Leverage vs Dependency - a thin line

Leverage and Dependency are two concepts that often intersect in various contexts. Whether in professional or personal life, we often leverage a resource to strengthen our position but also at times find ourselves dependent on the same resource to maintain our position. To define:

Leverage refers to the strategic use of resources or advantages to achieve a desired outcome. It involves maximizing the impact of a particular factor to gain an advantage.

Dependency, on the other hand, signifies reliance on external factors or entities. It implies that one’s success or functioning is contingent upon something or someone else.

Examples of Leverage:

• In finance, leverage can refer to borrowing money to invest, thereby amplifying potential gains (or losses).
• In business, leveraging technology or data can enhance productivity and efficiency.
• In negotiations, using your position or influence to achieve favorable terms is a form of leverage.

Examples of Dependency:

• Software dependencies: A program relies on external libraries or modules to function properly.
• Interpersonal dependencies: People may depend on each other for emotional support, collaboration, or validation.
• Economic dependencies: Countries may rely on specific industries or trade partners for economic stability.

The challenge for us is to realize the curve or the point where we dont become dependent on what resource we are leveraging, or in other words, keep hanging on a resource that generated some advantage or income but rather than leveraging that same resource to create additional source of income and diversify.

• Context matters: Whether a situation represents leverage or dependency depends on the context. What might be considered leverage in one scenario could be seen as dependency in another.
• Degree of Control: Leverage often involves an element of control or choice. You actively decide how to use a resource. Dependency, however, implies a lack of control—it’s more passive.
• Risk vs. Benefit: Leverage can lead to significant gains, but it also carries risks. Dependency, while providing stability, can limit flexibility.
• Balance: Striking the right balance between leverage and dependency is crucial. Too much reliance on external factors can be risky, while excessive leverage can lead to overextension.

An example could be, as in GCC countries, who are some of the largest oil and gas producers. They are dependent on that resource; however, some countries leveraged this position very early and diversified. They not only reformed their policies over the years to ensure that longevity of economy is not just on fossil fuels. UAE stands out and we see now Saudi Arabia opening up the economy to usher a development agenda not only based on oil and gas production.