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Since creating the @Navalmanack, I’ve been obsessed with the idea of Leverage — a mental model coined by @Naval.
Here is an overview:
L E V E R A G E — Thread #1: Introduction
Here is an overview:
L E V E R A G E — Thread #1: Introduction
Levers are force multipliers.
This is how some people can accomplish 10, 100x, or 1,000,000x what others can.
Leverage can multiply outcomes from your effort, your skill, and your judgement.
This is how some people can accomplish 10, 100x, or 1,000,000x what others can.
Leverage can multiply outcomes from your effort, your skill, and your judgement.
Can you lift 800 pounds?
You could with an 18 foot lever.
Can you earn $50,000/year without working even 1 hour?
You could with $1,000,000.
Can you get 100,000 people to read your tweet?
You could with 100 retweets.
You could with an 18 foot lever.
Can you earn $50,000/year without working even 1 hour?
You could with $1,000,000.
Can you get 100,000 people to read your tweet?
You could with 100 retweets.
You probably heard about a “lever” when learning about simple machines in elementary school.
Lever (Noun): a rigid bar resting on a pivot, used to help move a heavy or firmly fixed load.
Leverage (verb): Use (something) to maximum advantage.
Also financial definitions:
Verb: Use borrowed capital (to invest), expecting profits made to be greater than the interest payable.
Noun: ratio of a company's loan capital (debt) to the value of its common stock (equity).
Also financial definitions:
Verb: Use borrowed capital (to invest), expecting profits made to be greater than the interest payable.
Noun: ratio of a company's loan capital (debt) to the value of its common stock (equity).
Now, we generalize “leverage” into a mental model...
To slightly modify @Naval’s original formulation, there are four forms of leverage:
- Tools
- People
- Capital (money)
- Digital Products (software, media)
To slightly modify @Naval’s original formulation, there are four forms of leverage:
- Tools
- People
- Capital (money)
- Digital Products (software, media)
*Tools* help an individual accomplish more. A skilled person with the right tools can build an entire house or cut down an entire forest.
Each of us uses incredibly powerful tools every day: cars, computers, communication infrastructure.
Each of us uses incredibly powerful tools every day: cars, computers, communication infrastructure.
*People* can be force multipliers. Humans are natural cooperators. With clear communication and alignment, 1+1=3.
Employees, contractors, agencies, consultants, audience, and fans are all types of relationships that provide leverage.
Employees, contractors, agencies, consultants, audience, and fans are all types of relationships that provide leverage.
*Capital* inherently provides leverage. The same investment decision with 10x the capital returns 10x the results.
Capital can also be reinvested into other forms of leverage -- into people, tools, or products.
Capital can also be reinvested into other forms of leverage -- into people, tools, or products.
*Digital Products* include software, podcasts, books, songs, movies, tweets, apps, algorithms, etc.
Created once, these assets can serve an infinite number of customers. This is a new thing for humans and we’re seeing some wild outcomes because of it.
Created once, these assets can serve an infinite number of customers. This is a new thing for humans and we’re seeing some wild outcomes because of it.
Each specific application of leverage has a different margin, capital intensity, ceiling, gatekeeper, velocity, maintenance cost, and rate of entropy.
Those who focus on building, growing, and re-investing Leverage are playing a different game.
And the gap between the levered and the unlevered is going to keep growing.
And the gap between the levered and the unlevered is going to keep growing.
There are already (many) million-dollar 1-person companies.
Now, we are seeing billion-dollar 10-person companies.
Bitcoin may be a trillion-dollar asset with one creator.
This is the age of leverage. Learn to see it, learn to use it.
Now, we are seeing billion-dollar 10-person companies.
Bitcoin may be a trillion-dollar asset with one creator.
This is the age of leverage. Learn to see it, learn to use it.
Simple example of the levels of leverage:
- A lumberjack w/ no tools.
- A lumberjack w/ an axe.
- A lumberjack w/ a chainsaw and a friend.
- A lumberjack w/ a team, multiple chainsaws. and a tractor.
Who sees the most impact from their effort, skill, and judgement?
- A lumberjack w/ no tools.
- A lumberjack w/ an axe.
- A lumberjack w/ a chainsaw and a friend.
- A lumberjack w/ a team, multiple chainsaws. and a tractor.
Who sees the most impact from their effort, skill, and judgement?
Like a teeter-totter, the lever works both ways.
Multiplying positive force can make you.
Multiplying negative force can destroy you.
Keep a healthy respect for the possible downside. Stay balanced.
Multiplying positive force can make you.
Multiplying negative force can destroy you.
Keep a healthy respect for the possible downside. Stay balanced.
Modern people can methodically apply, increase, and compound leverage until they stand on a MOUNTAIN OF LEVERS -- accomplishing 1,000x their peers.
More to come. http://EJorgenson.com
More to come. http://EJorgenson.com
