What Self-Made Billionaire Investors and Entrepreneurs Understand That Others Don’t

In 2010, I made two pivotal decisions regarding my learning journey.

First, I chose to learn from the world’s top investors, based on the belief that we are all investors in our lives, allocating time and resources to skills, relationships, projects, and careers that we hope will yield significant returns.

Second, I raised my standards for whom I learned from. After reading "Fooled by Randomness," I recognized that luck plays a more substantial role in most people's success than they often admit. To identify individuals successful primarily due to skill, I established the following criteria:

• They belong to the top .0001% of achievers. This meant self-made billionaires who had transformed their knowledge into remarkable real-world success without privilege.
• They are not one-hit wonders. I focused on those with a multi-decade track record of consistent success, rather than those who merely stumbled upon success once.
• They actively share their insights. I sought out individuals who have authored books, participated in interviews, or publicly expressed their thoughts, allowing me to learn from them.
• They achieved success ethically. Their wealth was not acquired through unethical means, and many have engaged in philanthropy.

Implementing these filters revealed a clear pattern in skill selection. Sometimes, eliminating distractions is essential. For instance, it is challenging to discern the hidden letter in a set of dots until the more conspicuous ones are moved aside.

Here are a few examples that connected the dots for me:

In essence, each of these innovators and investors advocates focusing on rare and valuable investments. If you aim for significant returns and impact, you should prioritize the unique skills that set you apart.

I refer to this model as the Outlier Algorithm:

“To be an outlier, you need to be a contrarian who is smarter than the market.”

Ray Dalio succinctly summarizes this concept:

“You have to be an independent thinker because you can’t make money agreeing with the consensus view, which is already embedded in the price. Yet whenever you’re betting against the consensus, there’s a significant probability you’re going to be wrong, so you have to be humble.”

While the Outlier Algorithm may seem straightforward, its depth becomes apparent upon closer examination. Let’s break down Dalio’s insight:

• Investing in what everyone agrees is valuable leads to higher prices. Increased demand drives prices up, resulting in lower returns. Similarly, acquiring popular skills may not offer any competitive edge; it merely allows you to keep pace with your peers. For instance, if you're the only candidate with a sought-after skill, you can command a premium; if everyone has it, you become just another option.
• Conversely, betting against the consensus often leads to mistakes. In financial markets, 90% of professional investors do not outpace the market average. This means that seasoned investors can sometimes underperform compared to novices who simply invest in a diversified index. The same principle applies to learning; while pursuing skills deemed essential may be a safe bet, achieving top-tier status necessitates diverging from mainstream thinking. As Dr. Seuss aptly stated:

“You have to be odd to be number one.” — Dr. Seuss

Thus, the challenge lies in being correct when the majority is not, which can be quite difficult.

Reflecting on my experiences, the Outlier Algorithm not only expedited my learning but also catalyzed profound personal growth.

Applying the Outlier Algorithm to Learning Transformed My Perspective

The most immediate change I observed was that learning strategies that once seemed advantageous now appeared misguided. For example:

• Reading the latest bestsellers
• Keeping up with industry news (that everyone else followed)
• Daily checks of social media for industry influencers' opinions

Unbeknownst to me, I had primarily prioritized popularity. My underlying rationale was that if something was widely appreciated, it must be beneficial.

However, through the lens of the Outlier Algorithm, my logic shifted: While it might be worthwhile to familiarize myself with popular topics, I recognized they wouldn’t yield substantial benefits or influence.

To illustrate this, consider the following question:

How much would you pay for a life-saving procedure if you were certain you would die without it?

You might instinctively say you'd give everything for it, as nothing is more important than life, right?

But when you factor in how many people possess that skill, the equation changes. If everyone can perform that life-saving procedure easily, your willingness to pay diminishes significantly.

The skill remains valuable but lacks rarity; thus, its market value decreases. Additionally, a person acquiring that skill will have a lesser impact than if they were to master a unique, life-altering ability that few others possess.

With the Outlier Algorithm, I began to seek out learning sources that resembled the following:

• Academic research
• Fields outside my expertise that were largely overlooked
• Licensing exclusive data
• Building connections with insiders who might not disclose certain insights publicly
• Mental models that offer abstract but valuable perspectives

As I incorporated these approaches into my life, I experienced significant shifts in my career. As a writer, I began to articulate ideas that others had yet to explore. This differentiation propelled my writing into the limelight. Within a few years, my readership soared to millions across esteemed publications like Forbes, Fortune, TIME, and Harvard Business Review—an achievement I had once deemed unattainable.

On a deeper level, employing the Outlier Algorithm facilitated a transformative journey akin to the Hero's Journey—a universal archetype found throughout human history.

The essence of this journey entails:

• Individuals stepping away from the established norms of their culture
• Venturing into the unknown to reinvent themselves
• Returning with newfound knowledge to foster cultural evolution

We embark on a similar journey whenever we choose to pursue rare and valuable skills. By resisting the majority viewpoint, we initiate a cycle reminiscent of the Hero's Journey. We traverse from the familiar into the unknown, ultimately discovering something more precious than the mainstream narrative, thus completing one cycle and preparing for the next. Viewing the Outlier Algorithm through this lens helped me feel connected to a greater lineage and imbued my knowledge-sharing endeavors with deeper significance.

In conclusion, the Outlier Algorithm has enabled me to decipher the distinctive traits of numerous leading investors and entrepreneurs.

I now comprehend why Ray Dalio revisits ancient history to glean insights for contemporary markets: history tends to repeat itself, albeit sometimes over extended periods. Thus, one shouldn't rely solely on personal experiences to draw sweeping conclusions. By examining history, Dalio has uncovered a more reliable way to forecast future trends that others may overlook.

This perspective clarifies why Peter Thiel's primary query for new recruits is:

“What do you believe is true that no one else agrees with you on?”

This question serves as a quick filter to differentiate between consensus thinkers and contrarian thinkers. If someone cannot articulate even one contrarian viewpoint, they may not align with the desired mindset.

Moreover, it elucidates why Elon Musk prioritizes engineering and design, dedicating 80% of his efforts to these areas rather than conventional CEO responsibilities:

• It’s valuable. Musk and his team evaluate product quality against their ideal vision rather than merely mimicking competitors, employing a higher standard of value.
• It’s rare. He challenges conventional business norms, redefining the role of a CEO. Unlike most automotive CEOs, Musk is both a designer and an engineer, deviating from typical business activities.

Getting Started with Four Simple Guidelines

While the pursuit of rare and valuable skills can be challenging, that difficulty is precisely what makes it worthwhile:

• First, beating the market is inherently difficult. In financial domains, 90% of professionals do not outperform the average market returns—a phenomenon that extends to various sectors.
• Second, it often involves prolonged periods of misunderstanding. When individuals challenge conventional wisdom, they frequently face skepticism. Thus, breaking away from the norm can lead to feelings of isolation and underappreciation. You may be labeled a quack or face subtle disapproval, leading to self-doubt. If proven wrong, the fallout can be significant, potentially resulting in financial loss or career setbacks, especially when reliant on external support.
• Additionally, it is time-consuming. Relying on authorities—such as government, mainstream media, or experts—can be more convenient than conducting thorough research, particularly for those lacking expertise.
• Finally, it can be confusing. Initially applying the Outlier Algorithm may obscure rare and valuable skills, as prevailing consensus views often blind us to alternative, credible perspectives.

For instance, many successful artists, leaders, and entrepreneurs endured years of struggle before achieving recognition. Similarly, groundbreaking scientific ideas were once dismissed as heretical, and revolutionary technologies often appeared trivial at first. Bill Gates' 1995 attempt to explain the Internet's potential serves as a prime example.

On the flip side, the challenges of employing the Outlier Algorithm underscore its value. Greater difficulty equates to greater rarity.

To help you navigate these hurdles, here are four essential rules of thumb I frequently revisit. Though they are few, they pack a significant punch and encapsulate extensive contemplation on discovering rare and valuable skills:

1. Be the first to master a valuable skill. Monitor emerging sciences, technologies, applications, and fields. When you identify areas experiencing exponential growth, invest a few hours exploring them to determine if they merit deeper engagement. I refer to this as Jeff Bezos' Hockey Stick Rule, a strategy that allows you to test new ventures without committing too much time to potential failures.
2. Pursue valuable skills that pose challenges. Be prepared to invest time in areas that may be unconventional, demanding, or seem risky.
3. Seek out valuable skills with hidden benefits. Human beings often overlook skills that offer long-term, abstract benefits, micro-skills, interdisciplinary knowledge, and classic concepts that have fallen out of favor.
4. Reassess value in a way that surpasses conventional wisdom. In our careers, we utilize our skills to serve others, be they customers, supervisors, or audiences. Understanding the unmet needs of those you serve better than others can enable you to address those needs more effectively.

To summarize, remember to:

• Be first
• Embrace difficulty
• Search for hidden benefits
• Redefine value

If you’ve made it this far in the article (3,000 words and counting), you’re truly remarkable! Your dedication motivates me to create these in-depth, research-driven pieces, even as I grapple with the impact of social media on our attention spans. :)

As a token of appreciation, I invite you to take part in my month-long learning challenge, Month to Master, with the first week free.

During the first week (November 28th — December 4th), you will learn how to:

1. Identify a valuable micro-topic to become an expert in within approximately 100 hours (the worksheet includes a checklist with 30 questions to help you uncover rare and valuable skills).
2. Construct a learning curriculum to rapidly build expertise in that topic.
3. Gain momentum and support to kickstart your journey.

Discover a rare and valuable topic in just one week—join the free challenge now!