Leveraging to create impact
Since judgement leads to decision which leads to effort, leverage can be said to have the following characteristics:
Leverage consists of tools that amplify our effort.
Leverage boosts the impact of our decisions.
Leverage compounds our judgement.
Based on these characteristics we can define some applications for leverage. Lets get to know some of them.
Leveraging Capital:
Here we borrow money to increase the total amount of capital available to us or we pool money from outside investors and let them participate in upsides, whatever that might represent. We do share the upsides but do not risk any downsides. These practices are useful for everyone needing capital. For instance, a VC fund manger makes decisions on which companies to fund, leveraging the capital from the fund’s investors. By making these decisions he compounds his judgement. The tool which in this case is the pooled money from investors amplifies the effort he made to find a company that might generate returns for the VC fund.
Although innovations such as smart contract based financial markets do exist, leveraging capital remains one of the most established and well know applications for leverage. It seems extremely hard to make a significant difference in creating impact by leveraging capital only.
Leveraging equity:
One way to be uncapped in terms of impact using the leverage of capital is by leveraging equity. The pooled capital is used to leverage the success of other people, ideas, companies, technological trends etc. At it’s core it’s really simple, find the companies that will have the biggest impact on the future, use the pooled money to get some equity of these companies and do your best for these companies to have a large impact.
It’s easier said then done but there are some lessons from what follows that could be useful to identify these companies.
Leveraging Labour:
Leveraging labour is when we have people working for us. In other words, when we make a decision and have other people carry it out for us then we are using labour as leverage. It’s the most common application of leverage and slowly becoming outdated and ineffective.
Labour, consisting of humans, simply has a lot of limitations. Us humans have a lot of needs besides work - a quick look at Maslow’s pyramid of needs and you can see what I mean. We also have very limited computing capacities, skills, knowledge and experiences. Finally, we are complex and ambiguous beings with far from optimal cooperation and coordination skills.
Leveraging labour by simply delegating execution to other people is outdated. Delegating decision making to other people is established right now and has lead to organisational structures that lead to great success. Apple in it’s early days is one example, while opensource and permissionless projects such as the Ethereum ecosystem are taking it to new heights.
Ethereum wouldn’t have the impact it already has if it wasn’t for leveraging code. Leveraging labour and code is the new normal while leveraging labour only significantly limits the impact a person or company could have.
Leveraging code:
Leveraging code is having non-human systems execute tasks for you. A non-human system could be a computer, a robot, an app, a website, different functions of a website, an algorithm, a blockchain, basically everything that needs and uses human written code to function.
Note: This definition applies right now, but what about Xenobots? These are completely organic, do not need human written code and can still be manipulated and execute tasks that we choose. I will let you meditate on that.
When considering the previously mentioned limitations of leveraging labour it becomes obvious why leveraging code is so effective. It can eliminate all limitations that make humans less productive and could over time make everything abundant.
Right now we are still in the process of eliminating limitations by slowly replacing humans executing tasks by code doing what needs to be done but better in every way. For instance, Google allows us to search for information in a fraction of the time that it would have taken us without it or e-mail which allowed us to communicate with people in a fraction of the time and effort it would have taken us to send physical mail.
At the same time we are exploring abundance by making code do things that we humans could have never done. For instance, blockchains allow for levels of coordination and collaboration unimaginable before or neural networks enabling levels of computational sophistication that the human brain wouldn’t have been able to do.
Leveraging code is only starting and businesses leveraging code as their core strategy, especially those optimizing for abundance, have the possibility to have a huge impact on the future.
Leveraging media
Some of the most frequent and common success stories in creating abundance by leveraging code are the new-ish media companies. These companies allow us to leverage media for creating impact.
There is a whole new industry that formed around leveraging media. Whether it’s Emma Chamberlain that I mentioned in this post or Lex Fridman that I refer to often or all the other creators out there, they have understood how the effort of writing, podcasting, blogging, vlogging, educating, creating art and everything else that traditionally falls into the category of content creation, compounds over time, with a huge potential upside and close to no downside.
Leveraging Authenticity
There is one last type of leverage that in my opinion is the least known of all and not even close to being used in ways that makes it justice.
Currently the most common way authenticity is leveraged is through established brands that use authenticity as a full funnel marketing strategy. Since, the most authentic marketing tools out there are creators such as Emma Chamberlain, big brands leverage these people’s authenticity to market there own business and or specific products or services.
Now, this is well know and works but what I’m talking about is not authenticity as a marketing strategy but authenticity as the core of the company’s product or service strategy.
Here are some types of new-ish businesses that are designed to have authenticity at their core:
Long form conversation podcasts
Vlogs or similar video content creation
News in audio, picture, video or written format. We are at a time where information is freely available and easily accessible, which forces even the news to have an “authentic” personality.
Now, there is some grey areas since it is hard to identify where the line between the person or group of persons providing the authenticity and the company really is. But some of the most successful businesses built on the foundation of leveraging authenticity that I know are:
The Joe Rogan Experience
The Lex Fridman podcast
The All In Pod
Cody Ko
Emma Chamberlain
Jake & Logan Paul
While these businesses have been successful, it is nothing compared to what I expect to see in the near future. Businesses that leverage authenticity will be able to scale their impact significantly.