The total expenditure involved before the decision whether a product merits further development and promotion or discontinuation is small. The value of becoming the de facto standard in a market is enormous. The huge difference between the sunk costs of product development and initial marketing and the ongoing revenues from a success constitute leverage just as much as does the production cost of a mine compared to appreciation of its end-product, or the strike price of an option compared to appreciation in the underlying security or commodity. In the case of technological leverage, funds committed to new product development are multiplied by a huge factor in the revenues they return when they yield a successful product. Because the multiplier is so large, the consequences of a failure, or many consecutive failures, are of limited economic consequence except in opportunities foregone to attempt the products which failed.
Technological leverage is the economic consequence of the value of information.
Technological leverage translates possession of information into economic value, multiplied by market position and the ability to compound the initial success by delivering follow-up products to the original customers. Inherent leverage always involves a nonlinear price function. In the silver mine case, the cost of production set a floor on the profit curve. A software company with a successful product turns blank magnetic media and paper purchased for pennies into products sold for thousands of dollars by adding nothing but information to them. Technological leverage in the software business stems from the tiny costs of product development as opposed to the enormous ongoing profits of success.