The Game with Alex Hormozi - This is Our Competitive Edge | Ep 416

Episode Date: August 2, 2022

Too many lenses can make you to go blind. Today, Alex (@AlexHormozi) talks about acquisition.com, their portfolio company that does $100 million a year, and their core values that serve as a guide for anything and everything they do. He also talks about how things that are "true and innate to you" can help structure your core values and that you don't always have to have many of them to run successfully.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:(1:26) - Brain, heart, and conversations for business growth(3:52) - Find values through non-negotiables(5:15) - Ideal values with unimpeachable character(11:39) - Candor, feedback, and competitive greatness for progressFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

We're going to quantify how we can directly impact the bottom line of the business. We're going to ask for variable compensation around the value that we are providing for the business. And we're going to be able to get it because no one else can do it. 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, Mosey Nation? This is Alex Hormosey.

The purpose of this is to blow up some of the things. of the things that I saw online with relation to how to make more money when it comes to getting a raise if you are an employee, number one, or number two, getting a raise from your customers as a business owner, because at the end of the day, all of us are still beholden to our customers that we serve. And so if you don't know who I am, my name's Alex fromozia, I'm Acquisition.com, it's a portfolio of companies that's over $100 million a year. And I make these because I think it's fun. So let's rock and roll. So I think the easiest way to solve this dilemma, this problem, for not getting paid enough is to understand what are the variables that influence pay, right?

Right. And so I think a fun process is to go through this and think about it using inversion thinking, all right, which is something that Charlie Munger champions and a lot of other great thinkers. All right. And so if we wanted to make as little money as humanly possible and we were employees and or business owners, what would we do? Well, number one, we would provide very little value. All right, that would be the first thing that we do is we'd have skill set that just does not provide a

significant amount of value to a business and or to a customer. All right. That's first off is what we would do. The second thing that we would do is we would not ask for very much of that value that we were creating. So hopefully we're creating some level of value, which is why we're getting employed or why we're asked to solve some problem for a customer, right? We're solving a problem.

There's a job to be done. And so that is the potential amount of money that we can earn. The amount of that potential money that we earn is predicated based on our ability to negotiate. And so we ask for a very small amount. of that money. All right? So low value. And then of that small number, we ask even for a smaller percentage of that number because of our ability to negotiate. That would normally be the only two things that you'd think, okay, well, this is my potential and this is how much I ask for. And so there's

the only two variables that would create how much I'm getting paid. Ah, but there's a third. All right, and I'm going to get to the three and how you can flip this at the end of the video. All right. But the third one that we're going to look at is supply demand dynamics, meaning how easily replaceable is the value that we are providing. And so in an unideal world, in bizarro land, where we want to get paid as little as possible using inversion thinking, we would, one, have low value,

two, ask for very little of it, and three, have a line of people standing behind us, the opposite of scarcity, right? Working against us, we are commoditized. Our skill is easily found and easily replaced by other willing people who want to do it for less money, right? Because they hate us, they hate the economy,

they hate capitalism, and they hate generally moving up in life. So if you are an employee or you are a business owner and you are trying to get paid more, then we can invert this process and think to ourselves, what are the ways that we can, number one, create more value, which I wrote a whole book about, right? $100 million offers, 99 cents if you want it. Number two is how do we negotiate? Now we have a high potential value that we are creating, right?

So we've now, we've flipped the equation. We're creating tremendous amount of value for the person. Now, one of the keys in communicating value is using multiple lenses through which to see it. All right. So it's not just about, and the easiest one is just the quantitative number value in terms of how much money are we creating, right? How much money are we helping to produce? All right. So that is monetary value.

There are other forms of value, right? There's lots of services out there that exist that, especially consumer service, where there is no direct amount of value, but there's indirect value. So if you help someone lose weight, the amount that you can charge on that will depend on who you serve, right, which would then actually get into a fourth bucket, which is picking the right customers, right? And I'll tell you a quick story about this before I dive back in. I think you'll like the tangent.

So there's a boy, and he's 16 years old, and he's, you know, looking to get his first car. And his father one day surprises him with a vehicle, right? So he's super excited. He sees the car, but it's a little bit of a clunker. It's an old, you know, it's an old car, right? But he's fine with it. And the dad says, hey, if you want, you can go cash this in and then get, you know, and then use the money to get something else if you want.

And he says, okay. So he says, hey, why don't you just go down to the car lot and see what they'll give you for it? So he goes over the car a lot, you know, excited to see what they'll trade the car in for. And they said, you know what, we'll give you $5,000 for the car. And he was like, okay. So he goes back to his dad, tells him the story. He says, okay, son, well, why don't you, why don't you try the pawn shop, see what, see what give you for it, like the scrapyard. So he goes over to the pawn shop slash slash scrapyard,

right? It goes there. And he asks the same question. He says, you know, this is the car. How much can I get for it? And they're like, probably give you a thousand bucks just for like the parts and the metal. He's like, so he walks back to feed the lead to his dad. And he's like, you know, it's only worth $1,000 to those guys. Dad says, hmm, won't you go down to that antique dealership? See what they say. So he goes to the antique dealership, shows on the car. And they say, oh my God. this is a historic XYZ car. There's only this many of them ever made. This is a $200,000 vehicle.

The kid, blown out of his mind, runs back home. He's like, Dad, you won't believe it. And the dad smiles, and he's like, what? They say this car is unbelievably valuable. It's historic. It's like one of a kind. Blah, blah, blah, blah. And so the dad pauses and says,

so listen, son, what I want you to see from this is that the value that someone will give you is not necessarily just a result of the vehicle, of who you are, but who you are talking to. And so a hidden bonus of this video that I'm going to give you right now is that there are three is what I said, but the fourth one is who we are serving, right? So the amount that you can charge if you are a business owner will be also predicated on who you serve, right? If you can help a billionaire lose weight, he will probably pay you more than somebody

who's on, you know, who's on unemployment, right? It's just the nature of like that problem to that person is more valuable to solve, right? And that's because indirectly for them, if that helps the billionaire, right, get his wife, which he might value more, right, or he might be able to seal a deal because people respect him or whatever it is, right? Then there is more indirect value that you can ascribe to the services that are being provided. Okay. So I said there were three, but there's actually four because I'm trying to keep you guessing,

all right? But so I said number one was value. Okay. So values can be predicated on who we're serving and also how much value we can provide, which is going to come into what's the dream outcome we're providing? we're providing them. How likely do they think that they're going to get that with you as an employee and or as a business that they're hiring? Because all of us are doing jobs. All of us are employees, right, in one way or another. How quickly we can get that done. And then how much work they have to do as a result of that, which you can translate in a couple of ways.

If you're an employee and someone always has to check up on you and always has to give you direct instructions, that is less valuable of employee than employee who's coming with the ideas can get things done quickly, I have a large amount of confidence that someone's going to do the job and the perceived outcome that I want to create that employee can do. quickly. Awesome. So that's, you can reverse the value equation that I talk about in the book, whether you're working for a customer or you're working for a boss, either of those things. And I'll get to how you can make more money as an employee in a second. Okay. So one, we're flipping the inversion to we create lots of value. Number two, I said we're serving the right person. All right. That's the second component of value. Hey guys, real quick for those of you guys who are $100 million offers fans, I love you. I added in a lost chapter that has never been released. I'm releasing it now. Transparently, I'm doing that to be.

Build hype for $100 million leads, but you will have the unreleased chapter. It talks about your first avatar and how to segment customers to make more money. You can get it by going to acquisition.com forward slash leads. It's so free in exchange for your email so that I can email you when we launch $100 million leads and so that you cannot miss out on it because last time I sold out for like eight straight weeks really fast. So that is my way of making sure that y'all get first dips. Number two here is going to be how much we ask for. All right.

So how much we negotiate? And so as a business, we do this by setting our prices, right? That is fundamentally the negotiation that occurs. So we set our prices. And a lot of times you'd be amazed that just asking for more, you get more, right? Because most people sell from their own wallet, as in they think this is a lot of money. And therefore, they ask for what they believe is a lot of money. And here's the fundamental fallacy with this problem.

What comes easy to you is typically not easy for other people. And so I'll give you a simple example personally. I am not a car guy. I am not a fix-it guy. I just don't care. And so if I went to a mechanic shop and they said, hey, we've got to, you know, change your oil and, you know, do XYZ in your car, it's going to be, you know, $100. If they say $100 or $300, I'm not going to notice, I'm not going to care. But if you talk to another mechanic, they're like, you charge that guy $200 to change his oil. That's crazy. It only takes two seconds. And all you have to do is turn the knob and oil comes out and then pour back in, whatever, right? And, it's because to them, to a mechanic, changing oil, seems like a very easy thing to do. And it probably is. But to me, it's something that is going to take me time to learn that I don't care, right? And so what is easy to one person, because you have been doing it for so long, might not necessarily be easy to other people. And so your perception of the value is actually skewed, which is why you should not be the one necessarily setting your prices. You allow the

market to set the prices for your services and or the pay that you get, right? So, number one, lots of value. Number two, you negotiate or ask for a higher amount. Okay. And if you're an employee, an easy way to do that is create some sort of variable compensation for yourself and say, hey, these are ways that I think I can tie into the revenue of the business. Would it be fair? Would it be unreasonable for me to ask for a percentage of that, not for the whole, necessarily the whole company, but at least in this way so that I can drive towards those goals, which will ultimately make the company more money, right? Which is exactly what we're doing is, you know, when we serve customers, right? Especially if you're in B2B services. You say, listen, I think that this thing

will yield this amount of result, and I would like a percentage of that, right? And it's variable compensation. So the best way and the highest people who make the most money have variable compensation. Business owners have variable compensation. Depends on how well your business does and how much you serve your customers. The business itself is variable compensation, right? The enterprise value. All right. So if you can shift your thinking around this, it will pay dividends. So value, negotiation skill, and the third one, which is competitive landscape or competitive dynamics, supply demand for the job to be done. All right?

So think about this way. If I have lots of people who can do the job, right, if I have somebody who comes up to me, let's say they're an employee and they say, hey, I'm providing lots of value and I would like to ask for more. I would not have leverage on this situation if there was 20 other people who were lined up who could do the job and were willing to accept less, right? Which is why this applies for both labor as it does for owning a business. It's both sides, right?

If I want to provide XYZ service and there's another guy who's willing to provide X, Y, Z service for less, and there's nothing that really differentiates us, then most consumers will just go to the one that costs less, which brings up the important lesson of how do you invert this? How do we solve this problem? Which is we have to be in a category of one. All right. And so we do this by trying to niche down and create more specialized services because then we decrease the pool of people that we are competing against. Now, as you scale up in a business, I'm going to answer this as a business and also, for employees. As you scale up in a business, you do in general go broader, but usually you can use the experience, the depth of knowledge you have, and then be able to be better at that stuff at a larger scale. All right. And so the easiest thing to do, which is why I talk about this in the book, is is niche down at first, right, so that we can get really, really good at delivering one very

specific high amount of value to a very specific customer, right? And so when we do that, we basically fall into creating lots of value. We price high. So we're asking for a bigger percentage of the value that we know we're creating, and we're doing it as a category of one in that there's no other people who can do it. And so we add other features and bells and whistles and bonuses and guarantees to create offers that are more compelling to a customer that are one of a kind, which make it more difficult for other people to compete against us and thereby allow us to capture a larger percentage of the value that we are creating. That's the idea. That's the point. Now, if you're an employee, right, and you walk through this process, then the idea is how can I,

use my unique, unique being the key, skills and experiences to make the business that I'm working for more money. Right? Because ultimately that is, I mean, that's where you're getting compensated. It's a percentage of the revenue that you're responsible for, right? Indirectly or directly. And the more directly you can be associated with it, the more you will get compensated. Because the more clearly you can point to the value that you are creating, right? Because the more directed is, the less argumentation or discount that will be applied to the value that you're creating for the business, right? Does that make sense? Hopefully it makes sense. So if we are an employee and we want to make more money, then we're going to use our unique skills and experiences.

And we're going to try and quantify to the highest degree possible how we can directly impact the bottom line of the business. We're going to ask for variable compensation around the value that we are providing for the business, which just works the same if you're a business. And we're going to be able to get it. And this is the third piece here. The reason that we're going to be able to get it is because no one else can do it. And that's the idea. And so this also kind of brings in that part that the bonus number four, which is the type of opportunity that you are pursuing in terms of the overarching umbrella of business that you were working for will also dictate how much you get paid. Right. Like if you work at a dry cleaning business, it will be very difficult for you to make a million dollars a year. And that's because the business doesn't make a million dollars a year in all likelihood. Right. And so your opportunity vehicle will always be a subset of the business opportunity that you're working underneath of. And I think this is a a good thing to hit on because what it takes, which is a great book by Stuart Schwartz, Stuart Schwartzman, Stephen Schwartzman, the guy started Blackstone. Anyways, that guy, all right, he's worth $37 billion

today. So he's pretty rich. And he's pretty good. And what he talks about is the idea, and I think many other visionaries have said this, but you need to have a vision that is big enough for your business that others' people's visions fit inside of it, right? And so what that really means is that you need to have a pie that's big enough that everyone can get wealthy. And if you're operating in an opportunity vehicle that does not allow other people to get wealthy, then you will probably not attract 10 out of 10 talent. And if you are 10 out of 10 talent, then maybe you should be looking for bigger visions, bigger visionaries, bigger companies who have bigger goals and bigger dreams so that you can learn unique expertise while working at those businesses because listening to

Uncle Warren, there's only two things you should be working for, whether you're learning or you're earning. Right. So you should get paid in one or two or ideally both ways when you work, which you should be learning all the time and you should be earning, right? And it should definitely at least be one of those two things. And if you're not learning and you're not earning, you should stop working wherever you're working, all right, which is why we're seeing a precipitous drop in, I would say, frontline retail, very generic workers. The last two months, I think we have eight million people quit their jobs in those kind

of frontline sectors because the opportunity was not big enough, right? And so for us, we can think about this as business owners when we're thinking about our employees. We can think we have this as business owners as we're communicating value to our customers, which is how can I create the value? how can I capture the value through my pricing and my ability to negotiate? And then how can I create a category of once I'm not competing against everyone else's shitty prices? All right.

And so as the employee, we do the exact same thing, except our prices are the wages that we charge. And so in that way, being a business owner or an employee actually is very similar. It's just that we are just one degree separated from the customer. So the business owner is closer to the customer than the employee that works for the business from a value creation standpoint. right so business serves the customer employee search the business right and they do that I say that as a as a from a big picture perspective even though the employee may directly be servicing the customer they do it within the overarching infrastructure of the business that exists all right and so right now if you want to make more money you want to get paid more whether you are a business owner or an

employee think about how you measure up in each of those three dynamics and if you're like how do I create more value I wrote a book about it's 99 cents you can grab it if you want it's on Amazon as 4,000 five-star reviews. I think people like it at least, or at least they just like leaving five-star reviews for it. So either way, I'm cool with it. Ideally, they like it, though. But that's about the value creation. Your ability to negotiate, honestly, like you could have all the tips in the world. I'll tell you the simplest law of negotiation is this. He who has the most options wins the circumstance. And so your ability to get other customers, your ability to have other jobs if you're an employee, those that you bring to the table prior to your negotiation will

give you all the leverage you need. If you have 100 girls who are lined up to date you or 100 guys who are lined up to date you, you have more leverage in the, quote, negotiation, right? If you have hundreds of other businesses who want you, you have far more ability to negotiate, which is why people are like, how does the CEO make, you know, $50 million bonus or whatever from his public traded companies? I was like, well, do you know the amount of guys who can do that specific job? You can count on one hand in the entire planet, right? And said, that is why, because the supply demand on MX for that specific role, right? And the value that's being created and the percentage that they negotiate, that's how that kind of money gets created.

So you can make obscene amounts of money as both a business owner and or an employee, as long as you understand those three dynamics. All right. And as again, the added boned caveat to that is that those guys can make that kind of money because they're operating within a business that has a massive dream that is really to impact humanity overall. And lots of people can get wealthy in that. Both the owners and the employees, because in a lot of ways, the compensation structure,

the bonuses, options, things like. that they structure are based on variable compensation on the overall production of the business. All right. So lots of love, everyone. If you're new to Mosey Nation, welcome.