Leverage creates a disconnect between your inputs and outputs. Leverage allows you to earn non-linearly and achieve an oversized impact with your time. Without leverage, your compensation is tied directly to the hours you work.
Leverage comes in different forms. Labour and capital are permissioned leverage, requiring credibility to obtain. Labour, the oldest and most challenging form, involves managing people.
Capital uses money to amplify the effects of decisions. Deploying capital productively takes skill but is easier to scale than managing more and more people.
Technology (specifically code) and media are modern, permissionless forms of leverage. These are products you create yourself with no marginal cost of replication. You don’t need permission to succeed, and you can multiply your efforts without involving others. Code allows you to serve customers while you sleep. Media, whether through writing a book or building a brand on platforms like X, YouTube, and podcasts, enables you to scale your work to reach millions.
Startups offer a path to leverage by combining various forms to solve difficult problems. Solving a problem that many people care about creates value for everyone who uses your solution.
A good indicator of leverage is the potential for failure. Starting a business risks founders' credibility, time, and capital.