If you aren't creating leverage, WYD
From working harder, to working smarter to pulling the lever, Kronk.
The other day, my photo app’s memory roll reminded me of 2 things I was doing for cash a few years ago that are humbling in hindsight. One had me sleeping in my car to afford rent and the other had me running an instagram consisting solely of cute dog content. More on these to come.
After the initial chuckle, I thought of the deeper lesson that I was in the process of learning at the time: that a mimetically desirable—AKA “cool”—lifestyle doesn’t equate to jack squat if it keeps you broke, and that the one thing you should be focusing on when you are young is creating leverage.
I had moved to Denver shortly after high school with a friend under circumstances rather detached from reality. We were in a scenario where we had a nearly a year’s runway covered on rent and a chunk of resources that kept us running around, exploring all Denver and the surrounding mountains had to offer with little consideration for our longer term prospects.
I eventually rented my first solo apartment, in the same building where we had been living the year prior. As I began to incur the cost of rent on a month to month basis, I began to really feel the weight of the situation I had gotten myself into. I was 19 years old with around $2,000/mo in overhead, and was making barely more than that through the work I was doing, managing some social media accounts and a hair salon’s product line on Amazon.
On the outside, I had everything someone my age might have wanted. A cool apartment in a big city doing work that gave me relative control over my schedule…but it was a fool’s paradise.
The naïveté of youth was evaporating. I was saving a couple hundred bucks a month, max—and had no marketable skills spare the experience from one failed business and references from the work I was doing at the time.
All this to say, I knew I had to make a change.
The building I lived in had a restaurant downstairs that I frequented for their happy hour specials. I knew the owners, and so one day when I was down grabbing food, I floated the idea of picking up some evening shifts. The idea was well received. I got hired under the table as bartender at $20/hour plus tips. As far as trading time for income goes, that was more than I’d ever made in my life.
In addition to this and the other work I mentioned above, I continued to pick up menial opportunities from brokering freight to signing up for every gig app out there—which eventually led to my starting WAND, so no huge complaints there.
Still though, I wasn’t getting much further ahead. I had a finite amount of time to sell, and at my max phase of ‘working harder’, I was only stacking a couple hundred extra bucks a month, but nothing life changing. The thing I really wanted was to rid myself of the couple thousand dollar a month rent burden and start building equity in an asset. A back of the napkin calculation told me that at my current pace it’d have taken a decade at least to save for a down payment on a place in Denver, whose housing market is notoriously up and to the right.
This realization took me to my next phase of change.
Bottom line, my skills weren’t marketable to earn a higher income, so I started looking for the best ways to earn more per hour. I’d knocked out a couple of drag and drop websites in the past, and in doing so learned that if I actually knew how to code from scratch, I would be able to charge more and accept a broader array of gigs in this area.
I invested some of the little money I had saved into a 12 week bootcamp at Galvanize, and eventually started pricing myself into this kind of work at a couple bucks more per hour than what I was getting bartending. To scale up from there, I built a personal website so that I could market myself with more authority, and therefore justify a higher hourly.
Time went on, and I was elated to finally be seeing my savings account grow by more than a thousand dollars a month. In only a year or so time I would be able to take advantage of the FHA first time homebuyer option of 3.5% down to pick-up a modest condo or single bedroom on the outskirts of town.
I had some of my freedom back. I had more dispensable income. So at what point did I have to sleep in my car to make rent? That was a result of descending from my local optima in order to
Many people might settle for where I arrived at above, and that might even be fine or for the best. The issue for me was that I wasn’t doing exactly what I wanted to be doing. Before moving to Denver, I had deferred an opportunity to go to college in order to start the business my partner and I subsequently ran into the ground. I saw an opportunity to work even smarter so to speak, and so picked back up my application and was reaccepted to attend school in St. Louis with the intent to pursue the hard sciences.
When I started looking for a living situation in St. Louis, lo and behold I was able to spend the money I’d been saving for a downpayment in Denver to acquire a property outright. Only problem then was it was lacking a couple basic necessities like plumbing, electricity and central heat. With ~6 months left on the lease in Denver, the clock began to tick to get the house in shape for when I moved back to start school. This is when I began to explore things that created leverage, because now I was once again flat dry on cash and needed more time then ever to fly back a week a month to work on the house.
First, let me define leverage in the words of Jack Butcher, one of the influencers who taught me what is means to build once and sell twice:
Leverage idea number 1 nearly got me evicted, and it was also the one that had me sleeping in my car to make rent. On my 2nd or 3rd trip to St. Louis from Denver, flying out to meet my dad for sprints of work on the house, it occurred to me that my $1,500/month apartment was being left vacant for over a fourth of the time that I was paying for it. As a smart entrepreneur would recognize, that was value left on the table!
This led me to clean up the apartment, buy some new sheets, and lock my valuables in the closet. I began not only sub-renting the apartment when I was out of town, but I was making such a killing on the space that I began to look for any way at all to not sleep in the apartment I was paying for when I was in town. On better days, this consisted of staying with a friend or even dog sitting in others’ homes to double down on the revenue I could bring in by sleeping anywhere but my own home. At its worst however, there was more than one night where I found myself asking, “What would I rather do tonight- sleep in my bed, or sleep in my car and wake up $120 richer?”
So am I telling you to sleep in your car for the hustle?—absolutely not. This little scheme of mine ending in me nearly getting evicted when a guest waltzed into the leasing office to ask for the key for the Airbnb in unit 428 rather than adhere to my discreet entry instructions.—I would have given up a night in my bed just to see the expression on the leasing agent’s face.
What this experience did teach me though is that I could orchestrate systems that create value when I’m not around. In the words of Warren Buffet:
“If you don't find a way to make money while you sleep, you will work until you die.”
And so carrying on to the second of my 2 initial teases, what was the scheme behind posting cute pictures of dogs on Instagram? As I mentioned above, I managed a few social media accounts when I first landed in the big city. Something my buddy who I moved out with and I both grew good at was growth hacking pages in different niches, and so we proceeded to do this for everything from cars to motivational content and yes, cute dog pictures. Content was easy to source, and the potential audiences were large. The way that we were able to monetize these pages was by both promoting our own affiliate products, and taking payments from others in order to do sponsored posts of their products or pages—You’d be surprised what a puppy Instagram with 500 followers is willing to pay to a page with 10,000+ for a shout out. Once they see you do one with *Sponsored Post* at the bottom, then they know they can get one too.
My 2 silly examples aside, this is the snowball that has continued to grow through my subsequent experiences. Eventually, I looked in the mirror and asked, “Why am I continuing to build things for others when I can be building them for myself?” Seeking leverage is the north star that led me to start WAND, and to continue to look for opportunities to build systems that work without me.
To start creating leverage, you don’t need to dive headfirst into the deep end. Start small. If you spend 100% of your time playing wealth creation games, and all of your bills are paid with a surplus income, try bumping to a 90/10 split with the latter 10% allocated to leverage creation.
If you’re a web developer like me, try building your own software product. If the first one doesn’t stick, scrap it and move on. Before my co-founder and I landed on WAND, I’d spent a few months working on an Airbnb type platform for renting garage space. And even after starting WAND, I’ve continued to churn over ideas to varying levels of success. I built and eventually sold an email service that scraped news headlines to deliver you no bias headlines. I built a site to set-up an auto-reply bot for Twitter DMs that I just stopped supporting because it wasn’t worth it. In time, I’ve found a comfortable niche continuing to spin out new marketplace apps.
Naval @naval@rlope @tferriss If you’re leveraged with capital, code, or people, and own equity, then good decisions have a much larger earning impact than hard work.
Creators can build communities, people in construction and real estate can become landlords, and even doctors and medical folks can start private practices. Creating leverage is the essence of entrepreneurship. Almost anyone can start a business solving a problem or offering a service in an area where they’re competent. Where most fail is by locking themselves into what Michael Gerber refers to as the technician role in his book, The E-myth Revisited:
“If the Entrepreneur lives in the future and The Manager lives in the past, The Technician lives in the present. He loves the feel of things and the fact that things can get done. As long as the Technician is working, he is happy, but only on one thing at a time. Put it another way, while the Entrepreneur dreams, The Manager frets, and the Technician ruminates.”
Increasing your leverage looks like changing the ratio I mention to start with above. As you find a niche where your leverage investments start to net returns, progressively bump up the split from 90/10, to 80/ 20, to 50/50, to 10/90.
Game, set, leverage.
Wealth can give you a runway, but it can’t truly net you freedom.
Wealth is a tool for creating leverage. Leverage is a tool for creating freedom.
I just want to see everyone be free, because I think that is when the magic happens.
Go out there and pull the lever.
Liberty at all costs.
Send me signal on Urbit: ~padlyn-sogrum