Leverage,the magic word in wealth building!
What is lever and what is leverage ?
The lever and the wheel are amongst the oldest inventions of man that continue to play a significant role in his life even today.
A lever, says the Advanced Learners' Dictionary is " a bar of wood,metal etc used to lift heavy weights by resting the middle on something and lifting the weight on one end by pressing down on the other" and leverage is " the power gained by the use of a lever".
Once man discovered leverage, he greatly increased the amount of work he could achieve far and above his own direct capacity.
Some of the social and political applications of leverage
Leverage has its human relation equivalency with very serious socio-economic and sometimes political consequences.
It first appeared in the concept of marriage- a man and a woman uniting to form a single unit - the family.In most societies, it was the unwritten justification for polygamy .This basic thinking later extended to societal and communal living.
Its more directly economic apperarance did not come however until the evolution of serfdom. From this point onwards, man learnt to leverage on the labour of other men to create wealth for himself.This then is the basic relationship that has transformed through slavery into proletarianism.
What to leverage on and how to leverage !
Other than labour, the following possessions of other men can be leveraged upon - status,money,intelligence,insight,foresight,experience(hindsight) amongst other things.
By getting other men to put such possessions/attributes of theirs to work for him, a man extends his own capacity to earn and create wealth.
One of the reasons interpersonal leveraging works so well for wealth creation is than one man can leverage on the possessions/attributes of any number of other men and even in many places simultaneously. The entrepreneur leverages on as many men as can be gainfully employed in his organisation, so does a team leader in a multilevel or network marketing set up etc.
The human elements of wealth building leverage !
When lev eraging is moved unto the human level, it necessarily attains certain attributes for the fact that the thing being leveraged upon by the one- labour, time, etc belong to another human being; it is no more wood or metal. The persons being leveraged upon must fee motivated,compelled or obliged to provide the service or material which the other party intends to leverage upon. The willing slave felt it,the serf felt it and so does the worker of our day.
Interpersonal leverage is and must be mutual.it cannot be a strict issue of one-way usage or exploitation.
Of course, there is a senior partner in this relationship, usually the one who initiates it. He it is that bears the exhalted title of entrepreneur.
Even so, you must lead from the back :Robert Kiyosaki draws our attention to the fact that , in order to succeed maximally, he must be ready to play the servant- leader: he must be ready to be the last to be paid or rewarded.
Herein lies the deepest meaning of the injunction- "give and it shall be given unto you..." as well as the dictum "you can have anything you want in life,if you will just help enough people to get what they want ". Significantly, the "give" comes before the "take". It is also key to the most positive interpretation of the expression:"self-interest rules the world':minister unto other men's interests and they would gladly minister unto yours own needs.
Leverage, like all other natural forces, is neutral !
Man's capacity to work is called power and leverage is a way of extending this capacity. Leverage is necessarily subject to the same laws as that which it extends.The most important of these laws is neutrality:power is neutral and so is leverage.
But what excactly do we mean by saying that power is neutral? To fully understand this, we need to return to a more physical instance of power e.g fire or water current. Fire,for example, can both cook food(positive) and burn down a house(negative).Water current can wash a thing or create electricity(positive) and it can tear down a building(negative).
Coming nearer home, we have slavery, the crudest instance of one man leveraging on the attributes(in this case the raw power) of another man.Slaves built the pyramids of Egypt and slaves waged many savage wars.
Power can be used,so can leverage,following from which is the fact that both can be abused.Remeber what the wise man said: "anything that can be used can also be abused".
Money can be leveraged for or against you !
The crux of this article is to alert man to the possibility and danger of abusing money leverage.
Now, money leverage has different aspects as follows:
(i) leveraging on past income(saving or inheritance)
(ii) leveraging on today's income
(iii) leveraging on tomorrow's( future) income.
Any of these can be used or abused.Saving or inheritance can be abused either by direct squandering or by being applied to an ill-advised investment .Todday's income can be abused through the refusal to budget or the non -observance of a budget plan cum impulsive buying. Usage or abusage of tomorrow's income is the most complex of all because it relates to the art of borrowing.Its complexity also comes from the fact that it involves a double leverage.
When you borrow, you are leveraging on another man's past or current income in the first instance( that is the source of the loan supply) and in the second instance on your own future income( the means of liquidating that loan).
Ways of abusing wealth-building leverage !
One will be abusing this intricate form of money leveraging if he does any of the following:-
(i) borrows without a definite plan of usage and return
(ii) borrows from an unfriendly source or on unfriendly terms(cf Shyllock and Antonio in Merchant of Venice.)
(iii) borrows for an unproductive or unprofitable venture e.g. to buy luxury items like cigarettes,drinks etc.)
(iv) diverts or allows money he borrowed for a productive purpose to be diverted to an unproductive source.
(v) takes a short term loan for a venture that requires a long-term gestation without having an alternative means of defraying the loan within its agreed tenure.
Reverse or double leverage !
When man leverages on any of the resources of other men earlier listed( money, time, goodwill...), there is a phenomenon which may be named reverse leverage. This phenomenon identifies the fact that whereas two persons are involved, one is leveraging , while the other is being leveraged upon. An entrepreneur, for example, leverages on the sweat, time and intellect of his workers and the clear implication is that the workers are being leveraged upon. Equally, the big borrower is leveraging on the fund accumulated by savers in the bank; he is the one leveraging while the savers are being leveraged upon.
Of course, it is a matter of angle of view. Most workers see themselves as leveraging on the needs of an entrepreneur or industry . By this perception, they provide the needs of an entrepreneur or industry and they get " highly remunerated " for it. Similarly, most savers see themselves as earning interest income by leveraging on the bank's and potential borrowers' need for fund accumulation.
Depends on which side of the process you stand more often !
There are therefore no absolutes here ! Every man must at one time or the other find himself on each of the two sides of this double leveraging phenomenon. Leverage becomes a key to wealth building if a man positions himself such that the result of the leverage is a positive net effect on his life, just like the reverse will make leverage a key to poverty or the dissipation of wealth.
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