I have recently heard about a book called The Almanack of Naval Ravikant written by Eric Jorgenson on The Ranveer Show podcast. I got curious and read that book and found out a simple and effective concept of leverages.
Note — This article is my understanding of leverages concept by Naval Ravikant.
About Naval Ravikant and Eric Jorgenson
Naval Ravikant is an Indian-American entrepreneur and investor. He has invested in startups including Uber, Twitter, Notion, Stack Overflow and many others. He is the co-founder of AngelList, a job portal for people looking for work in startups. You can find Naval Ravikant on Twitter.
Eric Jorgenson is a product strategist at Zaarley, Inc and the writer of The Almanac of Naval Ravikant. You can find Eric Jorgenson on Twitter, Medium.
What is a leverage?
Leverage is about putting in small input and getting a huge output. Consider a blog or a YouTube video, the creator spends few hours to create it and in turn gets profitable for a long time. This is an example of leverage.
Types of leverages according to Naval Ravikant
Naval Ravikant categorizes leverages as three types:
- Labor
- Capital
- Code and media
Labor
Whenever you have to start a company or build a product, you need people with those skillsets. When you are the head of a company, you have to manage skilled people (employees) for efficient management for building a product.
According to Naval Ravikant, labor is a form of permission leverage because you need the acceptance of employees to work with you. If they choose not to work with you, your goal of building a powerful company or a product will be halted. Hence another leverage is superior compared to labor — capital.
Capital
Capital is the money you have. You need money investment for building a product or for generating more money. If you want to grow your money by investing in the financial market, you need money. Either you will have to arrange money by yourself or you need someone who will give you money — investor. Since you need to have money for growing more money or building a product, this is also a form of permission leverage.
Code and media
Since both labor and capital need the approval of someone to carry out a specific task, we need a permission less leverage for scaling our work. According to Naval Ravikant, code and media are permission-less leverages since you need no approval from others to create it.
Imagine you are a coder, you can create a code by yourself with no investment. All you need is a computer to create a code that can be used, reused multiple times. In the words of Naval Ravikant, that code will work even while the creator is sleeping and still brings him profit.
If you are someone who can’t code, content is another value based product you can give out to the world — a YouTube video, a podcast, a book, a blog post etc. This channels of content will share information to the world and it needs little effort to create but adds more value.
My thoughts
I personally like this concept and thought about it for a while. While Naval Ravikant used those leverages in the context of money, I think the last leverage — code and media can also be used for another context. Not every work is being paid. Yes, the world of content works on the motivation of putting out value based informative content and getting paid equally but there are few places where you are doing it for free too. For example, this article I’ve written is for free and I will not be getting paid for writing this. Still, I am motivated to write this article because this gives me the sense of satisfaction for passing out some valuable information. This gives me happiness and a motivation for value-based life at the cost of putting in my time and energy for writing this little piece.
