Product and media are the new leverage
Naval: The most interesting and the most important form of leverage is this idea of products that have no marginal cost of replication. This is the new form of leverage.
This was only invented in the last few hundred years. It got started with the printing press. It accelerated with broadcast media, and now it’s really blown up with the Internet and with coding.
Now, you can multiply your efforts without having to involve other humans and without needing money from other humans.
This podcast is a form of leverage. Long ago, I would have had to sit in a lecture hall and lecture each of you personally. I would have maybe reached a few hundred people and that would have been that.
Then 40 years ago, 30 years ago, I would have to be lucky to get on TV, which is somebody else’s leverage. They would have distorted the message. They would taken the economics out of it or charged me for it. They would have muddled the message, and I would have been lucky to get that form of leverage.
Today, thanks to the Internet, I can buy a cheap microphone, hook it up to a laptop or an iPad, and there you are all listening.
Product leverage is where the new fortunes are made
This newest form of leverage is where all the new fortunes are made, all the new billionaires. The last generation, fortunes were made by capital. That was the Warren Buffets of the world.
But the new generation fortunes are all made through code or media. Joe Rogan making 50 to a 100 million bucks a year from his podcast. You’re going to have a PewDiePie. I don’t know how much money he’s rolling in, but he’s bigger than the news. The Fortnite players. Of course Jeff Bezos and Mark Zuckerberg and Larry Page and Sergey Brin and Bill Gates and Steve Jobs. That is all code-based leverage.
Combining all three forms of leverage is a magic combination
Now, the beauty is when you combine all of these three. That’s where tech startups really excel, where you take just the minimum, but highest output labor that you can get, which are engineers, and designers, product developers. Then you add in capital. You use that for marketing, advertising, scaling. You add in lots of code and media and podcasts and content to get it all out there.
That is a magic combination, and that’s why you see technology startups explode out of nowhere, use massive leverage and just make huge outsize returns.
Product and media leverage are permissionless
Nivi: Do you want to talk a little bit about permissioned versus permissionless?
Naval: Probably the most interesting thing to keep in mind about the new forms of leverage is they are permissionless. They don’t require somebody else’s permission for you to use them or succeed.
For labor leverage, somebody has to decide to follow you. For capital leverage, somebody has to give you money to invest or to turn into a product.
coding, writing books, recording podcasts, tweeting, YouTubing, these kinds of things, these are permissionless. You don’t need anyone’s permission to do them, and that’s why they are very egalitarian. They’re great equalizers of leverage.
As much as people may rail on Facebook and YouTube, they’re not going to stop using it because this permissionless leverage, where everyone can be a broadcaster, is just too good.
The same way you can rail upon Apple for having a slightly closed ecosystem in the iPhone, but everyone’s writing apps for it. As long as you can write apps for it, you can get rich or reach users doing that, why not?
The robots army is already here—code lets you tell them what to do
I think of all the forms of leverage, the best one in modern society … This is glib. This is a little overused. This is why I tell people learn to code. It’s that we have this idea that in the future there’s going to be these robots and they’re going to be doing everything.
That may be true, but I would say that the majority of the robot revolution has already happened. The robots are already here and there are way more robots than there are humans, it’s just that we pack them in data centers for heat and efficiency reasons. We put them in servers. They’re inside the computers. All the circuits, it’s robot mind inside that’s doing all the work.
Every great software developer, for example, now has an army of robots working for him at nighttime, while he or she sleeps, after they’ve written the code and it’s just cranking away.
The robot army is already here. The robot revolution has already happened. We’re about halfway through it. We’re just adding in much more of the hardware component these days as we get more comfortable with the idea of autonomous vehicles and autonomous airplanes and autonomous ships and maybe autonomous trucks. There’s delivery bots and Boston Dynamics robots and all that.
But robots who are doing web searching for you, for example, are already here. The ones who are cleaning up your video and audio and transmitting it around the world are already here. The ones who are answering many customer service queries, things that you would have had to call a human for are already here.
An army of robots is already here. It’s very cheaply available. The bottleneck is just figuring out intelligent and interesting things to do to them.
Essentially you can order this army of robots around. The commands have to be issued in a computer language, in a language that they understand.
These robots aren’t very smart. They have to be told very precisely what to do and how to do it. Coding is such a great superpower because now you can speak the language of the robot armies and you can tell them what to do.
Nivi: I think at this point, people are not only commanding the army of robots within servers through code, they’re actually manipulating the movement of trucks, of other people. Just ordering a package on Amazon, you’re manipulating the movement of many people and many robots to get a package delivered to you.
People are doing the same things to build businesses now. There’s the army of robots within servers and then there’s also an army of actual robots and people that are being manipulated through software.
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