The Game with Alex Hormozi - 2020 Lessons & Failures | Ep 269

Episode Date: January 19, 2021

How bad do you want, what you claim to want? In this highly requested episode, Alex (@AlexHormozi) shares with us the lessons and failures that he took away from 2020, reflections on his notes, and what he learned in perhaps his largest year of growth yet.If you'd like to go back and listen to Alex's recap of 2019, click on this link. 2019 Failures and LessonsWelcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps:(1:21) - The journey of learning and scaling in business(8:52) - Shifting mindsets: from CEO to investor/owner(14:37) - The power of strategic hiring and minimalism in growth(24:40) - Investment strategies and financial management insights(33:12) - Finding purpose beyond financial success(35:09) - Finding meaning in work: the true wealth(38:00) - Innovation and adaptation: the 3-year product cycle(42:40) - Expanding time horizons for long-term success(46:59) - Investor mindset: rethinking business strategy(53:52) - Mentoring the next generation: anecdotes and advice(1:02:59) - Looking ahead: optimism for 2021 and beyondFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

What's going on, everyone? Happy Tuesday. I hope you're having a phenomenal day, whatever day it is that you're listening to this. I had a lot of requests from Instagram and DMs, and thank you for those, for the 2020 Lessons and Failures. This will be a sequel to my 2019 Lessons and Failures, which if you haven't listened to that one, I think my year-long recaps are, I think, some of my better ones. Um, but it's obviously up to you. So this one will probably a little longer than what you're used to. Um, and that's because trying to summarize what I learned in a year is hard in one episode. Welcome to the game where we talk about how to get more customers, how to make more per customer and how to keep them longer and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. For those of you don't know, uh, I, I keep an ongoing email thread to myself. Um, consistently consolidating, uh, 20,

20 lessons and failures. So I have this big thread that I just continue to email myself whenever I feel like I learn a lesson. And so I will do my very best to tell you each of the lessons that I learned and how I learned it. And 2020 was a packed year of lessons for me. And so, oh, where to start? From the $500 million mastermind, I learned a lot. From there, I really learned about scale and seeing the people that were doing more than me, all were going after bigger markets. So there's really two options for me to do that within the context of gym launch. One is go after, find alternative and additional channels to grow the business because it's not like we've sold 100% of gyms. And so that means that I have to find new ways to reach them.

So if my traditional advertising methods, obviously, you know, you can exhaust a platform, especially if there's a niche, it's usually much bigger than you think it is. But you may not have reached every single person on that platform, but you may have reached every person that you could reach on that platform profitably. So that's kind of the differentiation. And so for me, seeing all these people who are doing more than me, and I was, you know, providing value to them in a lot of ways. and it's always like it's been a consistent effort of mine to try and understand if there's

anyone who makes more money than me what it is that they have or what it is that I have that they do not have because sometimes the question is not this is an interesting one for you that I've learned also is it's not always good to say what does this person have that I don't sometimes it's what do they lack that I have and I think oftentimes it's more frequently the case which is why it's always backwards which is why I think the learning process is interesting And so, you know, champions beat normal people at their endeavor, not because they have something the other person doesn't, but because they lack the ability to stop working. They lack the off switch. And so I think sometimes not only thinking what do they have, but what do I have that's limiting me rather than what do they have that's giving them an advantage over me?

So first off, just even switching my thought process to thinking that way has been a lesson of 2020 for me from an entrepreneurial perspective. Before I go any further, I'll just say this so that I'm supposed to keep things interesting during these podcasts. So we hit our $100 million amount in 2020, which is kind of weird. So just to clarify this for anyone, the reason is I didn't put it on this award yet is because I'm not very handy with things and I'll probably mess it up. So I'll have someone else to it. But just for transparency, that means I've done $100 million in total sales in the last three and a half years. and so we did we did 30 we did 28 million we did 7 million in in in 2016 we did 28 million in 27 in 2018 we did 37 million in 2019 and in 2020 I think we finished at 31 we're still getting the

final books for this year but yeah so that was you know that's the that's the deal that's how we we hit 100 million, so it's not like I did 100 million in 2020, just for full transparency, because I think some people thought that. That's not what it was. But I made a podcast about how I've been stuck at 30-ish million for three years, and I finally figured out what I need to do to fix it. And among those is hiring really good talent. That is one.

Another one, and that sounds like so like, duh, Alex. but I feel like it's so many times the lessons that I learn are not like nothing's novel like nothing's novel it's just at what point does we call them singe moments but at what point does something that you've heard your whole life become real for you you know for some of us it's like be kind to others is something you hear your whole life but maybe some moment or some event triggers that for you and you're like maybe I should be kind to people and then you start changing the way you live and so for me you know I've always heard niche down I think it's important to niche especially when you're starting, but you will eventually be constrained by that niche. But that being said, if you're like, I get this one all the time from our clients, which is like, man, I got, my niche is too small and like, homie's doing like 500 grand a year. I'm like, your niche is a $6 billion industry and you think that you doing half a million a year is somehow tapped that niche. You just have such a poor business model that your lifetime value of customers so low that

you can only profitably reach a half. I mean, like a quarter of a quarter of a quarter of a percent of your market. So it's really important to delineate between am I capping my niche or are the economics behind my business model stifling my ability to scale and grow profitably? I think those are two very different things and everyone just likes to say, likes to point outwardly because it's easier to say, oh, my niche is small rather than saying, no, my business model sucks and I have no way of profitably reaching these people, which either means you need to fix your business model or you need to find alternative or additional acquisition

channels. And so for us, I think we have a, we have a, I don't know of a lot of businesses that have higher LTV from, from, you know, microdream owners than us. And that's candidly because we provide more value than everyone else does in the marketplace. That is why you get rewarded. And so, I mean, I always am trying to expand LTV, provide more value, find ways that we can, you know, solve problems. And I, I will always continue to do that. But given the numbers that we have, So one of the lessons of 2020 is expanding additional acquisition channels. And so we were able to build an outbound acquisition channel in 2020. So that was really cool.

And the additional part of what made that cool for me was that I actually had someone else owned the entire process end to end. So when I talk about hiring high-level talent, it's really for me transitioning from the what to the who. And you've probably heard that before. But on some level, it became real for me. and the obsessive nature of the entrepreneur of wanting to learn how to do everything is absolutely required in the beginning.

But as you scale up, it is more about finding the who. But the thing is, is that in the beginning, you think too soon you need to find the who. And in reality, you still need to learn the things that make the business work. And so I think that's why context and timing is so hard with these things, because we have to find, like, when I'm trying to give, you know, advice, it's, you know, you have to take it within, like, your current paradigm. And I understand that that's difficult. And that's why sometimes it's hard listening to billionaires

because it's like their paradigm of what's happening, what are the successful actions for them right now in their current chapter is different than somebody who's at zero or at $100,000 a year. And so I'm going to try and cater this as broadly as I can with as much contextual points as possible. So number one, adding additional channels. Number two, focusing on who, not what, and specifically high value who.

And my picker, my ability to judge the quality of talent has increased. I think I've gotten better at it. I was not nearly as good at it years ago, and I don't know how you learn that without experience. So that is something. Try and find people with preloaded solutions. So as a caveat to that, that's one of my lessons, which is like I've now found people who come preloaded with solutions.

They come batteries included. You know, I'm like, hey, here's my problem. I can point them at it. and they're like, oh, this is all the things we need to do because I've already done this three times. I'm like, got it. Yes, please go do that. And, you know, as a as a as a as a as a as a corollary to that,

my role within the company, I would say in 2020, transitioned from being, uh, CEO to being investor slash owner slash stakeholder, shareholder, whatever way you want to say it. But really, I would say for the first time in 2020, I really transitioned to being above the business, um, not in like a weird, arrogant way, just like not truly being out of it. And so I think there's definitely levels to being out of it.

You know, first you own your own job, right? You're self-employed. And that's just you doing things for other people for money. You just someone else is paying you and you're doing stuff. You know, above that, you start becoming a manager and managing other people, right? And then above that, you become a leader. And then above that, in my opinion, you become an executive, right? Which is like leading organizational change and departmental change around objectives

that are going to protect the business or grow the business, right? And I think the level above that is where I feel like this year I was able to get to. I could be wrong. We'll find out in 2021 lessons and failures. But right now, I don't actually do anything in the business besides meet with two leaders a week and really advise on the ways that we can strategically improve the business and provide more value. And so that's really the majority of my time is like looking at the overall marketplace and thinking, like, how can we provide more value in a strategic way to everyone?

Right. And of the many ways, what is the one thing that we're going to focus on? And so I think 2020 was also a really humbling year for me because we got to refocus on the few things that provide the most value. And so for us, it's, we need to get Jim's leads because that's what everyone wants. We need to make Jim's more money because that's what everyone wants. And that's about it. You know, pretty much any other, you know, endeavors that are not focused on those things are kind of a waste. As much as, you know, people may need to have better retention tactics, better, you know, better profit margins. And we talk a lot about that. Whenever we do talk about

that we lose people who lose interest because entrepreneurials, most entrepreneurs that I serve, only think about revenue, right? The only thing about growth, um, rather than what am I taking home, you know, how much risk am I exposed to, that kind of stuff. And I think that just comes with time. But I, um, will practice what I preach and not sell what I want to sell. I will sell what they want to buy. And so that is, uh, how, you know, we've, we've cut a ton of access out in 2020, um, in the business. And so, uh, really focusing on a handful of key priorities. Um, has been really useful. And interestingly, I think the business has actually improved since I've moved further away from it

because I tend to break things a lot because I want to fix it until it's broken, if you know what I mean. And so giving our leadership space to just transact, you know, run the business has been really valuable. And I think it's actually been, I think it's been better for the business overall. So those are some of my initial lesson. I've got a whole bunch, so I'm just going to keep going through this. So one of the next ones was I was talking to Brooke Castillo. She has an amazing business, a good friend of mine. If you've heard of her Life Coach School podcast, check her out.

She's an amazing podcast. She's a huge following. And she didn't say this directly, but the term that came in my mind was scale zero and simple scales. And or zero scales. I'll have to come up with something catchy for that. But basically, the reason that I had to be. get into the, you know, quote, in investor or owner type role, I believe is because if I am involved in any really day-to-day activity, I will become the bottleneck, right? And it's not a

bottleneck of communication, which is what happens when you are the manager as a bottleneck, but as somebody who even provides value in any way, if it requires you to be there to provide the value, then as soon as the team grows outside of you providing that value, if you, it cannot grow without you providing whatever that value is, then it will stop there. And so I think that's, 2020 was really my transition of, of moving above that. And so I think that was kind of the win for the year. And so that was kind of one of the lessons that I learned is, is you have to scale zero. Like, I have to get myself to doing nothing and still have the company make money and grow

and be profitable, et cetera, in order for us to be able to grow beyond where we're at. And I think that's much easier said than done, especially because a lot of companies start because the entrepreneur is skilled in a certain way or has a variety of skills, which is usually what happens. We have a stack of skills, which is why we start growing. And then somehow you have to, in the beginning, extricably, you know, or intrinsically link yourself to every aspect of the business is what makes it grow. And then piece by piece peel off each of these skills and traits and things that you don't even know you do in the business to keep it moving. And that's taking time. And it's taken trial and error and it's been difficult but ultimately rewarding. Because now, right now, it's, I would say, like, one day a week is focused on all my leadership meetings.

And that's it. And then beyond that, it's just strategic insight on monthly and quarterlies. So that's given me a lot more time to really focus on the industry and how we can help overall rather than being kind of like in the tactics. next one I have this belief and it just continues to be reinforced that see if you can just keep growing and not hire people we have had I mean all you got to do is look at our atrocious glass door reviews which suck to know that like we have we hire fast we've had a tendency to hire fast and fire fast so we have follow that mantra. But I, and the thing is, is part of the difficulty of having a business that, that grows quickly

is, um, or has any level of volatility month to month is that you have these waxing and waning demands for labor, right? And so it's like you need five people and then the next month you don't need the five people anymore. And, uh, you know, I'm not saying we hire five people and then let them go. It's more that like that consistent variability, uh, can be annoying from a, from a payroll and labor standpoint. And what's unfortunately happened many, many times is we'll bring people on. We will solve the problem and then they won't. And it really should be like, you know, for defined periods of time, you know, like project-based

and whatnot. The problem will be solved. And after we let the people go, the business grows more. And that's kind of weird and backwards for me as an entrepreneur. And so I'm going to just try and make sense of it out loud with you. But I kind of have this belief that only one out of five employees in a company is providing value. Like I actually kind of believe that. Kind of the 80, 20 people are fractal.

I just can't like I just, the amount of times that we've literally gotten rid of like a department because it's just like we created a department, for example, to solve a problem. let's say it was churn and provide value in all these ways to solve churn and then after scaling that after six months realizing that churn is completely unaffected and we just took 20 more employees on and then having just be like well guys you didn't solve the problem and as much as you're doing stuff it is not doing anything right and so then we have to you know let people go because it is a business and and and then just realizing that the business literally doesn't change at all Like revenue doesn't change,

turn doesn't change, profit doesn't change, well, profit goes up. And that's it. And it's just like, it's mind-blowing to me. It's like there are so many people, especially as your organization grows, that you're like,

this person was totally unnecessary. And that's crazy, because from the employee perspective, it's like, how can you do that? And I understand that perspective. But on the flip side, as the owner, you're like,

man, this person was $90,000 a year. Like, people are afraid of signing up for a mastermind and yet we'll hire an employee for $50,000 a year without even thinking about it. And it's just like, which of these things is providing more value? You know what I mean? And so that's something that's been like mind-blowing to me is seeing a company grow after shrinking. It's like, it's crazy.

And it's happened so many times. And it happened twice in 2020 for us where I would get rid of a key team or a key, you know, series of individuals who were doing a role that we were tracking metrics on and we kind of implemented it into it to provide a solution. And then it disappeared. right and because the solution like it did not solve the problem and therefore was not providing the value that it was supposed to and so people were essentially cutting grass with scissors which doesn't they're doing stuff but it doesn't mean it's for it's being valuable right and so um I am now really trying to add the constraints to I want to see if we can grow with no people like how can we look at Berkshire Hathaway right how can we look at Warren Buffett who has 19 employees and runs a gigantor you know company how can we find fewer, smarter people that are preloaded with solutions, like I said earlier. But it's like, I'm just trying to hit it this in multiple ways because it's really ingrained

in me this year how important having an A player is compared. Like, one A player literally does more work than 5B players. It's crazy. Like, most people actually do nothing. Like, it's crazy. Like, most people don't do anything. And that's why they can't progress. I mean, like, as a tangential side story, you know, there's a guy that I've seen in a mastermind.

This is an entrepreneur, right? And he's, you know, he's like, hey, you know, and this is three years ago when I met him. He was like, yeah, I'm going to start running Facebook ads soon. I was like, awesome. Fantastic. Like, that's a great idea. And because his biggest issue was that he couldn't get lead gen, right? Sorted.

And I saw him at an event three years later. And I was like, hey, man, how's it going? You know, how's the business, whatever? And he was like, yeah, just, you know, we're going to start. we're definitely going to start Facebook ads soon. And I was just like, bro, it's been three years. Like, what are you doing? You're like, like, what are you doing?

You know what I mean? Like, it's just, you know what I mean? There's different for me if someone's like trying to figure out what the obstacle is versus knowing what the obstacle is and not doing anything about it. That's the one that kind of drives me nuts. And so I was like, dude, if you literally spent one day and just Googled how to run a Facebook ad, you would be able to run a Facebook ad by the end of the day. like this is not a quarter-long solution like do it you know what I mean and so I say that to say

a lot of people think they are productive when in fact they are busy and actually do nothing and I don't know if it's it's their fault or whatever but that is just an observation that I've had and seeing the company become more profitable and grow even while we contracted resources is sadly reassuring or reaffirming and so it's just like you probably know if you're in a company of any size that like there's like a handful of people that you know that everybody knows because there's the people who move right like there are people in our company that I don't know who they are and I don't know their names and I'm like who they're like oh we let go of Kelsey and I'm like who's Kelsey and then now I've kind of been like well if I don't know their

name that's why they got let go because if you're doing something I will hear about you they're like oh yeah this new girl and blah blah blah is killing it right I'll hear about it but if I'd never hear name, it's because you're not doing anything. So, anyhow, that's another one of the lessons. I told you this was going to be a longer one and probably more encapsulated. Ah, okay, next one. Oh my God. Data management has been the biggest mistake or has been the thing that I messed up the most in the last three years, which is having a really good ERP or CRM that I run everything to do it as properly set up. And this has plagued my business. for three and a half years.

And I think it's actually been one of the things that has kept us at 30-ish, you know, a million a year. And we just got HubSpot. It's expensive. I think we pay $36,000 a year for it. But it's worth every penny. It's just worth every penny. It's so funny because we were like, man, that's so expensive for Sierra.

I'm like, do you think that the entire system and all the data of everything that you have is worth more than a frontline employee? just one. Do you think it could provide value to everyone in the company disproportionately to one frontline employee? Well, yeah. It's like, well, like, think, you know, think in relative terms. But now we finally are able to track from click to close,

which has been, gosh, the hardest thing in the world. And if I can start all over again, so if you are, you know, listening to this, like, invest early in really good data systems. Like, it will make your life so much easier. And, like, I genuinely, conservatively can say that we've left probably $30 million on the table

over the last three and a half years because of such poor data management and because of our IT systems have been literally the bane of my existence. And so now when I start new things or I talk to new companies, the first thing I'm looking at is where are you using track data?

What's your CRM? Are you one of a Google Sheet, you know, ZAR? Is that how you're running everything? Great. Let's put the whole system in place. So that's just a huge one that I feel like. I now, I got the, I got the success from that, and I've learned from three years of failures, and so that was a

really big win for us. Next one is three businesses. I shouldn't have three businesses. That's continued to be a lesson of mine because we have prestige labs, gym launch, and Allen. It's been very hard for me, not from a time perspective, but from an attention perspective to split my attention like that. And so I think part of this was like a paired lesson and failure is that I think that I

the decision was incorrect, but I think that the lesson that I learned from it was it forced me to get out of CEO and into investor owner role. And I think that was the gift of the curse. The curse is that I now know that I shouldn't do that in the future. And so now I'm trying to figure out really how to run these as portfolio companies, if that makes sense. So that's been the hard part. And the thing is you can't like undo something like that you know what i mean i've got i've got you know 100 employees like i can't you know what i mean so that's uh those are those are mistakes that are you know jeff basso says when i'm making a decision there's there's reversible decisions and irreversible decisions starting a company is in some ways an irreversible decision and so um it's not completely

irreversible but it does you know it it it's it's long and difficult you know what i mean if you want you try and undo that um which is either through a sale or you know whatever, or just winding it down. We're trying to somehow sustain it and systemizes it so it stays at a certain level and doesn't require attention is also hard. And so anyways, that's kind of actually a lot of what I would say I struggled with in 2020 that I've actively been putting solutions together for 2021. So I'll let you know how that goes.

This is a big one. Know what your game beyond the game is. This is a really big one that I've learned in 2020, which is, you know, my wife I've made a lot of money. Over the last three and a half years, we took $35, $36 million out of the business just in direct distributions, so that doesn't include the actual value of the companies. And you have to know what to do with the money. And I actively, I'll tell you the thought process I had behind this, which was my second year. So in 2018, we took home 174 in profit. it. So it's two years ago. And while at that point, I said, well, if I were to get 20% return

on my money, I would make $3.4 million on the 17, right? So me working on my business makes me 17. So I should just keep working in my business and ignore the money. But at a certain point, the kind of the lost compounding becomes big enough that that it can surpass your regular income. And so, you know, if you look at what 20% of, you know, if, for example, I had actively managed it and had 30 million dollars and done 20% growth, it'd be 30 goes to 36, 36 goes to 42. And at that point, you're making $8 million a year. And that's two years, three years later, right? And so at some point, the opportunity cost of not managing the money becomes bigger. And it actually starts to take attention.

Like a lot of my attention is getting drained on the fact that just this gigantic big stack of money that I was like, what am I going to do with this thing, right? I don't want to learn the real estate game. I don't want to learn the hard money lending game. I don't want to, like, there's so many different games for money. I don't want to learn the private equity game. So I spent probably 30% of my year this year on figuring out how to allocate money. and I try to allocate them within our companies because those are things I have direct control over and I'll get disproportionate returns on,

which is, you know, candidly why I started Prestige Labs is because I had all this money from Gem Launch and I was like, well, what's an ancillary business to what I currently have that can provide value to my customers, that I can use the same, you know, distribution base and shared services on that I can make, you know, that I can get a disproportionate return on. And that's what started Prestige Labs. And now, you know, two years or two and a half years later, Prestige Labs is a good business. It's a very good business. It provides a lot of value. We paid over $10 million in commissions. So that's been really good. But I don't think it was the correct decision at the time.

But now that I have it, I am grateful that we have it. So that's kind of the long and short of that one. But knowing your game beyond the game, because it will distract you. Because what ends up happening is like once you start getting into that world, you get sucked into it. and then your actual business starts losing your attention. That's where your highest return on attention is, is inside of your business, right,

is your income and growing it, right? Because both your net worth and the cash flow from your business, both of the, like, it's one of the cool things about being an entrepreneur is, like, the net worth that you have in the equity of your business is usually larger than what you have pulled out of your business. Actually, most times it's larger than what you pulled out your business. And so that's kind of, you know, interesting. And so for me, trying to figure out how to allocate those things has been a priority.

So before I get the question, I'll just tell you, this is what I have invested my money in this year. First, we have a whole life insurance policy, high cash value up front. You have to be really careful about the people that you work with this because they can totally screw you, and they are incentivized to screw you, and most insurance agents will not want to hear that. But the commission structure that they have for these policies is insane. it destroys the cash value that you earn from these things. So if you decide to set up a whole whole value, whole cash value, whatever, insurance policy, one go with the big four, so that's Guardian, New York Life, Northwestern Mutual, and UMass,

or Mass Mutual, excuse me. So there's a big four. They've been all around for over 100 years. New York Life's been around for 183 years. They predate the tax code. The reason I did that is because it, it basically creates a bank account for you that you can use. You obviously pay costs in the beginning,

but you can basically loan against the cash value of the insurance, and the cash flow guarantee is, you know, it's guaranteed growth at about 4% a year. And so if you just compare that to a traditional bank account where you're losing money, this at least covers for inflation, right? And so that allows you to at least park the money in a way that's not devaluing itself. And if you do see opportunities, you can loan against it and invest in those things.

So that's the first thing that we did. If you ever do one of those, you should be able to break even by year three to five at most. If it's designed properly, they'll tell you that no, it's going to sacrifice the long-term, blah, blah, blah, of the thing. I think that's horseshit when you compare it to the present-day cash.

Like the value of having your money available to co-invest at the same time is it's not even an argument, in my opinion. It's also how corporations and banks and Fortune 500 companies structure it. So look into Koli and Bowley, which is corporate-owned life insurance and bank-owned life insurance if you want to see how they structure it because they know what they're doing. And so that is how we structured it. So that's number one. Real quick, guys, if you can think about how you found this podcast, somebody probably

tweeted it, told you about it, shared it on Instagram or something like that. The only way this grows is through word of mouth. And so I don't run ads. I don't do sponsorships. I don't sell anything. My only ask is that you continue to pay it forward to whoever showed you or however you found out about this podcast that you do the exact same thing. So if it was a review, if it was a post, if you do that, it would mean the world to me and you'll throw some good karma out there for another entrepreneur. Number two, we are investing in B and C class multifamily apartment units, syndication.

So that's big apartment buildings. The reason for that is because I think single family might get hit hard in the next few years because I'm looking at like, you know, seven-year timelines. I actually think that, I mean, who knows? I don't even make my prediction because there's no point. But I think that that asset class has outperformed other asset classes. And if people will downgrade their living standards because of some kind of recession, because I'm really much more about downside mitigation than I am about getting the upside, because my upside's in my business. So it's really like, where can I park money that I know it's not going to go anywhere? And so I take inferior returns to know that I have no downside or less

downside. And so parking money in B and C class real estate has been one of those places through syndicated deals. The third place is I have index funds. So that's indexes of the entire market because again, this is one of those things that I don't want to think about and I'm not trying to stock pick because this is not how I make income. Like this is not, this is the thing that everyone is like, man, I could get better. Yeah, sure, you get better returns if you were a daily trader, but you also have a business. So are you going to learn? that game and be better than the biggest institutions in the world that have, you know, zillions of dollars to literally destroy you? Maybe, but probably not. And so what you can do

is be really good at your business and provide good value and make more money that way and then be willing to take the non-premium return, you know, of active management and basically make money on yourself twice because you're making money on income, doing your thing, and you get passive from your investments. I have a 5% hedge in crypto. I don't really like speculative things, but the only reason I have that is because if for some reason the dollar gets devalued

and for some reason we lose the world currency, that would probably greatly appreciate in value and would, the reason it's a hedge is that I'm not trying to make money on it. I'm only saying that I'm putting 5% there so that if that happens, that will probably five acts, if that were to occur, which would offset the losses I would have in basically the majority of my investments. And so that is my, that is the conclusion of my investment strategy and what I am focused on outside of just value creation of the

business, because that's actually the fastest way for me to increase my net worth. Okay. Next one. If you are financially done, you must have a bigger purpose. So that was one that I learned this year is like, you know, like, I mean, I shared my numbers transparently with everyone. I, we need to, like, you have to, you have to, it sounds stupid, you have to really like what you're doing, and have a purpose beyond it. Otherwise, like, the money starts being meaningless. And it, like, it just, it doesn't incrementally change my life in any way. You know, like, think, think about it.

I know this sounds crazy, but just like imagine if buying a Lamborghini, for example, was one week's paycheck. Well, what do you do after you buy Lamborghini the next week, right? And let's see you buy a crazy house and that's like five weeks of paycheck. Well, then what do you do with the other 45 weeks of the year's paycheck, right? Like, you know, a steak dinner, like is not that expensive in the relative term of things. If I ate a steak dinner two times a day, or went to the capital grill and spent $200 at three meals a day even, right? That's $200,000 a year.

And that is crazy for sure. But it's also like within the relative scheme. And this is where like this is where the ultra wealth part starts to get weird. Is that like if you have $10 million and you grow by 15%, that's a million and a half dollars a year, And it gets bigger. And that's what's, like, it's, you can't eat it. You can't, like, I still eat chicken and rice. Like, it's not, you know, it'll be like nothing.

I eat bagels and I eat the cheap deli meat from the supermarket. Like, my life hasn't really changed. You know, I have a nicer camera now. And there's a $1,000 camera, you know, but you really have to find something that, that, I'll put it this way. I have found that I must do work that I find meaningful. And that is what gives me purpose in life. is that what I do, I find the pursuit of that endeavor meaningful and the actual process itself enjoyable.

And so that is one of my bigger takeaways from 2020. Layla and I spent more time together this year than we ever have. And man, it was the best thing about this year was my marriage got a lot better. Not that it was bad, but it's just like, we're just really good. And the whole year has been great, which was definitely offset by the craziness of the world. And I think maybe that's maybe that's why we came even closer together. but really focusing on the marriage has just made my life more enjoyable, even though we actually made less profit this year than we did the last two years.

And so, yeah, that's that one. I did make one good decision this year. We actually developed a whole CRM for gyms for the same reason I'm bringing up is that you need to have good data management. And I spent a million bucks on this thing, and I realized that I couldn't have four businesses. And so I pretty much just killed the project and I just wasted a million dollars. So I make lots of mistakes, just so you're aware.

Lots and lots of mistakes. But that was a good, that was a good decision. Starting it was not a good decision, but not doing the business after I had made it was a good decision, even with the sunk cost, which was hard. Another one is entrepreneurship comes in cycles and seasons. There are seasons of heavy work, and there are seasons of, there's seasons of reaping and seasons of sewing. And I think recognizing that there are cycles is really important. and there's even seasonal cycles, which sounds crazy, but now this is like the fourth year

for our fifth year that we're going into for us. And every year I'm always like, I feel like January through June, I'm like, we're on fire, you know what I mean? And then like by December, I'm like, we suck and we shouldn't be in business and we're horrible. You know what I mean? And then like January comes again and then it's like everything explodes. And so, you know, I've now, I come to recognize it and I prepare the team for it. And I think now that this is like my fourth or fifth cycle through it, I'm more steady. And so that's been, I think, a lesson in seasonality. I was talking to Brandon from weight loss, lady boss, weight loss. And he talked about the same thing as that he and I started around the same time. And he realized the same thing is like, doesn't matter

what we do, we are somehow also subject to the cycles of seasonality. And they always have their, you know, Q1 is always their strongest quarter. Why? Because people are more motivated in weight loss when they're going into summer, going to spring, and just started, you know, it just had Valentine's Day and New Year's Eve. So there's like all the reasons are all right there. You know, once it's August, you know, or July, it's not usually a huge, you know, fitness month. And, you know, a lot of my business is correlated to fitness and weight loss. So that was that one. Ah, three-year lifecycle of products. So the average product or service has like a three-year life cycle. And, you know, Jim Launch has had to innovate its, I would say, product suite twice. So we started with. kind of like the whole six-week challenge thing. And then we transition to kind of higher ticket hybrid boot camp packages.

And right now we actually sell the same packages, but the acquisition system is different. It's all outbound-based because that's actually where the biggest arbitrage is right now, meaning we can buy leads and get sales, basically ROI on time is highest there. And so we just continue to see the cycle of, you know, and you kind of get into these transition points where like a new opportunity opens as another one's closing, and then you kind of have to like readjust the product.

and jump and that's always just focusing on what's working best right now. Another one is having multiple acquisition channels and streams is really valuable. Now that we have outbound, you know, like I teach the gyms what I'm doing with my own business. Having outbound has been really nice. It's stable, it's much more reliable, it's slower for sure to grow. It took 90 days to really get it right for us. It doesn't take nearly as long. I mean for gyms like we already have the whole system, but for us to start it from scratch and build the whole team,

and figure out how to find the data. Because it's not just trying to find the weight loss, like a lot of people are overweight. Not a lot of people are gym owners. So there's, you know, it's different. It's B2C versus B2B, but we had to figure out, okay, where do we find the data? How do we clean the data?

How do we create these lists? You know, what software do we use to cold call? What's the script? What's the hook? What do we say on the opener? How do we train the team? Where do we recruit from? How do we compensate these people?

How do we set up the sales process? Is it a two step or a three step? Like all those things are things that we had to figure out from scratch. it took us about 90 days to figure it out. So, but now that we have it, it's actually really great. And it's just really cool having two things that are really firing side by side between inbound and outbound.

I wrote this one again, but simple scales. And so simple, like really trying to figure out at all levels the simplest solution, not like oftentimes the best solution is not the best solution because it is more complex. And the simplest solution, though it might not be the best solution, though it might not be the best solution becomes the best solution because it is actually able to be realized. And so that is a lesson that I have learned in 2020 more so than any year is like we have made our product sweets simpler and more digestible and immediately actionable. And we are getting better client results now than even when there was like crazy Facebook arbitrage. And that took time. You know what I mean?

To just learn that because I would say like a year and a half ago, we had so much stuff inside of our product that's like it could be so perfectly customized. The thing is that it was overwhelming for the majority of clients. And so trying to rectify the complexity versus simplicity equation, you know, you kind of have to find the middle ground and the sweet spot for what's going to serve the most people at the highest level. And so that was just reinforced this year. And honestly, right now we're doing, I'm more proud of the gym launch product now than

I've ever been, which is pretty cool for me. Another one is that you can make the right decisions and be wrong. and you can make the wrong decisions and be right. And so this is really hard from a learning perspective because let's say, for example, I bet my life savings on black at the casino, right? If it hits black, was it the right decision? Probably not.

And so I may be rewarded for a poor decision just like I could make a strategic bet in business that for all reasons was the right call, and then COVID hits, right? And then all of a sudden, that wasn't the quote, right bet. But it was the right decision given the information available. And so things change. There are market dynamics.

And so I, instead of beating myself up over decisions, I think if all I had was the decision-making criteria that I had available to me at the time, the information available to me at the time, was the decision that I made the best decision. And what I don't want to do is unlearned good habits, right? Because we're constantly evolving and growing as entrepreneurs. And so not unlearning good habits and not reinforcing bad habits that have good outcomes is something that I have focused on a lot this year. And so sometimes there are short-term trades that have long-term outcomes. And I think this year was actually much more of a long-term focused year for us, ironically, with all the craziness that was going on.

we put a lot of foundational stuff in place that I think is really setting the stage for 2021. So pump for that. And I would say my, there's more to this, but I'll probably end on this note, which is understanding an expanded time horizon has been immeasurably valuable for me. And this is one of those things where you hear it all the time, right? But it doesn't become real for you. And I feel like it became real for me this year, which was I'm independently wealthy. I don't need any more money for the rest of my life.

If we grow our current net worth at 10% a year, will be worth several hundred million dollars, half a billion dollars by the time I'm 60. And so that probably means I won't need anything. I could stop working now, right? And that allows me to think from a slightly different perspective. but the thing is that I think the reason that the rich get richer is because it allows them to think from this perspective. And so the hardest thing is trying to get yourself into this. And so I'm making, like, this is, if there's anything that you listen to in this entire video, it is what I'm about to tell you.

If you can expand your time horizon beyond months and even a year or two, you will be so much better off. If you expand your time horizon beyond just a month or a year and actually start thinking, in five year and 10 year terms, you will be so much better off. And I think there's so many reasons for that. One is when you bet on long enough time horizons, you can virtually get rid of risk. And if you can make risk free guaranteed upside, then why would you not make those bets? The reason Warren Buffett said this, he said, no one wants to get rich slow, right? But I would rather get rich for sure than get rich fast and lose it, right? Or more realistically for many, try and get rich fast for my entire life rather than just saying, well, if I just did this for 10 years,

I'd be guaranteed to be a millionaire. And I think that is the issue. And I think that's the problem that the world has. And that's why most people will never become wealthy is because they cannot delay their impatience. They cannot delay their gratification. And so for me, when I'm thinking about our businesses, I'm now really thinking, like, do I think, and this is because I've been reading a lot about investor stuff, and I'm like, you know, private equity firms will come in, and their goal will be to double a company, you know, in five years, right? Double a company in five years. And I think about that with, like, Jim Launch, and there's so many times where I'm like, oh, we got to double this year. Why didn't we double? But if I'd said, like, we just got to double in

five and made the plan for that, the plan would look so much different and also so realistic attainable, that I think we'd probably overperform that, but what it would do is eliminate the needless frenetic energy of, oh, we got to do this now, we got to, you know, like, craziness of the shifts and the turns. And like, sure, there's always things that you have to adapt to in the marketplace, but it just gives you this steadiness as a leader. And when you can look at a five-year goal, but like, I've never even believed in five-year goals as a, from a goal perspective, but I think of it in terms of a timeline perspective of like, how am I measuring myself?

Like when I think about where I was five years ago, it's not, it's like not even comprehensible. And so, I mean, I hope to have that kind of difference five years from now, we'll see. But I think that if I can take a more steady approach, a more disciplined approach to growth and to value creation within the company. everything that I've read about, you know, value-based investing and how, you know, companies do turnarounds, which is really valuable. If you ever, you know, want to get into a reading topic, look at, you know, buy buying and flipping businesses, because you look at what they're looking at in the business is what they can do to improve. And so you can basically come in with fresh eyes to your own business and think, like, what would I do if I were buying my business fresh from day one today, which is actually a really good thought exercise. And so I've kind of walked through that process.

and the things that I would do are different than what I'm actually doing. And so by expanding it to an investor's time horizon, I feel like I'm making much better decisions, and I have much better perspective. And it's been, it's just incredibly calming, because I think the reason that entrepreneurs, you know, the double-edged sort of us is that we're emotional people. You know, we get so excited, and then we have all these ideas,

and we want to do all of them. And the reality is that you can't. You just can't. You can't even do most of them. You can do a very, very, very small percentage of them. And when a private equity buyer, for example, comes in to try and buy in business and improve it, they will... Actually, you know, I'll tell you what... This has been really enlightening for us.

I'll tell you what they do. So the first thing they do is they create a 100-day plan. And the objective of that 100-day plan is to align the economic interest of the management with the fund and the investor who's buying it, right? And the way they do that is they first figure out... out what their primary two to three KPIs are going to be. That's it. Two to three. And then they figure out how to accurately and meticulously track those things. So typically, you know, investors are known for, you know, cutting costs and increasing profits. That's like a standard

thing that they'll do. But they increase the cost on IT and reporting and diligence. And so for me thinking about that, it's like, okay, that just really shows how important. important the data and reporting is, which is kind of what I was alluding to earlier. And so they implement a lot of ERPs and CRM systems that they already have, you know, tests and whatnot to get the tracking in real time around their KPIs. Now, the number one KPI that they track, which I found incredibly interesting, which we don't track, which is wild, is excess cash flow. And it's crazy because that's the thing I care the most about as the owner is, what am I

depositing my bank account every month? But as financials become more sophisticated and you look at your profit and your EBITA, and like all the, you know, your P&L and you have to offset revenue based on contract terms, blah, blah, blah, blah, right? But all I care about is excess cash flow. And it was ironic to me that the most sophisticated investors, you know, in the world, some of them, right? The thing that they care about is the thing that I care about, which is just how much cash

we put off, you know? And they have different reasons for that because they can serve a step better. They can get better leverage, which means they can get better multiples and blah, blah, blah, and they get better returns. But for me, thinking about that is something that I'm going to be reorganizing our business around, which is how can we, and, and, and, and, and, and, and, and, and, and, and, and, and, and, and, aligning the incentive of the management team around that, that KPI. And so that's what they do in their first hundred days.

And then after that, they only create two to three focused task forces, right? Small teams that can be held accountable to big domino operational objectives that will provide the most value in the, that have high probability of success that will provide the most value to the business. And so that is it. And that's what they do. And they just ruthlessly manage around those metrics. And I think about that.

And what that means is they allow the management and leadership team to run the business rather than metal. And I think that I definitely have a tendency to metal because I like doing things my way and I want things to sound a certain way and blah, blah, blah, the same things all of us do. And it's not, it's not been, it actually hurts the business. And so because it removes consistency. And so if we can create consistency of operations, it creates less waste. right so you can be more efficient it creates a more consistent experience for the customers and so it allows us to make more profit from less waste it gives like I said more value and it allows us to just focus on a couple of things without feeling the constant overwhelm

so I actually think that our team itself would be happier with this type of approach and so that is how I'm kind of shifting my my perspective on our businesses now because we have three of them in doing that. And so that's been really cool. I've also taken on a number of small companies that I'm working with, so companies that are doing $1 to $5 million a year that are either, you know, consulting, service, knowledge, education-based businesses, or niche brick and mortar businesses that, you know, have the desire to, like,

franchise or scale. nationally. And so those, it's just because that's, that's the businesses that I know intimately. And so I'm actually working with some companies there. And that's crazy for me, because if you think about from an investor standpoint, I have a company that I just recently became an advisor to. And they'd been at half a million dollars a year for two years, I think. And now we're doing 150,000 a week, six months later, right? So that's, for, from $550,000 a month to $600,000 a month. Right? Wild.

So pretty cool. Very exciting. And I'm just pumped. Pumped out the future. I think 2021 is going to be a good year. I think there's a lot of cash on the sidelines. Savings across the entire United States like went up a ton, which means they're printing money and people are holding onto it,

which means that when people start spending that money, we should see a boom overall. I do think that, you know, as we have an entirely democratic president, you know, all three houses or whatever, branches the government are all democratic. I don't think that they're going to want to not look good. And so I think that they're going to pump the economy as much as they can, which will be good in the short term and we'll see in the long term. As much as everyone's really worried about the inflationary effects, which is definitely a concern. There's also really strong deflationary effects going on right now, too.

so I also think that the people who who are running monetary policy are probably more knowledgeable than we are. It's literally what they do for a living full time. So just something to consider there. But yeah, that was 2020. I have, I've had a, I hope you enjoyed this as different than the normal types of podcasts that I make. This is kind of the top of mind, the things that have been most meaningful for me. and I'm I think I'm in the best mental place I've ever been

which is cool for me I'm not a particularly I would never have described myself as a particularly happy person but I'm I'm pretty close to happy and I don't really like the word very much because I think it's really misleading but I'm really pretty fulfilled

I really I really I'm pretty fulfilled. I really like what I do I think I'm good at it, so I find that fulfilling. I find it challenging. I love the game of entrepreneurship. And I'm very grateful to be able to apply. You know, I really am. And I'm going to leave you with one thing that I, so I talked to my 18-year-old neighbor, right? And he's having a hard time.

He's got more stuff that's happened since the last time. You've heard a podcast from me. Just personal stuff. And, you know, he's having trouble with the sacrifices. that are required for entrepreneurship. You know, he's young, he wants to have fun. And the thing is, there's nothing wrong with that. It's just the question is, how bad do you want what you claim to want? You know, everybody wants a six-pack. It's just that they want donuts more, right? They actually want donuts. They claim to want a six-pack, but they want donuts more, right? And I think

that that, you know, analogy is the same for business. Like, he wants to be an entrepreneur, but it's hard to see your friends partying and having fun and living, you know, they're their youth, youthful lives without you. And it's easy to rationalize and say, like, well, I should enjoy my youth. And I'm not saying you shouldn't. I'm really not. I just know that if you, you know, the sooner you start investing in skills, and I'm not saying he's going to, like, investing in skills is the thing, right?

What he does to invest in the skills is irrelevant. But investing in skills is how he gets there. And putting a disproportionate amount of time towards developing the skills will allow him to, you know, outpace the competition being, you know, everyone else, right? And I said something that when I was 19 was a huge epiphany for me, so I'm just going to share it with you. I was dating a girl for two years in college, and she was very, very obsessed with happiness. It was like it was her major, it was positive psychology was her major, and she was really obsessed with happiness. And she ended up being an amazing person, you know what I mean, but I think at the base,

a relatively sad person. And I know that when we split up, and during that time, because people rub off on you, I had become really, really interested in happiness. How do I optimize for happiness? Does this make me happy? Like all this stuff. And I think happy is a horrible term. I think it's a horrible term.

I think it poisons so many people, you know. And I remember, you know, because you're kind of emotional when you're younger and or probably were emotional when we're older, we're just better hiding it. But when we split up, she and I and I had these habits of, you know, reading all this positivity stuff and blah, blah, blah. And I just remember going to this place

where I was just like, fuck happiness. I'm just going to win. And that became my new kind of operating standard. I was like, fuck happiness. Like, I'm just going to move. I'm going to take so much action that I don't have to think about it. I don't have to think, I don't have to be alone with my thoughts, right?

I'm just going to keep moving and I'm just going to keep getting better and I'm going to keep making progress. I don't care if I'm happy. And a weird thing happened. Once I stopped obsessing about happiness, I actually think that I became more content. Because the thing is, is I was constantly measuring myself before that to this, what I would consider an unrealistic expectation of the human existence. and always finding myself deficient. And so the desire for happiness creates an unfulfilled expectation that makes me unhappy. And disregarding happiness gives me permission to not give a fuck.

And if I happen to be happy or enjoy a moment or find fulfillment in my work, then it becomes above my expectation. And so I have a positive experience. And so one of the biggest things that I have worked on, and this is what I was talking to my 18-year-old neighbor about, was the only reason that you were upset right now is because of a fictitious expectation that you arbitrarily made up in your mind that you were not reaching that you made up. It's like if I said I wanted to gain 20 pounds of muscle in seven days and then was upset that I didn't gain 20 pounds of muscle in seven days because I worked out hard. It's the same thing. Right? I was like, you want to be a millionaire in your 19.

I was like, do you feel like it's reasonable that you think that after two months of beginning your entrepreneurial journey that you don't earn above the top 1% in the United States? Like, do you feel like it's reasonable that after eight weeks of not being in school that you are not in the top 1%? He was like, well, when you say it like that, and I was like, right, but that's what you're thinking. You're thinking like that. And so this kind of goes full circle with what I was saying earlier about having the extended time horizon. If we can extend our horizons, then we decrease our own expectations. And by doing so, we increase our fulfillment by default because we expect less or nothing. And while we increase our fulfillment during the process, we actually get better faster.

And that was what I am having him focus on. It's like, why don't we say, what's a five-year goal that we believe is reasonable? And let's make it action-based. All right? So instead of I want to make $400,000 a year in five years, why don't we say, what skills will I need to have that would allow me to make $400,000 a year? And then what actions would I need to take to acquire those skills that would be reasonable, even with poor talent that I would achieve that.

And so, for example, we determined that lead generation and sales, if he wants to be an entrepreneur, would be valuable skills. And so I said, okay, how do you think that we can go about guaranteeing virtually that you will have those skills? And he's like, well, you know, reps. And I was like, right. So how do we get reps in? And how many reps do we feel like are reasonable?

Right? I was like, do you feel like if you make 25,000 calls this year, which is 100 calls a day, it's just 500 calls times 52 weeks right you make 25,000 calls you'll be you'll be able to prospect and get business he's like yeah I think after 25,000 calls that would be reasonable like cool great so that's one year next year what do we do do you think after if you took you know you know 20 20 high ticket you know calls a week over 52 weeks you know a thousand high ticket phone call closes you would be able to be at least proficient in sales he's like yeah I think I could do that.

I'm like, okay, we still have three years left on this timeline. But I can tell you right now, if you can generate leads and you can prospect for your own thing and you can sell at high ticket amounts, you can make $400,000 a year, no problem. But we're only two years in. What else we're going to need? He's like, well, I don't know what I'm selling. I'm like, that's great. So then we have to develop a skill that's valuable, right?

And so at that point, I was like, I'm not going to make that goal right now. We're going to develop these first two. And then after that, we're going to go develop the other ones. And so I hope these kind of anecdotes about my 18-year-old neighbor are, our, useful for you. It's really, it's honestly been one of the, it's honestly been one of the most rewarding things for me. Um, because I feel like I get to live. I can, I can help someone not, you know, suffer as much as I did during that process and really shortcut the, the whole path to success. Um, anyways, I love you guys for listening. Um, this is, I, you know, I appreciate those

of you who find this valuable. Uh, this is really just my mental diary for myself so that I can look back, you know, and maybe, maybe hopefully, you know, in decades to come, I'll be among the billionaire bros who donates their life's net worth to some meaningful cause. And they'll be like, dude, you got to listen to Hermosie's old stuff. And so hopefully that's what these are. So anyways, I appreciate you all. I'm focusing on simple. I'm focusing on longer time horizons. I'm focusing on finding good people. I'm focusing on getting them focused on just a handful of things and just driving those and doing living a boring but steady business life and trying to come into it with no expectations and being pleasantly surprised about anything that happens.

And so that is that is my outlook. And I know that the world has been rough. My recommendation is to turn off all media. I turned off, I removed all the media from my phone because I thought it was especially overwhelming and I realized that my life was really the same without all of the news. So hopefully that's value for you

and I know that the news does not make me more money and I also know that the news does not help me prepare for what is to come independently because I think to myself, well, what would I do differently than I'm currently doing if these things were to happen and the answer is nothing which means it's not really providing me value and if it's like, well, I need to stay informed. If there's anything major, I'll find out.

I don't need to go surf the news to go do that. So anyways, 2021, I think it's a me a good year for a lot of us. I think a lot of people grew a lot in 2020. And so as a result, their businesses will grow in 2021. Like they personally grew. I personally grew more in 2020 than I did in any other year. And I think that we're going to, I think the result of that is going to show in 2021. So keeping amazing and keeping awesome lots of love and I will get you guys in the next fit

Bye