When I was a little kid, we had a toy in our house. It was a bongo board. It consisted of a long

board and a cylinder, and the board rolled back and forth on the cylinder. My sister was two

years younger than me. I was standing on one end of the board. She ran across the room,

jumped on the other end. I flew through the air and broke my wrist.

Hey, it's Kevin Beach, and this is a special archived episode of Akembo.

Of course, it wasn't Marjorie's fault. She didn't mean to break my wrist, but it was a perfect example of leverage.

As Archimedes probably didn't say, if you give me a lever that is long enough and a place to stand, I could move the entire earth.

A lever gives you leverage.

It gives you the chance to exert far more power than you would be able to on your own.

And so leverage has been around for a really long time.

But leverage has been changing our culture just for a few hundred years.

And I think in these times in particular, it's worth understanding

how leverage works and how we got here and what happens when it goes in the other direction.

Back in the early days of corporations, when colonialists wanted to put together ships to go on

long, perilous journeys, one method would be, take your life savings, buy one ship,

go on a journey. If it works, you do well. If it doesn't, you're completely wiped out.

But there's an alternative, and the alternative is to borrow money. When you borrow money, you have to pay it back

with interest, but all the winnings belong to you. So the easiest way to get rich for a very

long time has been in real estate. If real estate prices are going up over time, there are banks waiting in line to loan money

to investors who want to buy real estate. Typically, you could buy some real estate for only 20%

down. That means if a piece of real estate is for sale for a million dollars, you need $200,000

in cash to buy it, and the bank puts up $800,000.

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