What are the three types of leverage he proposed? (Capital, Labor, Code/Media)

Okay, that's an intriguing question. This is the core idea from Silicon Valley investor and thinker Naval Ravikant on wealth creation. He categorized leverage into three types, and I'll explain them in plain language.

What are the Three Types of Leverage?

First, we need to understand what "leverage" means.

Think of it as an "amplifier." You put in one unit of effort, and through leverage, you get 10 or even 100 times the return. For most ordinary people at a job, you put in an hour of work and get paid for one hour – that's leverage at 1:1. The key to creating wealth is to find and utilize your own sources of leverage.

Naval summarized three types of leverage: labor, capital, and code/media (the newest kind).

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1. Labor - "Having Others Work for You"

This is the oldest and easiest-to-understand type of leverage.

• Simply put: Getting other people to work for you.
• Example: You open a restaurant and hire 10 chefs and servers. Your decisions and menu concepts, as the owner, are "amplified" by these 10 employees. You alone might serve 20 customers a day, but your team can serve 200. This is labor leverage.
• Characteristics:
  • This is how things have been done for thousands of years.
  • But it's messy to manage. More people mean higher communication costs and management complexity.
  • Naval believes this is the least effective leverage because you need to convince people to follow you, and interpersonal relationships are complicated.

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2. Capital - "Having Money Work for You"

This leverage became mainstream after the Industrial Revolution and is essentially "making money work for you" or "money makes more money."

• Simply put: Using money as a tool to amplify wealth.
• Examples:
  • You invest money in the stock market, buying shares in a good company. Thousands of that company's employees are working to increase the value of your money (capital).
  • You take out a loan to buy a rental property. The monthly rent covers the loan payment and provides extra income. The loan here is financial leverage you're employing.
• Characteristics:
  • Much more effective than labor leverage. Money doesn't complain, doesn't get tired, and can work for you 24/7.
  • But it has a high barrier to entry; you need your "first pile of gold" to even start. Without capital, you can't use this lever.

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3. Code & Media - "Having Products and Content Work for You"

This is the modern leverage Naval champions most, and it's arguably the most powerful "wealth amplifier" of our time.

• Simply put: Creating something that can be replicated infinitely at near-zero marginal cost.
• Examples:
  • Code: A programmer spends months developing an app. They code it once, but the app can be downloaded a million times. Each additional download requires almost no extra effort from the programmer, yet their income keeps increasing.
  • Media: You create a highly engaging short video or write a blog post rich with practical insights. You invested one day in creation, but this video/article can be seen by tens or hundreds of thousands of people online, potentially generating influence or income for years to come.
• Characteristics:
  • This is the most powerful leverage. Because it's "permissionless." You don't need anyone's approval; just a computer to start coding, recording videos, or writing articles.
  • Marginal cost is practically zero. Meaning, the cost to serve 100,000 people is almost the same as serving 100.
  • It amplifies your knowledge, skills, and creativity to the entire world.

Summary

So, Naval's core advice is: In today's world, the best way for ordinary people to create wealth is to leverage this new power of "code and media." Find your unique domain of expertise, then amplify it through writing code, articles, videos, podcasts, etc. Let your ideas and products work for you.