The Power of Leverage: The Hidden Strategy Behind the Richest People In the World

Yong-Soo Chung [00:00:00]

Okay. I have a serious question for all you proud solopreneurs out there. And I want you to think about it, and answer it, VERY carefully.

Jeff Bezos started Amazon, an online bookstore, in 1994 out of his garage with a $250,000 investment from his parents. Back then, he was what you might term a solopreneur. Over the last thirty years, Bezos battled clones, copycats, and competition to build the internet behemoth we know today as Amazon.

My question is this: why is the number of solopreneurs who have come anywhere close to emulating him, so SMALL?

Actually, you could replace the name Jeff Bezos with Larry Page & Sergey Brinn or Mark Zuckerberg and the question is still valid.

Let’s put it this way, how is it that the richest people in the world are NOT working as hard as you but they are still PRINTING money? What are they doing differently?

Well, let's find out, shall we?

Yong-Soo Chung [00:01:00]

The next generation of successful founders in this digital age of entrepreneurship will leverage their audience to launch, build, and scale their brands. First Class Founders explores this golden intersection of audience-building & company-building with proven strategies to grow both your audience, which is your distribution, and your brand, which is your product.

Because those who can master both will create a category of one.

Yong-Soo Chung [00:01:27]

Hi, my name is Yong-Soo Chung and I'm a serial entrepreneur who bootstrapped 3 successful businesses from $0 to $20 million over 8 years.

On this podcast, you'll learn timeless lessons from world-class content creators, startup founders, and CEOs. You'll also hear tactical tips & strategies from ME, Yong-Soo Chung!

Are you ready? Then, let’s begin!

Yong-Soo Chung [00:01:53]

Today's episode of First Class Founders is a SOLO flight.

That is, I'm gonna be sharing with you my thoughts on a subject that I think you will benefit tremendously from - how YOU are missing out on the opportunity to earn MILLIONS as a solopreneur. Yeah, I am going to tell you the secret of how the richest people are making more money than you but working WAY less than you.

No, I'm not gonna string you along for thirty minutes and then tell you they are lucky or they work hard or they put their money to work for them. In fact, I'm just gonna tell you the secret right away. The secret is that they are using leverage differently from you.

What is leverage?

Well, if you don't know that, then you better listen carefully for the next thirty minutes because I plan to tell you EVERYTHING about leverage.

We'll first look at what it means to utilize leverage.

Then, we'll learn about the two types of leverage: permission-ed and permission-less leverage. Then, I'll show you how you are (probably) wasting a sh*t-ton of leverage. Finally, most importantly, I'll tell you about the biggest mistake you are making as a solopreneur, and mark my words you will AGREE with me.

Here’s a hint: It involves a personal holding company… stay tuned!

So, jet-setters, let's get this flight ready for take-off!

Let’s get down to business!

Yong-Soo Chung [00:03:12]

Before we begin, we teamed up with HyperPods to bring to you a quick 3-min hyper-visual summary of this episode on leverage to help you consume faster, understand better, and retain more key ideas and insights.

You can grab the hyper-visual summary for this week’s episode on leverage at firstclassfounders.com/hypervisuals.

Yong-Soo Chung [00:03:32]

I'd like to start with a bit of a history lesson first. Wait, don’t sleep on me just yet because I’ll be bringing this back to the concept of leverage in a minute.

Around the 18th century or so, the industrial revolution swept through Europe. At the time, when it was gathering steam in Europe, the United States was still primarily agrarian. The American Frontier was still being explored and the West was very much, shall we say, wild...

But, with all that exploration came a slowly-growing demand for resources and since the West was pretty much wild, these resources needed to be transported across the entire continent.

Then, at the turn of the 18th century, iron, steel, textile, and other industries sprung up and the Industrial Revolution finally jumped across the pond. The mushrooming of canals and railroads contributed massively to the economic growth. And at the forefront of this economic growth were legendary names such as Andrew Carnegie, John D. Rockefeller, and Henry Ford - just to name a few.

Yong-Soo Chung [00:04:30]

We all know how they got rich.

They invested their money and other people’s money in industries such as steel, railroads, and automobiles. They hired cheap labor to work in their factories and made significant profits. I know I'm skipping a lot of the fine print here but this was essentially the blueprint to their wealth.

What we are looking at here is called "leverage" - specifically, capital leverage and labor leverage.

In a tweetstorm - or as we now call it a Twitter thread - back in 2018, Naval Ravikant shared a series of tweets beginning with the wonderfully succinct sentence, "How to Get Rich (without getting lucky)". This became the basis for a book compiled by Eric Jorgenson called "The Almanac of Naval Ravikant" - a book that you should definitely read.

Yong-Soo Chung [00:05:14]

Anyways, in the tweetstorm, Naval spoke about four types of leverage - capital, labor, code, and media. Naval used the word 'leverage' because the Greek mathematician Archimedes once said (pause) "Give me a large enough lever and I shall move the Earth." In other words, if you have enough leverage, you can do really amazing things often without breaking a sweat.

But, in terms of wealth creation, what Naval was saying was this:

If you want to create wealth, you need to do one of four things.

1. You can invest money into it - buy low and sell high. This is capital leverage.
2. You can hire people to do some or all of your work - this is labor leverage.
3. You can develop something yourself - this is code leverage.
4. You can create content and publish it - this is media leverage.

Yong-Soo Chung [00:06:04]

The Carnegies and the Rockefellers, as you will now agree, used capital and labor leverage to grow their wealth - as did most people who made their fortunes before the 1980s.

In the 1980s, the internet was born. In the 1990s, the World Wide Web came into existence. And, with it, came TWO new forms of leverage - code and media.

Here's the thing - capital and labor require permission. You need permission if you are planning to use someone else's money as capital. You need to convince another person to work for you if you plan to hire them as labor.

But code and media? Thanks to the internet, they are the exact opposite - they are permission-less!

You don't need anyone's permission to write code that solves a problem. Similarly, you don't need anyone's permission to create content - for example a newsletter, a podcast, a YouTube video, or any other type of media.

I mean, that's how Mark Zuckerberg made his first million. That's how Larry and Sergey made their first million. That's how I made my first million. All of us were practically solopreneurs when we made our respective first millions... Heck, you will probably be the same - a solopreneur - when you make your first million.

But, maybe you don't HAVE to be...

Maybe, just maybe, you can make your first million a LOT quicker...

Yong-Soo Chung [00:07:20]

Interested? Good, because a short while from now I'm going to tell you about the importance of permission-less leverage on the path to your first million AND how you might be wasting amazing leverage without even realizing it!

But first, I want to take this wonderful opportunity to tell you about our sponsor for this episode Swell AI.

Ladies and Gentlemen, can I have your attention, please?

Quick question. Have you checked out Swell Ai yet? You know how I'm always looking for ways to streamline my podcast production process? Yeah. So I recently began using Swell Ai. Let me tell you, it's like having a mind reader as an assistant. I use it to write show notes, pull the best parts of the episode into an organized summary and optimize the episode titles for high engagement, and transcribe the whole entire episode. And the best part? All of this gets done instantly using the power of AI.

Can you imagine the amount of time I save? Go on give Swell Aii try. I'll leave a link in the show notes.

Yong-Soo Chung [00:08:31]

Okay, now let's get back to our episode.

Before the break, we discussed Naval Ravikant's concepts of the four types of leverage and I claimed that, MAYBE, you could make your first million a lot quicker...

Well, the secret to that is... permission-ed leverage.

Yeah, you heard me right.

And I fully understand that I am contradicting myself here but, bear with me for a moment, and all will become clear shortly.

But first, let me backtrack a little bit so I can explain this a bit more clearly. And you should definitely pay attention to this part…

The internet brought in permission-less leverage in the form of code and media, which democratized entrepreneurship. Anyone who could either code or create content now had the option of building a business for themselves using these two types of leverage.

And I predict that the next generation of successful founders will emerge primarily from this permission-less leverage. The old ways of relying solely on capital and labor for leverage are no longer applicable. The new way is to build products using code and media and distribute them to willing consumers.

An added advantage is the fact that you don't incur any additional distribution costs when you utilize the leverage afforded by code and media. It costs you NOTHING - in terms of BOTH time and money - to produce additional copies of your product. Your investment remains the SAME whether you are producing for one customer or one million customers.

Compare that to capital and labor-intensive leverage. You need to find more capital and/or hire more people to produce greater output.

Yong-Soo Chung [00:10:05]

In my opinion, permission-less leverage in the current age of unfettered internet access is literally a cheat code for people wanting to accumulate vast amounts of wealth. And solopreneurship seems to be the easiest and quickest method to scaffold your way to your first million.

We have seen many examples of it since the World Wide Web became a staple in our daily lives. From Bill Gates to Jeff Bezos to Mark Zuckerberg to Sam Altman - all of them used code as leverage to build products for customers and thus began their entrepreneurial journey. On the media leverage front, we have examples ranging from Casey Neistat to Mr. Beast to Pewdiepie, MKBHD, and so many more. All of them started as simple solopreneur Youtubers and grew into media behemoths who command both respect and a significant portion of the advertising pie today.

But, here's what most people don't realize - NONE of these examples I just cited are solopreneurs.

Sure, they might appear to have made their first million - or first few million - as solopreneurs but they quickly latched on to the fact that, as long as they worked solo, they would hit a ceiling of how much they could earn.

Yong-Soo Chung [00:11:26]

Being a solopreneur only gets you so far. After a point, you will find that you will NEED to hire people if you want to grow. You will NEED to invest more money into your business to extract more wealth out of it.

Basically, what I'm trying to say is that every entrepreneur who succeeded in making billions from their millions knew when to STOP being a solopreneur.

When I started Urban EDC, I was working solo. I designed the site, I negotiated the deals, I took photos of our products, I did everything. I was a solopreneur who had built it all myself by utilizing the power of code as leverage.

But, once the site began to take off, I found myself needing more than 40 hours a week to keep up with the demands of all my customers. And, soon, I was reaching the point of needing more than 24 hours a day to keep up with the demands of my business.

Now, if I had insisted on staying a solopreneur at this point, I would have to rein in the growth of Urban EDC. Or I would have to burn myself out trying to keep pace with its growth. Over time, one of us either Urban EDC or I was sure to get burned out.

Instead, I decided to hire my first employee.

Yong-Soo Chung [00:12:14]

And that immediately made a HUGE difference. Because now, instead of 40 hours a week, I have 80 hours a week to work on Urban EDC. I had an additional brain I could pick and bounce ideas off of. And, I had some breathing space to think about the next steps.

Adding an employee allowed me to build my network within the knife & everyday carry industry, which unlocked more opportunities to earn greater profits. Some of these profits I invested back into Urban EDC, thus giving it more capital leverage and accelerating its growth.

And that's what getting OUT of solopreneurship does - it gives you access to additional leverage - capital, and labor - to accelerate your growth and your wealth, BOTH.

But, do you want to know a secret? I found an even better hack! A more optimal way of utilizing all four forms of leverage. I stumbled into it with my second business GrowthJet and my ideas were validated in a recent episode with Mr. Sweaty Startup, Nick Huber himself!

Yong-Soo Chung [00:13:09]

And I'll tell you all about this wonderful hack in just a minute!

But first, since I mentioned GrowthJet, I want to quickly tell you about it because it is incredibly dear to me and I am, honestly, VERY proud of what I have achieved with it!

E-commerce fulfillment is a pain. One time, one of my customers emailed me asking me why we had shipped them an empty box. It turns out the 3PL had stolen the $1,000 product and shipped an empty box to my customer. Yeah, that was not fun.

So, I launched GrowthJet, a Climate-Neutral Certified third-party logistics company for e-commerce brands.

We can pick, pack, and ship your orders from our warehouse in Brisbane, California while having direct access to our team onsite. We take great pride in our customer experience. Just ask current partners! They love us.

GrowthJet is the 3PL that I wish I had when I launched my own brand, Urban EDC.

If you have an e-commerce shop, check out GrowthJet and hit me up!

And while you do that, I'll cue up the final part of this episode, in which I reveal the hack, the optimal way of utilizing all four forms of leverage.

Yong-Soo Chung [00:14:34]

Are you curious yet?

If you follow me on X - my handle is @yongsoochung - or if you've already heard episode 48 featuring Nick Huber, you already know what this hack is.

It is a personal holding company.

Now, before I launch into some details, I must make it absolutely clear that I am not a financial advisor or a tax attorney and none of what I am about to say constitutes financial or legal advice. I am merely sharing my experience of building my businesses over the years. I will not be held liable if you take any of my thoughts as advice and act on it.

That said, let's talk a little bit about what it means to have a personal holding company.

A holding company is a company that holds other companies. As of this podcast, I hold three companies - UrbanEDC, SpottedByHumphrey, and GrowthJet. And you might be thinking, "Well, that's not new - tons of people do that."

Well, not in my case. One, usually, holding companies are owned by several entities or individuals. I own 100% of my own holding company, which has all three companies I just mentioned. Two, each of the three companies is very personal to me. I started each of them specifically to address a particular aspect of my own life.

I started an e-commerce site called UrbanEDC because I am crazy about EDC - everyday carry gear and I found other EDC enthusiasts like me.

I started a dog boutique called SpottedByHumphrey because my French bulldog Humphrey amassed a fan following on Instagram.

A few minutes ago, I told you why I started my Third-Party Logistics company, GrowthJet.

And now? I’m starting the First Class Founders podcast and newsletter as a way to share these thoughts on entrepreneurship with the rest of the world.

Yong-Soo Chung [00:16:16]

Each of these ventures was intended to fulfill a very specific need-gap - either personal or entrepreneurial, and each of them is incredibly personal due to being closely associated with my hobbies, which makes them so much more than just numbers on a balance sheet for me. No, it ensures that I am fully invested in them and gives me the drive and enthusiasm I need to make them work for me.

While the concept of a holding company has been around for a while, this concept of having a PERSONAL holding company is pretty new. And I am seeing more and more new-age entrepreneurs following this path of setting up personal holding companies. For example, Nick Huber employs a similar model himself, as he explained in episode 48:

EPISODE 48 - NICK HUBER
"Yeah, every deal is different. So support shepherd, I only own 15. I own 15% of then we brought in another partner, Shaan Puri, and now I own 13.75% of that company, or maybe twelve and a half percent, um, recostseg, I own 45%. And kind of just different, differing variables. But the ones that I've started recently, the recruiting firm, um, in the United States recruiting firm and, uh, the Performance Marketing Agency. Yeah, it's, ah, a minority equity stake for the operating partner. A lot of times there's a revenue share as well. Revenue share aspect. Sometimes there's a literal salary to the person who is my operator. It, um, all depends on the risk appetite and the prospects of the business of how we come to a deal. But it's generally an equity share.”

Yong-Soo Chung [00:17:42]

When you think about it, my personal holding company is actually the perfect combination of all four types of leverage - capital, labor, code, and media.

I use code and media leverage to create my businesses. I use social media to build my brand and find customers for my businesses. Then, once my businesses begin taking off, I switch from the solopreneurship model and infuse the traditional leverages of capital and labor to grow them even further.

Finally, once they become somewhat self-sustaining, I find an operator who I can trust to run the business and hand it over to them,

Don't believe me? Well, how about this? My first venture, Urban EDC, brought in 3.3 million dollars last year. I spent LITERALLY ZERO MINUTES day-to-day working on it. All of the day-to-day work was handled by my very capable general manager.

All of my businesses also have GMs, and eventually, I might decide to do the same with First Class Founders too.

The big takeaway for this episode?

Solopreneurs, leverage is your friend. It’s how the rich get rich. Don’t fight it.

And if you care more about maintaining your lifestyle than money, I’d argue that hiring a GM frees up more of your time than doing everything yourself as a Solopreneur.

How do you deploy leverage? Start with digital leverage first… that’s code and media. Then, move up the leverage ladder and work on utilizing labor and capital.

One more thing…

Yong-Soo Chung [00:19:09]

If you want to dig deeper into leverage, I made a special bonus segment just for premium members of First Class Founders. Premium members at this very moment are listening to me giving highly specific and tactical advice on how to better utilize the four types of leverage we spoke about during this episode. I also go into more detail about how to structure your personal holding company.

Want to become a premium member? Go to firstclassfounders.com/join.

Yong-Soo Chung [00:19:36]

Okay, I'm guessing that, right now, you are probably eager to start your own business, set up your own PHC, and start on your journey to your first million.

Well, I have just the right episode for you to check out!

Open your podcast player and go to the First Class Founders page. Scroll down to episode 25. It is titled "How To Turn Your Side Hustle Into a Million Dollar Business as a Creator."

I have outlined a series of seven clear steps you can take to go from having just a side hustle to building a business around it that can earn you your first MILLION dollars.

Line it up next, while I tell you what to expect in the next episode of First Class Founders…

Yong-Soo Chung [00:20:21]

And… that wraps up today's show!

In the next episode of First Class Founders, we speak to Clifton Sellers. Clifton was in personal debt before he jumped on X and climbed his way into one of the biggest ghostwriting businesses on X. Clifton reveals the secrets of what it takes for personal brands to grow on X. This is an episode you don’t want to miss!

If you're a new listener and you enjoyed this episode, you can add YOUR voice to the show by leaving me a message on firstclassfounders.com. You can also follow the show by going to FirstClassFounders.com and clicking on the link that matches your preferred podcast player - like Apple Podcasts or Spotify. 

One last thing before I go, could you head over to FirstClassFounders.com/review and leave the podcast a five-star review, please? A five-star review helps bump the show up in podcast rankings, which helps me get bigger and better guests! I’ll leave a link in the show notes to leave us a 5-star review. Thanks a lot, in advance!

I'll see you on the next episode of First Class Founders.