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Achieving financial success and wealth

7 min read

From: alexhormozi

The path to financial success and significant wealth is often misunderstood, focusing on effort and time rather than more effective strategies. One speaker, who in his 20s earned more in a year than the combined CEOs of McDonald’s, Ikea, Ford, Motorola, and Yahoo, accumulated 100 million by that age [00:00:04], [00:00:21], [00:00:26]. This success is attributed to a specific understanding of “work” and a disciplined approach to wealth creation.

Redefining “Work” for Financial Success

Traditional definitions of “work” often fall short for knowledge workers, focusing on force times distance or simply inputs of time [00:02:30], [00:02:42]. Many people work long hours, but this doesn’t automatically equate to higher output [00:02:52], [00:03:11]. The speaker proposes a different definition:

Working “faster” then becomes “output per minute of time” [00:04:28]. The objective measure of the “hardest working man in the world” can be determined by who generates the most output divided by time [00:05:05]. For example, Warren Buffett took home $500 million in dividends from Coca-Cola in one year, spending less time working on the company than its CEO, but achieving more output through his ownership and leverage [00:06:52], [00:07:01].

The game is rigged towards leverage. If you want to outwork your competition, you should out-leverage them [00:07:14], [00:07:18].

Examples of increasing leverage for the same volume of activity include:

Leverage is the difference between what you put in and what you get out [00:10:51]. To make more money, you need to trade your time for more output, which means gaining more leverage [00:11:06], [00:11:08].

How Not to Get Leverage: Pitfalls that Keep You Poor

Many individuals unknowingly engage in behaviors that prevent them from gaining leverage and achieving financial success.

Uninformed Optimism and the Cycle of Failure

The “Stages of Change” or “Stages of Transition” model illustrates a common cycle:

  1. Uninformed Optimism: Hearing about someone else’s success and feeling motivated to switch opportunities, without understanding the full scope of challenges involved [00:12:12], [00:12:28].
  2. Informed Pessimism: Realizing the true difficulty and effort required for the new venture [00:13:03].
  3. Crisis of Meaning (Valley of Despair): Experiencing prolonged difficulty and zero returns, leading to a desire to change goals or give up [00:13:17], [00:13:33].
    • At this stage, most people revert to uninformed optimism, jumping to another “cool” opportunity, perpetuating a cycle of starting over without learning [00:14:04], [00:14:21]. Unlike video games where you restart quickly, in entrepreneurship, restarting means losing years [00:14:31], [00:14:38].
  4. Informed Optimism: Persisting through the crisis and figuring out specific solutions that begin to yield results [00:15:07], [00:15:28].
  5. Achievement: Reaching success, which then attracts others to try what you did, restarting their cycle of uninformed optimism [00:15:31], [00:15:33].

The grass is not greener. Every business has challenges. New information encountered should be seen as becoming "more informed," not a reason to quit [00:16:17], [00:16:33].

The Danger of Diversification and “Shiny Object Syndrome”

Trying to do many different things at once, especially when small, is counterproductive [00:17:53]. The “money you’re leaving on the table” by not pursuing multiple ventures is actually the focus you’re not giving to the one thing that matters most [00:18:18].

  • Case Study: The Roofing Contractor A friend with a small roofing business also pursued general contracting and house flipping, believing he shouldn’t “leave money on the table” [00:17:18], [00:17:26]. The speaker advised him to pick one and focus, citing Diane Hendricks, the wealthiest self-made woman in the US, who built her fortune primarily through a roofing supply company [00:18:02], [00:18:31].
  • The “Magic Wand” Story: Imagine a magic wand that eliminates all side projects except the one with the most opportunity. This exercise reveals how much easier it would be to grow that single venture [00:23:51], [00:24:13]. Often, the barrier to this focus is avoiding “hard conversations” or ego [00:24:41], [00:24:45].
  • The Woman in the Red Dress: This metaphor from The Matrix represents attractive distractions. The ability to say “no” to these opportunities, even increasingly seductive ones as your success grows, is crucial [00:25:05], [00:25:10]. These distractions can spread you thin, creating chaos and preventing real progress [00:27:04], [00:27:11].

Patience is not the absence of impatience, but acting in alignment with long-term goals despite feeling impatient [00:28:27], [00:28:44]. Similarly, character traits like courage or loyalty are built by acting despite contrary feelings, not by the absence of those feelings [00:28:34], [00:28:50].

Why “Better is Leverage”

Focusing on doing things better is the key to creating leverage and driving growth [00:30:00], [00:30:09]. If you do something better, you get more for the same input [00:30:20].

"Better comes from boring." [00:31:29], [00:31:31].

Many entrepreneurs were rewarded for “quitting” an uncomfortable job, leading them to believe that quitting is a path to reward. This “unlearning” is critical for sustained success [00:31:01], [00:31:25].

The “boring” work that creates “better” includes:

Most people already know what they need to do in their business but avoid it for more "stimulating" activities [00:32:10], [00:32:27].

The Power of Focus and Compounding

To build something “epic,” you must do the same thing for an extended period [00:26:50]. If your current “vehicle” does not compound with time, you should change it [00:31:30], [00:31:33].

The speaker’s personal experience highlights the impact of focus: After having nine “businesses” that made no money, he sold five gyms and shut down two agencies based on his wife’s advice to focus on the single most profitable venture (Jim Launch) [00:36:02], [00:36:26]. Twelve months later, that one business was doing 4.5 million a month [00:37:03], [00:37:11].

To achieve financial success:

  • Do one thing for a very long period of time [00:21:06].
  • Get help from others and learn from their mistakes [00:21:08].
  • Only make a mistake one time [00:21:13].
  • Always grow and challenge your beliefs by asking: “What do I believe to be true that is not?” [00:21:16].
  • Ordinary business done for extraordinary time creates extraordinary results [00:21:24].

The Self-Coach Mental Model

A powerful mental model is to ask yourself: “If I were coaching me right now, what would I tell myself to do?” [00:34:41], [00:34:58]. Your self-coach has all the information and no other agenda than to help you [00:34:49]. Often, the advice you’d give yourself is exactly what you should be doing but aren’t [00:35:02].

The Cost of Shortcuts

Many businesses fail because they prioritize speed and shortcuts over building a solid foundation [00:38:14]. They market an inferior product heavily, leading to negative word-of-mouth that makes advertising more expensive and growth unsustainable [00:38:43], [00:39:14]. Long-term success comes from taking the time to make the product or service truly “better,” even if it means breaking even or losing money initially [00:40:01].

Doing the "unsexy" work you know you should be doing, focusing on one thing for a long time without distraction, is the secret to success [00:41:53], [00:41:59]. This disciplined commitment to activities, regardless of immediate outcomes, forges who you are and leads to disproportionate results [00:43:00], [00:43:15].

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