Hey friend 👋,

I’ve been coming across many solopreneurs - folks who have the intention of starting 1-person businesses. They don’t want to hire more employees, raise money or be in the spotlight as a venture-backed high-growth company.

What’s one of the most effective ways a solopreneur can do this? Leverage.

We’re going to talk about what leverage is, why software is the highest form of leverage and how this applies to developer tool products in web3.

Let’s get to it!

🔧Software as Leverage

What is Leverage?

I came across a tweet not long ago that really hit me.

The main idea was the world is changing so fast that our lives - for people born during & after the 90’s - is completely different to the one our parents lived.

The way we interact with it - the fact we can connect with anyone around the world in a matter of seconds (the internet and rapid spread of mobile technology), or purchase digital products to help us healthier, wealthier and wiser (e-commerce), or take part in virtual-only experiences (the metaverse/web3), is even more varied.

Yet..should we still work as we did during the 20th century? Most definitely not.

The word leverage comes from the word lever, a primitive tool used to lift and move heavy objects.

Levers are force multipliers - with the proper lever, you can accomplish more than you would normally be able to on your own.

🤔 Different types of Leverage

In 2019, Angel Investor and Founder of Angel List, Naval Ravikant, recorded a podcast about leverage. He says there are 4 ways to increase output beyond our own effort:

1. Labour

2. Capital

3. Code (Technology)

4. Media (Audience)

1. 🙋🏽‍♂️ Labour - or People

Going back to the intro of this week’s post - traditionally, ''labour’ meant hiring more people. People are the most obvious type of leverage as you can accomplish more while working with two people, rather than one (statin’ the obvious a bit!).

However, fewer newly-found companies are planning to hire more people, and instead look to contractors, freelancers and technology (more on this later).

Many startups are suffering from over-hiring, leading to mass layoffs - society is taking notice, and I can’t imagine many entrepreneurs will be boasting about doubling their headcount anytime soon.

The labour market has changed due to:

• remote work

• access to global talent

• the freelance economy

Technology is making scaling teams frictionless compared to the past.

2. 💰Capital

Capital naturally provides leverage - if you’ve got money, you’ve got an ability to buy assets that can grow in value, thus giving you a return on investment. Money makes money.

In 2021, there was approximately $300B invested in VC money into startups.

Tools like email, LinkedIn and Twitter make it easier than ever to get in front with folks with $.

Many other alternative, yet innovative finance methods have led to the proliferation of capital, such as:

• Debt financing

• Crowdfunding

• Fractional investing

• Grants

Financial leverage is more accessible with each passing day.

3. 💻 Code

The one I believe is the most powerful in the modern age.

Code leverage is the ability to create digital applications to scale your value. You can even code it once, and sell it forever.

From bots being able to automate repetitive tasks, to computers being able to talk to each other and help scale infrastructure effortlessly, the power of coding has created a new generation of wealth.

When I think of this example of leverage, my mind goes to the likes of WhatsApp and Instagram, both acquired for extortionate sums while working with less than 50 engineers each (WhatsApp had an employee count of 50 when it was acquired for $19bn, while Instagram was at 12 employees by the time Facebook coughed up the $1bn).

4. 📣 Content - or Audience

We’re living in a world we’re the cost of creating content is zero - everyone can be a creator of content.

Content leverage is the content you create that scales via software - code - with a zero marginal cost of reproduction.

This means, we only have to make the piece of content once, but anyone with an internet connection can consume it repeatedly - this can be a newsletter (like this!), a YouTube video or even a tweet thread.

Why Software is the Highest Leverage

You may have seen a pattern from the above - each area requires software to scale even further. 

• Labour - by leveraging HR and creator economy platforms, employers can now instantly reach talent from around the world

• Capital - Platforms like Angel List make it easier to connect with global investors and join like-minded groups to co-invest together.

• Code - Pretty self-explanatory.

• Audience - Building digital products and having the tools available to do so, has led to an explosion of creative talent and digital products - these can also lead to new businesses, opportunities and growth.

If we look at the explosion of AI tools - chatGPT is starting to lead to layoffs, as companies realise they can pretty much automate a specific function (e.g. marketing copy or similar) with tools like this, compared to increasing headcount to fill the gap.

How does this apply to developer tool products in web3?

Developer tool products are high leverage software products - and there are some aspects of web3 that lend itself further to this.

Let’s dive into three -

Smart contracts:

Smart contracts are like programming lego blocks which have a ‘if'-this-then-that’ activity. It automates the actions that would otherwise be completed by the parties in the agreement, which removes the need for both parties to trust each other.

A network of computers executes the actions when predetermined conditions have been met and verified.

These actions could include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket.

The blockchain is then updated when the transaction is completed. That means the transaction cannot be changed, and only parties who have been granted permission can see the results.

The more smart contracts a developer builds, the more steps that can be automated using these functions.

Smart contracts will be the ultimate leverage play for web3 companies.

On-chain analytics:

Finding the needle in the haystack is hard - but doing it without a clear set of data in front of you? Next to impossible.

Web3 makes data openly accessible - everything can be searched, scrawled and discovered on the blockchain.

This makes it easier to analyze transactions, volume, transaction speed, gas fees and more.

Being able to analyze data allows you to make better decisions - now we just need the tools to help us gain these insights even faster.

Modularity:

This is a bit of an abstract term, especially for non-web3 natives - so I’ll break it down:

• From the 80’s, software companies started building software by writing everything in one large centralised database - this could be called a mainframe or even a ‘monolith’.

• In the 00’s, companies started breaking up their application into specific areas - e.g. Yelp broke up teams across Search, ‘Ads, Discover & Reviews - and much more.

• This led to teams having more autonomy as to when they could release software and not having to deal with too many changes every time they released a bit of code.

• The same can be said for our data - data is currently kept centralised to a company.

• Now, our data lives on the blockchain - meaning it’s not tied to a specific company, so we can move our data across different applications with no reprecussions or challenges with having to ‘start from scratch all over again’.

Having modular parts, when it comes to data or anything else, will help web3 teams to build upon previous iterations of code and build more scalable apps.

Conclusion:

We have access to leverage our parents would’ve only dreamed of.

Labour is global, capital is abundant, cost is democratized and an audience can be earned.

If we focus on achieving our own form of Freedom, we’ll stop trading time for money and capitalize on this incredible opportunity.

🔗 Links Of The Week

👷🏽‍♂️ Find a position of Leverage

I haven’t read the Almanack of Naval Ravikant for a while, but found this great article if you want to dive into the concept of Leverage further.

🛥 My Surreal Years Tutoring the Children of the Super-Rich

Fascinating account of a tutor who’s classroom would be on yacht decks, in Monaco penthouses and in Mayfair townhouses.

🖼 In a Meme:

For the pictorially inclined, here’s the whole piece in a single meme:

Until next time 👋

I hope you enjoyed this week’s edition - I'd love it if you shared it with a friend or two.

Got feedback? Reply to this email or tweet at me and let’s chat.

Fahim