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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.
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