How does Naval view the differences between "Value Investing" and "Growth Investing"?

Okay, let's talk about this topic. If you've listened to Naval Ravikant's podcasts or read his quotes, you'll find he's someone who enjoys cutting through complexity and getting straight to the essence. His view on the classic debate between "Value Investing" and "Growth Investing" follows the same principle.

Putting it simply, in Naval's view, the debate between "Value Investing" and "Growth Investing" is a bit like asking: "For a good car, are the wheels important or is the engine important?"—these aren't opposites; they are inseparable parts of evaluating a good car.

Here’s a breakdown of his logic in plain terms:

First, Forget the Labels; They're Imaginary Opponents

Many people frame these two investment styles as completely opposing schools:

The Traditional View of "Value Investing": Like shopping at a discount store. You look specifically for things priced far below their "book value." For example, imagine a company: if you sold off all its factories, equipment, and cash, it might be worth $1 billion, but its current market value (stock price) is only $500 million. Buy it! You're banking on its "cheapness," waiting for the market to recognize its true value and for the price to catch up.
The Traditional View of "Growth Investing": Like investing in a future star. This company might be losing money now, or have thin profits, appearing "expensive." But its user base is exploding, its market share is constantly increasing; people are betting it will become an industry giant, aiming for returns from potential hundred- or thousand-fold future growth.

But Naval believes this division is outdated today, and even misleading.

Core Perspective: Growth is Inherently Part of Value

This is key to understanding Naval's view.

Think of it this way: When you buy a company, what are you really buying? You're buying its future ability to consistently make money for you.

Use a simple metaphor:

Imagine you're buying an apple tree.

A so-called "value" investor might calculate what the tree's wood is worth and what the existing apples on it are worth. They find its "liquidation value" is $500, but it's currently selling for $300. They think it's a bargain and buy it.

But what would Naval (and the modern Buffett) think? He would think: Is this tree healthy? How many apples will it bear over the next 10, 20 years? How much money could those apples be sold for? Will there be pests in the future? Could someone build a chemical plant nearby that pollutes it?

See? This tree's future "fruit-bearing capability" (its growth potential) is the core component of its "value" today. An old tree that will die next year has low investment value, no matter how valuable its wood might be. Conversely, a small sapling that looks immature today but has excellent genetics and strong vitality has immense future value.

So, Naval's point is: When valuing a company, you must factor in its "growth potential." A company without growth is likely a "value trap" – seemingly cheap, but becoming increasingly worthless over time.

So, What Does Naval Focus On, Then?

He doesn't split value and growth; what does he actually look for when investing? He prioritizes fundamental qualities:

Business Quality
This comes first. Is this company a good business? Does it have a "moat"? (A moat refers to enduring competitive advantages hard to replicate, like brand, patents, network effects). Only a great business can continuously create value over the long run.
A Fair Price
Note: It's a "fair price," not necessarily a "cheap price." Even the best thing isn't a good investment if you pay a ridiculously high price for it. Naval is deeply influenced by Buffett's adage: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
A Long-Term Horizon
Naval emphasizes playing the "infinite game." Investing isn't gambling where you buy today and sell tomorrow. When you find a great company, the best strategy is to hold it long-term, letting the "compounding" – the eighth wonder of the world – work for you. The company's growth will gradually manifest in your returns over time.
Deep Understanding
This is what he often calls "Specific Knowledge." Don't invest in things you fundamentally don't understand. You should place bets within your areas of familiarity because only there can you potentially see deeper and further than others, truly judging a company's "quality" and "growth potential."

Summary

So, the next time someone asks Naval how he views "Value Investing" vs. "Growth Investing," you could tell them:

For Naval, this is not at all an 'either/or' question. True investing is about finding companies that are fundamentally excellent (valuable) and have the capacity to grow sustainably in the future (growth), and buying them before their price gets bid up to the sky (at a fair price).

His focus isn't on labeling an investment "value" or "growth," but rather on the quality and the prospects of the business itself.