Books

4 Hour Work Week Summary: A Guide to Join the New Rich

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4 Hour Work Week Summary in one sentence: The book gives you actionable tips and advice on starting a business and tactically removing yourself to sit back and let the money come your way.

4 Hour Work Week Summary: Quick Look

Who is this book for?

Before we go any further, let’s see if this book is something you should put time and money towards. The book specifies that you need not be born rich or be a young single twenty-something. You also don’t have to quit or hate your job.

The book is written in simple language that can be read by college students and even experienced working professionals. The principles used in this book are more geared towards people who wish to optimize how they utilize their time. Additionally, the book is also for people who want to start their own business or want to become better employees at their job. 4 Hour Work Week targets a wide audience while combining Productivity and Business and setting the complex jargon aside.

This is a must-read for those who want to transition to doing something better in life through a new career or business.

Let’s delve deeper into Tim Ferriss’s claim: “Escape 9-5, Live Anywhere, and join the New Rich”

Who are the New Rich?

The title and the tagline of this book seem too good to be true. But Tim Ferriss does in fact give you the steps and resources that you can use to design the lifestyle of the “New Rich”. That makes you wonder, what or who is the New Rich?

The book talks about the New Rich taking mini-retirements throughout life as opposed to saving up for one long retirement after working for decades. The people who save it all for the long retirement are called Deferrers in the book. Let’s look at the main differences the book highlights between the Deferrers and the New Rich.

Deferrers	New Rich
To work for yourself	To have others work for you
To work when you want to	To do the minimum necessary work for maximum effect
To retire early or young	To take mini-retirements through life and do what excites you
To buy all the things you want	To do all the things you want to do and be all the things you want to be
To be the boss instead of the employee	To be the owner
To make a ton of money	To make a ton of money with specific reasons, dreams, timelines, and steps
To have more	To have more quality and less clutter
To reach the big pay-off: IPO, acquisition, retirement, etc.	To ensure payday comes consistently, focusing first on cash flow

DEAL

The book is divided into four parts, one for each letter in the acronym DEAL (catchy, I know!)

Definition: This part talks about the basic mindset of the New Rich. It also talks about mini-retirements, less is more, relative vs absolute income, and learning from failure. Tim Ferriss’s idea of fear-setting (inversion) in this section asks you to imagine the worst-case scenarios and coming up with potential solutions.

Elimination: This section helps you think of the unimportant tasks you might be doing in order to reduce or eliminate them. It takes a deep dive into time management with the help of the Pareto Principle and Parkinson’s Law.

Automation: This is probably the most interesting part of the book. It talks about taking advantage of currency differences to outsource and automate tasks. This is an important step because it also helps you learn to delegate. It also talks about validating ideas to test if your business venture would work.

Liberation: This section looks at Vagabonding and mini-retirements in detail. The book talks a lot about traveling in the periods you are not working. This is not forced upon you, however, and you can spend it some other way.

Looking at Work Differently

4 Hour Work Week challenges every conventional notion that most of us have just internalized.

“If the recipe sucks, it doesn’t matter how good a cook you are.”

Interest and Energy

The book brings up the basic underlying fact that a lot of people choose to ignore: Interest and Energy are cyclical. One fuels the other and it is important to maintain a certain momentum.

Extending the same idea, working at a job that you hate for decades just to unlock the golden egg of retirement is working backward. Work needs to be more than just a source of cash to fund you towards the end of your life. Retirement is considered to be a kind of insurance rather than the end goal.

Absolute vs Relative Income

Absolute income is based on just one metric: money earned in a year. For example, someone earning a salary of $100,000 per year.

Relative income takes into account the number of hours worked to earn the $100,000.

Let’s consider two cases:

For the numbers to be practical, the absolute income you earn should be enough to sustain your lifestyle.

Fear-Setting and Inversion

We tend to avoid uncertainty or uncomfortable ventures because we don’t fully grasp what could go wrong. Recognizing the potential roadblocks that might result in failure can be done through fear-setting. This is based on the idea of inversion where you visualize everything that can go wrong and prepare accordingly to avoid each of those scenarios.

The practice of fear-setting or inversion can induce much-needed confidence to help you jump ship if you were fearful of it earlier. To learn more about this counterintuitive practice of fear-setting, watch Tim Ferriss’s TED Talk.

Being Effective vs Being Efficient

The book draws a clear distinction between effectiveness and efficiency.

“Effectiveness is doing the things that get you closer to your goals.”

“Efficiency is performing a given task (whether important or not) in the most economical manner possible”

The underlying idea behind being effective over being efficient is doing what is important. However good your systems might be, if a task is unimportant it does not matter if you are efficient or not. This requires focusing more on what you do as opposed to how you do something.

Pareto Principle

The Pareto Principle is, at this point, overused and even wrongly applied a lot of the time. However, the basic principle still makes sense.

Using this principle, Tim Ferriss analyzed which 20% of his customers were causing 80% of his problems. Additionally, 20% of customers are contributing to 80% of desired outcomes. Figuring this out, meant he could keep his best customers and let go of the ones that contribute to the majority of his misery. People tend to also compare Price’s Law with the Pareto Principle because they sound similar.

Less is More

By focusing on only 20%, you eliminate your sources of misery and also avoid feeling overwhelmed.

“Being selective – doing less – is the path of the productive. Focus on the important few and ignore the rest.”

As seen above while comparing absolute and relative income, focusing on less but meaningful work can help you achieve maximum output for the minimum required input.

Multitasking is seen as a virtue by some but it only makes you less effective. It is another way to feel efficient while not being effective. According to the book, divided attention leads to more interruptions and poor results.

Parkinson’s Law

Simply put, Parkinson’s law argues that work expands to fill the time you allotted to it.

We have been in situations where you tend to take up all the time you allotted to a task even though it could have been done sooner. You might have to run errands that should ideally not take you more than a couple of hours. But because you designated Sunday as the day to run these errands, you somehow tend to take the whole day.

To avoid falling prey to this law, you need to set short and clear deadlines to complete the small portion of tasks that contribute to outsized portions of your income. Setting shorter deadlines helps you stay efficient and effective.

Low-Information Diet

This was probably one of the most relatable parts of the book. By limiting the amount of information you feed your brain, you eliminate irrelevant and unimportant things from distracting you. Scrolling through Instagram or Twitter sporadically through the day is such a cliche that it does not even require any further explanation. It is pretty much the same situation when you are trying to catch up with the latest news. The barrage of information can make you stray away from your inner scorecard and it is important to prioritize what is important.

By recognizing the time-wasters in your life, you can find ways to reduce or eliminate distractions. You can utilize this cumulative free time (which was significant in my case), to do things that are actually important like building a business or developing a skill. Some of the steps you can take to avoid time-wasters could include:

• Low to no media consumption
• Turn off notifications for email and social media
• Use an app like Freedom to block email and social media websites. Limit checking email and social media to once a day or a few times in the day (batching)
• Batch tasks like buying groceries or other errands to a specific time in the week to avoid doing them in small spurts over and over. Use a note-taking app to keep track of all that you need to do the next time you run errands. I outsource this by asking Alexa to add things to my shopping list.

Outsourcing and Geoarbitrage

Speaking of outsourcing, Tim Ferriss talks about outsourcing tasks while being in America to remote personal assistants in India. An added advantage for an American, in this case, is paying less than what you would pay an American personal assistant for achieving the same work quality.

Getting your tasks outsourced to a remote personal assistant can help lessen your burden. These tasks can range from buying a gift for your friend’s birthday, sending emails, scheduling interviews, website development, etc. By delegating tasks to a personal assistant, you also sharpen the tool that an entrepreneur needs the most: managing other people. Outsourcing tasks helps you automate your life to a much larger extent. This is key in eventually helping you to replace yourself in business. This is useful even if you are an employee who is not looking to start a business. Outsourcing tasks can help you focus on what is absolutely important while have others do less important tasks.

The book also talks about costs associated with outsourcing your tasks to a remote personal assistant.

“It is absolutely necessary to realize that you can always do something more cheaply yourself. This doesn’t mean you want to spend your time doing it. If you spend your time, worth $20-25 per hour, doing something that someone else will do for $10 per hour, it’s simply a poor use of resources”

Eliminate Before You Delegate

It does not make financial or managerial sense in delegating something that is not important at all. This only leads to wasting someone else’s time and your money. Before delegating your tasks it is important to know the procedures and rules yourself. A deep understanding of the procedures can help you delegate work better and would make the process more efficient. To make sure you delegate right, it is important to outsource tasks that are time-consuming and well-defined.

“Using people to leverage a refined process multiplies production; using people as a solution to a poor process multiplies problems.”

Outsourcing Internationally

As mentioned before, it is cheaper for someone in America to hire someone on the other side of the world. The other advantage that arises from people being in different time zones is that people can work on the assigned tasks while you sleep.

All this comes with a testing phase to hire and check potential assistants. Instead of looking at the per-hour cost, it is better to look at the per-task cost. In order to completely be hands-free, it is important for you to not take additional time to clarify parts of the assigned task. Managing is effective, micromanaging is not.

Testing and Validating your Business Idea

One of the core ideas of the 4 Hour Work Week is starting a business and automating it. It is easier to enter an existing niche than to create demand in a new niche. The business should be scalable i.e. 10,000 orders per week can be just as easy as 10 orders per week. Information-based businesses are low-cost and fast to manufacture and time-consuming for competitors to duplicate.

It is a much better indicator of a product’s success if someone actually pays instead of just saying they will pay. Before investing a significant amount of your time and money, it is important to test the potential demand for your products. This is before manufacturing anything. This involves setting up a website with a landing page talking about the product and some FAQs. These visitors can be asked to join the email list to get notified when the product is on sale.

Replacing Work

All the automation, outsourcing, and eventually replacing yourself can lead to more free time. This is also the point where you have enough money coming in to sustain your lifestyle and indulgences. However, all this free time can create a vacuum. Tim Ferriss talks about how learning at this point is beneficial. Warren Buffett and Charlie Munger still read every day with other people around taking care of a lot of the important work. Learning new things about and around your target market can help you make your business better. This period can also be used to travel to other places for a few months rather than a few days or weeks. This helps you understand the place and the culture better which can be a learning experience in itself. Being intellectually curious about things around you open up the possibilities of new ventures fills the void.

Final Thoughts

Learning a new language, hiking, sports, volunteering for causes you believe in are all good ways to spend this free time. This learning period can also be used to develop skills that can help you explore a new field. The eventual goal is self-development and helping others achieve something. The 4 Hour Work Week can get you inspired to start thinking about how to improve your life.

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