Why does Naval consider entrepreneurship a "highly leveraged investment"?

Hello, that's a fantastic question. Naval Ravikant's view is arguably one of the core tenets of his wealth philosophy. Let me break it down into plain English so you thoroughly grasp it.

Why Does Naval Consider Entrepreneurship a "Highly Leveraged Form of Investing"?

First, let's unpack the term: "Leverage" and "Investing".

What is "Leverage"?

You've probably heard Archimedes' famous quote: "Give me a lever long enough and a place to stand, and I can move the Earth." The "place to stand" and that long "lever" are leverage.

In life and work, leverage means achieving significant results with minimal effort.

For example:

Work without leverage: Hauling bricks. You get paid per brick hauled. Haul 100 bricks a day, earn the pay for 100 bricks. Your income is directly tied 1:1 to your physical effort and time. That's linear growth.
Work with leverage: You design an automatic brick-hauling machine. You spend a month designing and building it (your initial investment), but once it’s done, this machine works 24/7 hauling 10,000 bricks daily. Your income becomes decoupled from your time input. That's leverage.

Naval believes creating true wealth requires leveraging leverage. He breaks it down into several types:

Leverage of Human Labor: Hiring people to work for you. You're the boss with 100 employees; the output of all 100 belongs to the system you created. This is the oldest form of leverage but is management-intensive.
Leverage of Capital: Using money to make money. You invest or lend money, letting it work for you. This requires significant starting capital.
Leverage of Code and Media (This is key!): This is Naval's most advocated form of leverage in the modern era and the core of entrepreneurship.
- Code: You write software, an app, or a website. You build it once (a huge upfront investment), but it can be replicated infinitely and sold to users worldwide. Selling an additional copy costs you almost nothing.
- Media: You record a podcast, write an article, or shoot a video. You create it once, but it can be viewed or listened to repeatedly by countless people. While you sleep, your content is still "working" for you, building your influence.

Entrepreneurship, especially internet-based entrepreneurship, fundamentally utilizes this third type of leverage—code and media. You are not selling your time; you are creating a product or content that can be infinitely replicated.

Now, What is "Investing"?

"Investing" simply means putting something in (like time, money, effort) with the expectation of a larger future return.

Ordinary investing usually refers to stocks, property, etc. You put money in, accept risk, hoping the value increases for future sale.

So, why is entrepreneurship considered "investing"?

Because entrepreneurship perfectly fits the definition of investing, though what you invest is more unique:

You invest your all: You contribute not just money, but crucially, all your time, energy, intellect, creativity, even your reputation and network connections. These are your "principal."
Extremely High Risk: The vast majority of startups fail. Your investment could vanish completely—poof, gone—leaving nothing. This mirrors high-risk investing exactly.
Long Return Horizon: You won't get rich overnight. It takes significant time developing the product, refining content, building a user base; potentially years with no substantial income. You are betting on an uncertain future.

Putting it Together: "Highly Leveraged Investment"

Alright, now combine "highly leveraged" and "investment," and it clicks.

Entrepreneurship = You use your judgment to invest enormous upfront effort (time, energy) into building a system (that's the leverage) that can be replicated infinitely and works for you continuously.

Ordinary Employment: A low-leverage, low-risk "investment." You invest 8 hours, steadily exchanging it for 8 hours' wages. The return is predictable, but the ceiling is low.
Entrepreneurship: A high-leverage, high-risk "investment." You might invest 3 years working 16-hour days only to see your company fail, gaining nothing (investment failure). Alternatively, that same 3-year intense investment could lead to success, creating value you couldn't earn in 100 years of employment (leverage works, investment succeeds).

To summarize Naval's point:

Stop viewing the world through the lens of being an employee—that model of trading time directly for money won't make you truly wealthy. You should adopt the mindset of an investor: use your judgment to seek massively scalable opportunities (leverage), then stake your time, energy, and talent (investment) to create a system—a company, product, or content engine—that generates money automatically.

This path carries enormous risk, but if successful, the returns are non-linear and exponential. This is the true allure of entrepreneurship as a "highly leveraged form of investing."