← The Game with Alex Hormozi
The Game with Alex Hormozi
The NO BS Way To Build $1,000,000 Business (on Impact Theory with Tom Bilyeu Pt 2) | Ep 857
00:57:27
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- [00:01]
A
Hey, guys. Welcome back to the game. This is part two of the Impact Theory guest spot with Tom Bilyeu. We go deep on a ton of topics. It's me. So it's going to be business related. Tom talks about a lot of stuff, but for. In terms of this podcast, it's mostly business. And so I think you'll enjoy the exchange. I don't get to go this deep on stuff often, and so it was enjoyable. If you like the first one, you'll like the second one. Enjoy.
- [00:29]
B
Yeah, no, the willingness to try things, I think is incredibly important. You said earlier about courage. I want to go back to that. So what is, what is the most courageous thing you've done?
- [00:41]
A
I actually think it's quitting my job. When you think that's the hardest thing.
- [00:45]
B
Back in the early days.
- [00:46]
A
Yeah, because I actually, weirdly, I think about this a lot. Like, what are the hardest things that I've done? Hard thing number one was quitting my job. This is the decision of quitting my job and then leaving Baltimore because I. To give everybody an idea, like, you see me now, but I was so afraid of my father's judgment and the few people that I knew from back home that I was going to like, quit my white collar job to go to go start a gym and be a personal trainer, that I actually drove across the country and called them when I was already there. Because I basically left in the dark of night, like no one knew. I basically was a stowaway to my own fear. And so I had to just say it. I just had to. I just drove there and I called my dad. I think when I was going through Texas, and Texas is like forever when you're driving across it. Yes, it is. And I called him, I was like, hey, I'm gonna, I'm gonna do the gym thing. And he was like, yeah, no worries. He's like, just, you know, come over, we'll talk about it at lunch. Because he would always talk me off the ledge. He'd be like, hey, you've got the, you did, you did Vanderbilt. You did in three years. You got the good consulting job. He's like, you aced the gmat. He's like, you're going to go to Harvard, you're going to get your MBA there, or Stanford. You'll pick one of them. He's like, and you're set. Like, you're good. Just. Just follow the plan. And I was like, I, I don't, I don't want to do that. And when I was like, I'm already gone. Then like the flip, you know, Then the thing that I was most afraid of was that he was freaked out, which is exactly what he did. And the thing is, is that a lot of people would expect the story to be like, oh, my dad understood and he was super supportive, but he wasn't. We didn't talk for a few years after that because I was the prodigal son and I did everything to his plan and I was living the most successful version of his life, not mine. And it was one of those realizations. You're like, I'm winning at a game that I didn't design.
- [02:33]
B
Yeah.
- [02:34]
A
And so I'm actually by default a loser. And so me quitting my job to then pursue fitness was the hardest thing I've done. The second hardest thing I've done was actually getting my gym to work, because I didn't. I had so little understanding of how anything worked. I had $50,000 saved up when I was 23 from the consulting job. I lived on basically nothing and almost banked all my pay. And I basically bet it all on the gym. I had $5,000 left after paying for all the equipment and everything else. And I had $5,000 a month in rent. And I had never sold anything to anyone. And so the idea of making $5,000 having never really sold anything to anyone in a local business, tried, never had in a. In California, which I was from Baltimore, I knew no one. So it wasn't like I could just get on my immediate friend group to come and at least pay the rent. I had no one. And so I think when I was like sleeping on the actual floor of the gym because I couldn't afford two rents was when it like really hit me that no one was coming to save me. And like, if I failed, I would have to go back and tell my dad he was right. And that felt like worse than death for me. And so that was incredibly hard. I remember that I was. I have a pretty decent work ethic, but at that time I was. My first session would start at 4:30, so I'd wake up at 4 and then my last morning session ended at 10. And then I would do the marketing, sales meetings, I would clean the gym, I would set up the next thing I would do the get the workouts, I would get the music prepped and then my 4 o'clock start showing up. And then 4 until 7:30 or so people were at the gym. And then after that I would run the billing and make sure the contracts are right and Then reset up for the morning and do it all over again. But I had zero employees. And so I didn't know. I didn't know you could hire employees. It was only when a member of mine who was an entrepreneur came up to me, and I'd been short with the class that morning. And she was like, you can't treat people like that. And I was like, what do you. But I knew that if she was saying it, like, I was really off, off base. And I think I was sleeping right around 4ish hours a night. And people say. But I did it for. I want to say. I want to say, like close to six months. Oh God. I was like delirious. I felt I'd fall asleep on the, like leaning on things. Sure. Yeah. I was very, very tired. And I used to tell people that it was the kind of. Kind of tired that a good night's sleep couldn't fix. Yeah, like, I needed a lot of time, but that was probably the second hardest thing that I did. A lot of it was just because I made up for a tremendous lack of knowledge with just, I just have to make rent. And then everything else is mine. So I didn't have any understanding of, like, I just, I. I spent money on nothing. My first gym had sandbags that I wrapped in duct tape as the equipment that I started with. Yeah, it was crazy. And when I opened the gym, I was selling people into a gym that had no equipment because I thought that you should open as fast as possible to start making money. Now, if I know now, I would have said I would have three months of pre sales, only collect money and have no, have no classes. That's what I would have done. But I didn't know any better. And so I was trying to get open as fast as I could then meant that eight hours a day at baseline is me with a microphone in front of customers, training, doing all of that before I could work on the business. And so, like, it was very real, 16, 18 hours a day. And I. I think setting that standard for people who are new is useful because when you start, you don't have enough money to pay other people. And so you either have to raise money, which you can do, I wouldn't recommend, especially if it's your first shot, or you have to work three jobs and basically throw out all of the opinions of everyone who has no idea how business works, because the only people you probably know when you're starting out don't have businesses. And so they will tell you all these things. You should be doing. And you should take more time off and you should have more balance. And this isn't healthy. And they will tell you all these things, but they are not where you want to be. So don't listen to what they say, completely ignore them. And instead, like, I like this little ism, but it's, listen to the opinions of people. Don't listen to the opinions of people who are closest to you. Listen to the opinions of the people who are closest to your goals. And a great approximation of that is if I had known that when I was doing the decision to quit, then I would have known that this is where I want to go eventually. I want to start a business. And if it's hard for me now, it's never going to get easier. That says I have more responsibilities, kids, wife, whatever. That's only going to get harder. And the people that I looked up to the most were the most aspiring entrepreneurs. And they would have said, go for it. But everybody I knew was saying, don't go for it. Don't throw away what you have. But I think sometimes you have to trade good for great. And there's always going to be a J curve, there's going to be a dip, where instead of being immediately rewarded for the decision, you're immediately punished. And you think that you're making the wrong move because of what immediately happens after, which is how humans learn, which is why it's so tough. But it's like the first week of the gym. Just because you haven't seen results doesn't mean you're doing the wrong stuff. You're probably measuring on the wrong time horizon. And so quitting the job, starting the gym was the second hardest thing that I've. That I've done. I would say that the, the third hardest that I've worked has been now the season that I'm in right now. This is probably close to the hardest I've worked, but it's different. There is nothing urgent, everything's important. And I am taking fewer days off than I ever have and basically working at all hours that I can physically. And so the times that I'm not working is active rest so that I can increase my total output over a longer period of time. There's a long winded answer, but those are the two things that I feel like those were hard, hard calls for me to make and those were real struggles for me. But those, those were the times when I feel like it. It was. I'm very proud of who I was.
- [08:30]
B
Then to do it now. I heard you talk recently about you can feel a shift in culture, people moving away from the soft stuff, getting a little bit harder.
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A
Yeah.
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B
What do you think's going on in culture?
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A
Oh, I think the pendulum has swung back and I'm so excited. I do think that it's going to swing back too hard, that people are.
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B
Going to go way too hard into like other direction and all that stuff.
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A
Oh, hustle porn. Oh, that. I. I don't mind about hustle porn.
- [08:53]
B
So what do you mean?
- [08:53]
A
No, I meant societally, like from the political realm and stuff. I think that the pendulum definitely reached its pinnacle on the other side and then is going to swing back and there's going to be. And the thing is, is that when the way pendulums work is that we have, we start swinging back and everyone agrees. It's not everyone, but more people than not agree that the it's better coming back to the middle and then it's better and then it's better and then all of a sudden. But hey, more of that was good, but then at some point it stops being better.
- [09:18]
B
Right.
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A
And so, and this, I think cycles is why humanity lives in cy. I think it's likely that we will over crack, but it might take 10 years for that to happen. So I think right now we're going in the right direction, which is basically pushing away from the political correctness and leaning more into reality, which I am, I am a staunch proponent of reality.
- [09:38]
B
You and I both. Now you've said that you want to normalize guys, young men working 12 hours a day, six days a week.
- [09:46]
A
Yeah.
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B
Why?
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A
Because I think that's what's required to get where you want to go on the timeline that they want.
- [09:53]
B
Why men? Why not men and women?
- [09:55]
A
I have a 88% male audience or something like that, and so I feel like it's my place to speak to them. There are obviously women who follow my stuff, and if that's you, then you can assume that when I say men, I mean men and women. But I think that if a message is going to hit people, if I say men, I will have a stronger reaction and a higher likelihood that it changes someone's behavior than if I said people or men and women. And so if I, if I, if I look at my effect size of my message, if 88% of the people who hear my message are men, then I'd rather make it as potent as possible. That's why I do it that way.
- [10:30]
B
Makes sense. So what should young men be doing? Like what they're. If they're working their ass off 12 hours a day. How do they make use of that 12 hours?
- [10:42]
A
I think being really clear on trade offs. So I, and I think you, I think I'm speaking for you here. I gave up my 20s.
- [10:54]
B
I would say I sold my 20s.
- [10:55]
A
Yeah, sure, yeah, yeah, I sold my 20s. I'll say that. Well, I actually ended up losing everything. And so I did have to start over at zero again.
- [11:03]
B
But hey, with way more knowledge. Yes, all day long.
- [11:07]
A
So I traded my twenties. How about that? So, and that, and that perfectly mixes with the trade offs is that you can have the nights out, the fantasy football league, the rec dodgeball team that you want to go to beers on Tuesdays. You can do that. You just can't also build your dream unless that is your dream. And I think that's the big part is like entrepreneurship isn't for everyone. And I, as much as I, I talk about entrepreneurship a lot. I think there are plenty of people who don't want that. In which case, great, like, you've already won. Congratulations. Right. It's simply the complaining about reality that's my problem. And so I think that most young men could accomplish all of their goals if they extended how long they would be willing to give themselves to accomplish it. Now, not to anti Peter Thiel here, because I'm a huge Thiel fan as well, but I think that when you are a novice, you have no approximation of reality. And so one of the difficult parts with how we observe success, a lot of it's social media driven. And this is the easy, this is the best analogy I have. If you were to look at an Olympic marathon, look at where the people in the stands are situated. They're situated at the beginning of the race and they're situated at the end of the race. But watching someone start a race and watching someone finish a race has almost nothing to do with running a marathon. And so that is the closest approximation that people think. That's why everyone's really excited to start a business and they're really excited to sell a business. But everything in between, the mundane middle as I like to call it, they're just, okay, I'm four miles in, it's this times six. Okay, I'm five miles in, it's this times five plus one. Like, you just keep playing these mental games with yourself to learn, to endure. And I think that that endurance is. If I had to pick one trait for a young man to have, it would be resilience. And I define resilience as the amount of time after an aversive experience that you return to baseline function. And so if you have a series of behaviors that you do under certain conditions, and then something bad happens, how quickly you return back to the original behavior set. And so in doing that, like, if someone can not give up and learn, then on a long enough time horizon, you guarantee victory. Like, if you only had those things, you don't stop and you get better. That's it. And I think that if those are the two hypothetical extremes, that's what I would want young men to have. And if you know that, then I know for me, because I've been asked before, like, did you always know you're going to be successful? And I don't really like the question because I only knew. And I. And I, to my core, believe this. I knew I would never stop. And that was the only thing I could commit to. I just knew I would never stop. And I knew that I wouldn't go home to Baltimore if the gym failed for whatever reason. And so my plan B. And this is. This is super tactical for anybody, is that I think you should look at your plan B in excruciating detail. Now, Arnold has this whole thing of, don't have a plan B, make plan A work. And I understand both. Both sides of this, but me knowing my plan B allowed me to pursue plan A. It allowed me to take the jump. But I think the day that I decided to live, for me, was the day that I. I allowed my father's dream to die. And so I think that you either live out your own dream or you live someone else's. And one of them has to die for the other to live.
- [14:38]
B
Wow. Yeah. That's heavy. It's interesting. I never love my parents.
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A
Yeah.
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B
But I never felt in any way, shape, or form beholden to what they wanted for me. Now, I will say, though, sort of a bizarre similarity. I was trying to write. I wanted to break into the film industry. And I thought, okay, I need a screenplay. That's going to be my calling card because this is all before YouTube. And my mom once calls me in the middle of the day and I'm sleeping. She's like, why are you asleep in the middle of the day? And I'm like, I got a new job. Doing what? Driving. Driving what? Driving models. Driving models. That's escorts. And I was like, oh, God. And so my mom was like, you have to call them right now. And, like, turn this down.
- [15:22]
A
There's no way.
- [15:24]
B
And so that is the one time where I let my Mother's superior judgment, I think, in this case. But, yeah, so that I could write, I took a job driving lingerie models to their appointments.
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A
Someone has to.
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B
Someone has to. And the funny thing is, in the interview, they're like, first of all, the guy, he's sitting there playing guitar while interviewing me. And he goes, I have to ask, why are you interviewing for this job? And I was like, I need something that'll let me write during the day. He's like, okay, well, here's how it's going to work. The girl's going to have a pager. You're going to have a pager. If they paid you, you know, whatever, seven. They're like, you go in there with a gun, you kick the door down. And I was like, oh, God. Oh, God. But I actually took the job. I can't believe I did. Yeah, very stupid. I'm very grateful to my mom for ensuring that that did not happen. But I was actually going on a job where they're like, you kick that door down. You get in. If she sends you a 7, or whatever the number was. I was like, okay, cool. If that's what it takes to write, man, yeah, then we'll go for it. But thankfully not.
- [16:23]
A
I think it's worth. For those of you who are young men or young women. There you go. Who are listening, I think, planning out what B looks like and not being ashamed of it. Because the thing is, is people will judge you based on the career path that you're making, but you're not making that as your career path. You're making that as the launchpad for what you really want to do. And I think that if you can. If you can reconcile that reality, which is that you will have. Like, for me, it was super tough because everybody at Vanderbilt was that all the guys I knew were pretty successful. And so a lot of people were like, oh, back home now. High school friends, sure. Different. But, like, my college friends, I went to a good school. Like, almost all of them are investment bankers, management consultants, private equity. They all make good money. They're, like, heading some software thing. They all are successful. And so when I went to do this personal training gym thing, it was like, oh, Hermosa gave up. He's out of the race. You know, he's not. He's not playing the game anymore. And I would have these, almost like these fan. These shame fantasies of what they were saying about me while I was sleeping on the gym floor, not being successful, having literally kids above my roof, because it was. I was In a garage. So kids would like party at night while I was trying to sleep really tough, but like literally in front of me, demonstrating the life that I could be having while I actively was on the floor. But they weren't thinking about me to begin with and nor do they really care. And they're going to all die eventually. And so if, if they were to die for me, then their opinions wouldn't matter. And if I'm going to eventually die, then what happened to me won't matter either. And so then it's like, wow, I'm going to change my entire present existence to satisfy the fictitious idea of what other people are saying behind my back when they aren't thinking about me. That seems silly, but it's hard. But people don't do it. And so I'm saying don't be ashamed of the, the lingerie job or the Uber or whatever it is that you're doing, as long as you're using it to build towards thing. Now if you're, if you're live, you know, you're driving Uber all day long and you're making 70,000 a year and then you spend a hundred percent of it, then what are you doing? You're using all your time up and using all your money. Like you have to be banking something. You either be banking time so you can work, you're going to be banking money so that you can something. When I say invest, I mean invest in skills, invest in opportunity. Not trying to, you know, play the crypto market or become a day trader because you will lose.
- [18:42]
B
Yes, you will. Speaking of things that people may lose at, and that might be giving them existential dread, what do you think about AI for entrepreneurs?
- [18:50]
A
Oh, it's a great question. I, I'm not worried about it at all. From a. What will it change about what I do? So I have seen, I basically see the history of humanity as humans, then humans plus tools. And then tools beat all humans. And so AI for now is a tool just like the Internet, just like computers. And we will use the tools. So I as an entrepreneur will use all the tools available to win. And so AI will come online and we'll do that stuff until AI can do everything better than everyone. And at that point it doesn't matter. Nothing matters. And so again, me dreading that changes nothing about what I do today. And so what I will do today is what I've always done, which is do the best I can with the resources at my fingertips, what's available to me. And so I absolutely, across all portfolio companies are pushing. How do we incorporate AI into this? How do we put it into a streamlined process? How can we incorporate in sales and marketing, whatever. And we will continue to do that until an AI is starting and running businesses without us. And at that point we will try and do that. And if AIs own AI businesses and they're just out competing humans at everything, then the world is different. And I have no ability to predict that. And so I'll just keep playing the game until I can't play anymore.
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B
What's the most jaw dropping use of AI that you guys are doing in a portfolio company?
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A
We're getting really close to being able to have it take calls.
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B
Whoa.
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A
Yeah.
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B
Specifically inbound, I assume.
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A
No, outbound works too.
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B
Whoa.
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A
Sales setting. I think it will get sales. Yeah, I think end of next year it'll be able to do sales.
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B
Whoa.
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A
But like setting, I think we're basically like three months off. So main thing, the only issue right now is lag. So the actual responses are perfect. They're on script. They all reasoned, all that stuff works. The only issue is the lag time between someone saying something in the response or if someone says something, the person starts, the AI starts responding and then they say something else. It can kind of like jumpstart it. And so the next big iteration that's going to happen is voice to voice. So right now what happens is you, you know, prospect says something, it goes to a satellite, which then goes down to a database, which then transcribes it. AI takes that as a text prompt, responds in a text prompt, beams it, translates it to voice, and then beams it up to the satellite to then say to the other side. That takes like a second and a half. As soon as it's voice to voice, it eliminates like three steps. And so it'll probably be like a half second. And at that point that's just human latency. And so that's close. Like, that's, I think that's three, three months off, four months off. Like, that's, that's, that'll be end of Q1 next year.
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B
Wow. Now, are you guys doing any of the training or are these companies that are building these, These are tools that we.
- [21:33]
A
I'm not an AI company. And so like we were talking earlier about the platform of like, are we a, you know, are we a dev company? Acquisition.com as a holding company is not, is not an AI company. We want to utilize the tools that are available to us. And most of the AI companies that we've you know, started vendor relationships with, etc. There's usually a training period that you want to train your specific, you know, model, agent, whatever. And so we bung in that process.
- [21:58]
B
Yeah, that's where I want to get my hands in the mix. I want to do the reinforcement learning so that it will do the things we want to do. But, yeah, I don't want to have to build the AI out itself. AI is the one that. Man, this really gets me excited when I think about how much it's already sped us up and we're, you know, what are we just under two years from when it launched? It's absolute insanity how far it's already come. If you could push a button and get it to work in one area of your company, that would just have a huge impact. Where would you want it?
- [22:32]
A
It's tough. I'll give you three. I'll take them. So, I mean, marketing. Sales. So marketing is like, how can we get the stuff to be, like, truly top 1%? The thing that's tough is that the thing that I hate and like about it is that whatever skill AI can do for you can do for everyone.
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B
Yep.
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A
And so it has a massive equalization. So, like, the ability to execute is going to be not nearly as much of a competitive advantage, which I'll just say transparently, I'm bummed about because I'm pretty good at it. I get it. But I'd say marketing and sales, both of those. And then the one that people might not expect is this decision making. Like, if it can get better at prediction than me for outsized returns, then of the three, that would be the highest return thing that we could do. And so I think that again, but if it can do that for me, you can do it for everyone. And so that's where that's. Again, this is where I struggle with it. So I just think of, like, what can I do today? And then I don't spend any time on what might happen in the future with it, because when it changes, I'll be there.
- [23:39]
B
Yeah, yeah, no, that's, I think, the right way to think about it with that kind of stuff. The nice thing now is AI doesn't have taste. And so what I have found is that because the output of the prompt matters so much in terms of what I give it, that that still feels like it matters a lot. To your point about you have infinite or limited resources against infinite possibilities. The same is true with AI. So you can have it go a thousand different directions, ten thousand, million, whatever. And that matters. So understanding the end target person that you're creating this piece for, but it taking all of the manual work off of my plates that now I can iterate faster. So I just have to think about, okay, I need to understand my customer. I need to understand what it is that I'm trying to communicate. The angle that I want to do it, knowing which piece to say yes to, which to say no to, where to push it and then to be able to edit it. It's taken so much time off of so many of my different workflows.
- [24:38]
A
That's cool.
- [24:38]
B
It's really incredible. And for us, because game development is such a big part of what we do. If it can do 3D characters, oh my God. All of the cost is in the creation and the rigging of the 3D characters.
- [24:53]
A
How far is that away now?
- [24:55]
B
I'm going to guess So I just saw very compelling 2D to 3D stuff. It's static, so you can't rig it yet. So I'm going to guess guess 2d to 3d over the next year is going to be extraordinarily compelling. Give it another 18 months. So 18 months to 24 months. And I think that the financial structure of a gaming company changes overnight.
- [25:18]
A
Yeah. Yeah, it's pretty crazy.
- [25:22]
B
So you were saying that you're bummed about it replacing certain aspects of marketing because you're really good at it. What is the thing? Because we can all look at you and go, yeah, there's something here that you were unusually good at. What is that thing?
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A
Things. Rhetoric.
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B
Say more.
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A
How you structure statements to make them more interesting or compelling for an audience.
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B
Doing it intuitively or do you have a method?
- [25:50]
A
The single greatest training grounds for this is Twitter error. X I. I started tweeting. I can't remember. You probably look at my profile probably 3, 3 ish years ago. And I think Twitter is one of the best writing tools that exists because it gives you real time feedback immediately for how good the quality of your writing and thinking is. And so there are basically sentence structures that resonate better with people. And so that would be like having three things in a row where you have. They all start with the same letter. If you have basically like a reverse sentence, like, it's not about listening to people who are closest to you, it's about listening to people who are closest to your goals. And so it's like there's repetition there and you change one variable. If you can't do it in a decade or if you wouldn't do it For a decade. Don't do it for a day. So there's alliteration and so there's. And I would say some of this has been probably subconsciously intuitive because I've tweeted probably 6,000 times over the last three years. And so I've had a lot of reinforcement loops. And it's. And this is where, like, AI will do better than I will eventually. But, like, right now I can look at. I want to record this because there was this time where Layla and I were driving, and she wanted to, like, tweet while I was driving. And so she would read me what she wanted to say, and then I would tweet it back to her. And they ended up like they just banged it. And you kind of get in the flow. I was, like, driving on the road. I could just, like, kind of, like, zone out and think about it and like that. That's something that I've gotten significantly better at over the years and making more content. So it's like I have verbal practice and feedback loops, which are more delayed. So I don't think it's as strong as the Twitter feedback loop. And that's probably been. I think that's. That's the. From. From a. From a copy and content perspective. That's where I think I've put more emphasis. I love it, because this is really interesting for persuasion, is that if you make the statement more memorable, people have a higher likelihood of remembering it. If people have a higher likelihood of remembering it, then they will think it was their idea. If they think it was their idea, they're more likely to do it. And so the best persuasion is when someone doesn't feel persuaded. They just think it's their own idea and then they do it. And so if you make things memorable in a very real way, you will influence and change more people's behavior. And so if we look at the best orators of our time, the last hundred years, they were very skilled rhetoricians or whatever, and they use specific sentence structures that people tend to like. And same. It's like, probably chords in music. I think it's the same thing happens with words.
- [28:33]
B
That's interesting. All right, what's some of the worst business advice you see people give out all the time?
- [28:39]
A
Do a bunch of things and see which one works.
- [28:42]
B
Why is that terrible?
- [28:44]
A
God, so many reasons. Well, first off, trying to do many things at once, you already have such limited resources. The easiest analogy I can think of is, imagine you've got one cup of water and you need to overflow Another cup to get it to be an effective dose. Enough volume for you to see an outcome. The visual I can give is, okay, let's line up seven shot glasses, because millionaires have seven streams of income, apparently. And so now we're going to pour that water into all of those glasses and then hope that it somehow overflows, but it's not going to. And so what ends up happening is you just have insufficient volume of action on seven things and then you accomplish none. And the fallacy is thinking that you'll see which one will work, which assumes that the environment, the circumstance is going to be the thing that makes it work rather than you. And so better stated is that you can make any of them work, but none of them, them will work unless you focus on one of them. That's all rhetoric, right? That's. That's the idea. And so I think that is a very insidious piece of advice. I think that you can try many things if you want. If you are going to do that, do it in sequence. Do one at a time. But I say that knowing that if you actually try hard at the first one, you'll probably make that work. So try the first one that you think is the best one first. In which case, why do you even have six through, you know, six through two or seven through two? And so that. And I think there's this big idea. This is one that I remember talking to a portfolio company about. He was like, I'm not really sure if I'm passionate about this anymore. Like, about, like this, this, this product or the company, whatever. And so he was like, I think I want to consider starting something else. And I said, what do you think the natural extreme of this looks like at the top? Because in my opinion, all businesses at the top look the same, which is you're going to have a head of marketing, you're going to head of it, you're going to have it as sales head of, head of product, head of customer success, whatever. And so if you win and you win all the way, it looks the same. And so where your entrance point to the maze is, doesn't really matter if that's what the hypothetical extreme is. And so I have this story about a friend of mine who started a cookie store actually here in California. She started this cookie store. And he was in fitness, right? So it was kind of hilarious. Like, it's a really fit guy, starts a cookie store. And I remember I asked him, I was like, are you passionate about cookies? And he was like, no. And I Was like, huh, weird. He's like, well, I looked at the market. There's, there's a lot of people. And this is before cookie, before crumble. So he had a, he had a good inclination that like high end cookies were going to be a thing. So he, he did his, he did his, his homework. But what he was passionate about was being excellent and he did amazingly well. And so I think that you can be passionate about ideals and translate that to anything. And so I had a conversation with Ben Francis from gymshark this year. Probably the most, the best, the best day that I had from a business owner perspective was hanging out with him. Just had a really good conversation. And there's not a ton of people you can talk to about like revenue levels and problems that come at that. And we had a great discussion. And what was interesting, he was like, I can't believe that you're doing all these different things. Because he saw each of the portfolio companies as a different thing. He's like, I can't imagine doing anything besides gymshark. This is all I want to do. And I thought about it for a second. I was like, acquisition.com is the only thing that I'm doing right. These are just like, fundamentally, like, you have different types of clothing. How I can't believe you have all these different types of clothing, all these different types of apparel. So it's really chunking up and chunking down. And so if anyone hears that and thinks, well, wait a second, I thought you told me that I should focus on one thing. How are you doing all of these different things? There's a very big misconception when you are starting out that CEO and owner are the same thing, and they are not. And that's because in the beginning they are the same because you're the only guy. But if you look at, you know, Berkshire Hathaway, for example, Warren Buffett is not CEO of Coca Cola. He's not CEO of Geico. He has operators who are in charge of each of those companies. Now, those guys couldn't run three companies. They can only run the one they're at. And he can only run Berkshire Hathaway. And so it's really chunking up or chunking down a level to understand how do you do, how do you have multiple things? Because you can always go down and say, okay, well, if you have an agency, then you have 10 clients. How can you have 10 clients? You should only have one. Well, it doesn't, the logic doesn't carry. But it's really just that One person has limited resources. And so by limiting the scope of the problems that we have to solve, we get more leverage, as in, we get more for we put in, in my opinion. And so that was how I reconcile those two kind of styles of doing business is that I'm not CEO of any of them and I'm not even really CEO of acquisition.com, if at all. And so that was how I made sense of that, because that's the only one thing that I think about.
- [33:43]
B
All right, so what is the difference between what life is like when you're running a million dollar company versus $100 million company?
- [33:52]
A
I was going to give the obvious answer, which was scale. That's like the first.
- [33:56]
B
What's the knock on.
- [33:57]
A
Yeah, so we have only one theory of how we grow everything. And so that's kind of been our unifying principle, which is the theory of constraints. So a system will grow until it is constrained and it will grow no further. And until you relieve the constraint, whatever the bottleneck is, it will stay there. And so the difference between a million dollar business and $100 million business is typically if you're a million dollar business, you're still, you're doing a lot of everything still at 100 million, you're predominantly making decisions and SWAT, teaming in on high leverage problems that need to get solved. So kind of like the Elon, like we jump in and Layla and I both kind of championed this methodology of close CEOing, which is rather than having somebody who's kind of like running the basically driving so driving objectives on a regular basis, we see as like traditional operations and management versus kind of like CEO as saying, okay, the single most important thing that we need to solve right now is this product ascension piece, or we need to solve this sales constraint, or we need to solve this CS issue, whatever it is. And then basically CEO goes in, is now on every huddle for that because the operators who are running each of the divisions or functions are continuing to drive the ball forward. And so the TLDR is in the very beginning you're doing everything, at the end, you're doing one thing very well. And your understanding of talent will dramatically shift over that time period. And so right now you can't imagine having anyone else do anything because everyone who works for you probably isn't that good. And that's because you don't know how to recognize talent and, or you can't compensate them well enough. And unless you're giving away big chunks of equity to people, which is a strategy, there's nothing wrong with that. But either you're building a dream team or you're, or you're bootstrapping it. If you're bootstrapping it, you're gonna be doing a hell of a lot of work. If you build the dream team, then you're gonna have to give slices of the pie away again. Cool. Either way, expecting a different outcome from a different decision is where the problem comes in. And so that's kind of obviously like at a, at a very high level, you're doing a lot of stuff with no help to. You're doing a few things with tons of help so that all of the normal day to day activities continue. And you're just thinking what's the highest leverage move we can make?
- [36:11]
B
How do you recognize talent?
- [36:14]
A
So this is probably so if I had to say like the three things that have changed in terms of me as an entrepreneur for the year or like last two years, like big, big moves. One is my understanding of brand. So probably four. So understanding a brand has, has deepened. My understanding of focus has deepened. My understanding of talent has deepened. So it's not like, oh, I learned about talent, it's just my understanding of it has grown more nuanced and the arbitrage that exists between B and A plus and so I still think that one of the greatest returns that you can make as an entrepreneur is paying someone who's exceptional exceptionally well. And Steve Jobs gives this, so I'm not going to claim credit for it, but he says if you look at the best cab driver in New York compared to the worst cab driver, it's probably a 3x difference between and that's the best and the worst. But the best marketer and the worst marketer, it's not a 3x, it's probably 100x difference. Same thing for the best engineer. And now that's the best and worst. What about good and best or good and top 0.1%? Well the difference between those guys is probably still like 25x. It's huge, huge, highly leveraged. And so the arbitrage is that you don't typically have to pay the best guy 25 times more than the good guy. You can just pay him three times more. And then the all the increase in throughput goes to the company. And that has been my shift and moving away from. So basically headhunting happens in level. Right in the beginning you start running ads to get first you, you talk to friends and family, right? And then you start running like indeed ads and Craigslist ads to get people and maybe you post in communities you own or you make public posts, whatever. That's how you get your next level of talent. And then from there you start networking. Maybe you hire headhunters and recruiters to help you out. Maybe you get an internal resource who starts doing outbound looking for specific types of candidates. And this also follows with the functions of the organization. If you're finding a low level role, you can still do the lower leverage ways. The higher the role, the more individualized the approach. Just like a whale would be if you're trying to go after a big client, a high value client, like, okay, I want to sign Amazon for my warehouse services. Like, okay, we're going to have a really tailored approach. You're not going to run an ad to get Amazon. You're going to have to know somebody, you're going to have to work your way in. It's going to take a while. And so I would say that now my thinking has, rather than been like, let's go find a unicorn to I need John from this company to work for me. And I don't know John, but I know he's really good and I need him. How do I. What would it take for me to get him to be here? And so I'd say that that has been the shift and I am more okay with getting, I'm basically being involved in some of the highest level recruiting and, and Those roles take 6, 12, 18 months to actually come to fruition. Because it's like a courting process. It's more like a marriage. Like they don't need your company and like they have a career. You're not giving them an opportunity. Like they're giving you a company because they can drive an entire division of growth. They can take you international because that's what they're, you know, that's their Rolodex is. Or, or they're, they can take you public if that's where they're, you know what they're specialty, whatever the thing is. And so, so that's kind of how I see as a very high leverage use of my time. Despite the fact that it's a very slow process that has very delayed reinforcement.
- [39:34]
B
Yeah, talent is a whole beast. How do you go in when you've got a role that you don't necessarily know? How do you make sure that you can't be bamboozled?
- [39:44]
A
So I'm stealing this from Layla. Her frame is talk to as many really smart, basically reach out to people who you would want to hire. Ask Them, if they know anybody, hop on calls with them. And she uses the interview process as her learning process. And so from there, you know, if you only talk to one customer success person, you have no idea if they're good or bad. If you talk to 20, you have a really good idea. And so because then by the, by the 17th, you're like, but what about this and what about this other thing? And the, the way that I think through this is a couple of razors. So razor number one is the quality and quantity of metrics they track and how they influence those metrics. So if I talk to, let's say I wanted to find a sales manager, I might say something like, okay, so you know, how do you, how do you think about running sales and improving sales performance? Now if the guy says, you know, got to get in there, get the team riled up, you know, make sure, make sure the culture's good, you know, drive outcomes, I'd be like, okay, how do you measure that? Now if the guy's like, you know, make sure the close rates are good. And, and yeah, and I'd be like, okay, how do you make that go up? Now the best guys would say, well, they would have every metric all the way down. So it's like, what's our contact rate, what's our, what's our, what's our offer percentage? What's our close rate, what's our cash collected, what's our back out rate? Buy rep, what's LTV to rep? So because some reps will have higher LTV because they'll have lower turn because how they're sold and what expectations were set. And so if these are the metrics that I'm doing, they would then say, well, which metric would you want me to improve? I'd be like, okay, if, let's say that offer rates low, what do you do? Like, okay, well then that's probably going to be a lead nurture issue, which is we're not qualifying people on the front end. We probably need to fix the headlines that we have in the ads. Maybe the offer that we're doing for whatever giveaway we have that's generating these leads. And then I would probably add in some sort of disqualification process earlier. So if the guys can look at the stats, I could remove them from the calendar so they can open up a slot and then increase throughput. Now if someone said that, then I'd be like, okay, that's clear. I zoomed in on a metric because he had many and he had quality metrics. And he knows how he can influence them. And so if you have a very good idea, because I remember the first really good HR person that we, that we brought on, they introduced all these new metrics to me that I had no idea about. And I was like, this is great. She was like, well, what's the cost to acquire talent here? And I was like, I haven't thought about it. She's like, oh, yeah, well, we need to know we can spend this much to acquire talent. And this is our average cost to acquire a role at each level. And then what's our. What's our two way fit percentage? I was like, what do you mean? I was like, what, 90 days? What percentage of people are saying it's a 10 out of 10 from the manager to the person and the person to the manager. So it's a two way fit. Both people say that this is a good, a good thing. And then what's her average time to fill? And I was like, I don't know. Right? And so all of a sudden, she had all these different metrics. I was like, this makes complete sense to me. And I've never measured this. And then all of a sudden, from that point going forward, for every single head of people or director of whatever it is we're doing, if they're in charge of some sort of recruiting function, then if they're not bringing up those metrics, then I know that they're already not at that caliber. And so again, it's like. And this is where I think, like, entrepreneurial pattern recognition is so valuable. Is like every entrepreneur that I know who has had something successful and then started something else with the assumption that the first thing wasn't because of luck, because we have probably both seen some guys that got richer than they should have. I'll just put it that way, because I remember I had a dinner with somebody once who was like. And I'll loop back, but he said, isn't it crazy that, like, Gym Launch could be the biggest thing you ever built? And I was just like, that is not true. I just like, I wholeheartedly reject your premise. Like, I know exactly what we did to build Gym Launch, and I know all the reasons that it was not as big as I want it to be, and I know what I'm going to do next, and I know how to win. And that guy never ended up building something bigger than the exit that he had. And it might have been because of his view of the world or because he got lucky or whatever, but that pattern recognition for most Entrepreneurs that truly are self made, that forced their will into existence, their ability to get it again after losing it all, or just when they, when they take their second or their third or their fourth swing, they almost start. Like, for me, every company I've built has gotten to each revenue level faster than the company before. And it's because it's like, oh, I already beat the boss at this level. I know what has to happen here. Oh, I know what has to happen here. And then you finally get into virgin territory. You're like, I don't know what's going on. And then your rate of progress slows again. And so it's like you want to crystallize the artifacts of the knowledge of beating the game at every level so that when you, when, when you get to that level again, you're like, oh, this is another one of those. I know good sales managers look like this. They, they know these metrics, they say these things, they interview this way. This is the best source for them. And then all of a sudden, when it takes someone 18 months to find a sales manager because they hire wrong the first time and then it takes them a year to figure that out and then they go back into the process and then they have to do sales rent themselves and then they've finally on their third try and that was the constraint, they can't fix it and so they stay stagnant that whole time. Whereas if you think about how much faster it goes when you're like, all the roles are right and then it's like, boom, you just go to the next level. That's order of magnitude. I think that's the, that is the, those are the scars and the lessons that we collect as entrepreneurs so that we have our cheat codes for when we get to that level next time.
- [44:48]
B
All right, as you scale up and you are just really entering a whole new echelon, how do you think about, or do you think about political environment? Does the government matter to you at all? Do you think about tax or anything like that?
- [45:02]
A
So I'll start with tax. I don't think much about it. I have always been of the belief I should just make more money and that's more under my control. Now. We'll be, you know, we'll be sensible. If we buy a building, we'll depreciate it, you know, you know, we'll donate a certain amount to charity because we can, you know, write off 30% of adjusted gross income. It's like, okay, well that takes me from 37 to 29 you know, you know, we work our way down, but we still pay taxes, right? And I'm still waiting for this. I'm like, what is this? No taxes that billionaires are paying? I'm still trying to find this loophole that all these politicians are talking about. But the big realization that I had around taxes was realizing, and this was when Elon still lived in California, that all the richest people in America lived in California, or many of them did, and New York. And I was like, if they're the richest people and they're in the highest tax state, what do they understand that I don't understand about making money? And so the big misnomer or misconception that I had is that my understanding of making a billion dollars, which was a goal that I had for a very long time, was. And to be clear, for anybody who has that goal, like, it wasn't always a billion. It was first a million, and then it kind of moved its way up. But the first way I thought of making a billion dollars is that I had to make $2 billion in net income, and then after taxes, I would have a billion. And then the second version was, oh, I just need to make enough, and then I'll invest that money. And then if I make maybe, you know, 400 million over 10 years with appreciation of the stock market, things like that, I could get to. I could get to a billion. Okay, that was my like 2.0 version. And then the 3.0 version was, oh, you. The thing. The asset itself has inherent value. And so I only need to get to like 100 million in EBITDA with a conservative 10x multiple to have a billion dollar asset which I can then take loans against, or I could sell portions of it or whatever I want to do there. And so that's kind of like how my evolution of getting to a billion kind of changed over time. I know, you know, this is obvious, but, like, for me, I didn't even understand how it worked. So that's the tax component and some of the enterprise value component. What was the other part of the. You had two questions.
- [47:12]
B
Well, so do you care about who's in government?
- [47:15]
A
Yeah. No, that's my simple answer. Who is in government? The regulations that they put in place, I will only be affected by those regulations or changes in tax code. Like, you know, like we just said, if it was something that affected me disproportionately, maybe like Elon, then it might make sense for me to change my behavior in a way to try and influence the outcome of the election. Because then it's like, I have high. You know, we. I think we all try to have high agency. Like, what can I do about it? But as a rule, I try not to think at all about things that I cannot control. And so we're like, sure, you can vote. Okay. But, you know, the one vote I have in the one state of the county, that's already whatever color you're in, whatever. But if I really wanted to get into it, it's not your vote that matters. It's how many votes can you influence? Like, that's the game. And so the easiest litmus test I had for this, I remember this was like, a formative experience for me, is that when we went through Covid, I was in the gym space, which, woof. Right. 100% of my customers were not allowed to do business legally, in 24 hours. And so that year, we went from 37 million in revenue to 31 million in revenue. Okay, so we did 31 million in sales in an industry that was not legally allowed to do business.
- [48:44]
B
Whoa.
- [48:45]
A
And I think is one of the biggest entrepreneurial successes I've had, despite the fact that we shrunk that year. And I remember managing the team during 2020 saying, if we cannot control it, we do not talk about it, period. Only talk about the things that we can control. And whenever there's a disadvantage, it means all of our competitors are screwed. And so that means there'll be more for us because we'll work harder while they get disheartened. And so they're going to be talking about all the things that's not fair and blah, blah, blah. But we are going to advertise our asses off, we're going to sell our asses off, we're going to deliver like crazy, and we're going to find a way to make it through this, because every one of us, like gyms, will not stop existing. So if we believe that to be true, then we need to find a bridge for them to get from here to there. And so we can build that bridge. And the nice thing is we have more resources than our competitors, which means we can build a better bridge than anyone else can.
- [49:44]
B
What was the bridge?
- [49:45]
A
So we. We came up with something in seven days called the hybrid gym. And so basically what we would do is you could meet with people one on one, in person. That was loud. You couldn't do workouts. And so what we did was I got all the gyms together to teach different classes and different variations. The whole gym launch, community so that we had 12 hours a day of sessions that were being streamed by different gym owners. And so everyone was able to maintain their membership and have way more classes than they did before and do them at home.
- [50:16]
B
And so we pooled the resources. Very smart.
- [50:20]
A
And so we, we cobbled together the streaming thing so that because we, you know, we, we paid for all of the baseline tech that was required to do that, they supplied the talent to lead, to lead those sessions. And then from marketing and sales perspective, they either sold over the phone, which we had more ramped up sales scripts, which was more reasonable at the time because people understood it, or you'd meet in person, one on one to do it. And some people were able to meet one on one, just do one on one training, things like that. And we leaned really heavily on supplement sales because we still have Prestige Labs. And so Prestige Labs. A lot of gym owners were able to get more people to take supplements during COVID because they're shipped straight to their door and not have to come to the gym. And so the combination of those two things allowed the majority of gym owners to get through. Now, what was really interesting. Now, I think you'll dig this. So about. I can't remember the exact number. I want to say between 8 and 10% of all gyms went out of business in 30 days.
- [51:15]
B
Oh, my God.
- [51:16]
A
Yeah, and my theory around this. Yeah, my theory around this was that they were waiting for a good enough reason to give up.
- [51:25]
B
Interesting.
- [51:27]
A
And so they were waiting for a reason that they could look at their friends, that they're like, you know, what are you gonna do? Oh, my God. They were looking for a socially acceptable race. People who had owned a gym for eight years, 10 years, and then when the second wave of shutdowns happened, like nine months later, whatever it is, when they were like, maybe we'll open it and shut it down. That was when the guys who really wanted to but could, who literally couldn't pay the bills anymore, went out of business. So it happened in two waves. The first ones gave up. The second ones had no. Of course you always have a choice, but like, those guys ran out of resources and so. But yeah, we were able to make it through.
- [52:02]
B
Wow, what an awesome example of no bullshit. What would it take? What do you like, off camera? Like, are you. Do you have a super hard edge? Like, you have a really playful vibe. But you've said a couple things here that if we can't control it, we don't talk about it. Like, things like that. I can see, I Think people are always surprised when they come to work for me if they've seen me on camera. Now I have the world's most angry face so that helps at least a little bit. But I'm very, look, this is me on camera. But I, I am very intense for sure. Yeah, yeah. What's your, what's the off camera like? Not for play. I don't fuck around or.
- [52:43]
A
I think the number one thing that I get from the people who work with Slash for me is that I have a much a lighter sense of humor when they see me kind of day to day. I do like to poke fun and make illicit jokes and things like that that people are like, is that HR compliant? I'm like, definitely not. Not for sure. You should talk to them. But they work for me. So I guess it doesn't really matter that side but I think it depends on the stakes and how far in a deficit people are. So like high performers, I think like me in general, like I'm super encouraging, I'm very rewarding, telling great job etc. I want to create an environment where people can win and if you win you will love me. And if you don't win you will be very uncomfortable. And so I see the job of the manager is to create the best possible environment for the best performers and a terrible environment for low performers. And a lot of people don't like the second half of that.
- [53:41]
B
Are you flirting with me for that?
- [53:47]
A
I want and I think a problem that has happened in a lot of management, I think some of this is in the Wokeism stuff is the idea that we should accommodate everyone. And I heard this from someone, I can't remember where I heard it but it was like this company is a dangerous place to work and I just love that saying. Now I don't think like Layla would probably be like, you know, Shiver would be not happy me saying this, but I want a place where winners want to win and I want to build a company where ambitious people can build world class products. And whether your product is consistently delivering a sales script or it's making amazing content or it's just the actual companies themselves if you're an entrepreneur. Like I want to create an environment where ambitious people can build world class companies. And if I believe that, which I do, then my actions need to be aligned with that. Which means that if, if you don't like metrics, if you don't like being held accountable to your performance, if you would rather have a political environment where people jockey and backstab and Gossip, this is not the place for you because I will root that out quickly and ruthlessly. I prefer. In my opinion, the perfect organization has zero managers. Hypothetical ideal. Of course, you need to align people's. I mean, in that hypothetical ideal, everyone works, period. That's all they do every day is they produce. And so if that's the hypothetical ideal, then every layer of management fundamentally acts as waste. Now we have to orient that behavior so that it's aligned within whatever the objectives of the department or the, or the company are. But that should be the only real role and rewarding people who do well and providing feedback for people to improve. And so I see fundamentally that is the role of the manager. And that means that the manager most of the times also should probably work on stuff besides, like, I do all this stuff. And if we see a good manager, then they should increase the overall output of the team. Now if I add a manager and performance stays flat, then I don't need you. I could not have a manager and performance stay flat. Right? Like, and if performance goes down even worse. And where I hate is the outside cause, you know, pointing outside to external circumstances. And I tell the story of COVID to my company as well, which is, hey, if we have a company that relies on financing, let's say you're in home remodeling, whatever. So financing is a big part of our car sales. Hey, credit, you know, you know, interest rates are higher. It's harder for us to do sales. Can we control that? No. Why are you talking about it? It's just a very easy razor to drive. Like, what can we control? Well, good, more for us because other guys are all like, they all have all these disadvantages. We don't live with it. They do, because they'll talk about it. We won't. And I, I, I think the world needs a little hardcore. And I'm okay being that.
- [56:35]
B
I love that. As always, my friend, it is wonderful to have you. Where can people follow along for the hardcore?
- [56:43]
A
If you listen to a podcast, then I have a podcast called the Game. You can check that out. I have, I think it's like 580 something. You'll probably find it. I have two books that I give away for free on my podcast. $100m offers $100m lead. So it's $100m and then offers $sign hundred m leads. Those are the book titles. They're on Amazon too, if you like, like physical copies. But they're free if you, if you like consuming them and if you still can't find it, just Google it. Find it on my podcast. That's probably the best thing you can do. And if you're on YouTube, then you can check out the videos on YouTube.
- [57:15]
B
I love it. I highly encourage people to do so. And speaking of things I encourage you to do, if you have not already, be sure to subscribe. And until next time, my friends, be legendary. Take care. Peace.