From: alexhormozi
The speaker achieved a $100 million net worth by age 31, a feat accomplished after losing all his money twice [00:00:00]. The transformation stemmed from adopting specific rules for making and keeping money [00:00:09]. These rules emphasize a fundamental shift in perspective towards time, money, and personal development, underpinned by a long-term commitment mindset [00:06:09].
Reconceptualizing Income: Return on Time
The concept of “passive income” is often misunderstood; instead, all income is a spectrum of activity relative to the time invested [00:00:35]. The critical metric is “return on time” or how much one makes per hour [00:00:51]. Initially, the speaker was obsessed with “quick, easy, low-effort money things,” leading to significant spending on ventures that required no time to make money [00:01:10]. This often meant neglecting active income streams [00:01:27].
To understand one’s true hourly rate, one can divide last year’s earnings by 2,000 (for a 40-hour work week) or 8,000 (for actual hours alive, or by dividing the 40-hour rate by four) [00:02:09]. This calculation provides a humbling perspective, guiding decisions on whether an activity is truly “worth my time” [00:02:31]. The shift in mindset involves investing money into active income to multiply its effectiveness, rather than solely seeking passive opportunities [00:02:40].
Financial Discipline: The “Buy It Twice” Rule
A core principle for managing money is: if you can’t buy something twice (or three, four, five times over), don’t buy it once [00:02:53]. This rule encourages calculating the time required to earn an item’s cost post-tax [00:03:07]. For example, a 6 per hour post-tax made the speaker realize he was “giving a third of my earning away for lunch every single day” [00:03:39].
Thinking about purchases in terms of “would I work a whole shift if someone just held up a shirt that I didn’t need” profoundly changed buying behavior [00:04:13]. While saving money doesn’t directly make money, it creates financial capacity to take on bigger risks that do lead to wealth [00:04:37]. This rule applies universally, whether buying a shirt as a teenager or a 1,000 item as an adult [00:04:50].
[00:05:27] “Whenever I had the well I’d rather just not work than do that thing then I was like I shouldn’t buy that thing.”
The Power of a Decade: Long-Term Vision
Most people overestimate what they can accomplish in a year and underestimate what they can accomplish in a decade [00:06:09]. Life-changing wealth can be built over a decade, often in less than 10 years for major companies [00:06:46]. This perspective encourages making “unreasonable” long-term bets that compound over time, making winning inevitable rather than a game of chance [00:07:23].
A common mistake is prioritizing immediate “actualized earning” over investing in potential earning [00:07:46]. For example, choosing a $100,000/year job now over a free internship that could 10x earning potential in three years [00:08:04]. The asset to invest in is oneself – time, experience, and skills [00:08:31]. In early stages with limited money, it’s better to invest in oneself (the “S&P 500”) than traditional market investments, as personal growth will always outperform the stock market [00:09:01].
Strategic Partnerships
One should only aim to get rich once [00:09:12]. This means not betting what you have and need for something you don’t have and don’t need [00:09:15]. Failed partnerships are a significant risk. A good partner must bring one of three things you lack, with clear contributions [00:10:08]:
- Money: Clear financial contribution [00:10:12].
- Experience: Clear contribution of expertise [00:10:16].
- Time and Energy: Clearly defined investment of effort [00:10:22].
Insecurity often leads to entering partnerships out of fear of doing it alone, which can result in significant losses [00:10:49].
Mastering Time Management for Wealth
The ability to manage money is directly linked to the ability to manage time [00:11:26]. Money is an “encapsulated version of time” [00:11:47]. The wealthiest individuals are those who learn how to best invest their time [00:11:38]. Regularly appraising how time is spent and making trades that yield more money is crucial [00:12:12].
[00:12:35] “The bad trades are the one that when you actually think about it in terms of what it costs you’d say I wouldn’t do the trade that’s a bad deal.”
The statement “you don’t have time” is often a lie, as most people have between 5-9 AM and 5-9 PM free daily, even with a 40-hour job or full-time studies [00:16:29]. Reframing comfort today as future discomfort can motivate individuals to utilize these hours [00:16:52]. Working not only makes money but also prevents spending [00:17:18]. Patience in investing means actively working to accumulate more money to invest, allowing that money to compound over time [00:17:33].
Financial Awareness and Personal Growth
Checking one’s bank account before social media is a powerful habit, especially if it causes anxiety [00:12:52]. “What gets measured gets managed” [00:13:30]. Awareness of financial reality leads to conscious and subconscious behavioral changes [00:13:58]. This consistent monitoring helps develop financial discipline and longterm planning [00:15:01].
It’s crucial to learn how to make money before trying to make money make money [00:15:11]. Young people often try to compound small sums like $1,000 with unrealistic returns, often losing it [00:15:16]. Instead, that money should be invested in actively improving skills that generate more income [00:15:49].
The Cost of Ignorance and Value of Knowledge
The biggest cost one incurs is ignorance [00:20:08]. The “cost of ignorance” is the difference between one’s current state and their goals; if one knew how to achieve their goals, that knowledge would bridge the gap [00:20:44]. Prioritizing “paying down ignorance” by investing in learning through relational capital, favors, or direct payment is essential [00:21:01].
There are two types of knowledge [00:24:05]:
- Declarative Knowledge: Learning about something (e.g., private equity exists) [00:24:19]. This often reveals “unknown unknowns” and is gained through access to networks and relationships [00:25:14].
- Procedural Knowledge: Learning how to do something (e.g., how to buy and sell a business) [00:24:22]. This is more predictable and involves clarifying steps to acquire specific skills [00:25:31].
The speaker paid significant sums to join rooms and learn from others, leveraging his skills (like sales) to barter for knowledge when he lacked money [00:22:19]. Treating favors with the same commitment as paid work ensures reciprocity [00:23:00].
Avoiding Status Symbols and Investing in Time
Material possessions like watches and luxury cars are often bought for “short-term status” at the expense of longterm wealth [00:28:04]. Wealthier individuals are not impressed by assets; they are impressed by effort and work [00:28:13]. The goal is to “buy time like a rich person, buy stuff like a poor person” [00:29:14]. This means outsourcing low-income time activities (like cleaning, grocery shopping) to free up high-income earning time [00:29:31].
By replacing 96 hours of draining work per month (like chores) for about 15/hour, it’s a logical decision to buy that time back [00:31:01]. This not only increases income but also allows for more skilled work and faster personal development [00:31:37].
Strategic Comparison and Future Focus
Who you compare yourself to, not who you spend most time with, is the highest predictor of your earnings [00:32:16]. Motivation stems from lacking something and desiring more [00:32:25]. Surrounding oneself (mentally or actually) with people achieving more creates that desire [00:32:42].
[00:33:17] “There will always be time to make money later.” - A poor mindset [00:33:23].
The “spend now, work later” mentality is the fundamental cause of poverty [00:33:41]. Sacrificing present comfort for future growth is crucial [00:34:22]. The speaker intentionally “underlied” (had less fun) but “overskilled” in his 20s, which led to current happiness and success [00:34:53]. Painful moments often define personal growth and become a source of purpose [00:35:28].
Automate Investing, Frictionize Spending
A core rule is to invest first, then spend the rest [00:36:47]. This means prioritizing future self over current self [00:37:20].
- Automate Investing: Set up automatic deductions from paychecks or use apps to segment funds into investment accounts [00:37:33]. As income grows, maintain a fixed spending amount and invest increasingly more [00:38:00]. This allows investing early in oneself [00:38:18].
- Create Friction for Spending: Make withdrawals manual (e.g., writing checks for rent, paying bills manually) [00:39:21]. Delete shopping apps, don’t save credit card information online [00:39:52]. The goal is to make it hard to spend and easy to save [00:40:01].
Thinking Bigger: The Million-Dollar Mindset
It’s often easier to make a million dollars than 100,000 income typically requires trading all of one’s time in traditional employment [00:41:01]. However, aiming for a million or ten million forces one to change their “solution set,” using different tools and acquiring higher-level skills [00:40:52]. This leads to achieving more in less time with more skill [00:41:30].
The Purpose of Money
Money itself is not good or bad; it is “potential energy,” or “bottled time” [00:42:41]. The “love of money” is often cited as the root of evil because an excessive desire for it can lead to unethical actions [00:42:02]. However, if one’s mission is to help the world, making money amplifies that ability [00:43:09].
To make money, three variables are key [00:43:27]:
- Value Created: The total value provided to others [00:43:32].
- Negotiation Ability: How much of that value one can capture [00:43:38].
- Uniqueness: How many others can create that same value [00:43:46].
Unique skills are often a “stack” of diverse experiences [00:44:29]. One’s unique life experiences and the time invested become a competitive advantage, a “moat” that others cannot easily replicate [00:44:42]. Time is a weapon if invested wisely [00:45:17].
[00:45:25] “Money loves speed. Wealth loves time. Poverty loves indecision.” [00:45:25]