Three Forms of Leverage

Fortunes require leverage. Naval splits it into three classes; the first two are permissioned, the third is permissionless.

1. Labor — other humans working for you

• Oldest form. People follow you.
• Naval calls this the worst form: managing humans is messy, requires leadership skill, "one short hop from a mutiny."
• Impresses parents; don't waste your life chasing it.

2. Capital — money

• Trickier, more modern. Dominant form of the last century. Bankers, fund managers, large-co CEOs (mostly financial jobs).
• Scales well: managing more capital is easier than managing more people.
• Permissioned: someone has to give it to you. To raise capital, apply specific knowledge with accountability and demonstrate good judgment.

3. Code & Media — products with no marginal cost of replication

• Started with the printing press; accelerated with broadcast; exploded with internet.
• Permissionless: no one's permission needed. Anyone can code, write, podcast, YouTube, tweet.
• Where all new fortunes are made (Bezos, Zuckerberg, Page, Brin, Gates, Jobs — and now creators like Joe Rogan, PewDiePie).
• "An army of robots, freely available — packed in data centers for heat/space efficiency. Use it."

The leverage equation

Specific knowledge × accountability × leverage → wealth

• Leverage is a force multiplier on judgment.
• A leveraged worker can out-produce a non-leveraged worker by 1000–10,000×.
• "Forget rich vs poor, white-collar vs blue. It's now leveraged vs un-leveraged."
• "If you can't code, write books and blogs, record videos and podcasts."

Connection to inputs/outputs

• Tools and leverage create disconnection between inputs and outputs — the higher the creativity component, the more disconnected. Where they're tightly coupled (real-estate labor, customer service), wealth creation is hard.

Related

• Specific Knowledge — what gets multiplied.
• Accountability — what unlocks leverage.
• Judgment — what leverage amplifies.
• Real Estate Leverage Ladder (Worked Example) — concrete worked example.

Sources: [Almanack pp34-35, 55-66]