The Game with Alex Hormozi - Calculated Decisions: Risk, Reward, and Entrepreneurship (with Erika Kullberg) Pt.1 - Apr. ‘23 | Ep 566

Episode Date: July 22, 2023

“But the difference between somebody who's loyal or not is whether they cheat, right? And so I think that it's the same thing with patience. It's the same thing with honesty.” Today, join Alex (@AlexHormozi) as he guests on Erika Taught Me to share his insights on the importance of accepting that success is the result of many small things, not just one big thing. He also discusses his journey from quitting his corporate job to starting a gym and eventually launching his own successful business. This is part 1 of the interview.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.Check out the episode on Erika Kullberg's YouTube Channel!Timestamps:(2:53) - Success requires consistent effort(4:19) - Take calculated risks in life(9:01) - Entrepreneurship can replace traditional education(13:32) - Importance of internal validation(19:03) - Actions define character traits(22:40) - Action leads to true learningFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

I felt very confident that I would either get what I wanted or die. Because I was just in a tremendous amount of pain in the need of validation from exterior, that that pain was motivation enough for me to just continue to drive no matter what happened until I got where I wanted to be. 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.

So, Alex, what is a view that you have that got you to where you are out today that most people would disagree with. So I guess the more commonly held view, so I'll answer the question in a round about why. The more commonly held view is that things should be fast and they are just missing this one thing. And if they had that one thing, they would be successful.

But the reality is, it isn't one thing. It's a hundred small things. And if you can accept that it's a hundred small things, then you don't expect something to happen overnight and you don't expect some secret that you're going to find. You don't put your hope in a mentor or to be a savior for you. and you realize that you were the only person who's going to have complete control over your own life,

you're the only ones who could at least influence it. And so if you shift to that mentality, then everything's your fault, and then you actually can start making progress. And what did it take for you to realize that? I think I always thought that. Just realistically, I think I always thought that. I had a Middle Eastern father, immigrant, came here with nothing. So there was never, there was never an illusion that work was not required to get to where you wanted to. to go. I think that the moment we're really shifted though. I was probably in college. It was about 19. And everything had come easy to me. Like school-wise, I did really well. I was president of like

the newspaper and the, the literary magazine, the vice president of the creative magazine. And so I did, I just did really well with those things. I was in three varsity sports, like all that stuff. But in college, I went to Vanderbilt and everyone there was really smart. I was like, oh, okay. So I just always expect that I could just not say for anything. And like, I would ace it and I didn't have that happen. And so I ended up going fall break with like a one-o GPA, which is bad. And so he was like, hey, I'm just not going to keep you in school if this is what's going to happen. So I didn't go out, didn't do anything for the remainder of the semester. And I think I finished with a three-two. So I basically got an A on every single

assignment from that point going forward. And he said, cool. So now that we know what you're capable of, that's the expectation. And so bar was set. And that was probably the moment, though, where I tied hours of work to outcome. And then that just became my M.O. Like everyone knew it was like, Ramosi's in class, at the library, at the gym, or at the cafeteria. There's the four things from nine to nine every day. And so I started taking being a student like a job. And so it was nine to nine every day. And I pretty much worked 12 hours a day since then. But it was just being okay with the fact that things were going to take time. And I had to do them for an inordinate period of time without convincing myself how smarter than I was. And let time.

have its moment. Yeah. And after college, you went to this very traditional route of going into management consulting. And you eventually quit that to start the gyms. Yes. Can you talk about that moment where you decided that I'm going to quit, I'm going to try something different that's not on that standard path? Yeah, that still is to date, the most terrifying decision I made in my entire life. And so for anybody who's on that, on that edge or that precipice, like, I can only promise you

that it actually just gets easier. Because once you burn the boats there, I had to do this risk analysis, which was, okay, if I continued on this path, I am guaranteed to not get what I want. On this other path, I'm not guaranteed to get it,

but I have a shot at getting it. And so from a risk-adjusted basis, it made more sense for me to risk it because it was the only chance I had at getting what I wanted, which for me, my mental math at the time was, I wanted to make a million dollars a year and I wanted to not work that much.

That was at least my thought process. at the time. And I figured that if any company would pay me a million dollars year, because it's really, at least at that point, I only saw two main tracks for that, which would be investment banking, finance slash management. There's kind of like the only two paths that I could see in front of me that would pay me that kind of money. But I knew that if I was going to get paid a million dollars a year, they're going to be ripping $10 million out of my soul every year. And so that didn't seem like an acceptable outcome. And so seeing that, I decided to quit the really prestigious job that looked great on LinkedIn and Facebook.

all my college friends and all that stuff, to start a gym, which my parents were thrilled about with my Vanderbilt education, that that's where I was choosing to go. But again, it was from a risk standpoint, I knew a lot of people say, like, I want to be a business owner someday, but I thought, well, what, like, what would I have to use as qualifiers for what someday would look like? Like, what would that day have to look like in order for it to happen? And I reasoned at least that the later I got in my life, the harder it would be to change because I would be making more money in the future than I was today. I would have more responsibilities than I'd do today. I would have wives, kids, et cetera. I'd also probably have more assets. I'd probably have a house, bigger,

you know, car, whatever. And so it seemed to me that the lowest risk time that I would be able to course correct if I failed was in my 20s. And so that plus the, what I was saying earlier about, guaranteed to not get what I wanted to go. For those two reasons, I took the jump. It still took me six months to make the jump. And I talked to like my closest friend at the time pretty much every day for like an hour, just heeing and hoeing and heying and hoeing until finally I, I called him when I was like in Ohio and I'm from Maryland. And I didn't want to let anybody know that I had left because I didn't want anyone to talk me out of it. And so that's, that was what ended up, you know, being the breaking point to to get there. Are you typically very calculated in your decisions? Like all of your decisions

take those six months? Or do you go with your gut now where you make a decision, in a spur of moment. It's not a gut thing. I think I'm pretty cocked with decisions, but I don't think that decisions need to take a long time. And I think that I would say that as we've, as we've progressed in business, our speed of decision making has decreased. You know what I mean? Because I'm also, I can accept mistakes much more easily now and realize that most of the biggest mistakes have come from delay more than actual wrong doings. Because a lot of times it's like happy to glad decisions. It's like, okay, should we rent or should we buy the building?

Like, well, either of them have, like, a material out like change in our, in our lives? No. So I just basically put decisions in two buckets, which is, is it a reversible decision or an irreversible decision? And then if it is irreversible, to what degree is it irreversible? So, like, having a kid, very irreversible. Marriage, less irreversible. But also, but still pretty, pretty irreversible, tough, right, to get out of there.

You know, where we're going to go for lunch today? Like, irreversible, but very low. steak. You know what I mean? So it's like that's it's it's in your which I think is why partially all people struggle with it so much because it is an irreversible decision, but it also doesn't matter. Yeah. Which I do think as a hack is just knowing what you eat for most of the meals that you have just makes life so much easier and waste so much less time. But on the reversible decision side, then those ones we just say, I like using the term, what's my best bad guess? Caleb's probably heard me say this a hundred times. I'm like, this is my best bad idea.

This is my best bad guess. And so it just, it sets the bar lower for the expectation of yourself and others. Not to say that you don't have high, you know, high expectations of yourself, but in terms of like having a way to put language around decreasing your action threshold to do something, just saying, hey, this is my best, bad idea. And we only commit to one thesis at acquisition.com and everything we do, which is test and iterate. So that's what we commit to. We're not committing to this path. We're committing to test and iterate. And this is just the first test. And so seeing it that way, then it makes it just a tiny test on a much bigger process that we're all aligned with always. So it's just the only decision is which test we're going to run first,

which is just less. I know when I, so I was a corporate lawyer. I left this very prestigious law firm. And when I was going through that decision, similar to you, I was just thinking, what is the best case scenario? What is the worst case scenario? And for me, the worst case scenario was like maybe I would fail, but I would go back to find a law job.

Like it's a degree that you can typically find a job with. When you were going through that decision, what was your best case scenario? What was the outcome you wanted? And then what would have been the worst case scenario? So best case scenario is what I'm doing now. worst case scenario was I would have a really good essay for business school because I already took the GMAT too because I wanted to like really shore up my options. I'd already applied to get a

master's accountancy too because I figured if I had that plus my two years of management consulting, I would be positioned to do finance or management consulting really well going into B school. And I and I had read that, you know, they liked having some entrepreneurial experience if you have that. And so to me it was just that was actually a really big point from like the downside protection. It's like, best case, I actually succeed and I, I'll zoom out for a second. When I looked at business school, for me, it was 200 grand in like opportunity costs, like hard cost plus what I wasn't going to make, probably more than that 250. And then at the end of that, the median salary, I think, was like 110 or 120 from Harvard, somewhere in there, right? And so I figured if I took $250,000 and I took two years, I thought I could get close to making what my median was, except

I would already be living my, I'll be a business owner someday, and then I could, you know, scale past that. And so that was kind of like the reasoning on that side. But to your point about the, knowing that I could use it in an essay, which sounds so silly, to increase my likelihood of getting into a good school, actually was one of the major factors of me being okay of taking the jump. It's interesting because I went through the same process. I wanted to go to business school too when I was already a lawyer at the law firm. JDA. MBA. Yeah. So I took the GMAT while I was working me as 100-hour weeks. And I think, looking back at it, I think I wanted the Harvard or the Stanford as a crutch to validate that I was a good entrepreneur. Like, I'm so glad that I didn't

end up going that path because I think it would have been a two-year waste of my time and a lot of money. Yeah. It's, you know, I'll say the one thing with the, with like the super high tier schools, it's just the network. I mean, you're paying for a mastermind of sorts for, you know, 200 grand or 250 grand for them to screen high likelihood people who you're going to want to do business. with in the future. And so I think in that way, that's the main value. Besides that, you know, I think the rest of it is like, I mean, most of, half of it's like socializing. Like, they even build that in because they know that's the value. Isn't it funny though? Now that we have social media followers, we can DM people. It's like the same network effect as an MBA.

Oh yeah. You could post a story and just be like, anybody know an amazing commercial real estate attorney who does deals over 50 million. And then like you'll get like 60Ms. And you're like, perfect. Wonderful. You just tap in. You know, it's funny because this was a topic that Caleb and I've had a lot of talks about because I'm sure because you're you see the TikTok world and the shorts world and we're just barely getting into it. The amount of, uh, guruism around like networking, like networking tips and tricks and hacks and stuff. And networking has never been an issue for me because I at least my perspective on it has been if I provide sufficient value to everyone in my network by extension have access to everyone who I've already provided value to. And so it's like

Joe Rogan doesn't need to do, go to networking events like he's Joe Rogan. There was a neighbor I had who had a little kid who was eight years old. We were driving somewhere. just got an ice cream, kids in the back. And she was saying, you've got to know the store owner. She said it. And then she like turned around because she wanted to teach her kid a lesson. And she was like, these are the types of people you have to know. You have to know these people, all right?

Because you have to stay in contact and you have to know this stuff. I remember hearing that and thinking to myself, I was like, no. I was like, I'm the person that everyone needs to be in contact with. And it was just a difference in worldview. And she was a super networker. But she had not, she'd never seen herself as the person to provide value. It was always like, how do I manage all of these hundreds of acquaintance? And she was amazing networker.

But it was just a different view. And I feel like, I mean, they're both fine. I just, for me, it was better suited my personality that way. Real quick, guys, you guys already know that I don't run any ads on this and I don't sell anything. And so the only ask that I can ever have of you guys is that you help me spread the words so we can out more entrepreneurs, make more money, feed their families, make better products and have better experiences for their employees and customers.

And the only way we do that is if you can rate and review and share this podcast. So the single thing that I asked you do is you can just leave a review. It'll take you 10 seconds or one type of the thumb. It would mean the absolute world to me. And more importantly, it may change the world for someone else. You mentioned earlier that when you quit your job, your best case scenario is where you're at right now, what you're doing. How would you describe that? And did you really anticipate that that would have been your best case scenario?

Yes and no. Ultra success, yes, path, no. I felt very confident that I would either get what I wanted or die. I mean that genuinely. So I knew that I was just going to continue. You know what I mean? Because I was just in a tremendous amount of pain in the need of validation from exterior, that that pain was motivation enough for me to just continue to drive no matter what happened

until I got where I wanted to be. Now, obviously, I have new goals now, but they're motivated a little bit differently. but by and large, yes, I did think that I was going to be successful. Did I think it was going to be necessarily through gyms and then a gym turn around business? And then like, no, I didn't think that was. And I think that's kind of the push and pool of being opportunistic when things open up, but also being dedicated to the long-term path. Do you still feel like you need the validation?

Probably do a degree. Yeah. I think a lot of even just comes from internal validation. Like, I want to prove it to me. Like, I want to prove it to me. And so I think that's where a lot of it comes from now. I'm sure there's some external stuff because humans are social preachers. And like if everyone hated me tomorrow, I'm sure I'd have a bad day.

But I think I would just say it's shifted in percentage. I'd say, you know, when I was 19, it was 99.999. Everybody else in 0.001% me. And maybe now I'm 6040, you know, maybe 70, 30, if I'm lucky, I'm having a good day. But, you know, my goal is just to just increase that percentage over time and maybe die close to 90-ish. So after you quit, what was the first taste of success you had that gave you validation that maybe that was the right decision to quit and leave my job?

I actually saw pretty rapid success with the gym. So I was fortunate in that way. I made profit every month. Well, the first month I broke even the second month. I made $5,000, which was what I was making at the consulting job more or less the next month I made $10,000. Next month I'm in 15, 20. And I went from there.

And so I had immediate validation. I would say I didn't feel secure. I felt like it was going to be over tomorrow always. I would say that, that feeling has taken a long time to get rid of. And I would say that truthfully right now, I don't have that feeling. But I have certainly had that at times with gym lunch in the earlier days, prestige labs in the earlier days. The gyms, absolutely, when I was running those, I was like, tomorrow everything can go away. So I think that that has diminished. But yeah, from the get-go. And that's probably not the the standard entrepreneur story, but I slept at the gym. I mean, people hear the sleeping in the gym part

and they're like, oh, like he went through the grind and I did. But I was also like stacking every single dollar that came in and just plowing it in my bank because I had no employees. And the only thing I paid for every month was the rent for the facility. I did everything to run an entire gym. Like imagine a gym you walk into and there's no employees. There's one guy. And I did that for like six months. What is now to you? Is now what you're doing hard or are you a easy phase. Hard changes. Like the, like the way the heart feels is different. So like when I was, when I was starting out, the heart was just sheer exhaustion and fatigue of just like my first session was started at 430. My last sales consult ended at 10 o'clock at night. And then I would do

all the billing and process all the contracts and whatnot, which ended at 1130. And then I would sleep right there like on the floor. And then I did that because I didn't have to save the commute time. and then I would just wake up at a cold terror of stress. And I would be up and my shirt would be clinging to me because it's soaked in stress sweat. So that was that. That's what it felt like then. When we started doing gym launch,

the stress was more around like money. It was cash flow issues of, okay, we're launching all these, you know, we're launching eight gyms next month. I've got a front hotels, airfare,

rental car, per diems, ad spend, get all those, you know, campaigns up and running. And I had to front all that cash off of last month. So it was more like a managing the cash that was coming into the business thing, which was super stressful.

But that was the different kind of stress. Jim launch is hard was, well, one, it was realizing that there was an opportunity in licensing and just called digital products or B2B services that weren't like in person. Like that was the huge, that was the big unlock when we went from a few hundred thousand dollars a month. I think we were like three or four hundred when we were doing like turnarounds in person to, you know, two or three, you know,

and at like four and a half million a month, just riding that. But there, the issues were me. And so it was my character traits that were the deficiency at that point. So I feel like I had to change. I'm sure I had to grow at all these stages,

but like my ability to handle stress in general, my focus had to increase because when you were a small business owner, you can shift the ship really quickly, you can turn, you can pivot and all that kind of stuff. But when you have hundreds of families that are, just on the employee side, but thousands,

if you include the customer base, that are relying on you. It's like you can't make these snap decisions anymore. And so it's like, I had to calm down and become less erratic. And that's where the stress and emotional tolerance fed into, okay, we have a bad day. It doesn't mean we need to change the strategy. It just means you had a bad day. And then what do you do? Nothing. That's all it is. So one of the things that it's been a huge epiphany for me as we've gone through this journey is that, because I talk about character traits a lot because when we look at portfolio companies, for the most time, we're betting on the jockey. I mean, like, we understand the fundamentals

of the business and we, you know, we're betting on this market, et cetera. But like, Like the number one thing, 80% of our scorecard is based on the entrepreneur. And so when we're looking at that, a lot of people, at least myself, including when I was coming up, I thought like, I'm impatient. I would speak that over myself. Like, I'm an impatient person, you know, and I wanted to be more patient. So the difference between somebody who's loyal to their wife and somebody who is not is not the fact that they might have their eye get caught because that happens. They're human. You're going to have emotions, right?

But the difference between somebody who's loyal or not is whether they cheat. Right. And so I think that it's the same thing with patience. It's the same thing with honesty. It's not, do you want to lie? It's do you choose not to despite wanting to lie? Right. And it's just like courage, you know, the famous one with like it's not the absence of fear,

but taking action despite it. And so I think a lot of those character traits, a lot of people, it feels like these amorphous things that we want to have and like take off the shelf and put inside of ourselves. And so we think that we need to feel a certain way in order to be a patient person or be a kind person or whatever, when, at least in my experience, it's been you don't feel that way, and you take the action that a patient or kind or courageous or loyal or honest person would take despite the feeling. And that was a huge unlock for me in terms of understanding my stress levels

in terms of decision making within the company. Like if I want to be a long-term thinker, then I have to, despite not wanting to act in the interest of the long term. And I think when I started doing that, the compounding of the businesses in general started to really unlock. I think it comes down to discipline, probably. Yeah, short term. Yeah, being able to be uncomfortable in the short term for whatever you want in the long term. Absolutely. But yeah, in the final chapter, which we consider with Acquisition.com to close the loop on that,

the hard now is just, I would say it's those character traits that I just went over, but just more. It's just the standard of patience is higher. The standard of discipline is higher. The standard of focus is higher. And so it's not, and even to further this point, character traits are not binary, right? They're not, you are patient, you are not patient, you are not, you're dishonest or honest, it's how honest are you? And so I think that maybe what was able to get me through Jim Launch,

Prestige Labs, and Allen was maybe like a seven out of 10. And like to get to a billion plus, which is what we're on the path to do now, I've got to be a nine, you know what I mean? And maybe to get to 10 billion, I got to be a nine and a half. And so at least that's my, that's, I would say, that's what hard feels like is choosing the actions that I know is aligned with the person that I need. to be in order to do the thing I want to do, despite not feeling like it. What types of books or podcasts or media are you consuming to help you to develop these views? Not many. I'm not super heavy on consumption, to be honest with you. I would say that the degree of my consumption is mostly as silly as it sounds, our stuff just to make sure that it's like looking

okay. I'd say like proofing our own stuff is like, I would say 70%. which sounds ridiculous, but it is. That's also because it's a very small percentage. To be fair, it's a small percentage of my time. And then the other 30% is, like, if you looked at my Twitter, the best majority of the people that I follow are, is, is, is philosophized stuff. So it's like, you know what I mean? If you look at my Instagram, the only people that I'm really following are people that I want to just see what they're doing rather than consuming their content. I just want to understand their strategy, their cadence, how they caption stuff, are they doing anything new? Because I'm new into that world in the content world. And so I just, I'm just trying to learn. And so

that's, but I don't have any specific people that I consume a lot from. I mean, most of my learning comes from doing. I had this myth that I used to believe that like if I read a book, I would somehow have a skill. And I feel like when you read a book, you have like a general idea of like the vague outline of what the skill might be. And so like you, you learn so much more from your first hundred sales calls than you will from reading every single book in the library on sales. And so I think that that belief shifted actually. when I was doing, when I was in that six-month terrible period of my life where I was like deciding whether to stay or go, I read, I think like 10 or 15 self-help books and I realized that my life

hadn't changed. And so then I almost like decried all of the, hopefully it's not too graphic, but like the mental masturbation of just like, I'm learning, I'm learning, I'm learning, but like I wasn't really learning because it didn't actually affect my behavior. And if you look at behavioral conditioning, they say the definition of learning is that way you put the same condition and you have a different behavior. And so if someone does something in a condition, and then they learn something, and then you present the same condition,

if their behavior changes, they have learned something, right? Which either happens to reinforcement or punishment. That's it. And so I was consuming all the stuff and in the same condition, which means that I had learned nothing, despite consuming a lot of content.

And so once I realized that, I realized that behavior in action was the thing that actually got me to learn. And so I biased all of my activity towards that rather than massive consumption of information. and I figured I would learn more from doing than from learning how to do. And that ended up being true.