Importance of skill acquisition

From: alexhormozi

Skills are invaluable assets that cannot be taken away by external factors like government, divorce, revolution, or financial crises [00:00:33], [00:09:05], [00:09:10]. For this reason, individuals who possess strong skills can rapidly recover from financial setbacks [00:09:13]. For example, the speaker recounts a time they lost everything, yet within the next month, they collected $110,000 in cash due to their existing skills [00:00:20], [00:00:26]. This highlights the importance of skill development and how it serves as a robust foundation for financial resilience and income generation [00:00:30].

Investing in Skills vs. Traditional Assets

When considering investment opportunities, a traditional choice might be purchasing a house. For instance, with $50,000savedfroma$60,000 annual income over five years, one could put 10% down on a $500,000 house, incurring a monthly mortgage liability [00:01:27], [00:01:31], [00:01:54], [00:02:02].

An alternative, often overlooked, is to use that same $50,000 to acquire a business [00:02:14], [00:02:23]. This strategy focuses on increasing one’s income-generating capacity through skill acquisition and its impact on income, particularly negotiation and business acumen [00:03:37].

Strategic Business Acquisition

The speaker proposes a method for acquiring a profitable business with minimal upfront capital:

1. Identify Potential Businesses: Look for businesses in your area, particularly those with motivated sellers who might be tired of the business [00:02:30], [00:11:54], [00:12:44]. Brokers can provide insights into price ranges, but direct negotiation avoids retail markups [00:02:36], [00:02:45].
2. Agree on Price, Then Terms: A crucial negotiation tactic involves first agreeing on the total price, then separately negotiating the payment terms [00:03:42], [00:03:50]. This allows for creative financing solutions.
3. Seller Financing: Negotiate for the seller to finance a significant portion (e.g., three-quarters) of the business purchase price over several years [00:04:10], [00:04:18]. This means you pay over time, reducing your immediate out-of-pocket expense [00:04:12].
4. Leverage for Remaining Portion: Secure a bank loan (e.g., SBA loan) for the remaining quarter, using your saved $50,000 as a down payment (e.g., 25% of the loan) [00:04:47], [00:04:52], [00:04:55].

By following this approach to learning, self-improvement, and mastering skills, an individual can transform their income significantly. For example, by acquiring a business generating $250,000inannualprofitforaninitial$50,000 investment (structured with seller financing and a loan), one can increase their income from $60,000to$250,000 [00:03:08], [00:03:30], [00:05:16], [00:05:37]. This massively accelerates financial progress compared to simply saving for a house [00:06:01].

Case Study: Gym Acquisition

The speaker provides a personal example of acquiring a gym with zero money out of pocket [00:08:03]. Previously, they had invested $40,000intheirfirstgymand$250,000 in a second, which made no more money [00:06:32], [00:06:52], [00:06:57]. However, with improved skills and experience, they acquired a fifth gym whose owner was motivated to sell due to personal crisis [00:07:10], [00:07:20].

• Agreement: The speaker agreed on a price of $40,000-$50,000 for the gym [00:07:39], [00:07:41].
• Terms: They negotiated to pay the full price over 12 months, putting no money down upfront [00:07:46], [00:07:55].
• Results: Within the first 30 days, the gym generated $51,000 in sales, effectively paying for itself [00:08:13], [00:08:20]. The gym became a cash-flowing asset, and 12 months later, it was sold for 1.5 times the purchase price, demonstrating how skills enabled acquiring an asset for “nothing” and generating significant profit [00:08:24], [00:08:38], [00:08:45], [00:08:49].

Mindset and Risk Aversion

People who have achieved wealth tend to be more risk-averse, focusing on investments that cannot go to zero and often acquiring assets for little to no upfront cost [00:09:38], [00:10:03], [00:10:31], [00:10:49]. They prioritize guaranteed small returns with no risk over potential huge returns with guaranteed risk [00:11:00], [00:11:04].

Conversely, those with less money often take higher risks with investments like lottery tickets, which have a high chance of going to zero [00:10:10], [00:10:15], [00:10:41]. This highlights the impact of mindset on skill acquisition and success.

Success requires patience and developing character traits that allow for careful decision-making [00:12:02], [00:12:04], [00:12:09]. While starting a business is appealing, seeking out existing businesses with motivated sellers offers a path to income generation with very little risk and often at a significantly lower cost [00:11:52], [00:11:58], [00:12:59]. This approach leverages the work ethic and patience to find unlisted opportunities [00:12:48], [00:12:53].