If outsourcing a task will cost less than your hourly rate, outsource it.
Set and enforce an aspirational hourly rate
Nivi: We covered the skills that you need to get rich. That was specific knowledge, accountability, leverage, judgment, and life-long learning. Let’s talk a little bit about the importance of working hard and valuing your time.
Naval: No one is going to value you more than you value yourself. You just have to set a very high personal hourly rate and you have to stick to it. Even since I was young, I just decided I was worth a lot more than the market though I was worth, but I started treating myself that way.
Always factor your time into every decision. How much time does it take? Oh it’s gonna take me an hour to get across town to get this thing. I value myself at a $100 an hour; that’s basically throwing $100 out of my pocket. Am I going to do that?
You buy something from Amazon; they screwed it up, you have to return it. Is it worth your time to return it? Is it worth the mental hassle? Keep in mind that you have less work hours, you have less mentally high-output hours. Do you want to use them to run errands and solve little problems, or do you want to save them for the big stuff?
All the great scientists were terrible at managing their household life. None of them had a clean, organized room, or made all their social events on time, or sent their thank you cards.
You can’t penny pinch your way to wealth
You can spend your life however you want, but if you want to get rich, it has to be your number one overwhelming desire. Which means, it has to come before anything else; which means you can’t be penny-pinching. This is what people don’t understand.
You can penny-pinch your way to a basic sustenance. You can keep your expenses low, maybe retire early and not spend too much. That’s perfectly valid. But we’re here to talk about wealth creation. If you’re going to do that, then that has to be your number one overwhelming priority.
My aspirational rate was $5,000/hr
Fast forward to your wealthy self and pick some intermediate hourly rate. For me, believe it or not, back when you could have hired me... Which now obviously you can’t, but back when you could have hired me... this was true a decade ago or even two decades ago, before I had any real money. My hourly rate, I used to say to myself over and over is, $5,000 an hour. Today when I look back, really it was about $1,000 an hour [back then].
Of course, I still ended up doing stupid things, like arguing with the electrician, or returning the broken speaker, but I shouldn’t have, and I did a lot less than any of my friends would. I would make a theatrical show out of throwing something in the trash pile, or giving it to Salvation Army, rather than trying to return it, or handing something to people rather than trying to fix it.
I would argue with my girlfriends, and even today it’s my wife, “I don’t do that. That’s not a problem that I solve.” I still argue that, with my mother, when she hands me little to-do’s. I just don’t do that. I would rather hire you an assistant. This was true even when I didn’t have money.
If you can outsource something for less than your hourly rate, do it
Another way of thinking about something is, if you can outsource something or not do something for less than your hourly rate, outsource it or don’t do it. If you can hire someone to do it for less than your hourly rate, hire them. That even includes things like cooking. You may want to eat your healthy home cooked meals, but if you can outsource it, do that instead.
I know some people will say, “Well what about the joy of life? What about getting it right just your way?” Sure, you can do that, but you’re not gonna be wealthy because now you’ve made something else a priority.
Paul Graham basically said it pretty well for Y Combinator startups, he said, “You should be working on your product and getting product-market fit. And you should be exercising and eating healthy.” That’s about it. That’s all you have time for while you’re on this mission.
Your hourly rate should seem absurdly high
Set a very high hourly aspirational rate for yourself and stick to it. It should seem and feel absurdly high. If it doesn’t, it’s not high enough. Whatever you picked, my advice to you would be to raise it. Like I said, for myself, even before I had money, for the longest time I used $5,000 an hour. And if you extrapolate that out into what it looks like as an annual salary, it’s the multiple millions of dollars per year.
Ironically, I actually think I’ve beaten it. I’m not the hardest working person; I’m actually a lazy person. I work through bursts of energy where I’m really motivated with something. If I actually look at how much I’ve earned per actual hour that I’ve put in, it’s probably quite a bit higher than that.