A Hard Learned Lesson (ALEX HORMOZI)

Summary

• When I strive for a better ideal and follow through, I consistently see an increase in my earnings.
• Reading and learning from those who make more money than me has been a beneficial strategy.
• It's crucial to learn the skill of focus, specifically learning to say no to opportunities that don't align with my current level.
• As my business grows, I need to reassess what opportunities to decline, even if they're more attractive than before.
• I recommend the book "The Road Less Stupid" for entrepreneurs prone to constant innovation and change.
• A critical mindset shift from Jeff Bezos: it's not just about the big wins, but understanding the cost of experimentations and the risk associated with big bets.
• Adopting the three-question framework has helped me tremendously: What's my upside? What's my downside? Can I live with the downside if it happens?
• I've realized it's important not to spread myself too thin but rather concentrate on a few well-considered bets.
• Reflect on the concept presented by Charlie Munger and Warren Buffett—bet less frequently but with higher conviction on "no-brainers."
• I've come to understand that even well-intentioned but rapid business changes can incur significant costs without guaranteeing the desired upside.
• Accepting and preparing for the downside risks of a decision can be illuminating and improve strategic planning.
• Avoid getting trapped in a cycle of chasing the next big thing and instead focus on continuous improvement in the fundamentals—this has paid dividends for my business.
• It is crucial not to let optimism cloud judgment and to critically evaluate the costs and likelihood of success before making business decisions.
• I've had to say no to many potential distractions, focusing my team on incremental, sustainable improvement.
• Studying successful role models has taught me valuable lessons in decision-making and resource allocation.
• Sharing these insights is part of my contribution to others, providing lessons I wish I had learned earlier in my career.

Video

How To Take Action

I would suggest implementing a focus on learning from those who are more successful. It's a smart move. Read books by people who've made more money to learn their strategies. A book to try is "The Road Less Stupid." It's great for learning how not to change things too quickly.

Learning to say "no" to opportunities is huge. This gets harder as your business grows because you get bigger, more tempting offers. But you've got to say no if they're not right for you, no matter how good they look. As your skills get better, you'll see more chances but saying no helps you focus on what really works.

One skill to master is focus. Focus means not doing everything. Pick a few things that really matter and do them well. This means sometimes you don't chase the shiny new idea. You double down on the basics. That'll help your business grow without spreading yourself too thin.

Ask yourself three questions before making big decisions. These can guide you: What's my upside? What's my downside? Can I live with the downside if it happens? This helps avoid big risks that might not pay off.

Look at what successful people like Warren Buffett and Charlie Munger do. They don't bet often, but when they do, it's with a lot of thought. They only go for "no-brainers" – things that are almost sure to succeed.

Think about the cost of change before you jump into something new. Your business might spend a lot of effort without much return. So be skeptical about trying lots of new things quickly. It’s better to improve a little each day than to keep starting over.

And remember, sharing these lessons can help others. It’s good to pass on what you’ve learned. That's part of growing and contributing to everyone’s success. Keep focusing on those fundamental improvements, and you'll see results.

Quotes by Alex Hormozi

"Every time I take a step towards a better ideal in this direction, I make significantly more money"

– Alex Hormozi

"One of the hardest learned lessons was learning to say no to opportunities that were now at a larger size than what I used to learn to say no to"

– Alex Hormozi

"Big people who bet big win big, but they bear the cost of experimentation"

– Alex Hormozi

"What's my upside? What's my downside? And can I live with the downside's gonna happen?"

– Alex Hormozi

"Our optimism can become our Achilles' heel because we believe that the chance of success is actually greater than it really is"

– Alex Hormozi

Full Transcript

every time i take a step towards kind of a better ideal in this direction i make significantly more money and so i figured i'd share it with you but uh recently i've been spending a lot of time reading um and specifically reading from people who make a lot more money than i do and i think that i haven't had a good um kind of a little bit more head of a podcast until recently so i'm going to try and break that streak today so one of the hardest learn lessons that i've i mean and i'm still actively learning it but every time i take a step towards kind of a better ideal in this direction i make significantly more money and so i figured i'd share it with you so um in some of my earlier podcasts i talk a lot about focus right about learning to say no and i think that over the last year and a half two years um there have been my hardest learned lessons were where i said yes to opportunities that were now at a larger size than what i used to learn to say no to and so i've referenced the opportunities that that come to us as like the woman in the red dress if you're familiar with the matrix is that the thing is is that at every opportunity level as you level up the opportunities become sexier right the woman in the red dress becomes more attractive because you know in the very beginning before you've made any money anything is attractive you say yes to anything but then as you acquire more and more skills more and more opportunities open up and better and better opportunities open up which is why you have to like relearn the same same concept but at a different level right because at one point you don't say you you say yes to a 10 million opportunity or one million dollar opportunity everything's relative right but at another level you have to learn to say no to that if you were above that at that certain time and i think i've made that mistake multiple times at different levels and so i'm partially making this you know video for me and so um there's a book called the road less stupid it's really really good i'd highly recommend it especially if you're an entrepreneur and especially if you're prone to getting excited about new ideas constantly wanting to innovate constantly wanting to tweak and change things which is really really you know the thing that excites us a lot and it's a lot of times it's the the key to to big breakthroughs that being said one of the quotes i used to quote a lot was from jeff bezos who said um basically business is different from baseball in that uh in business uh in baseball when you swing for the fences the most you can ever score is four runs right but in business every once in a while when you step up to the plate if you hit the ball hard enough you can score a thousand runs and um so big people who bet big win big but they bear the cost of experimentation right and so um the he references earlier on in that in that little address that he said if you have a chance of a hundred times payoff and you've got a one out of chance 10 chance of hitting it you should take that bet every time and after having thought about this i mean jeff obviously makes a lot more money than i do um i think that that's not it's correct mathematically but in practicality i think there's another sentence that needs to be added to it and so to give it a realistic context imagine you're going to the casino and that's the bet right that's the bet is uh you have to put uh let's say ten dollars down and you can win a thousand but you've got a one out of ten chance right now here's where it makes it realistic let's say you only go into the casino with thirty 30 then what do you do think about it so that means that if you were to bet three times you've got a one you've only you've only got a one out of three chance of ever of coming out of the casino with anything right and so that's i think a more realistic paradigm for what most entrepreneurs go into because you have a constrained amount of capital money and a constraint amount of time and resources and bandwidth for your team and so kind of adapting that extra sentence on there of just understanding that there's a cost to making that bet it's not just oh if i have a 1 out of 10 chance of scoring a thousand then i should definitely make that bet every time for a 10 bet yes you absolutely should mathematically and in jeff's case he's had access to unlimited money virtually unlimited money for 20 years he's been able to re raise funding um and fun i mean they have 500 million dollar mess-ups and they're like whoops that didn't work but a lot of us don't have that and so um there's in the in the the book the road less stupid he gives a context um that i think has really really been useful for me even lately in making decisions about opportunities right it's the things that i have to say no to and so the three questions are really simple which is why i've been using them so much which is what's my upside what's my downside and can i live assuming that the downside's gonna happen and so the third question stated a little bit differently but that's how i'm using it and um in phrasing the three questions that way it's helped me so much in saying no right in like man why don't we try this new follow-up sequence so that we can get you know more leads in well what's the what's my upside maybe i get a 10 boost what's my downside i lose 50 because the test doesn't work or it bombs because what i'm going against is a control which has already been tested against other things and is working and can i live with my downside of losing fifty percent for the hopes of gaining ten no i can't because i'm gonna assume i'm gonna make that loss and so then i just say no and what's happening is it's giving me so much attention back so that when i'm making my bets because ultimately if you really think about what business is it at it's very basic it's just betting which is why a lot of entrepreneurs love gambling uh because it's what we do we do it in a controlled setting it's like you know business is the ultimate version of poker right like poker is a combination of skill and luck right business i would say is even more skill and still a little bit of luck and so it just has more skill under control but the other day there's still bets they're replacing it's not just on black and black and red it's should i hire a salesperson first or should i spend more on this marketing campaign uh should i test out this new follow-up sequence or should we try and run seo uh or should we do cold outbound messenger right and so it's like all of these things are decisions where you're choosing between two different opportunities and i think if you apply that framework that three question framework it's been i just like for me it's been a game changer it's been so helpful um and we've seen you know huge reaps you know we've reaped the benefit in the business um just in the last 90 days even during covid we've had some explosive growth i'll tell you more about it in a couple months um but it's been in really trying to hone that discipline and i feel like at every level you get that that discipline muscle gets stronger and stronger and stronger and the things that i'm able to say no to get better and better and better and so um one of the things that if you look at if you study like charlie munger they talk about the best the best bettors the best gamblers actually bet the the least frequently they actually bet the fewest amount of times but when they met they bet big and so um i'm trying to really apply that and with it when they bet big they bet on what they call no brainers right it shouldn't be like you should have in their mind virtually no chance of not succeeding when you make the bet right and then if you think about that then you're like well shoot there's i mean when will i ever see those types of bets if you look at them over 40 years they only have 15 bets that have created all of the the billions that they've been able to generate 15 15 winning bets out of all the bets they've made have been the winning bets that got them to where they are and i think that in business it's a lot like that so let me just tell you one one quick anecdote to wrap this up to make this real for you tell me if this sounds realistic you get really excited about a new concept a new idea that you think you're going to test out right and you you pitch it to the team you let them know what's going to happen you're saying we're starting on monday this could be the new way we do things the team's not 100 um trained up on it but they're kind of you know fly as you go your feet is king let's rock and roll with this thing and after a month or two months you look back at your stats and they're pretty much the same maybe even a little bit less but there's like three other things that happen during that same period of time so like i don't know if it was this or it was because the new process honestly you know there's this and that and then all of a sudden you realize that you didn't even get a definitive answer on the test that you ran um and you definitely didn't get the result that you were hoping for and so what ends up happening is that your company and you incurred this enormous cost of change without real like without any real upside and so in in thinking through the bets that i'm making now i'm assuming the cost and what i mean like i'm assuming that i'm to have the downside even the one that i'm understanding but i'm assuming there's going to be some that are unknown that i'm going to have to incur and so when i'm making that assumption which is that third question which is and can i live with it assuming that it does happen i ca it's just like it's been it's been so illuminating for me and so helpful for me because what happens is you get in these vicious cycles especially um especially if you're in an emotional situation right because i know a lot of a lot of um where a lot of business owners in general right now are cash constrained they're trying to figure out what to do they're trying to pivot fast make fast decisions on on incomplete information sometimes that's just the name of the game right um but in doing that um they're they're hoping for the hail mary and so their internal optimism which is what leads them to be an entrepreneur ends up ends up weighing against them it ends up stacking the chips against them because that one thing which has been your your hope right your greatest strengths can become your greatest weakness as an entrepreneur there's no different right our optimism can become our achilles heel because we believe that the chance of success is actually greater than it really is and we underestimate the cost of taking the bet and that's where we get [ __ ] right and so when you go back to the casino and when you're considering the bets and you're like man if this hits this could be 10 times what we're doing right now right but just remember you only might have three bets to make and you got a one out of ten shot so use them wisely so anyways i hope that was useful for you it's been incredibly useful for me um i've been saying no to way more um tests and tweaks and variations and and and and and just small things that would really distract the team and just saying guys we're just going to keep we're going to keep focusing on executing we're going to keep focusing on doing better at the fundamentals and it continues to pay dividends because the team doesn't have to be scattered they just have to think how can we get one percent better every day rather than one percent better for two weeks and then change everything and then one percent better for two weeks and then change everything right um where they never actually get to get that long-term compounding uh improvement which is what ultimately will separate you over time so like i said hope that was valuable for you it's been it's been a huge lesson for me and in studying some of the the greats the all-time greats seeing how they make decisions seeing where they place their bets um i wish i had learned it earlier um but hopefully i can pass you know at least that that nugget on too because it's been really helpful for me so lots of love keep being awesome hope you ever meet saturday and um hopefully a beautiful view here from the from bear lake and i'll catch you guys soon [Music]