Leverage: How Small Actions Result In Monumental Growth

Leverage is the usage of tools, resources, or people to amplify the energy we put into something to generate a bigger impact. A small, well-focused action can generate a big, disproportionate impact. It involves considering how, when, where, and with what we approach situations in lieu of using brute strength.

At the core of the concept is mechanical leverage. A lever is a simple machine where a beam is pivoted at a fixed hinge—otherwise known as a fulcrum. The lever amplifies the input force to a greater output force. Leverage is thus the mechanical advantage gained by exerting the same amount of force but generating a bigger impact. The earliest evidence of such mechanisms goes back thousands of years where it was first used in balance scales and to ancient Egypt for moving and lifting obelisks that weigh more than 100 tons.

Levers are typically classified based on the position of the fulcrum, effort, and load. They come in three types. Class one levers are those where the fulcrum is in between the effort and load, such as a crowbar, seesaw, a pair of scissors. In class two levers the load is in between the effort and fulcrum, such as in a wrench, a bottle opener, brake pedal of a car; these are the force multiplier levers we are particularly interested in. And class three levers are these where the effort is between the load and the fulcrum, like a hammer, tweezers, a fishing rod. Think of class one levers as your head balancing on the spine, class two levers as your feet holding you in place, and class three levers as your arms bending to lift something.

The utility of a lever comes from it’s ability to make small forces capable of affecting large objects. The concept can be expanded into relationships, finance, productivity, business, negotiations, and other domains. At it’s core is identifying and utilizing impact multiplying tools: things which allow small inputs to produce disproportionately larger outputs. Identifying such tools, strategies, and systems, maximizes returns while minimizing effort, risk, and resource expenditure. It’s somewhat similar to the Pareto principle in this regard, where it reinforces the pursuit of the “vital few”.

The effectiveness of leverage depends when and where it is applied. This means that figuring out where the “fulcrum” is is critical to maximize your impact. A business might, for example, leverage automation technology to scale it’s operations without incurring significant costs like firms of the past. Leverage can also compound: gains build on gains, those gains further amplify outcomes, making for ever-larger gains, and so on. An instance of that is borrowing money to start a business that earns you money at a faster rate than the loan premium. Both you and the bank, well, make bank. Although if not managed carefully, the system can collapse as it did in the 2008 economic crisis.

The idea is that you should look for resources and tools that allow you to create a leveraged impact. Always seek out a position of leverage, be it in personal development or negotiations with a client. Tackling problems with direct physical force is fine, but there might be—and there probably are—finer solutions to approach a challenge than head on. Don’t reveal when others have leverage over you, as Warren Buffet said, “Don’t ask the barber whether you need a haircut.” Act as if taking the other party’s offer is you doing them a favor. Brainstorm options of leverage. This is how you scale your impact as an individual and business. What additional tool, practice, person, or point of focus might you employ to create oversized results?

Real life implications of leverage:

• Finance: you might borrow money to invest it into a high-growth asset, such as real estate or stocks, to increase potential returns by using external capital;

• Time: you could delegate lower-value tasks to others to maximize how long you spend on high-impact tasks, effectively multiplying your productivity in the process;

• Technology: you can, as a single programmer, build an app that serves millions of users and automates thousands of mundane, low-skill, time-consuming, repetitive tasks, allowing people to focus on what matters most—and if you’re not a programmer, just find an app;

• Social: as an influencer or thought leader you can leverage your audience to amplify your reach to, say, spread your ideas or sell your products—this is why you should build your network;

• Business: licensing a product or scaling through on-demand manufacturing can help you scale while minimizing risks and proportionately increasing revenue, a no-brainer strategy;

• Creative: an artist or writer can create work that generates licensing or reproduction royalties long after their initial work is done—hence creating assets that can be monetized long-term is crucial.

How you might use leverage as a mental model: (1) identify leverage points, finding areas in your life where small inputs generate outsized results; (2) focus on scalable activities, such as creating digital products that last and automating repetitive processes; (3) balance risk and reward, avoiding over-leveraging because that can cause catastrophic failure—operate with a margin of safety; (4) invest in high-return activities, such as learning, networking, and technology that you can leverage across fields; (5) iterate and refine your processes to install leverage where it fits.

Thought-provoking insights. “Give me a lever long enough and a fulcrum on which to place it and I will move the world.” said Archimedes in his legendary scripture showing the advantage you can gain by understanding and using leverage. “Small hinges swing big doors.” and “Don’t work harder; work smarter.” tap into that same vein, emphasizing how small and seemingly insignificant efforts, when well-applied, can lead to significant change. The key to leverage is in comprehending where a small investment and yield the largest returns while minimizing the risk of overextension. Mastering it equates to unlocking the ability to achieve more doing less. Isn’t that lovely?

Questions to reflect on:

1. How can you leverage your existing resources or relationships to amplify outcomes without increasing effort or cost?

2. In what areas in your business or creative projects does a small input result in a large output and how might you capitalize here further?

3. What steps can you take to cultivate underutilized assets for significant leverage?

4. How can you delegate, delete, and automate as a form of leverage to free up time and energy to concentrate on high-impact tasks?

5. How does the concept of leverage affect risk management?

Quotes that depict leverage well:

1. "Give me a lever long enough and a fulcrum on which to place it, and I shall move the world." - Archimedes.

2. "The secret to my success is that we have gone to exceptional lengths to hire the best people in the world." - Steve Jobs. (leveraging talent)

3. "Leverage is the key to turning small actions into monumental achievements." - Unknown author.

Example use cases:

1. Business: utilizing strategic partnerships or outsourcing non-core tasks to allow you to concentrate on high-impact competencies can accelerate growth disproportionately.

2. Content creation: repurposing existing content, like by turning a book into a series of articles and those articles into videos can maximize reach and engagement while minimizing additional effort.

3. Technology: routine processes can be automated using software and code, thereby freeing up time for creative or strategic tasks that drive that business forward.

4. Finance: using borrowed capital or investments to scale operations, knowing that returns can significantly exceed the costs of leveraged debt.