The Game with Alex Hormozi - Why 20 Year Olds Stay Poor | Ep 490

Episode Date: January 26, 2023

If you’re young and think you know everything? Reality check: you don’t. Today, Alex (@AlexHormozi) talks about why there are so many 20-Year-Olds who aren’t earning as much money as they think they deserve, why they should focus on learning & skill stacking, and why hustling and actually loving the game will benefit them as they grow older.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:(1:41) - The longer you delay your earning cycle, you compound your learnings(7:29) - Start from the bottom, don’t fast-track your way to make money(8:59) - Keep hustling, keep learning. You’re not as good as you think you are(11:55) - If you love the game, you don’t care about the short-term earning(17:26) - 2 steps to stop yourself from falling into this trap of “earning fast”(18:46) - Understand what season you’re in & focus on compounding your skillsFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

So the most important thing you have to realize when you're in your 20s is what season you are in. You have to stop comparing yourself to people who are earning more than you because it means that what they're doing is often short-changing their long-term earning for short-term earning. 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 wished Bezos, Musk, and Buffett had documented their journey, so I'm doing it for the rest of us. Please share and enjoy. 20-year-old state poor because they think that their side hustle has to become their main hustle. And they see lots of influencers all over the internet and they consume my stuff or whatever.

And the thing is, is they will lack context. They will think that a big business lesson will apply to them today. And so they have the right lesson at the wrong time, which still makes it the wrong lesson. And so what they're trying to do is they're trying to earn and learn or earn rather than learn. And the thing is, is that the company that happens in your earning is just, like the game of cash flow. This may be a game that was before your time if you're 20 and you're watching this, but basically with this little board game where everybody starts at the same, you roll dice and you keep moving along the board. And as soon as you graduate high school,

you had the option of starting a job and start earning more money immediately after high school, or you could go to college, wait four years, and then make more money after that. Or you could go to medical school and make even more money after that. But each time, you continue to push back your earning in favor of learning. Now, the way the game worked, for the most part, most people are able to make more, the more they educated themselves. Now, the theory of the game is correct. The fact that nowadays, college is massively overpriced and undervalued and some other career paths are as well, doesn't disprove the idea that the longer you can delay your earning cycle, the more you are compounding your learning unto itself. And so I want to give you a quick

example of two guys about the same age that took two very different directions in life. One of them, We'll just call him Logan. It's a young guy, ambitious-ish, started listening to some of my stuff, went to another guy who was a little bit older, and then tried to learn the basics of editing video. Because he was like, video is big. That's what all these guys are doing. I think I could get a job doing editing, right? Makes sense. Cool.

Other guy, we'll call him Smakeup. Same idea, wanted to make money, but had zero skills because he's 17 years old. Of course you would have no skills, because why would you? right and so he decided because he talked to a mentor who was older than and said hey i think you have a proclivity for sales i think you'd be good at so you should start at a sales place at the lowest tier of the business now here's where things differed Logan went to the business used the buddy who taught him a little bit about editing to get a job interview and he'd learned enough that he could get a job offer for the job offer at age 17 or six years old or whatever it was

he gets a $60,000 offer, right? Which is a solid amount of money for editing with basically no experience just from the small amount of skills you's able to learn. Mind you, for everybody who's thinking about the college thing, you can learn skills quickly to replace what the average college income is afterwards.

So as an aside, that probably took 12 weeks of learning to get that level of scale. Now, in this instance, you've got Logan, who then, rather than accept the job, because this particular company had a huge suite of other people

who significantly more advanced, including the guy who taught him the basic level of skills just enough to get the job. So he's got multiple people who have mastered different platforms, creative director, who's done multiple big brands that he had the ability to learn from. But what did he do? He asked for $3,000 more because he's a fucking idiot. Because what he thought he had to do was earn rather than learn. Who cares if he makes an extra $3,000 a year? Now, the business is obviously not going to do that. Here's why. Because one, his skill set is replaceable. There's hundreds of other people who are mediocre at video. The second thing is that if somebody starts out the relationship that way, they indicate that they're going to be a pain in the ass. And there's no amount of money that is worth taking on a pain in the ass in your business. And so what this guy does is he starts trying to negotiate back and forth. He's watched some videos on YouTube about how to negotiate. He's trying to get the upper hand. But he forget. gets the thing that matters most, which is he has no leverage. No one cares. And so what ends up happening? He goes to a three more interviews. The guy who is his mentor is like, what the hell are you doing? I got

you this job. You're making me look bad. And dude, you don't know anything. Like there's so much you don't know. But the thing is, when you're early on, you learn this much and you think you know everything. And it's something called the Dunning Kruger effect, which is that the more you learn in a specific skill, the more you realize you don't know. And so if right now you're young and you think you know a lot, I want to tell you it's a psychological fallacy. Like you actually know nothing. Like you think you know it, which is why it's a fallacy. Think about it.

If you were young and you're like, I'm really good at this, it's because you actually have no idea. And the reason that some people are older have to stain for people who are younger is because of this psychological effect. People who are older who have had more experience, realize they know less, and then see somebody who's younger,

thinks they know more, and they realize the discrepancy and how ignorant it is. And you just look stupid. So this is me trying to prepare you for what I think the best career path is. And it's not necessarily what you think. This is me maximizing for your long-term net worth. This is me trying to make you as rich as humanly fucking possible.

So this is what Logan did. Logan goes, wheels and deals, and then eventually gets a job to be the sole that the lead head honcho of video editing and whatever at some small business that has no idea how to do this at all. Guess what? He's not doing anymore. Learning.

And so what he did was he took two, steps forward and then put himself in front of a wall because there's nowhere else he's going to learn from. There's no other mentors. There's no other people ahead of him. He's not going to learn. And so he took the right hook in his career 12 weeks after getting into it. And now they're the ones who are trying to extract as much from him rather than coming into a business where he's the small man on the totem pole and he can learn from everyone else, which would maximize for his long-term net worth. So let's walk through the other example, sma-up. All right. So Smekup listens to the advice of the older guy, and the final decision that happened there

is said, listen, you can try and become a millionaire in 90 days, and you've got a one in a thousand shot of getting it. And what's crazy is that they did a survey of high school seniors. 52% of high school seniors believe that they will be a millionaire by 25. You are sadly fucking mistaken. Like, it's delusion. Like, that's what it is. It's delusion. Over half, thought they were going to be millionaires by age 25. If you look at the actual stat of people who are millionaires at 25, it's not even 1% of people who are millionaires of 25. It's less than 1%.

So you're rolling a dice, making decisions in your life based on a bet that's worse than anything you find in Vegas. And so the second half of that conversation with Smigup was you can try and roll the dice and have a one in a thousand shot of being a millionaire in 90 days because that was the behavior that he was starting to show. Or I can guarantee that you'll be a millionaire in a decade. Which would you prefer? He said, I want to be a millionaire in a decade. And so, the mentor said, start at the lowest rung of the totem pole, start at the bottom, and learn every skill along the way. And so Smakeup went in there. He also took the mentor's advice. And he said, whatever the minimum

quota is that they tell you to do an activity, double it. So this was a sales role. And so he was required to do 100 calls a day. And so he did 200 calls a day. The mentor also said, go and spend as much time as you possibly can with the number one guy. Listen to everything he does and watch what he does. So that's what he did. And then he did twice as much volume. Why? Because he's not as skilled. So he has to do twice the work or has to do four times the work in order to get the same output as somebody who's more experienced. And so whether you're trying to get into law or you're trying to get into accounting or you're trying to get into video editing or you're trying to get into sales or you're trying to get into marketing, whatever the core activity that you do, making videos, making ads,

writing sales pages, actually doing sales calls, whatever it is, if you do two times or four times the volume, you will get better, faster, and pay down your ignorance debt at a faster rate that compounds. Kobe Bryant was famous for doing this where he would do two practices a day. And he thought, if everybody else does one practices a day, if I do two a day, I will get better faster. And in the beginning, the difference is not that noticeable. But after five years and then 10 years, he becomes unbeatable because he has compounded the number of hours in the trenches learning the thing, which is the same reason why he would laugh at an 18-year-old who's turning down a massive signing bonus because they want more because they don't realize that they're

not as good as they think they are. And one of the truths that I will tell you right now is that the reason you're not making as much money as one is because you're not as good as you think you are. Real talk. So Smakeup started at the bottom of this totem pole. And then he proved himself as number one on that bottom team. then he got promoted. Again, he was young men in the tonable. So he's the youngest guy there. Worked his way up.

Because what he realized was that no one was going to give him respect based on his age. And rather than bitching and moaning about it, you know what you can control is what you actually do. And respect is always earned. And the younger you are, the more you have to earn it. And you can either resent the world for not giving you respect that you do not deserve, or you can go get it. And the thing is that at the end of the day,

with enough proof, everyone will respect you. Hustle across age, gender, culture is always respected. It's one of the universal currencies of respect. But the problem is that people want the respect before they do the hustle. And they have the sequence wrong. You got to do the hustle, and then you get the respect. So he moved his way up, moved his way up. Now, he also listened to his mentor,

and rather than making content about how good he was at sales and selling a thing, he just showed the lessons he was learning along the way. So rather than pretending to be the authority, he's just sharing the lessons he's learning, which doesn't make him sound like he's an idiot because everybody who's ahead of him says, oh, that makes sense, that's cool. He's just providing value rather than posturing. Flipside, you've got Logan, who's going to try and pretend like he knows more than he does because he thinks that's what is required to be successful.

But I can promise you all the guys were young and posturing like that, don't get clout, from guys who've got game. Because we know you don't have enough money yet to be wearing the shit you wear and driving the car you drive and flying private and whatever. Real quick, guys, you guys already know that I don't run any ads on this and I don't sell anything. And so the only ask that I can ever have of you guys

is that you help me spread the words so we can out more entrepreneurs, make more money, feed their families, make better products, and have better experiences for their employees and customers. And the only way we do that is if you can rate and review and share this podcast. So the single thing that I asked to, do is you can just leave a review, but take you 10 seconds or one type of the thumb, it would mean

the absolute will to me. And more importantly, it may change the world with someone else. What the killers look like in their 20s who become the killers in their 30s don't look like the kid with the Lambo in the watch. They don't look like that. And so the guys who are kingpins at the game know what they looked like when they were younger. What they looked like is hungry as fuck to learn and work. And such a deference to displaying it and only to playing it the game as long as they possibly could because they love the game itself, not the spoils of the game. Because if you only love the spoils of the game, then when you get hit, you can't get back up because the reason you did it to begin with was weak.

And so if you love the game, then you don't care about the short-term earning. You're worried about the long-term earning. And you only get there through the learning. So he stacked his way up, stacked his way up, then became one of the top closers in the company. So you're going three levels of sales, all right, in an organization where many people were experts at sales, very good salesman, and he was able to learn from them because he was hungry and he did extra hours. Now, at this point in his career, he could right now probably start a million dollar year business. But again, he could right hook it and do that now, or he could reinvest. He could double down. And so he got another opportunity to work at a much more prestigious company where it'll get even bigger and better

experience. And guess what? He's going to get paid less than he was making his current job. Why would he do it? Because he's smart and he's thinking long, not thinking short. If you go for the earning early, you stop the learning. And the moment you stop the learning is when you decide and you tell the universe that I have made enough, this is enough for me. I don't need a learning more. I am good enough. And that comes from pride. And so if you can humble yourself and you realize that Dunning Krueger effect exists, that you think you know more than you do when you start because you don't know anything. That's why Socrates said, like, the more I know, the more I realize I know nothing. One of the smartest, wisest people

in the world says he knew nothing. He wasn't being, you know, humble there. He was, he had an accurate perception of reality. And so, as this plays out, when we look at this 10 years from now, in the story of Logan and the story of Smakeup, I promise you, Smekup will make more money and have a higher net worth. And also have people, everyone around him who respect him for the fact that he was willing to do the work and do the learning and not try and write hook for the earning too early. So I'm going to flip to my employer hat for a second. If someone comes in, and I can tell what season they're in, if they're in the earning season, I will work you like a mule because I know that this is the only exchange. If you come in and I know you're in a learning

season and you've said I'm in a learning season, then we will be so generous with how much we can give and reinvest in you. Because the exchange when you're coming in and I have to pay you above to get you to come here means that I have to extract more value from you than I pay you. That's the fundamental of business. Like if I don't extract more value, you can't be here. So I have to get that much more.

So the expectation of how much you're going to work versus reinvest in yourself goes higher. So you might not even have the extra time to reinvest in your learning because the smart business owner is going to try and pull and squeeze as much as they can. But if you come in with a learning hat on, then that business owner understands that maybe in five years you're not going to be there.

Okay, no big deal. If you're upfront about it, then they can be like, cool, how can I assist you in your career? What skill sets do you feel like you lack? I can pair you with people in the company who are further ahead in you and help you get mentorship within our company and you learn for free. Not only that, I'm going to pay you to learn because now I'm increasing the value of my people. But if I have to pay you top dollar to come in above what you really should make, then all of it comes back to squeezing as much out of that investment as I can.

And that's exactly the situation that Logan went into versus the one that Smakeup started at. And Smakeup started at less than half of what Logan started at. But now Smakeup makes significantly more than Logan does and will make continuously more by under-earning versus what he wants to learn. So even if he is a half a million-dollar-year skill set or a million-dollar skill set, you can accept 200 grant or 250,000 a year. You can accept that if there's a discrepancy that makes sense. So the most important thing you have to realize when you're in your 20s is what season you are in.

You have to stop comparing yourself to people who are earning more than you because it means that what they're doing is often short-changing their long-term earning for short-term earning. And so if you play the game long and you can think long, and I get how hard this is. Your brain, when you're 20, literally hasn't finished growing. I'm saying this because I changed a lot between 20 and 26, 20 and 27. Like my ability to think through consequences changed. It's because my prefrontal cortex literally hadn't finished developing yet. And I get how hard it is to think in the future.

Because when you're 20, five years ago, you couldn't even drive. So thinking five years in the future, you're like, oh my God, that's fucking 100 years from now. But it happens like this. And if you can think longer and stop comparing yourself to people that are taking the short term win, you'll decrease the anxiety you have in your life. And if you start comparing yourself to the people who made the big win, later on, you will notice that their path is more similar to yours. It's a J. It's really slow in the beginning and then it skyrockets up. If you make the first jump real fast, then it flatlines.

And then you have a real hard time because then what also happens is that Logan will adjust his lifestyle to his new earnings and he will start displaying his earnings because he gets status from that because he didn't play the game because he wanted to learn it because he liked it. He did it because he wanted to show something. And so he's fucked. Unless he changes literally who is. But if you can get in to learn, you'll earn the most over the long haul. So make sure that you know what season you're in. There is a time for the earning. But the moment that you decide to make that red hook, it's going to be hard to come back because you're going to earn more. And you decide that from here and out, you can't really learn much from people ahead of you

because they're not going to give to you the same way you would if you were in their business. Yeah. So if you're like, shit, I'm a Logan. I made that move and I regret it because I'm not learning what I thought I was going to learn. I went for the quick and easy money. You have to do step one is admitting that you have a problem, which is good. If you're thinking that, then good. Step one is there. Step two is that you have to decouple your self-worth with the current amount of money you make at 18, 19, 20, 25, 26.

You have to decouple that because what the next thing that you're going to have to do is you're going to have to take a pay cut. And you're going to take a pay cut by going somewhere that will actually have people far more advanced than you who are willing to invest in you. And if they're willing to invest in you, then it means the exchange is not just money, which is why you can't compare two jobs. So let's say, let's say job number one pays you 80,000 a year, and you're expected to bring all the game and build everything and no one there knows anything about the skill that you have, that you've spent a lot of time in your, in your mind,

a lot of time learning versus job two is $40,000 a year, and there's tons of dudes who are way ahead of you in that job. Which one's the better deal? Well, the answer depends on your time rising. If you only live one more year of your life, then you should do the 80 grand. but if you think you're going to live longer than a year or two, then you should do the $40,000, increase your earning potential, and then later you right-hook life, and you can maximize or realize the potential you've had over the skills you've stacked.

20-year-olds stay poor because they start trying to earn rather than trying to learn. They don't realize the season they're in, and they do it out of order. And so they try and go and write-hook life and get as much they possibly can rather than realizing that when a business is trading with you, the only thing you're getting paid for isn't just money. You also get paid with experience.

And if you're the one who's coming in with all the experience, guess what you're not getting paid with, experience from other people. If you come in for half the price in terms of your salary at a company that has a way better reputation, way more people ahead of you, you will get paid less in the short run in money, but you will get paid more long term in skills. And if you mess the season up, you will cap your earning potential fast. You will be the person who's the little rocket that shoots up, fizzles, and then goes down. And then oftentimes, because you can't get out of that mindset, you started another thing, shoot back up, started another thing, shoot back up, and you can't break through it. It's because you never gave time, time to do its work on you. Because my favorite

sayings in the Bible is that your work works on you more than you work on it. And so the work that we do is the thing that builds us more than what we build. And so if you think of yourself as the asset that you're ultimately trying to compound over time, then why would you not make the investment in the skills that will compound later rather than trying to, I'm using Gary's right hook, try to immediately go for the ask from life without ever getting anything else. And so the first shift that you have to make in your 20s is that your compensation right now should be majority skills experience learning, minority money. As you age, the percentage that you're getting paid in experience will go down.

So if money's on this side and experience is on this side, in the beginning, you've got little money, lots of experience you're getting paid with. As you age, it'll start shifting. So maybe in your 30s you'll get paid half in money and then half an experience. And as you're 60 years old, by all means, you get paid mostly in money. And that's usually how the guys who win the game play. And they recognize the young actual tigers who really are playing the game the right way because we know what we looked like at that age and it wasn't flashing shit and trying to show

off because somebody who like that, I already know they're not playing to win. They're playing to show. And they're really one of those all show no go type people. And they cap themselves because they don't actually love the game. And the only way you win this game is by being able to play it forever because it's the only way you don't quit. If you think of earning potential as the total amount of value that you can exchange with the marketplace, you're going to be compensated in some way in money and experience, some makeup of that. If you come in to a business and a certain percentage is money, or a smaller percentage is money, then you are providing more value than you're being compensated for. And if you were in a good company, you will be compensated back in excess of what that

experience is. That will further increase your earning potential. And then you can even trade that earning potential for, again, a bigger chunk of cash, but you still have goodwill built into the exchange with the business. And so, So if you can, just like a brand wants to undersell its demand in terms of it stacks up goodwill and it makes a light ask and then it continues to do goodwill. As a personal brand for an employee or somebody who has a career, you want to follow the same mindset of it's I'm okay under monetizing the short because I'm compounding my earning potential. And the earning potential itself, your ability to provide value will compound with time,

especially as you start pairing skills. So I'll give you the example of Jay-Z because I like this one a lot. So if you think about Jay-Z in the beginning of his career, right? He was, well, before, after he was a drug gun, the first part of his career. So first thing he did was he learned how to rap, all right? That was, you know, maybe he had rhythm. That was a skill. And then he turned, he figured out how to do the lyrics.

Okay. And then he figured out how to put those together, started to make a little bit more. And then he started learning how to promote. So he started promoting himself, another skill, significantly more money. And then after that, figured out how to do a record label and distribute even more money. And then after that, he figured out how to recruit a record. other artists and get them sound on his label even more money. And so what happens is that he still needs these early skill sets, even though he didn't monetize them hard there, he monetized them big later.

And so skills will compound. If you have one plus one plus one, it doesn't equal three when it comes to skills. If you are good at math, cool. If you learn bookkeeping, a little bit more. If you learn how to become an accountant, even more. If you start understanding taxes and insurance, all of a sudden you're a CFO. Now, if you start understanding M&A and mergers, entity structures, all of a sudden, you're not only a CFO, you're a rainmaker at that point. You're somebody who can bring in deals, execute deals, et cetera. And the earning potential difference between somebody who's just a bookkeeper in accountant is large, and a rainmaker is tens of millions of dollars per year.

And so even though these skills are like this, the earning potential stacks like that. And the thing is, is if somebody who is an accountant who could eventually become a rainmaker takes too early and doesn't have other rainmakers around them early on in their career, They won't know it exists. They'll never understand the deficits they have, and they'll always wonder why they can't move ahead. And it's because they tried to exchange 100% of their potential earning for money today, rather than leaving some in the tank so they could get deposited from others so they could earn more tomorrow.