From: alexhormozi
Many entrepreneurs never reach the highest echelons of business success, with 90% of businesses never hitting a million dollars in annual sales, and only 0.4% (1 in 250) achieving $10 million or more [00:00:30]. Success, however, leaves clues, and it often hinges on two major categories: the entrepreneur themselves and the opportunity vehicle they pursue [01:00:00].
The Entrepreneur: Skills and Beliefs
A successful entrepreneur is fundamentally defined by their skills and beliefs [01:31:00]. Character traits, often considered separate, can actually be broken down into specific, trainable skills [01:37:00]. For instance, patience is a collection of smaller skills that can be learned and improved [01:44:00].
Hard skills are those easy to measure, while soft skills are simply harder to quantify, but both are 100% trainable [01:59:00]. For example, “people skills” can be broken down into specific actions like smiling when someone walks in or greeting them by name [02:11:00]. Mastering these skills is crucial for gaining influence within an organization [02:44:00].
Overcoming Limiting Beliefs
The other critical component for an entrepreneur is having beliefs that do not limit their potential [02:59:00]. Often, our beliefs, especially those we never question, are the biggest barriers to achievement. These “unknown unknowns” are the most powerful to overcome [03:54:00].
A compelling example is a high-level CrossFit competitor who built an excellent fitness app but refused to market it. His limiting belief was that unless he was the absolute winner, he didn’t deserve to have an app [04:18:00]. Once convinced to make just one post, he doubled his revenue from 100,000 a month, simply by shifting his belief [04:46:00]. He already possessed the skills and the product; the only barrier was his belief [04:56:00].
For the speaker, a pivotal shift came when advised to move from owning gyms (a “level two opportunity”) to teaching his methods (a “level 10 skill set”) [07:01:01]. This was an “unknown unknown” – he didn’t know licensing or B2B national models were possible, preventing him from even seeing the skills he needed to acquire [07:26:00].
Leverage: Maximizing Input for Output
Leverage is defined as the difference between what you put in and what you get out [11:10:00]. Acquiring skills directly increases leverage; a skilled cold caller, for instance, might get 10 times more appointments than a novice for the same 100 calls [11:39:00]. Being a skilled entrepreneur means mastering hundreds of smaller skills to prioritize effectively [11:51:00].
As Warren Buffett famously said, “It’s not about how hard you row, it’s about what boat you’re in” [12:36:00]. This highlights the importance of the opportunity vehicle, or “lever,” you choose [12:38:00].
The Four Types of Leverage
Inspired by Naval Ravikant, the speaker identifies four types of leverage, categorized as “C”s [13:37:00]:
- Collaboration: Other people working for you [13:46:00]. (e.g., managing a salesman instead of selling yourself)
- Capital: Investing other people’s money to generate returns [13:50:00]. (e.g., raising a billion dollars and earning a percentage of the gains)
- Code: Building software that can be used by millions of people after being built once [14:15:00].
- Content: Creating content (like a podcast episode) that can be consumed by millions multiple times [14:22:00].
You don’t need all four types of leverage; maximizing even one can lead to immense success [15:37:00].
Personal Journey of Increasing Leverage
The speaker’s career trajectory illustrates how increasing leverage translates to higher income:
- Employee: Made four figures a month [16:24:00].
- Self-employed: Gained control over his own time, moving to five figures a month [16:27:00].
- Employing others (Gyms & Turnarounds): First level of leverage (collaboration), reaching six figures a month [16:40:00].
- Licensing: Leveraged content (created once, accessed by many), reaching seven figures a month [17:15:00].
- Acquisition.com: Added capital to collaboration and content, achieving eight figures a month [17:38:00].
The Cost of Ignorance Debt
The most expensive thing in business is the “unknown unknowns” [02:55:00]. The speaker recounts an anecdote where a woman earning 950,000 annually for “not knowing how to make a million dollars” [03:25:00].
This is “ignorance debt” [03:32:00] – the financial cost of not knowing how to earn more. The speaker applies this to his own current situation, stating he is “paying down ignorance debt” of $950 million a year for “not knowing how to make a billion” [03:49:00].
Investing in skills and education is key to paying down this debt [03:57:00]. Unlike other assets, education cannot be taxed, taken from you, or devalued, and it only gets better and compounds over time [03:49:00].
Strategy: Allocating Limited Resources
Strategy is about allocating limited resources (time and money) against unlimited options [03:07:00]. The goal is to prioritize investments that yield the most leverage [03:34:00].
“Can we do anything that gets us more than ten percent back?” — Alex Hormozi [03:57:00]
Investing 1,000 in an S&P 500 index might yield 10% annually, reaching 1,100 [03:15:00]. However, investing 40,000 to 1,000 investment yielded an extra $180,000 every year [03:31:00]. This demonstrates the vastly superior return on investment for education and skills.
How to Acquire Skills
A simple three-step process for skill acquisition is:
- Document: The person teaching you documents the skill [04:15:00].
- Demonstrate: They perform the skill in front of you [04:20:00].
- Duplicate: You perform the skill in front of them [04:25:00].
The crucial step is “duplicate” – you must take action and execute [04:37:00].
Getting Paid to Learn and Transitioning
Get Paid to Learn
The speaker advocates for having jobs, especially early on, to “get paid to learn” [04:53:00]. This might mean taking a pay cut to learn a valuable skill, effectively “going from earning to learning” [04:25:00]. The speaker did this personally, moving from a management consultant role to a personal trainer earning $14 an hour [04:31:00]. This requires humility and a willingness to “swallow your pride” [04:07:00].
Communicate your desire to learn new skills to prospective or current employers. A good business owner will support this investment in your human capital [04:47:00].
Transitioning to Entrepreneurship
Once you feel you have nothing left to learn in your current position, consider these steps to transition:
- Live Below Your Means to Stack Cash: Minimize personal expenses to build a financial buffer. This allows you to take calculated risks in business without jeopardizing your personal stability [04:21:00].
- Start a Side Hustle: Use accumulated cash to fund a side hustle. This should be viewed as a stepping stone to a main hustle, not just a source of extra income [04:51:00]. Service businesses are often recommended as they have low overhead [04:38:00].
- Match and Sustain Income: Continue the side hustle until it consistently matches your current income, and sustain that level for at least six months to account for volatility [04:49:00].
- Cut Bait and Go On Your Own: Once the side hustle proves stable, you can confidently transition to full-time entrepreneurship [04:55:00].
Don’t judge yourself or allow others to judge your side hustle [04:12:00]. Your willingness to “do your two days during the summer” while others are comfortable is what will eventually allow you to catch up and surpass them [04:51:00].
The Infinite Game of Business
Business is an infinite game, meaning there’s no end goal, only the point of continuing to play [05:27:00]. Most games worth playing, like health or marriage, are infinite [05:21:00]. The day you start playing is the day you win, and the day you stop is the day you lose [05:59:00].
Your identity should not be tied to your business [05:36:00]. The further you can separate your self-worth from the business’s worth, the better you’ll be able to make tough decisions and view it as an asset [05:46:00].
Instead of quitting an industry, consider switching roles within it, as many business functions are similar across different sectors [05:24:00]. In a micro-business, you’ll gain exposure to all roles, helping you identify your strengths and passions [05:52:00].
The ultimate goal is to keep learning and evolving your skill set. This continual investment in yourself is what allows you to increase your “baseline skill” and consistently achieve higher levels of income and success [05:40:00].