What are Naval's views on "Company Equity vs. Public Markets"?

Sure, here is the English translation in markdown format:

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Okay, let's discuss how the Silicon Valley guru Naval Ravikant views the topic of "Company Equity vs. Public Markets." This is actually a core tenet of his wealth philosophy. Understanding this point gets you to the heart of his thinking.

I'll explain it clearly in plain language.

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The One-Sentence Summary:

For Naval, true wealth is created through owning equity in companies, while the public markets are primarily places for preserving and transferring wealth.

Think of it like the difference between “Planting a future fruit-bearing tree” and “Buying and selling fruit in a fruit-trading market.”

• Company Equity: This is like planting a tree yourself that might bear countless fruits in the future. The risk is high – it could fail completely. But if it succeeds, you own the entire tree and its ongoing stream of fruit.
• Public Markets: This is like a huge marketplace for trading fruit that's already been picked. Everyone is buying and selling harvested fruit at fluctuating prices. You can potentially profit from buying low and selling high, but you only own the fruit itself, not the tree that produces it.

Let’s break this down.

Why Does He Champion Company Equity (Especially in Early-Stage Startups)?

Naval believes achieving financial freedom is nearly impossible solely by selling your time for a wage (your income is capped by the 24 hours in a day). You must possess "leverage," and equity is one of the most powerful forms of leverage.

1. Asymmetric Upside

   • What does this mean? It means "losses are limited, but potential gains are unlimited."
   • An example: You join an early-stage startup and receive equity (options). The worst-case scenario? The company fails, your options become worthless, and you've lost potential higher earnings elsewhere during that time. However, if the company IPOs successfully, that small piece of equity could multiply 100x or 1000x, generating life-changing wealth. This type of "input vs. output" dynamic, with extreme imbalance favoring upside, is very hard to find in the public markets.

2. You Are an "Owner," Not a "Trader"

   • Owning equity means you own a piece of the company. Its success is deeply tied to your interests. You're working for yourself; your intelligence, effort, and time are all increasing the value of the equity you hold.
   • Naval often says: "You want to be rich while you sleep." Equity is that kind of asset. The company team, its product, and its code are all working 24/7 to increase the value of your stake.

3. Creating Value, Not a Zero-Sum Game

   • A successful startup is creating new value. It solves a problem that wasn't solved before or creates a new market. All participants (founders, employees, investors) can benefit. This is a "positive-sum game."
   • Routine trading in the public markets, however, largely resembles a "zero-sum game." The money you make often comes directly from another trader's loss. The information gap has narrowed drastically, making it incredibly difficult for the average person to consistently outperform the market's smartest, best-resourced professional institutions.

So, What About Public Markets (Stock Trading)? How Does He View It?

Naval doesn't completely dismiss public markets, but he believes ordinary people have misplaced expectations for them.

1. The Information Juice Has Been Squeezed Out

   • In the stock market, any publicly available information has been analyzed countless times by thousands of analysts and fund managers using sophisticated models; the price already reflects this information. Trying to find an "undervalued opportunity" based on a news headline or an earnings report is almost impossible. What you think is an "insight" might just be common knowledge others already priced in.

2. It's a Pro's Playground

   • He believes active trading in the public markets is a full-time job and one of the most competitive sports in the world. As an amateur trying to beat these full-time professionals with your spare time, you're fighting a losing battle. The frequent result is falling victim to market volatility like "being harvested."

3. Its Primary Role is "Preservation" and "Diversification"

   • For those who have already accumulated wealth through equity or other means, the public market is a valuable tool. You can diversify your wealth by investing in many companies (e.g., via index funds/ETFs) to hedge against the risk of any single company failing, allowing your wealth to grow steadily with the broader economy.
   • Its role is that of a "wealth storage unit," not the "wealth generator."

Putting the Contrast into Perspective:

Summarizing Naval's Advice in His Signature "Epigrams":

• Want to create transformative wealth? Acquire equity. Build your own company or join a promising early-stage company you deeply believe in, securing stock options or shares.
• Already have wealth you want to preserve and grow? Consider allocating a portion into the public markets, for example, by buying low-cost index funds and holding them long-term—avoid constant trading.
• Never rely on frequent stock "trading" in the public markets as your primary path to wealth. That's an incredibly crowded, hyper-competitive, and low-probability game.

Hope this explanation is clear! This logic is a key to understanding the patterns of wealth distribution in the modern tech industry.