#23 Three forms of leverage
Companies use different forms of leverage to build products and grow their business. Fundamentally, there are three core forms of leverage - labor, capital, and media/code.
Labor is the oldest kind of leverage. If you want to build a business, you hire people to do the work. The more people you have, the more you can produce. In the old days, labor was the main leverage to scale operations and produce more.
Capital is another leverage businesses use to scale their production. With capital you can hire people, buy real estate, buy raw products, etc. The more capital you have, the faster you can go.
The newest form of leverage is products that have no marginal cost of replication. It means you create once and distribute infinitely. It includes books, media, code, etc. It started with printing press, accelerated with broadcast media, and blew up with internet and coding. Today, you can create a piece of software once and it can be used by people all over the world and generate billions of dollars in revenue.
Startups and tech companies are perfectly suited to make the best use of all three leverage points. Startups create products that scale infinitely and have a low marginal cost of replication. They hire high-skilled labor that can perform high-leverage activities such a write code and create media. And they accelerate growth with efficient use of capital. That’s why technology companies are able to grow and scale faster than any other types of businesses.