The Game with Alex Hormozi - Hard-wired Entrepreneurs, Grand Slam Offers, & More... (on Foundr Stories) Pt. 1 - Feb '22 | Ep 433

Episode Date: September 10, 2022

I prefer to be dealing with tremendous demand and fixing operational problems rather than trying to generate demand... Today, join Alex (@AlexHormozi) as he guests on Foundr Stories’ YouTube to talk about whether or not entrepreneurs are hard-wired or born that way, becoming a billionaire, grand slam offers, and more! 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 Foundr Stories’ YouTube Channel! Timestamps:(1:01) - Alex's first job, entrepreneurial mindset, and book inspiration.(6:18) - Giving after death, billionaire aspirations, and the path to it.(11:22) - Post-billion goals, software impact on billionaire status speed.(17:13) - Importance of the "offer," steep learning for $2M+ monthly earnings.Follow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

Moses Nation did a podcast with Founders Stories where we talk about three main things in part one of the podcast. First is, are entrepreneurs hardwired as entrepreneurs or are they born that way? And I think I have some interesting thoughts around this that will serve you. Second, do you have to have a software company in order to become a billionaire? I'll give you my thoughts on this often overused path and the many dangers of thinking that is the only way to become ultra-altra wealthy and the many, many, many people who have not been. And third, how to craft an offer that's so good. People feel stupid saying no. And if you're used to it, it's a nice verbal overview.

And if you haven't read the book, then it'll give you a decent crash course. If you like it, you can grab the book on Amazon for nine minutes. My belief is like the three pieces of scaling that I adhere to is zero to a million is promotion. One to ten million is product. 10 to 100 is people. 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.

Alex, thank you so much for taking the time to speak with me today. The first question we ask everyone that comes on is, how did you get your job, aka how did you find yourself doing the work you're doing today? Oh, by a master plan. I started out when I was three. I iterated and failed my way here. So I went to school for a business degree,

did management consulting after school for two years, did defense contracting. So space cyber intelligence, top secret, all that stuff. It sounded really cool, sounds much cooler than it was for me. I was mostly just taking notes during dictated meetings and turning them into and highlighted color-coded notes. But didn't like that. Had coworkers told me that I should start fitness stuff because it was all I was talking about.

Use the consulting method which I knew, which is look up experts and connect with them because it's faster to learn that way. He emailed 40 guys. One guy got back to me. I offered to work for him for free. Left everything I had, sold my condo, drove across the country 36 hours later. I was there. Work for free for three months. Started my first facility. Learned about Facebook ads at about that time. Use that as the primary of getting customers. After month 15 of the first location, opened up a new location every six months at full capacity, went to a different marketing

summit, saw a guy, signed up for his mentorship. He said, I should be showing people how I was doing what I was doing rather than opening up more gyms. I took his advice because he was richer than me. So then I did turnarounds for, so I flew around the country and did 33 turnarounds. So I flew out and filled people's gyms and had an eight guys sales team doing that, turn around eight gyms a month. That was an intense period. And then from there, I realized that the logistics were getting really difficult to scale. We were doing probably three, three-ish, $100,000 a month at that point.

And so we switched to a licensing model. And then that is when everything kind of took off. There's a ton of heartbreak and bankruptcies and failed partnerships intermixed in there. but that is the two-minute story of how I got to the first big successful company, which is Jim Launch. Then we started a supplement company 12 months later. Then we started a software company 12 months after that. And then we started the parent company acquisition.com.

We acquired interest in three other companies, about to be four, so we'll have seven in the portfolio. And those companies now do about 85 million here. Do you think entrepreneurs are hardwired? Or do you think they can be made? And if so, why? I think it's a really good question. I think it's a nature and nurture thing. So I think that there are some people who are hardcore could never live another way. And there are some people who will never be entrepreneurs. But I think there's a whole lot of gray in between that depends

on stimuli and circumstance. I think for me, I don't think I was hardwired an entrepreneur. I wasn't slinging lemonade. I think if there was like 10 being, you know, the Gary Vee, who says he could never be anything but an entrepreneur. And then a one is, you know, an academic chair at a Department of Mechanical Engineering. I think I was actually closer to like a three. Like I think I'm actually left of middle in terms of not being necessarily an entrepreneur personality type. The only reason that I think I even got into this was because I so disliked the career that I was on that candidly, I just wanted the emotional pain to end. And so I just thought like I didn't even want to be alive anymore. And so I just threw away all my goals around money and just

said, I'm going to do something that I love, even if I don't make anything. I'll start a gym. I like fitness. But then I got the bug and realized I like business more than I liked fitness. And then that kind of started the next kind of passion that started growing within me. Like the day that I opened my gym was the day that fitness became second most important thing in my life. Business became the most important thing in my life. I see. So you wrote this book called 100 million dollars. Yeah. It seems like a lot of, like it seems like it's doing really, really well. Like, what compelled you to write this and what inspired you to write this book? I share my numbers really transparently on the channel.

You know, my wife and I have taken a tremendous amount of dividends from the business. And we sold, you know, one, I sold my gyms, but that wasn't anything huge. And I, we signed our will to give away everything we have when we die anyways. So in thinking through that decision, I was like, well, giving away everything that I have when I die is, is neat, I guess. Because then it decreases some of the pressure around like, why I make more now, right? but then I was like, I think the most valuable thing that I can give isn't money, which we do give, but it's the skills, right? It's the giving fish versus teaching them into fish. And so that was kind of the spirit behind the YouTube channel, the spirit behind the books and the courses and things that

I'm just giving away now, mostly because it feels good. And because I get to participate in some cool companies, you know, some, you know, I get to meet new people from this. And I think that Layla and I were really, really sheltered in terms of how we've done. our business career at this point. I mean, you know, we were known within a very small niche, but for the most part, we've just kind of stuck to doing that. That was actually an active decision about a year into gym lunch once we transitioned to licensing. We were doing about two and a half million a month. And we said, we can't mess this up. And we've got too many families, too many employees who rely on us. And so we basically said, we're not going to have friends. We're not

going to drink. We're not going to go out. We're just going to work. And right or wrong, you know what I mean? That was just where I was mentally at the time. I was like, I just need to do this and do a really good job. And we did. But now that we've kind of come, I would say, come out of that season of life, now it's like, hey, we can look around and share some of the lessons that we've learned along the way. Yeah, that's cool. I respect that. So I have to ask you, just delve a little deeper on that piece that you said you and your partner, Lelavori, written your will and you give everything away. Like, like, why? Why? We're not big believers in legacy. You know, I believe, at least, you know, America's built on

equal opportunity. I don't think that inherited wealth does anyone. any good. I think it ruins people. I think you have to learn how to, like, I believe money is a tool. And my favorite magic card, which there's a game called Magic the Gathering that I played one as a kid, but it was, she wished for a weapon, but not the skill to wield it. And so I think that people get this very powerful tool and they don't have the skill to wield it. I think the only way to have, not have money own you is to know how to generate it. And then you can respect it for what it is, know what its limitations are and know what you can do it, use it for. And I think that most people who are gifted it. So I don't have kids, but if I did have kids, I still wouldn't give

them the money because they have to do it on their own. Otherwise, it'll, I think it'll ruin them. And when it comes to aspirations, one of my close friends, he's a, he's a gym guy. So I think he, yeah, he been following you for a long time. He mentioned to me that your aspirations are to become a billionaire, right? So like, you want to, you still want to acquire, you know, a sizable amount of wealth, right? Yes. The easiest way for me to explain it is like, I want to have a very big goal that sounds exciting, but I have absolutely no emotional investment. If I never hit it, I wouldn't be upset. I do think I'm going to get it, but I wouldn't be upset either way. Can you talk to us about the how, like conceptually kind of like top level? Like, like, how do you plan to get there? We're just going to be investing in businesses that are similar, the ones that we scale and participate in the growth. It's very simple model. And just, you know, penciling out the numbers. Like, I know that I can acquire. probably a decent size chunk of four to eight businesses a year. And I think that I can reasonably three to five X those in three years because we're just looking at niche businesses that we know

that we can crush. So the thesis, I'll zoom out for a second. So the thesis point acquisition.com is that formal education, at least in America for me, I feel like formal education failed most of us, right? You know, we put a lot of money in. There's some in the U.S. you can't bankrupt out of the debt. Like you cannot get out of the debt that you go for your schooling. And the entire idea, like the original premise of higher education was that you'd now be a more valuable member to society, be able to be more gainfully employed and provide value, right? The problem is that the promise is under-delivered, right? And people go in and get the same level of income after they get a degree as what they could get

before. And if you just look at the parallel track of somebody who took the same amount of money and spent it on what I would consider alternative education over a four-year period, I would say almost invariably the person who spends an alternative education would be far better off four years later than somebody who partied for four years at college. And so I think that with technology, I borrow this from Naval Rabakhan. I just like to quote a lot. Technology democratizes consumption and consolidates production, which means if you're the best in the world, you get to do it for everyone. And so I think that education is going to become or already has been and will increase in its fragmentation. So you'll have more niche verticals.

And instead of having generalists, which is what formal education is based on liberal arts where you get like, I've got English and math and Aztec literature and female studies and whatever, right? Instead, it's how to use Aaron B to make money. how to drive Uber and make money. How to you, you know, do Amazon FBA. What's hilarious to me is that, like, there's more Amazon sellers than there are almost, then you can pick, you can pick a profession that's out there in the United States.

And there are more individual Amazon sellers than there are almost of any, you know, sub-group of individual thing. But why isn't Amazon or e-commerce a major in undergraduate? It's a real, you know, it's a real way of making money. And so I think that with this huge fragmentation, education hasn't gotten close to catching up, but the demand for high value skills has never been higher. And so you have this huge amount of demand for people who want to have skills so they can

feed themselves and provide value. And then you have almost no supply. And so what that's given birth to is what I would consider the alternative education scene, which is blowing up, right, the entire, all the gurus and e-learning and all that stuff. And some of it's bad, some of it's good. But at the end of the day, the demand is going to drive it. And so my bet that in my thesisbindacquisition.com is I want to find the people who are the best at their specific thing, the best salon girl, the best auto mechanic, the best gym owner, the best

all of these things, and then wrap the model that I already know how to deliver, you know, provide exceptional service, provide great value, how to teach effectively so that people can understand the concepts, and then ultimately make a lot of profit and then participate in that process. So that's, that's the thesis behind it. Hey, Mosin, Nation, quick break just to let you know that we've been starting to post on LinkedIn and want to connect with you. All right, so send me a connection request and note letting me know that you listen to the show and I will accept it. There's anyone you think that we should be connected with,

tag them in one of my or Layless posts and I will give you all the love in the world. All right, so let's get back to the show. We share similar views on education and that whole system. Won't go too deep because we can talk about it forever. You talk about the billionaire goal. Once you hit that, like what's next and how, and when do you want to do that by?

I think if I said it, it would sound unreasonable. But I think that, I mean, I'll tell you what I have it. I don't think I've said it publicly, but I think 10 years is what I think I can, I mean, it'd be cool to do it sooner than that. And that's barring, you know, a global meltdown and reset or whatever, you know, like an erasing of currencies and crypto ruling the world. But, you know, short of that happening, and as long as, you know, whatever the recession that is coming comes in, it's just a normal level recession and not like a global depression meltdown, I think that in 10 years we could get there. And that's just based on normal, like just based on the assets that we already

have how I plan on allocating the assets and what kinds of returns I think will be able to reasonably expect, that's where that's based out of. Because all I have to really do is get to a hundred million in EBITA in 10 years. And then the company, you know, the portfolio I have will be worth a billion. That's what I have to do. So I feel like I can do that though. I'm curious as well, kind of like what would be next once you hit that. So what would be next is just continuing to, Alex's boring recipe for success is just to keep doing what's working. I would just continue to do that. But I think that what will be different by that Acquisition.com, the way in the designing it is, I'm trying to design it so that everybody, every single party that touches it benefits.

So the vast majority of the, like, because there's a, it's like an ecosystem of what I'm trying to build. So everybody who consumes all the content for free, right, gets hopefully value for and excess to the time that they're investing, because that is the real cost. It's the time that you're investing and consuming the content, right? And so if you get value for and access of that, then you will be left better off. And that's going to be not. 99.9% of people because I'm not selling anything. For the 0.1% or 0.01% of companies that we may end up partnering with or doing some sort of investment deal with, those companies will benefit because we'll be able to directly invest in them and we'll help them grow. The team that I have within Acquisition.com,

I'm recruiting the absolute best in the world. So we're talking about people who have uncapped earning potential so they can make $500,000, $1 million, $2 million a year, $5 million a year within that structure. So the people who will work for me will be. able to make, you know, tremendous amounts of income and create their own independent wealth. And then obviously, Acquisition.com as a portfolio itself has to make money. And then maybe in the future, I'll be able to help all of those companies, you know, all those people, they could reinvest their own money and then also participate as both an investor and a doer. And so that's what I'm trying to create is just a huge ecosystem that just creates value for all parties that

are involved. Yeah, love it. So I want to dive into your framework more, but I have to ask one question selfishly. It's not written down here. Like, dude, if you want to become a billionaire, wouldn't the fastest way from my perspective, and this comes from, I've interviewed a lot of billionaires, spoken to a lot of like extraordinarily successful people, probably hundreds at this point, there is no doubt about it that the fastest way from my perspective to acquire and generate serious amounts of personal wealth is starting a software company and getting it to a hundred million ARR. Why don't you do that? Like, you're a super smart guy. Why wouldn't you just focus on that? It's a really good question. It's what, I mean, my wife and I talk about all the time,

because I say the same. I mean, we go back and forth on this thing. I'll walk you through the decision-making process, or at least the reasoning behind it. So I think that software, if you look at the people who are billionaires, right, many of them create it through software now. And so what I feel is not represented as the many people who tried to create it with software and failed. And so if we're looking at the ones who become billionaires, it's like VC, if I bet on 50, one of them or two of them are going to hit it, right? But if you're the entrepreneur in the one, your success likelihood is far lower. Whereas I feel like if I invest the way that I plan on investing, I will have a vehicle that compounds capital at a very high rate of return,

and I can diversify my risk and virtually guarantee that I get there. And so, So that's the, it's a risk analysis, which is I could probably hit bigger, but the risk that I don't hit it is high. It's reasonable at least. Whereas the risk that I don't hit it on the other side, I feel like is is dramatically lower. And I still have software companies that are coming to me that I can still participate in that process. So that's, that's the overarching reasoning behind it. Now, that being said, maybe in three years we'll get on here. I'll be like, you know what, man, I was full of shit.

I saw the software opportunity and I crushed it. So maybe that's where I currently stand. And I think part of that's because my heroes are like Charlie Munger and Warren Buffett. Like those guys are my absolute heroes in terms of how they live their lives and how they make decisions and how they think through things. And so I think that's been a big influence on why I'm choosing to go in this direction. Yeah, that makes sense. So you go in like the portfolio model. Look, to be honest, it's probably more fun that way too.

Let's be honest. That was a big part of it. Because Layla and I spent 18 months figuring out what do we want to do, what do we really want to do? is the next thing, the next season for us. And I had all these like non-negotiables, right? I was like, I don't know if I want to run another end to end. I mean, I can do it. I would just, I don't know if I want to do another, you know, grind first three years again. Maybe, but I don't know. What's something that I won't get bored of? Because for me, I get bored in about 24 months. That's my, that's my window. I know that. And so if I can participate in lots of different companies, I think that I will be able to

keep my attention on one thing. And I think that's probably the biggest, that's probably the biggest one. Because like every company we've started has gone from zero to two million a month in less than a year, like every company. So we know how to scale them. I just, you get what I'm saying. I'll stop. So you talk about crafting an offer that's so good that people feel stupid saying no. So why is the offer the most important part when it comes to selling anything or building a business in general. I struggle with saying it's the most important because you and I both know it's it's like an engine right like a business is like an engine you need wheels as much as you need cylinders as much as you need gas all of them are important right but I see the offer as like the spark

where we're actually giving them exchange for their money and I think most entrepreneurs who are starting out do it out of sequence and so they try and fix step two or step three and they're like hey why is my copy bad or why are my ads not performing when they're not starting with the very first part of the process, which is that initial transaction, right? And so a lot of my learnings around the offer came out of necessity because I prefer to be dealing with tremendous demand and fixing operational problems rather than trying to generate demand. And so my belief is like the three pieces of scaling that I adhere to is zero to a million is promotion, one to ten million is product, 10 to 100 is people, right? And you can say, well, if you have the right people,

you could do that. Yeah, but that's not typically how it actually happens, right? So you have to know enough promotion because if you have nothing, then you need to get people to find out, right? So you have to start generating some traction. Once you get the traction, and this is where I think people mess up, is they get their first dollar from promoting and then I need to spend more dollars promoting when it's like the whole point here is to get the product market fit and make sure that product is exceptional and we're getting virality from it. People are sharing it. We're getting amazing reviews. All of that stuff is happening because then when we go back to really scaling, we're going to so much more return on every dollar of advertising or media that we're buying, that it all makes

the whole machine work, whereas most people then try and dump more promotion on top of it, but the product isn't fixed. And so the reason that the offer was so important was because just getting that first traction, that first spark started, it's so much easier to just give someone everything they possibly could dream of and then work backwards from there. I'm curious, kind of, you said also that the past few companies that you've worked with, you've taken from zero to two million a month in a year. Is that correct? Yeah, so Prestige launched $1.7 million a month by month, I think, like four.

Jim launch hit $2 million a month within 12 months of us hitting, us switching to licensing. And then Allen was at 1.7 as well. So just under two. Yeah, wow. Okay. So multiple different industries, which was the steepest learning curve? Software. Why?

I see business, like there's three pieces where you've got acquisition, you've got product, and you've got ops, right? Shared services, whatever you want to call it, right? So with the first two companies, so with Jim Launch, the gym licensing company, acquisition I could cover, product I could cover because I knew everything about, because what I was showing was how to acquire customers just within a smaller niche, right? And run the business model and all the other things. So I understood both the acquisition and the delivery to an immense amount of detail, right?

I would say it was a master at it. I'd master's level both of these things. And then my wife is a prodigious operator. Like she can build a team around anything, which is why we've been able to scale so many things so quickly. So with the first company, all three pieces were in place. It blew up. The second company, I contracted the best doctor that I'm aware of

to create all the formulas for all the products that we sold. And so I had the acquisition. I had the product. And then we had the operational piece again with my wife. With software, I knew how to acquire the customers. We knew how to build the team, but I'm not a code guy. And the mistake that I made when I was building Allen was that I did not have a technical co-founder, which is what I should have had.

And so I had an outsource development team, and that was a big mistake. I shouldn't have done that. And the thing is, it's so difficult. You know, I was blind negotiated, is how I'd say. It's like, I would say, hey, can we change this button? Right. And then you'd say, you know, it takes a month. And I'd be like, I feel like you can do better than that.

I had no idea. It could have taken two years. I have no clue. So I'm blind negotiating, trying to just keep a front. But I have no clue what I'm talking about. And I hate operating from some sort of that kind of information disadvantage. And so that was why it was so difficult. Now, I blew the doors off for the acquisition because I can go market and sell all day long.

But with software, to your point, getting 100 million ARR to get the 10x multiple that you're going to get on it, it's about having net negative churn. And that's going to be all product driven, right? That's going to be making sure that the UX is amazing, the engineering team's on point, you know, like people are promoting like crazy, all that kind of stuff.

And so I feel like it's interesting because in the internet marketing world, because I see this all over the place, so many of these guys are switching to trying to do software. But they're selling the software the same way they sell their digital products, which means they have a shit software, and they're just selling it. And they're like,

I'm going to be able to sell this for a ton of money. It's like, no, you're not. You're only going to be able to sell for a ton of money. If you didn't market, it still grows. Moses Nation, hope you enjoyed that podcast, got some nugs on the hardwiring versus BORN so that you can no longer use that as an excuse or use an excuse for other people that you know why you hopefully don't have to start a software company to become incredibly wealthy and hopefully give you a couple tips and tricks that you can use to improve the offers

you have so you can get more customers, make them pay more and keep them longer. Stay tuned for part two where we dig into even more Mammajamba of Business Stuffs.