Leverage is the magic pill

The ancient Egyptians used levers to lift stones weighing up to 100 tonnes to build the pyramids. They used the concept of leverage to generate disproportionate force. Leverage is the amplification of efforts. 

If you want to build true wealth you need to understand leverage and use it. You have limited time in the day which caps your input. You need to figure out a way to compound your efforts. Leverage helps you do that.

How do you capture leverage? Through economies of scale and network effects.

In business with economies of scale the cost of production goes down as output increases. This means that making product number 23 is cheaper than making product number 3 and making product number 100 is a whole lot cheaper than previous ones. Apple products are a great example. The reason why a small company can't come out with an iPhone competitor is because it is too expensive to do.

A great way to capture leverage is to produce media or build software. Code and media have zero marginal cost of reproduction. I can write a tweet and it can be seen by a thousand people immediately, the same goes for videos or even this article. Whether you get 10 views or 1000 the input effort is the same. Scalable professions disconnect input from outputs. Ex - Investing, podcasts, digital products, newsletters.

Network effects mean that users add value to each other. Take twitter for example, each new user adds value to existing user. The value of such products to any individual user is determined by the number of other people who use that product. If you are building an audience or a community pause for a minute and reflect on this.

Naval says that economies of scale, zero marginal cost of reproduction and network effects combine to form great businesses.

Now go out there and build something that is free to scale and where each new user adds value to your product. Do this and you will build wealth in your sleep.