How does Naval define "leverage"?

Hi, I'm really happy to chat about this topic. Naval Ravikant is a thinker I deeply admire. The concept of "leverage" he discusses can be considered the cornerstone of his entire theory on wealth creation.

I'll explain what he means in the simplest way possible.

In one sentence: Leverage is an "amplifier"

Imagine trying to lift a huge rock with your bare hands – it would be extremely difficult. But if you're given a long enough pole (a lever), you can lift it easily.

In Naval's view, leverage is the tool you use to amplify the output of your personal effort and judgment.

Without leverage, your income is tightly bound to the time you put in: you work for an hour and earn pay for that hour. This is like lifting the rock with bare hands – no matter how strong you are, the weight you can lift is limited.

With leverage, however, a single decision or one hour of your effort can be magnified hundreds or thousands of times. This allows you to break free from the "work-for-hour-pay-hour" model.

Three (or maybe four) types of leverage in Naval's framework

Naval primarily categorizes leverage into three types, each with its own historical context, advantages, and disadvantages.

1. Labor Leverage - The oldest leverage

What is it?
- Simply put, it's having people work under you. You're the boss managing a team.
Characteristics:
- This is the most traditional, ancient form of leverage. For thousands of years, generals leading soldiers and bosses overseeing employees have utilized labor leverage.
- The drawbacks are clear: Management is a massive headache; people are complex and difficult to coordinate. Furthermore, those working for you take a large portion of the profits (as wages, bonuses). Hence, Naval views this as the most inefficient, most problematic, and least scalable form of leverage.

2. Capital Leverage - The leverage of the 20th century

What is it?
- Using money as leverage. Making money work for you.
Characteristics:
- For example, investing a large sum in stocks, starting a factory, or lending money to collect interest. Your capital is doing the work, not you personally.
- This was the dominant form of leverage in the 20th century. Wall Street financiers are masters of this.
- The obvious drawback: The prerequisite for using this leverage is you need money first. The barrier to entry is very high for ordinary people. You need to convince others (e.g., investors) to give you money, or you must have already accumulated enough capital yourself.

3. The "New Leverage": Code and Media - The leverage of the 21st century

This is the essence of Naval's thinking and what he considers the most powerful, most democratic leverage of our era. It has near-zero marginal costs and is "permissionless."

a) Code

What is it?
- Software, apps, websites, or automated scripts you create.
Why is it super leverage?
- Think of it as an army of robots that never tires or asks for a salary.
- You write a piece of software (requiring only a one-time investment of time and effort), and it can serve thousands of users worldwide, 24 hours a day, 365 days a year.
- Adding one more user to your app costs almost nothing extra, yet your potential revenue increases. This embodies "zero marginal cost."
- Crucially, you don’t need anyone's permission to write code. You can start with just a computer.

b) Media

What is it?
- Content you create. For example, podcast episodes you record, YouTube videos you publish, blog posts you write, or even an influential Weibo/Twitter account.
Why is it super leverage?
- Think of it as a radio station broadcasting your voice 24/7.
- A podcast episode recorded in a few hours could be listened to by thousands, repeatedly, for years to come. It continuously builds your personal brand, attracts like-minded people, and brings opportunities – even while you're asleep.
- Like code, its marginal cost is near zero, and you don’t need anyone's permission to start creating.

Core Summary

Therefore, the essence of "leverage" as defined by Naval is:

Finding a way to make the outcomes of your decisions and efforts massively replicable at minimal cost.
The ultimate goal is to decouple your income from the time you personally invest. You are not selling your labor by the hour; you are creating an "asset" (be it code or media) that works continuously for you.
For ordinary people in our era, "code" and "media" represent the most potent leverage because they are "permissionless" – anyone can start from zero and use them to create wealth and build influence.

Put simply, Naval is telling us: Don't just rely on straightforwardly selling your time anymore. Find your lever and use it to amplify yourself. That's the runway to financial freedom.