The Best Book I’ve Ever Read About Financial Freedom

this book The Almanac of nval rakan is one of the best books I have ever read about Financial Freedom and in this episode of book club which is the ongoing Series where for the last 5 years I've been distilling And discussing highlights and summaries from some of my favorite books we are going to be talking about the five key components of the Financial Freedom equation all right so the first key idea from the book is to find and build specific knowledge now this is probably the thing that is most confusing about the stuff that Nal

writes in that like what is specific knowledge well here is what he says in the book about what specific knowledge is he writes specific knowledge is knowledge you cannot be trained for if Society can train you it can train someone else and replace you secondly he says specific knowledge is found by pursuing your genuine curiosity and passion rather than whatever is hot right now thirdly building specific knowledge will feel like play to you but will look like work to others fourth when specific knowledge is taught it's through apprenticeships not schools and five specific knowledge is

often highly technical or creative it cannot be outsourced or automated and the way that I understand the concept of specific knowledge is that it's this combination Knowledge and Skills that is somewhat unique to you so Nal writes that when I talk about specific knowledge I mean figure out what you were doing as a kid or teenager almost effortlessly something you didn't even consider a skill but people around you noticed your mother or your best friend growing up would know an example that nval uses is maybe you had an obsessive personality you dive into things and

remember them quickly or maybe you have a love for science fiction you are into reading sci-fi which means you absorb a lot of knowledge very quickly maybe you play a lot of games so you understand Game Theory pretty well and if I use myself as an example there were broadly three things that I was was kind of super into when I was a kid and a teenager the first one was reading a lot of books the second one was trying to build stuff so this was like Legos and like airplane models when I was kid

and then like websites and like web development e type like trying to Tinker away and build things and the third thing is that I always really really liked teaching I would always be teaching students who were younger than me or students in the class who would ask me for help and stuff like that and teaching is something that came very naturally to me and I found myself effortlessly drawn to it now nval would probably call this combination of factors some kind of specific knowledge and in the intersection of these things like reading a lot of

books and enjoying teaching and enjoying building stuff that is sort of morphed into this career that I've stumbled into where I make videos and I write books and I like do reviews of books and and stuff like that but I didn't get here by setting out 20 years ago to become a YouTuber doing productivity stuff and writing self-help books it was more a case of pursuing what I was genuinely interested in and curious about rather than by trying to find the most efficient way to learn a skill that can make money or whatever that might

be Nal writes specific knowledge is found much more by pursuing your innate talents your genuine curiosity and your passion it's not by going to school for whatever is the hottest job it's not by going into whatever field investors say is the hottest all right so one of the things we're going to talk about later in this video is the concept of Leverage and the concept of media based leverage and that is where the sponsor of this video comes in which is Riverside Riverside is your all-in-one online studio for video and podcasting both recording and editing

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love Riverside been using it for years we'll continue to use it for years and thank you so much Riverside for sponsoring this video and so if you're at this point in the video the question you could be asking yourself is what could my own specific knowledge be and there's a few different ways of thinking about this so firstly you can think about internal versus external motivation you want to ask yourself what are the sorts of things I am internally intrinsically motivated to learn more and find out more about this could for example be the difference

between someone who when they were a kid or a teenager would take apart computers for fun versus someone who learns to code because they've heard that Tech pays really well so when you're internally motivated to do stuff then it's probably stuff that you would be reading about in your spare time or maybe talking about that thing with friends friends maybe a bit too much and it's probably the thing that you would find yourself drawn to even if you weren't getting paid for it now if you compare this to external motivation that's when you're following market

trends like hey I hear AI agents are really hot right now so let me build an interest in AI agents and you'll have a sense of constantly checking whether the thing is profitable yet this is like the difference between someone who starts a YouTube channel because they love the idea of personal self- expression versus someone who starts a YouTube channel because they think it'll make them money and if you're in that category where you're only starting a YouTube channel because you think it'll make you money then you're constantly going to be checking to see have

I made money yet have I made money yet have made money yeah and given that it takes ages to make money and it's not even guaranteed chances are if you are chasing starting a YouTube channel or any kind of skill because you see the money on the other end of the thing chances are you won't stick to it long enough for it to actually work and you probably won't enjoy it very much either which means you will be out competed if it's a zero some game by people who genuinely do enjoy the thing secondly you

can think of building specific knowledge in the sense of process versus outcome are you focused on the process or are you focused on the outcome and generally the vibe is that if you're building specific knowledge I.E things that you can't be trained for things that are found by pursuing your genuine curiosity and passion if you're genuinely leaning into your own natural inclinations then chances are you'll get lost in the process rather than being fixated on the outcome and thirdly something that nval often talks about in interviews is that if you're looking for specific knowledge you

want to be looking at what are the intersections or the unusual or unique combinations that are specific to you and true valuable specific knowledge often comes from combining interests in a way that might seem strange to other people at first like if we take someone like Joe Rogan for example he starts off as a comedian and then he gets into fighting and then he gets into like commentating on like martial arts fights and stuff and then he develops a skill to just have a conversation with anyone and then he starts a podcast which ends up

becoming like one of the biggest podcasts in the world but this combination of like comedian plus fighter plus commentator plus interviewer that's kind of an interesting combination that not many people in the world have or if you look at Naval rabhan himself like there are thousands and thousands of investors out there but Naval is one of the most wellknown not because he is a particularly good investor but because he combines the investing entrepreneurial stuff with philosophizing on Twitter and writing essays and these tweet storms about stuff like this like wealth and happiness and health and

how to how to get rich without getting lucky and it's this combination of the philosophizing with the investing e thing that leads to an interesting combination that makes Naval much more wellknown than most other investors who maybe specialize just in the investing component again what this is trying to get at is that if you really want to become wealthy if you want to be financially free don't just follow the previously pre- trodden paths because if there was genuinely a path that you could literally just you know stack the blocks and like follow the path to

a tea and then that would get you rich everyone would already be doing that and that would be priced into the amount of money you can make from the thing and so to round off this section here are a couple of prompts that can help you think about finding your own specific knowledge firstly what do you do on weekends that feels like play to you but looks like work to other people secondly what topics make you lose track of time when you're learning about them thirdly what unique combinations of interests do you have that seem

unrelated and four what do your friends constantly ask your advice about all of these are different ways of getting at what could your specific knowledge be to find within yourself innately and then to build upon that but having specific knowledge alone isn't enough if you want to build wealth or if you want to build Financial Freedom without getting lucky there's all sorts of people out there like researchers and developers and people with deep deep unique expertise who haven't achieved Financial Freedom because they're missing the other components of this little Financial Freedom equation and that brings

us on to component number two which is [Music] accountability now as it relates to accountability what Nal says is Embrace accountability and take business risks under your own name Society will reward you with responsibility equity and leverage Nal writes we are socially hardwired to not fail in public under our own names the people who have the ability to fail in public under their own names actually gain a lot of power so this is the first aspect of accountability that he talks about this ability to actually take risks under your own personal name now in most

Industries the people who are making the most money are most likely the people whose names are out there and whose names themselves are on the line if we take the industry of medicine for example like you could totally make a reasonable living as a doctor where no one really knows who your name is other than your employer and like you know you introduce yourself to your patients but within medicine the doctors who tend to make the most money tend to be the ones who are taking risks under their own personal name they are building a

personal brand for themselves they're putting themselves out there maybe they're getting really good at orthopedic surgery and so they're known as like the best orthopedic surgeon in New York and so patients are actively seeking out that individual rather than saying hey I'm going to go to this hospital cuz this hospital is really good and I'll just be paired with whatever surgeon happens to be working on the day again that's that's totally fine and for most doctors the goal of becoming wealthy is not the primary goal they're working towards but the doctors who tend to be

the wealthiest and that's what we're talking about here Financial Freedom how to build wealth they tend to be the ones taking risks under their own personal name building their own personal brand taking accountability without hiding behind a brand or an institution why do companies sell themselves to Berkshire hathway it's not because they care intrinsically about Berkshire hathway they care about Warren Buffett because Warren Buffett has built a strong personal brand professional reputation credibility around his own name and therefore people want to do business with Warren Buffett because he's built this credibility for being a fair

guy for like holding on to stuff forever for like not really interfering with the business that's one form of accountability in that you are putting your name to things but another form of accountability that Nal talks about in the book is being accountable for your outputs rather than your inputs so what does this mean well for the most part if you are for example an employee you tend to be accountable for your inputs in that your job is to show up and put in the hours fundamentally the employer is buying your time and the employer

is hoping that as a result of that time certain outputs will get produced and those outputs will will drive certain outcomes for the business or for the customers or whatever but fundamentally you're accountable for your inputs the problem with being accountable for your inputs is that your time and value and work and how much you get paid is generally quite annoyingly correlated then you've got level two where you're accountable for your outputs now in this context you could imagine someone being let's say a freelance writer now if you're a freelance writer and you're getting paid

per article you produce suddenly you're accountable for your outputs rather than your inputs the client does not really care how long it takes you to write article as long as you produce the article and therefore you have decorrelated the amount of time you're putting into the thing with the amount of value you're creating and the amount of money you can get paid for doing the thing but then you've got level three where you're accountable for outcomes now again if we use the example of a let's say a freelance writer being accountable for inputs might be

being paid per hour for writing a sales page being accountable for outputs might be being able to charge I don't know $5,000 for a draft of a sales page but being accountable for outcomes that would be level three of accountability might be saying to the client hey don't pay me to actually do the work of creating the sales page but anytime this sales page makes more money than your previous one did I want 20% of the upsite that is where you are accountable for the outcome now as you go up this accountability Spectrum from input

to Output to outcome you as an individual end up taking on more and more risk but the rewards also get higher and higher and as you go up this accountability Spectrum as well you also end up spending more time sweating at night if things are not working out this is also what nval means by taking accountability in this capitalist world that we live in the greatest rewards go to the people who take the greatest RIS R now in a world where you're being employed by a business and being paid an hourly rate you're unlikely to

get very rich off of that even if it's a very high hourly rate because the business and by extension the business owner are the ones taking on the risk of being accountable for outputs and for outcomes You're simply being paid an hourly wage to hopefully generate some outputs and hopefully generate some outcomes but you're not really going to capture the value that you've created because you're not taking on the risk he does write that accountability is a double-edged thing it allows you to take credit when things go well and to Bear the brunt of the

failure when things go badly he writes in the old days the captain was expected to go down with the ship if the ship was sinking then literally the last person to get off was the captain accountability does come with real risks but we're talking about a business context here the risk in a business context would be that you'd probably be the last one to get your Capital back out you'd be the last one to get paid for your time the time that you put in the capital you put into the company these are at risk

but the point that he makes is that in a modern society this downside risk is actually quite small even personal bankruptcy can wipe the debts clean in good ecosystems he writes I'm most familiar with Silicon Valley but generally people will forgive failures as long as you were honest and made a high integrity effort so at this point we have talked about specific knowledge and we have talked about accountability but even those things aren't enough like for example you could imagine a doctor who is employed by this big hospital and that doctor or surgeon is really

really good they are taking risks under their own personal name and they have deep specific knowledge but they are unlikely to get as rich as the person who owns the hospital and that brings us to point number three from nal's book and point number three is [Music] equity nval writes if you don't own a piece of a business you don't have a path towards Financial Freedom why is owning equity in a business important to becoming rich well it's ownership versus wage work if you are paid for renting at your time even lawyers and doctors you

can make some money but you're not going to make the money that gives you Financial Freedom you're not going to have passive income where a business is earning for you while you are on vacation without ownership your inputs are very closely tied to your outputs in almost any salary job even one paying a lot per hour like lawyer or doctor you're still putting in the hours and every hour you get paid without ownership when you're sleeping you're not earning when you're retired you're not earning when you're on vacation you're not earning and you can't earn

nonlinearly if you look at even doctors who get rich like really rich it's because they open a business they open a private practice the Private Practice builds a brand and the brand attracts people or they build some kind of medical device a procedure or a process with intellectual property essentially you're working for somebody else and that person is taking on the risk and has the accountability the intellectual property and the brand they're not going to pay you enough they're going to pay you the bare minimum they have to to get you to do their job

that can be a high bare minimum but it's still not going to be true wealth where you're retired but still earning if you look at someone like a Management Consultant or someone like a lawyer or someone like a private Equity partner the way they get really rich is because they own equity in the business it tends not to be from the salary that they're getting paid and as he talks about there's a couple of different rots here so for example you could work at a tech company that gives you some amount of equity in the

company in return for you working there you know there's a lot of people who join early stage startups they're taking a big risk because most startups don't work but if the startup does work and then sells for I don't know tens hundreds of millions or billions or whatever the thing might be then even as an early stage employee you can get pretty rich in that process secondly there is what MJ DeMarco calls the slowlane path to wealth which is basically where you have a job and you spend less than you earn and then you put

the remainder of that into something like the stock market and so you could invest that in the S&P 500 you could invest in the top 500 companies in the US you could invest in just tech stocks or whatever the problem with that approach is that if you want to make real wealth through that you have to be putting in a ton of money like Millions into the stock market to get enough passive income for it to be you know lead to meaningful wealth or meaningful Financial Freedom but what MJ DeMark calls the fast lane path

to wealth is by starting your own business because you have 100% or like a massive chunk of equity in your own business rather than trying to buy 0.00001% of Apple every year based on like the amount of money spare money you saved up from from your salary for example but even Equity ownership by itself has limits like if you imagine you starting a very small business like the local restaurant or something you are unlikely to get very rich off of starting just simply the local restaurant and that is where principal number four comes in and

that is leverage now this whole leverage stuff is something that Nal is very famous for he writes that there are three broad classes of Leverage one form of Leverage is labor other humans working for you it is the oldest form of Leverage and actually not a great one in the modern world I would argue this is the worst form of Leverage that you could possibly use managing other people is incredibly messy it requires tremendous leadership skills your one short hop from a mutiny or getting eaten or torn apart by the mob secondly money is good

as a form of Leverage it means every time you make a decision you multiply it with money capital is a trickier form of Leverage to use it's more it's the one that people have used to get fabulously wealthy in the last century it's probably been the dominant form of Leverage in the last century but then the final form of Leverage is brand new the most democratic form it is products with no marginal cost of replication this includes books media movies and code code is probably the most powerful form of permissionless Leverage all you need is

a computer you don't need anyone's permission and this whole idea of Leverage is being able to multiply your own efforts this book for example is a form of Leverage long ago I would have had to sit in a lecture hall and lecture each of you personally I would have maybe reached a few hundred people and that would have been that so books for example are a form of media leverage where you do the work once and then you could sell the thing potentially infinite times code software for example is a form of Leverage where you

do the work once to create the product and maybe a little bit of work in maintaining it and then in theory you could sell it an infinite number of times probably the most interesting thing to keep in mind about new forms of Leverage is that they are permissionless they don't require somebody else's permission for you to use them or succeed for labor leverage someone has to decide to follow you or be employed by you for Capital leverage someone has to give you money to invest or to turn into a product coding writing books recording podcasts

tweeting 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 they're great equalizers of Leverage every great software developer for example now has an army of robots working for him at night time while he or she sleeps after they've written the code and it's cranking away so if you combine these things if youve got specific knowledge I.E this combination of unique skills that are somewhat unique to you that you have personal interest in you combine that with accountability like taking risks under your own

personal name putting your personal name to something and being accountable for outputs or outcomes you combine that with starting a business around the thing and having equity in that particular business then you choose a vehicle so rather than opening the local restaurant that has very little leverage around it unless you like hire people to work in your restaurant which is kind of annoying you find a way to use Media or content and a code in particular to like do the stuff that you know as your vehicle for the business all of that sets you up

very nicely to become wealthy to become financially free and then we have key principle number five which is time and there is a subsection in the book in titled be patient one thing I figured out later in life is generally at least in the tech business in Silicon Valley great people have great outcomes you just have to be patient every person I met at the beginning of my career 20 years ago where I looked at them and said wow that guy or Gala super capable so smart and dedicated all of them almost without exception became

extremely successful you just had to give them a long enough time scale it never happens in the time scale you want or they want but it does happen it takes time even once you have all of these pieces in place there is an indeterminant amount of time you have to put in if you're counting you'll run run out of patience before success actually arrives oh that's good if you're counting you'll run out of patience before success actually arrives again this speaks to this idea around following your curiosity if you're doing something that genuinely feels like

play to you you won't be counting the minutes down and like the hours down and the days and the years waiting waiting to become successful waiting to become rich you'd be doing the thing anyway and weirdly it's the people who are not seeking the money who tend to get the money everybody wants to be rich immediately but the world is an efficient Place immediate doesn't work you do have to put in the time you do have to put in the hours and so I think you have to put yourself in the position with the specific

knowledge with the accountability with leverage with the authentic skill set you have to be the best in the world at what you do oh this is good stuff this is good stuff you have to enjoy it and keep doing it keep doing it and keep doing it don't keep track and don't keep count because if you do you will run out of time man that's good stuff now you know I was in two minds about whe whether or not to make this video because I like to make videos that are a bit more actionable that

give you more of like a step by you know follow the step-by-step process here's how you build a YouTube channel from the ground etc etc but this book doesn't really give you a step-by-step process instead it gives you more like the philosophical like like the way of thinking about it and what I was really worried about before making this video is that oh is there any is there really any value in this video will people just think that like oh they're not going to read the book because it's not it's not step by step or

it's just it's it's too high level and I thought you know what I have benefited enormously from this book by thinking in these different ways by thinking like okay specific knowledge what are the what are the different factors that I'm personally interested in where where I can to find the intersection of those accountability okay cool I need to take risks under my own under my own personal name and really I need to decorrelate my own time from the value that I'm trying to add to the world I need to be owning pieces of businesses preferably

my own business I need to have leverage and so Media or content which is the thing that I do and code which is the thing that we're now doing with software like voice pal and progress pal and superfocus me and my team are building various different apps that is a form of code-based Leverage and then the time thing it's like oh I just need to do this over a long enough time Horizon like following this advice and thinking in these terms for myself has had an enormous impact on my own life and I think this

is a really good framework like if you're genuinely interested in becoming financially free and becoming wealthy you really can't expect to get there by watching a YouTube video that gives you a step-by-step road map because like I said if there was a step-by-step road map other people would already be following it and it would be priced into the system and it wouldn't work anymore but what I really love about this book is that you we we've barely scratched the surface there's a load of interesting stuff in here about happiness and about health and about like

what's even the point of money anyway but like we've literally just focused on the first I don't know 50 50 60 70 pages that specifically talk about how to get wealthy I really would recommend the book there's a lot of really good wisdom in here but I'm hoping that if you've gotten to this point in the video you can see that this was a little bit of a high Lev thing but I'm hoping you found it useful anyway and like I said you should definitely check out the book if you are looking for more specific

advice on how to become financially free this video over here is a conversation I had with a friend recently who is a corporate lawyer who wanted to become financially free uh by making passive income and this is a recounting of the conversation that we had that goes into a little bit more practicalities around how to actually do this stuff so thank you so much for watching and I will see you hopefully in the next video