4 Types Of Leverage To Actually Grow Your Business

What’s up, everybody? Welcome back to the pod. We’re gonna do something a little bit different. If you’ve been tuning in, we have, like, almost 600 episodes of this podcast, and it has only ever been me sitting here talking to you. This time, we’re gonna do something different. We had a tweet a while back where I talk about the six pieces of business advice that I would give to my younger self. And I actually have a younger version of myself here in the form of a news young buck. He’s gonna go through that tweet, and he’s gonna ask some questions. We’re gonna break it down in more depth, and over the next week, we’re going to unpack this entire tweet store.

So, anoosh, what do we got?
So, six pieces of business advice. The first one that you had said is master leverage, and you can move mountains. Now, there’s four parts to it. You had said there’s labor leverage, capital leverage, technology leverage, and media leverage. So if you could explain those.
Yeah, so if you master leverage, you can move mountains. And the key here is understanding the four different types of leverage that are useful when it comes to making money. In. In particular, you have labor leverage, capital leverage, technology leverage, and media leverage. Labor leverage is the most effective in the beginning when you don’t have anything else, and it breaks down into two forms. You either have your labor or you have other people’s labor. The problem for most of us is that we grow up in a world where society tells us the main way to make money is through your own labor, to go exchange your time for money. You go to punch your clock in the w two, and you get paid an amount of money for that.
And then as you start learning more about winning the money game, everybody tells you that you have to, you know, decouple your time from your money, and you can’t charge for your time and all that. But the problem is, in the beginning, that’s all you got. All you got. You don’t have anything else. You don’t have experience, you don’t have capital, which are the two other things that you need for a business to succeed. So you got to use what you got, which is your labor. And so you get going by doing the work and putting in the, you know, the elbow grease. And I.
This is what we call sweat equity. But there comes a point where you only have so much time in the days. There’s only so much you can do. And so your ability to recruit other people into your vehicle and give everybody a collective dream towards which we can row the boat. That is the secret to making a ton of progress really quickly. And you can do this if you’re very persuasive, if you have great sales skills, you can sell people on the vision of your business. But again, this scales quickly. I can go get five of my buddies, I can convince them I will share profit with you.
As we go out there, knock on doors, and we sell window washing. Right? But it’s the most operationally complex, because for every person that I add to the machine, the nodes of communication get exponentially more complicated. So when it’s just me, I just have to tell myself what to do and go do it. When it’s me in Anuj, it’s. I tell him. He tells me it’s very simple. As soon as there’s a third person, I have to talk to that person. That person has to talk to Anooj, that person has to.
Or Anoosh has to talk to me. Right? So now they can have a conversation that I’m not present to and starts to spiral really quickly. This is called Metcalfe’s law, is that the nodes of communication expand exponentially with each person added to the communication system. So labor is great to get started, but it gets really complex really, really quickly. Compounding that is the fact that, like, your friends or family or parents, they look at labor leverage as, like, the bees needs. They think that is the best way to grow a business. When people, in the beginning, they ask you about your business, they’ll be like, oh, how many people work for you? And some people are like, oh, you only have five employees. They think down on you.
But if you have 500 employees, they’re like, oh, that guy is great, regardless of the fact of the business is profitable or not. So that’s labor leverage, just understanding how do we use our time, our energy, and the energy and resources of other people to row the boat towards our collective goals? Capital leverage is the second form of leverage, and this is where we’re using money to go buy back our time, to make our money go work for us, you know, work harder for us, and we worked for it. It’s the whole idea of, like, investing our money. And this has a lot of potential upside. This is how Warren Buffett made all his money. You know, take his money and all the money that he raised from investors and then go deploy that into opportunities. He doesn’t do any of the work after he’s invested in Coca Cola or after he’s invested in Apple. It just compounds and does the work for him.
Very, very powerful form of leverage. However, it’s hard to get. If you don’t have reputation, if people don’t know who you are, if you don’t have a skill to back it up, nobody’s going to give you their money. The other side is, it has a lot of downside because you could screw up. You can lose a lot of people’s money, and so it’s a blade that cuts both ways. You can either make a lot of money, or you can lose a ton in the process. The third form of leverage is technology. And what we’re talking about here is really code.
The ability to sit down in your basement with a computer and create the next social media app that impacts billions of lives is it’s available to everybody. Everybody that has a computer and the ability to speak code could do that. But the thing with technology is it’s your best bet to make a billion dollars or to completely waste your time. And what I mean by that is technology code. In software, it typically falls into the category of, like, winner takes all, right? Because there is so much potential upside there. There’s a lot of competition, and it typically aggregates in the hands of one or two or three players. And so if you’re not in the top three of your industry, it’s very easy to go to zero with technology. However, because you can take so many swings at bat with this, nobody’s stopping you other than your ability to sit down and, and do the work.
Like, you can come up with tons of ideas, keep trying to find market product fit, and eventually hit that big opportunity. So, technology, that’s not my game, but it’s a very. It’s a very powerful one. It’s the one that’s made all the trillionaires that you know of at this point. The fourth form of leverage is media. Media is the content game. So the content that you’re consuming right now, this podcast, is a form of media leverage, where I can create this once, and it has the ability to go out and impact the lives of thousands, if not millions of people. And the marginal cost of replicating that, for me, is zero.
It’s just, it’s the time investment I’m putting into it right now, the time put into editing it, into posting it, all that stuff. But once it’s out there, it’s continuing into perpetuity to bring awareness to what we do. So the thing with media is that it’s my favorite because it’s the machine that if you play the game the longest has the highest likelihood of working. But I it’s also the slowest of all the ones that we talked about. Right now. With labor leverage, you could go out right now and make $10,000 in the next month just off the back of your labor. With capital, if you could get somebody to give you their money, you could go invest that and earn a yield on that. With technology, you could code something and go sell that very quickly.

But with media, typically takes a while to build reach and reputation. And the reason for that is that reputation takes time. Takes time to build, takes seconds to destroy. But it’s worth it. If you’re listening to this, you’re an entrepreneur that wants to build a business. It’s worth taking the time to start building that media leverage side of the equation while you’re using your labor, while you’re using your capital, while you’re using your technology. And I think that’s the secret to really succeeding here, is to use all four forms of leverage concurrently. If you do that, it’s very, very hard to lose the game.

So that is four types of leverage. Master those, young buck, and you will move mountains. That’s going to do it for me, guys. We’ll catch you in the next episode.