Leverage

to use something that you already have in order to achieve something new or better

Leverage

Let me share 5 examples that would help you understand my perspective on leverage.

Sea facing 5 Star Hotel

Have you wondered why does a 5 Star hotel with a sea-facing property can charge so much? Even when the building, bed and bath are of decent quality. They are not definitely the best in class in most cases. The food is decent, the cutlery is expensive and the napkins are soft. You pay the premium for the sand, sun, sea, sky and scenery. All those are free for the Hotel till the time they keep running in the same property. That’s the leverage hotel enables to charge you a big amount.

Venture Captial Funding

Venture capital is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which have demonstrated high growth. The entrepreneur gets a constant stream of money without selling a single unit of product. The concept is the valuation will grow 100X and more. Thus the entrepreneur enjoys the leverage by onboarding customers quickly, running 1000 experiments per month, pivoting the product many times a year, acquiring the best talent money has to offer, getting media attention on the next investor rounds and so on. It’s not completely free here they have to give the equity but the downside is none when they crash and burn. 9 out of 10 startups fail.

Internet

It’s the easiest way to explain the idea of leverage. You must be reading this article using the internet the cost of it is negligible as compared to the opportunity it gives us. It helps me to connect with 100s of people like you. I don’t have to meet you in person in order to share my thinking process.

If you are really interested in talking with me we have jumped into a zoom call and I can compress my experience + judgement to give an answer to your specific problem. You can help me with my personal passion project of making Indian youth more employable. You can take part and earn side income too from using only your mobile phone and cell phone internet. We can even build a virtual community to learn a skill, share expertise or mastermind. This helps you grow your knowledge, income and reach sitting in the comfort of your home. Thus there is a low cost of the Internet as compared to the benefits it has to offer to justify the leverage.

Mentoring

Yesterday in our mentoring session our mentor showed some light on how to improve our product performance. It was been discussed that we can put in 3 months of the entire team to focus on faster load time, increase concurrent saves and improve on uptime. We had many unknowns, uncomfortable moments and unpleasant feelings. We had low confidence, low clarity and low understanding.

Our Mentor helped us to think more like an experiment, how to take low-risk bets, break the problems into isolation etc. He even gave us the actual timelines that could range from 3 months to 1 year. There were many external factors and it also depends on the high demanding clients and their comfort. One of the most import advice he gave was that we should not be in a position after 3 months where we did not achieve any improvement in outcome and not even improved. That is the luxury we cannot afford and makes us focus on how we want to invest our time and effort. Here the leverage was borrowing his experience to anticipate the state of the team 3 months in the future and saving us a disaster. Not all leverage is about money some are to avoid risk.

Subconscious Mind

A study says that the subconscious mind can process 20 000 000 bits of info per second. The conscious mind can only process 40 bits of info/sec. So the subconscious mind can process 500 000 times more than what the conscious mind is able to.

One of the best ways to train your unconscious mind is by simply opting for a brainstorming session right before you go to sleep. If productivity (or the lack of it) is your issue, contemplate your problems and try to communicate your goals to your subconscious mind.

While you may not find a solution by the time you sleep, once you wake up, you’ll wake up with a fresh mind that has already pre-fixed a couple of goals. Yes, your subconscious will take care of these goals and help you stick to them for the rest of the day. Every one of us has this built-in power within us. We only have to put it to use with practice and enjoy the free benefits. Thus leveraging of the Subconscious mind is almost free like magic.

Bonus Example: Compound Interest

Compound interest is when the interest you earn on a balance in a savings or investing account is reinvested, earning you more interest. As a wise man once said, “Money makes money. And the money that money makes, makes money.” The power of compounding is one of the most powerful forces in finance. This concept allows investors to create large sums with little initial capital. Savings accounts that carry a compound interest rate are common examples of exponential growth.

Compound interest and compounding can supercharge your savings and retirement potential. Successful compounding lets you use less of your own money to reach your goals.

Compounding interest is the 8th wonder of the world. Those who understand it earn it, those who don’t pay it.

Either Einstein or Lincoln said this

The power of compound interest will work for you if you poach it and stick with it over time. The only thing you have to do and is most difficult to do here is to do nothing. You have to leave your investments untouched for 10, 20 or 30 years and enjoy the benefits.