Wikipedia defines Leverage as “In finance, leverage is any technique involving borrowing funds to buy things, hoping that future profits will be many times more than the cost of borrowing”. You hear money show talking heads and quantitative hedge funds enamored with leverage. There is a good reason for it– they get to use other people’s money and multiply it with minimal downside risk to their personal wealth.
There are other ways to think about Leverage outside of the financial context. This is a partial list, I am sure the concept applies in many common daily scenarios.
- Platform Leverage (Build once and leverage for many use cases) : This is technical platform leverage. Building capabilities that allows anyone in the ecosystem to build on top of it. An example is a payment platform that supports multiple payment methods, currencies and reusable payment profiles. The platform allows clients to enable customer experiences to collect and process payments in a secure, PCI compliant way without worrying about the implementation.
- Systemic Leverage (Make your services available while you are sleeping) : If we relied on earnings based on time spent working, your ability to make money will be limited by your time. However, if you build a system that makes money while you are sleeping or while you are doing other things, you have now created leverage.
- People Leverage (Delegate tasks that don’t require your unique skills) : There is only so much an individual can do in a day– if you hire or delegate tasks that don’t require your unique skills or knowledge, then delegate those tasks to create people leverage.