What does Naval Ravikant mean by Leverage ?

In twitter world, one of the most value adding content i have came across over last two years is from Naval Ravikant. The best thing is, its direct, fundamental and timeless.

One thing he talk about most for career perspective is Concept of Leverage. I understood what he talks about but it seems hard for me to articulate to others in verbal form. Here’s my attempt to articualte it in written form.

There is three Fundamental Element in his idea of Leverage.

  1. Lever
  2. Fulcrum
  3. Force

It all starts with this famous line,

Give me a lever long enough and a fulcrum on which to place it, and I shall move the world. -Archimedes

“Leverage” in Naval’s terminology is ‘Force Multiplier’.

Here’s the basic diagram of how leverage works.

We all have used this in our childhood. If the distance of both side is same, we can lift 10 Kg of weight on left side by applying same weight on the right side.

Suppose we want to lift 100kg on left side, while applying the same force on right side. What we need to do is increase the length of lever by 10X on right side.

If the lever is 10X longer on the right side, we can lift 10X weight with same force which required to lift 10kg.

It’s basically about effort and output ratio. If it’s linearly structured, there is no leverage attached. If there is leverage included in any form, the output will be tens or hundreds or thousands of times more than input applied.

This is simple physics concept but we are not evolve to understand and apply it into real life.

in Naval’s formula include four types of Leverage.

  1. Capital:

Your personal (mental) efforts remain same for managing 1 million or 10 million as an investor. But 10 million is longer lever compare to 1 million. 10 million can generate more profit with the same force (Efforts Applied).

Additional 9 Million is the ‘Force Multiplier’ element in this case.

  1. Labour:

You working in a factory you own Vs 100 people working for you in your factory.

Your effort (force) remain same but efforts of those 100 people becomes your ‘Force Multiplier’.

  1. Media:

Media here doesn’t mean news. Media means “Content Broadcasting.”

Writing book, Blogs, Recording Podcast, Creating Video are forms of media leverage. Once the efforts has been made, results will get multiplication effects. Because the distribution of content will be optimised through technology. Once you wrote a book on Kindle, Post a blog, record a podcast, or Post videos on Youtube, there are thousands of servers somewhere in the world which will take care of its distribution without any of your personal effort applied.

Automatic Distribution through technology for 24x7x365 is ‘Force Multiplier’ in this case.

  1. Code:

Google search engine algorithm is the best example of it. Design of that algorithm has been foundation for one of the most powerful corporation on the planet. Till date nothing can beat power of that code in domain of search engine. Effort was made once but its outcome has been multifolds since two decades and still continuing.

Writing Code which can create utility for millions around the world is ‘Force Multiplier’ in this case.

When Inputs and Outputs are non linearly matched, There is some form of leverage attached in that scenario.

But if inputs are tightly attached with outputs, there is no leverage utilised.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s