Naval Ravikant on Leverage: The 4 Types That Build Wealth

Naval Ravikant, founder of AngelList and early investor in Uber and Twitter, explains the 4 types of leverage (labor, capital, media, and code) that create wealth. Learn how to apply them.

Naval Ravikant, founder of AngelList, Product Hunt and Spearhead

Who Is Naval Ravikant and What is Leverage?

Naval Ravikant is known for building AngelList, Product Hunt, and Spearhead, and for early investments in Uber, Stack Overflow, and Twitter. He’s also one of the most listened-to thinkers on wealth and productivity.

In one of his podcasts, he mentioned the importance of leverage. It stood out to me.

"Leverage is the reason people build wealth despite limited time. It’s a multiplier."

— Naval

There are four types of leverage: labour, capital, media, and code leverage.

1. Labour Leverage: Scaling Through People

Labour leverage is the oldest type of leverage. It’s based on the idea that other people can work for you, and the most common form of labor leverage is using workers.

Labour Leverage: The Great Wall of China

In the past, entire empires were built upon the work of servants. The Pyramids of Egypt had an estimated 20,000-30,000 workers working on them. The Great Wall of China took millions of soldiers, peasants and prisoners to build.

In the 1900s, almost everything was built on human labour. Now however, these roles are slowly being automated.

It’s also why “gurus” tell you to build a business instead of working a 9 to 5: executives and shareholders profit from the work you do.

How to use it today:

• If you have a business, hire employees

• Outsource tasks (virtual assistants, freelancers)

• Automate human labor with AI/robotics

2. Capital Leverage: Multiplying Money with Money

Capital leverage is hard to come by. Many individuals who built massive amounts of wealth through capital are from already affluent families or started out building capital somewhere else.

With capital leverage, the goal is to invest and outperform the market. Legendary figures who did this include Warren Buffett, CEO of Berkshire Hathaway and Jim Simmons, Founder of Renaissance Technologies.

Warren Buffett and Jim Simmons side by side

Warren and Jim have extremely different styles of investing.

Warren is a qualitative investor: he evaluates the people behind the company, the strategic decisions they’ve made and its intrinsic value. Check out: Warren Buffett's Investing Strategy: An Inside Look

Jim is a quantitative investor: he relies on complex math and computer science. No one knows what he does. Check out: Who Is Jim Simons? What Is Quantitative Analysis?

Beyond investing, financial institutions also use capital leverage by loaning money to earn interest or selling insurance. With loaning, the debtor has to pay interest, increasing the capital that the institution has. Selling insurance is a way to raise enough money to begin investing large scale (what Warren Buffett and Berkshire did).

I would not suggest day trading or picking individual stocks over a stable income; most investors can’t beat the market. It’s much more profitable to invest in an S&P 500 index fund. Do not take out loans to invest.

This is not financial advice. Investing involves risk; consult a professional.

3. Media: Building Influence for Profit

Media leverage is based on the idea that people or companies with popular brands are able to generate wealth directly through sponsorships and advertisements.

Personal brands can also help in job search.

We see influencers every day on social media , and they are able to generate wealth through ads and sponsorships.

An older form of media leverage includes news companies, which gain wealth through advertisements and also paywalls. Examples include the Wall Street Journal and CNBC.

Media Leverage: Rihanna Fenty Beauty Liquid Killawatt Highlighter Campaign

Finally, there are celebrities. They often have the largest, most powerful brands in the world. Take Rihanna and Fenty. She built a multi-billion dollar empire through her music and uses it to sell her own products.

First steps for media leverage:

• Building a personal brand (LinkedIn, Instagram, Youtube, X)

• Create content (run a blog, podcast, social media account)

• Monetize through ads, sponsorships, or paid subscriptions

4. Code Leverage: Automating Wealth with Software

Code leverage means building systems (apps, software, automated businesses) that work for you.

It also has the potential to create billion dollar empires.

Minecraft, one of the most successful examples of code leverage

Here are some examples:

• Instagram (acquired for $1 billion): two founders, 13 employees during acquisition

• Flappy Bird ($50,000/day peak from ads): one founder, completely solo

• Minecraft ($100 million+/year before acquisition): one founder Notch, ~40 employees during acquisition

Code requires a certain degree of skill in coding. However, you can get started with:

• Learn coding (free courses on Coursera, freeCodeCamp)

• Use no-code tools (Bubble, Webflow, Zapier)

Code scales infinitely with a low marginal cost (all you need to scale is Amazon Web Services or Google Firebase)

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Final Thoughts: Which Leverage Should You Use?

Naval’s framework shows that wealth comes from a combination of both leverage and hard work. Here’s how you can choose what fits you best:

• Labor: good for traditional business

• Capital: best for investors with expertise

• Media: ideal for creators/influencers

• Code: perfect for tech entrepreneurs

Pick one type of leverage and start small. Over time, combine them to grow.

This newsletter is an example of media leverage.

Which leverage will you try first? Let me know!