Issue 017 // On Leverage.
Lessons on building systems for leverage, the Navalmanack, photographs of monumental solitude, and a commitment to 75 Hard.
Bom dia, gente ☀️
Ignacio here, hoping you’re happy to see this in your inbox - even if it is on a Tuesday. We have the Panama City airport wifi to thank for that. Better planning next time.
Read on for some lessons from re-reading one of my all-time favorite books. I wasn’t much of a re-reader before, but can recommend it for the best books, 10/10.
On Leverage.
1️⃣ Piece from me:
Building systems for leverage.
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2️⃣ Best of the internet:
@krimar’s Monumental Solitude
Say hi to the Navalmanack.
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1️⃣ Curveball:
Sign up to do 75 Hard
1️⃣
Build systems for leverage.
The best time to plant a tree was 20 years ago. The second best time is now
- Chinese Proverb
There aren’t many ideas that I wish I’d heard of sooner - or concepts that I wish I’d internalized when I was younger. In my experience, it’s easier on you if you accept that lessons come when you’re meant to learn them, no sooner and no later. You learn when you’re ready. There’s no use in worrying about what you could have, should have or would have absorbed earlier in life. You didn’t, and that’s ok.
There are, however, some exceptions that are simple and true (in the sense that they’re real) enough that I think they would have made me better understand the world around me if I’d picked them up earlier. Before we dive in, let’s cover our bases: this is not financial advice. It cracks me up to write that, but hey - I’ve been through banking regulatory training, old habits die hard, and that’s the world we live in.
Cash and time unlock leverage.
There are two kinds of assets: assets that are cash generating, and assets that are time generating. Cash and time give you leverage - they let you do more (professionally, personally, whatever) with less time.
You can go straight to the source, or build a system.
More money, more leverage.
Let’s say I decide to buy a car. I can do what most people do and buy directly.
This means I:
Get a job
Set aside a chunk of my salary for a downpayment
Pay X% of the car down payment
Pay for the car, monthly
This is fine, but it has some fundamental challenges: it takes longer, and it creates a direct tie between your salary and your monthly payments. It adds another dependency on your monthly salary, beyond survival and subsistence.
In this scenario, you’re exchanging your time for the car.
Alternatively, I can buy indirectly, through a cash-generating asset.
Here, I:
Take out a loan
Buy an cash-flow generating asset
Use the cash to:
Repay the loan, monthly
Save for the x% downpayment
Pay for the car, monthly
This is, of course, totally oversimplified - but the concept holds. There are tradeoffs. The risk is higher, and it takes much more work up front, but you save time and ultimately end up with whatever you were after, as well as an asset that continues to (ideally passively) generate income for you well beyond the pay-off period.
You can buy all sorts of things with assets - shoes, cars, houses. In a capitalist financial system, that’s what most of us think of first. I’ve been there too. You can build a system of assets that pay for your lifestyle.
Less work, also more leverage.
So what if your products save time to build leverage?
This is where it gets cool. If you’re not familiar with the concept, the best person to guide you through contemporary leverage is Naval Ravikant. He puts professional leverage into three categories when you’re pursuing wealth: labor, money, and products. The thinking here is most clearly aligned with the latter two.
A few of the best engineers I know followed a simple rule for documentation (courtesy of a killer Knowledge Management Lead): if 3 people ask you something, write it down and share the answer.
Instead of sharing the answer directly over 5 minutes, you take 50 to write a really beautiful, explanatory document. Share it with more than 10 people, and your investment has paid for itself. Even better, it’s infinitely replicable. The same document can help 100, 1,000 or 100,000 people and (once it’s out) it makes 0 difference to you. Belleza.
Sound familiar? Good. It’s the same simple framework to think about cash-generating assets as it is to think about time-saving products.
Leverage decouples your time from your output.
Now let’s take it back to middle school physics for a second: the further you are from the lever, the less force required to move the object on the other side.
The same concept applies to your output over time. More leverage means less time per unit of work output. By investing in assets that create leverage, you’re buying back youre time today, and saving time tomorrow.
This is where we get to layer shit. Let’s say you get paid a consistent salary of $400 a week, and work 40 hour weeks. That works out to $10 per hour.
If your weekly car payments are $100, you’re taking home $7.50 per hour.
You save up and buy an asset that pays for your car. You’re back to $10+ an hour. Then, you replace a weekly training you run at work (5 hours) with a recording. That saves you 20 hours per month, and bumps up your hourly rate to $11.42+ Because you’re getting paid for output (not time - this is key) you don’t have to work the 5 hours again.
Again, it’s a simple example but it holds. Do this over, and over again and you’re accumulating leverage (and wealth) through time and money.
And here we’re only pulling time-saving levers. You can also push and scale cash-generating levers to increase the value of your time. What if you sold that training session for more money? Or less money but upped the volume of sales?
Time is the ultimate currency
Why is this important? Time is money, money is time. It’s the ultimate conduit to freedom. And everyone wants a bit more freedom.
Ok. Maybe not everyone (some people thrive within rigid structures, and that’s cool too. But freedom to do what you want, when you want to is the top theme that’s come up across content and conversations in my bubble.
Let’s be clear. Money is important. Even if you’re not very money oriented, it;s likely that money will make it easier to get to whatever it is that moves you. I know it’s not easy to keep money top of mind. What helped me was starting to think of it as the physical manifestation of things that were much more important to me: time and security.
Time is paramount to me. I think deeply about how I spend my free time, and who I spend it with. I am happiest when I have the time and psychological safety to explore and create whatever drives my curiosity. Thinking about money as a conduit to find that time helped me accept that it should be a priority.
It took me a while to get there and internalize it, so here I am - sharing in the hope that it saves you some precious time.
2️⃣
The Navalmanack.
The best way to describe Naval is a modern-day Twitter philosopher. I’m not joking. He’s the former CEO and founder of Angel list, and a deep thinker that’s incredibly clear, concise and eloquent.
The Almanack of Naval Ravikant is a curated collection of his best thoughts, pulled together by someone else. It’s free online - and what better place to start than his article on, well, leverage.
https://www.navalmanack.com/almanack-of-naval-ravikant/find-a-position-of-leverage
“Monumental Solitude”
Sometimes two words are enough to describe a canon of work. I think it’s the case with Karim Amr’s photography.
1️⃣
It’s happening! 121 goes (75) Hard.
I’m bringing this back up because we have a small group of folks all ready to go and signed up. It’s official, we’re taking on the challenge, starting March 1st.
75 Hard is a 75-day challenge that’s meant to build up mental fortitude, and get you feeling better, overall. As you can imagine, it’s meant to be hard. It involves:
Working out 2x/day, for 45 minutes - once outside
Drinking a gallon of water every day
Stick to a diet (your choice)
Read 10 pages/day and take notes
Track your progress with a picture
If you’re interested in doing this with us, fill out the link below. It’s a done deal, and will be the first time we come together as a 121 community.
Have an idea/question/suggestion for 121? Give me a shout.
Writing is much more fun when it’s interactive and the best content so far has come from questions and conversations with the 121 community. This week my brother shared a quote from a book I’d read a while ago, and it made me pick it up again, and share some thoughts with you.
You can DM me on Twitter or reach out over email at ignaciosemerene@gmail.com. I’ll answer every message.
Stay curious and keep building.
Abrazo,
Ignacio
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