Wealth Hacks of the Elite: Leverage, Part III

It’s a question I encounter frequently, whether at tech conferences in New York City, during investment meetings for McDonagh Family Office, or even in casual conversations: What really separates the ultra-successful from everyone else? Is it just grinding harder? Innate genius? Luck?

While all those can play a role, the more I navigate the worlds of entrepreneurship, investment, and machine learning, the clearer the answer becomes. The elite, the truly wealthy, understand and master a force multiplier that many overlook or underutilize: leverage.

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I’m Matt McDonagh. By day, I’m an entrepreneur, investor, and machine learning engineer. My firm, McDonagh Family Office, strategically invests in tech-enabled companies, and a significant part of my role involves embedding resource-efficient technologies and data-driven strategies to amplify their value and efficiency. Before this, I spent 15 years in Strategy and Operations, helping companies sculpt their revenue engines using data, systems, and technology. My journey began on Wall Street in investment banking after graduating from Fordham University with a business degree. But the siren song of technology’s transformative potential pulled me towards data engineering and building robust revenue systems within a family office structure.

This path, from the structured world of finance to the constant evolution of tech and private investment, has given me a ringside seat to how wealth is truly built and sustained. It’s not just about what you have; it’s about how much you can control and influence with what you have. That, in essence, is leverage.

The elite don't just work in their businesses or careers; they orchestrate a symphony of different leverages. Think of it as a sophisticated, interconnected system. Financial leverage might get you in the game, but technological, operational, and social leverage are what let you dominate it.

We’ve talked about leverage before. After that, we wrote a popular follow-up that focused on how companies specifically apply leverage:

Here today we are going to break down how these interwoven forces of leverage work. Then we’ll look at what happens when you layer them together efficiently.

Financial Leverage: The Accelerator

This is often the first type of leverage people think of: using other people's money (OPM) to amplify returns. My early days in investment banking were a masterclass in this. We structured deals, raised capital, and helped companies acquire assets or fund growth far beyond what their own balance sheets would allow.

Financial leverage is about access to capital. This can come through traditional borrowing (loans, lines of credit), equity investment (venture capital, private equity, public markets), or even astute management of existing resources to free up capital for new ventures. When McDonagh Family Office considers an investment, we're not just injecting our capital; we're often providing a financial foundation that allows a promising company to access further funding, make strategic acquisitions, or invest heavily in R&D.

For instance, a company might have a brilliant software product but lack the funds for a large-scale marketing push. Financial leverage, perhaps through an investment round, allows them to hire a sales team, launch advertising campaigns, and rapidly scale their customer acquisition. The goal is for the returns generated by this expanded activity to far outweigh the cost of the capital.

But financial leverage isn't just about borrowing vast sums. It’s also about smart capital allocation. It's choosing to lease equipment instead of buying it outright to preserve cash flow. It’s structuring deals so that payments align with revenue generation. It’s understanding tax efficiencies. The elite understand that capital is a tool, an accelerant. My background in finance, combined with my current focus on data engineering, allows me to see both sides: how to acquire the capital and how to ensure it’s deployed with maximum informational advantage for the highest possible ROI.

However, financial leverage alone is a blunt instrument. It needs to be wielded with precision, and that’s where other forms of leverage come into play, particularly technology.

Technological Leverage: The Multiplier