4 Types of Business Leverage
Naval Special
Naval Ravikant is a pretty famous, albeit extremely low-key businessman and investor based in the US.
He has some seriously sound business advice and because of his low-key-ness, it comes across and is presented in such a clean way without ego or selling you anything (ness).
But today I wanted to outline a really strong part of his concepts which is leverage.
In his words;
Seek Leverage: Naval emphasizes the importance of seeking leverage in whatever you do. Leverage allows you to achieve more with less effort. Whether it's through technology, capital, or network effects, leverage amplifies your potential for success.
The 4 Types of Leverage
Business leverage comes from 4 areas;
Capital (Money).
People (Labour).
Code (Tech).
Media (Distribution / Audience).
Capital
Capital means money. To raise money, apply your specific knowledge, with accountability, and show resulting good judgment.
Similar to what we discussed in our post yesterday around using cash to create cash flow. Capital here is a form of leverage.
People / Labour
Labor means people working for you. It's the oldest and most fought-over form of leverage. Labor leverage will impress your parents, but don’t waste your life chasing it.
This quote “labour leverage will impress your parents” is so incredibly accurate it’s scary.
One of the questions people ask to “gauge” whether you are a real/good businessperson or not is how many employees you have. I’ve been guilty about doing this as well, its an easier way to ask “are you real or just BS”.
And asking directly, how much revenue and profit you make is quite socially awkward.
As a result, how many employees do you have or how many people in your team seems a lot more low-key but it’s still asking the same question.
In 2024 onwards, I think labour and people leverage is the lowest form. There’s people building multi-million dollar companies with a handful of good people and solopreneurs doing multiple 8 figures a year, the labour leverage is not what it used to be.
Capital and labour are permissioned leverage. Everyone is chasing capital, but someone has to give it to you. Everyone is trying to lead, but someone has to follow you.
In short, someone else has to make a decision to help you with the above leverage.
Code & Media
Code and media are permissionless leverage. They're the leverage behind the newly rich. You can create software and media that works for you while you sleep.
Meaning no one has to “agree” with you or make you fill out an archaic form to get moving.
If you can't code, write books and blogs, record videos and podcasts.
There’s multiple ways to leverage permissionless leverage, you just have to be creative in how you approach them.