22 years ago, two PhD students launched a company based on a research project called “BackRub.” Today, that company is commonly known as Google, and founders Larry Page and Sergey Brin are worth more than 60 billion USD each.
When talking about building wealth, people often think you need to start an amazing business like Larry and Sergey. But look a bit deeper and you’ll see a further interesting story.
This article from 2007 estimated that more than 1,000 people had >5 million USD worth of Google shares. Not bad for a company with ~17,000 employees at that time. How would you feel working for a company where 1 out of every 17 colleagues was a 5x millionaire? Assuming someone had kept their shares, they’d be worth easily >20 million USD today.
You might think the lesson here is: join a successful tech startup early. That’s actually a risky strategy, because most startups fail.
Instead, let’s examine an important factor behind those early Googlers getting rich. What can we learn about building wealth even when you’re just a salaried employee?
For that, we have to consider the powerful concept called leverage.
Trading Time for Money
When I was younger, I wanted to be rich. What I didn’t know, was how? Up until my mid-twenties, I thought the only practical way was to get a well-paid job and save my salary.
This isn’t a bad strategy, but you have to be patient. For most people, if you rely on a single salary, you maybe get to millionaire status after decades of disciplined living.
Wanna accelerate the process? You need leverage. And when I say leverage here, I don’t mean only the type of leverage that’s used in the financial world. That’s financial leverage, meaning borrowing money to make more money. More on that later.
Time for an example. Here’s a non-leveraged way to make money: Driving for Grab. Your earnings are mostly limited to how much time you spend driving. If you happen to fall sick and can’t drive, your income suffers accordingly. Same goes for anything that pays you per hour. Some would call this trading time 1-to-1 for money.
Here’s a leveraged way to make money: Get a group of drivers under your name, and take a 20% commission on every payment they receive. Now, you’re leveraging on the hard work of people under you. The more people who drive for you, the more you earn. Get 5 drivers and you have a small business. Get 200,000, and you have a billion-dollar company.
Okay, that’s a bit of an intimidating example. What are some smaller, more practical examples of leverage in daily life?
- Writing a blog post. You spend hours on one post, but once it’s done it’ll always be on the Internet — forever useful to anyone who discovers it.
- Starting a YouTube channel. Similar to above, you put in a lot of initial effort, but those videos have potential to reach millions. (Hard to remember, but up until about 20 years ago, there was no way a random person could just upload something that could reach so many people.)
- Learning to code and creating an app.
- Getting promoted to lead a group of people. I left this one for last since it’s a very common form of leverage in a “normal” job.
No matter how talented you are, eventually you run into limits of what a single person can do. But lead a group of people well, and you can put a rocket into space.
The sky’s the limit here. There are young managers who manage small teams of four people. There are CEOs who lead companies with 100,000 employees. And of course, let’s not forget leaders of countries, who guide and shape the destiny of millions.
Making Money on Leverage
“Wait!” you say. “That’s nice and all, but where’s the part about getting rich?”
Let me explain by riffing on the earlier examples:
A freelance writer might get paid RM 1,000 for an article they take 8 hours to write. But after the sale, they don’t earn anything else on the same article. On the other hand, every article a blogger writes makes their website more valuable.
Get to 1,000 followers who’ll buy an RM 10 product and that’s RM 10,000 in earnings. Get to 10,000 paying followers, and that’s RM 100,000.
YouTube pays out between 3 to 5 USD per 1,000 video views. That’s ~500 USD if 100,000 people watched your video once. Nice, but not “fire my boss” money. Where it gets eye-watering is when you scale up further. Reach Sugu Pavithra levels (17 million views) and that’s 85,000 USD. And remember, videos created years ago can still contribute to earnings. It’s like writing a book once, earning royalties forever.
Also, earnings aren’t limited to ad money. At a certain level of influence, other opportunities like paid sponsorships come up. Many say billionaire Michael Jordan is the greatest basketball player ever. Guess how much his salary over his entire playing career was? A total of 96 million USD over 16 years. On the other hand, Jordan made 130 million USD last year just from Nike royalties (reportedly 5% of every dollar the Air Jordan brand makes).
You can get rich being world class in something. But you only get world-class rich with leverage.
According to Payscale, the median salary for a finance manager is ~RM 8,700/month. Compare that to the starting salary of a fresh graduate, let’s say RM 3,000. Does a manager work 3x harder or 3x more hours than a freshie?
No, but that manager might have 3x the experience and 9x the leadership capabilities. Capabilities that allow the company to earn much more than RM 8,700/month. As you go higher up the ladder, it becomes less of how hard you work, and more of how much value your work creates.
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Another way of figuring out how to earn on leverage is asking a typical startup question: “Will it scale?” In other words, “Given my limited time, will what I do be able to serve 10,000 paying customers as well as 10 customers?”
Something like giving private piano lessons in person doesn’t scale. But owning a tech stock that goes up 36x like Google does.
Note: some people will share you examples of scalable things and sell you the dream of “passive income.” (*cough cough MLM.) Don’t be fooled. Just because something is scalable doesn’t mean you can Netflix in your pajamas all day. Creating videos can be a full time job. So can managing 5,000 followers. It’s still work; but it’s highly-effective work. That’s leverage.
For some other forms of leverage, check out Todd Tresidder’s work here.
What About Financial Leverage?
Search for “leverage” online, and the top results are mostly financial leverage. I also get this question often: “Should I borrow money to invest?”
So let’s address this: Consider an example of financial leverage that’s supposed to make you rich. Commonly found in “Be a Property Millionaire!” bullshit courses:
- Apply for bank loans to buy multiple properties at the same time.
- Take advantage of “no money down” developer promotions where you pay peanuts at the start.
- Once your properties are ready, rent them out. Make sure you charge enough rent to cover the monthly loan payments.
- Genius! You’re now a property millionaire with multiple sources of income. And because your tenants are paying for the loan payments, you’re actually owning a property for free!
- When your properties’ prices increase enough (because real estate always goes up!), sell them for a huge profit.
The first time I heard of friends making money through properties, it blew my mind. How else could an average working person make a few hundred K in a few years?
The secret: It’s not that properties give you 10x better profits than other investments. No, real estate does NOT always go up. It’s that property loans technically give you 10x leverage — with an RM 50,000 downpayment, you can buy an RM 500,000 property.
That’s financial leverage. If everything goes well, you transform limited capital into huge profits.
But if something goes wrong (e.g. you can’t find tenants or the market crashes), then you’re fucked.
Using Other People’s Money
Am I saying you should never borrow money? Nah, that’s oversimplifying.
There’s reasonable leverage and there’s over-leverage. Financial advisors will tell you the “ideal” ratio for personal borrowings is this:
- Property loan payments: <33% of your gross salary
- All loan payments: <50% of your gross salary
So if I’m earning RM 8,000 a month, I should try keep my home + car + education loan payments below RM 4,000.
What about borrowing money to do business? OK, but make sure to manage the risk (high) of your startup failing. And manage your business finances well.
Where I draw the line is borrowing money to invest. I don’t do it, and I don’t think most people should do it either. Because investments — whether it’s stocks, bonds or crypto — can go up or down — but you always need to pay back your loans. If we’re being technical: your risk-free return will never be higher than bank interest rates.
(In Malaysia, the one exception I’d consider is ASB Financing. I say “consider,” because not being a bumi myself, I don’t have personal experience and I haven’t run the detailed calculations.)
Leveraging Your Life
How do you use leverage to get rich? Some closing thoughts:
- Focus your life on high-impact things. If you’re putting in effort, it should be for something worthy. Life is too short to waste time on meaningless shit.
- If your job involves a lot of low-impact stuff, think of ways to improve the process and make life better for everyone.
- If your job stops you from working on high-impact stuff, consider moving to where your work is scalable. You can also work on scalable side hustles in your free time.
- When it comes to using financial leverage, be cautious.
I say “rich” in the broad sense of the word. For some people, having 10K in the bank and a happy family is already rich. For others, it’s having a million in liquid assets, and regular dinners at Nobu. Whatever it is for you, understand leverage is just a tool to amplify everything you do.
Use it wisely.
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