Everybody talks about “labor, capital, code, media” and how AI will be the next leverage. That is wrong. AI is not the fifth leverage. AI collapses the other leverage factors and amplifies it.
The rules of scaling and leverage just changed.
Wealth is created through the factors of production.
Generational wealth is created through factors of leverage.
Generational wealth today is created because AI has democratised the factors of leverage.
Since the days of Adam Smith, the classical factors of production have been well defined. Land, labor, capital and entrepreneurship are the building blocks of the economy and businesses are built on the management of these resources.
Peeling the onion further, land and entrepreneurship are resources which are not easily scalable and require time to develop. Labor and capital are much more immediately scalable especially if there is a lucrative business which attracts such mobile factors of production.
Given the mobility of such resources, Naval Ravikant introduced labor, capital, media and code as “factors of leverage”. He further adds that “Leverage is the reason people build wealth despite a limited time, it is a multiplier.”
Time is the only true commodity and leverage allows you to produce more within the same time frame.
Let’s unpack these factors of leverage individually.
Labor: Labor is manpower. The employment of others to do your work also allows you to leverage on their efforts to achieve your goals — faster. You scale your output by scaling your headcount. While this is the backbone of modern society, it comes with a cost which scales up as your team size grows.
Cost of Factor: Financial cost of salaries, management cost of managing large teams.
Capital: Capital is financial in nature. You raise or borrow funds, you deploy the capital, the business returns some cash, you pay off the investors and you keep the proceeds. Dollars work for you and you scale via raising more and more money. It is a great factor of leverage — but critically, the decision factor lies in you in fundraising, in identifying the right opportunity, in deploying into the right projects and in having the right insight and connections.
Cost of Factor: A lot is riding on you — the manager’s ability to research and create financial returns to walk down the path of Warren Buffett.
Code: The problem with Capital and Labor is that you need permission. You need a bank to approve your loan, your employees to agree to work with you etc. Without their agreement to be on the same boat as you, you can’t build and you can’t produce. Code changes that - Code is permissionless. You, yourself, a laptop and some code has given you all you need to create a product which runs 24/7. Critically, this product has zero marginal cost of replication. Once you have created a working product, you can sell to one or one million at minimal additional cost. This leverages up the reward output from the effort input. BUT it is going to take a while for you to learn how to code independently.
Cost of Factor: Skill and time it takes to learn how to code and build a working product.
Media: If code allows you to build without permission, media allows you to sell without permission. For the longest time, selling required television station to play your ads, newspaper to print your ads, celebrities to endorse your product. This has all changed — you have the ability to reach out to millions of users online and put your product in front of them. The problem with these reduced barriers to entry is also good luck retaining your audience’s attention. There is so much competition for eyeballs and attention that most content creators struggle.
Cost of Factor: How do you stand out in a sea of competition; how do you gain credibility to monetize the attention?
Sure, the factors of leverage allow you to create more output from your input, but there is always a tradeoff. There is always a cost involved in one of these factors and entrepreneurs tend to specialize in playing well with one of these factors leading to an unequal payoff.
AI is the meta-leverage which changes everything because it destroys the cost of factor.
At the risk of portraying AI as a panacea or a deus ex machina, AI changes everything because it reduces the cost of leverage. AI is not a fifth factor of leverage, rather it allows you to leverage on the other forms of leverage much more easily at a lower cost.
AI x Labor: AI allows you to have infinite interns, analysts, designers, junior coders, marketers, copywriters and the list is endless. This has transformed the market for the junior ranks and increasingly threatening the job of the middle level employees. The financial cost of running a 20 employee company has been reduced to a few $20/month subscription and the managerial cost of running a company is close to nothing. Anybody can now run a company powered by AI agents.
AI x Capital: That managerial insight we spoke about on capital deployment? AI has sped up the due diligence process, the financial forecasting, the ability to juggle multiple deals at the same time. Money managers now have better data points to make (hopefully) better decisions which overtime should lead to outsized outcomes for their financial sponsors. Even smaller outfits can now wield capital like giants.
AI x Code: So, the knowledge gap preventing people from coding and creating digital products? That is all gone with AI. You may think lines of code look like the matrix and means nothing to you, what if I told you AI is able to code for you as long as you tell it what you want. Anybody can create an app today as long as you are willing to invest sometime to tinker with the AI. Today, we are no longer gated by knowledge and technical literacy — we are gated by imagination.
AI x Media: Can AI help you retain attention and attract eyeballs? Nobody knows, but what AI can do for you is to create cheap, fast, hyper-personalized and multi-lingual content (at scale). You used to only be able to create content for your target audience — but AI now enables you to reach multiple audiences across multiple languages as long as you are willing to fully lean into AI.
AI has collapsed the marginal cost of ALL leverage factors. The entrepreneur of the past explores and controls one leverage factor. The entrepreneur of today can master all four of them with the assistance of AI, simultaneously.
AI is not a fifth factor, that undersells what is happening.
AI allows you to pull across all factors at the same time. It changes everything — all at once.
the new leverage is the meta-leverage.
I believe the future belongs to the solopreneurs who coordinate labor, capital, code and media simultaneously, at near-zero cost.
One man mastering labor, capital, code and media with the power of AI. Think Thanos, Infinity Stones and Infinity Gauntlet.
AI allows leverage upon leverage - compounding like recursive interest. The key is not merely cheaper access, but the multiplicative impact of a flywheel. Code generates media, media attracts capital, capital funds labor, labor produces more code. In the old world, spinning this flywheel required an institution. In the new world, a single operator can set it turning.
Leverage used to be a choice, today it’s a stack. AI is the fulcrum and whoever learns to pull all the levers at once will look less like a founder and more like a one-person institution.
So where do we go from here?
the new leverage empowers solopreneurs to take on institutions. One financial analyst taking on Goldman Sachs, one coder taking on Google, one consultant taking on McKinsey and critically winning against these institutions.
The future has three immediate implications.
Startup disruption is far more disruptive: Small startups working faster and disrupting bureaucratic organisations has been a known fact since the mini-mills vs steel mills days. This has gotten sharper when solopreneurs can work faster than small startups and deploy faster than organisations. Moats get increasingly shallow, and bureaucracy issues become increasingly fatal.
Moats and Bottleneck shifts: What is a true moat of today? The bottleneck is no longer resources. It is agency and imagination. Stop finding excuses to not launch your business - AI has made it doable and achievable, unless you lack the motivation. The scarcest resource of tomorrow is taste. AI can do a lot of things, but AI cannot replicate taste the same way money cannot buy taste. Knowing what to build, what to say and how to direct the compounding power of AI is what creates a true moat to build a defensible business.
Power law curves exponentially - welcome to the new age of wizards:
Wizards have always been people who could master new elements and resources better than the masses. The first people to master the meta-leverage will not just run one business, they will master the flywheel, build new industries and create enterprises. Mastering the meta-leverage will make you a wizard in the new era. While people are figuring out how to create a prompt in ChatGPT and guard against hallucinations, you already have agents working in the background running your empire. When one solopreneur compounds his efforts across labor, capital, code and media simultaneously, the outcomes diverge exponentially. The biggest opportunity for generational wealth is upon our shoulders - and the new leverage wants all of us to succeed.
Every successful entrepreneur you see today made a well-informed choice between labor, capital, code and media - and did well in their choices. AI has collapsed that decision matrix and reduced the cost of using these leverage devices. The new leverage is all four, pulled together, stacked, compounded and available to anybody ruthless enough to walk away from the old ways of the world and embrace the future.
This is not just a new technological wave. This is the democratization of opportunities. This is the end of excuses.
the new leverage is here.
The only question is:
Who will pick it up?