Role of skills and beliefs in entrepreneurial growth

From: alexhormozi

Only one in every 250 businesses surpasses $10millioninannualsales,meaning99$1 million in sales [00:00:31]. Success, however, leaves clues, and achieving high-revenue businesses depends on two major categories: the entrepreneur and the opportunity vehicle they pursue [00:00:57].

The Entrepreneur: Skills and Beliefs

A successful entrepreneur is one who maximizes “leverage,” which is the difference between what you put in and what you get out [00:01:08]. This means a high-leverage entrepreneur possesses numerous skills and holds beliefs that do not limit them [00:02:54].

The Power of Skills

Originally, entrepreneurial components were categorized as skills, character traits, and beliefs. However, this has been simplified to just skills and beliefs, as character traits can be viewed as collections of smaller, trainable skills [00:01:23]. For example, “patience” is a general term for many little skills that can be trained and improved [00:01:39].

The distinction between “soft skills” and “hard skills” is primarily about ease of measurement [00:01:56]. “Hard skills” are easy to measure, while “soft skills” are harder to measure, but both are 100% trainable [00:02:00]. For instance, “people skills” are a hundred micro-skills like smiling when someone walks in or greeting someone by their first name [00:02:12]. These “soft skills” are incredibly important for gaining influence within an organization [00:02:41].

Acquiring skills provides more leverage, meaning you get more for what you put in [00:11:45]. A skilled entrepreneur, who understands how to prioritize actions, is a “big bucket” for hundreds of smaller skills [00:11:51].

The Impact of Beliefs

Limiting beliefs often decrease an individual’s potential [00:03:05]. The most dangerous beliefs are the “unknown unknowns” – things you don’t even question because they are invisible to your lens of reality [00:03:31], [00:05:31].

“We question all of our beliefs except for those that we truly believe, and those we never think to question.” [00:03:25]

An example of a limiting belief is a high-level CrossFit competitor who built a fitness app but refused to market it because he believed he didn’t “deserve” to have an app unless he was the winner, not just top three or fourth place [00:04:11]. His belief, not a lack of skills or product quality, held him back [00:04:54]. Once convinced to make a single post, his revenue jumped from $20,000to$100,000 a month [00:04:46]. Unchaining an entrepreneur often involves identifying and addressing these reasons they give for why they can’t do something [00:05:08].

The Opportunity Vehicle: Leverage

Warren Buffett famously said, “It’s not about how hard you row, it’s about what boat you’re in” [00:12:36]. This highlights the importance of the opportunity vehicle or “leverage” in entrepreneurial success [00:12:40]. Leverage means getting more output for the same input [00:11:10].

Types of Leverage

Inspired by Naval Ravikant, there are four types of leverage:

• Collaboration: Other people working for you [00:14:46], [00:14:07]. This involves skills like recruiting, recognizing, onboarding, training, managing, and growing talent [00:21:25].
• Capital: Other people’s money invested on their behalf [00:14:10]. This requires skills in math, networking (to get rejected often but secure checks), legal understanding for fund structuring, and negotiation [00:21:44].
• Code: Building software once that millions can use repeatedly [00:14:15].
• Content: Creating content once (e.g., a podcast) that millions can consume [00:14:15]. For content creation, one needs to understand platforms, storytelling, and have credibility based on experience [00:22:21].

It’s possible to “max out” on just one of these leverage types to achieve significant success; you don’t necessarily need all four [00:15:37].

The Evolution of Leverage

The speaker illustrates his own career progression through increasing levels of leverage:

1. Employee: Started making four figures a month [00:16:19].
2. Self-Employed: Gained control over his time, moving to five figures a month [00:16:29].
3. Employing others (Collaboration): Started gyms and later a turnaround business, moving to six figures a month [00:16:40].
4. Licensing (Content): Transitioned to a licensing model by creating content once that many could access, reaching seven figures a month [00:17:15].
5. Capital: Added capital to his strategy (Acquisition.com), which involves buying into companies with existing collaboration and using content for attraction, reaching eight figures a month [00:17:38].

Switching to a higher-leverage vehicle can unlock immense value, even if it means starting from “zero” again [00:09:43]. However, sticking with a less leveraged vehicle for a long time can also lead to significant success, as seen with Panda Express, which has operated for 45 years and generated billions in revenue through collaboration and capital [00:20:42]. The key is that consistent effort over a long period can unlock “multipliers” on existing leverage [00:20:55].

Investing in Skills: Paying Down Ignorance Debt

The cost of not knowing how to achieve a higher income is quantifiable as “ignorance debt” [00:29:27]. For someone making $50,000ayear,thecostofnotknowinghowtomake$1 million is $950,000 per year [00:29:19]. Investing in skills is a way to pay down this debt [00:29:46].

Skills as the Best Investment

Investing in yourself, particularly in skills, yields a far greater return than traditional investments like the S&P 500 [00:31:55]. A $1,000investmentinasalestrainingcoursethatincreasesincomefrom$40,000 to $220,000annuallyprovidesanextra$180,000 every year, unlike a one-time stock return [00:33:23].

Skills are invaluable because:

• They cannot be taken away (by government, divorce, or lawsuits) [00:34:27].
• They cannot be taxed [00:35:22].
• They only get better over time and compound upon themselves [00:35:24]. For instance, learning sales and then lead generation can 5x the demand for your sales skills [00:35:31].

To achieve significant income growth, one must be willing to put in disproportionately higher inputs, especially when starting out [00:36:09]. As Kobe Bryant demonstrated, doing “two-a-days” when others do one compensates for natural talent deficiencies over the long term [00:36:38]. This emphasizes the importance of work ethic in skill acquisition and success.

Strategies for Entrepreneurial Success

Acquiring Skills

The process of skill transfer involves three steps:

1. Document: The teacher documents the skill [00:40:15].
2. Demonstrate: The teacher performs the skill in front of you [00:40:20].
3. Duplicate: You perform the skill in front of them, and then on your own [00:40:23].

A practical way to acquire skills is to “get paid to learn” through a job [00:40:47]. This may involve taking a lower-paying job to gain new expertise, as the speaker did by going from a management consultant to a personal trainer for $14 an hour [00:41:20]. An ideal employer will support your learning, either by providing opportunities or funding external training [00:42:33].

Transitioning to Entrepreneurship

To successfully transition into entrepreneurship and foster business growth:

1. Live below your needs: Keep personal expenses low to stack cash and allow the business to weather storms, enabling offensive moves and calculated risks [00:44:21]. This financial discipline is crucial for business stability and growth.
2. Start a side hustle: Use the stacked cash to start a side business with the intention of it becoming the main hustle [00:45:17]. The new venture should offer more leverage and eventually match or exceed your current income [00:46:08].
3. Sustain income for six months: Before cutting ties with your job, ensure the side hustle’s income is consistent, not just a one-off good month [00:46:27].
4. Cut bait: Once stable and consistent, fully commit to the entrepreneurial venture [00:46:55].

Industry experience is highly valued; Y Combinator, a prominent startup accelerator, prioritizes founders with direct experience in the industry they’re entering or who have personally experienced the problem they’re solving [00:26:57]. It’s generally better to make a “half-pivot” within the same industry rather than switching entirely, as making up years of experience is extremely difficult [00:27:16].

Cultivating an Infinite Game Mindset

For long-term entrepreneurial success, it’s crucial to adopt an “infinite game” mindset [00:50:04].

• Finite games: Have known players, agreed-upon rules, and a defined end/outcome (e.g., a quarter, a year, a goal) [00:50:33].
• Infinite games: Have known and unknown players, no agreed-upon rules, and the point is to keep the game going indefinitely (e.g., health, marriage, business itself) [00:50:42].

Many entrepreneurs approach business with a finite frame, leading to burnout and failure [00:50:49]. The goal is to find games you don’t want to quit [00:52:04]. It’s important to separate your identity and self-worth from the worth of your business, viewing the business as an asset that can create value and require hard decisions [00:49:46].

Often, people quit industries when they really just quit a function of a job [00:53:24]. All businesses, at higher levels, share core functions like marketing, sales, product, customer success, finance, and legal [00:53:05]. By staying in the same industry but switching roles or functions, you gain more experience and can identify what you enjoy most [00:53:48].

Identifying Foundational Skills for Budding Entrepreneurs

For budding entrepreneurs, learning how to sell is often the first crucial step to move beyond the sub-$1 million revenue category [00:55:57]. If you can’t sell, you can’t make money [00:56:01]. The ability to market and sell allows a high baseline income, ensuring financial stability regardless of external circumstances [00:55:10]. This highlights the importance of specialized skills in entrepreneurship for sustained growth and resilience.