The Game with Alex Hormozi - Maximizing Effort: The Leverage You've Been Missing (with Dan Henry) Pt.1 - June ‘22 | Ep 515

Episode Date: March 25, 2023

“I think the people that move fastest in life are the ones who employ the most leverage.” Today, join Alex (@AlexHormozi) as he guests on Dan Henry’s show to talk about discuss the importance of putting in significant effort towards one's goals and not getting distracted by unnecessary tasks. He also emphasizes the need to focus on the key drivers of growth, such as acquiring and retaining customers, and shares insights on how to scale a business effectively. 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 Dan Henry’s YouTube Channel!Timestamps:(3:20) Focus effort on the right things, not just effort itself(9:16) Entrepreneurs focus on the wrong things, like aesthetics over content(13:43) Two things entrepreneurs need to do more(18:28) Different archetypes of entrepreneurs: product-driven vs. promotion-driven(27:41) Ignorance is the biggest threat to entrepreneurs' successFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

There's usually this massive gap between what people think is required to get the outcome versus what is. And they're like, what if I double? It's like, dude, it's not even 10x a lot of times. It's like 50x, the amount of volume. 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. I watched your video on training your calves because my calves and my traps weren't growing. And I watched the video and I was like, well, this makes me. make sense. So I started doing it. I started like literally doing cabs, 10 sets of calves every single day as well as shrugs. And lo and behold, it's only been like a week and a half and I can literally see them growing. I was like, this dude was right. Yeah, everyone works out like three sets a week and they're like, my calves aren't growing. I'm like, no shit. Like you walk around all day long, your calves can take a lot more than three sets. Right, right. Well, I saw another older video you did or

or it wasn't a video, it was a post, and you were, I think you said you did like 30 sets every workout, full body every single day. That was your, that was your workout. I was like, holy crap, that's a lot of sense. I've been doing it for a decade. I've been training that way for a decade. I've been training for almost 20. Yeah, and that makes sense like a lot of times people, and it's sort of like business, because a lot of times people like, well, why aren't I bigger? Why, why am I not a bigger person? Why don't have bigger muscles? And it's like, because this guy over here is doing 30 sets a day and you're doing three and then it's the same thing with business like why am I not making more money and you're doing one tenth of the work or one tenth of the effort that the people

who are making money even a tenth a lot of the times it's like a hundredth like that's one of the things I tell the story all the time because I think it drives at home so hopefully the audience will appreciate it so I was really early in business and I had my gym so I like you had like a brick and mortar that I kind of started out with this is my first gym and I was told to put flyers out, right? And I was like, okay, I'll put some flyers out. So I put some flyers out from a guy who was a really successful business owner. And I ended up meeting up with him, you know, a few months later or something. And he was like, oh, how did the, how did this flyers work out? I was like, they didn't really. You know, we got like, I got one call from a guy who said, I dinged his car

and he was going to sue me. And that was it. That's all I got from the flyers. He's like, well, you know, what was your test size? And I was like, what do you mean? He was like, like, what was your test? Like, what did you test before you did? the main amount. I was like, I didn't do a test size. He's like, well, how much you put out? I was like, 300. He's like, 300? He's like, I don't even test with less than a with less than a thousand. I was like, what? He's like, yeah. And then when we start doing it, we do 5,000 a day. And I was like, fuck. And he was doing 5,000. So he was doing 150,000 flyers a month to drive business into his small business. And I was here jerking off about 300. You know what I mean? And so like,

he did 45 times, I think, the effort that I did to get the outcome. And it's the same thing with like DMs and phone calls. And it's like, I know you had your rule of 100. And so over the last, I literally got a message and said, so over the last eight weeks, I sent 100 DMs. And I was like, bro, it's 100 a day. A hundred a day. You did 100 over eight weeks. That's 156th the amount of effort that is required. So it's just like, there's usually this massive gap between what people think is required to get the outcome versus what is? And they're like, what if I double? It's like, dude, it's not even 10x a lot of times. It's like 50x, the amount of volume or same thing with phone calls. I make 10 phone calls a day. I'm like, bro, our guy's minimum quote is 200 a day for the call team.

You know what I mean? So people just don't get, I'll give you a different story because this happens all the fucking time. I had one of our portfolio companies who were scaling up the traffic. And I was like, bro, you need to make more creative and you need to do it on a more consistent basis. And he was like, okay, that's fine. And I was like, dude, we made creative every, I was like, you need to start every 14 days. You need to make, have a full creative day and like create new ads, all that kind of stuff. And so I got an end of day thing. And he was like, hey, man, the first creative day went awesome, recorded four ads, really excited.

I was like, what the fuck do you do all day? Four? I was like, dude, we would do like 40. You know what I mean? Like minimum. And when we were at like, you know, full swing, because right now for us, uh, cold, calls on the gym on side is now like 75% of the business. But when ads were the vast majority of the business, we were running like 30 to 40 new ads every three days. He was like, what? I was like,

yeah, bro. Like, I don't know. It's like, there's just a massive different. And he thought four was a lot. And doing four every two weeks, he thought was a lot. And so I'm like, what was he doing before? You know what I mean? But like, that's the thing. It's just like people I just have this massive discrepancy between what, what is required and what they think will, make them successful. You think that's always been that way or it's being further perpetuated by society? Because, you know, when I, I used to work for like direct TV. And I remember we were expected to make 200 dials a day. And if the phones went out or something like that, there was a tech issue and we called up and we were like, hey, the phones are out, our boss would be like,

why aren't you already on the phone with the cable company getting it fixed? Why are you calling me? you know, and the expectation was so much higher, and nobody was sitting there saying, well, you know, you got to pander to people's emotions and feelings. You just did your job. And I recall, you know, in today's world, I've, you know, I've had a conversation with like a sales rep who wants to make all this money being a sales rep.

And I'm like, how many dials did you do today? And they're like, oh, I didn't. And I'm like, well, I need you do at least 30 by lunchtime. And they're like 30 by lunchtime. You know, there's not enough hours in a day. And I'm like, dude, not everyone's going to answer. You can do 30 in the next hour. What are you talking about?

Like, just the fundamental lack of understanding and acceptance around that. Do you think that it's worse today because of like society and culture or do you think it's just always been that way? No, I mean, I think there's a slight, you know, degradation over time. But I think it's cyclical. So, I mean, like, there's lots of like macro stuff. But I think it's like every 80 years or so, there's like the big pendulum that's, swings. And so it's like, you know, like hard times, build hard people, hard people build, good times, good times, build soft people, soft people build hard times, right? And so I think that

we're in the hard people built, you know, we're soft times built soft people stage right now. And I think that, you know, we will have another hard time and it will build more hard people. I think it's very likely that we will be the, like our generation will be the one that will have to step up in the next decade or so and become a harder generation, which I think, I think will rise to it. I mean, I think, people are amazingly resilient when they have no choice. Like if we think about like human capacity versus like what is societally accepted, like I think a lot about like really dark times. I think a lot about like Auschwitz and slavery and things that were really horrific kind of human experiences

and huge populations were able to go through it. And those same people prior to, well, obviously slavery wouldn't work, but like prior to that experience, you might have people who were softer. And then they go through things like that and it really fundamentally changes them. And to the same degree, if I were to think to myself, like, the difficulty of my life compared to a lifetime of slavery is different. Right. It's a different level of difficulty. And so I think, like, knowing that that is possible gives us a lot more potential for effort. Because it's like we're so untapped in the amount of effort that we put forth into the endeavors that we pursue.

Awesome. That makes a lot of sense. So let me ask you this kind of feeding off that. because it's one thing that I've noticed is there is effort, there's lack of acceptance around how much effort, but then I've seen a lot of people, including myself, we put effort into the wrong places. You know, like we started talking before we began recording, and your companies, you know, you guys, you and your wife are doing a million, a hundred million dollars a year, and you're in a hallway right now with no art on the wall. You, you, I, I thought it was the

camera angle, but do the thing with your hands, like, like literally, literally you can touch both sides of the wall. You're in this hallway and your obviously beautiful condo in Vegas. But like, dude, like you're, you know, most people, they have this big office with this nice views and this over-the-top stuff and these, and maybe they have like crazy lighting and stuff. And they just go overboard, but you're just like, screw it. I'm in this hallway and I'm just building this, you know, billion dollar play. Would you say that part of your success is the fact that you're basically just the ultimate minimalist. Like, I mean, everything that I see from you is ultimate minimal, right?

It's like iPhone videos for YouTube. It's your logo is just acquisition.com. It's just, and your website is just like blah. Like, you know, you just intentionally don't give a shit about any of the stuff that most entrepreneurs obsess over. Do you think that's part of your success? Rather than minimalism, I would say it's form over function. So it's not just because I think it can look similar.

but I think it's a shade different. You know what I mean? Like for like this tank top, this particular like white tank top that I wear, like I bought 40 different brands and I tried different sizes on so that I could find the right white tank top for me. And like I bought all the highest rated barefoot shoes on Amazon because I was trying to because I realized I don't wear T-shirts.

It was something. I was like, I wonder if I could eliminate T-shirts for my life. So I don't wear T-shirts. I either wear I have a beater or I put like a flannel if it's cold or I put a Hawaiian if it's hot and that's it. And so that's just like what I wear up top most of the time. And then like with shoes, I was like, can I eliminate socks?

And so I tried all the barefoot shoes on. And then I ended up realizing that I liked my crocs the best, but now I'm just informed on it. So I like got rid of all those and like I wore crocs just about everywhere. I figured out I can work out in them. So I was like, great. I don't have to have workout shoes. Anyways, all that to say, I think it's just like what's the function that's required. And I think a lot of times people miss the forest for the trees.

You know what I mean? like I think the YouTube video stuff works, even though the quality is poor because, you know, the stuff is useful for people. And then also for me, from a form over function standpoint, if it takes me more effort to do the other thing and I become less likely to do it as a result, then the overall function goes down. So it's like if I do one third the videos and they're prettier, will I get the same output as three times the videos that are kind of quick and dirty? And for me, at this point, I do that. I'm not to say that I wouldn't, like, if I can figure out a way to get the function down

where it's, like, really effortless for me to do nicer ones, I'll do nicer ones. It's just that right now, it's like my, I don't make my money from being an influencer or whatever. Right. Well, I mean, the quality, you got to look at the categorization of quality because from a content perspective, your videos and the content you put out is better than, like, virtually everybody else. Like, you know, most people are like, uh, the four hour work week and stupid shit.

and you're like literally giving actual hardcore advice that makes sense and that is stuff that most people charge for and it isn't even that good. In that case, would you say that the ability to focus solely or at least focus the most on the content is just any view of like fancy cameras and all that stuff is just a distraction from creating amazing content and ultimately that's what people care about? I think it comes second. It's exactly that. is like it comes like it's I think there's some benefit to it.

I just think it is less benefit than people give proportional to their focus. So it's like let's say it's 80, 20, you know, 80% comes from the content, 20% comes from the touch. I think people put 80% on the touch and 20% on the content. And so it's like, I think if you allocate the focus appropriately, then you'll get the outsized outcomes. And I think fundamentally like the people that move fastest in life are the ones who employ the most leverage. And so a lot of employing leverage in business and whatever relationships is understanding where the points of leverage are. And that means that being able to look at a lot of variables and identify which of these

ones has the most influence over the outcome. And then ruthlessly focusing on that one variable and driving it. And I think most people will focus on a lot of other variables that they don't see don't have a huge effect on output. And the easiest litmus test for this, and this is for anybody in the audience, is if right now you're working, you know, most of your hours of the day, for example, it's not that you need to work more. It's that fundamentally what you are working on is not effective.

Like you might be doing stuff and you might be producing things. Like you might actually be getting things done. It's just that the things that you were getting done are literally irrelevant. So, like, I mean, it's kind of like cutting grass with scissors. Like you can do it. It just doesn't make it meaningful. which is really disheartening for some people, but it's also the truth.

Hey, Mosin, a 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. So then let me just dig a little deeper there. What would you say are two things that most entrepreneurs, and especially, you know, online entrepreneurs do that they don't need to do. And what's two things that they're not doing that they absolutely need to do?

I can answer the second one better than the first one. Because like my answer for the first two would be anything you're doing that's not these things. Like, you know what I mean? Like, right? Like people do a zillion crazy things. And so with regards to the things that people need to be doing more, like if you boil everything, like, again, what are the points of leverage? Like, what are the things that actually grow a business? Like, number one is you can get more customers. Number two is you can make them worth more. It's literally it. So everything flows down from that equation at the top. And every time we have quarterly release with the portfolio companies and things like that, like, I always write it on the board as a reminder to just be like, guys, we're either making this number go up or making this number go up. What is all of these, you know, these quarterly objectives that we're doing, how is it going to drive that versus how is it going to drive that? Right. And so, like, the two most important things are getting more customers and making them worth more.

And so then it just depends on which of these things is the bottleneck within the business. And in the beginning, and this is where a lot of people fuck up, is that like zero to one million, one to three million is, in that range is you have to learn how to sell something to someone. Right. It's one product, one avatar, one channel. Very simple process, right, which is really just finding product market fit, which is what they call from the software world is do people want the thing you're selling? that's it right and can you get them to give you money all it is but going from like three to 10 for example you can gas like you can gas marketing all you can just keep acquiring customers the thing is is that like in order to keep doubling down on that you have to start you have to double your sales velocity every time

you want to double the business so it's like I go from 50 customers a month to 100 customers month and I sell from 100 customers a month to 200 customers a month and I go from 200 to 400 to 400 and it becomes really untenable at a certain point to keep selling more people and then that's where the business will plateau. And so instead, the better way of growing the big business is as soon as you have product market fit, which is selling shit that people want, and they're actually buying from which usually you're making $1 to $3 million-ish, right? At that point, you pause an acquisition and then you focus all of your effort on how do I retain these people, how do I get them to never leave, how do I extend the LTV per customer so that even if I sold the same amount,

my business continues to grow, right? And so usually if you think, fix that properly during that period of time, you can keep the same acquisition numbers and then expand the business from three to 10 million with a lot less effort, think leverage. And then then when you go and jam more marketing into the business, then it just boom, you're at 30, boom, you're at 50. You know what I mean? And it's just that most people just think, oh, I started marketing that made me some money. So I'm going to market more to make me more money. And it's not that. I mean, you will make what I would consider like, you will become rich doing that if you just want to market a lot, but you will not become wealthy because you will not build assets that are valuable because people will not want to

buy a thing that's purely built on just front end and not tons of like word of mouth and higher LTV metrics. And then what happens is the media arbitrage that most people figure out in order to acquire the customers usually shuts down. And then all of a sudden their margins compress. And then it becomes untenable for them to acquire the amount of customers that they were. And then overnight, they disappear. You know what I mean? And that's what usually happens. Whereas if you have a stable base of customers that continue to pay you because they like

the thing that you're doing, it gives you the gross profit margin to then weather those storms and then build other channels. Got it. So then let me ask you this. You probably have a lot of data on this next question already. How many portfolio companies do you have currently? If you don't include the three that Layla and I still have big chunks of that we sold majority of, but we're still 25 to 40 percent.

owners in those companies, we have eight. So eight companies. So I would say that that's not one or two. That's a pretty fair amount to be. 11 between all of them. Okay, so 11. So then let me ask you this. When you start working with the portfolio company,

I imagine that you've probably helped or coached or somehow interacted with a lot more companies than that. My question is you probably are seeing patterns, right? Like as soon as you start working with a, company, you probably see the same mistakes over and over again, or you start changing the same things over and over again and they repeat. Can you expand on what are those repeated patterns or what's the first thing you usually change that you just consistently see? I would say that there are different archetypes of entrepreneurs. So just as a hair to that, like a shade of gray or nuance,

is that there are product-driven entrepreneurs and there are promotion-driven entrepreneurs. And then, you know, the best ones can do both, but most of them tend to have a leaning one way or the other, right? And so if we have a product-driven entrepreneur, usually we have to focus on acquisition stuff, right? And that's, I would say that's probably the minority of the time. I'd say that's maybe like 25% of the time. The other 75% of time, it's usually promotion-driven entrepreneurs, at least the ones who come to me or maybe attracted to my stuff. And to be fair, my company sold acquisition.com, so like maybe the promotion guys are more attracted to the stuff that I talk about, right? And so with the promotion guys, it's usually we have to fix back end stuff. And so it really depends on what they're

presenting with because like the way I see it, it's like, imagine you have a Mona Lisa painting that's the embodiment of like a 50 or $100 million business. And then we've got whatever their current business looks like, which is a Mona Lisa that has like gunshot and bullet holes all over it. It's like, okay, how do we look at this and then just systematically fill in the holes? And so two different businesses might have like gunshot holes in different areas of the painting that they currently have that has potential to be a Mona Lisa, but it's not there yet. And so we just kind of fill in the holes based on that. But big, big picture, most companies at that size, they have really, really shit data tracking. So usually they don't have consolidated metrics.

And that's a big one because it affects everything that you're trying to improve. Like, if you don't have all the metrics and tracking around like customer lifetime value and your acquisition metrics from click to close, and it becomes really difficult to make decisions. And so then you're just shooting from the hip, which is just not that effective. So getting the right data in place. second one, and this is probably pretty universal, is that the talent at that stage is low. So usually it's the genius of the thousand hands model. You've got one guy who's kind of like really pushing and driving everything. And then a lot of people just like help him out or her out, right? And so what's required at that point is that we need to have like the first like true

mid-level leaders. That's kind of like directors and managers that need to get put into place. And sometimes those directors and managers can level up even beyond that to go from 10 to 30. And sometimes we have to replace them. And it just depends on whether they're willing or able to grow. And so it's a data problem. It's a people problem. And then there's usually some sort of, this is one that's not like necessarily a problem, but like what we're really good at is figuring out the best ways to monetize businesses. And so it's like, how can we reconfigure how we price? How can we reconfigure the thing that we're selling or create some sort of ascension or some sort of tied in continuity to increase the lifetime value per customer? Those are like the, I would say,

the three bigger buckets that we look at is like, we got to get the data right so that we can make the strategic decisions. And then once we have the strategic decisions we need to do to build the beautiful Mona Lisa painting that we want to paint, then who do we need on the bus, who is either there and then who would need to get off the bus? Because I would say it's more than a third and less than half the time. So in that range, we also have to fire a bunch of key people. Or I would say, they're key roles in the business, but they are actually sabotaging the business. And so we've had two instances or three instances, and not necessarily even fires a strong word, but like we have fundamentally move the org chart a lot. Sometimes we have to let somebody go, but sometimes it's like

it has to be a major move. Like maybe the CEO is actually a really good CMO and he's not really a CEO, right? Like he's a founder, but like if you look at Shopify, the founder, I can't remember his name. I now I feel like an idiot. But anyways, the founder, he's a product guy. And so he's not CEO of Shopify, even though he's the founder. He's just chief product officer because that's what he loves doing. And that's what he's really good at. Right. And he found a CEO to, run the business because he recognizes his own deficiencies. But a lot of times people's egos cannot take that. And it's the thing is always like, what is the business require? Period. And then like, that's what it requires. So whether it's you or something like, that is what is required. And then it's

just having a conversation of like, do you want to become that person or do we want to find that person? So what do you mean by their ego gets in the way? People have attachments to the title of CEO. They're like, I want to be CEO. It's my company. Like, well, I mean, it's a business that requires a CEO. you do not need to be that person. Like, Warren Buffett's not CEO of any of these companies. You know what I mean? Does that lead into playing to your strengths a lot? Because, you know, for me, I've always thought if I was going to be a C-anything,

it would be a CMO, not a CEO. Because the operational aspect of business is the part I like in the least. I mean, it needs to be done, but it's the part I like the least. I like, you know, I grew up watching Mad Men and thinking that was the greatest show in the planet and just coming up with the best ad campaign. And it was, to me, that's like art. You know, it's like painting, but you're painting with products. Totally.

Yeah. So the best people see whatever they do is art. So the best product guys talk about product like it's art. The best operators talk about culture and meeting and onboarding and leading like it's art. I'm so glad to hear you say that because I have always, my entire career said that, you know, I grew up an artist. I was a poor musician, played guitar. and I never could get that to be successful.

And so when I started learning sales and marketing and building a business, I didn't really view it as a business, you know, because I was that, I was that like anti-corporate guitar player. And I was like, you know, fuck these guys. But then I realized that that is, it's just a different canvas. It's a different stage. And I always viewed building the business and ads and marketing and creating products as art, not as, you know,

I mean, obviously it's a business, but I viewed it as art, and I've said that a lot. So to hear you say that, it just lets me know I'm on the right track with that thinking. I think it has to be art. I mean, because it is sort of like you don't need more money. You know what I mean? And so it has to be something that you would do. Like if you would play music all day long, if you didn't need anything ever,

then it's just, and this is a lot of people won't like what I'm about to say, but I'll say it anyways. Like to compete against the people, if you're like, I really want to make money, but you don't really like business. like I started in fitness and then I realized I had a deeper passion for business. Like I liked it more than I liked fitness. And I was obsessed with fitness for a long time. But like when I, like the day I started my gym was the day fitness became number two and

then business became my first love. And I'm still, you know, in my love affair, you know, with business, my long term relationship with business. And it's because like the only way you're going to beat everybody else is is to truly love it. And if you don't, I think it's very difficult to do that. And I think it's just like maybe picking another metric or different bone to gnaw on. But I had one quick thing, I was pulling it up while you were, we were talking about the art thing earlier. So like a lot of marketers will talk about how their products are amazing.

Right. Like how many times have you heard people like, oh, no, no, our course is awesome. Our program's awesome. Or whatever, right. They say that. But the thing is like, and I've done this at like a couple of like workshops I've been invited to. And I'm like, all right, who here knows what they're, you know, their CPM, their CTR, their, you know, their CPL, like their set percentage, their close rate, their CPA, their cac, like, who knows all those numbers?

Everyone's like, oh, yeah, 100%. I'm like, cool. I'm like, what's your, what's your TTV, what's your CHS, what's your NPS, what's your churn, what your activation points? They're C or C. And they're like, what? I'm like, right. So how can you set you a fucking good product and you don't even know what the fucking

metrics are to track good product? Well, I mean, I think that just goes to the fact that most entrepreneurs are kind of full of shit. Silence in the room, right? Yeah. Wow. I mean, I mean, and that makes sense because, you know, if you think about it, most entrepreneurs are full of shit.

And even if they're like, no, I mean, look, I'm just going to look, I'll just say this, okay. I've, you know, I've personally worked with, and you've worked with tons of entrepreneurs. One of the biggest things is online coaches, course creators, even agencies. And I've always given blunt direct advice. And I can't tell you, if I had to sum up my experience with most people, And I was probably this way too when I came up, so I'm not like judging. But it's really like, hey, you are currently full of shit, and you need to understand how to not be full of shit. And now you can sort of really see the forest through the trees and see what needs to be done.

Because you have this cloud over, this lens, your glasses are dirty. You can't see the real world because you're stuck in this alternate reality that you've created. And I like it. I like how you just broke it down. You're like, listen, do you, you, you feel? feel that you have a good product, but that is a feeling, that's an emotion, that's some shit you need to talk to your therapist about. What are the metrics? What is the data telling you? Is the data telling you it's good or do you just feel it's good because you just want to wake up and

think life's great? So I think that that's a great point because as an entrepreneur, isn't it about that? Isn't it about the data and analyzing the situation and making decisions and not about just feeling a certain way? Wouldn't you say that that ultimately is that next level is detaching yourself from that and just looking at it as it is. Yeah. And most people just don't know what ideal scene looks like. And so that, I mean, the biggest threat that most people, I mean, I would say the biggest threat to all entrepreneurs is that they are ignorant is that we are ignorant of what it takes to be successful at whatever the next level is for us. And so like, this concept is one that has just like frightened me and like for my whole life, which is, I think I heard

Myron say this on stage and it was like really impactful for me. He said it was a close for him, but I just think it's a, it's a great concept. He said it's costing you. a million dollars a year, every year you don't know how to make a million dollars. And to me, that's the tax of ignorance. So like everyone who's listening to this, who's not making a billion dollars a year is getting taxed by life far more than the government is for just the ignorance that you have to not knowing how to do it. And so that's always been the biggest tax I've tried to pay down as fast as possible,

which is like every person who makes more than me knows more than me in some way. and I just have to try and figure out what am I ignorant of that they are not ignorant of. And a lot of people will throw stones and be like, well, that guy doesn't have ethics or that guy doesn't have morals. One of the big pieces is that there's always the compounding effect of time, right? Is that like you might be on the right path as long as you are making progress, and that's a big one, right? As long as you're making, you might be on the right path to a billion because like, Warren Buffett at my age, I think was worth 10 million in those days dollars. I have to figure out what that is in today's dollars. But like, you know, he was worth 10 million at my age.

And I'm like, so maybe it is the right path. I don't know. You know what I mean? But also the world's changed. Do you think one of the big things is like to just expand on that? Like people assume they need to like someone to learn from them. And I've always, I've never understood why someone sets a requirement to personally like someone to gain value or knowledge from them. Oh, yeah.

I wrote that down because it's a really good tweet. You don't need to like someone to learn. them. That's great. Well, I'm glad I could contribute to your Twitter somehow. Amen. I love that. It's a great. It's a great statement. But, you know, Naval said something that I thought was really impactful. And it's like, this is something that took me a very, very, very, very, very long time to understand. So before I explain what that quote is, most small business owners suck. And that is why they are small business because they are so bad at virtually all aspects of business that that's why I'm they are small, right? Like, the thing that separates small business from big business is skill,

right? And, you know, market, opportunity, et cetera. But like, you can even get into, like, well, picking an opportunity is a skill, right? And so we were like, well, that's easy. He's selling B2B. It's like, well, they want you to sell B2B or whatever. I mean, I don't think it's that easy, but you get the understanding, right? And so, Naval said, you only do sales or good at selling because you don't know how to market. And you only market it because you don't know how to build product. And so I think there's a tremendous amount of truth to that, which is like if you build the product good enough and it takes a tremendous amount of effort to build an exceptional product that grows on its own via word of mouth because of all acquisition channels, only one of them is

quadratic in nature, right? Only one of them can multiply and compound on its own. Every other acquisition channel, you get an affiliate, it's a one-to-one relationship. You get, you know, you dollar in, Same thing with ads. It's like you put a dollar in, you get a fixed amount out. Maybe it's 10 to one, but it's fixed. So I put another dollar in, I get another $10 out. But for something to be quadratic, it's like, if I put 10 in, I get 100, and then I get a thousand, and then I get 10,000, right?

And it multiplies. And the only thing that does that is word of mouth, right? And one of the things that's really interesting about the internet space specifically is a lot of people will start their business. They'll shoot up because they'll figure out how to get ads to work or whatever, whatever their acquisition general is, they'll figure out how to do that. and it'll shoot up in revenue, right? And this is particularly for paid ad people, right? And, you know, within six months or 12 months, all of a sudden, they're like, man, my, my CPMs are out of control,

my cost of acquisitions way, you know, above KPI, like, you know, Google's changed, YouTube's change, Facebook's changed, right? They, you know, they throw that out there. And the thing is, it may have gone up by like 10%. It may have gone up by 15%, but your cost of acquisition is quadrupled. And so, the thing is, is what is the invisible hand behind the scenes pulling the strings against you? And it's the same people who are like, well, word of mouth doesn't exist. It doesn't work anymore. And that's course shit. Word of mouth, 100% completely exists. It's social media for God's sake. Of course, of course word of mouth works. It's just working against you. And so right now, everyone has word of mouth that is about their business. The question is, is it neutral? Is it

positive? Or is it negative? And then actively destroying your business the way positive word of mouth can grow your business. And so the guys who have positive word of mouth, they see their cost of acquisition to continue decline, even if their cost per impression remains the same or even goes up slightly because they have that quadratic compounding that's happened behind the scene. Whereas the other guys are having that compounding that's happening behind the scenes, which is like, oh, I saw this ad from, you know, Johnny So-and-so, I think it looks cool. And then they message your friend. They're like, oh, dude, heard that guy's a complete, you know, like his product shit, doesn't respond to you. The team sucks. He just has a bunch of VAs in the Philippines who are like your

support and it's terrible. And they're like, oh, wow. And then that person, the person who said the negative thing gets asked a question again about Johnny. Another situation tells people, he prevented that sale. No one knows why he prevented that sale, but that sale was prevented. And then the guy he tells it to gets another message like, hey, are you going to do that Johnny thing? And he's like, oh, no, I actually heard from Frank that it's actually a really bad product. And they're like, okay. And that's enough. Like, it doesn't take a lot to get people to not buy. And so it's just like You have this machine that compounds. And the easiest way to prove it is like if your cost of acquisition has gone up

3x, but the cost per impression has only gone up 30%. You have another thing that's working against you, which is like, how is Jim Montch still here six years later, seven years later, right? And still growing, right? It's only there because it has at least neutral or positive word of mouth behind it. Otherwise, it wouldn't exist. We wouldn't be able to acquire customers.