The Game with Alex Hormozi - A Hard Learned Lesson | Ep 213

Episode Date: June 12, 2020

It’s all about being practical the more you progress. Today, Alex (@AlexHormozi) talks about one of the hardest lessons he’s learned in his entrepreneurial journey, how to not get distracted by opportunities that might seem attractive and how he’s been able to grow more money as he takes a step forward. “Our optimism can become our Achilles heel because we believe that the chance of success is actually greater than it really is.”Welcome 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:(1:39) - Some opportunities are attractive, but learn to say no.(3:32) - Alex shares realistic view on taking opportunities.(5:11) - 3 important questions to help learn to say no.(7:37) - Discipline to say no gets stronger as you progress.(8:39) - Alex shares story about internal optimism weighing against entrepreneurs.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Business is different from baseball in that. In baseball, when you swing for the fences, the most you can ever score is four runs, right? But in business, every once in a while when you stepped up to the plate, if you hit the ball hard enough, you can score a thousand runs. If you have a chance of a hundred times payoff and you've got a one out of ten chance of hitting it, you should take that bed every time. I think that that's not, it's correct mathematically, but in practicality, I think there's another sentence that needs to be added to it. Welcome to the Jim Secrets podcast where you 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 that we have learned along the way. I hope you enjoy and subscribe. What's going everyone? Happy, I think today's Saturday. Give you a nice, beautiful lake view. Very, very pretty out here. We're in Bear Lake on the quarter of Utah. But recently, I've been spending a lot of time reading and specifically reading from people who make a lot more money than I do. And I think that I haven't had a good kind of a little bit more heavy of a podcast until recently.

So I'm going to try and break that streak today. So one of the hardest learned lessons that I've, I mean, and I'm still actively learning it, but every time I take a step towards kind of a better ideal in this direction, I make significantly more money. And so I figured I'd share it with you. So in some of my earlier podcast,

I talk a lot about focus, right, about learning to say no. And I think that over the last year and a half, two years, there have been my hardest learned lessons were where I said yes to opportunities that were now at a larger size than what I used to learn to say no to. And so I've referenced the opportunities that come to us as like the woman in the red dress familiar with the matrix is that the thing is that at every opportunity level as you level up, the opportunities become sexier, right?

The woman in the red dress becomes more attractive because, you know, in the very beginning before you've made any money, anything is attractive. you say yes to anything. But then as you acquire more and more skills, more and more opportunities open up and better and better opportunities open up, which is why you have to like relearn the same concept but at a different level, right? Because at one point, you don't say, you say yes to a $10 million opportunity or $1 million opportunity. Everything's relative, right? But at another level, you have to learn to say no to that if you were above that at that certain time. And I think I've made that mistake multiple times at different levels.

And so I'm partially making this video for me. And so there's a book called The Road Less Stupid. It's really, really good. I'd highly recommend it, especially if you're an entrepreneur. And especially if you're prone to getting excited about new ideas, constantly wanting to innovate, constantly wanting to tweak and change things, which is really, really the thing that excites us a lot.

And a lot of times it's the key to big breakthroughs. That being said, one of the quotes I used to quote a lot was from Jeff Bezos, who said, Basically, business is different from baseball in that. In baseball, when you swing for the fences, the most you can ever score is four runs, right? But in business, every once in a while, when you step up to the plate, if you hit the ball hard enough, you can score 1,000 runs. And so big, people who bet big win big, but they bear the cost of experimentation, right? And so he references earlier on in that, in that little address that he said, if you have a chance of 100 times payoff and you've

got a one out of 10 chance of hitting it, you should take that bet every time. And after having thought about this, I mean, Jeff obviously makes a lot more money than I do. I think that that's not, it's correct mathematically, but in practicality, I think there's another sentence that needs to be added to it. And so to give it a realistic context, imagine you're going to the casino and that's the bet, right? That's the bet is you have to put, let's say, $10 down and you can win $1,000, but you've got a one out of ten chance, right? Now, here's where it makes it realistic. Let's say you only go into the casino with $30.

Then what do you do? Think about it. So that means that if you were to bet three times, you've only got a one out of three chance of coming out of the casino with anything, right? And so that's, I think, a more realistic paradigm for what most entrepreneurs go into is because you have a constrained amount of capital money

and a constrained amount of time and resources and bandwidth for your time. team. And so kind of adapting that extra sentence on there of just understanding that there's a cost to making that bet. It's not just, oh, if I have a one out of 10 chance of scoring a thousand, then I should definitely make that bet every time for a $10 bet. Yes, you absolutely should mathematically. And in Jeff's case, he's had access to unlimited money, virtually unlimited money for 20 years. He's been able to raise funding and fund. I mean, they have $500 million messups and they're like, whoops, that didn't work. But a lot of us don't have that. And so there's in the book

The Road Less Stupid, he gives a context that I think it's really, really been useful for me even lately in making decisions about opportunities, right? It's the things that I have to say no to. And so the three questions are really simple, which is why I've been using them so much, which is, what's my upside? What's my downside? And can I live assuming that the downside's going to happen. And so the third question stated a little bit differently, but that's how I'm using it. And in phrasing the three questions that way, it's helped me so much in saying no, right? In like, man, why don't we try this new follow-up sequence so that we can get, you know, more leads in? Well, what's the, what's my upside? Maybe I get a 10% boost. What's my downside?

I lose 50% because the test doesn't work or at bombs because what I'm going against is a control, which has already been tested against other things and is working. Hey, if you're a return listener and you have not rated or reviewed the show, I want you to know that you should feel absolutely terrible about yourself and everything else in the world. I'm kidding. But it would mean the absolute world to me if you guys would go ahead and do that. You don't even have to pause the show.

You can keep listening and you can just do it with your thumb right now. It'll take you less than 60 seconds. And like I said, the only way that podcast grows through word of mouth and this is you joining hands with me and helping as many entrepreneurs as we possibly can because no one is coming to save us. It's just us. All right, so please go do that now, and let's get back to the show. And can I live with my downside of losing 50% for the hopes of gaining 10?

No, I can't because I'm going to assume I'm going to make that loss. And so then I just say no. And what's happening is it's giving me so much attention back so that when I'm making my bets, because ultimately, if you really think about what business is at its very basic, it's just betting, which is why a lot of entrepreneurs love gambling. Because it's what we do. We do in a controlled setting. It's like, you know, business is the ultimate version of poker, right?

like poker is a combination of skill and luck, right? Business, I would say, is even more skill and still a little bit of luck. And so it just has more skill in our control. But the end of the day, there's still bets they're replacing. It's not just on black and red. It's should I hire a salesperson first or should I spend more in this marketing campaign? Should I test out this new follow-up sequence or should we try and run SEO? Or should we do cold outbound messenger, right?

And so it's like all of these things are decisions where you're choosing between, two different opportunities. And I think if you apply that framework, that three question framework, it's been, I just like, for me, it's been a game changer. It's been so helpful. And we've seen, you know, huge reaps, you know, we've reaped the benefit in the business. Just in the last 90 days, even during COVID, we've had some explosive growth. I'll tell you more about it in a couple months. But it's been in really trying to hone that discipline. And I feel like at every level, you get that, that discipline muscle gets stronger and stronger and stronger. And the things that I'm able to say no to get better and better and better. And so one of the things that if you look at,

if you study like Charlie Montgomery and Burn Buffett, they talk about the best, the best betters, the best gamblers actually bet the least frequently. They actually bet the fewest amount of times. But when they bet, they bet big. And so I'm trying to really apply that. And when they, when they bet big, they bet on what they call no-brainers, right? It shouldn't be like you should have, in their mind virtually no chance of not succeeding when you make the bet, right? And then if you think about that, then you're like, well, shoot, there's, I mean, when will I ever see those types of bets? If you look at them over 40 years, they only have 15 bets that have created all of the billions that they've been able to generate. 15. 15 winning bets out of all the bets they've made have been the

winning bets that got them to where they are. And I think that in business, it's a lot like that. So let me just tell you one, one quick anecdote to wrap this up. To make this real for you, tell me if this sounds realistic. You get really excited about a new concept, a new idea that you think you're going to test out, right? And you pitch it to the team, you let them know what's going to happen, you're saying we're starting on Monday, this is going to be the new way we do things. The team's not 100% trained up on it, but they're kind of, you know, flies you go. Your speed is king. Let's rock and roll with this thing.

You know, we'll pick it up as we go. And after a month or two months, you look back at your stats and, they're pretty much the same, maybe even a little bit less. There's like three other things that happened during that same period of time. So you're like, I don't know if it was this or it was because of the new process. Honestly, you know, there's this and that. And then all of a sudden, you realize that you didn't even get a definitive answer on the test that you ran.

And you definitely didn't get the result that you were hoping for. And so what ends up happening is that your company and you incurred this enormous cost of change without real, like without any real upside. And so in thinking through the bets that I'm making now, I'm assuming the cost. And what I mean, like, I'm assuming that I'm going to have the downside, even the one that I'm understanding, but I'm assuming there's going to be some that are unknown that I'm going to have to incur. And so when I'm making that assumption, which is that third question, which is, and can I live

with it assuming that it does happen? I, it's just like, it's been, it's been so illuminating for me and so helpful for me because what happens is you get in these vicious cycles, especially, um, especially, um, it's just like, Especially if you're in an emotional situation, right? Because I know a lot of, a lot of business owners in general right now are cash constrained. They're trying to figure out what to do. They're trying to pivot fast, make fast decisions on incomplete information. Sometimes that's just the name of the game, right?

But in doing that, they're hoping for the Hail Mary. And so their internal optimism, which is what leads them to be an entrepreneur, ends up weighing against them. It ends up stacking the chips against them. because that one thing which has been your hope, right, your greatest strengths can become your greatest weakness as an entrepreneur. There's no different, right? Our optimism can become our Achilles heel because we believe that the chance of success is actually greater than it really is.

And we underestimate the cost of taking the bet. And that's where we get fucked, right? And so when you go back to the casino and when you're considering the bets and you're like, man, if this hits, this could be 10 times what we're doing right now, right? But just remember, you only might have three bets to make and you got a one out of 10 shot. So use them wisely. So anyways, I hope that was useful for you. It's been incredibly useful for me.

I've been saying no to way more tests and tweaks and variations and just small things that would really distract the team and just saying, guys, we're just going to keep, we're going to keep focusing on executing. We're going to keep focusing on doing better at the fundamentals. And it continues to pay dividends because the team. team doesn't have to be scattered. They just have to think, how can we get one percent better every day rather than one percent better for two weeks and then change everything? And then one percent better for two weeks and then change everything, right? Where they never actually get to get that long-term compounding improvement, which is what ultimately will separate you

over time. So like I said, hope that was valuable for you. It's been a huge lesson for me. And in studying some of the greats, the all-time greats, seeing how they make decisions, seeing where they place their bets, I wish I had learned it earlier. But hopefully I can pass, you know, at least that nugget on to you because it's been really helpful for me. So lots of love. Keep being awesome. Hope you for me Saturday.