Wednesday, November 22, 2017

The Power of Leverage

I’ve been learning from James Altucher, the entrepreneur-blogger-author for a few months, and following his advice on investment to manage our family fund. Immediately the performance of the fund has been multiplying.

This got me into thinking how did it happen?

Well… the answer is simple at the outlook: because James is a very experienced investor / businessman / entrepreneur, so naturally his experiences on what to do, what not to do, and how to do, is more correct than what I’ve used to be doing, possibly for a very long time.

However, digging a bit deeper, what really separates James and I, at the levels of.. say how atoms and molecules work, so that vastly different results are achieved?

I recall that Elon Musk once remarked how Internet companies operate at the levels of bits, and now other companies that operate at the levels of atoms will also be seeing Internet-style innovations now (his Tesla Inc. is one example).

So I start to wonder, what’s really happening, eventually happens at the atomic levels of the material / physical world, but before that, it occurs in the binary worlds of bits (info processing on financial IT systems). And before that, it happens at the levels of human ideas and thoughts.

Ideas and thoughts are really abstract and intangible things that are hard to evaluate. You cannot see nor touch an idea or thought (before it’s realized through actions), yet it’s the most powerful “pusher and mover” of the physical world that’s eventually affected by these ideas and thoughts.

What determines the actual effects of these thoughts/ideas then? I think both “correctness” and “leverage” are into play.

Correctness” refers to whether the particular ideas captures properly some “truth” about the universe or how the world operates. With the correct idea, predication that flows from the idea would then correctly describe the states of affairs in the world, and possibly impact it as well. This is like whether we’ve formed the “right model” in Science about some phenomenon.

Leverage” relates to the environment in which the idea is being executed. For example, an idea to build a spaceship launching people onto Mars, would likely find considerable less support in terms of manpower, experiences, funding in a country like Malaysia (or Taiwan) than in the U.S.

Part of the reason for the change in performance of my investment is that not only I’ve started to follow James “correct ideas” about how to view and execute investment strategies, but I’ve also switched gears from investing in Taiwanese stock only previously to now investing in U.S. stock.

This “leverage” effect becomes very interesting in the age of globalization and Internet though, as you can now pretty much tap into any talent via outsourcing sites such as or Upwork, or perform global transactions with much less regulations using Bitcoin.

When access to both manpower talents and capital becomes democratize via remote work and global currency (say a VC that invests companies via cryptocurrency), the “leverage” part may become much more powerful and interesting than what currently is.