The Game with Alex Hormozi - Why Mr. Beast will be Worth $100 Billion | Ep 576

Episode Date: August 15, 2023

“He will do whatever it takes to win no matter what." Today, Alex (@AlexHormozi) discusses why he believes Mr. Beast will be worth over $100 billion, citing his massive audience on platforms like TikTok and YouTube, his approach to content creation and business, and his potential to dominate the consumer packaged goods industry with his brand Feastables. He also highlights the power of influencer traffic and the importance of building a strong brand to generate pricing power and increase enterprise value.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:(1:12) - Adaptable approach, multiple achievements indicate billionaire status.(3:15) - Feastables expands into various verticals for substantial growth.(7:19) - Powerful brand offers pricing and profit leverage for success.(13:13) - Early twenties master of content, poised for business success.(16:10) - Feastables' beverage expansion yields tenfold chocolate bar revenue.(17:36) - 8 reasons why Mr. Beast will be worth $100 BillionFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

There's a ton of leverage for media creators because what they sell and how they market themselves are one and the same. And with that leverage, he's able to gain access to other people's massive distribution bases that might even be different audiences than him. 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. Mr. Beast is going to be worth over $100 billion, and it's going to happen fast than you think.

So Jim, this is me calling my shot for you. In 2022, Mr. Beast had the fastest growing account on TikTok and YouTube. So two of the platforms that have the most eyeballs right now, he has the most of them. You think about the amount of creators on each of those platforms, and he was literally number one on both. The reason that I'm so bullish on him isn't because of what he currently is accomplished, but because of how he approaches his accomplishments in general. The fact that he actually transitioned platforms, not that he stopped YouTube,

but was able to build the team and understand content to such a degree that he could come to the game late on TikTok because relative to other creators who had been on there, he waited years before he decided to get on TikTok and then still beat everyone on the platform within his first 12, 24 months. To me, that's a sign of a champion.

And it's that approach that he has to everything that I think is why it's going to be worth $10 billion. And I'm going to give you some numbers to back that up. And if you don't know who I am, my name is Alex Ramazioen Acquisition.com, portfolio of companies that does about $200 million a year in aggregate. I make these because I hope to attract other business owners towards us that are over a million dollars a year in profit so that we can invest in your business

and help it scale. Right now, I think the entire world is under indexed on how valuable influencer traffic is. Even though people still talk about influencers and like it's, it almost feels like it's old now. I still think they're wildly underpriced. And so let me just give you a couple ideas here. So Logan Paul, KSI, and Jake Paul recently partnered on Prime, right? And in trailing 90, in internal sales, meaning like what they sold to distributors, not what

the distributors marked it up as, they did over 250 million in revenue, which means that they're pacing over a billion this year in sales in the company. And they were able to do that with almost no marketing budget because of the reach of Logan, KSI, and Jake Paul. Paul. But here's the kicker. Mr. Beast is bigger than all of them put together. Just from reviews and subscribers' perspective. And this isn't me throwing rocks. I'm just looking at the numbers of total subscribers. And to be fair, you know, Logan owns 20% or whatever he owns of that. It's more than Acquisition.com does in revenue. So like, that's not me thrown shade. The reason that I make

this content is because as a businessman, I can see how undervalued an audience is. And I'm just attaching a different backend. So rather than having a consumer-based product, I have a business product which is really just me buying into businesses now let's talk about what that means from evaluation perspective so a company that's fast-growing that has significantly better margins because they don't have nearly the cost the marketing costs because most times CPG so consumer pack goods when the biggest costs in them is inventory and marketing and so if you can cut out an entire massive cost center and get instant national recognition or international

recognition then the the potential of the brand day one already becomes a billion, 10 billion, et cetera. And so the fact that right now, I would say that their company could probably trade at a few billion right now, like as soon as they finish this year with a billion in sales, they'll probably be able to trade up multiple billions. And the fact that Jim has a significantly larger audience than they do, and he's international in a way that they are not. Like he has an Indian channel, he has Spanish channels, he has Chinese, he has, he's translated all of these things so you can get even wider and wider reach. And so the trade-off is that right now, he's got feastables, right? And so despite the fact that

Mr. Beast has, you know, Mr. Beast gaming, he has the ghost kitchen that he does with Beast Burger, in my opinion, where he will generate all of his wealth is actually not in gaming and not in the Coast Kitchen. And I'll give you my explanation why. The Ghost Kitchen just has really, really bad margins in general. And so even though that company probably does, I think I heard on a podcast, it does a few hundred thousand dollars a day in sales, he might actually only receive net 10% of that. Now, then he also has a partner who has half of that. And so it's a very small percentage of that that he's able to actually collect in cash flow. And that thing would probably trade on earnings.

And so it might be worth $100, maybe $150 million. Now, not saying it's small money, but I said $100 billion. And so compared to that, it's kind of negligible. Now, let's talk about gaming. So gaming absolutely has the potential. to become from an opportunity vehicle perspective, and he has one of the biggest, if not the biggest, gaming channel on YouTube.

But it's just that I think right now, Jim has realized the power of CPG, and there are more people who eat chocolate than play video games. And just like what I think he's witnessed with what Logan, Paul, Jake Paul, Case, I have done with Prime, is that there's even more people who drink beverages.

Think about how much chocolate any consumer is going to buy per week, right? Probably not a ton, maybe a bar, right? Right. Now, compare that to how many cases of water or energy drink or sports drink that you might consume. Because if you become a regular consumer of a beverage, you usually just keep buying that beverage over and over and over again. And the reason that it's so powerful in the influencer space is that most people don't have incredibly strong affinity to the brands that they consume. Most brands are really old. People don't remember the come up. They just like have been drinking it because they've always drank it. Not because they actually made a conscious decision. They might have got introduced to Pepsi.

or Coke or one of their sub-brands, by the way, that not everything they have is evil, one of the sub-brands that they own, and then just like, they just continue to drink that. But as soon as one of the influencers that you saw come up and that you're a fan of or even recognize, and you're like, oh, this is John's company. I watch John's videos. Then even if it's water that's branded John's water, we wouldn't brand it that way, you'll be more likely to take it and maybe even pay a little bit of a premium on top of the commoditized product.

And that's where the opportunity exists for these massive, brands, all right? Now, these are personal brands, but they are still brands in general. And you can measure the strength of a brand based on how much of a premium you can charge on a commoditized product. And so, for example, if I have two white t-shirts, right, and one of them has an LV logo on it, and this one can go for $100, and this one goes for $1, then I have significant branding and pricing power as a result of that, right? And that discrepancy is the strength of the brand. Now, how powerful a brand do we know this is? Well, right now the richest man in the world owns this brand.

So pretty damn valuable, right? So Bernard Arnaud owns Louis Vuitton and a zillion other luxury brands because he understands the pricing power of brand. And those gross profits that you can generate for selling the same thing is what you can then reinvest in innovation, staying ahead, and marketing even more to reinforce the brand. And that's what becomes the brand flywheel, is that you create a little bit of a premium, you make the spread, you reinvest that into the branding

itself, then that reinforces the brand, you can raise the price more, increase the spread, and then around and around you go. And so you have this incredibly strong brand that's established that consumers in general are willing to pay more for. And if you think about enterprise value in general, it's a discount applied to future cash flows from a business. And if pricing power is the strongest lever on cash flows in a business, which it is, by the way, For example, if I had a business that ran 50% margins and I double the price and I get the same amount of people to sell, then I triple the profit of the business because I went from 50 to 150 in terms of actual profit. And so pricing is the strongest lever on how much money a business actually makes. And what is the strongest lever on pricing?

Brand. And so building a strong brand gives you influence over the strongest lever of profit for a business, which then translates into the highest enterprise value. And for that reason, I think that Mr. Beast will be a sense of billionaire. And it's also because he has so much time to do it. Based on the intel I have, and this isn't me validating that these are the actual numbers, but based on the intel that I have, right now, Feastables is probably going to pace $300 million this year in sales. All right.

Now, if we assume a 20 to 25% margin for that business, then it's going to do $100 million in profit. Now, that business on its own would probably be valued at over a billion. Now, Mr. Beast has already sold chunks of Beast industries at over a billion dollar valuation. So from a he's already a billionaire. If you don't know that, he's already a billionaire from an equity value perspective. And so all I'm making the argument is that he's going to 100x his net worth over the rest of his life, which actually, I think, is a very easy argument for me to make.

And so the thing is, is that he was able to accomplish that with one-tenth of the distribution of Logan Paul, KSI, and whatnot, in terms of their brick-and-mortar distribution. So think about it like this. He might have five times the brand size and he's got one-tenth of distribution. And so there's a 50x discrepancy between what their sales are, which we can prove and have been public, and what I think his sales could be. Now, again, this is only on chocolate. And the idea is not like, Mr. Beast isn't going to make most of his money on chocolate. Chocolate was the first thing that he saw everyone would buy.

And so the next follow-up is like, okay, well then, Is it chocolate or feastables, the brand? And then you have feastables chips, and you have feastables water, and you have feastables energy drinks, that he can then, category by category, crush everyone else with. Because he will have a stronger brand, because when he's compared to three other bottles that look like the ones you've always seen,

and then you see feastables, what are you going to do? You'll probably try it once. And if it's at least as good, and to be fair, or to be real, your perspective on the brand in a real way will influence how good you think it tastes. So just like there's a famous wine experiment where they had expensive, medium, and cheap wines, they had people taste test them and people rank them, expensive, medium, and cheap. But what they didn't know is that the wines were all the same and they just changed the labels. So how you perceive the brand also influences how much you like it.

And so if you have strong affinity for Mr. Beas, which millions of people do, he could even have an identical product and people will perceive it as better. And so I think that the fact that he can do three or four hundred million dollars with chocolate bars shows that when he gets into far larger categories with larger lifetime values and larger average purchase like sports drinks like energy drinks where people will consume one or multiple per day like most people aren't even multiple chocolate bars a day but people will drink multiple gatorates or multiple powers or multiple energy drinks per day and again that's just the beverage category like he can still come out with other verticals and knowing mr beast he'll do his research and he will look at what is the

largest category by revenue across the widest base because he has his audience is everyone and so he needs to find products that everyone consume and then for that reason he will be able to sell more than anyone else if we were to 50x the sales and that's again his chocolate versus beverages which is an unfair pairing he could already be worth it from that and that doesn't include global that's just us and he has a larger audience outside of the u.s than he does inside the u.s. so right now if Jim goes into a 7-Eleven, person after person will walk in and take a picture with him, which means that he already has mass brand awareness, which is the hardest thing to accomplish and the most expensive thing to accomplish. And so he has this brand that's already established,

and all he has to do is plug in distribution into that brand. And so with every added distribution, he will just generate more revenue instantly. And likely, from what I understand with these, he sells out faster than any other brand. So he's taking up more shelf space, and pushing through his product at a faster rate than any other brand on the category. Hey guys, real quick, if you're new to the podcast, I have a book on Amazon. It's called $100 million offers that over $8,000 five-star reviews and it has almost a perfect score. You can get it for 99 cents on Kindle. The reason I bring it up is that I put over 1,000 hours into writing that book.

And it's my biggest gift to our community. So it's my very shameless way of trying to get you to like me more. And ultimately make more dollars so that later on in your business career, I can potentially partner with you. So that's my give, go check it out, Amazon, and back to the show. And so when he applies that to multiple things in the vertical, feastables will just grow and grow and expand and expand. And so do I think that he could do it in gaming? Sure.

But kind of, why bother? Because you could just do this and do it all in all the way and get to a centibillion. And just to give you some context, my team had to go to a zillion different grocery stores and we still couldn't find these nuts. That's one of the tag bars. they're sold out almost everywhere, right? And Jim's already learned a lot about, like, how to

taste test these things. And what's crazy is that he's in his early 20s. Like, he's just getting started. And he's a master of content. And over the next decade, he'll become a master of business because he has access to the best and smartest people in the world because of his brand. And so he can immediately, you know, jump to, hey, Elon, what should I do? Right? And Elon will probably respond. So let me give you an idea of what Beast Industries is all about in terms of the ecosystem. So across like four or five, six YouTube channels, he's got 183 million subscribers and that doesn't include the international channels, which are more than half of his audience. On top of that, he's got TikTok, he's got Instagram, he's got Twitter. And in aggregate, he's got over 300 million

plus subscribers. And I think the main argument I would make there is that they're also incredibly engaged. Like, there's a difference between Mr. Beast and another mega influencer who just has 200 million Instagram followers versus him where people have been following and watching his videos. And they have seen him start from counting backwards or counting forwards to a million or whatever it was as a kid to seeing him become and live out his own vision in front of people of what he wanted to create. And he has tremendous goodwill because of the amount of philanthropy work that he does. And so he has one of these strongest brands out there. Now on the business side, he's got Beasburger, which is a ghost kitchen, which basically leverages the network of restaurants that already exist.

and then he uses his distribution base of customers to buy stuff on an app, and then it gets delivered and filled on from whatever local restaurants he's already partnered with. And I know he's got a few hundred restaurants that are already there, so he can already hit national distribution. But I don't think that's where he's going to make the main money.

The next thing, he's got Beast Gaming, right? Which is where he'll try and make apps and video games because he has a big gaming audience. He also has translation services, which I don't know what's going to happen with AI because AI is moving at such a fast pace that might have been started and might not be the best opportunity vehicle for him now

versus when he started only a few years ago. But I think where the real winner for him is going to be, and this is what I would make my bet on, is that he's going to be going all in on feastables. Because feastables, if you think about, if you're an influencer, you have a massive audience, what you want to do is simply reverse engineer maximum enterprise value. And the way you would do that is number of sales

times lifetime gross profit. All right? And so what that means is, what do the most amount of people in my audience want multiplied by what is the most gross profit I can make per customer. Right. And so an example of one that I told Mr. Jimmy, I'm still making my point here.

I still think you should start a credit card and start a banking platform, just saying. Because what is banking about? Trust, right? Everybody would switch to a beast card, and then there's a zillion ways you can monetize because the wedge product for most consumers into banking is a card. And then you can offer loans.

You can do all sorts of stuff anyways. You might not want to do that. But if we're looking at what does everyone use, banking, and what makes the most lifetime gross profit banking, and we look at what business has been around the longest, banks, then I think that that's a really strong competitive thing. That being said, CPG makes a ton of sense for him because so many people eat chocolate, eat chips, eat pretzels,

and a lot of those people are in his audience. And I think that what we are seeing with Feastables just with chocolate is a drop in the bucket compared to how big this brand will be once he enters bigger, more profitable categories. What I mean by that is, okay, how many chocolate bars is the average person buy a week? Now, how many sports beverages or water do people consume per week and purchase per week?

Significantly more. And so if he goes into those categories, he might be able to, in and of itself, even if the same number of people purchased, get 10 times the revenue he's currently getting with chocolate bars. Now, his chocolate bar distribution compared to some of the biggest competitors

that are out there in the space is a 10th or a 20th in terms of actual brick and mortar locations that sell his stuff. And right now, he's selling out faster than any other brand. And so he's still way under indexed on how much revenue he could be making from what I would consider

a less than ideal product for how many people he could potentially sell and the life's on gross profit he could achieve with a different vertical, which Jim's smart and he will do that next. And what I respect about Jim is that he's just here to win it.

Like he will do whatever it takes to win no matter what. He gets people to move in with him in his house so that he can just, He can indoctrinate them into the Mr. B's way of doing things, which is just when it all costs without hurting anyone and do good while you do it. That's me consolidating it. But there's eight points that I want to make in terms of why I really think he's going to get $100 billion. So first, is he has massive leverage in terms of what he puts in versus what he gets out. So he may spend

a million, $2 million, even $4 million on a video, but the amount of impressions that that one video gets across the world because he also translates it is worth hundreds of millions. His biggest videos are bigger than the Super Bowl. It's hard for people to comprehend that. And he can make one of those Super Bowl videos every single week if he wanted to. And there's no other people who he's advertising against. It's just him. Number two is that when you have a media company, your product is your marketing,

which is one of the unique advantages that only media companies have. Meaning, the more you spend on your product, which is your media, the more marketing ends up happening. And so the stuff you put out, which you spend money on, because people consume your product as media, also doubles as your media department in terms of how do I market my thing? And so there's a ton of leverage for media creators

because what they sell and how they market themselves are one and the same. And with that leverage, he's able to gain access to other people's massive distribution bases that might even be different audiences than him. So when I talked to Jim the other day, he was talking about how he was surprised how much Joe Rogan's podcast with him,

how many older people, started recognizing him from that podcast, right? And so he can get on flagrant. He can get on Joe Rogan. He can get on impulsive and all these other ones because he's already established this brand because they know that if he's on their podcast, that podcast will crush

because he brings his own audience. And so that's the leverage that he brings to every conversation. And so whenever he does knock on the door, the door is open for him. Number three is that he's able to monetize the widest base of his audience. And so like at the most basic level, when he monetizes all the ad sense, every single person who views his video, he gets some money off of, right? But what's the level underneath of that?

And so an interesting concept here is that if someone paid Mr. Beast, like for an integrated ad inside of one of his videos, fundamentally they believe that they're going to make significantly more by paying him for the integration than they're going to, sorry, they believe they're going to make significantly more than they paid him off of that ad. And so he would then make more money promoting his own thing and make up the arbitrage. So if someone gets 10 to 1 or 20 to 1 by paying him $20 million a year to market their thing, then it means that he might be able to get $200 million or $400 million a year marketing his thing. And that's not to mention the fact that if he says, hey, check out Shopify or hey, check out Pepsi or whatever, right? I know he wouldn't do Pepsi, but you get the idea. Why would he not do that? Because he's trying to go into consumer products.

But point is, there's also some degradation of the call to action. So what I mean is, if Mr. Beast talks about Mr. Beast stuff, it's all Mr. Beast. If he talks about something else, then there's a certain amount of trust that gets lost, not with him, but just like he doesn't own Shopify. And so a certain percentage of people are just like, well, I don't want to do that. Whereas if he's promoting his own thing, the trust transfers 100% from him to the product. So if someone else can make 10x on his ads, then he might be able to make 100x on his ads because it stays within the brand. And it's congruent.

And subpoint underneath of that is that his media, his content, touches the broadest audience, which is simply entertainment, right? People want to be entertained because they want to be attracted from lives, whatever. But everybody can watch Mr. Bees' content. And so his products, as a consequence, he gets to reach everyone with what he sells. If I started a chocolate bar, it might not even resonate at all with my audience because, one, I think a lot of my audience is probably relatively health conscious. A lot of them are entrepreneurs trying to be better. And they might not be like, well, Alex, chocolate bar is not really like on brand for you, right?

Now, if I sold nasal strips, then that might be very on brain because they would to breathe better, they want to perform better, they want to sleep better, all those things that are a lot. And I do it and they know I live this stuff, right? And so, again, the consequence here is we want to sell the thing that the most people in the audience will buy. Number four is that, and this is the main reason I believe that the CPG angle, so consumer package goods, compared to his software slash gaming play, would be better for him, is that it takes a, it's like getting into software is already an incredibly hard and competitive space. Now, he has this huge competitive advantage of having the big brand, but I think that he doesn't, basically why introduce another risk variable when he could just do a very simple business model and have a superior brand on top of it? And so like manufacturing, you know, the chocolate bars or check. or water is not overwhelmingly complex compared to making a software or an app or something like that. And so he can leverage the fact that with his audience, he can have a very simple transactional business and then focus the rest of his time on distribution.

Number five is that Jim is smart enough to know that he doesn't know everything. And that would be very tough. It's actually really hard for me to imagine being one of the most popular people on planet earth in your early 20s and not letting that get to your head. and having had many conversations with him, he's confident that he can kill it, but he's incredibly open-minded to listening to people who he feels has expertise outside of what he has mastered. And so now, is he going to take advice on content from a lot of people? I mean, I think he listens to everybody because he wants to take anything that he can, but he takes that same winner's

attitude to every other thing that he does in business. And so he hits up people, anyone who he thinks he can learn anything from. And he doesn't judge the fact, he's further ahead than some business people, because think about this, if he raised at one and a half billion or 1.6 or whatever it was for Beast Industries, he's technically a billionaire on paper, right? And so why would he talk to somebody who's not a billionaire on paper? Because he still feels like there are things that he can learn from them and then implement into his machine and instantly get to 10 or 50 or 100. And just as like a micro example, like he still texts like the thumbnails that he's thinking about going on for his videos to some of his close buddies that are super high

YouTubers just to get their feedback because at the end of the day, he cares about winning more than being right. Number six is that he's trying to hire a God Squad and he's doing it aggressively. So he wants the Avengers of business and content to be on his team in-house. And the thing that he has, that's again the huge advantage of the personal brand is that smart people recognize the fact that he's growing like crazy and they want to get on the ship. And so the access to talent that he has, the same way he has access to expertise is seconded to none. And so he can get someone to take a pay cut to join Beast Industries for one of the verticals he wants to go after who are maybe even underpaid, not that's saying that he doesn't pay well, but I'm saying like they're willing to take a smaller slice because

they believe in the bigger pie. And the reason they're able to do that is because the value they're getting from Mr. Beast and Beast Industries isn't just monetary. So even because the thing is, the more he develops his brand, the more just saying I worked at Beast Industries, I work for Mr. Beast becomes an asset that you get to live with for the rest of your life that you can then leverage in other places. So the trade is still a great trade. It's just not all denoted in money. Number seven is that he, for being so young, it's amazing how collaborative rather than competitive he is. Now, don't get me wrong, he's super competitive as a person, but I think a lot of it is him against him. But he's willing to collaborate with other creators rather than cut them down.

And so he spends time, like he helps people out on their first channel with no, subscribers. He does TikTok videos with TikTokers that aren't nearly as big as him. And he does that because he sees the world as larger than a zero-sum game, meaning we can just both win. And I think that's actually been one of his low-key secret to successes because early on he was masterminding with all these guys who are all together trying to get millions of subscribers and all of them did. And I think, you know, this is me just putting my theoretical hat on. So I'm going into conjecture. But I'll bet that him seeing that all of them could win when they all worked together and they all won faster and bigger

than if they worked on their own, probably changed the way he saw the world in terms of how he creates and how everyone can win together. And I think that might have actually been a really core pillar of why he is more open to collaboration and helping everyone. And number eight is that Jim is playing an infinite game.

And what I mean by that is that he's in the game to play the game. Like by any stretch, he doesn't need money anymore, right? He's got a billion dollar value, you know, plus billion. valuation personally in terms of his net worth. And if you lost everything tomorrow, he would still make YouTube videos. And the reason I know that is because when he had nothing, he made YouTube videos. And because he plays the game that way, he's going to have one of the biggest piece of leverage that everyone underplays, which is time, right? Because it doesn't matter, like, on a long enough

time horizon, you can actually pursue a lower leverage opportunity and still win huge. It just takes a longer time. But he is in a high leverage opportunity vehicle, and he has time. So, he's already got almost a decade of experience under his belt in his low 20s. And so in terms of like entrepreneur years, he's actually older than people give him credit for. But he's still being old for what he's given credit for still has 60, 70 years ahead of him where he can continue to compound that, meaning his audience compounds unto itself. His media compounds unto itself. And so if you imagine any reasonable rate of progress over that 60,

year period, I feel incredibly confident that he can hit that sensibility and probably far more than that.