Aug 5, 2019 ~ 2 min read

Modern-day Leverage

Podcast episode of the day:

In one particular section of this long episode, Naval speaks to the changing nature of economic leverages humans have had, and the new options we have now.

Of past forms:

  • The tried and true original form of leverage starts with wage. We trade our time for money. Growth is linear. New job, new salary, but low rate of growth compared to other options.
  • Managing. Leading and managing people, as in the case of a feudal lord, king, whatever position, was a form of leverage. Such a person had power and can capitalize with that leverage. But it is no longer a stable form. With people, you have people issues. Revolutions, mutiny, emotional cascades.

Another form of leverage

  • Capital. If you have capital, you have the power to move the chess pieces in your favor. People who move large amounts of money around wield capital.

The newest form of leverage:

Cheap replication, the idea that production can have no cost of replication.

  • With the advent of the printing press, and now the internet and code, you can multiply your efforts to global scale instantly.

With a handful of skilled people, a tight team of designers, engineers, and product managers, you have the potential to output on a scale much larger than ever before.

This is the new form of leverage: internet.

By combining capital, management, and the internet, tech companies have maximized their leverage and received outsized returns.