In mechanics a lever amplifies an input force to produce a greater output force. In the same way, intellectual leverage multiplies your personal decision making into a larger output.
There are three types of intellectual leverage:
- Human leverage: people working for you
- Financial leverage: more money to multiply the impact of a single decision
- Digital leverage: Zero marginal cost of replication such as code and media
Labour Leverage
The first type is human or labour leverage. This is where other people work under your instruction and so your single decision making gets amplified by how many people follow your instructions.
This is the oldest and most well understood form of leverage because it has existed the longest. It also gives the highest social status. People brag about how many employees they manage or the size of the department or company that they are working in.
However, labour leverage is also the hardest to scale. Managing people is hard and not scalable. Large organisations develop bureaucracies which reduce the effectiveness of their actions.
Financial Leverage
The second type of leverage is financial capital or money. This is when the impact of individual decision making gets multiplied by the amount of capital.
An investor who buys 1 share for $20 and sells at $50, has just made a $30 profit. Another investor who uses outside capital and buys 1 million shares, has also made the same decision but has profited $30 million.
Digital Leverage
The most recent form of leverage is that of Media and Code. This form of leverage exists due to zero marginal cost of replicating media and code. e.g. creating a Youtube video that can either be watched 10 times or 10,000,000 times. The cost of each additional person who watches the video is essentially zero.
This form of leverage has only existed since the development of the Internet as a form of distribution for digital things. This is the least understood and in fact the most powerful form of leverage available to us right now (this explains why incredibly rich people – Elon Musk, Marc Andreesen etc have focused on creating their own media).
Maxims on the types of leverage
- Society’s understanding always lags the technological edge of what is capable. The order in which society has encountered these types of leverage also reflects their relative understanding.
labour > financial > digital.
People generally have a good understanding of the benefits and drawbacks of scaling labour leverage (e.g. the problems related to organising large groups of people).
People have less understanding of financial leverage (e.g. People are comfortable taking a 30 year mortgage but dont regularly trade optinos).
People have very little or non-existent understanding of media and code leverage (e.g. most technologists are seen as a loser nerd who is possibly also evil – see Mark Zuckerberg’s public profile before he started jiu jitsu). People who pursue media leverage, the most obvious being Instagram or Tik Tok influencers, are seen as clout chasing dumb teenagers, who do stupid dances for no/little money. (Btw I dont agree with these interpretations, just laying out a stereotype to illustrate society’s current understanding of this type of leverage)
- Labour and Financial leverage require permission e.g. people have to follow your instructions or give you money for you to actually obtain leverage.
Media and Code is permission-less, meaning that you don’t have to get someone’s permission to produce something. People still have to watch or listen to you, or use your software but there are no barriers stopping you from creating in the first place.
- Labour and Financial leverage are about inputs whilst Code and Media is all about output. This means the quality of the output is no longer directly tied to the quality of the inputs. My favourite example is that I could spend millions of dollars to produce a highly scripted movie that sucks and gets 100 views on Youtube. Some famous influencer can take out their iPhone and record a video of themselves and get millions of views and dollars (see Kanye’s superbowl ad).