the sense that you don’t do anything, but in the sense that you don’t have to be any place you don’t want to be, you don’t have to do anything you don’t want to do and you can wake up when you want, you can sleep when you want you don’t have a boss. That’s Freedom.

So we’re talking about enough wealth to get to freedom. And especially thanks to the internet these days those opportunities are massively abundant. I, in fact, have too many ways to make money. I don’t have enough time. I literally have opportunities pouring out of my ears and the thing I keep running out of his time. But there’s just so many ways to create wealth, to create products, to create businesses, to create opportunities and to, as a by-product, get paid by society that I just can’t even handle it all.

Nivi: I think it’s pretty interesting that the first three kinds of luck that you described, there are very common cliches for them that everybody knows. And then for that last kind of luck that comes to you out of the unique way that you act, there’s no real cliche for it. 

So for the first three kinds there is “dumb luck” or “blind luck”. That’s the first kind of luck. The second kind of luck, there’s the cliche that “fortune favors the bold.” That’s a person who gets lucky just by stirring the pot and acting. The third kind of luck people say that “chance favors the prepared mind.” But for the fourth kind of luck, there is not really a common cliche that matches the unique character of your action. Which I think is interesting and also just shows that people aren’t necessarily taking advantage of that kind of luck the way they should be.

Naval: I think also at that point it starts becoming so deterministic that it  stops being luck. So the definition starts fading from luck to more destiny. So I would characterize that fourth one is your you build your character in a certain way and then your character becomes your destiny. 

 One of the things I think that is important to making money and this is not in the original tweetstorm, this is a little bit of an add-on, is you want the kind of reputation that makes people do deals through you. So I use the example of: if you’re a great diver then treasure hunters will come and give you a piece of the treasure for your diving skills.

If you are a trusted, reliable, high-integrity, long-term thinking dealmaker, then when other people want to do deals, but they don’t know how to do them in a trustworthy manner with strangers, they will literally approach you and give you a cut of the deal, or offer you a unique deal just because of the integrity and reputation that you’ve built up.

If you look at a Warren Buffett he gets offered deals and he gets to buy companies and he gets to buy warrants and bail out Banks and do things that other people can’t do because of his reputation.

But of course that’s fragile, it has accountability on the line, it has a strong brand on the line and, as we’ll talk about later, that comes with accountability attached. 

But I would say your character, your reputation, these are things that you can build that then will let you take  advantages of opportunities that other people may characterize as lucky, but you know that it wasn’t luck.

Nivi: You said that this fourth kind of luck is more or less a destiny. There’s a quote from that original book that was in Marc’s blog post from Benjamin Disraeli, who I think was the former prime minister of the UK, and the quote describe this kind of luck was “we make our fortunes and we call them fate.”

There were a couple other interesting things about this kind of luck that were mentioned in the blog post I think it’ll be good for the listeners to hear about is that this fourth kind of luck can come out of the eccentric ways that you act and that eccentricity is not necessarily a bad thing in this case. In fact, it’s a good thing.  

Naval: Yeah absolutely, because the world is a very efficient place. So everyone has dug through all the obvious places to dig. And so to find something that’s new and novel and uncovered, it helps to be operating on a frontier. Where right there you have to be a little eccentric to be out on the frontier by yourself. And then you just have to be willing to dig deeper than other people do deeper than seems rational just because you’re interested.

 Nivi: Two quotes that I’ve seen that express this kind of luck, in addition to that Benjamin Disraeli one, are this one from Sam Altman were he said “extreme people get extreme results.” And then there’s this other one from Jeffrey Pfeffer, who is a professor at Stanford, that “you can’t be normal and expect abnormal returns.”

Naval:  And one quote that I like which is the exact opposite of that is “play stupid games, win stupid prizes.” A lot of people spend a lot of their time playing social games like on Twitter where you just trying to improve your social standing and you win stupid social prizes which are worthless.

 Nivi: The last thing that I have from this blog post is the idea that by pursuing these kinds of luck, especially the last one, everything but dumb luck, by pursuing them you essentially run out of unlock. So if you just keep stirring the pot and stirring the pot, that alone at some point you will run out of unlock.

Naval: Or it could just be reversion to the mean right? So then you at least neutralized luck so that it’s your own talents that come into play.

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