Definition
The leverage can
be defined as ”The increased force resulting from the action of a
lever.”
Levers are everywhere
Levers are very
common. You can probably find many of them in your immediate
surroundings, or from your body. For example, think about your hands
from your shoulders to your fingers. Think about your shoulder and
imagine a tennis ball on it. How far you think you can move it by
using your shoulder? Not very far I presume. Now, think about having
this same ball on your hand. How many times farther you think you can
move the ball? I haven´t measured, but probably your hand is about
10x longer than your shoulder. I am sure you can move the ball more
than 10x farther with your hand. This one of the simplest levers.
If you are an
employee, you are a one type of lever for your employer. One person
cannot deliver all the business for all the clients. The better you
are in your job, the bigger the leverage you offer for your employer.
And you can ask more money from your services to the employer. The
bigger the demand for your skills, the better leverage you have in
wage negotiations. To be more exact, the more the employer associates
your abilities to value you offer for him, the more money you can
ask. All the employees are not paid by their real skills. Getting a
feedback while you are practicing is a form of leverage too. A
feedback from a coach is the best way to accelerate your development.
And you can also
use leverage with things related to money. Your mortgage is a lever
for buying a house. Without a bank, you couldn´t buy a house that
costs much compared to your income. All the credit cards you use are
levers as well. These are not the best ways of using leverage in
financial situations. Investing in a business should be a better way
of using leverage. Using other people´s money or other resources are
good ways of using leverage into your own advantage.
Using leverage is dangerous
Levers can be
wonderful tools. But you need to know what you are doing or you will
create mostly destruction. For example, using too much dynamite to
blow up something, will probably kill the user. To keep things
simple, the bigger the leverage, the more dangerous it is to use it.
And the bigger the leverage, the more skilled you need to be to use
it properly. And sometimes too much leverage destroys everyone, no
matter how skilled they are. Be aware about the delays. Sometimes, the
effects of using leverage wait in hiding. Systems with
self-reinforcing feedback loops and leverage can be lethal. For
example, the last financial crash happened very quickly after the
negative effects of too much leverage had grown enough. After this
point, self-reinforcing feedback loops destroyed many banks and other
financial institutes. And their owners and executives had no ways of
solving problems.
Leverage points
First, I would like
to say that leverage point may not be the best way to define a thing
I am introducing. There are situations where using the leverage for
pushing something forward gives a lot bigger outcome than the effort.
Failure to choose the right point of using leverage gives the
opposite result. First, imagine a big rock on a flat ground and a
lever to move it. The result is irrelevant. Now imagine a big rock on
a big hill on the edge of the major fall and a lever. Most leverage
points are not this obvious. Some points you will not notice until
you have seen their full effects. And some effects of the leverage
points are not understood at all, because you haven´t noticed the
point at all. This is the most probable situation.
The more skilled
you are in something the better the chance you have to notice these
points. Linear effects can be transformed to compounded effects by
using the leverage at the right point. When this point of critical mass is reached, things start taking care of themselves. For example,
you can buy more ads to sell a product, when it is on the brink of
coming popular enough, and getting a massive amount of social proof. You should also try to figure out those
leverage points that are producing the biggest negative effects for
yourself. If you are in a competitive environment like athletes, you
need to be aware of them. Your opponents will surely use them against
you if they notice them.
-TT
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