The Game with Alex Hormozi - Keys to a Terrible Business Partnership | Ep 638

Episode Date: January 11, 2024

“An unreliable partner, creates an unreliable relationship, which creates an unreliable business.” Today, Alex (@AlexHormozi) emphasizes the importance of distinctive skill sets, complementary experiences, and aligned values for a prosperous partnership. He addresses common mistakes made during the forming of partnerships, like lacking clear expectations or written agreements, disproportionate effort or shared equity, and misaligned goals.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:(0:35) - The Art of Inverted Thinking(1:27) - #1-5: Knowledge, time, and money imbalances, no agreements(5:36) - #6-10: Give away everything, misaligned mission, value, vision(7:56) - Having resources you don’t have & expectation agreementsFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition(This episode is a re-run. Original airdate was August 23, 2022)

If you can think a few steps ahead of the person, rather than saying like, oh, I'm going to get them. Just say like, hey, I don't know if this is going to be equitable in the future. Like, give them more. And you'll actually start to create a relationship rather than a negotiated contractual agreement. Welcome to the game where we talk about how to sell more stuff to more people in more ways and build businesses worth owning. I'm trying to build a billion dollar thing with Acquisition.com. I always wish Bezos, Musk, and Buffett had documented their journey. So I'm doing it for the rest of us.

Please share and enjoy. I want to give you the keys to having a terrible. terrible, terrible partnership. And the reason that we're going to talk about in this perspective is because my, my big hero, Charlie Munger, talked about inverted thinking as one of the best ways to solve problems. So rather than think, how do I have an amazing partnership? Let's think about how would I guarantee a miserable, terrible partnership that would definitely ensue in a terrible breakup with lots of lawyers and all the paperwork and just honestly, ideally take forever and result in no benefit. Now, as somebody who has a lot of partnerships, it has taken me a very long time to get here. And I have learned a lot along the way. And the beauty of having stories is that you can get the lessons without the scars. And so I will give you, let's see, one, two, three, four, five, six, seven, eight, nine, ten, ten different things that you can do to guarantee absolutely atrocious, terrible partnership that you wish you could just not live anymore, right? That is what's going to happen if we can make this partnership as terrible as we're going to shoot for here. All right. So,

number one is that we're going to make sure that they have the exact same knowledge base as you. All right. So this person that you're going to do business with knows the exact same stuff. of you. There's no stuff that they know that you don't know, all right? Because that way, one of you is unnecessary. All right? And so this is a great way to have a terrible start to a partnership. One of you being unnecessary to begin with, which means both of you are giving away half your equity for no incremental benefit. It's also not very good for the business because why would you do that? So that being said, number one, have the same knowledge base and maybe even if we're being crazy, which we are, right? Throw into the same experiences. Right. If you both work at the same place,

doing the same thing, why not start a business together doing the exact same thing? Brilliant. I know. All right. So number two is time, right? Make sure that they have the same amount of time as you, all right? Or disproportionate. And what I mean there is the big three on partnerships is knowledge, money, time, right? Which means they either have to have knowledge you don't have. They got to have money you don't have or they got to have time you don't have. Right. And so if you have no time, make sure they don't have time too, right? Now, if you do have time and they have time, then you're fine. But the thing is just then you'd have to look at one of the other three parts of this equation in order to make sure that's still a terrible partnership. All right. So make sure that you're misaligned on time. All right. The next one is money. If you're getting to a partnership, if one of you has money and the other doesn't, then that's value that's being out of the relationship.

But if you're going to partner with somebody and they don't have money that you don't have, they don't have knowledge that you don't have and they don't have time that you don't have, then why don't you do the partnership? I don't know. But it is a great way to have a terrible partnership. Now, that being said, let's say that somehow we still figured out a way that we got in a relationship where one of us didn't have the knowledge, they have the time, we didn't have the money that the other person had and we got together. Okay, cool. There's still more ways that we can torpedo this thing. Just wait, buckle up. So the next one is that we can make sure that we have different expectations of one another and the business. All right. So it's like, hey, what do I expect you to do? What do you expect me to do, right? And those expectations, we want to make sure, and this is number five, is that there's no agreements. We don't record it anywhere. We don't write it down. We do it on a

handshake because we're old school. Yeah, great way to have a terrible business relationship. And the reason that people don't want to do that is because usually they don't want to have the hard conversations, all right? They don't want to say, what happens if this goes wrong, right? And like, what do you expect? You really expect me to take the trash out every day? Like, they want to have this unspoken expectation. You have unspoken expectations of you know what's going to be imaginable, where you don't actually have. You don't actually have. have to have hard conversation with people. And if you can't have a hard conversation with a partner before you even doing business, before you are even married, before you, there is even money or

stakes on the table or equity value that's been grown, then dear God, you're not going to have a good conversation at the end. All right. So if someone's like, I don't do agreements, just walk away. I just, I've been doing this, like, just walk away. It's only like very, very, very weird people do that. Like, banks, banks don't just give you money without I expect it. Like, come on, like, this is real world. And I used to, I remember earlier on, I, I, I heard. someone told me that and I was like, oh, I don't want to be the guy. It's like, I'm the type of person that if you can't shake your hand, then blah, blah, blah. And I just, I just don't, I just don't trust people that much. So the idea for me is make sure the paper says we needed to say, but then trust the person, right? Which is like, I hope that we never have, like, we write these contracts is the intention of never having to look at them, right? But we still use the contract as a vehicle to facilitate dialogue around difficult topics and to have shared expectations in a way that we both understand them and agree. That is the purpose of the contract. It's not to get lawyers involved.

The purpose of the contract is that we have clear expectations. That is why contracts exist. Clear expectations on agreements. Hey guys, love that you're listening to the podcast. If you ever want to have the video version of this, which usually has more effects, more visuals, more graphs, drawn out stuff. Sometimes it can help hit the brain centers in different ways.

You can check on my YouTube channel. It's absolutely free. Go check that out if that's what you are into. And if not, keep enjoying the show. So if we're making sure that we have a terrible partnership, We got to have all the same knowledge. We got to have disproportionate time or money. Right.

So all of those things, time, money, knowledge. We're all matched on those, which means that one of us isn't necessary. On top of that, we have different expectations. We didn't write it down. So there's no agreements. And there's no expectations that been communicated about what you're going to do what I'm going to do. All right.

Now, the next one, this is a big one. Give away everything. All right. So make sure that you give away everything in the partnership and do a disproportionate amount of work at the onset. Because that way, you'll just definitely make sure that you can garner a resentment towards the other person. And the flip side can be true, too.

If you know the other person will be doing a lot of work, then you think to yourself, huh, well, I'm going to squeeze as much out of them as I possibly can. Well, what's going to happen? They're going to resent you and they're going to try to renegotiate later once reality sets in. So if you can think a few steps ahead of the person rather than saying like, oh, I'm going to get them. Just say like, hey, I don't know if this is going to be equitable in the future. Like, give them more. And you'll actually start to create a relationship rather than a negotiated contractual agreement,

which at the end of the day, that's all contracts are supposed to do is just outline the expectations between two parties. That's it. All right. Now, the next one is that we want to make sure that we have not, we want to have a misaligned three things, mission, values, and vision, all right? Which means that we don't actually want to take this business to the same place. And this may sound hilarious to you, but you would be amazed at the amount of partners that we get on the phone with that I'm like, what do you guys want to do this business?

And one person's like, I think we should go this one. The other person is like, I think we should go that way. I think that you should figure that out, right? Or one of you shouldn't be here, right? Figure it out. All right, which is where do we want to go? And the next one is the values, which is how are we going to get. there, right? What are the things that are important to us about how we deal with other humans,

right? What are those values? And if some people have different values, it becomes very difficult to do business, even if you want to accomplish it the same thing, because you want to do it different ways, right? And that will create endless strife and conflict throughout. Now, the last one is what you can consider lifestyle, right? Which is, what are you similar interests, lifestyle? It's very difficult to do business to somebody. If you're like, you're a Dave Ramsey saver and you, you know, you live far below your means and you're doing business with somebody who lives far above their means and goes into debt all the time because the thing is is when you're in a business relationship, you're in a marriage. And their extra quickly life is going to get dragged into the business.

I promise you. I promise you. It is going to get dragged in. Right. And so you've got to look, just like you marry the girl, you marry the family, that whole thing. It's the same thing with business. If like they've got all this crazy stuff going on in their personal life, it's a great way to guarantee that that stuff is going to trickle into your business. And the thing is, is if you have an unreliable partner, creates an

unreliable relationship, which creates an unreliable business. And so it's a great way to have a terrible partnership. All right. And so when we're thinking about partners, big picture, I give you two frameworks and then some in-betweens. So framework one is that they got to have knowledge, money, or time that you don't have. If both of you have the exact same experience, knowledge, time, and money, one of you isn't required. I know. Crazy. The thing is, is just because you need something. For example, if I need an accountant for a business, doesn't mean I have to partner with my account it, just means I have to pay them for services. So just because you have a need doesn't mean they have to have equity. All right. So big aha moment here. If you're like, well, I don't know

how to do that. He does. It's like, well, can you pay someone to do it? Like, equity is the most expensive thing that you give up in a relationship. So you want to make sure if you want to build something big, they're giving away equity to people who are going to really drive the growth and you have to see this thing 10 years in the future, which is knowing things 10 years in the future anyways, which is why everyone's small. Okay. So boom. So knowledge money time. You got to check those boxes. Make sure that you're aligned there. Next one is expectations agreements. All right. Make sure that they're equitable, make sure that they're well understood and making sure that they're documented. If you do those things, then it's very, very, it's much less likely that you're going to have a terrible

partnership. You can still have one, but it's much less likely, all right? And point of this is to guarantee a terrible partnership. All right. Now, the next big framework is that mission values and similar interests, it actually works the same way in marriages as a dozen partnerships. And to be real, it's very similar. So you got to make sure that you want to do the same thing with the business big picture. You got to make sure you want to do it the same way, right? And then you got to have similar interests in lifestyles, right, which is making sure that they don't have a messy life, which is you want to be proud to associate with the other person that you're doing business.

And I'm saying proud, not okay with, but proud to associate with them. You want other people to meet them, just like you want to meet, you know, the girl meets the parents. You want to be proud to present this person not like, ah, crap, right? Big picture, great ways to guarantee a terrible partnership is if you do all those things. All right. So on the flip side, make sure that they have time, money and knowledge that you don't have,

right? Either they got money you don't have, they got time you don't have, or they have knowledge you don't have or experience, right? So they can bring something to table that you, don't have so one of you or both of you are required and that the company grows based on the shared skill sets that both of you have, all right? You want to make sure that you set expectations, that you document them and then you make sure that they're equitable, all right? Because if you do that, then it's very unlikely that you're going to fail, all right? And the next one is that you want to

make sure that there's aligned mission, values, and similar interests. You want to deal with the types of people who see the world the same way as you have the biggest long-term goals and they want to do the process of getting from where you are to where you want to go the same way you do. And the easiest limit test is, if you present both of you with the same data, would you make the same decision? If these answers yes, then you'll have far less conflict in your partnership over the long haul. And so the idea is, can I find people who have complementary skill sets, but aligned mission values and interests? If you can do that, you can make room for a magical rather than terrible partnership.