Give me a lever long enough and a fulcrum on which to place it, and I shall move the world. - Archimedes
At every single moment of our life, we create decisions. Those decisions lead to action, and action leads to an impact.
Decision -> Action -> Impact
For instance, you decided to teach your friends mathematics, and through that action, your friend scores better at the math exam that you are having the next day.
However, it's important to note that our world is often not that simple. There are ways for your decision to do a particular action to have more impact on the world.
Leverage is a way for multiplying your action and therefore increasing the impact that you have. It is one of the most essential tools in value creation and the most crucial aspect of running a business.
The Oldest Leverage
The oldest and most common form of leverage is the workforce. A manufacturing company will be able to manufacture more physical products as the number of workers grows. It's as simple as that.
People often ask the question "How much people are working at your company?", whether subconsciously or not, the goal of this question is really to see how much leverage this company has. It's one of the ways that people do to establish credibility.
People understand this leverage because it's easy to understand. It's linear.
More people = More work is done = More money for the company.
The Most Hated Leverage
A lot of people despise this form of leverage because they believe it's unfair. It's a form of leverage that can be passed down to your children, creating what people would call the generational wealth. It's the simple reason why the rich got richer.
Capital pretty much dictates the functioning of a business. More capital means you can hire more people, spend more on marketing, squeeze your competitors, and the list goes on and on.
It propels expansions, it attracts talents, and on the proper hand, it attracts more capital.
The Dark Horse of Leverage
If you know me, you would probably know what this is. It's technology.
Technology is a unique form of leverage, and a lot of people often fails to understand its fullest capabilities.
Technology leverage is unique because, on the right hands, it can quickly turn into an exponential, and perhaps, infinite leverage. This is the reason why people fail to understand it. Our brains, through evolution, is hardwired to imagine things in a linear progression.
So here's a simple analogy to help you grasp the concept of infinite leverage.
When you have a book, every time you want to publish and sell those books, you have a variable cost tied to it. The more books you want to be printed, the more money that you need to spend printing those books (workforce, materials, etc.). Your profit grows linearly with your spending.
The same logic does not apply to digital products made possible by advancement in technology.
Digital products exist without a variable cost tied to its replication. It does not rely on how much workforce that you have to keep up with its replication. This is exactly the case with e-books.
You can easily replicate an e-book and sell it for, virtually, an infinite amount of times and it will still cost you the same amount of money. That's how technology allows the concept of an infinite leverage.
Facebook, Amazon, Netflix, Microsoft, Google. A vast majority of the new wealth is created through this form of leverage playing a crucial role.
Having only leverage doesn't necessarily mean that you are going to have the greatest impact that you can have.
The quality of your impact is only as good as the decision that you make. However, it is often tough to predict whether or not your decisions are the correct decision. These are the tough calls that CEOs in big (and/or technology) companies are faced every day.
The decisions made by these CEOs are exorbitantly multiplied by the company's enormous amount of leverage, and therefore a failure to make the most optimal decisions means that you are going to incur a massive opportunity cost to the company.
Shareholders expect nothing less but the best, and this is the reason why CEOs are paid the amount of money that they are paid. Their job is not to micromanage their employees but rather to make high-impact decisions for their business.
In the age of infinite leverage, being able to make the best decisions became the most important skill.