Alex Hormozi: [00:00:00] Hey, YAP fam. Last Friday, I played part one of my interview with Alex Hormozy, where we got a foundation of his life story and interesting philosophies. Today, you're going to be listening to part two. It first went live back in December 2022, but it's still as fresh as ever. Because Alex digs into the concept of value and why it's so important for businesses that want to scale.

you'll learn all about Alex's value equation. He breaks down the four primary drivers of value and shares some of the most practical sales and marketing strategies from his book, As a marketer and entrepreneur myself, I study Alex's work on the daily.

 This is an episode you cannot afford to miss if you want to charge high rates and get people to say yes. But before we [00:01:00] get to it, At Yap Media, we've been experimenting with AI to see just how far we can push it. That's right, I didn't actually record this myself. Could you tell that this was an AI voice?

Let me know. Send me a DM on LinkedIn or Instagram, or send me an email. And now let's get to my conversation with Alex Hormozy. 

Hala Taha: now we're going to talk about 100 million offers and get into some real practical tactical sales and marketing tips. 

Let's talk about pricing.

Can you talk to us about. Why it's not ideal to start off with a low price and why we need to not have that kind of a mindset when we're going into price our offers. 

Alex Hormozi: So there's really two pricing strategies and this is, I'm, it's a gross simplification, but like you can be the lowest price leader or you can be the high value leader.

Like those are really the positions in the marketplace. Now you can make an [00:02:00] argument for a third, which would be luxury, but in like business services that doesn't really exist as much. Right? And so either your entire strategy is built around being able to provide the same value as the rest of the marketplace, which is commoditized and do it for less.

That is a strategy, but there's only one guy who can have that spot. And most people don't start with that strategy. They're like, they look around, they see what everyone else is charging. They take the average and they say, I'm going to do the same thing they're doing for and do a little bit better. I'm gonna do a little bit more for a little bit less.

And then the thing is, is that everybody, because the marketplace tries to do a little bit more for a little bit less until eventually you can't do any more for any less. And so you end up being a nonprofit, which is what most small businesses are. Most small business owners don't make any money. And it's because of that kind of mindset.

And so it's solving for a different outcome, which is how do I provide the absolute most value to a very specific type of customer? Because if you talk to that specific customer and you can really help them accomplish their dreams, they'll, they'll pay you as much as you want. But the thing is, is about stacking the other side, rather than trying to cut the price, it's just trying to increase the value.

And then by extension with the increase in value, you [00:03:00] get a corresponding increase in price that you are able to charge. And by doing that, you went to a virtuous cycle of price rather than a vicious cycle of price. The vicious cycle is you keep cutting your prices, your margin drops, you can't spend as much to fulfill each customer, your service drops even lower, your salesmen aren't convicted because they see all the complaints, you have really low reviews, you can't pay people well, you have to lower your price, you have less profit, and it just goes around and around.

It's a very terrible existence, and I've been there. The flip side is like you charge more. And so the people that are buying are more convicted that you can actually help them. They're more invested because they paid more. And if you have any kind of business where somebody has to do something in order to be successful, which basically many service businesses, the client has to do some stuff.

The more invested the client is in a very real way, the more valuable your product, because if you get somebody who's super invested and does the stuff, then you deliver a better outcome. The next thing is that people actually perceive the value higher. So they've done a study with this where they had three bottles of wine, low, middle and expensive wines, and they had people taste them and they had them rate them.

And unsurprisingly, [00:04:00] people rated the low wine, the lowest, the middle one, the middle, and then the expensive one, uh, the best. What they didn't know is that all three wines were the same. And so in a very real way, the relationship we value in price is bidirectional. People. Ascribe value to something based on the fact or partially based on the price that is there So if they if you charge more money people will also perceive your thing is more valuable but with that excess profit you can also fulfill in that purpose like So now you have you can hire the best people you can spend more in marketing to acquire customers You can treat them with the little doodads that you probably wouldn't be able to do if you were trying to be a low cost leader.

And so you enter a virtuous cycle where people get more value, they tell their friends, they stay longer, they pay more, you can market more, and then around, and then it spins the other way. It's the scariest thing for entrepreneurs because we've done this with, with portfolio companies. We had one portfolio company, we did a ton of research to look at the marketplace, etc.

And after all the research, the very first thing we did, which is not common for us, is we made a price change. We said, we're going to do nothing different. We're just raising the price. 50%. I had to get on nine calls with the [00:05:00] CEO to like convince him to do it. Nine be like, it's going to be okay. If it doesn't work, we'll switch it back.

You know what I mean? He made the change. We tripled the profit of the business. And this was a big business tripled. And here's what's crazy. Most times when you increase the price, you sell fewer units. It's common, but it's okay because you make it's a curve. Like if you, if you charge 10 times as much and you sell one third, fewer customers, you make way more money.

And so in this particular instance, we actually sold more people because people perceived it. This was a medical professional center. And I was like, I think you're mispriced. Like, People expect it to be higher than it currently is because of your medical background. And so we made the price change and then, you know, tripled, tripled the profit of the business in, in three months.

So all that to say, most people are competing as commodities. There's two people in the marketplace. People can't tell the difference. They pick the cheaper one. The idea is how can we make our price so much more expensive than everyone else in the marketplace that people have to pause and think, huh, there's something different happening here.

I should [00:06:00] think more about this and then you stack that with all of the other value that you're going to provide them that ultimately makes them choose you even though you're not the cheapest person. 

Hala Taha: Yeah. Like you said, there's benefits to actually increasing your pricing. The client can actually get a better result because they're more invested.

And also. Yeah. They think it's worth it because they're like, Oh, it's priced higher. This must be really good. Right? So what are the other things that make people feel like they're getting a good deal? 

Alex Hormozi: So, I mean, one of my favorite things from Warren Buffett is price is what you pay values, what you get.

And so the ideal is that we still want to always give people a bargain, right? Everyone wants a bargain, but it doesn't mean cheap. And so that's the big difference, right? Like you can have something that's very expensive. So if I said, Hey, here are the keys to my, my brand new Ferrari, and you can have it for 50 grand, A lot of people would find a way to come up with 50 grand like that if they knew the car was worth 600.

And so the idea is how can we make our service very clearly worth 600 and charge 50 rather than try and sell a crappy Honda for a little above [00:07:00] market. That's where everybody messes up. They take a shitty product, they raise the price, and then they get more upset customers. So it's like if I spend 100 in cost to deliver 10, 000 of value and charge a thousand, Then I have 90 percent margins.

They get 10 times the value and everyone wins. And that is a wonderful business. And that's what we try to create is we look at how much value, like when we're looking at companies we want to take on is we look at the core product, how much value are they really able to provide a customer? And then we can reorient the monetization and the productization of the, of the business and the services in such a way that we can maximize how much money we make.

And then ultimately spend more to acquire customers, hire better talent, et cetera, et cetera. And that's how we can scale it. 

Hala Taha: Okay. So let's talk about your value equation that you have in your book. You say there are four primary drivers of value. Can you break that down for us? 

Alex Hormozi: Yeah. How is it that liposuction is 50, 000 cause that promises weight loss and then an ebook on weight loss is five bucks and it promises the same thing.

And so if you think about this like a fraction, the [00:08:00] four, like, so just draw a line mentally. The first one is the dream outcome. The higher and the cooler, the dream outcome, the more valuable, the thing you sell is number one. Number two. Is the perceived likelihood of achievement. Now this is the last one I ended up coming up with when I was writing the book.

I was like, something's off here and I'll give you a clear example. So we'll use that liposuction thing. So imagine you've got a doctor who finishes medical school and the day after they finished medical school, they put up their shingle and they say, I'm doing liposuction. You've got another guy who's done 10, 000 surgery of this particular surgery.

Who are you willing to pay more for the same surgery? The guy who's done 10, 000. And I was like, what is that? That's perceived likelihood of achievement. It's risk factor. It's that when I pay this money, it's the likelihood that I'm actually going to get what I want. And even though, and this is a good one for everyone who's a service provider, the guy who's newer probably will take longer.

So he's spending more time with his patients than the experienced guy, but it doesn't matter because it's about the outcome and the perceived like that they achieve it. And that's why testimonials having guarantees, things like that can increase the perceived like of achievement. And if you add a [00:09:00] guarantee, you can in a very real way increase your price because people you have decreased their risk.

So you maximize the first two, which is going to be the dream outcome is something they really, really want and that you increase the perceived likelihood that they're actually going to achieve it. Now, the second half of the equation is the bottom side of the fraction. The goal here is to minimize these things.

And the first half of my career, I spent all my time on the top side, making bigger, bigger promises, lots and lots of testimonials. That was all I did. And I think that's a kind of a telltale sign of a newer market or newer entrepreneur, the businesses that are worth a fortune. They spent all of their time on the bottom side because the bottom side is usually the competitive mode.

Anyone can make promises and anyone can show testimonials and things like that. But what people can't do is the bottom, which are these two things. Number one is time, and the second one is effort and sacrifice. So time delay is the distance between when you buy and when you get, right? So if I were to swipe my credit card for a gym membership, it's going to take a long time for me to get the body that I probably want.

Why does liposuction cost more? Because it happens way faster. You can get someone to lose 50 pounds in basically [00:10:00] them going to sleep and waking up. Now, sure, there's pain, there's recovery, but it's still, they don't have to go to the gym, they don't have to change their diet, they don't have to sweat, they don't have to change their schedule, they can still drink margarita, like, they can do everything.

And then in a day later, they're gone. And the marketplace values that in a very real way. You have to arm wrestle someone to get them to sign up for a 29 a month gym membership, but people will fork over 40 grand for liposuction all day long. And so it's because of the time delay. And in a B2B example, to give a different one for your audience, if I were an agency and I had marketing services, two agencies have identical marketing services in terms of outcome.

But one of them, the moment you sign the contract, Your phone rings and it's a, it's a prospect. How much more valuable is that compared to the guy who's going to take 60 days to ramp up significantly more valuable. And so one of the easiest business strategies in the world is do what everyone else is doing.

It didn't do it in half the time, just easy way to provide value and win. The fourth one is, is effort and sacrifice. So they're two sides of the same coin. Effort is things that you have to start doing that you don't [00:11:00] want to do that you weren't doing before you signed up for the thing. And then sacrifice are things that you have to stop doing that you do want to do that you can't do as a result of buying the thing.

So effort would be, I have to show up to the gym. The sacrifice is I can't sleep in. And these are valuable because it helps you with the copy in terms of explaining it to somebody. Like the effort is that I have to eat chicken and broccoli. The sacrifice is I don't get taco Tuesdays. And so you have to give up, you have to make trades.

That people don't want to make as a result of the purchase. And so oftentimes, especially newer entrepreneurs, if you can't give away your services for free, like people won't say yes to you, which by the way, I recommend everybody get get your first 10 clients by servicing for free. But if people are not willing to work with you for free, it's because your price is not the most expensive thing that they are overcoming the money because there's additional costs and many of them are time, effort, and sacrifice.

And so with the agency example, If all of a sudden as a result of this purchase, you have to meet with me three times a week, You have to start recording creative and make ads and write copy and check in on campaigns with [00:12:00] me That's a lot of effort and sacrifice that I didn't have to do before versus, hey, pay us and your phone's going to start ringing.

We'll handle everything else significantly more valuable. And so in a real way, businesses that can minimize the effort and sacrifice that their bit that their customers go through and deliver the promise faster and do it in a way that the person feels like there's almost no risk, that they're definitely going to achieve it.

And it's something that they actually want becomes tremendously valuable. And so like the ultimate version of this is. All those things maxed out, which is the most amazing dream thing that I know without a doubt I'm going to get that happens instantly with no effort. And I think the moment we can click a button and then a six pack appears on our stomach, it would be an infinitely valuable thing.

And so I think a lot of entrepreneurship is just going towards that ideal. And then that is really, it shows us that we always have more that we can improve on. And if you look at Amazon, what have they done? They incorporate all those things. They have the dream outcome, so they'll show you, like the best Amazon sellers have little videos that'll demonstrate how to use the thing.

So they show you what the dream outcome looks like of what your experience is going to be. [00:13:00] You have the perceived likelihood, because you have all the, all the reviews, right, that are there, that you can see. You've got the time delay, which they've minimized with Prime. It shows up the same day and then effort and sacrifice.

You click a button, you don't have to type in any stuff, et cetera, et cetera. Right. It just, it's delivered. And so it's like all of the best businesses, Netflix, like they deliver the same experience as blockbuster. That's the dream outcome is watching the movie, the perceived likelihood that you can get what you want suggested by Netflix, they make it even easier.

The time delay is instant. You don't have to go anywhere in the effort and sacrifice. You click a button from your couch. And so the businesses that focus on the bottom side of the equation, create a competitive mode that make it very difficult for new entrants. And so that's where the enterprise value comes.

And I would say the latter half of my career has been focusing on the bottom half rather than the top. 

Hala Taha: 

Hala Taha: So when you're talking about dream outcome, a lot of entrepreneurs make the mistake of talking about features. And in this whole value occasion, you did not say anything about features or value proposition of your product. [00:14:00] So why is it important to not sell the plane ticket, but sell the vacation?

Alex Hormozi: So this is actually really interesting because I actually, I've gone even deeper in this. So to advanced people, it's actually a thing of language. So if I were to talk to an advanced business owner, I can explain features and they will already translate them into benefits for themselves because they are experienced beginners.

If you were selling to beginners or intermediates, you have to translate the feature into what it will do for them and what their experience will look like after they've used or the feature has been consumed. And so, Using the value equation will inform how you talk about your products. So it's like, here's the dream outcome, which you can describe to them.

Here's why you should feel like it's very low risk to make this purchase. Here's what you can expect from a time perspective. And then this is the effort and sacrifice that goes into it. If we can explain the benefits of what we're selling in using those four buckets, which I would highly encourage everyone to look through with those four check marks, if it's not doing one of those four things, you can probably cut it when you do it that way.

And then you dump it down to a third grade [00:15:00] reading level because half of America doesn't even read above a seventh grade reading level. You will get more people to buy. 

Hala Taha: Yeah. So another question that I have is that you use the word perceived and I was curious about that. So why is it perceived likelihood of achievement, perceived time delay, perceived effort?

Alex Hormozi: Because if you don't communicate it, it doesn't matter. They will not perceive the benefit because all that matters is their perception. Cause everybody's reality is, you know, whatever, I'm not even getting into that. But like the point is, is like they will not buy something they do not perceive as a benefit.

And so the point of underlining their perception is that if we do not communicate it, they will not perceive it and they will not value it, which means you don't get paid for it. So if you do not communicate it, you ain't getting money for it. And so that's why each of those four has to be communicated in such a way that they perceive the dream outcome the way they want it to be.

So I'll give you a quick example of this perception thing. So in the gym world, we would sell memberships. What's interesting is that we found out that if somebody said no, and we said, you know what? We just want to give you a nutrition [00:16:00] consultation for free. We want to have goodwill in the community, etc.

People would say, okay, fine. They'd come to the nutrition orientation, and people who said they could not afford the gym membership would buy 50 percent more supplements, and this is to a no. This is to a non close. Would buy 50 percent more supplements than the people who bought and it was because they wanted the dream outcome But they wanted it their way.

They wanted a different vehicle So we want to solve the problem a but we want to solve it the way they want it to be solved 

Hala Taha: Yeah, 

Alex Hormozi: and so for each of these things we have to communicate that thing Otherwise, they're not gonna they're not gonna perceive the benefit or pass 

Hala Taha: amazing Okay So i'm going to skip over a few parts because there's some really important things that I want to talk about I'd love to understand what makes a good market for your offer 

Alex Hormozi: In the book, I break down four factors.

So you've got the first thing is you want to make sure that the people actually want what you have. All right. So typically I express that as pain. They're in some sort of pain. There's, they're suffering some some problem that they want to solve. And the bigger the problem that you solve, the more money you make, you make for it.

Right? So number one is that they're in pain. Number two is you want the marketplace to be [00:17:00] growing rather than shrinking, right? Because if you're going to do the same work, you might as well have something pushing behind you. The third one is you want them to have the spending power. Because the worst thing in the world is like, you've got a market that's growing.

There's a painful problem that you want to solve and that you have the ability to solve. But then they ain't got no money. A friend of mine had a resume business, right? He wanted to like help coach people on their resumes and whatnot. That's And, uh, he called me up one day. He's like, this is brilliant.

gonna make all this money. And it turned out, he was like, dude, they're all broke. They're all in unemployment. Now you could make the argument that helping people with a resume inherently is not bad, but he had picked the wrong market to serve. If he had helped corporate executives get raises, you probably would have made a lot more money, but he was picking unemployed people to help them get a job rather than helping people get a better job.

Hala Taha: Yeah. 

Alex Hormozi: Tiny difference. The lever on how much money you can make serving different audiences is. Is the name of the game. The reason many of the fortune 500 companies are enterprise, like Salesforce, like their enterprise, well, they've, they've gone down market now, but like they built [00:18:00] their, their value on the fact that they serve very expensive customers, million dollar, 2 million, 10 million a year contracts.

It's because you get to charge based on the value of their business, not yours. And that's one of the beautiful things about this. Let's say you have a CRO agency. So conversion rate optimization agency. And you go to an e commerce store and you say, I can optimize your site and get you 10 percent more conversions.

Okay, cool. So if I'm making a million dollars a year as the commerce store owner, CRO happens, I make 1. 1. Fantastic. If I go to the same, same type of business e commerce and they're doing a hundred million a year and I do 10%, they make 10 million a year. Same work. And I make them 10 million versus 100, 000.

Which one do you think I can charge more? The 100 million one. I could probably ask for 2. 5 million of the 10 million that I make them. Probably. 

Hala Taha: Yeah. 

Alex Hormozi: I could probably negotiate that in if it was only on the gain. And so many times the amount of money we make is partially due to the value that we provide, but a big part of it is the market.

And the market I actually put before I put the value of the offer itself, because I think it's [00:19:00] actually an even bigger determinant. So a different example would be like COVID with toilet paper. Yeah. If you were selling toilet paper during COVID, it didn't matter what your offer was. The supply demand curve was so strongly in your favor that you could sell for whatever you wanted.

You're going to sell out. And so the idea is to try and align those four things. You want a market that is actually in pain, right? We're not trying to sell ice to Eskimos. Not actually. You want them to be growing. A friend of mine was in the newspaper business. And so he had an amazing offer. He would actually do a rev share based on only revenue that he would bring newspapers.

And he was eating up market share. The problem is the market was shrinking at a compounding rate of 25 percent a year. So from year one to year eight, it had already gone to like 5 percent of the original market size. It really was, even though he was quote, gaining market share, he couldn't grow the business.

And he kept looking at all these things. I was like, dude, you're selling to newspapers. Like literally, I couldn't make this up. Like you're selling to newspapers. So you couldn't grow. And many of us are, it's an extreme example, but many of us are pursuing newspaper type businesses. We're selling to people that the marketplace is closing down.[00:20:00] 

Those are the variables that we look at within the marketplace. And so the famous example is the, uh, the marketing professor who's talking to his class and says, okay, if you have one strategic advantage for your hot dog stand, what would you have? And everybody in this, you know, it's like better hot dogs, better sauces, lower prices, better location, whatever it is.

And so like, after it all dies down, he's like a starving crowd. If you're out right in front of the bar at 2 a. m. You're out of hot dogs. If you're out in front of the stadium and you're the only hot dog stand there because everybody else is in their brick and mortar locations and you can wheel your cart up front, you're going to sell out.

It doesn't matter how shit your hot dogs are. My point is not to say that you should make shit hot dogs. You'll sell even more because if the next time the game gets out and your hot dog was good, they'll come back. That's the piece that people miss is that you can, anybody can sell one thing once, but the things that build the compounding.

Businesses are the fact that the product is so good that a they tell their friends and be they come back and that's the Unlocking that most people miss out on because in the beginning I'm gonna go on this tangent because I think it's important 

Hala Taha: it is 

Alex Hormozi: When you are a new business owner, you have to learn how to promote.

You gotta learn how to market, learn how to sell. And the [00:21:00] reason is not so that you can make money. The reason is so that you can get customers, you get customers so that you can learn how to fulfill on the product. What happens is you get a positive reinforces just like quitting the business. You get a positive reinforcements from learning how to market and sell.

And so then you think mistakenly, in my opinion, Oh, I should do more of this. But the thing is, is if you don't have a big percentage of your business, that's referral, your product is still not good enough yet. And so what happens is you get to a point where you cannot outsell your turn. And so the path from going to zero to like 10 million really fast is not the same as going from zero to a hundred million really fast because you build the business differently.

Because you build it knowing that you have to have a compounding vehicle. And for many people, the compounding vehicle is that the product you sell gets other people on their own to come back and bring you more customers because as you expand, so here's some facts about business. Number one, advertising will become more expensive over time.

Media always goes up in cost. Number one, number two, as you scale, infrastructure costs will increase. So how do you continue to scale? You have to have a compounding force [00:22:00] that is viral in the other direction. So as you go to colder and colder markets that you have to reach to advertise to that cost more and more money and you have higher and higher fixed cost of infrastructure, you only way you can continue to scale is that the customers that are buying in that cold market tell five other customers.

What happens is your revenue scales up, your profit decreases, and then eventually you have a break even point. And that's where many businesses go, because they're trying to build their ego by showing their top line, rather than building a business that has an amazing product. And so it's a race to show and brag to their friends about their revenue, rather than think on a, remember, 10 year or 20 year time horizon.

If you're looking like that, there is no rush to spending a year or 18 months getting the product right. One of my good buddies is a software designer, and he spent an entire year just trying to get his user experience right so that he could get the return customer to come back on their own without him having to do any reminders.

His company, his software company, is growing at 25 percent a month with no marketing. But like, most people would have the first [00:23:00] product, learn how to market and sell, and then try and sell more and more and more and more of that, shove it in the front door, but the churn at some point gets too high that you just have to sell more people to break even.

That's it. And then you have too much overhead because you had to hire all these people to sustain it and then you're fucked and that's what happens to a lot of businesses and they can't take the ego step back and say, you know what, we're going to cut down our marketing. We're going to cut down our advertising.

We're going to cut down our sales team. We're going to spend this year fixing the product. And then after that, it will. And what's crazy is when you do fix the product, the business will grow back on its own. And then you have the, the contribution margin from each new customer that you can go into colder markets can spend more money on acquisition in different channels because you make so much money per customer.

That is how you unlock the scale not being like a crazy, like there's a role for marketing. Don't be wrong. Obviously that's, That's what I teach. You have to get sequence right. People sell first and then don't stop and think, I'm only selling so that I can learn how to fix my product and make it amazing.

You have to get some people to buy for sure. But after that point, [00:24:00] that's not the point you hit the gas. That's where you actually pump the brake. Keep going. Marketing and sales on a slow burner, fix this, and if you fix this right, you will keep growing. And then at that point, you double down and you gas it.

Hala Taha: Can you talk to us about why it's important to minimize headspace and focus on the vehicle that gives us the most return? 

Alex Hormozi: So if you think about progress in anything, you have volume of activity times leverage equals output in any system. So how many times you do something.

Times how much you get for each time you do it equals what you get overall. And so the first thing that people need to do is maximize their activity. So if you're lazy, you procrastinate, et cetera, you have to get over that first. So you got to do something. Once you start doing stuff, you very quickly maximize your, your time.

Like you start working 16 hours a day. Basically you sleep and you work, right? But then how is it that some people can work 16 hours a day and other people can work 16 hours a day and the person, person two makes 1000 times more than person one. Well, it's because of the second [00:25:00] piece, which is leverage.

And so a lot of times people think they need to do more things rather than doing more of the one thing. And you get your outsized returns by getting better, not by necessarily even doing more. And so what I mean by that is like, so leverage is defined by the difference between inputs and outputs in a system.

And so that means that if I put one input and I get more output, I have high leverage. If I put a lot of input and little input, little output, then I have low leverage. And so a high leverage activity gives you more for what you put in. The thing is, is that activity is limited with time, right? Time, focus, energy, et cetera, but leverage is not.

And so the idea is if we can pursue higher leverage opportunities, things that get us more for our time, then we will make significantly more and very quickly outpace the activity, which is why someone like Like I probably work less now in absolute time. I probably still work 10, 12 hours a day, but like I'm not working 16 and I still make significantly more because the leverage multiplier is so high and I work this much because I enjoy it.

I could work less. I just like working. What else would I do? And so from a focus standpoint, you're competing [00:26:00] against people who are focused. And so I think it's very prideful to think that you split between your quote for businesses. So you can have four businesses on your LinkedIn. Like when I see somebody who CEO for businesses, I just assume that they don't make any money because Zuckerberg didn't have side hustles.

Hala Taha: Yeah. 

Alex Hormozi: And so a lot of times people like, there's a fallacy for newer entrepreneurs, which is that like I'm going to try four things and see which one hits. But the reality is that all four of them could hit, but none of them will hit if you try to do all four. 

Hala Taha: Yeah. 

Alex Hormozi: And so I think most times you have to reconcile the fact that like you just need to focus on one thing.

And most times people will just not confront the hard thing because like there is a reason your one business is not working. Solve that problem. I'm a big advocate of the theory of constraints, which is a business will grow to the constraint of the system and then no longer. And so anything you do to a business that is not de bottlenecking the constraint adds potential to the system, but not throughput.

And so it's like reinforcing a bridge that has one loose brick and reinforcing the backside because you add potential to it. You add all these bells and whistles and all this other stuff, but [00:27:00] you're not confronting the one loose brick, which is limiting your throughput. And so our whole theory at acquisition. com is it's like, find the constraint, fix the constraint, let it grow. And then until it gets constrained, we don't change it. And then it will get constrained. Again, we will identify the constraint. A lot of it comes down to properly identifying the constraint because some people think they have a leads problem when the reality is that their product sucks.

And that's especially with newer entrepreneurs, like my stuff's so good. If people just knew about it, well, it's like, well, do you have customers like, well, yeah, I have customers. It's like, well, people do know about it and they don't tell their friends. So why don't we solve that problem? 

Hala Taha: Yeah. It's really interesting because I feel like a lot of people, they don't spend enough time on their goals.

To your point, they're going from shiny object to shiny object to shiny object and then they never get to. really good at something to be exceptional and become super, super successful. I'd love to understand how that focus enabled you to believe in yourself more. 

Alex Hormozi: So I'm not a big believer in affirmations and things like that.

I think a lot of people are like, fake it till you make it and that kind of thing. And I think that there's a lot of [00:28:00] like chest beating to try and posture. I personally, that doesn't work for me because what, what that makes me feel like is a liar and I have no power when I feel like I am when my foundation is sand.

And so if I am not confident about something is my belief that it is because I do not have evidence that I should be good. And so it's like, if I want to say that I am good at sales, well, I could claim to be good at sales, but wouldn't it be so much better to just have a thousand closed deals and say, I think it would be reasonable to say that I'm good at sales.

Right? Like, I just have evidence. And then that way I don't need to have it. I don't need to have bravado. I just have fact. And then it makes it much less postury. It's like, this is just what it is. And so like when our portfolio is 200 million a year, that's just what it is. And so some people would say that if we just look by percentages, like we do more than the vast majority of people, are we the best?

Absolutely not. But we're pretty good. And so we have evidence and it just makes it for me, much more black and white. And it also gives me something to focus on, which I think is the real benefit of this. Is that [00:29:00] people were trying to trick their mindset when really they just need to change their circumstances.

They need to give themselves evidence to why they are good. That is a workable equation. You just do more. And you get better and all of all the best returns in life come from the diminishing returns at the end. So i'll give you a quick example for everyone's listening. So like if you sprint a lot, right?

If you're a sprinter and you go to the olympics the difference between the first place olympics and the fourth place olympics It's like a tenth of a second or whatever it is, but the real difference in real life outcome between gold And not on the pedestal is everything. And so what happens is that when people spread themselves thing, they never give themselves the opportunity to get the outsized returns that happened at the end.

Being the best salesman in the world compared to being a top 10 percent salesman in the world. The difference in income between those two things is probably 50 million a year. 

Hala Taha: Yeah. 

Alex Hormozi: Just that last bit. And so it's like that the difference between a thousand reps and 10, 000 reps, diminishing marginal returns, you get less for the next 9, [00:30:00] 000 than you did for the first thousand in actual ability.

But the real world difference between your 10, 000th rep and your thousandth rep is such a degree of expertise that your value in the marketplace skyrockets. And that's the thing that people don't allow themselves to unlock. They keep pursuing new rather than pursuing better. And when you're a new entrepreneur, here's the human behavior behind this.

You get reinforced for changing path. You were in corporate, you go to a job, you get positive reinforcement. You get some freedom. You might make more money, whatever it is. Positive reinforcement. And so you learn a lesson, that's the wrong lesson. You learn that changing is the key to entrepreneurship, but you only have to change once, which is you have to quit the thing to start the next thing.

And then after that you have to unlearn the character trait that got you there and learn a new trait, which is discipline and focus, and then keep doing this new path for an extended period of time. So much so that it would be unreasonable that you would suck. And at that point people ask you how you did it.

Hala Taha: So good. I would advise everybody to rewind that part of this show back. [00:31:00] So the last way that we end this show, what is one actionable thing that our young improfiters can do today to become more profiting tomorrow? 

Alex Hormozi: Uh, cut all the side things and focus on one. 

Hala Taha: Okay. And what is your secret to profiting in life, Alex?

Alex Hormozi: Focus. So one of my favorite sayings is if it's worth doing, it's worth doing right. And I think it's a very deep saying because Most people focus on the doing right part, but I think more people need to focus on if it's worth doing and Many people do many things that are not worth doing and so they do many things that are not worth doing and in so Doing do them poorly because they do too many things I just don't think many people can you can't do a lot of stuff like strategy Is how you allocate limited resources against unlimited opportunities.

And so it's literally a process of saying no, because compared to the options of life resources, we have in time and money are so limited comparatively that we just have to say no 99 percent of the time, 99. 99 percent of the time, but that's a [00:32:00] muscle you have to learn. And so like, if you just did one thing and I'll just tell this quick story that I think we'll bring it home.

I was talking to a business owner the other day who had like four or five things. And I said, how easy would it be for you to grow? I was like, which one's your best one? He's like, this is the one that takes me the least amount of effort that makes me the most money. I was like, okay, if you cut out all the other ones, how easy would it be to grow that business?

He was like, oh my God, I could grow it in my sleep. I was like, then why aren't you doing that? He said he didn't sleep for like three days thinking about it. And then he shut down all the other businesses and then he did it. A lot of the progress we have is on the other side. A very hard decisions are very hard conversations that we've been putting off.

And so I think if you can confront those things, you can cut down and narrow your focus and then make it unreasonable that you would lose on a long enough time horizon. If you do this one thing more than anyone else has done it, you will be better than anyone else has been at it. 

Hala Taha: Amazing. Thank you so much for your time, Alex.

I absolutely enjoyed the conversation. 

Alex Hormozi: Appreciate you. Thank you so much for having me. Very honored to be here. Thank you again.

Hala Taha: [00:33:00]