Leverage advantage

Sy Zhang asks:

"What does the term "leverage advantage" mean? Would you please complement the question with examples on its usage?"

My comments:

Thank you, Sy, for raising an interesting question. It would've been better, though, if you had complemented the question with a usage example of your own. That way, I'd know you were looking for answers by yourself instead of trying to leaving the whole thing, lock, stock and barrel, to me.

But that's neither here nor there now. So, let's get busy.

Leverage advantage is an advantage secured from using a lever.

The lever is the thing that the Greek mathematician and inventor Archimedes wanted to use to move the earth. Educated Chinese readers may not know how to use the word "lever" or "fulcrum" in English, but they all know this Archimedes quote: "Give me a lever long enough and a fulcrum on which to place it, and I shall move the world."

Hence, by extension, leverage advantage comes to mean any efficiency gained from utilizing tools, skills, expertise or experience.

Leverage, both as a noun and a verb, is most useful today in the financial world. An American English term by and large, popularized by rampant capitalism and money-making, leverage refers to the use of various financial tools to achieve greater efficiency in cashing in on one's investment, i.e. making more money on less investment.

Banks, stocks, bonds and other derivative products, favorable industrial policies and so forth are all levers for the businessman to "leverage advantage" to their extra benefit.

In a simple example: Say, you invested 1 million dollars on a project and a year later made 100,000 dollars in profit. That would be a 10 percent net return on your money. However, if you had only invested 100,000 dollars out of your own pocket, with the rest of the money coming from the bank and if, a year later, you had made the same amount of 100,000 dollars in net profit (after paying loans and interests to the bank), you would have made a 100 percent return on your money instead of 10 percent.

What if the project failed? Well, in that case, you would have lost only 100,000 dollars instead of 1 million. The rest is what is called OPM (other people's money). All the more reason for borrowing to spend, a great American tradition that the Chinese are catching on these days like Beijingers caught on fever three weeks ago when a big cold front swept through the city from the north.

Yes, like influenza, money-making and consumerism are the game of the day in this country. I assume young and ambitious people like you, Sy, are no exception. So therefore, learn to use all the tools (levers) available for any leverage advantage that you can get.

And avoid leverage disadvantage. Do that by going with the flow, not against it.