So why don't we talk a little bit about leverage the first tweet in the storm was a famous quote from Archimedes, which was give me a lever long enough and a place to stand and I will move the Earth. The next tweet was fortunes require leverage business leverage comes from Capital people and products with no marginal cost of replication leverages critical. The reason I stuck in our committee has quote in there is normally I don't like putting other people's quotes in my Twitter like that doesn't add any value. You can go look up those people's quotes but this quote I had to put in there because it's just so fundamental. I read it when I was very very young and it had a huge impression on me and we all know what leverages when we use a seesaw or a lever. We understand how that works physically, but I think what our brains aren't really well evolved to comprehend is how much Leverage is possible in modern society and what the newest forms of Leverage our and so the oldest form of Leverage is labor, which is
The working for you. So instead of me lifting rocks. I can have 10 people lift rocks then just buy my guidance and where the rock should go a lot more rocks get moved and I could do myself everybody understands this because we're evolved to understand the labor form of Leverage. And so what happens is society over values labor as a form of Leverage. This is why your parents are impressed when you get a promotion and you have lots of people working underneath you. This is why when a lot of naive people we tell them about your company, they'll say how many people work there they'll use that as a way to establish credibility. They're trying to measure how much leverage and impact you actually have or when someone starts a movement. They'll say how many people they have our how big the Army is we just automatically assume that more people is better but I would argue that this is the worst form of Leverage that you could possibly use managing other people is incredibly messy. It requires tremendous leadership skills. You're one short hop from a mutiny or getting eaten or torn apart by the mob. It's incredibly competed over entire civilizations have been destroyed over this fight for
People communism Marxism is all about the battle between capital and labor that's capital and that's labor. Right? So it's kind of a trap. So you really want to stay out of Labor based leverage, you want the minimum amount of people working with you that are going to allow you to use the other forms of Leverage which I would argue or much more interesting. The second type of Leverage is capital and this one's a little less hard wired into us because large amounts of money moving around and being saved and being invested in money markets. These are inventions of human beings the last few hundred to a few thousand years. They're not involved with us from hundreds of thousands of years. So we understand them a little bit less. Well, they probably require more intelligence to use correctly and the ways in which we use them keep changing management skills from a hundred years ago might still apply today but investing in the stock market skills from a hundred years ago probably don't apply to the same level today. So capital is a trickier for leverage to use this more modern. It's the one that people have used.
Get fabulously wealthy in the last century has probably been the dominant form of Leverage the last century and you can see this by who are the richest people it's Bankers politicians and corrupt countries who print money especially people who move large amounts of money around and if you look at the top of very large companies outside of technology companies in many many large old companies. The CEO job is really a financial job. They really financial asset managers. Now sometimes an asset imagine can put a pleasant face on it. So you get a Warren Buffett type but deep down. I think we all dislike Capital as a form of Leverage because it feels unfair because it's this invisible thing that can be accumulated and passed across generations and suddenly seems to result in people having Gargantuans amounts of money with nobody else kind of around them earnestly sharing in it that said capital is a powerful form of Leverage. It can be converted to labor. It can be converted to other things. It's very surgical very analytical if you are a brilliant investor and give a billion
And you can make a 30% return with it wears. Anybody else can only make a 20% return you're going to get all the money and you're going to get paid very handsomely for it. It scales very very well. If you get good at managing Capital, you can manage more and more Capital much more easy. They can manage more and more people. So it is a good form of Leverage but the hard part with capital is how do you obtain it? And that's why I talked about specific knowledge and accountability first if you have specific knowledge in a domain and if you are accountable and you have a good name and that domain then people are going to give you Capital as a form of Leverage that you can use to then go get more Capital. So but Capital also is fairly well understood and I think a lot of the knocks against capitalism come because of the accumulation of capital
