Why The First $100k is the Toughest | Charlie Munger Secrets

Summary

• Making your first $100,000 is the hardest because it restricts you to think within "time for money" opportunities, a constraint that limits business scalability.
• Most successful people began by earning their first $100K in ways that required significant personal effort, but this starting point is essential for growth.
• The first $100,000 I earned felt incredibly significant because it marked a massive increase in financial security compared to what I had before.
• Making $100K is tough because it generally involves no leverage; you're trading time for money and must fulfill multiple roles within your business without help.
• Once you hit the $100K mark, you can start to leverage other people and resources, expanding your capability to earn more without directly exchanging more of your time.
• To scale beyond $100K, think in terms of higher goals, like making $1 million, which forces you to consider different, more scalable business approaches.
• Identify opportunities where even a small certification or skill enhancement can significantly increase your hourly rate or value in the marketplace.
• If my businesses had failed, I was prepared to earn income through any means necessary, knowing my skill set would ensure I wouldn't make less than a certain amount.
• Embrace every job and challenge as an opportunity to acquire new skills. The more skills you accumulate, the more valuable you become and the higher your baseline income will be.
• To gain valuable skills faster, invest in learning from mentors and experts rather than trying to figure it all out individually.
• If you're feeling "busy and broke," it's likely that you're not optimally using your time. Evaluate and remove time-wasters and focus on high-value activities.
• View each entrepreneurial challenge as a chance to build upon your "skyscraper of skills" which will eventually enable you to seize multi-million dollar opportunities with the right experience.

Video

How To Take Action

I would suggest starting by focusing on building a strong skill set. Remember, the more skills you have, the more valuable you become. So, even if you've got a job that pays the bills, look for chances to learn new things. If your job isn't paying enough, maybe pick up a certification that can boost your hourly rate.

A good way of doing things at the start is doing the work yourself. When you're new, you'll need to wear many hats and learn all parts of the business. This might be tough, and it can feel like you're going slowly, but that effort is teaching you a lot. Every job you do is a step towards becoming more skillful and valuable.

Once you've got some experience and maybe saved up your first $100K, you can start to use leverage. This means hiring people to do tasks that take up a lot of your time but aren't the best use of your skills. Pay someone else to do the things you can hire for cheap and use that extra time to do higher-value work.

And don't forget to use your time wisely. If you're feeling "busy and broke," check what you're spending time on. Is it really helping you grow? Cut back on activities that don't add much value and put your effort into ones that do.

Lastly, it's really important to learn from others who have been where you want to go. Paying for a mentor or coach can seem expensive, but it helps you learn valuable skills much faster than you would on your own.

Keep building that "skyscraper of skills." Every new thing you learn is another floor on your tower. And the higher it gets, the easier it is to spot those big-money opportunities. You've got this!

Quotes by Alex Hormozi

"Your work works on you more than you work on it"

– Alex Hormozi

"The first hundred thousand dollars is the hardest amount of money to make"

– Alex Hormozi

"You can't be busy and broke"

– Alex Hormozi

"You have to trade some of your life for money"

– Alex Hormozi

"The level that you can fall to continues to go be higher and higher"

– Alex Hormozi

Full Transcript

special uh podcast episode for you today um what i want to break down is a conversation i was having with a different friend about how a hundred thousand dollars is the hardest amount of money to make um and i was actually talking to him he's he's starting his physical therapy uh clinic practice right now um and he's he's he's you know he's eating for lack of a better term you know what i mean like he's just he's just trying to figure this out and the thing is is that a hundred thousand dollars is the hardest amount of money to make for a variety of reasons and that's not me i'm not the first person to say that charlie munger said uh who's warren buffett's uh business partner said the first hundred grand is a he even says that uh it's a quote you can look it up um but anyways and and there's there's a bunch of reasons why and so i wanted to kind of walk through it uh the first is the the biggest one which is that when you're when you set the goal at a hundred thousand dollars you only think of hundred thousand dollar opportunities right um and what i mean by that is you're not like if i were to say hey you need to make 10 million dollars you can't 100 grand your way times 100 to get there right you have to think of a different way of operating of doing business in order to make 10 million dollars right because at that point you know you can't sell your time like it's not going to work right you have to do something else and so inherently when someone puts the constraint of i want to make a hundred thousand dollars on themselves then they automatically only construct confine themselves to vehicles where they have to sell time for money right which are inherently constraining which is why it's a right it's hard because you literally have to sell your time in order to do it that being said most people who've made millions started with something that got them a hundred grand and i will tell you personally the first hundred thousand dollars that i put in my bank account was by far the most meaningful that of all the money that i've made in my life um i remember when i looked at layla and i had a hundred thousand dollars in my bank account after everything um i remember looking at her and saying it's gonna be okay we've got three and a half years of money now that if we mess up for three and a half years we'll still will still be all right and i remember feeling that that sense of relief and the reason that i think it was so impactful is that difference between zero or let's say the difference between a thousand dollars you're making a hundred thousand dollars is a hundred x increase for me to have that same 100x increase i'd have to go from 100 000 to 10 million in my bank account to have the same proportional increase in terms of security and i'll tell you even after 10 million my bank account i was like it still didn't feel as good as the first hundred grand all right and so it doesn't matter where you're at like i'll tell you if it's hard right now it's normal it's supposed to be hard but it will get better because you're gonna start thinking differently all right now back to the original topic of why 100 000 is the hardest money to make first is you think of time vehicles time for money vehicles the second is that you have no leverage all right so what i mean by that is that inherently all businesses arbitrage right you're buying and selling things at less and you're making the difference right if you're in a service business i'm buying people's labor and i'm selling it at a higher price to the marketplace because i see the discrepancy between that and i can add value to a person by training them in certain ways or putting them inside of a system and then the sum of the individuals or sorry the sum of the whole is greater than parts right that's essentially what it is but when you don't have money you have no leverage on anything and so you have to do everything yourself and so again it takes tons of time to get small amounts of output and so because of that you're really inefficient right because you have to and you also have to wear all of the hats you have to learn every aspect of the business in order to really turn the first dollar and that takes time and it takes effort a lot more effort than you think it will right and then once you finally figure out how to make the first dollar you have to keep repeating that action over and over and over and over again until you have you know 100 000 in your bank account but once you have that you can start paying people to do things you can start paying for you know advertising and you're not worried about paying your rent or and what happens is you now start having the big l word right which is leverage you can you can you can move the world a lot faster because you can have 10 people doing outbound for you you can pay a team to make advertising for you you can have a video set up or whatever that's going to get you a higher roi or make your stuff look better and you get more you know you get more engagement or whatever right but the thing is is that that first hundred grand is so hard because the vehicles that exist for it require all your effort if you're doing sales right you're working all the time if you're doing a job you're working all the time if you're you know if you wanted to drive uber to make 100 grand you probably work 12 hours a day and it would require time but thing is is that once you do that though you can you can then start piecemealing out pieces of your day and you do that in reverse order of the value that you can buy that same skill in the marketplace so let me let me dive into that for a second so let's say that in your business you might be doing 15 different things but you might find out that the administrative work of scheduling um and answering the phone might be the least valuable it may be it may not be whatever but let's just say it is and let's say that the marketplace you can buy that skill for ten dollars an hour and so what that means is you can get let's say four hours of your day back for ten dollars an hour and so now you have four more hours and if you can make more money in those four hours and this is a key point i see this one as a mistake too is uh people will outsource certain work that they're doing but they will not replace the time with higher value skill so then they basically just pay people and then stop working and make the same amount of money which can be cool but if you want to grow then you're going to need to continue to work and just do higher and higher and higher value higher leverage time in the time that you buy back right but fundamentally when you think about your business as what would it take for me to make a million dollars would it take for me to make 10 million dollars you think of different vehicles in order to get there and if you don't know of the vehicles i would highly highly encourage you to look at the vehicles that already exist so like one of the things that's here's an interesting nugget for you there's no reason for anyone in the united states to make less than 25 dollars an hour why because in one day you can go through a certification and become a phlebotomist and make 25 an hour so who wouldn't take a one-day education to triple their income from minimum wage who wouldn't do that the reason people don't do it is because they don't know people are ignorant right and so if you're watching this and you didn't know that that even existed there are so many other opportunities that are like that that you can immediately get more leverage on the time just as you're starting so if you're if you're working a job and you're not making that well then go find go find small opportunities go find little mini certifications that you can get that qualify you uh for now that's only get a certification if it's required if it's just like oh this is a certain don't worry about it but like if if you can find these little opportunities you know like i'll tell you for me my plan b of like if my business was going to fail i knew that what i was going to do was i was going to drive uber and i was going to strip at night that was going to be my 100 my my gig because i knew that if i drove uber 12 hours a day and i stripped for four hours every night i would be able to make about 200 grand and i knew that even if i started at zero i could do that again and try and try and get another do-over right and the thing is is that as your skill set increases right the base level of your building as i like to consider it like this is your building of skills the base level your basement continues to rise right and so the level that you can fall down to continues to go be higher and higher right and so once i learned how to sell i knew that i would never really make less than 250 000 a year because i knew i could always go to a car dealership and sell cars no matter what i could go sell cars make 200 300 400 000 a year i knew that because i had that skill and that means that from this point going forward with my life i'll never make less than that right but then i learned how to market and then as soon as i learned how to market i knew that that was going to be my because now i could take my sales skill and pair it with marketing and then i could generate demand at will right and then that means that my new level might be 3 million a year that i'll never make less than because i have the skills that even if i have to start over i can end there and the thing is is that if you think about your your journey as an entrepreneur in terms of as a skill set stacking all you're doing is acquiring skills and putting in your back pocket put it in your tool kit right then you inherently become more valuable and you stop seeing your failures as failures but rather lessons on the way to where you're trying to go because you inherently become more valuable because your work works on you more than you work on it all right i'll say that again your work works on you more than you work on it and so even if you didn't make a hundred grand the first year that's okay because you developed the foundational skill sets that maybe got you above 50 000 a year right but as long as you were continuing to acquire skills that baseline will will go up and the speed with which you move up will be how much volume you do so volume of work for a specific skill with deliberate effort will improve your skill set now you can do it faster or slower depending on how quickly you learn the skill but you still have to learn it and there's usually a certain amount of volume that has to happen which means that there's some amount of time but then how do some people acquire skills faster than others some people are more deliberate with their practice some people get mentors and experts that feed into them every valuable skill that i've acquired in my life i've paid someone to acquire so i could get it faster alright and so if you're like well i don't have money then do the high value do the do the leverage do the shitty work now do the first 100 000 that's a do that work now you have to trade some of your your life for money and that's okay which is why i have a saying which is you can you can't be busy and broke right you can't be both if you're busy you should be making money right and if you're broke you're not busy which means you've got time so you can always trade back and forth time for money right if you have more money then uh and but you're busy all the time then you can trade some of that money back to buy some time back right but you can't be busy and broke all right so think about that and if you feel like you are busy and broke i guarantee you're wasting a lot of your time so anyways uh to ring this full circle a hundred thousand dollars is by far one of the hardest amounts of money to make because we think about it only in time vehicles and for many of us it's the first thing you have to do so just bite the bullet go do it and then after that you can start leveling up your skill set you can pay for skills you can pay for um for for things to happen faster for you you can pay for other people to do some of the lower value work that you're doing because they're earlier on in their journey so you can buy their time that's less valuable than yours and you continue to work up and build the foundation of that building that eventually becomes a skyscraper of your skills and then you'll have the perspective to identify the 10 million the 100 million the billion dollar opportunities and go all in on them because at this point you'll have the skill set to make it happen so anyways hope that was valuable for you hope you're having an amazing day uh and i'll see you in the next video bye [Music] [Music] [Applause] you