← The Diary Of A CEO with Steven Bartlett
The Diary Of A CEO with Steven Bartlett
Money Making Experts: This 3-Step 'Offer' Formula Makes $20k Per Month! Alex Hormozi, Codie Sanchez, Daniel Priestley
02:33:37
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- [00:01]
Alex Hormozi
Jamie Lee Curtis and Lindsay Lohan are back to switch things up in Disney's Freakier Friday toy range. Yes, it's an absolute riot. And the only movie that can be.
- [00:10]
Cody Sanchez
Described as so much weirder than the last time.
- [00:13]
Alex Hormozi
What last time? It's the Frequel.
- [00:15]
Daniel Priestley
You ready?
- [00:16]
Alex Hormozi
We've been waiting for that absolutely.
- [00:18]
Daniel Priestley
Slays.
- [00:19]
Cody Sanchez
What deeply out of touch old person.
- [00:21]
Daniel Priestley
Came up with that?
- [00:22]
Cody Sanchez
You did.
- [00:23]
Alex Hormozi
Wow. Don't miss the comedy event of the summer for all ages. Disney's Freakier Friday now playing only in theaters. Get Tickets now.
- [00:28]
Steven Bartlett
Rated PG.
- [00:29]
Alex Hormozi
Parental guidance suggested.
- [00:30]
Steven Bartlett
I've got three boxes here. One of them contains $1,000, one of them contains $10,000, and one of them contains $100,000. And you three are the Avengers of entrepreneurship on the Internet. So you're going to tell me what you would do with that amount of money to build a scalable business.
- [00:45]
Alex Hormozi
So do I get to give the money? Is that how this works? Okay, so I would. Three highly successful entrepreneurs with three very different perspectives. This is the ultimate masterclass in creating and scaling your businesses to make millions.
- [00:58]
Cody Sanchez
There's two paths to making money quickly if you don't have any. And the first path is go find the best entrepreneur and go work for them. Learn as much as you can.
- [01:06]
Daniel Priestley
Totally agree. Like, Kim Kardashian was Harris Hilton's assistant and she learned the playbook for being famous and then she took it to a new level.
- [01:12]
Cody Sanchez
And then the second way is high risk but highest reward. Go do it yourself.
- [01:17]
Alex Hormozi
And the first business that you start, you're going to be learning the game of business even more than you're learning the business that you're doing. Things like you wait eight seconds after you ask someone to buy you close 30% more sales.
- [01:26]
Cody Sanchez
And there are actual studies now that show that if I'm a woman, you make more more money. If you do one thing, you wear makeup, which is wild.
- [01:34]
Steven Bartlett
And what about making content, building a.
- [01:36]
Daniel Priestley
Content empire that builds your business. This is brand new to a lot.
- [01:39]
Cody Sanchez
Of people and so a lot of creators online don't think about how do I monetize on top of this, right?
- [01:44]
Alex Hormozi
And I can name some TikTokers with 50 plus million followers that have had failed launches because they have views but they have zero influence. And in order to create influence, there's four things. So number one is, okay, so let's.
- [01:55]
Steven Bartlett
Go on to simple actionable frameworks.
- [01:57]
Cody Sanchez
So I have a framework in order to raise money.
- [01:59]
Daniel Priestley
I have a framework for pitching and.
- [02:00]
Alex Hormozi
I have one that can and increase sales by 20 to 40%.
- [02:03]
Cody Sanchez
And then if you want to know if your business is going to make you money or not, we use the.
- [02:06]
Alex Hormozi
Moat strategy and there's a lot more.
- [02:08]
Steven Bartlett
So let's go through all of this. Daniel, Cody, Alex, I feel like I have waited a long time to have this conversation with you three because in my mind, you three are the avengers of entrepreneurship on the Internet and for very different reasons. You do very different things, you have very different perspectives, you run very different businesses. But that is why I've been so looking forward to this conversation. Before we get into some of the technical stuff and really specific topics, I wanted to start with a more broad question. You're all entrepreneurs, you all speak to and educate millions of entrepreneurs on your own channels, in your own rights. And the question I wanted to start with is from a psychology perspective and a mindset perspective, what does it take to be an entrepreneur? And can anyone listening to this right now become an entrepreneur, a successful entrepreneur? I'm going to throw that question across the table straight away to Alex.
- [03:08]
Alex Hormozi
So starting with the second question first, can anyone become an entrepreneur at the basic level if a kid can go around the neighborhood and say, hey, I will mow your lawn or I'll rake your leaves or I'll babysit your kid in exchange for money, Fundamentally it's entrepreneurship if we're just taking it at the most basic level. And so what prevents someone from doing that? Basically, if you can get a job, then you can be a self employed entrepreneur. And so I say that as like my baseline number one from a behaviors perspective. Then you get into, okay, I want to learn about the game of entrepreneurship. And then there it's basically a lifelong journey of how much leverage can I apply to this at all pieces of the business? Because even going around knocking on a door and saying, hey, can I be a babysitter? You have all levels of all functions of the business still exist there. They're just done a lot of times simultaneously and at very low leverage. So you have some level of advertising, you went up, you knocked on a door, you have some sort of presentation that you give in exchange for money. And they agree, okay, great, we have a selling component to it, then we have some sort of delivery that's going to happen, which is like I might show up with my human body and then take care of this other human body and make sure they don't die and probably have a couple other things that I might clean the house while I'm here as a little value add. And then fundamentally it's like, that's a complete cycle of exchange. And then maybe they leave a review because you start to have a website, but that starts to create leverage and then you expand from there. But I think fundamentally, at the most basic level, that is entrepreneurship. And then everything else is just more.
- [04:22]
Cody Sanchez
Cody, you can be an entrepreneur if you're willing to tolerate pain. I think being an entrepreneur is largely a byproduct of three things. One, being how much pain can you tolerate. Two being how consistently. And three being can you take the consistent pain that you have and find a way to decrease it, which just means can you learn from the things that you've gone through as an entrepreneur? By and large, it is a hard path because at the end of the day, you can't blame anybody else. And there's a scoreboard constantly behind you. And so you, if you have a job, it could be the boss, it could be the other decisions, it could be somebody else's fault. But if you are the entrepreneur in charge, there's nobody else. And the thing that I love about entrepreneurship, and I think all entrepreneurs love, is you either win or you lose. In a lot of ways, it's a zero sum game, and it's measured predominantly by do I grow my profits and revenue in the way that we set up the system today? So, yes, I think anybody who is willing to tolerate pain can become an entrepreneur. And I think it's actually okay to have pain in your life and you should seek it a little bit. Same thing as the gym. We don't go in there and think it's going to feel great to have a workout and have our muscles literally rip apart in order to rebuild. And yet that's what it takes in order to get more fit. And so I think part of the game of entrepreneurship is just like, can we increase pain tolerance over time consistently? And once you do that, then the things that used to be hard today you'll look back on and you'll sort of chuckle because they will not be hard any longer.
- [05:53]
Steven Bartlett
So there's various types of pain in my life that I'm not willing to tolerate. And there's other types of pain that I've like volunteered to choose over long periods of time. So I'm trying to understand, and this is just like a question to all of you. We'll get into Daniel straight after is, how do I know what pain is worth tolerating and over a long period of time? Cause some pain is not good pain, some pain is not worth it. How do I know what pain is worth it.
- [06:17]
Cody Sanchez
Well, I think that's what comes into that third level of you have to be able to be on a journey to decrease the pain, which is learn. Like, that's what learning means. Like you try something, you touch the stove. Once you realize that the stove burns you when you touch it, you don't do it again. If you continue to touch the stove continuously over time, then you haven't really learned. But, you know, I mean, there's lots of different types of pain. There's acute pain, which is like you feel it in this moment really, really deeply and intensely. And that in entrepreneurship, things like, I've completely run out of money, nobody is going to fix this problem, I'm the last one on the line. And then there's a type of pain that is low grade pain. So kind of consistent over time. I have to work harder. Every single Friday there's a, you know, a paycheck that I have to give somebody else that's sort of consistent pain. And I think in entrepreneurship we should assume you're always going to have some version of low grade pain. I had so pain.
- [07:08]
Steven Bartlett
I had pain when I worked in the call center and I have pain now.
- [07:11]
Cody Sanchez
Did you have acute pain when you worked in the call center?
- [07:13]
Steven Bartlett
It was just drudgery and boredom.
- [07:15]
Daniel Priestley
So low grade, you were out of alignment. So when you have an origin story, a mission and a vision, and you feel an alignment between your past, your present and your future, and you feel excited about the future that this is working towards, then the pain becomes meaningful. And what you're looking for is pain that is in alignment with origin, mission and vision.
- [07:32]
Steven Bartlett
So meaningful pain, Meaningful pain. What do you think? What do you think about that? Same question about can everybody be an entrepreneur and what does it take from a psychology perspective? I'm asking this question because there's people at home that are going to wonder. They're in a at the moment, they're pondering a lot. They see people like you three who seem like you're a million miles away, but you didn't start a million miles away. So what does it take to be successful at the highest level in the.
- [07:54]
Daniel Priestley
Comments of every one of these videos is not everyone can be an entrepreneur. Not everyone wants to be an entrepreneur. Interestingly, the idea of a job is a very recent innovation. If you take a long view of history, jobs really only came into existence around the 1850s. The idea of a wage. Prior to that, people got paid for tasks and essentially you completed a task, you got paid all sorts of levels of Society. And that gave rise to very entrepreneurial classes of people. You had to be quite entrepreneurial prior to the 1800s. So it's definitely built into us. I personally think that the human brain has three kind of levels. The base level is very concerned with survival and it's fight, flight, freeze, freak out. The next level up is just interested in status quo and it's interested in repeating the past and doing what's safe and just doing what's comfortable. And then there's this other part of us that is a visionary and it's interested in exchange, it's interested in empathy, strategy, love, compassion, adding value to others. And it's a higher mind, it's a higher way of thinking. Unfortunately, what happens in most of society, especially with a lot of social media and especially with the way we were raised through the schooling system, is that we keep just getting dragged back into the autopilot and the reptile brain, as opposed to being able to have a little bit of time for the visionary. And it's that visionary mind that makes you feel very entrepreneurial. I have seen people who have never had a business, they've never been entrepreneurs, and they get around a group of entrepreneurs and the buzz and the energy from that group of entrepreneurs becomes contagious. And they start opening up this other part of their mind and they go, oh, wait a second, I've got an idea, I could do this. And they start thinking about what's possible. And I've watched people go from I could never do this to I could totally do this in a day.
- [09:41]
Steven Bartlett
Alex, you wrote something down there.
- [09:43]
Alex Hormozi
It was when you were talking about what kind of pain is there? I think there's a classic example of when do I push and when do I pivot? And so pivoting comes from, at least from my perspective, where you have an underlying assumption that your original thesis was based on that has been disproven. So if I say, hey, I want to start a doggy tooth brushing business, there's an underlying assumption that people are willing to pay for their dogs to get their teeth brushed.
- [10:11]
Cody Sanchez
Right?
- [10:12]
Alex Hormozi
And within the context of, like, I have presented this in a way that follow the normal persuasive taxes of this is the benefit, these are the prices that I would need to charge in order to make a profit, et cetera. If I find out that no one cares about this, then that would be a moment where I'd say, I don't think you should push harder. I think you should consider pivoting. The pushing scenarios is typically when your Underlying thesis is still true. You have not invalidated that. And so you just haven't figured everything out yet. And most of that is where the pain comes in that Cody is referencing. Now. I think the third door where it gets really tricky is that there's opportunity cost. And I think this is where most entrepreneurs get trapped, and in some ways, rightfully so, because it's very, very hard to build a successful restaurant that's local. And if you want to be a trillionaire, it's probably not the way to do it. And so what happens is you develop skills, developing your first opportunity. You figure out how to do doggy toothbrushing. You find out that people don't actually care as much about brushing their dog's teeth, but they do care about their dog having good breath and being clean and groomed or whatever. And so you pivot a little bit and then you're doing this thing, but then you have these big aspirations of being a trillionaire, and you're like, I don't know if I can turn this into being a trillionaire, but I did learn how to market, I did learn how to sell, I did learn how to manage. And then you think, okay, well, should I start an AI startup? You know what I mean, as my next thing? Because I did develop all these skills, so now what do I do? Right? And I think a lot of people are maybe one step later, entrepreneurs are in this camp where they're like, okay, I didn't understand the world as well. Now I understand different opportunity vehicles have different returns, but also risk associated with them. All of them require pain and work. And so if pain is basically, I can only interpret pain as 1 to 10. And 10 out of 10 restaurant days will still suck as much as 10 out of 10 AI software days. But this one has a billion dollar payout, and this one has a $2 million payout. Well, if I'm going to suffer either way, I might as well do the thing that gets me the best return, which is good entrepreneurial thinking. But then so is focus, and so is longevity. And so then what do you do? Right? And so. And so I just thought about that from a pain perspective, because you have a lot of times the pain happens from insufficient volume. Like, you think that this business isn't working, but it's usually because you're not working enough. And when I say that, I mean doing enough in it. So it's like, hey, I knocked on 20 doors and no one wants this. It's like, well, obviously with 20 doors, you'll have no fucking idea if somebody.
- [12:26]
Steven Bartlett
Wants it or not.
- [12:26]
Alex Hormozi
It's like, knock on 2000, you'll probably get a better idea. But most people have never had rejection before. And so they think 20 is a sufficient amount. Or like, hey, there's no good. There's no good. Engineers in insert city. It's like, well, how many did you interview? You'd keep talking and eventually it's three. And you're like, okay, well, no shit. I mean, if you're going to marry somebody, do you think you'd only go on three dates and then just say, I guess I have to pick for one of these? It's probably not a good idea? And so I think the same idea of insufficient volume is one of the things that can create pain for entrepreneurship. You have opportunity cost of like, okay, well, now there's. The grass is green over there. Should I stop what I'm doing now? And then you have kind of underlying theses, which. Absolutely. If you have your underlying thesis for the business that is disproven, then that's one of those times where it's probably worth pivoting. But for anybody who's listening, who's a newer entrepreneur, my ask to you would be, I probably wouldn't start an AI startup caveat as my first business. And what I mean by that is, as in building an actual tool. Now, if you want to implement AI using other people's tools, that's a different thing. But the first business that you start, you're going to be learning the game of business even more than you're learning the business that you're doing. And so then once you learn the game of business, then you start to see again, you start to see more clearly the opportunities that exist.
- [13:37]
Steven Bartlett
The next step for me in what Alex said was about how do I know which idea is worth pursuing. Alex was saying there, which I completely agree with, is that the first thing you do actually teaches you the fundamentals of how business works. Team building, marketing, promotions, customers, customer service. But for those people that are sat at home and they have an idea and they're mulling whether that is the idea worth pursuing. Is there a framework for knowing if it's a good idea or a bad idea?
- [14:01]
Cody Sanchez
What we use, that comes from private equity. If you want to know if your business is going to make you money or not or investable or not, we use the moat strategy, which is basically M stands for margin. So you want a business that actually makes you money, doesn't just generate revenue. And so a good business typically has at least 15% net margin. So that's the money you put in your pocket.
- [14:20]
Steven Bartlett
Right, so that's profit.
- [14:21]
Cody Sanchez
Yeah, yeah, exactly. And then the O stands for operations. So operations being can this thing actually scale over time or will I really have a job? Not at all. Business.
- [14:30]
Steven Bartlett
And what's the difference there?
- [14:31]
Cody Sanchez
The difference between the two is if you have a job, not a business. That might be for instance, without AI if my entire business was just me talking continuously to camera and I'm an actor, it's really hard to turn acting to a business. Right?
- [14:43]
Steven Bartlett
You're trading time, right?
- [14:46]
Cody Sanchez
You're still an employee, you're just self employed as opposed to a business owner. And there's a real difference between a CEO and a self employed person. And then the A stands for advantage, which is do I have an unfair advantage in my business? I think over time all arbitrage windows close. So if you don't have some sort of advantage, it's hard to stay in business over a long time. An advantage might be I have distribution because I have social media so I can get more eyeballs. I can figure out how to talk to 2,000 people quickly because I can do it via video as opposed to knocking on tolling doors. Or it could be logistics, or it could be 10 years of experience in an industry. And then the T stands for tam. Total addressable market, which goes back to the doggy teeth issue, which is is this a real market that enough people are interested in that I can build a business that is big enough for me? And to Alex's point, I don' Everybody should try to play the trillion or billion dollar game. In fact, I think it can be quite miserable to strive for billions. And so the total addressable market for your local fruit stand in your community may be a perfect amount of income for you, but let's actually know what amount of income is reasonable for you. And the cool thing about entrepreneurship in like today's age, the data is available everywhere. And so in private equity you would take this model like that. So you'd go moat, I take them and for each one I rank em one to ten. And businesses. So margin, operations, advantage, total addressable market. Each one of them, a ten is perfect, A one is the worst you could have. And businesses that are better than 30 across all four, well that's a fund it, that's a fundable business model. Businesses that are less than 30 but more than 20, that's a fix it. You've got some problems in the model and businesses that are less than 20, that's a fleet. It this is probably not right for you and a hard business to do.
- [16:32]
Daniel Priestley
I think it's not just the people who are looking for a new opportunity or people who don't currently have a business. I personally think at the moment, every single person on the planet who has a business should assume that their business is on borrowed time because AI is going to disrupt everything. And in that disruption, everyone has the opportunity to rethink whether they want a different opportunity or whether they want to pivot. It's the perfect time. I look at simple things when I'm thinking about is it a good opportunity? I think every good business is built upon somebody's case study. So when I look at not just businesses as a thing on their own, I think businesses as a thing on their own have to be taken in consideration with who's the entrepreneur. So your entre like something that's a great opportunity for Cody may be just a disaster for me. And likewise. So I'm looking at the background of the entrepreneur. Do you have a case study to leverage? Do you have knowledge? Do you have a network? Do you have resources? Have you got a reputation in something? Because those are the things that we can then leverage. And then I'm just going to have a look at three little things. I'm going to say this idea that you've got going forward, does this address someone's pain, right? Is there some sort of problem that this solves and that we could measure that, right? Because people pay to move a metric. They love to move some sort of a number. So is there a pain that we can measure? And can I take people out of that pain based on my story, the next thing is, does that type of person who I'm going to solve that for, do they have money to spend? Because ultimately 60% of all the money is in the top 10%. So the top 10% have about 60% of the available disposable income. So groups that tend to have money is business owners, executives, people who've got accumulated wealth, you know, so you're looking at like some sort of indication that you're selling to a group of people who have money underneath that top 10%. Amazon's already got them, McDonald's has already got them. Like that's a saturated part of the market. You were looking for that top 10% who've got disposable income. And then the final part is passion. Like, are you passionate about this? And my definition of passion is a willingness to suffer. So it's not, do you get joy from it, not are you super happy from it. It's are you willing to suffer for this? Are you willing to have delayed gratification? Would an objective third party who looks at your behaviour, who looks at the way that you show up in the world, would they agree that you seem to be willing to push through difficult times in order to have this? So those are some of the conversations I'd have with anyone and not just people who are starting out, people who have already got $100 million business.
- [18:57]
Cody Sanchez
It's like the adult marshmallow test, basically.
- [19:01]
Alex Hormozi
I think Cody had a great framework in terms of thinking about this from an investing perspective for the people who are considering starting their first business. I like the pain passion profession angle of typically it'll be something that comes from a personal pain that you overcame. Whether it's you had an eating disorder or you have kids who have allergies and you figured out how to pack lunches or you figured out how to store stuff for twice as long because some unique thing that you retrofitted a cooler with, whatever, some passion which is just a hobby that you're deeply interested in or it's a profession. So something that you already currently do. In a way, this is I think one of the easiest self entrepreneur self employment path is just going from employed to self employed, doing the same thing that somebody already pays you for. So you don't need to worry about market risk of I wonder if accounting is still going to be desired by other people right now because everyone's so interconnected like remote work and being able to be fractional like many people can start kind of mini consulting businesses doing. Because a lot of businesses and entrepreneurs are very bad at allocating resources. And so they have a lot of full time employees that are working 20% of their effort and still keeping their paycheck. And at the end of the day they do enough to keep their job, but not so much that they are nearly at their full discretionary effort. And so all of a sudden you think, okay, well I could probably do the same work for half the price and the entrepreneur would be willing to pay it, but I could do that same work for half the price for five times the people and make three as much and do it on my own time. And so that becomes, I think a great foray into entrepreneurship. Now what do you have to learn there? It's like, well, you already have delivery down because you already do the job. You just have to learn how to promote. Just like how do you reach out to people and ask Them if they want what you have and then get them to trade your money for it, that at least takes half of it out of the equation. And almost all three of those pain, passion, profession, you already have kind of the back end. Like you have the pain, you figured out the thing, the passion. You've already spent all this time loving this thing. So you've already done a lot of the work and research. And so really you just need to learn the front end, which is like, how do I promote and how do I sell, how to get someone to give me money for it. And then in terms of how much money you make, I think Dana had a great perspective of sell to the rich. They're the ones who have the money. And if you sell to rich people, you get to sell at rich people prices, which is more fun. I'll give you a simple example. I have a CRO company that we do conversion rate optimization across our sites in our portfolio. And so if that company works with an E commerce business and they add 10% to top line and goes from 1 million to 1.1 million, they make $100,000 of value. If they work with an E Commerce that's doing $100 million a year and they do the same exact work and they add 10%, they add $10 million a year. So it's 100 times more in terms of value that's being created. And so fundamentally, you have the value to create your ability to negotiate a slice of that pie, how unique that is. As in, for example, I could have plenty of sales guys who are like, hey Alex, I could sell millions of dollars of stuff for you. I'm like, yeah, but so could every other salesperson. So you have significantly less negotiating power even if you have the negotiating skill just because many other people can do it. And then the final component is risk. And that's the one that I would multiply everything by, which is, how much risk do you take on.
- [21:54]
Steven Bartlett
People often say this idea of selling to the rich, but as you explained it there, what it actually sounded more like is sell to the person who's going to yield the most returns from your skill. And I reflect on this because I spent the first half of my career doing social media marketing. I think I said this when we sat down, Cody, that I used to work with fast fashion companies or fashion companies, and the net return for the client of me selling them more dresses was tens of thousands. I then left that business and spent two years working in psychedelics in the biotech industry, where if this was around The Meme stock thing, where if they could galvanize people on social media to care about their stock, the upside, the swing was billions of dollars. I was the only employee in this biotech firm that ended up listing on the NASDAQ for $3.2 billion. And so their remuneration to me for the six months contract was many, many, many, many, many, many, many millions. Yeah, because they made billions. So for me, they thought they were ripping me off. And I think about, funnily enough, when you put the same company on different stock markets, the company is worth wildly different. And I think the same about our skills where. Think about the stock market where you're trading your skills.
- [23:06]
Daniel Priestley
I've got a small example of that, really small example. There was a guy who we worked with who was an occupational health and safety consultant. And inside the workplace, in a typical office, he would charge a couple of grand a day to go in, and it was about 10 days, so about 20 grand to do an occupational health and safety. And I asked him the question, what is the most dangerous workplace you've ever worked in? And he says, well, there's this type of manufacturing that has lasers, freezing stuff, boiling stuff, lava, you know, sharks, you know, the whole thing. Right. Whatever it is, and not actual sharks, but you get the idea. And I said, do you know how to solve the problems of that workplace? And he says, yeah, I absolutely know how to fix those problems. I said, why don't you position yourself and why don't you run a campaign that you're one of the best in the world for that and that you're actually going to just run a campaign around that? Within a year, his day rate had gone to 20,000 a day from 2,000 a day, and a typical engagement had gone up to 400 grand. Mainly because he went from, you know, the same skill set, but he applied it to a much, you know, more valuable environment.
- [24:12]
Steven Bartlett
Podcasting is somewhat similar, you know, because if I podcast in the UK, the amount of money I get per view from YouTube is half versus if I do the same activity, the same amount of effort, the same amount of hours. In the United States, the platforms pay me double for the same amount of views. And I think many of us are like, trying to get a pay rise from our boss or whatever, but actually thinking about, are you trading your skills on the highest return market is a great way. I used to hire writers at my old company, and those writers would be paid, you know, 30, 40, $50,000, whatever it was in the UK when I was working in Biotech and we were looking for someone that could write about biotech. It was a quarter of a million in the salary. It was five times more for the same fundamental skill of writing.
- [24:55]
Cody Sanchez
I think that a lot of times when you're starting out as a brand new entrepreneur, it's scarier to sell to rich people. You're like, I don't know rich people. I'm not a rich person. I'm going to sell to my friends. That is very normal. That's the people that you have the closest proximity to. But the problem is, is that means you have to play the volume game. And the volume game is actually really hard. It's hard to get a lot of people to buy your thing. Incredibly difficult. It's actually much easier to get a few rich people to buy your thing. And so, you know, we had this home inspection company and I didn't know it at the time, but he was telling me they were having like major cash issues in their business. And I could kind of tell, because when an entrepreneur is under stress, like you can sort of see it, you know, it's a visual thing too. And he was about 45 days away from running out of cash. And when I was sitting down and talking to him, I was trying to understand his business. Home inspection has been around forever. It's a normalized business. This business works, it functions, it has good margins. It's a roll up for private equity. The business model is not the issue. So what was the issue? The issue was their clients and their pricing. So he was trying to be the home inspector for everyone at a lower price point. And what does that mean? It means it was actually really hard for him to advertise because he wasn't niching. He was competing with all of the major players and he had very little margin because he was competing for people who couldn't afford very much in their home inspection costs. We made one change, which is we just said in front of his business name and in all of his ads, luxury home inspections instead of just San Diego home inspections or whatever city he was in previously. And that one change increased his margins by 45% and they saved his business. He didn't do more volume, he didn't hire more people. He didn't get smarter, he didn't get better, he just sold to rich people instead. And because that increased the surface area that he was covering, so each house was like, I don't know, thousands of dollars instead of a couple hundred bucks to inspect, his business was saved forever. And so I think protecting your Profit is so crucial when you start a business and nobody tells you that because it feels safer to sell things cheaply to people who don't have very much money. But there's that old adage which is try to work with a $50 client and say I need everything under the sun for this $50 I'm going to give you. And then go to a $50,000 client and they'll say wire sent. And so true in the beginning go for the 50,000. And the last thing I'll say on that is also when you're a young gun entrepreneur, a lot of times people who have money, they got there through business, nine times out of ten they see themselves in you as a young hard worker. You can often get away with things when you are young, working for somebody who is rich and sees themselves in you. Especially in service businesses that you just can't at volume when you're selling to people that really need that last dollar. And so I think that's why most businesses go service based business. You trade your time for money in some sort of way, then you productize the service so now you make the service so other people can run it too. And then finally you turn it into technology software as a service. You increase your margin at every single one or your profit at every single one. But they're the same business. You're just smarter, you're a higher level entrepreneur when you're able to create tech around it. But really all tech is is process at. And so it sounds scary when you're just starting out, but it's really just the difference between 10 years and entrepreneurship.
- [28:09]
Alex Hormozi
And learning and not I think when you're starting out a lot of times you sell out of your own wallet to Cody's point. So it's like you have no dollars in your wallet, so you assume everyone else has no dollars in their wallets either. And you're so afraid of getting rejection that you continue to lower the price until you hear people say yes. But just as a benchmark for people who are starting out is that usually you're appropriately priced. When 7 out of 10 people are saying no, that's about the appropriate price. So if I see a business and they're doing 80% close rates, as in like 80% of the people they talk to say yes, they usually have a double or triple in pricing just sitting there. If they're at like 60% close rates, they usually have a one and a half to 2x price increase that's sitting there. If they're at 40 to 50, they've got a 50% price raise in there. And if they're right at that 30, ish, 35%, then they're usually appropriately priced. And if they're at 20, they just need to learn how to sell better. But fundamentally, I say this because usually in the beginning of entrepreneurship, you're so afraid of hearing no, but the reality of it is that you need to be hearing no more than you hear yes. To know that you're being appropriately priced. Because way back in the day, I had a gym and I had. I can't remember how many members it was, but I said, that's it. And I decided to triple my prices, which is a pretty big move when you have a recurring membership base. And so I gave everyone a trial of the new level of service I wanted to give. I wanted to go from large group to semi private. And I tripled the price alongside that, and I lost one third of my customers. But I had two thirds of the people at three times the price. And so I made two times the revenue, and I cut my costs by two thirds. And so I made a lot more money.
- [29:47]
Daniel Priestley
And it was probably better for your clients as well. It was a more exclusive experience, 100%.
- [29:51]
Alex Hormozi
And it was like, right as I was beginning to learn how, like, pricing worked with profit in a business. And by doing that tripling in price, it didn't like, like, triple my profit. It did way more than that. And so when you have a 10% or 15% margin business, like Cody's saying, if you actually can pull off a double in your pricing, it'd be a 6x or 7x increase in profits. So there's a lot more sensitivity to that price number. What's interesting is that it's really just like a lot of people are like, how do I raise my price? It's like you do the exact same thing you normally do, and then right when you're about to say the number, you just add a zero and then you just act the same. Dan Kennedy had this great quote. He said, go as high as you can without cracking a smile. And I think that's usually a pretty decent place to start.
- [30:30]
Cody Sanchez
Yeah. And if nobody is giving you pushback on pricing, that means you're too cheap immediately. I mean, value metrics, I think, are so listen, the thing is, if you're a serious business person, you want to make more money, pricing is going to be really interesting to you. If you're not a serious person wanting to make a lot of money, pricing seems like such a Boring conversation. This will never go viral on the Internet except for people who actually are in the game of business and they understand that pricing saves people, saves businesses. And the thing that I learned that I thought was, like, wrong at first, and I'd be curious if you guys were the same. I thought it was wrong to charge different people different prices. I was like, no, no, no. Everybody gets the same price. That's the right way to do business. And then I realized there's something called value metrics, which is basically, your prices should be a representative of three things. Usage. So does somebody use this service a ton? Then you should charge them more. Do they have a lot of users? Do lots of people use it on their behalf? Or then finally, value. How much value do they derive from it? Do they a ton of money? Can they have some sort of quantifiable return? And if you're charging everybody 90 bucks a month for whatever your service is, you are wasting a ton of money from a segment of your clients that would pay you way more.
- [31:40]
Steven Bartlett
Like Typeform is a good example. I started using Typeform, started using it myself. They charged me $50 a month. Then I started running tens of thousands of surveys through there, and I put my whole team on there. Now I'm paying $1,000 a month. It's the same fucking tool. Yes, it is, but I'm using it way more. And I've got more of my team using my account as well. So they're charging me one over $1,000 a month.
- [31:59]
Cody Sanchez
And they only had to acquire you, which is amazing. So from acquiring one person and your cost of good or their cost of goods don't escalate at the same rate at all. So that's how these SaaS companies get this 80% margins.
- [32:11]
Daniel Priestley
That's it. When you look at this little pyramid of customer segmentation, you get 1% of people who have 15% of the budget, 9% of people have 45% of the budget. 90% of people combine 40%. Right. So when you actually break that down, you have one person willing to pay 15 grand, you have nine people willing to pay five grand each, and you have 90 people willing to pay 445 each. So you are almost always better off going. I think the best place for most small businesses to go is that 9%. And the reason is the top 1% typically shop on pedigree. They want to work with the best businesses out there. They want to work with the ones who have won awards and the ones that have been around for a long time through Relationships. And through trusted relationships. The 90%, they shop on price. They have a fixed price and they only want to shop on that price. The 9% shop on passion. They want to follow someone who's an interesting, who has an interesting new take on things, who's putting together a group, who's done some education or entertainment around it. So this 9%, I would call that the affluent niche. And that affluent niche is really a good place to start.
- [33:17]
Steven Bartlett
And that 9% are the ones that are closest to moving into the 1%. So you can grow with a client over time, which we saw a lot.
- [33:23]
Daniel Priestley
You could help get them up to the 1%, and then they'll take you and introduce you to all the others.
- [33:27]
Steven Bartlett
This was one of the really fascinating things for me when I was running a marketing business, which is. I think you referenced this, Cody, which is when I started the company, I was working with founders who had a 10k budget. And the amount of times they would call me because of that 10k budget, because that was do or die for them. And then when we signed Uber and Coca Cola and Samsung, the budgets are massive. And they call me less, they sign things up quicker, the meetings are easier, life is easier. And that's just one of these sort of interesting phenomenons with client services, I guess. And service businesses generally is the bigger the budget. Typically it requires the same or less units of effort to keep them happy than someone whose life is on the line because it's their five grand out of their own pocket.
- [34:11]
Alex Hormozi
I think part of that you earn too, as an entrepreneur, I think, I mean, I'll speak for myself. You start out selling way too cheap because you also need the money. Because as much as it's like a nice. It's very comfortable for me to say, like, yeah, you need to add a zero to your price tag. If I don't get paid for the rest of my life, it doesn't matter. And so I have a lot of leverage. And people can feel that.
- [34:32]
Steven Bartlett
That's really interesting.
- [34:33]
Alex Hormozi
Right. Whereas I mean, this is also like, if you behave as if. Right. If I behave as if I have a significant amount of money, then I tend to attract people who are going. Or basically somebody else who also has a lot of money will recognize that behavior and say, okay, this guy's a player there. And so then they'll be more willing to do business with me. Now it's tougher when you don't have that and you present that way. Right. Which is. So I think that a lot of this kind of does become Earned. Because either you're faking it, which is not my recommendation, or you just do a decent amount of volume and you realize you're like, you know what, I can't charge $99 a month for this. It doesn't make sense for me. And then you have a different level of confidence going into this, where you just look at somebody like, I just can't do it for that price.
- [35:07]
Steven Bartlett
That's the word confidence, isn't it?
- [35:08]
Alex Hormozi
Yeah. Well, that's how I had to find it.
- [35:10]
Steven Bartlett
Yeah. And how does one build that confidence or portray that confidence when really they don't believe it themselves?
- [35:16]
Alex Hormozi
You outwork your self doubt, right. You do so much volume that you get bored of it. When you can basically train out your affective response or your emotional response to a given activity, then at that point I would say you are ready. And so whenever I hear somebody's like, how do you get rid of nerves? I was like, you're just not. You haven't done enough times until you're bored and you hate it. At that point I'm like, okay, now you're ready.
- [35:36]
Steven Bartlett
Is that what self belief is to.
- [35:39]
Alex Hormozi
To me, yeah.
- [35:40]
Daniel Priestley
There's two types of confidence. There's a confidence that comes from repetition and I think it takes courage the first 30 times and then you get a little bit of confidence and then it takes courage and then you get confidence. But I think it's like 30 little blocks of 30 repetitions and then you get rewarded with a little bit of confidence upgrade. That's one type of confidence. There's another type of confidence which is an abundance of options. So let's say you run a lead generation campaign and you want to get 10 clients and you're hoping to sign up 10 clients and 1,000 people respond. You end up with this with or without you energy. And the with or without you energy is, I'm going to be fine with or without you. I'm going to definitely make my 10 sales. I've got a thousand leads, I've got 10 sales I can make. So therefore it's out of balance.
- [36:23]
Cody Sanchez
I go back and forth on this because the good thing about today actually is I think people do less than ever, but think that they do more than ever. Entrepreneurs. And so we have a lot of mental masturbation that goes on. I've thought about this a lot, I've really pondered it, I've wondered about this, I've worried about it, et cetera. Right. I've watched all these videos, I've consumed all this stuff. But I've actually done nothing.
- [36:43]
Steven Bartlett
Keep watching the videos.
- [36:46]
Cody Sanchez
Like and subscribe. But you know, if you take the quantity advice, then what you do when you try to go get a job, let's say whether it's a job that, that you have in your business or you're trying to get an actual job, then you just go and you apply to 15,000 of them. I actually think you'd be much better off by applying to five and doing as much work as it would take to reach out to 15,000 to obsess on those five. And so even if you haven't done 10,000 hours of painting somebody's house, if you go and sit down and you sit down with AI, get in front of perplexity and you write down, okay, what is the average painting job cost? What are the problems that come up with painting jobs? Who is the most expensive? How do I upsell them? And you put together a package that is like, here is everything that you think you need to know data wise on this job that I want, you will be the 1%. Nobody preps for anything anymore to the degree that you need to execute. And so I don't think you always have to do the job. If you do the preparation to show that you care about the job. And just think about it like, how many times have we all had people reach out to us and they're like, I wanna come work for you or I wanna come get this job. And they're like, hey, can I send you a video of xyz and if I do it then you'll hire me or can I a sales pitch for you? You know what you should actually do? Make the video. Make the video. Put together an entire prep document. Put together a strategy document on why I should hire you. And make it so that it is almost impossible for somebody to say no to you. Because it shows how obsessed you are in a world of super curious, uninterested, not that deep obsession. And I've hired, God, I probably hired 15, 20 people solely because obsession is rare and competence is rare. And if you can show those two things, you can be people who have been doing it for 20 years. Because I many painters, we own one of the bigger painting franchises in the country. And I know very many painters that have all the experience, but they don't know how to properly communicate it and show the preparation that they've already done.
- [38:47]
Steven Bartlett
Let's talk about that then. Cause that's a function of really sales. I guess that's sales, that's marketing. I was mulling the other day, because I've just hired someone called Harry, who's our new head of Happiness in Flight Story. And she didn't just make a seven minute video, she also sent the video via unsaturated, less noisy channels. And it made me think about this framework of the resonance of the message and the high signal ness of the medium. Because as you'll all know, you're getting DMs from people that say any job's going. That's like low emotional resonance and a terrible medium. So I think of it as like this four sort of square quadrant where in the top right of the quadrant you have message it the seven minute video. But then figuring out how to get it round back past the pas, not into the saturated inboxes, maybe into the post. I think post is so like unbelievably unappreciated as a medium in a world of like, laziness where nobody wants to like go to the post box. You're all on the receiving ends of thousands of DMs and messages a month. And sometimes some of them get through, sometimes some of them result in someone being offered a job or you investing in their company. So if I'm listening at home and I'm thinking, okay, I've got four people here who get thousands of DMs, what is the secret that penetrates your fortresses?
- [40:03]
Daniel Priestley
I would be careful reaching out to people who have millions of followers, because it's hard for you if you've never had millions of followers or even hundreds of thousands of followers. It would blow most people's minds just how much traffic is moving in the background on any given day. There are plenty of people who have 10,000 followers or 20,000 followers, or they've got a very successful business. They don't get a thousand emails a day, they get maybe a thousand emails a year. So there's a, there's something that you can reach out with which is called a proof story, which you mentioned. And the format that I like to use is I did something special. I recently worked with a extremely famous YouTuber who has over 22 million followers. And we were able to spin out a new business which became very, very successful and excellent. And that business got 10 million worth of revenue in the first six months. And I project managed the whole thing. And I can explain exactly how we did that step by step. So the format is I did something special with a certain type of person. We got a great result. Here's what the result was and here's how I can Explain it step by.
- [41:10]
Steven Bartlett
Step and what's in that for me? Or am I making the link?
- [41:13]
Daniel Priestley
So I'm reaching out to you with my proof story. So I'm telling you this is what I've done.
- [41:17]
Steven Bartlett
And are you asking me for something?
- [41:18]
Daniel Priestley
I'm saying, would you like to know how we did it step by step?
- [41:20]
Cody Sanchez
Step.
- [41:21]
Daniel Priestley
Now, the other way we can do this that works pretty well is to do this in the public domain. So for example, you could reach out by actually posting a video or a post on LinkedIn or on Instagram or on X. And what you can do is have five, six, seven, eight friends who then jump in and start commenting on it. Now, for me personally, if you've tagged me in something in the public domain and people are now commenting it, so that the thing might be, I've got a little bit of advice for Daniel Priestley, and I go, ooh, what's going on here? Right? And then I see that there's a public video and I see several people commenting on it, and then I look at the video and it's a proof story and it's really complimentary. I really like your stuff. And here's what here's going. And here's my proof story. And by the way, Daniel, I'd love to get in touch. Drop me a dm. I'm gonna check that out because it's in the public domain because, well. Cause it could be negative. It could be.
- [42:17]
Cody Sanchez
On Reddit.
- [42:18]
Daniel Priestley
I want to know what the heck what's being said there. Right?
- [42:21]
Cody Sanchez
I think the real thing is don't confuse famous with rich. Like, you guys shouldn't care about us and reaching out to us. There are people that are richer than all of us, even though we all have some means. As far as I understand, there are people that are way richer than us that nobody knows that nobody's reaching out to that want to give you their money. And so I think a lot of people spend time focusing on fame as opposed to rich. And when you're young, who cares? Like, you can't eat fame. Fame is not lasting. We will all be totally irrelevant probably sooner than we even want to. Just speak for yourself, like, and subscribe.
- [42:57]
Daniel Priestley
Alex will be remembered in 500.
- [43:00]
Cody Sanchez
So, like, you know, for young people, I do think sometimes because we get DMs, we think that it's important. But if you're watching this, you should really be obsessed with just making money. And then you can be sitting at a table like this and not worry about, you know, slipping into our DMs. I mean the richest guy that you know probably started a sprinkler head company, lives down your street in a big house and if you went and asked, knocked on his door and asked him how he made it and if you could do a service for him, he would probably let you.
- [43:26]
Steven Bartlett
So true.
- [43:27]
Cody Sanchez
I wouldn't mess around with famous people.
- [43:28]
Steven Bartlett
The people that gave me my first leg up in the world of business were no one, they didn't have followers. They were some guy who had built a business similar in the city and was now living out in Monaco, living an isolated life. It was, it was someone who'd sold some kind of company, was running some kind of marketing business and they were at that level, they were probably at the $50 million level in terms of net worth. And they were delighted to have an email from me tickling their ego. Of course, reading their blog, et cetera.
- [43:54]
Alex Hormozi
It's very exhausting to do the very deep level of work that you do in order to get a high level client and then have no response. That can be really extinguishing from a behavior perspective. But if you do that work for Stephen Bartlett and then you make the post and you say, hey, this is this like I'm a XYZ whatever designer and I've worked with these types of clients and let me just show you my breakdown of what I would do. I think his stuff's awesome. This is just some stuff I would do. And then I tag you, then I'll probably Thing is enough people will see that, that you'll get it sent to you from somebody else who you will answer the response from messenger messaging type perspective. Like somebody who DMs you will open will be like, hey, I don't know.
- [44:31]
Steven Bartlett
If you saw this team member.
- [44:32]
Alex Hormozi
Right, exactly. And you do respond to them.
- [44:35]
Steven Bartlett
I do, yeah.
- [44:36]
Cody Sanchez
Right.
- [44:37]
Alex Hormozi
And so all of a sudden it's like that's actually how you can get in. But you also get all the free exposure of the work that you're doing and then another person who might not be you and it might be me and saying hey, I like Steven's stuff too. And I thought this was a pretty good breakdown. Hey, do you have services, you know.
- [44:51]
Steven Bartlett
In exchange for money you can intercept my.
- [44:53]
Alex Hormozi
Yeah, totally, I'm nab that shit. And so yeah, I actually really like that perspective because it doubles. It allows the work that you do for your lead magnets to basically double as content and so it doubles as promotion. And so you kind of get multiple bites of the apple ch. I think is really Good.
- [45:07]
Cody Sanchez
I think if you do do it though, be sure you're good. Because the truth, this happens all the time with you and I. We go back and forth because people will say online, like, I built everything that Alex Hormozi owns. Can I come work for you? Cody?
- [45:22]
Steven Bartlett
Oh, yeah, I received those emails too.
- [45:25]
Cody Sanchez
Of course he has the same people, you know, I built everything Cody has. And then kind of funnily, I'll be God, I don't remember that person ever working for me. Like, did this actually happen? And so I do think this is just a little. Listen, you gotta hustle when you're young. You gotta do things you're gonna cringe about later. I am so on board for all of that. But also remember that the world is small, especially with people online.
- [45:48]
Steven Bartlett
I'll pause on that because I think this is an important point, is all the people that have had the biggest net impact on my success, my career, in my team, they don't seem to have time to be telling the world that they did everything. Yeah, I mean, Jack is a good example. Jack was here from episode one of the podcast, but Jack, in my view, is doing the like least personal branding, milking the cow. And he's, in my view, arguably the most responsible for all of this stuff. And there's almost this inverse correlation between someone that works for you for three months and then builds a personal brand off the back of that and is on stage claiming the success versus the people in the trenches.
- [46:24]
Daniel Priestley
Inner circle.
- [46:24]
Steven Bartlett
Yeah, it's a bit of a side point, but one of the things people are so fascinated by is this idea of passive income. And I think they're fascinated by it because it's a promise of big returns for no work. And that's. You talk about offers a lot. That's like the perfect offer.
- [46:40]
Alex Hormozi
Yeah.
- [46:43]
Steven Bartlett
What's your thoughts on passive income, Alex? And is it something we should be aspiring for?
- [46:47]
Alex Hormozi
So first, I think it'd be helpful for everyone to even define in terms of how to think about passive income versus active income. So one is that people often often discuss it in binary terms, passive versus active, when it's really more of a continuum of how passive is it versus how active is it. And that way it becomes way less black and white. When I think about passive, versive, active, when people are starting out, I generally just discard it entirely because they typically don't have sufficient capital in order to actually make meaningful passive income. And they would get significantly higher returns on increasing their active income. And virtually every extremely rich person who's self made as my asterisk generally has gigantic active income and only begins to look at passive when they have so much money from reinvesting in their higher return things, which is what got them this very large active income that they're like, where else should I put it? And then at that point, it's really a question of diversification, which is like, how much more do I not want to double down on the main thing? And that's a completely personal question. And there is no, in my opinion, there's no right answer to that because that's a fundamental, like, how much risk do I want to take? Which I see is entirely personal. But I'll give you a real example of an investment I made five years ago, which was we did exited the business and I had more time on my head hand, and I was like, okay, well, why don't I just start spending a couple million bucks a year on making content? Now, that had basically zero return in that time period. But if I were to look at the return on capital for that $2 million a year I did for the first few years compared to today, it was probably the highest return capital that I made. But was that a passive. No, it's definitely not passive. It's 100% active from an investing perspective. And so this is when people were like, what do you mean by investing yourself? I mean that you're investing in either the skills that you're acquiring, the businesses that you have. And a very simple investment a lot of times can get you ideally leverage on your time. And so I'd rather think for the person who's starting out, not like, how do I make this passive? I'd rather say, how do I get more leverage on my active. And so I could start by shoveling snow in the beginning, and then once I save up enough of my shekels, then I'll buy a snow blower. And all of a sudden I can go from doing one driveway and I to doing three drive, race an hour. And then boom, I tripled my income now for that one week that my cash flow is down because I had to buy the equipment. I'll have made less money, but then I'll very quickly recoup it now to the same degree that's in a capital expense from an equipment perspective. But you can do the same thing from a skills perspective. I give a classic example of a phlebotomist. As somebody who draws blood in the U.S. i think they make somewhere in the neighborhood of like $25 an hour, something like that it doesn't take very long in order to become a phlebotomist and doesn't take a lot of money. And so a couple weeks you do the studies, you get your cert, and then all of a sudden and you take minimum wage. And as long as you're not in San Francisco, you have double or tripled your earning capacity in just a very short period of time. And so that's a very good return on capital. And so that's where I think about the best investments for people who are starting out who have call it sub $10,000, sub maybe $25,000. It's like I put all my money into how I get more leverage on my active, which is either going to be more skills or more actual physical equipment in order to get returns on the skills I already have.
- [49:39]
Steven Bartlett
Interesting. More leverage on my time. Time.
- [49:43]
Daniel Priestley
I personally like the idea of asset income versus passive income. So if you actually look at what's really going on with passive income, it's that there is an asset and that asset is in some way generating income. So for example, you own a house and you get rental income, or you write a book and you've got intellectual property, and that intellectual property generates royalty income. So first there's an asset. Income follows assets. So the first thing you need is an asset, and then you get the yield from the asset asset. And there's traditional assets, which are very, very good. If you've already made money or you already have money and you want to park it somewhere and you want to stay ahead of inflation, traditional assets are terrible for trying to make money.
- [50:20]
Steven Bartlett
Give me an example of a traditional asset.
- [50:22]
Daniel Priestley
In this definition, I think of something like art, wine and watches as more like a speculation or perhaps a store of value. But then there's something else which is called a performance asset. And a performance asset is typically intellectual property, media code or data. And when you have these performance assets, if you can build these, these are ones you don't have to buy. You build them. So for example, you could write a book and now you've got intellectual property. You could build a system like a SaaS platform. And now that SaaS platform is in some way an asset and you can rent that out to more people. You could build a database of 1,000 people and build a relationship with those thousand people. And then every time you write one email, it goes out to a thousand people and they've got a little newsletter. So that's a performance asset. So typically, when you look at the people around this table, we're very lucky to have a lot of performance assets, big followings, lots of media and content books that we've written. So these are kind of like the performance assets that anyone can create. It used to be until very, very recently that you just couldn't build assets like you couldn't. It was very, very difficult. But we live in this magical moment where almost anyone with a phone and a laptop can start creating performance assets with intellectual property, media data and code. And then you can basically start the process of building those assets. And then those assets produce more income.
- [51:49]
Cody Sanchez
Here's my conspiracy theory about passive income. And I think that passive income, it's a tax code, right? It is a real thing. It exists. You pay less money to the government if you have passive income. Active income, like that's where the word comes from. But I think the reason that it's been so idealized is because there's an entire industry where people have told all of us for decades that they are better at managing our money than we are. That's the mutual fund industry, that's the investment industry, that's the real estate industry, that's the private equity industry. And they have said, we are professionals. And thus we will charge you 2 and 20, we'll charge you an investment fee on top of your assets for you to give us, the professionals, your money to beat inflation over time. The problem is, is that to your point, they will never make you wealthy. Investing over time in those assets are great for beating inflation or making sure you have downside protection for your cash over time in order to allow it to grow and have diversification. But they're very bad. If you want to get rich, if you want to get rich, you're not going to get rich in mutual funds and sitting it in somebody else's private equity fund. The people who get rich off those things, things they do, the active income, they're the ones who are running the private equity fund, they're the ones that are running the private equity companies, and they're the ones that are running the real estate. And so there's this fascinating world we live in, actually, where people think that it is better and more sophisticated to not teach you how to become capable of running your own business and creating active income, but that instead you're more sophisticated if you're on one Wall Street. And so I think that passive income was actually in a lot of ways, a way for the wealthy class to gain a lot of our assets.
- [53:30]
Steven Bartlett
But people click it, and this is why there's a generation of younger people as well that are obsessed with trying to figure out how to make passive income. It's clickbait, isn't it?
- [53:39]
Cody Sanchez
I think it's clickbait forex trading, but I think it's almost deeper than that. I think it is actually that it sounds, you know, if Alex says this, I say it too. But investing yourself, people are like, what does that mean? Of course I'm trying to, but how do I invest in myself? That's hard. I don't know exactly how to do it. What, are you trying to sell me courses or tell me to buy your books or whatever? And that's the reaction. But the truth of the matter is, is that you will never be able to have the return on investment in somebody else's asset that you will in yourself. You just won't.
- [54:09]
Steven Bartlett
Okay, so let's go on to that then. Investing in yourself. If you were starting out in your career today without the skills that you have, without the awkward that you have, and you had to choose how to invest in yourself, what is that investment you would make in yourself today in 2025?
- [54:26]
Alex Hormozi
I'm gonna give two answers. So I started at zero once, and then I've lost everything twice. And so I have done that three times now, starting from zero, without a reputation or money. And so what I did in all three times was the same thing, which was the first thing I did was I learned how to advertise, which is how do I let people know about the stuff I I have. The second thing I did was that I went to people who had an existing business and I said, hey, for as little money as possible, what would you do to fulfill your existing services? And then when someone I would then use the advertising that I had. So at the time it was Facebook ads, I would run ads and then I would sell those leads into that business based on the pre determined price. And so let's say it's a chiropractor or for me it was a gym. So I went to a gym owner, I said, what would you take for a minute, member? And they said, we would actually take them. If you can just bring them, you can keep the money. We just want the customer for free. And so I said, okay, well the first six weeks of the time that they spend money with you is mine. And then after that they're all yours. And they said, that's fair. And so then I just spent money and I sold them to someone else's business. And I kept everything above the spread, which since the basis was zero, I kept all of the money. And I had zero cost of delivery. So literally it was just cash collected, minus cac. All of that was profit. And so when I started over from zero the third time, I was able to make $100,000 in the first month when I needed it.
- [55:49]
Steven Bartlett
Because you had that skill of advertising. Yes.
- [55:52]
Alex Hormozi
And so when we say invest in yourself, it's a very amorphous term, but fundamentally, you have to learn the skills of generating money. And so you're going to have to have some level of promotion. You have to let people know about your stuff, which is either going to be through content, through paid ads, through outreach, or it's going to be through affiliates. If somebody already has an audience you negotiate some sort of thing, thing with. Honestly, so many businesses, like, you can go to a chiropractor and say, hey, how little will you do 10 sessions for? And you'd be amazed if I say, hey, I can bring you 100 people. How little can you do 10 sessions for? They might say 20 bucks a session. Now, I might sell it for 200, but that's on me. And I make my 90% spread, and I don't have to do anything. I just have to promote and sell. And so that is an example of something that I have done and did do each of the times when I needed to make money in the beginning, when I had nothing.
- [56:34]
Steven Bartlett
What skill that you currently have would get you back to being $100 million entrepreneur?
- [56:41]
Alex Hormozi
So it's a really good question. I think it's actually stacking skills. So a lot of times when this question gets asked, basically the assumption is that you have to stay in the same vehicle. And so the fastest way to make $100,000 is not the fastest way to make $10 million, but I might make $10 million faster if I started with $100,000. And so if I have zero, then I'm going to do something that costs zero capital and is pure skill, which is exactly what that was right now. Now, to make, let's say to actually start running those ads, I might need $1,000. And so it's like I might drive Uber for 1,000 bucks, get my thousand, then spend the thousand on ads to make my 30,000. And during that process, I can reinvest that to get the 100. Okay, great. Now I've got the 100. Now with the 100, I can flip that into. And the key of each of those is that none of those are really businesses per se, and that I can just walk away from them whenever I don't have ongoing delivery or ongoing commitments. And so that gives you a lot of flexibility. And I mean, I think there are a lot of entrepreneurs, at least the ones that I know have had these moments where they needed to generate a lot of capital in a short period of time and have a few kind of like fast money skills that they don't flex normally because there's caps to them. Right.
- [57:47]
Cody Sanchez
I think is cool about entrepreneurship too is we can all do it. You have to find your unfair advantage. One of your unfair advantages is you're very good at paid promotion and getting to the masses. Right. That was never really mine unfair advantage. I think there's two different ways you could do this. One would be promotion. So are you an incredible salesperson to go direct to a ton of people? The other way is partnerships. And I think you can think of these different ways. Promotion could be B2C often, which is like going direct to consumer. Often partnerships is B2B going to a few big people. I think of partnerships as employment, which is a very fast way often to make money too. Like Jack might make way more millions with you than he does individually. And so my background, when I didn't have any cash, I didn't know how to go to people directly. I didn't know how to do paid ads. I wasn't sure how to do promotion, which is a volume game that you have to be good at. So I went towards partnerships. I said I can get to fewer, bigger, faster, I can't get to many fast. And so I think there's like two paths to making money quickly if you don't have any. And the first path has less risk but perhaps mid sized returns. And that is go find the best entrepreneur, founder, business builder you can find, who you can still get to on a daily basis in some way and go work with for them. Learn as much as you can, earn as much as you can. As you learn more, ask for more continuously over time. This is how, I mean, Sheryl Sandberg is one of the richest people in the world and she's never had her own business. Right. She's only worked for other people and she's doing just fine. So I think that's the first way and that would be what I would call partnerships or employment. And then the second way is to go do it yourself, right. Which is high risk but probably highest reward. And in that instance, you have to go and figure out how to get people to buy your things continuously over time. But like when I didn't have money in the beginning, I had just I'd gotten out of finance, I didn't want to work for somebody else again. I was pretty miserable. I had worked for a billion hours, four people in investment banking and asset management and I had massive golden handcuffs. Like I made a lot of money and I had no brilliant idea, I didn't have a business idea, I had no idea what to do next. And I'm pretty risk averse actually. I was like way too scared to go do what you guys all did, which is start businesses from scratch. And so instead I partnered up. I went to another company that needed to raise capital and get a few investments in it and I went to them and said I can raise money from a few of these people that I know. If I do that, can I negotiate a little bit of equity in the company? Can I negotiate upside return for the money and dollars that I bring in? And I want to be a partner in the company. And so you don't always have to start your own thing if you can negotiate with partnerships. I think sometimes you can skip to the front of the line if you're not a great national salesperson or marketer. And so you really just need to decide which one. And neither of them are better than there's just better for you.
- [60:31]
Daniel Priestley
The amount of resources you have access to is a factor of knowledge, network and reputation. So at all times you're trying to build your knowledge, you're trying to build your network, you're trying to build your reputation. A lot of people are worried about the knowledge, but they've probably done interesting things already in their history. They're probably, if they looked over the last three, four, five years, they could say, actually I've done all sorts of things. But I've never told anyone about that, right? I've never actually explained to. I've Never posted on LinkedIn, I've never posted an update telling people what I. So therefore I've actually got things that could build a reputation, but I've never leveraged that reputation. If you're a young person, especially network is actually you've got a superpower with network. And I'll tell you why. Because if you go to a private bank that normally banks people with 3 million, but you say, I want to be an entrepreneur, I want to come to some of your entrepreneur events that you host, they'll bring you along because you're an ambitious young person. If you go to a large accounting firm and say, do you have a host big events? Could I attend some, Can I jump on a newsletter that lets people know about the events, they'll invite you along. And I'm talking about, like, Ernst and Young and kpmg. Every single week, they've got some thing that they're doing in their offices. They've got experts, they've got rich people, they've got all that sort of stuff happening there, and they'll invite you along. So you've got this ability to build your network. You've got this ability to leverage your reputation. I actually don't think that you can make good decisions about the knowledge on your own. I think you need someone who's at the higher level to tell you, this is the skills you should go for. These are the things you should do. So, for example, at the time that Alex did ads, it was a great time for doing ads. But now, fast forward to today, it's probably better to study AI and to bring that to the table. So sometimes those things change. So let's say you figure out what is your reputation? What can you talk about when you're in front of people? You go networking, you go to a few of these events, you outreach, you get yourself in front of some people, and you actually ask the question, what kind of skills do I need? What sort of. I need to build my skills, I need to build my knowledge. What do you think would be a valuable thing to do? Because people who are at that next level up, they're noticing what they need, they're noticing what's hot, what's not. So they're gonna be able to teach you or guide you. And to coach Jody's point, you know, you want to have a mentor in your life. You want to have someone who's. Who's been there, done it. You want to, you know, partner with a bigger organization and get some of those. Before Kim Kardashian was Kim Kardashian, she was Paris Hilton's assistant, and she learned the playbook for being famous. For being famous. And then she took it to a new level. Took it to a new level. So she. She. She did an apprenticeship, and then she applied the apprenticeship.
- [63:08]
Steven Bartlett
One of the things that all the of. Of us have in common is we make content. And it's almost a bit of an elephant in the room that no one's. No one's really doubled down on. When I asked what you guys think is the most sort of, like, undervalued skill or the best place to invest in yourself, I was actually expecting you all to say, start making content for a variety of reasons, not just because you want to build an audience. So you have more customers. But actually, and I can see it on all of you, it's helped you to think better, it's helped you to communicate better, it's helped you to sell better when you get that chance to sit down with that investor or that rich person. You said a second ago, you said earlier that if I'd sat old Alex here, one of the big differences is this one's much more focused, concise, articulate. So I'm wondering what you guys think of that content as a undervalued, underappreciated skill in the world we're heading in.
- [63:52]
Alex Hormozi
If I'm starting today rather than when I had zero, there's still a huge amount of attention that sits on social media, if not more. And there's even more demand for content now than there was. And so you can supply that and get compensated for it. And you'll have to do repetitions for a period of time until eventually you get good and then you can develop an audience and then you obviously can sell things to them.
- [64:13]
Daniel Priestley
I think content. Content's a little bit of an interesting one because content works when you've got intellectual property leverage. So I remember Alex popped onto my screen the first time and he says, I've sold my company for $40 million and I've got nothing to sell you. I'm just gonna tell you how I did it. Cody's the same. She's like, you know, I was working at Goldman Sachs, but then I left Goldman Sachs to earn more money through Laundromat. I'm like, that's interesting. That's fascinating, right? So I'm going to watch that content because there's some interesting intellectual property there. My channel took off when I started talking about. I've done seven startups that went zero to a million in the first 12 months. So it's that ability to have some intellectual property that people are going to want to get to.
- [64:54]
Steven Bartlett
I can think of a bunch of examples of creators that hadn't done anything, but their ideas were the value. So if you think of someone like George Mack or even James Claire or lots of other of these sort of like Jay Shetty online writers who.
- [65:09]
Daniel Priestley
Jay Shetty had a great one, which was, I've got Monk wisdom for the modern world. And we've got Ali Abdaal. I left the. I quit being a doctor to be a YouTuber. So there's these little hooks that work.
- [65:21]
Steven Bartlett
And does everyone have a. You don't have to have sold a business for tens of millions or made millions from.
- [65:26]
Daniel Priestley
I think there's some intellectual property that you've got. But bear in mind that there was a different time where you could just burst onto the stage scene. And we now have AI generated content. So if you imagine like airplanes and they're at the airport and the fog rolls in, and if you're on the ground, it's very hard to take off. But if you're already up in the air, it's very easy to stay up in the air. And it's kind of like the AI content that's coming in is. Is that fog, right? There's just going to be thousands of AI generated content pieces just flooding onto everyone's feed. And if you don't have a really good hook, you're just not going to drown out that noise.
- [65:59]
Steven Bartlett
You guys must all be thinking about this.
- [66:01]
Alex Hormozi
I have so much, much. All right. So one thing I think everyone has to decide on if they're going to start making content is am I an entertainer or am I an educator right off the bat? And so I think AI content for sure will have tremendous leverage on entertainment, more so than education. Because the big underlying thing that Daniel is hitting at is that you have to have proof. An AI avatar cannot come in and say, I sold my company for 46. They can't. They didn't do anything because they don't exist in the real world. Which is why, in my opinion, the absolute foolproof method for making educational content is do epic shit and then talk about the epic shit you did, period. And so like I. So yes, I'm in, you know, I'm in la. Cause yesterday we also, we had the school games Winners Come Out Schools platform that host online communities and the winner of the last school game. So 90 days, he got to like 300 and something thousand a month from a YouTube channel that he started 16 months ago. So he started 16 months ago making videos about AI. Now, what was his interesting thing? So he was just always into AI, learned about the tools, and then he started helping small businesses for like $1,500, $2,500 a month, where he would just help them implement these automations that would save them money and time. And then people were like, well, how to do that? And so he just basically would just explain each of the automations that he made for each of these businesses on his channel. And he made one video a day explaining one of the automations. And then he said, if you want, I have a group that's whatever, $300, $400 a month that shows you how to build the Same automations. To your point about the education is like you just need some and it doesn't like, you don't have to like. The bigger the proof you have, the wider basically the wider tam you'll be able to reach because more people will be, I'll just put the words impressed. If you just are in your 20s and to be fair you've just quit Goldman Sachs, it's like that is enough of a thing that because it's a 1% type deal, right? But you can also, you can 1% through achievement. But the other side that I think people wildly underestimate is you can 1% through volume of work. So if I said I read 200 books last year, let me show you the 200, they're all dog eared, let me tell you what I learned, I'd be like, well shoot. Because I think everybody wants a bargain on time. I went on 100 speed dates, this is what I learned. It's like, well I don't wanna go on 100 dates but anyone can do that. So it's either 1% achievement or 1% effort. But this one you can do. And even if you have zero outcome, there's still stuff that you'll learn and then that people will find interesting that you can build an audience around. And if you do that enough times, eventually you do achieve something that is interesting and then that kind of becomes permanent. But at the end of the day, prove that always beats promise.
- [68:20]
Cody Sanchez
I also think anybody can go viral online with one of two things. We've talked a lot about experience. So if you do have experience, if you built a billion dollar in assets under management business gone to Goldman, built seven startups, that's incredible, that's not normal, that's totally fine. But that means that you could just have the everyday other e of starting the experience. I think we obsess on expertise. Expertise is the way to make content online and make millions. But what about just the experience? You could say actually I've done nothing. I'm a college dropout, I've fucked around a lot, I don't have much figured out but over the next year I'm gonna try to make a million dollars. And you can go just as viral, if not more. I mean a good example would be like Ryan Trahan, who I love, who's in Austin, Texas too. And Ryan is just like I'm trying stuff and this might fail and I have no idea. And you guys can come along, the proof could actually be you just trying a thing and it not working. One way or the other. And so I think the only problem with this type, which is experience as opposed to expertise, is, is that with expertise you have attention and intention, AKA intent to buy. Whereas if you're just experiencing things, you might have attention, but what are you going to sell because you don't have like a value derived from it? Where's your intent? I mean, if you think about who are the biggest creators online? Onlyfans, the Kardashians, you know, what are the biggest websites online porn sites. That's a lot of attention. But the intent to buy is going to be low for any of those over time, writ large. And so I think you have to ask yourself, okay, if I get a ton of attention, let's make sure I'm really thoughtful on what I get attention for. And then let's think about once I have that attention, where do I actually have some sort of expertise or value that I can trade in order for people to have intent to buy? And I think about it like this. Rihanna, huge star, right? Big celebrity billionaire now because of Fenty Beauty, Drake, giant celebrity, arguably more views, more hits than Rihanna worth 1 5th, 1 6th, 1 8th what Rihanna is worth. Why? He has tons of stuff, attention, but he hasn't actually done much to get intent to buy from him. And so Rihanna's just categorically better, if we define better as bank account and scoreboard on net worth than Drake is at monetizing their intention. And so I think that a lot of creators online think too much about views, likes, subscribes, and don't think very much about how do I monetize on top of this. Because nobody stays relevant forever online. And so I think while you're in the spotlight, you do have to think about how you're going to convert that funnel in some way.
- [70:49]
Daniel Priestley
That's a really great point. A lot of the people you see blowing up online, they do have a backend that monetizes it because to your point, it costs money. You know, I probably spend 40, 50,000amonth just on retainers of people who are working on that stuff. And content, yeah, content related stuff. And, and because I have businesses that can monetize that, then it's worth doing. But it's hard to compete with that if you don't have a backend. The other option is to work with someone who does have a business and they do have experience, they do have something to talk about, but they're busy and they need someone to project, manage this. Because one thing that's happened is that to the traditional business owner, this personal brand thing and this building a content empire that builds your business, this is brand new to a lot of people. So there are plenty of people who've got a $50 million a year business and they're going, oh, should I show up online at all? Maybe I should. And they're just starting to tiptoe into the water and they've got a story, they've got a backend business, they can monetize it, they can allocate budget to it. You could be the person who does that and you'd be. If you did do that, you would be one of the very special people in their life. I had a guy come to me a couple of years ago and said, daniel, I just cannot believe you've written five books at the time. You've got seven different companies, you've got all this stuff going on and you've got a few thousand followers. And I've had a look online, you get like 10,000 views a month. And I'm like, yeah, but I'm busy, I'm running my businesses. And he came to me and said, I will project manage you into the millions per month. And he just literally picked this up, a guy called Martin, right? And he just said, I'm going to do this. I'm going to turn up at your house, do a day of filming every month, I'm going to edit it, I'm going to chop it it all up, I'm going to do all this stuff and I'll project manage the whole thing. Now, the two of us are very close now. We've got a good relationship and he's now got an idea for an AI startup and I'm going to back that.
- [72:41]
Steven Bartlett
Every single one of you watching this right now has something to offer, whether it's knowledge or skills or experience. And that means you have value. Stan Store, the platform I co own, who are one of the sponsors of this podcast, turns your knowledge into a business through one single click. You can sell digital products, coaching communities, and you don't need any coding experience either, just the drive to start. This is a business I really believe in and already $300 million has been earned by creators, coaches and entrepreneurs just like you have the potential to be on Stan Store. These are people who didn't wait, who heard me saying things like this and instead of procrastinating, started building, then launched something and now they're getting paid to do it. Stan is incredibly simple and incredibly easy and you can link it with a Shopify store that you're already using if you want to I on it and so is my girlfriend and many of my team. So if you want to join, start by launching your own business with a free 30 day trial. Visit Steven Bartlett Stan Store and get yours set up within minutes. If you guys were starting from zero today with AI in the picture and all of these platforms and the way things are going, I've spent a lot of time thinking about the next big opportunity in content and I think about the next big platform. Where would you be starting, starting today, based on who you guys are and the skills that you have and the things you're interested in is probably a better way of saying it. Would you be on LinkedIn posting once a day? Would you be on TikTok making videos? Would you be on YouTube starting a channel? Would you start a newsletter? And with AI in the picture, I think it changes the answer because content is going to become very easy to make. So where does the value accrue to? Like, where does the value move to in a world where every kid in Mumbai can make a real or a quote picture now with ChatGPT. So where is the value gonna accrue? And how are you gonna milk that cow? How are you gonna capitalize? Like, what is the one thesis you have about the future of content that you haven't told anybody yet? Tell me, I'll tell you mine. I'll tell you mine.
- [74:36]
Cody Sanchez
I wanna ask a question too for everybody at the end of my. I'll give you my quick thing. One, I will say like, and I'd be curious if you all agree. When I first started making content, most people that I knew thought it was really cringe actually. They're like, why would you make content if you've actually had any success that you supposed to have had? Why would you be so idiotic as to be on the Internet making content? It can't be true that you've done these things if you're making TikToks all day. And I think they totally miss the boat that like the 21st century currency is attention. And attention could be bought with ads, or attention could be bought in a different way, but through organic content creation. And so you go like cringe to content, to conversion. And actually I think all of us would probably agree it was a pretty good play. But like, I'm sure. Did you guys all get laughed at when you first got on the Internet?
- [75:23]
Steven Bartlett
Of course.
- [75:23]
Cody Sanchez
Yeah, right?
- [75:24]
Alex Hormozi
Never.
- [75:26]
Steven Bartlett
I still get laughed at now.
- [75:28]
Cody Sanchez
I still get laughed at. So, like, I just want to prepare if you get online, be prepared. People will think you're idiotic.
- [75:33]
Steven Bartlett
And, and your friends, and your friends shedding, period. Where you transition 100%.
- [75:38]
Cody Sanchez
And people who are serious, for whatever reason have not figured out that there is a huge arbitrage opportunity with being known, even if you don't care about the views. And all I have as something that's a differentiator is that if I ping Steven, you'll respond to me because I am somehow I have some preference online. Same with Alex. Right. With all of us. And so one, I just wanna say that up front because it will suck. I'm in these creator groups and at some point it just. This happened yesterday. I'm in a group with some of the biggest creators in the world and all of them were listening. I mean, maybe 50 responses of a moment where everybody hated them on the Internet. It was super dark. They couldn't stop watching and reading the comments and they felt like there was a fight or flight situation from a bunch of strangers. And so I think it's worth just saying content can have a little bit of a downside and you gotta protect against that, but also go full fucking bore into it because who cares? You'll be forgotten anyways.
- [76:34]
Steven Bartlett
Embarrassment is the price of entry, as they say. Yeah, and we've all faced that and had to go through that to get to the other side. Now I want your content secret.
- [76:41]
Alex Hormozi
We talk about social media and I think there's been a lot of talk about it shifting really more towards interest media rather than social media. Right. So I think this is extremely important because what Cody was referencing earlier is again, entertainment versus education. And so Rihanna and Drake, I see both as entertainers. Now what's interesting is that where do they have influence? So she used the word intent. But fundamentally I say, how do we increase the likelihood someone complies with a request or complies with a solicitation if I tell you to do something? 1. I mean, we've all seen some creators who have tiny audiences, but if they say, hey, go do this thing, they have 100%, not really 100, but they have a huge conversion on a very small audience. And then other people, I can name some tiktokers right now that have 50 plus million followers that have had 13 failed launches because they have views, but they have zero influence. No one listens to them for their advice. And so in order to create influence, there's four things. So number one is. And so I just remember spcl, so you have status. So somebody who controls scarce resources. So a Bartender at a bar, there's alcohol behind them, it's a scarce resource. In the bar they have status. When they walk outside of the bar, no one cares about them. But in the bar they have status. So they give influence. The second is power. And so power is basically sedu correspondence, meaning if I tell you to do something, follow these instructions and a good thing happens, then you I'll increase the likelihood that you comply with requests in the future. And so, for example, Martha Stewart was the first self made female billionaire. And I think there's a huge amount of reasons for that. And one of the biggest ones is that she literally gave people recipes and they followed their recipes and they had a good thing happen. And then people told them they were great and this cake was great and this lasagna was amazing. Their family, their friends, they also got status. So a massive good thing happened after following explicit directions. And so then when she said, follow my next directions and buy this thing, people said, okay, the last 10 times I did it, it worked, I'll do this. And so that's why she had so much influence. The next is credibility, which is do you have proof? Right now all of these can happen at the same time or separately. So I'm trying to give more isolated examples for each of them. But like one thing can check multiple boxes. So if I say, hey, I sold a company for $46.2 million, I have money, which is where status comes from. But I also have credibility that the stuff that I do works. I wouldn't have power yet though, until I say, hey, if you take what you're currently doing and then add a bonus, urgency, scarcity, guarantee, think about a value equation. All of a sudden you can sell it for way more money. And then you follow those instructions and then you do make more money, then you're like, now I'll be more likely to comply with this person's request in the future. And so then that person gains influence. And then the fourth L is likeness. Do they look like me? Do they act like me? Which is both physical but also psychographic. Do they share the same values as me? Are they similar? And so if I have two people that both have spc, so they have status, they have power, they have credibility, and then one of them just also looks like me, I'm more likely to listen to that person. So each of these are additives. If you have all four or you'll be more influential. And so laddering this back up to conversion, we think, okay, well if I'm going to make content with the purpose of conversion, then I want to make stuff that demonstrates these four things. And so that is why educators typically have significantly smaller audiences, but can usually generate a lot more money than entertainers can. And entertainers typically can monetize almost exclusively through sponsorships as the most efficient means or vehicle. Now, where does an entertainer have influence? Influence? Rihanna is beautiful. And so she does have credibility in terms of beauty. She does have. And then especially if she starts making content around that stuff, she takes her entertainment audience, but she's talking about something she has credibility to. And then she can add power to that because people start following what she does, right? And then they start looking a good way and then they say, you know what? She really does know what she's talking about here. And then all of a sudden, when she does point people to a thing that, that they can buy, then they're more likely to do so. And so it's how do we merge those two things together? And then when we're making the content. And I think a lot of people who are starting out are very obsessed with views, which I would strongly recommend, especially in this interest media time, that it's so irrelevant. And what I mean by that is if we think, all right, I want to start a bait and tackle dropshipping business, whatever for fishermen, well, if I just start making videos on philosophy, I might get way more views than I do if I make videos on bait and tackle. But the likelihood that the people who are watching philosophy also want bait and tackle is very low. And because the content is now the targeting for social. If anyone's run ads before, you have to select, okay, I think I want 42 year olds and I want men and I want whatever as you go through it. But the thing is that the algorithms are so good and the AI is so good at understanding what the content is about. And they also know what type of people consume this type of content. They just do the targeting for you. And so if you want to reach a certain type of person, you just only make content that that certain type of person wants to consume. It's actually easier now than it was before, before. And so you can have a 40,000 person audience, but that 40,000 person audience might be made up entirely of fishermen who buy tackle, which I'll bet you you'll crush. And so that is how I kind of see the future of media, at least, is that if you want to have maximum persuasion or conversion power, we want to make content that is explicitly for a specific audience and we want to demonstrate the Proof that we've done. We want to have things that they. We want to give them instructions that they follow that good things will happen for them, and we want to look like them. And if you do that, you have somebody who's going to make a lot of money from an audience.
- [81:54]
Steven Bartlett
That last point, super interesting as well. How do I make myself look more like my audience? And I think relatability and humanizing yourself is one of the great ways to do that.
- [82:04]
Cody Sanchez
I think it's a very fair point. I mean, I also think it's not just physical traits. So let's say that you don't really look like the audience that you want physically. What are the values that that audience has that you can have them see themselves in you? And, you know, it's kind of like whether or not you like the guy who cares. But let's say Trump, for instance, really looks not a lot like his audience, predominantly, you know, in suits and ties, constantly, sort of a blue blood billionaire from the East Coast. How does he associate with this group of people where really he doesn't look like them on average? Well, it's because they believe that he has a similar moral compass to them. They believe that he has similar ethics to them. And so I don't think that creators have leaned into this enough. And I don't mean to become click baity or political or divisive or anything like that. I mean that it is rare to see people in business take a stance that could hurt their business values, for instance. And Chris and I have a rule which is we don't have close friends that haven't done something publicly that could be against their best interest. I just don't want friends that don't have that, that haven't done that. Because I think that the world is really hard and I want to see if somebody's gonna have like moral fiber before I become quite close with them.
- [83:17]
Steven Bartlett
Super interesting.
- [83:18]
Cody Sanchez
Yeah. And so I think you could do that as somebody who is a content creator today, like be value aligned with your users and show that that's rare.
- [83:29]
Steven Bartlett
Also to the point about the algorithm becoming about interest based, it's also becoming value based. We're seeing echo chambers emerging around ways of thinking.
- [83:36]
Daniel Priestley
Right. Well, the content that I saw of you that most interested me was when you were talking about how important ownership is, and you were talking about just the philosophy of ownership, and you said, there's a group of people who want you to own nothing and be happy about it. And I was like, I really resonate with that. I want people to own their businesses and I want them to own their stuff. And I liked the fact that you were standing in front of a huge audience taking that position and everyone knew that it was a little bit of a position to take. And it wasn't specifically content about how to build a business, but you were sharing something about yourself.
- [84:08]
Cody Sanchez
I have a belief you don't actually ever sell anybody anything. You only find those who are already predisposed to want the thing that you are selling. And if you believe that, then I think your business gets easier too easier to target people. That's why I never kind of got off on that content. You know, it's really big online on sales where it's like, here's how you close them, you know, here's how you do this, here's how you switch them and you give them a hot dog and then they buy the car cause you gave them the hot dog cause of reciprocity. And you're like, huh, I've never bought a car because somebody gave me a hot dog. But apparently this is what works on Instagram. And so I don't think that's actually true. I think you just find people at a trigger moment that they want something and then you give it to them.
- [84:42]
Daniel Priestley
Regarding content, for me personally, I find that the only reason I'm going to create content is if it's in alignment to a mission that I've got. So I don't actually want to create content. I don't want to be out there naturally. I would much rather be a way more private person. And you won't, you won't find a lot of stuff about my family or my, my kids, kids, my, you know, very rarely do I post anything like any of that sort of stuff, but for me, I do it in alignment with the mission. I really believe that if you're on a mission, you've got something you want to achieve in the world, you're going to need other people to believe in it. You're going to need other people to get involved, you're going to want to hire talented people. Those talented people are going to want to, you know, see you online first. And it's all about the building relationships at scale. And content is just people discovering someone new like you would a friend and then getting to know someone. And I think the big play in a post AI world is having really deep relationships with a lot of people using long form content where you share who you are, what you're about, what's your mission, what's your origin story, what's your vision? What are your values? And people then say, in a very noisy world, I will pay attention to what Steven says.
- [85:49]
Steven Bartlett
I agree. And so to give my answer to this question, my thesis here in the world of AI is that actually that if you look at who has the most loyal, engaged fan bases, it's not necessarily podcasters. We're doing pretty well. But it's not podcasters. Podcasters can sell out arenas, and when they go on tour, they can sell out globally streamers. And I think it's because of this, the depth of the parasocial relationship is the equity value of the connection. And I was sat with a streamer who's 18 years old, massive in Europe, and I was. We were playing at Old Trafford for the Soccer Aid, and I just got to sit down with him. So I was like, explain to me what you do. He goes, so I wake up in the morning, I go, then what? He goes, I sit there and I go, for how long? He goes, eight hours. And I go, what'd you do? He goes like, nothing. And I go, how many people tune in? He's like, 100,000. I'm like, concurrently, 100,000 people sit there with you? He goes, yeah, people are quite lonely. I sit there and what we do is we watch TV together. So when we got to the stadium, 70,000 people in the stadium. We're playing soccer. The stadium, when they announce your name, the size of the cheer correlates to the amount of hours you spend with your audience. The streamers are the celebrities. The podcasters sometimes come in, the actors almost, you know, but the streamers own the stadium. When you play Soccer Aid, it doesn't matter how much money you've got or how big your following is, the streamers are the ones the streamers have. This particular streamer has less of an audience than me, but he sits with them for seven to eight hours.
- [87:15]
Daniel Priestley
Deep connection.
- [87:16]
Steven Bartlett
So if we think about depth as the metric that you can exchange on, especially if you have authority in a niche and you're educating, as Alex was saying, that's why I think a lot about my behind the Scenes channel. I think it's. When we go on tour, it's so funny. We did a tour in Australia, and remarkably, I'd say about 50% of people were talking to me about Diarizio, and then 50% of people were talking to me about behind the Diary, which is the behind the scenes channel, where you get to know me a bit better. And that channel has a fraction of. Of the viewership and actually that same thesis is the reason I started podcasting. I was doing Facebook watch videos. They were getting tens of millions of views, which, by the way, no one remembers because no one remembered any of them. And no one came up to me in the street and said, I love that two minute viral philosophical video you made about motivational fluff. No one ever said that. Then I started this podcast and it got a thousand downloads and it felt like I was like Oprah Winfrey. Like people were coming up to me and I was like, oh, there's this interesting between the depth of the medium and the resonance and the memorability and therefore the value. So just pursue depth as much as you can. The strength of the parasocial relationship, the.
- [88:18]
Daniel Priestley
Part of the brain that has short term memory, we've driven a truck through that. You know, we've now got just hundreds of things a day that hit that. But then there's this other part of the brain where I've spent seven hours with someone. And if that's the depth, are you.
- [88:33]
Steven Bartlett
Guys thinking about that? Because you guys, you all make content, which is educational, but, but it's less personal. And I mean, you two podcast. Alex and Cody, you both podcast, you don't podcast yourself.
- [88:44]
Daniel Priestley
I'm a guest, You're a guest.
- [88:47]
Steven Bartlett
You don't run your own podcast. So are you thinking about a deeper format for yourselves? What are you thinking about?
- [88:54]
Cody Sanchez
Yeah, well, there's two things I wanna talk about there. One, I think it's depth, but I would also wonder if it's not rawness. Like in an era in which we cannot trust what we see anymore because of AI and anything can be recreated, reproduced and overprod. Increasingly, a stream is interesting because it is raw. It is for 1000%. Whatever is happening on there is happening in real time. And thus we can actually trust it. And so I think, as, I mean we've all seen it, content has gotten so produced and overdone and that actually, I think decreases trust because we can't tell if something is real or not because it's been edited and filtered and overlaid.
- [89:34]
Alex Hormozi
Exciting, we say, with our 40 person teams. Yeah, but it's true.
- [89:39]
Cody Sanchez
Think about the content. Even like this is like sort of tactical, but maybe a year ago the big content change in video on Instagram was that you had a lot of B roll and images overlaid on top of videos. And I don't know if you guys have noted, but that doesn't work very well anymore. Actually, the more that you have third party assets in your Video and it's been overdone. The less the video works, the more.
- [90:01]
Daniel Priestley
You'Re just walking along with the handout.
- [90:04]
Cody Sanchez
Right. Because it's more real. So I think it might actually be like depth and rawness.
- [90:09]
Steven Bartlett
Rawness, yeah. Authenticity, I guess.
- [90:11]
Cody Sanchez
Yeah, I fucking hate that word.
- [90:12]
Steven Bartlett
But yes, it's like 60 Minutes versus Joe Rogan 100%. It's like just, it's just no cuts. No cuts. Yeah, yeah.
- [90:18]
Cody Sanchez
And then when it comes to. Am I thinking about this for our channel? Yeah, I mean I think about it. We have something that we teach everybody which is like the marketing affinity loop. And basically it goes like this. I'll show the graph so you can see it. But you start with awareness. Right. And that awareness is what we're all talking about. How do we get more people to just see us? And then we go to consideration. Okay, maybe I like this person, maybe I'll follow them, I'll give them a quick follow and then we go. Well, I actually, I like them. I follow them and I might buy something from them. Okay, that's interesting. And then I might not only buy something from them, but advocate for them. Write a testimonial, a review, something like that. And then finally I might be loyal to them. AKA I'll refer a friend, I'll sign up for their year long program. I'll buy again and again. And so we go from awareness to consideration, to purchase, to advocacy, to loyalty. And if you can get most people stop at awareness, very few people can get somebody to go from awareness to purchase. Even fewer people can get them to advocate for them, leave and review. And the very, very fewest refer a friend. And so the holy grail of business is always have your clients tell other people nice things about you. And so I think in content, what I think about is I don't always care that people buy things from me. And at this point I love money, don't get me wrong, I want to keep making it, but I actually really care that they're loyal and they tell other people about what we're doing. And that is something we now measure for videos. We can actually now measure with like a little UTM link. How many of all of our videos get shared and how many of those shares actually go to a purchase or something that goes a little bit deeper. And so I am thinking about that. But then I think you also have to decide what's your personal line is. So for, for me, I can't imagine wanting to stream all of my life continuously. Cause I'm not Sure. That's good for the audience. Actually. I think they should live, not watch. So it's like I just have a line that I kind of don't wanna cross. And Chris and I actually have a rule too. We only post so much about our relationship. Cause it always does well. So the team's like just full send Chris shirtless nipples every day. The Internet loves it. And Chris has been really good about saying no, we have to keep something sacrosanct. And so I think you have to decide how deep you wanna go down the rabbit hole in order to win.
- [92:28]
Daniel Priestley
Yeah, I've been the same with my kids. It's their decision as to whether they wanna build a profile and how they wanna build it. So you won't, you know, I won't put them in that position. The depth that I'm loving is writing books. Because someone who reads a book, like you really get to go deep with a book and also live experiences. So every year for the last four years, I've taken about 80 or 40 my clients to the, to the snow and we go skiing. And those 80 clients who, if, if someone has gone on my ski trip, the level of loyalty and depth because we've shared fun together. I'm about to take 30 clients to Necker island and spend a week with Sir Richard. And I've, I'm convinced that just doing that with 30 people will build, you know, lifelong like friendships. So this idea of that, like they're, you know, that you do stuff in the online and offline world, you know, that you actually figure out who are the people who are at the core group, those real die hard fans. And then let's do something together and do fun stuff together. Go skiing, go to islands, go sailing, that sort of stuff.
- [93:32]
Steven Bartlett
Alex, I see you wrote. It looked like you drew the universe or something.
- [93:37]
Alex Hormozi
Oh, I was thinking about again, it was just talking about like authenticity. And so with each of spcl, all of them exist in a continuum. And so I can say credibility, I could say, hey, I sold a company. But if you see a PR article that will increase the credibility. If you were somebody heard about it from somebody else, that'll increase the credibility of that specific credibility driven event. Likeness is the same thing. And so I think the connection between streamers and having huge influence is that they have tremendous likeness and that because they are quote, authentic in that there's very few, there's very little ability to describe, distort, you have basically what you see is what you get. And so if you're the type of person who likes that particular streamer, then you'll have super strong affinity towards them, and you'll be likely to comply with their request. Like, show up to a stadium so that you can support me. But even authenticity is, again, a term. It's like, how do you define authenticity? Which I see as how you act when you have no risk of punishment. And so different way of saying this is like, how do you act when you're alone, when no one else around? And so I see the discrepancy between how you behave when you're alone and how you behave in public as basically your authenticity score. The question is, or the problem is that no one really knows how you behave when you're alone unless you're streaming. What was that?
- [94:50]
Steven Bartlett
Unless you're streaming all the time. Right?
- [94:52]
Alex Hormozi
Yeah.
- [94:53]
Daniel Priestley
So you're saying authenticity is that there's not a difference between how you act when there's no risk of punishment and how you act normally. Okay, got it.
- [95:02]
Alex Hormozi
Right. And I think that also being very candid for all of us is, sure, we have audiences that can punish us with their comments, I guess. But we've all built enough of, call it a fortress, if you will, of currency, network relationships, et cetera, that even within our companies, if you go into the room, I can be really authentic in my company because no one can fire me. My risk of punishment is lower than, say, an employee's is. And so it's relatively. I'd never use this word, but it's a relatively privileged position to be in, to be more authentic, because no one can really punish you. And I think this is kind of the essence of the fuck you money that people want to get to, which is like, I just want to be me, but I can't be me because I have this risk of punishment. And so degrees of freedom, basically. I think your happiness is very correlated with your degrees of freedom.
- [95:54]
Steven Bartlett
So Elon's authentic.
- [95:55]
Daniel Priestley
That's about the same. Exact same thing.
- [95:57]
Alex Hormozi
I mean, I don't think anyone would argue that he's not authentic. They might not agree with him, but I don't think they think that he's trying to pull one.
- [96:03]
Cody Sanchez
I do think that if you're gonna go online, one of the ways to inoculate yourself against being canceled or to inoculate yourself against caring so much is to do ridiculous things every so often that are super authentic to who you are out loud. Because then what happens is the people that hate you, they leave, and the people that like you kind of like you a little bit more, or trust you a little bit more for it. So I think one of the things that I do not really on purpose, but it is just like, it's like getting a vaccine. You go out on the Internet and you something that you know other people are not going to like, but you believe strongly in. And when you do that kind of consistently over time, I also think that increases your trust because we've all met like other creators that you're like, ah, man, like you're just never gonna say anything that's not PC. Like I can think of two in my head where I'm like, they're never gonna say anything. And if it could hurt their audience, they're not gonna say it. And that just decreases my trust level. And I think the audience is really smart people. People are smart. And so I think you should inoculate yourself more often before we move on.
- [97:06]
Steven Bartlett
To a little game that I've prepared for us here. You're all very good at pitching and you all have your own frameworks for pitching. So I wanted to pause on that for a second. Daniel, what is your framework for pitching a business or an idea?
- [97:19]
Daniel Priestley
There's two things to start with, which I believe that entrepreneurship is the journey of a thousand pitchers. That basically what we do as entrepreneurs is we pitch stuff into existence. And the penalty for an average pitch is that you do a thousand pitches and you get nothing to show for it at the end of it. And the payoff for a great pitch is that you do a thousand pitches and you end up with 10 to $100 million. You end up with an amazing team of people and lots of customers and everything. Everything's great. So I think treat entrepreneurship as the journey of a thousand pitches. And also treat pitching as this magical thing where you get what you pitch for and you can't switch it off. So for example, if you say the economy's bad, the economy's bad, the economy's bad, as if by magic, the economy is going to be bad. If you say, I'm seeing lots of opportunities right now, I'm seeing lots of opportunities right now. You start conversations where people go, oh, I've seen an opportunity as well. So whatever you're out there talking about, you tend to bring those conversations to the surface and it's a self fulfilling loop. With that said, you have to have a framework for pitching if you're gonna do a good pitch. It's gotta be a framework. I've got social pitching framework, scheduled pitching framework, and sales pitching framework. So social pitch, name same, fame, pain.
- [98:36]
Steven Bartlett
Am game, What's a social pitch?
- [98:38]
Daniel Priestley
Social pitch is on social media or in a social situation. It's basically a situation where you've got about 30 seconds before someone. Someone thinks that you're being too obtuse.
- [98:50]
Steven Bartlett
Okay?
- [98:51]
Daniel Priestley
Right. So you've got about 30 seconds of people's attention, and you're gonna say, what is your name? What are you? The same as that they already understand what makes you famous or different. What are you aiming for right now? What's your bigger game? Or what pain do you solve? What are you aiming for? What's your bigger game? So there's a few things you can put in there, and it rhymes so you can remember it in a. In a social situation. Scheduled pitches. I always do something called capstone. And it's clarity, authority, problem, solution, traction, or the why. Either way, opportunity, next steps, and an emotional ending. Right, so that spells out capstone. Now, is that the best pitching framework? Maybe, maybe not. Maybe there's better frameworks. But the point is, is that you've got a framework that you're not just winging it. You're not just, you know, randomly spewing words. You've actually gone through the process of thinking through your pitch in a framework approach. One thing that's really fascinating is the three of us have a framework for everything. Like, we. We're just like very framework thinkers. And I've noticed that with a lot of entrepreneurs. Do you guys have pitching frameworks? Be shocked if you didn't.
- [99:54]
Cody Sanchez
Yeah, I do. I mean, I think I'm like, lazy intellectually. And frameworks help you remember things. And so if you don't have very good memory, then it's just easy to put it in something that can make sure that you remember it. What's. Why, when we were in school, you know, they used to make us sing songs about how to remember the variance states. If I wanted to raise a bunch of money from other people that didn't know me, and I wanted to never have a problem raising money again, I didn't want to use any of my money ever. I would use what I learned in venture capital, which is the Midas touch. And basically, I think you need one of these four in order to raise money. You don't have to have all four, but if you do, that makes it really, really easy. The easiest one is profit, Right? If you have a business right now that's making, making money, profit in your pocket, you can raise capital, you can raise money from people. As long as that amount that you're raising is reasonable to the Amount of profit. If you don't have any profit, but you have growth, let's say like Replit, we were talking about a big AI company. Great. You can raise a bunch of money if you got growth too. The third thing, if you don't have either one of those, you don't have profit, you don't have growth, but you have a history. I've sold a company before, I've built this before. You can raise purely on the fact that you've done this before. And if you haven't done any of those three, you've done nothing in life, then you need a really good story. And the story is something that you can often raise money off of. So I believe that we are going to create the next xyz. And if we do this thing, then you will all make money, I will make money, and we will change the world together. And so I call it the Midas touch because I think people who, if you can accumulate this over your life, it's not that hard. Right? So eventually at some point you'll have a history, which is your proof. Then you can craft a story. You'll get better at it as you continue to grow. You will learn how to get profit in some way. And because you, you've driven profit before, you'll know how to get growth. So I think almost any entrepreneur over time, if you focus on those four things, can raise money. And you start with only the story when you have nothing.
- [101:48]
Steven Bartlett
Alex, I have a lot of pitching for you. Yeah.
- [101:53]
Alex Hormozi
I'll say first and foremost, if you're trying to sell anyone anything, proof will always be promised. And I can say that a thousand times in a row. You could literally say nothing, get on stage and then just hit next on testimonials for 60 minutes and you will close a percentage. Literally. The last slide just says, go over there to go buy something and you can say nothing and you will sell.
- [102:12]
Steven Bartlett
Why?
- [102:13]
Alex Hormozi
Because I think proof acts as an approximation of something that would happen for the prospect. And so the only reason that proof works is that they think, oh, some element of this is like me. And so if I do the same thing that this person did, and the closer the proof is to the prospect, the more compelling it is for that specific prospect. Which is like when we used to run ads for different markets, we'd go into an entirely black market. And surprise, surprise, if we have black testimonials, the pages would convert better than if we had white testimonials. And then flip flop in the other direction too. Right. And so we Want to show as many different types of proof as we possibly can. And obviously, not all proof is created equal. You can have live proof versus recorded proof. You can have a demonstration of something that, like us using the thing is going to be more compelling than not using it and just describing it, right? If. If I have a. And so there's a bunch of things on proof, but that's just like, big thing number one. And so that's why, for me, if somebody's gonna sell something, I recommend most people just get five or ten clients for free up front. With the primary purpose of getting proof, because you're gonna make more money on the proof than you will have trying to just get the tiny amount that you can charge with absolutely no proof. So it's like, don't do that. Just get 10. And on your 11th, you'll be able to charge 10 times more because you'll be able to say, hey, look at the 10 people that I helped. And realistically, you'll get more out of that than they will because you probably suck. So it's probably for everyone's best interest that you don't charge anything. But from an actual closing perspective, and I'll talk about this from appointments, I think, to use Daniel's language, I've taught the closer framework for a very long time, which is C L O S E R. And so C is clarify why they're there. And typically, anybody who's going to be in that appointment has taken some action. So whether that's. They responded to a post, they commented they liked. If someone's already set an appointment, they walked in the document, like, there's always something like, why'd you pick up the phone? Like, there's always some reason. Why'd you give me five seconds? There's always something they've done that you could say, hey, so tell me why. Right? And so then you're clarifying why they're there, why they're still listening.
- [104:06]
Steven Bartlett
So you listen to them because we often think about sales as me just hitting you with fucking.
- [104:11]
Alex Hormozi
So the perfect salesman says nothing and only asks questions because there's nothing to disagree with. And fundamentally, they're gonna believe way more of what they say than what you say. So you want them to, not you. And so you clarify why they're there.
- [104:24]
Steven Bartlett
C. It reminds me of spies. I've interviewed a couple of CIA spies now, and every single one of them, I was expecting some, like, incredible technique or whatever. They all say, no, we just spend six to eight weeks in the back of the cab. Listening to the Iranian taxi driver to figure out that his son has a health issue that we can then leverage later to get him to turn against his country. So the first eight weeks of just listening to him offload, and they're like, it's crazy how people will just offload, offload if you let them. Everyone wants to talk 100%.
- [104:52]
Alex Hormozi
So one is clarify whether they're L is label them with a problem that you can solve. So it's like, okay, so it sounds like you were here, you responded to my ad, you DM me thing, or you, whatever, because of this reason. Is that right? So you get confirmation on the problem, which is L, then you O, which is overview, past experiences or past pain. So it's like, what have you done so far to try and solve this? And this is important because motivation is the equal opposite of deprivation. So the more deprived someone is of something, the more motivated they are to solve it. And so if you haven't eaten in an hour, you're probably not that motivated. If you haven't eaten in two days, you're very motivated. If you haven't slept in a day or you're normal motivated, I guess that was a bad one. But if you haven't slept in three days, you'll be incredibly motivated to sleep. And so we want to find what they're deprived of and then try to increase that deprivation in the conversation, basically make them more aware of the deprivation, the things that they don't have. Then once we have enough deprivation that it's very clear that it's like, okay, this is why you're here. You agreed with, this is the problem that you want to solve. You've tried all these things and it hasn't worked for you. I can imagine how frustrating that would be. S, which is. Then you sell. You sell the vacation, which typically is just 3 points. I usually keep it to 3 because most people can't remember more than that anyways. And the three points are usually, you can always find three. And if you need two, you can chunk up if you've got five, and if you've got two, chunk down, as in break into smaller pieces. But when I was in the fitness world, it was fitness nutrition account accountability. If, when I was selling mortgage leads, it's like you want the leads to be unique, you want them to be timely, and you want them to be exclusive or qualified. And so it's like there's always three things that you can usually triangulate. But when you say the three points, you don't. Then Feature Jarble about the points. You then just usually put like a one sentence analogy of what that thing is. So it's kind of like this. And so these are like little 30 second sound bites to make the three points that should never last longer than 90 sounds seconds. Because most people waste all this time on the selling part and that doesn't really matter because the more we can talk about them, the more they're going to want to buy. And then E at the end of that you say, cool, Ready to get started, Ready to rock and roll. Ready to start on Monday, whatever it is. And then E and R are around. What happens if they say no? You explain it with their concerns. E. And then R is you reinforce the decision. And so R was actually something I added much later when I was teaching many salespeople because after they would explain away and then close, they were just like, see you later. I got the credit card. You're dead to me. But the R is like, no, no. Reinforce the decision. I think it's a great decision. I'm gonna introduce you to Poly. Polly's gonna get you onboarded. And then Polly also continues the R being like, Jack definitely helped you out. Let's get you all squared away.
- [107:15]
Steven Bartlett
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- [110:05]
Alex Hormozi
Yeah, so I will. Because I think getting. So I'll just. There's so many variables here, but I'll just try and focus on. On the ones that a lot of people sell over the phone. And even via Zoom, it's harder to see body language as well, which nowadays I think a lot of selling happens in those two environments even more than in person, even though that's where I came from, which I actually think is the best place to learn, because you have to control every variable and then you have far more leeway on the phone or on Zoom than you do in person. And so to that extent, there's Basically, five things you can control about how you talk. And so you have your speed of talking, like, how fast you talk. You have your cadence. You have your. Basically your. Your enunciation. Like, do I pronounce every letter in the words that I'm saying? You have the volume that you speak at. Because if I talk too low on a phone, it doesn't really matter because they're just going to increase the volume. But if I lower what I'm saying right now, it sounds more important in person. It's more important. Volume is more important in person. And so those first three, I consider there's kind of persuasive tone, which all three are constant. And the only point of those is to maximize comprehension. It's just that they can hear you, that they can understand what you're saying because you're talking. And. And a speed that they can understand. Like, I'm somebody who talks fast, and I have to pull back how fast I talk when I'm in, like, a selling situation. There's only two that I teach salespeople to try and actively control, which is gonna be pauses to draw attention and when do I raise my voice? And the reason that those are the only two things you really need to teach a salesperson, outside of the persuasive tone, which is that you're gonna talk at a certain speed, which usually about 150 to 175 words a minute, because that's the amount of speed that most people can understand. You're going to enunciate the words, which is going to force you to actually speak at that speed, and you're going to talk loud enough they can understand you. This sounds very simple. This sounds so simple. I can't believe people don't do this, except they don't and they don't close. And so the only things that you have to teach a salesperson, and these are so important. There's been three independent studies that are massive meta analyses of salespeople. The salespeople who, one, speak less, close more. And number two, the salespeople who know when to shut up. Most importantly, after you ask for the sale, like, if you wait eight seconds after you ask someone to buy, you close 30% more sales.
- [112:17]
Steven Bartlett
If you wait eight seconds.
- [112:19]
Alex Hormozi
Yeah. So you ready to start?
- [112:24]
Steven Bartlett
Okay. So.
- [112:25]
Alex Hormozi
Mm. And so people, like, they'll close themselves, but the salespeople are so afraid of that silence that they then jump back in. It's like you had the. Just shut up. And so I used to talk about how emphasis was super important and so, like, a very, very easy example to demonstrate this in terms of communication is that if I say, I didn't say he hit his wife, I didn't say he hit his wife. I didn't say he hit his wife, I didn't say hit his wife. Those all mean very different things. But fundamentally, it's just because I changed where I pause, right? What word? So I'm emphasizing a different word. And so I used to talk about emphasis a lot, but I've trained more and more and more and more salespeople over time. I just say, when do you shut up and when do you raise your voice? That's it. The rest of this, we speak in the exact same tone. And the reason that I feel very confident about this is that AI is doing an increasingly good job at ads. I don't know if you've noticed this, but a lot of ads are just being voiced over in AI and they convert higher because people can understand them. I think a huge part of it is just they can comprehend it. They can actually hear all the words, and it's set in a tone that's loud enough and there's enunciation. And they actually get it because most. It's like one of the easiest ways you can improve copy on is just get it below third grade reading level. Like 50% of people can't read above sixth grade in the U.S. that's crazy. So you're alienating 50% of the market now you might think, oh, well, those are the idiots. No, I know plenty of people. I mean, like, I've got two friends who dropped out of high school and are super, super successful entrepreneurs, barely can write their names and they like, they make fun of it, but, like, they're smart, they just weren't educated. And those are different things, right? And so I say this to say, like, if you're in these selling situations and you're like. Because what happens is you. You get nervous, right? You get this fight, flight, freak out, the ones that Daniel was saying earlier. And so your adrenaline kicks up and so you want to talk faster, you want to talk louder, you interrupt the other person. And all those things are antithetical to closing. And so just teaching someone to be okay with pauses can increase the likelihood that people pay attention to the words that they say. Because all we do is we draw attention when we pause. So you have short pauses that draw attention, and then you have long pauses that solicit. If I pause long enough, what do people do? They talk.
- [114:27]
Steven Bartlett
And I just think of someone as being higher Value if they're taking pauses. One of my great mentors early in my career, he. There's something about the way that he spoke. He was incredibly slow with the way he spoke. He was like that. And the minute he started speaking, when my company were over there and having these mentorship sessions with him, everybody would stop and just was fixated on him. And then I remember this girl who worked at my New York office.
- [114:55]
Daniel Priestley
Opposite.
- [114:55]
Steven Bartlett
And it's just the use of this instrument. Do you think much about that? Do you think much about how you present yourself? Do you think much about your body language?
- [115:03]
Daniel Priestley
I think it's natural. I think more important is the distinction between are you coming across as a newbie, are you coming across as a standard worker bee, or are you coming across as high status key person of influence level? And each one of those has body language association. It has different ways of presenting yourself, but it's a self identity thing. And if you can shift that self identity, you can naturally become more of a key person of influence. When we meet someone within a few seconds, we evaluate their status level relative to us and you can't switch it off. And there's plenty of evidence to say that, like, unfortunately, you just do it automatically. I've seen people completely change their life by just simply changing the way that they pitch from a newbie worker bee to a key person of influence. I can think of an example. There's this woman who. I asked her, what do you do? And she said, I'm a financial planner. I can help anyone with their financial planning. If anyone wants to talk about their wills or any of those sorts of things, then that's what I can help people with. Right? And it sounds worker be. And her, her body language was kind of like this. I asked her a question, I said, when did you do something special that was really transformational something. Something important? She said, last month I went out to the countryside. I worked on a. And I worked with the owner of the farm and their kids and their grandkids to get alignment between the three generations. The farm was going to be sold off to private equity and instead I helped them to get alignment as to how they're going to keep the family farm. And I said, how did you do that? And she said, well, I used to be a city girl and then I married a country boy and I learned how to do it. I got her to change her pitch and I said, pitch yourself as a key person of influence at that. So she stood up in front of the group and she, she said, for the last 20 years I've been working with rural families who own farms and I help them with their financial planning and I secure their family farm for the next two generations. And her body language just went like, key person of influence. And everyone just responded differently. And when I asked the audience, in the first instance, what do you think her day rate was? Everyone said $500. I said, in the second instance, what do you think she charges per day? Ten grand. And it was, it was just the ability to pitch yourself as that key person of influence in the room.
- [117:12]
Cody Sanchez
You know, what's fascinating is there are actual studies now that show for women in particular that you make more money if you do one thing, which is you wear makeup, which is wild. So they did. There's three studies that have been done, totally different groups, one by Harvard, one by Stanford, and I can't remember, it was either Oxford or Cambridge. And the studies showed that women who, there was no attractiveness differential between them, but one wore makeup consistently at work and one didn't. They made anywhere from 20 to 40, 40% more money. Inside of this study, what I thought was really interesting about that because I'm not really historically a makeup girl, although being fully face painted for this is that that actually makes sense in a lot of ways because we do have this initial reaction that we always have with people. We judge somebody like you talked about almost immediately. And so when I saw that study, I thought, well, first of all, that's interesting. You don't have to be smarter, better looking or anything else. And you can make more money just by the way you present yourself. And so, so I thought, well, what about the way that you dress? Is that also the same? And there are studies that back this as well, that in fact you can make more money as a man for dressing one way and as a woman. And women are interesting because you are not the norm.
- [118:21]
Alex Hormozi
What am I missing?
- [118:22]
Daniel Priestley
You got the lumberjacks on.
- [118:23]
Alex Hormozi
I've got 20% sitting on the table right now.
- [118:26]
Cody Sanchez
But what's fascinating is I like things where you don't have to, you don't have to be better than anybody else. You can just use human psychology to make more money. And so, and so if I'm a woman, I know that the way that I dress. So when I pay attention to my dress and dress professionally, whatever that means. In this instance in the study that I saw, it was like, you know what I would have on a blouse, a suit, something like that. Women make two times more than men when they dress better men. It actually is Less important. Still more important, though, if you dress professionally in a suit and you don't have all the other proof and things you have, you have this sort of interesting thing that's like you have sort of diametric opposition. I make a lot of money, and yet I care so little about money that I dress in a white theater. Yeah, exactly. And so men make somewhere between 15 and 18% more when they dress in suits. So I think there's a real argument to be made for if you're gonna pay attention to the way your voice sounds. That takes some training. It doesn't take much training to change the way that you look professionally and how you dress. And the only other thing that I would talk about on sales and pitching is we tell all of our company people the. The line is show, don't tell. We increasingly do not believe the things that were heard. So, like, think about a sales pitch that goes like this. We, for instance, have a lot of home service companies. So these home service companies are selling a homeowner on, let's say, landscaping. And so I'm gonna come and we're gonna clean up your lawn, and here's what we're going to do. And this is how much it's gonna charge. I'm gonna charge, and this is how long it's going to take. And you can tell the Clock client that we're an expert at this. I've been in business for 42 years. We have 1,000 reviews on Trustpilot, et cetera. Or you could do something that'll double your conversion, which is simply bring a phone or an iPad with you and say, can I show you what we did for your neighbors down the street and just show them the image of it. Just go. We do have a thousand trustpilot reviews right here. We could see what the last one said. Click on it. Show them the trustpilot review. You don't have to train that. And I really like my success to not have to become experts, but to be enabled by what's called sales enablement or technology, just to show. Because we are a visual species. And so wherever possible, if you want to increase your conversions, I tell my team, you are not allowed to close a sale without showing something.
- [120:42]
Daniel Priestley
Some visuals, you have to have a.
- [120:44]
Cody Sanchez
Visual because it's just a trust transfer and a higher signal.
- [120:48]
Daniel Priestley
What's wild now is that in that same business, you could take a photo just right there in ChatGPT, say, do the landscape gardening and then show them, this is your house.
- [120:57]
Cody Sanchez
Exactly.
- [120:57]
Daniel Priestley
Landscaped people are vision 70% of the brain is visual processing.
- [121:01]
Cody Sanchez
Exactly. And then you believe it, and then you've already seen it happen.
- [121:05]
Daniel Priestley
I work with a lot of entrepreneurs, and I get them to create a brochure, like a physical brochure for their business, and people are like, what on earth am I creating a brochure for in 2025? Because the act of creating a brochure gets what's in your head, out of your head, and into a document we can all explore. And I still think a brochure is actually one of the coolest things that an entrepreneur can do as an activity to really just solidify what they do.
- [121:31]
Steven Bartlett
I saw you scribbling again, Daniel.
- [121:32]
Alex Hormozi
Oh, I have lots of things. But yeah, I was thinking about makeup versus suits and whatnot. And so one, it's like, if you have zero status, you have no credit, like SPCL we went through. Then it's like, well, then what are the smallest versions of that that you can demonstrate? And so I would also bet that if the girls did makeup, like hooker makeup, and then you also do professional makeup, I'll bet you there's a very different outcome that happens. Because if you have understated business makeup, then that probably signals a certain level of status, and they will treat you like other people that they have treated in the past, because that associates with the status those people had. Same thing with a man in a suit. Like, literally, fancy pants, right? It's like, this guy's got fancy pants, therefore he must be 15, 18% better on average. Now, to comment on Cody's point earlier, it's like, I have other status inducing points that are superior to a suit, and so I don't need one. Right. So how do I get away with that? It's like, yeah, having a suit only means that you have $500.
- [122:23]
Steven Bartlett
Billionaires don't wear Louis Vuitton because in the status game they're playing, that would be an inverse signal of wealth.
- [122:29]
Alex Hormozi
Exactly. It's who you're trying. And then to Cody's point about proof, proof is always number one. Right? And so trustpilot reviews is a kind of proof. Somebody down the street is a closer approximation, which. Which is a higher form of proof. And so proof is always gonna be number one. What you can lead with, you can almost immediately in any sales process, if they don't have one of these, just implement a video sales letter and increase sales by 20 to 40% with, like, really doing nothing else, sometimes more. And so that typically is like, okay, what's the promise that we're Gonna, you know, what do we do? What's the pain that we're solving? What is the plan? Or sorry, what is the proof that we have that we can solve it? And then what is the plan for the rest of this video? And then typically after you've demonstrated each of those P's, you then say, great picture number five, which then gives you kind of the visual roadmap. And then after that, I typically like to have people just respond to all of the biggest objections that people have around whatever the specific service is as the main points of the video. And then after that, you just make your call to action or you just reinforce the appointment. Say, hey, if you like this video, text me this keyword. That way I know you to want and we'll give you an extra 5% on whatever. And that way the salesperson knows the person watched it and it gives them incentive to do so. So it's like, hey, have you watched the video? You get 5%. It's like, oh, shit, that's amazing. But then that way they know that they actually watched it.
- [123:48]
Daniel Priestley
The one other thing that I've found that is the most powerful sales closer is to pitch the assessment. And to pitch the assessment is, I don't know if I can help you, but if we answer these 40 questions and we go through this assessment, then we'll figure out whether we can help you or not. So it's kind of like if you went to the doctor and said, I don't know whether you need anything, but we'll put you through a blood test and an X ray and then we'll see. So one of the biggest way I've scaled multiple companies where you pitch the assessment, you don't tell people whether you can or can't help them. You just simply say, the next step is to take an assessment. And when we do the assessment, it will tell us whether I can help you or not. And it's one of the best sales guys closing techniques.
- [124:29]
Steven Bartlett
There's a lot of psychology around that. They did that the study where they had the boring focus group and they had one group of people who were allowed straight into the boring community group and then they had the other group of people who had to take a survey to get in, and the group of people that took the survey to get into the boring community group all said that it was great in there, so much better. And there's something about how friction upon entry makes you value the thing more a zillion percent.
- [124:53]
Alex Hormozi
Like, I cannot, I can't emphasize this more like in every single CRO split test that we increase friction or increase the quality of leads, we make more money. CRO split test, so conversion optimization test that you'd run across a landing page or funnel or sales motion when you add more friction. And it's good friction, ideally, meaning you're not getting out bad people, you're getting out good people, which is bad friction. You want good friction, which gets out bad people.
- [125:20]
Steven Bartlett
Yeah.
- [125:21]
Alex Hormozi
You will typically always increase the cost per action. So your lead cost will go up, your cost per call will go up, but your show rates will go up, and your close rates will go up, and your cash collected will go up.
- [125:32]
Steven Bartlett
And it seems counterintuitive to apply friction to a process.
- [125:35]
Alex Hormozi
And I can almost promise that. Like, I have so few examples where it didn't work that I almost believe that it's law at this point. And I think it's law because it's so counterintuitive, because it's scary to add friction. Cause you know that you're actively decreasing your lead flow and increasing your cost per lead. You're decreasing your calls, you're increasing your cost per call. Like, that is frightening for just about every business, which is usually why it works.
- [125:57]
Daniel Priestley
At the Louis Vuitton store, they put a security guard to keep you out, and then it pushes the prices up.
- [126:02]
Alex Hormozi
Yeah. After Covid, none of them stopped doing because they're like, oh, wow, we made more sales during COVID because we had people wait in line and showed scarcity.
- [126:10]
Steven Bartlett
It's like Birkin, isn't it? You don't even get to pick the bag. You get. And you have to join a waiting list. Then they interview you to buy the bag.
- [126:16]
Alex Hormozi
Yeah.
- [126:16]
Steven Bartlett
And then they decide whether they should let you have.
- [126:19]
Daniel Priestley
What do you bring to the table.
- [126:21]
Cody Sanchez
That's how Ferrari works. You're not allowed to buy Ferraris unless you go through this list. And if you're ever shown to flip them or sell them, you'll never buy another Ferrari again.
- [126:29]
Steven Bartlett
So I've got three boxes here, and these three suitcases contain different amounts of money. One of them contains $1,000, one of them contains $10,000, and one of them contains 100,000. You're gonna pick a suitcase, and you're gonna tell me what you would do with that amount of money if you were starting with that amount of money today to build a scalable business.
- [126:53]
Alex Hormozi
So do we keep the money?
- [126:56]
Cody Sanchez
He wants to buy a watch.
- [126:57]
Alex Hormozi
I'm like, I'm feeling 100,000. All right, what do we got? Oh, I have a Thousand dollars, Alex. So do I get to give the money? Is that. Is that how this works?
- [127:08]
Steven Bartlett
Yeah, you can keep it.
- [127:08]
Cody Sanchez
Smells good.
- [127:10]
Alex Hormozi
Smells like money. Okay, So I have $1,000. So I would take the thousand dollars, put it in my pocket, do nothing with it, and I would watch YouTube videos on AI integration into small businesses, and then I would go to small businesses, and once I had a specific integration that I would do, which I would probably bet would be around, likely email list activation, because that's typically, like, fastest, easiest money that most business owners have is their contact list. So they've been in business 10 years, they've got 8,000 customers they've sold over that whole time period. And maybe a list of, call it 20,000 leads that they've had. They never email them, ever. If they do, it's just like, here's our random discount that we send once a quarter for Christmas or whatever. And I would say, hey, I will email those people and I will get everything approved by you. And don't pay me anything. Just pay me a percentage of the sales that we generate afterwards. How's that sound? And that offer tends to do well, and I know that because I've done it. So that's what I would do. And the thousand dollars, I would go buy Layla something for a little bit of time so that she can stay with me until I make the money from my email reactivation campaign.
- [128:13]
Cody Sanchez
See what I get. I got the 10K. All right, we're going around the circle here. I like it. I would find the person who would buy what I was selling for the highest dollar amount humanly possible, which means I would probably go to private equity companies. So Alex gave me the idea for Main Street. I know that Main street businesses are, like, often cash crunched, right? They don't have a lot of money, and they often cannot extract enough value from a lead that I need them to. So Alex would need to find the perfect company to do that, and there's lots of them. Or he would build his own, which would be great. I think in my specific instance, I want to go to the people who are already good at extracting the most value humanly possible. So I'd probably try to go to a private equity firm.
- [129:01]
Steven Bartlett
What's a private equity firm?
- [129:02]
Cody Sanchez
It's basically a fancy way for saying that people use their own money to buy businesses, as opposed to public equity, where people use the stock market's dollars to buy businesses. And so examples would be like, kkr, Carlyle, Cerberus are some of the biggest in the World.
- [129:18]
Steven Bartlett
So they go around buying people's businesses with their own money.
- [129:20]
Cody Sanchez
That's right. Yeah. They find entrepreneurs right about the point where they cannot take it anymore, and they buy those businesses and then they. They grow them hugely and in. And again, because I'm better at partnerships, I would want to go to them and I would want to say. And it really, what's interesting is I bet all of us are going to be really similar. The money actually doesn't matter. And so even though I have $10,000, 10x what Alex has, it doesn't actually matter because what I would do still $10,000 is not enough for me to make a couple million, which is what I would want to do with this. So what actually is the differentiator? What is the business model I choose? Who do I go to sell it to so that I can get the most value out of it? And with these PE companies, what I would do is I would go to them and they're buying companies all the time. And so there's two ways to sell to a PE company and I'd see which ones I could get them to sign up for. On one hand, there's something called a deal sourcing fee, which is if you can find companies that are in the niche that PE companies want to buy, they will pay you for sourcing the company. And I know this because I pay deal sourcing fees. And so, so I would go to local private equity companies. You're not going to be able to get to Cerberus or the big guys. So I would go to the ones in my local neighborhood that you could find by searching on AI to say, local private equity companies buying these types of companies, I would reach out to the gps. Those are the general partners of the company, the guys who run it. And I would say, what type of companies are you actively purchasing right now? What's your investment thesis and deal box? And if I could get them to respond to me, great. If not, I'd search. What do private equity companies typically want to buy? What is the deal box or investment investment thesis of a private equity company. I would find that deal box and then I'd play the game of door knocking. I'd go to a bunch of these businesses and try to find companies that wanted to sell. And then when they tell me they want to sell and I have a buyer, which is the private equity company, the private equity company will pay me either a percentage of the sale or a flat fee for sourcing it.
- [131:04]
Steven Bartlett
What might that look like in terms of a percentage and dollar number.
- [131:08]
Cody Sanchez
Yeah, I mean if you're like a non institutional player doing this, I think you would go to them and say, can I get like 10k for every company that I source you, that's over a million dollars in revenue that's profitable. Your deal box. They'd probably say, yes, the normal sourcing fee is somewhere between 3% and 5%, but you're not going to get that when you're brand new. But I like the idea of making 10k on one deal to start. Then what else am I learning while I'm doing this? I'm also learning simultaneously. How do you buy businesses, what type of businesses? How do you find businesses for sale? I think this is the highest leverage activity I know how to do. I know more how to buy a business that's already making money and make it make more money with a higher degree of certain. Because if it's already profitable, it gets out of the valley of death, which is where a company starts and never actually makes any profit. And so I would start there and then what would I do for that? Well, the second that they see that I'm good at sourcing deals, they're gonna be throwing offers at me. But what I might do instead is go to those GPS and say, hey, I'm pretty good at doing the hardest part of private equity, which is finding the deals. Why don't you guys back me for me to find the deals for you? Maybe they'll invest in my company for me to then run a private equity firm. Or maybe they'll say come work for me. Then I can make a couple hundred thousand dollars. I can learn what I think is the best skill out there to learn, which is deal making. And I can use my leverage, which is knowing what a company's worth and how to buy it, using other people's money in order to increase my earnings. And that's interesting.
- [132:30]
Steven Bartlett
You'd both use the money for personal things. Probably just pay your rent or take you.
- [132:33]
Alex Hormozi
It doesn't make a difference at that level. And I mean even the hundred is, is close to. I mean it's more than 10 in one.
- [132:40]
Cody Sanchez
But yeah. And there's just one idea. I think there's so many things you could do with one.
- [132:45]
Steven Bartlett
But they're all very similar in their fundamentals.
- [132:47]
Alex Hormozi
Well, you go to find something like the leverage comes from tapping into existing networks. You find an existing business and either you're selling the business as the product or you're selling the product of that business. Right, exactly. So you're selling either way. And all of it is promotion. You're selling, and you're trying to get a percentage of upside. I'm getting a percentage of. Because to Cody's point, a lot of Main street businesses don't have money. And you're like, cool, pay me on money that I make you. And they're usually very, very generous with money they don't have yet. Same same for a deal that we haven't made yet. I'll give you a fee for those things. Again, it depends on the timeline. If I have 30 days, then getting a deal done in 30 days will be tough. But getting a brick and mortar, it's like, probably do that in 48 hours. To get somebody to say yes to free money for no risk. And I do all the work. It's an easy offer. So, again, I think it's. That's where, like, the constraints of the initial prompt is like, how much money and how much time? If it's a year, it's like all of this changes. If it's 30 days and I have nothing, it's like, well, then we want to generate as much cash as we can at little time as possible. No risk.
- [133:44]
Cody Sanchez
Yeah.
- [133:45]
Steven Bartlett
Daniel's about to invest in the s and P500.
- [133:48]
Alex Hormozi
He's like, I take your $10,000 and I raise you.
- [133:51]
Daniel Priestley
Yeah, so I have 100,000. So he's leaving with it. This is a dangerous amount of money. This is the worst case scenario for most people because if you have a thousand, you know you don't have money. If you have 10,000, okay, you might get a cleaner, you might get an assistant. You might do a few little things with it. The danger of 100,000 is you can kid yourself into thinking that you've got money. And it will make your head spin how fast you can blow through $100,000 if you don't know what you're doing. If you give me a Formula one car and ask, what am I going to do with it? I'm going to crash it. Right. If I can get it even started in the first place. So I've got to come up with something that the first problem that I have is I don't have the knowledge. I don't have the network. I don't have the reputation. So here's what I'm going to do. I'm going to leverage Cody's. I'm going to go to Cody and I'm going to say, cody, can I do a deal with you? I would like to start a business. I know you've Got lots of ideas that you just don't have time for. I'm going to invest $100,000 as debt for equity for. For 10%. So I'm going to put 100 grand in and that'll come out of the business at some point. But debt for equity on 10%, and I'm going to do sweat equity for 10%, and you keep 80%. And it's your idea and it's your network and it's your reputation. But I'll be the person who's heavily invested in this. And the only condition is that as the business becomes profitable, we can repay the 100 grand. And then once it's repaid the 100 grand, either you buy it or we can sell the.
- [135:16]
Alex Hormozi
The business.
- [135:18]
Daniel Priestley
Now, what I'm doing there is I'm basically acknowledging I don't know what I'm doing. I'm acknowledging I don't have the reputation, I don't have the knowledge. All I have is this hundred grand. And I have a very strong desire or will to be an entrepreneur. Now what's going to happen is that probably with an hour of Cody's time per month, she's going to be able to say, here's the idea. Here's my cfo. Talk to my cfo. Here's my head of marketing. Talk to my head of marketing. Here's my friend who's actually, actually got even more money and wants to invest, and she's just going to like, fire off a few emails and she's going to love the idea because it's her idea. And I'm going to work hard, right? And what's cool is that when the time comes that that business becomes valuable, I've got one buyer on the table. Cody's either going to say, hey, look, I'll buy you out because it's only 20% and now I own the whole thing. Or we go to market and Cody will know someone who can buy the business and I get 20% of the exit. So. But the key here is that just that acknowledgement that it's really. It's the knowledge, the network, and the reputation that is the valuable bit. And the money is a bit of a red herring.
- [136:18]
Steven Bartlett
And you're gonna get Cody's skills. Cause you're gonna be in her proximity, you're gonna get a little bit of.
- [136:21]
Daniel Priestley
Her reputation at the end of that deal. I will then have knowledge, I'll then have reputation. I'll then have. All of those things will have leveled up for me.
- [136:31]
Cody Sanchez
You know what else is Interesting too. It's really what you're proposing is something that I used to not like. And since. And since think that when you find the right ones, it's really fascinating. Which, it's a franchise model, you're essentially saying, which is what you do when you come to a franchise. If you come to Resi Brands, you go, okay, I have $75,000. I don't know anything about window cleaning. I don't know anything about running a business. But I do know that you know how to do it. And I know that you have all these case studies, AKA proof of other people just like me that have done it. So I'm actually going to pay you for this business, for the right frame, you to take a percentage of my ownership forever in perpetuity. But I will teach you how to, or you will teach me how to run the business. And so I think that's actually, I think I used to think that franchises weren't good for entrepreneurs because I am relatively unemployable and I don't like to be told what to do. But for people that have never run a business before, like, what you're saying is, like, I'm paying you for the right to learn because you have a proven system that if I use it over time, I have a lower likelihood of failure. Because we know the truth, which is 90% of startups fail. Most startups never make any money. You pay for the right to maybe potentially one day make money. And so I do think stealing other people's homework is real and valuable.
- [137:47]
Steven Bartlett
I wanted to ask you all a question, which I have an answer to, so I assumed you would, but maybe you don't. Which is, what is the one thing about entrepreneurship? Wealth creation, finance that you think most people undervalue, that you put a disproportionate amount of weight on. So for me, I can think of a game in business. I think of business as a set of games we're playing. I can think of a particular game in business that I don't think other entrepreneurs understand the value of. And I'm wondering if you all have an answer to that as well. Is there one game in this game of business, one fundamental game that you think most entrepreneurs listening now don't appreciate, and they should from the entrepreneurs you've worked and invested in and been one yourself?
- [138:26]
Alex Hormozi
Well, I think I'll say one that everyone here at the table will agree with. But I think that brand and distribution is still wildly undervalued. I mean, I think that's the reason that all of us decided to get into it is because you just, I mean at least I saw just the wild discrepancy between the cost of building brand and building distribution versus the value of that distribution. And you know, the primes, the lunch leaves some of these insane zero to many billion dollar case studies. Teramana who of beauty proper whatever it is for. Yeah, like there's so many examples at this point that it's almost trite. I still think it's undervalued distribution, which.
- [139:02]
Steven Bartlett
Is building an audience that you own.
- [139:05]
Alex Hormozi
That has a high likelihood of complying with requests.
- [139:08]
Cody Sanchez
AKA brand.
- [139:08]
Alex Hormozi
Yeah, yeah.
- [139:10]
Cody Sanchez
I mean, well, I think that's a very good one. And the reason that we know that it's so undervalued is we're all offered things all the time that do not. I mean I remember talking to my president of my company and I was the former president of Mr. Beast. It was interesting is he said like every deal we looked at, we almost regretted doing it. Like we couldn't. I think you and I talked about this. We couldn't do a deal that the other party fully understood the power of our distribution up front. We almost had to like prove it, put in a bunch of milestones on a later date because the deal is so good. And I found the same thing in the deals that I did. Like we've talked about, like, I mean I did a bunch of deals early on where I bought businesses and they couldn't benefit from distribution. All my laundromats, my car washes like it does. It doesn't matter that I have a big audience online and so the leverage wasn't there for me. So I think distribution and brand are huge. The secondary thing that I do not think most entrepreneurs understand is financial engineering. The richest people in the world are rich. If they didn't get it from daddy and mommy and they didn't get it from investing in third party companies, they got it from owning companies and buying them over time. Like every billion. There is not a billion dollar company that exists that hasn't bought other companies. It doesn't exist.
- [140:25]
Steven Bartlett
When you say financial engineering, how do you simplify that for someone that's 16.
- [140:29]
Cody Sanchez
Years old, man understanding how to get other people's money. To say it really simply like how to get other people's money, which sounds a little scammy, except it's not. Most businesses are bought with the SBA loans, loans from the government that allow you to buy a business. Businesses need lines of credit. That's just money from the bank For Future State. So, like, if you actually understood how money and finance works in your business, it's harder to die because cash flow is what keeps your company alive. And also it's easier to buy your competitors because whoever is most funded wins typically. And so I think more entrepreneurs need to obsess on the thing that isn't the magic. Like, the magic is coming up with an idea, having the grit, doing the brand, doing the distribution. That stuff's actually really, really hard. Financial engineering is modelable. It's the same every single time. It's just been gatekept by Wall Street.
- [141:22]
Steven Bartlett
Money games. I had such an epiphany moment when I was like 23, 24 years old, when a German group had basically bought the majority of my company out. And I got to spend a lot of time because we now had this German office. So I was there a lot. And I just observed this one individual who I shan't name. And I'm there building this business and pitching to clients and doing all this hard work. And I met him and he says, I don't want to do any hard work, I just want to do deals. And I was like, tell me more. And I lent in. I'm like, what do you mean deals? Because I'm like, I'm not sleeping here. And this guy looks like he's sleeping tremendous amounts of hours. And he was like, I just want to play money games. I want to be in the middle of the transaction of the deal and taking some. But then he's also when he says money games is like leverage and arbitrage, raising money against an asset, overvaluing that asset, and buying lots of cheaper assets with the value of the expense of. And he made a lot of money doing exactly that and almost never working because he understood exactly. What you're saying is that really, really rich people understand money games. Just how to use money leverage to make more money.
- [142:25]
Cody Sanchez
Look at the Forbes 100 list. It's all comprised of people who do financial arbitrage in one way or another.
- [142:29]
Steven Bartlett
How do I go learn that skill? Do I have to go work in finance?
- [142:32]
Cody Sanchez
No, you don't have to work in finance. But I mean the best business school has always be in business. So get into business and then obsess on one. Like I think it's like tiered. Bottom level is like understand a P and L. Most entrepreneurs don't have a profit and loss statement. They don't actually track their profit and loss statement. I mean, we invest in a $60 million a year business. The guy didn't have an up to date profit and loss statement. It's incredibly common. I'm sure you see it. You look at a bunch of businesses too. Second level after a profit and loss statement is do I understand where my financing is coming from? All you need to do to understand that is talk to your bankers. Do you have a bank that will lend you money? Understand why? Explain to them what you do and see if they understand it and how much money they'll give you. And then the third level of the game is go and talk. Every learning that needs to be done is just getting in the room with other people who have their. Tuesdays are like your dream days. So I think you want to get in a room with a bunch of people who are doing deals. That's how you do more deals when I am.
- [143:28]
Steven Bartlett
I told you earlier, we were talking about psychedelics before we started recording. When I left my last company, I had that year and a half where I invested in this massive psychedelics company. And it was the pandemic. So we're working from. Everyone was working from home. I was working from the billionaire's apartment in London. And I got to see in the lead up to the IPO, he did 10 IPOs a year. So I got to sit in his kitchen and he used to work over there. And I just got to see what was going on. And all he was doing was making phone calls to people with lots and lots of money and he was giving them access to the IPO before it IPO at a valuation which we all knew was gonna 10x. And I just thought, oh my God. Like this is how rich people make money. They have some kind of access or arbitrage and they move money around to capitalize on these multiples. I thought, fucking hell.
- [144:11]
Daniel Priestley
Like that's, that's the game.
- [144:13]
Steven Bartlett
Get around billionaires. I know it's a crazy thing, but.
- [144:14]
Alex Hormozi
You wanna start a podcast, Start a podcast.
- [144:20]
Daniel Priestley
I'm slightly older than you guys. Like I remember before the Internet, before YouTube, before all of this sort of stuff, there was no access to this information. You couldn't get this information. And now you can, you can listen to podcasts, you can chat to ChatGPT, you don't even have to get in the room. And like it's, it's all on the Internet. And it blows my mind because I remember a time before that. I love what you said. I totally agree with what you said. I'm going to go with the one game that most people don't understand is bananas.
- [144:49]
Steven Bartlett
The podcast.
- [144:52]
Daniel Priestley
In lesson one of every economics class, they say if you've got 10 bananas and 100 people want a banana, you're going to have high prices and profit. Demand outstrips supply. If you've got 10 bananas and only one person wants banana, you're going to drop the price of those bananas and you're going to make a loss and your business is going to go badly. And what most people do not understand is that the whole game relates to constrained supply and excess demand. And if you can't constrain the supply and create excess demand, you won't get a profit. You can take something like Google Maps, which probably costs 500 million to set up and launch satellites and everything. They have to give it away for free because they have infinite supply. They can supply everyone on the planet with Google Maps. So because there's infinite supply, they just give it away for free. But Google Ads, there's a limited number of people who can advertise on every search. So because that's limited, the price goes up. So I have a client who saves lives and they do first aid training and they're an amazing person and they literally save children's lives and all this sort of stuff. And she's telling me, you know, why aren't I able to charge more money? I'm literally saving lives. I'm a really good person and I'm very valuable. I say, because the whole game, no one, that's not the game, the game is demand outstripped supply. So you need to constrain the supply of something and you need to maintain manufacture excess demand. And unfortunately, as much as you might be the most amazing human being, if you can't manufacture demand and supply tension, you can't make a profit.
- [146:22]
Steven Bartlett
I was hoping and thinking someone might say hiring, because for me, my answer is hiring. That's the first thing I go to. I remember Richard Branson sitting me down when we spoke in New York and saying, listen, I built one of the biggest groups in Europe. And my CFO pulled me out the room and said, I don't know what net profit is. And he says, my CFO got crayons and a piece of, of paper and drew fishes in a net in an ocean and said, richard, that's your net profit. And then they walked back in the room and he was at the time running one of the biggest groups in Europe. So when he said that to me, I was like, well, he was like, you don't really need to know much if you're a really masterful delegator. I don't hiring, he said I was a dyslexic thinker, so I was always forced from the very beginning to just find someone to do it that was exceptional. And actually, the further I've gone in my career, the more just like you figure out with, like the game, this game, that it's actually just a couple of fundamental things that sway the outcomes. Like, most of the returns come from, like, a couple of things in business I've just come to learn the further I've got that my returns come from truly exceptional people. Binding them with a culture and then setting them the sort of strategy or more technical things that I would agree with that.
- [147:22]
Daniel Priestley
And the reason you can find such amazing, talented people, and so could Richard Branson, is because first he could create excess demand for that role, and then you could choose from that list.
- [147:33]
Steven Bartlett
So I go back to. I was 18. I was 18. Broke, drop out of university, parents aren't speaking to me, shoplifting food. I managed to get a guy called Chris who was running a business to stop his business. He was double my age and successful. To stop his business and to decide to come and build a social network with a kid who was stealing Chicago Town pizzas in Manchester, who had never built a technology company before. In exchange, I couldn't pay him in exchange for 30% of the company. And this goes back to this whole thing about offers. My pitch, my offer at that time, I was trading in future money equity, and he believed in the value of the future money. So I say to kids all the time, actually, you don't need to be in my position now. You've all got future money. And the future money is determined by how good your pitch is, your sell is.
- [148:17]
Cody Sanchez
But I think that goes back to that. Like how I talk about pitching for money. That's your Midas touch. You didn't have profit, you didn't have growth, you didn't have a track record. What did you have? An incredible fucking story.
- [148:26]
Steven Bartlett
Yeah.
- [148:27]
Cody Sanchez
So if you got nothing else but a story, then you can hide. Hire people much smarter than you.
- [148:30]
Steven Bartlett
Exactly. This actually brings me to a point that I haven't told the world about yet. I've just built something called Culture Test. You can find it@culturetest.com Essentially, the thinking is that one bad hire, as I'm sure all of my guests here will agree, can ruin your business. It can ruin your idea. So Culture Test helps you figure out and spot red flags and people you're thinking of working with or currently do work with by making a personal, personalized culture test survey and it scores that person in terms of how aligned they are to you and your mission. It has been a game changer for my business. We've culture tested about 40,000 people. I just wish I was doing this before. Check it out. Culturetest.com, make your own culture test, use it and thank me later. Alex, you've got this book about to drop called 100 million money models. What is the one money model in this book that's added the most to your net worth?
- [149:26]
Alex Hormozi
So it's more the concept. So like each of the offers had the value equation, which is kind of the core concept that the book was built around. The leads book was about the core four the ways to promote anything. And so $100 million money models is about client finance acquisition, which is fundamentally how do you get customers to fund your own expansion. And so Cody said this earlier, but depending on the source, it's roughly like 80% of businesses fail because of poor cash flow or they just don't have enough money. And the other 20 is probably just people just give up. And so as long as you don't give up, the reason that you go to business is you just don't have cash flow. And so that book solves cash flow, which is why the sub headline is how to make money, which is pretty on the nose. But fundamentally, each of the examples that I had in my business, and I define that within client funding's acquisition. As I define it, when you have like a $100 million money model is that we're able to get a customer to pay you twice as much as you spend spend on them in the first 30 days. And by doing that, the more specific equation would be that your 30 day gross profit from a customer exceeds 2 times CAC plus COGS, meaning CAC is in cost to acquire a customer plus COGS, which is cost of goods sold. So how much does it cost me to get them? How much does it cost me to deliver them? Times two. If I can get that from one person, then for the rest of my expansion, all the customers finance the acquisition of the next customer. And then cash flow is no longer a constraint of the business. You'll still have constraints, you'll still have supply constraints, still have hiring constraints, you'll other constraints, but cash won't be one of them. And so as a result, you can grow pretty much as fast as you can handle. And so that is how I've grown. All of the companies that I've started without funding and been able to grow Very fast in each of them is with that core concept.
- [151:02]
Steven Bartlett
Thank you. Thank you for choosing to be here today. And I invited you here because you're the three people that guide me that I listen to, that I think have the most credible, important information that can guide my audience. And I know who they are. They're people that want improve their lives in some subjective medium to the North Star that they have. And you all represent different perspectives and also different strategies, but there's so many overlaps that I think actually getting three people like you around the table to understand where we overlap and where you think the same is incredibly powerful. I highly recommend everybody goes and reads Cody Sanchez's book Main Street Millionaire how to make extraordinary Wealth Buying ordinary businesses, which is really what one of the things Cody has pioneered the idea and made accessible to the masses because most people didn't think you could do that. So many of my friends are now buying boring businesses, as Cody says, because Cody has laid out a framework to do that and to create wealth in this book. And my favorite book of Daniel so far is over subscribed how to get people lining up to do business with you. And there's so many that I could have chose from. But also you all have YouTube channels and your YouTube channels are amazing. So I'd ask my audience, I'm gonna link them all below to go and check out your YouTube channels. Daniel, you're just starting out on YouTube. You're getting your feet wet and inspired. But Cody and Alex have been making so much incredible, actionable content. I love one of your new formats where you sit with someone and you sort of redesign their business with them. And Cody's been making some of the most entertaining and informative content on how to get going with simple companies and businesses for the longest time. So please go check out their work and go follow them on social media. These are three of the people that I admire the most in this space. And if you like what we do here on the Diary of Series a year, you're going to love what they do. So thank you so much everybody for being here, for being so generous with your time and hopefully we'll do this again sometime soon.
- [153:03]
Alex Hormozi
Foreign.
- [153:08]
Steven Bartlett
If you're someone running a business today, that means you're probably operating in a world that doesn't sit still. Tariffs and trade policies are dynamic, customer expectations shift constantly, and the pace of innovation is relentless. So your margin of error is becoming increasingly smaller. Making decisions without full visibility across your business is not only risky, but it inevitably slows down and everything and I see it all the time. Businesses with the right ideas, but they're stuck because they're spread across five systems that don't talk to each other. Many of my companies now use our sponsor Netsuite by Oracle, which has an AI powered business management suite that allows you to see your business more clearly. Everything from financials to HR to operations lives in one place. So instead of chasing information, you've got it all in front of you. It operates in real time so you can forecast with assurance spot problems before they even become problems and generally move faster without blind spots. If your business is generating seven figures or more, there's a free ebook that's worth your time reading. It's called Navigating Global Trade three Insights for Leaders and you can download it now from NetSuite.com Bartlett that's NetSuite.com Bartlett I'll link it below.
- [154:14]
Alex Hormozi
This is the story of the one he's responsible for keeping a leading healthcare facility clean and safe. And he trusts Granger's highest quality H vac cleaning and safety products combined with their world class supply chain to consistently deliver, ensuring he's covered inside and out so he can focus on keeping his facility clean to help protect the health of everyone inside. Call 1-800-granger clickranger.com or just stop by Granger for the ones who get it done.