Leverage: Fortunes require leverage. Business leverage comes from capital, people, and products with no (minimal) cost of replication. Tech startups ideally combine all 3.
- Oldest form is labor. Hiring people. It’s the oldest form so people get impressed by how many people work for you, or how big the company is. We just assume that more people is better. Though Naval makes the argument that this is the worst form of leverage. Managing people is extremely messy. Requires leadership skills and are always close to a mutiny. It’s a trap.
- You want the minimal number of people working with you to use the other kinds of leverage.
- Capital is less engrained. Requires more intelligence to deploy, and ways to maximize keep changing. Dominant form in the last century.
- Bankers and stock market is using capital as leverage.
- People don’t like because it feels unfair. Can be passed by generations.
- Can be converted into labor and other things. Very surgical and analytical.
- Scales very well (if you do well at turning $ into more $$, it’s highly likely people will give you more of it).
- This requires specific knowledge and accountability. You must have those 2 in a domain that generates money to make a return and inspire others to give you their money. Track record and a good game.
- Products with No Marginal Cost of Replication: The newest. Started with printing press and broadcast media. Exploded with the internet and coding. This podcast is a version of this leverage.
- Where the new fortunes have been made. Code and Media.
- Generally take a while to get going because you make very little money per user. But can really really add up over time.
- Network Effect Magnifies this. You want to be in a network effects business. If you get there first, you can build a natural monopoly. This is where each added user – adds more value to the network.
- Permissioned vs Permissioned-less: New forms don’t require someone else’s permission to do use them or succeed. For labor, someone has to follow you. For capital, someone has to give you $. Coding, youtubing, podcasts don’t really cost anything (or minimal). You can learn to write code and sell it in the ap store.
- The Robot Revolution is already more than half over. They are just INSIDE the computers. Now the hardware (autonomous vehicles, drones, etc) is catching up.
- Jeff Bezos’ google searches and netflix experience is the same as yours.
- Labor and Capital are becoming lower permissioned, through technology. Crowd funding. Facebook has 1bil people working for free to generate content.
Technology is making many things more egalitarian. Even food has become egalitarian. Food is so abundant that it’s almost too abundant – and people are getting fat and unhealthy. Technology has scaled food up that much.
We are surrounded by technology. The spoon was technology once.
for a full transcript + podcast (worth the listen!!) = https://nav.al/rich