The Power of Leverage — 4 Ways to Build Wealth

and how to have a higher output for the same input.

Yesterday I read a tweet by Barret O’Neill (@barretjoneil on twitter) that really hit me. The main idea was the world is changing so fast that our life — for people born around 90s and afterward — is completely different to the one our parents lived.

Actually, not only our world is different, but the way we interact with it — and specifically, the way our income is — or can be — generated.

This is why, I decided to further research the ideas discussed in this twitter thread and summarize it all in a short, concise and useful medium post.

Do you want to know how to use leverage to get wealthy? Let’s find it out together! :)

Young people today and their parents have grown in completely different worlds. During our childhood and prime working years — starting around late 90’s — the world has experienced a really rapid tech innovation.

First the internet.

Then the social networks.

The iphone — and the rapid spreading of mobile phone technology.

And so so many others events.

Yet… should we still work as we did during the XX century? Certainly, no.

The internet created financial opportunities that seemed foreign to our parents —by Barret O’Neill

Defining Leverage

The word leverage comes from the word lever, a primitive tool used to lift and move heavy objects. The main advantage of levers is that they are force multipliers — with the proper lever, you can accomplish more than you would normally be able to on your own.

Do you think you cannot lift 1 tone? Maybe not on your own, but with a long enough lever you certainly could! It is physics!!

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world. — by Archimedes

And as it is stated in the law of the lever, the longer the lever, the heavier the object you can move. The best part is that this idea extends far beyond just moving heavy objects.

Can you earn $100,000 a year without working even 1 hour?

You easily could investing $5,000,000 properly.

Can you get 10,000 people to like your Instagram post?

You easily could with 1,000 people sharing it.

This is an incredibly powerful concept. If you want to give yourself the advantages that will help you succeed, then you should focus on getting yourself as much leverage as possible.

Leverage Types

According to Naval Ravikant, there are 4 types of leverage that you can acquire.

1. Labour — or People

Traditionally, this meant hiring people. People are the most obvious type of leverage as you can accomplish more while working in a team than by yourself. A team of two people can get more than double the results than that of a single person.

It is even more powerful when you have people working for you such as employees and contractors. With such people working to build your business you can accomplish a lot more, while all you have to do is coordinate the resources.You might even get to keep all of the business equity, which is always the most valuable piece.

I would rather earn 1% off 100 people’s efforts than 100% of my own efforts — by John D. Rockefeller

2. Capital

Capital naturally provides leverage. It gives you the ability to buy assets that can grow in value, thus giving you a return on investment. Capital can also be reinvested to buy into other forms of leverage.

You can buy people leverage by paying employees or contractors. You can use capital to physically buy advantages: a plane ticket, advertising for your business, joining a networking event — these are all forms of leverage that can give you some future reward.

Price is what you pay. Value is what you get — by Warren Buffett

3. Code

Code leverage is the ability to generate algorithms — contained in apps or programs — that can be useful and automate tasks that you don’t want to do. Even better, you can even sell them to others. Code it once and sell it forever.

From bots ferrying information across the internet at every google search, to bots processing and producing recommendations for our next film or gift purchase, to now even full language pieces for us to consume, coding is already here to stay. We are flooded every single day by algorithms — and they are becoming one pillar of our modern societies.

Leveraging code brought us the big tech titans of today —Google, Airbnb, Uber among others — and a new generation of wealth. It is the most powerful leverage in the modern age.

Coding is today’s language of creativity. All our children deserve a chance to become creators instead consumers of computer science — by Maria Klawe.

4. Content — or Audience

Thanks to social media such as Facebook, Twitter or Instagram and content sites such as YouTube, Twitch and Medium we are living for the first time ever the democratization of not just the delivery of content, but access to the creators of content.

Influencers have changed the traditional definition of the celebrity, and YouTubers are upending traditional news channels. Content leverage is the content you create that scales via software — code — with a zero marginal cost of reproduction. That means you only have to make the piece of content once, but anyone with an internet connection can consume it repeatedly. It’s instant, highly scalable leverage.

In this interconnected world, it’s now easier than ever to connect to our 1,000 true fans and we have platforms that enable us to do that easier than ever before.

Create because it’s fun. Create because it helps people. Create because it gives you a sense of accomplishment. Create like nobody’s watching and you might be surprised how many do. ― by Matt D’Avella

The Core Concept

Naval states that wealth creation — and taking advantage of leverage to do so — is a skill that anyone can learn. The core concept of leverage is that you want to detach your output from your input. Work in a way that you can scale it up without having to commit any extra time or effort yourself. You work smarter to increase your leverage which increases your success on its own, rather than working harder and being limited.

Money is a tool that you exchange for products and services. It’s fixed.

Wealth, however, is something that works on itself while you’re sleeping. It could be the program you wrote that’s working for you while you’re on vacation, a business you’ve to step up, or merely a piece of content that’s being shared across the globe.

To create this wealth, you have to give society value — you have to give something that society needs, but they don’t know it yet. These innovative products will come out of your specific knowledge and are within your capabilities. Once you figure out what society wants, you need to scale it by building leverage.

You’re never to get rich renting your time— by Naval Ravikant

The way you can tell that your leverage is increasing is that you can make more money with the same amount of time and effort as before.

You have a higher output for the same input.

Feel free to share your thoughts and experiences in the comments! ✨

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