The Game with Alex Hormozi - The 3 Evil "E's" Entrepreneurs Make | Ep 508

Episode Date: March 9, 2023

Growth will pay the expenses. Today, Alex (@AlexHormozi) talks about the three evil “E’s” in entrepreneurship, how each evil affects you, and advises on what you can do to avoid them! Be careful, for they might just be in front of you without realizing it!Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps:(1:09) - The 1st evil “E” of entrepreneurship is Expectations(3:08) - The 2nd evil “E” is Emotions(8:21) - The 3rd evil “E” is Expenses(12:12) - The evilest of the E’s and what to do to avoid themFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition(This episode is a re-run. Original airdate was May 11, 2021)

The biggest mistakes that are made stem from these three evil ease. 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. What's going on, everyone? It's Alex Mosey, CEO of Allad, Prestige Labs, Jim Launch. We've done $120 million in sales in the last four years, and I have nothing to sell you. And so today what I want to talk about is the three entrepreneurial evil ease, or of a, of, entrepreneurship all right so these are the three kind of ease that I that I see over and over

again from the entrepreneurs that we work with directly in our portfolio companies but also in the entrepreneurs that I talk to in general the biggest mistakes that are made stem from these three evil ease and so what I'm gonna do is I'm gonna walk through all three of them I'll tell you an easy way to try and at least attenuate the mistakes that you can make from them and then at the end I'll show you the one that I think is actually the most evil of them all all right so So the first E is expectations. And the reason that this one is so evil is that most of the time, us entrepreneurs, we think

that everything has to happen immediately. I had an entrepreneur not that long ago reach out to me and say, hey, how can, you know, if we work together, how can you guarantee that I'm going to get to a million dollars a month within the next six months? And they were currently, I think, doing $100,000 a month. and that kind of expectation and mindset is literally what will destroy you in business because what happens is you set these arbitrary because all the goals are arbitrary for the most part right these these numbers that in your mind make you feel good or make you feel accomplished

and you set these things up there with not a huge path of getting there and you put an arbitrary timeline on it and then you try and force yourself into it and so it ends up happening is you take shortcuts, you make hasty, high-risk decisions, and most of the time you end up destroying the business and taking 10 steps backwards. And so expectations that we set for ourselves and our teams, we want to be intolerant of anything other than excellence, but focused far more on the process than the outcome.

So if you could shift the expectations from outcome-based expectations to process-based expectations, and then meet that with the intolerance of excellence, or tolerating only X-lings, excuse me, then you can help mitigate expectation evils, where you basically destroy your business as a result of thinking that you have to be at a million dollars a month or $100,000 a month

or $10,000 a month or whatever that number is for you by X time, right? What I see again and again and again of the people who make way more money than I do is they have reasonable expectations that would be unreasonable to achieve based on process, right? I have a mentor right now who always repeats the same thing. He says, good process drives good results. And I just, that's been something I've been trying to ingrain in

my mind. Good process drives good results. All right. So that's evil number one. The second evil is emotions, all right? The second thing that will kill your business. All right? If you look at the biggest CEOs in the world, you look at the Bezos, you look at, you know, you look at, you look at, you look at Munger, you look at Buffett, you look at all these. guys right and what you may notice is that they're very devoid of emotion and it's not that they're like emotionless people it's more so that they try and stay as even handed as possible with the decisions and this is just something that i've observed and so here's a telltale sign that you can tell for yourself if you're if you're suffering from this because sometimes it's hard especially

for guys for us to be like i'm emotional right now right but like we're human we have emotions and so if you're looking and you flip-flop a lot on decisions, as in you're presented the same data, and one day you feel this way and another day you feel this way, and literally how you process the decision flip-flops all the time, it's because you're being subject to emotions. Now, if you look at the trajectory of a business and the hundreds and thousands of decisions that we have to make as an entrepreneur, you can see how quickly these thousands of decisions can spin this way or this way on this path based on your emotions, and it can be the right we're the wrong way. And so I'll give you, here's two pieces to this. It's very difficult to eliminate

emotions, right? But if you can detect when you are emotional, then you can decrease the speed of your decision making, which is usually contrary to what most people do when they are emotional. They speed up their decision making process when they're in emotions, all right? And so if you feel urgency, so for me, these are things that are like red flags, if I feel like I have to make a decision by today or whatever most times it's completely fictitious and made up in my mind and so what i try and do is extend the time horizon between the the feeling i have and when i actually decide to take action i can't tell you the amount of huge mistakes that i was able to avoid simply by sleeping it off right giving myself 24 hours to think on it right and a lot of times the entire world looks different when you wake up

at the morning and so that should frighten you because it frightens me how can the world look so different and only after nine hours of sleep, right? It's because our emotional state's different. And so this is a tactic that I do like a lot for managing emotions. So the best decisions that we make for ourselves, in my opinion, or that I have made for myself, have come from a state of contentment. And so there have probably been moments. That's why when you go on vacation, you feel like you have a lot of clarity.

It's because you're in the correct emotional state to make the right decisions because you're not operating from a place of scarcity, right? You're not operating from a place of have to. You're not operating from a place of deficiency where I am not good enough, right? When you're operating from a place of contentment, and I'm not saying we're always content, that's not my point, right?

The point is that you could probably recognize those times where you sit back and you're feeling gracious, you know, you have a lot of gratitude for an experience or things that give you perspective. And so it's in those time periods where you should make big decisions for your life and then know that you made them in the proper emotional state. This is something that I'm actively focused a lot on for me because in our businesses now,

we have four of them. Being in the correct, making the right call is basically my only job now. It's really just proper decision making. Hey, Mosin, 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 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. And so when I sense myself in a well-rested, content, you know, full of gratitude mood, that is when I want to look at my most complex issues, my most complex multivariable, you know, decisions and say, this is what I think the best course of action is. And then sticking with that, even when the, the, the, the, the and tribulations that are inevitably going to happen as a result of the decision later down the road. And so that's my, that's my hack is I can't get around emotion. I try and extend time horizons whenever I feel urgency.

And then if, if I'm going to make emotions from an emotional state, I try and go from a place of contentment and gratitude. And if I do not feel that state, I don't usually make the decision. So think about that. So if you have like moments when you're playing with your kids and you look back and you're like, man, life's awesome. That's when you make the decision. that you need to make about your life.

Because from there, you'll be operating with a much longer time horizon. And that's, I think, my way, I think this is doing it that way will trick yourself into extending your time horizon, which ultimately will lead to better decision-making. And the third E, of the third evils, evil E, oops, I'm writing down evil, is, or are, excuse me, are expenses. All right, so the first two. One is what you think should happen.

The emotions affect how you, think it should happen and the expenses are the the it's like the cloud and the dirt right are the things that that we incur along the way that increase the risk of it not occurring right so if you think about expenses in general they are liabilities they are risk that we take on and so if if our goal is entrepreneurs is to increase our upside and decrease our downside right that is kind of entrepreneurship and business in general right then actively thinking about decreasing our downside our liabilities is a way of increasing the likelihood

that our expectations are met, right? And so one of the biggest mistakes and biggest evils that will destroy entrepreneurial businesses is because they set massive expectations when they are emotional and emotionally deficient because they need to satisfy emotional needs that their parents didn't meet when they were kids, they then incur expenses that they shouldn't otherwise have

to meet these demands that are completely arbitrary and made up in their minds, right? And so I see this what happened all the time. It's like, hey, we want to scale. We just hired four more people so that we can scale. It doesn't work that way. Get the growth first, and then the growth will pay for the people. Don't put the cart in front of the horse.

The only exception to this is if you have like commission-only, you know, reps, like sales reps, things like that. But most other times, 99% of other times, when you are incurring greater expenses, It's not like it should not be to quote anticipate growth, right? Growth will pay the expenses. And if you need to, quote, delay something for a smaller period of time so that you can short up your infrastructure, then you can do that. And you would be amazed at how much flexibility there is, right? It's much easier to solve problems with cash in the bank, with contracts signed. And you're an entrepreneur.

Like solving problems is what we do, right? And so if you're in that state, think about how much you eat. Like, if you need to, if you have the immediate demand, right, you will solve the problem and the people will come. I promise you. All right. One of the biggest mistakes that I mean, I've made this one so many times. I hired 25 support reps in anticipation of growth for our supplement company, Prestige Labs, two years ago. And I currently now have four people that handle more business than the 25 did.

Think about that. And so what happens is when you anticipate growth, you don't even know what the growth is going to look like. And so you basically just put people there. The culture of the team decreases, the morale of the team decreases. They're being less efficient. And when you have lots of people, you don't think about driving good process. Right? You just think, like, we'll just throw more bodies at the problem.

And that's a horrible way to go about business. It's also not a good customer experience in the long run. And so if we can adjust our expectations to be reasonable and based on process, not outcome, by managing our emotions and making decisions from a place of contentment, right, so that we don't set these deficient expectations on ourselves and our business that we have to satisfy because we must be a certain way by this time, then we won't incur expenses and risk that is undue and not necessarily that will likely destroy our business when it was 100% based on our false, made up expectations about what we thought should happen, should. And so when I look at,

the things that undo entrepreneurs and entrepreneurial businesses, these are the three evil ease, expectations, emotions, and expenses. And I told you at the beginning that I would share the one that I think is the most deadly. And it's this guy, in my opinion. Expectations. Because what we believe, because these are basically beliefs, just said differently, right? Another way to say this. And this is a really, a really good way that I got from a different coach.

to reframe beliefs is, she said, if you just call all your beliefs assumptions, they will be far more malleable. And it's such, words matter, right? And if we call our beliefs assumptions, they become far more changeable for ourselves. And so if I say, this is my assumption, what do you guys think?

Rather than this is my expectation, what do you guys think? See how different that feels? But they function the same why, right? But one of them is approachable, one of them is malleable, One of them can take new feedback and new inputs and new data. And the other one is a must, a should, a have to.

And so if we can readjust our expectations and be focused on our product, over delivering, delighting the customers, being intolerant of anything but excellence in the process, and because of that, our emotions stay more stable because we're not missing goals that we have to hit, which then create more scarcity, more deficiency. more guttural feelings that then make us shorten our decision-making loops that cause poor decisions and then cause us to make poor decisions that create expenses. All right, so this is a loop that self-reinforces, and it can either be a virtuous or vicious cycle. And so it starts at the top and spins all the way around. And so those are the three evil ease of entrepreneurship and entrepreneurial mistakes that hopefully you can use some of these tactics to avoid.

All right. Don't hire before you need it. Let the growth pay for the expenses. When you're making decisions, try and extend the space. This is what I have found effective for me. And try and make decisions from a point of gratitude and contentment. And then keep the expectations driven around process, not outcome. And if you can keep your high expectations, but keep them on process, not on what has to happen. Because when you reverse it the other way, you'll start making terrible decisions. You know,