Start with an idea that looks airtight: if I could borrow unlimited money and put all of it into Buffett’s company, then in theory, given enough time, I could earn unlimited money. Berkshire has compounded at nearly twenty percent annually for decades; once compounding rolls, the interest on my borrowing looks like pocket change. This isn’t speculation — this is standing next to history’s most successful compounding machine and collecting.
Where does the arithmetic break?
It breaks on treating time as free. Berkshire’s returns are lumpy: more than once in its history the stock has drawn down thirty to fifty percent — 2008 sits right there. That long-run twenty percent is the average after surviving every one of those craters. Your interest is not an average; it accrues every second of every day. Returns can wait ten years; interest waits for no one. A few years without positive returns and the snowballing interest eats you alive — you didn’t borrow money, you borrowed a countdown timer running by the second.
The more direct layer is the margin call. When the stock falls thirty percent, the lender will not sit with you and discuss long-termism; they will demand more collateral, and if you can’t post it, they liquidate. At the moment of liquidation you haven’t merely lost — you are out of the game. Berkshire did come back, but the comeback no longer belongs to you. Leverage’s real killing power is not that it turns your return negative; it is that it guarantees you won’t survive to be proven right.
Push one step further and the idea hits a ceiling of scale: the world’s pool of investable assets is finite. Pour unlimited money into any single company and marginal returns decay toward the market average. Infinite profit requires an infinite economy to pay it out, and there is only one Earth.
So borrowing infinite money to make infinite money is not boldness — it is a structural error. Compare it with how genuinely successful people place bets: their gamble has a floored downside — the most they can lose is the money they put in — and an open-ended upside — if it works, it becomes a company, an industry. Now look at infinite leverage: unlimited upside in theory, unlimited downside in practice — at the blow-up you lose everything and still owe. That structure is identical to a gambler’s; only the table has been swapped for a brokerage account. Successful people win by making their bets asymmetric; leverage is precisely what hands the symmetry back.
Here is where I land: time was always compounding’s friend, and that is the one thing leverage truly changes. Money can be borrowed; time cannot. And in investing, the final contest is simply over who is still at the table.
