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Explore entrepreneurship with Alex Hormozi's insights on the business lifecycle, overcoming fear, mastering sales, and building high-leverage businesses. Learn practical strategies for growth, hiring, and achieving peak performance.
Published February 13, 2025
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Alex Hormozi
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Interviewer: This is the entrepreneur life cycle, and there are six stages. Now, the vast majority of people get stuck under stage three. I've made some of the biggest career mistakes at this point, and you end up living the same six months for 20 straight years, suffering until you learn how to break free from it.
Interviewer: Alex Hormozi is the master of business strategy, an artist in scaling companies into the millions and a leading voice in how to craft your way to success. He's an entrepreneurial powerhouse. Whether you're starting out or want to go from 1 million to 10 million, there are certain behaviors and actions that will increase the likelihood of success that we're going to go through.
Interviewer: But here's the really hard truth that a lot of people don't like talking about. Entrepreneurs must be willing to make impossible choices, have the courage to be willing to be wrong, have shame by failing at things in front of people whose opinions they carry. And that fear keeps people stuck in a job and a life they don't want for years.
Interviewer: And that was my path. I had a white-collar job, a condo overlooking the city. Everything's according to plan. And I remember thinking, like, I didn't want to be alive because I was so afraid. But once you get over the fear, it unleashes this whole new realm of possibility of being able to do what you want. And that is when you can learn the real game of entrepreneurship, such as knowing that business ideas typically come from one of three Ps. And you only need one of those three.
Interviewee: We're about to hit 10 million subscribers on YouTube, which is our biggest milestone ever, thanks to all of you. And we want to have a massive party for the people that have worked on this show for years behind the scenes. So they said to me, Steve, for every new subscriber we get in the next 30 days, can $1 be given to our celebration fund for the entire team? And I've agreed to the bet. So if you want to say thank you to the team behind the scenes at Diary of a CEO, all you've got to do is hit the subscribe button. So actually, this is the first time I'm going to tell you not to subscribe because it might end up costing me an awful...
Interviewee: Alex, if someone's just clicked on this conversation and they're considering listening for the next couple of hours, based on everything that you do for the millions of entrepreneurs that follow you, that read your books, can you tell me exactly why you believe they should stay and listen and who should stay and listen?
Interviewee: At Acquisition.com, we scale businesses. The content that I generate, that we put out, conversations like this, helps people who are going from zero to one just getting off the ground to helping people go from one million to ten million to helping the entrepreneurs going from ten to a hundred either get there or exit along the way. And there are frameworks that cross all three of those that I consider both deep and wide that help any business navigate whatever strategic decision is in front of them to get the highest potential return for their time.
Interviewee: For the people that are at zero, what is it that they're typically coming to you to help them with? So if you were one of them, what is it that they want from Alex or Mozy?
Interviewee: I think it's there's what they think they want and what they actually need, which are two different things. And so I think what they think they want is some tactic that's going to immediately help them start a business. What they typically actually need is the courage to be willing to be wrong and to be willing to have shame by failing at things in front of people whose opinions they care about.
Interviewee: And I think that's... If I rewind the clock for me, it was probably one of the hardest things that I had to get over. And so I think that's why maybe my message resonates with a lot of people is because it was so hard for me to get over. And what's interesting is basically anybody who's listening, the harder it is for you to break free of whatever kind of mental prison you've made for yourself, whether that's real or just in your head, the more compelling your story will be when you break through it. Because it will resonate with even more people.
Interviewee: For the people that it was easy, that their story doesn't have a lot of... Like I was immediately an entrepreneur. Like I wasn't like that. I had a job when I was in high school. I had a job immediately out of college. Some people were like, I was selling lemonade out of the back of my thing when I was 13. I didn't do any of that. Like school failed me. I actually was pretty good at school. I didn't have any of those issues. You know what I mean? And so I had a pretty clear career path. And so I had what many would consider like... I had a real opportunity cost.
Interviewee: So I had a white collar job and I had a GMAT score above Harvard's Midscore. And so I had a really clear path of what my life could look like in the next 20, 30 years. And it was fairly well-defined. Like I'll go to Harvard or Stanford or one of the top business schools. And then I will either go back into management consulting, I'll go into investment banking, and then eventually end up in private equity. And that would be the path, right? And then all the flowers would be set at my feet. And, you know, everyone would say, we approve of you. You're an excellent person. But when I saw the people who were 20 years ahead of me, I really didn't want their life.
Interviewee: And then it started making me look at my life. And I was like, I don't even know if I really want my life. And so the big decisions that I've made in my life, unfortunately, have almost always come at the doorstep of apparent death. And I think maybe in some ways that makes me a coward for having needed death to make decisions. And so operationalizing that has been something that has helped me move faster to make decisions that I know I need to make but don't.
Interviewee: And so, like, the first big kind of, like, what felt like a death decision was I was a consultant, 22-ish years old. I had a paid-for, you know, condo that I bought overlooking the city. And I remember thinking, like, I really hope I don't wake up tomorrow. And that, and I don't mean that to be melodramatic. I just, I just, for a period of time, I just always just, like, hoped every night. I was like, I just really hope I don't wake up tomorrow. Like, I just don't want to do this.
Interviewee: And what was difficult about that was that at that time was when my father was most proud of me because I was doing everything that was according to plan. You know, he could talk about, like, his son, who graduated in three years from Vanderbilt, had the good job. Like, everything was, we're following the plan. And it was upon realizing that my ultimate expression of living out his dream was me feeling like I didn't want to be alive. And so in, and it took me time to get to that point to even articulate that. Because obviously you never want to kind of, like, admit failure of, like, I have really messed something up here. But I was living my life to win someone else's game.
Interviewee: And when I realized that, I realized that one of our dreams had to die, either his or mine. And when I realized that his dream must die in order for mine to live was a statement that I kind of crystallized when I was at that point in my life. Like, I had to keep repeating that. Like, his dream has to die in order for mine to live.
Interviewee: And so to put this in perspective of, like, how afraid of my father's judgment I was, I left the state and drove across the country halfway through before calling him to tell him that I was gone.
Interviewee: Like, I said, hey, I want to go pursue this fitness thing. He said, cool, come over for lunch. We'll talk about it. You know, and I was like, I'm already gone. And then obviously his tone changed a lot. And, you know, our relationship struggled for, you know, years after that.
Interviewer: And I also bring that up because sometimes there's this illusion that, like, you know, you get on the Oscar stage or whatever it is and you're like, hey, I just want to thank, you know, my mom, my dad, my friends for always supporting me. And I can't say that. And I wish I could. And you might not be able to say that either. And I also don't think that's a reason not to do it.
Interviewer: And so we did struggle for years after that to kind of like, because I was basically living as what was once his prodigal son goes and takes a minimum wage job as a personal trainer at a gym, like, you know, cleaning floors and stuff to learn, just to learn the gym business. But that was ultimately like how I broke free, literally, you know, physically leaving the area and, you know, mentally.
Interviewer: But I think that I had to accept that there was a timeline where my father would never talk to me again. And I had to be okay with that to pursue what I wanted.
Interviewer: And I think that when you asked the original question, what are the people from zero to one really looking for? I read tons of business books at that time, but I couldn't use any of them because I was so afraid.
Interviewer: And what's crazy is that, like, I think about it now in retrospect, and it's like, it's crazy how large the perceived monsters can appear. And Layla has this quote that I love, but it's, fear is a mile wide and inch deep. And so you look at it, and it looks like this ocean. And then you take the first step and you realize you don't drown because it's like, oh, there's ground underneath of this, right? There's other people who are more on my path. And the friends you lose, you gain new friends, right? And so that fear was the hardest decision that I've had to overcome in my entrepreneurial career.
Interviewer: And I think of all the split paths in my life, that was the one that if I had many timelines or many universes that existed, that was probably the one that is the most likely that I would not have parted from. So I think in like 90% of universes that Alex Ramose exists, I'm just a consultant somewhere.
Interviewer: So I would encourage you if you do feel that, you're not going to die. Like you won't die and you might just live.
Interviewee: It's so interesting because I think everything you've said is just absolutely spot on, but you're right in the way you say that if you'd asked an audience member listening now why they haven't started yet, they wouldn't say fear. They would say, I haven't got the X, I haven't got the Y, but actually it is such an emotional thing. And we don't talk about that enough because uncertainty is, humans seem to be allergic to uncertainty and they'd rather the certain misery of their current situation typically than uncertainty.
Interviewee: And I think, and I used what I consider a very non-palatable word of coward purposefully because no one wants to say they're afraid because if you say you're afraid, then it means you're a coward. And I think that it only means you're a coward if you allow that fear to change your behavior in an aversive way as in it not towards what you want.
Interviewee: And so, you know, the inverse of that, many people have heard it, courage is not acting without fear, but despite fear. And I think that when you act, when you allow fear to change your behavior the wrong way, that is when you can give yourself that title of coward. And I think that that is a title that I have feared my whole life. And that label is almost, I'm more afraid of that label than the label of failure. I'd rather be a failure than a coward.
Interviewee: Is there a framework for knowing when to quit? So I think there's the, there's like the math behind it. And the math I think is pretty straightforward. So like, when do you quit your business? I like, you've saved up three to six months of personal savings, number one. Number two is that you have started something because nowadays in the digital age, you can begin a business on the side that can generate income. And that income in the small amount of time that you're not working replaces or at least matches the existing income you have from your, your current job. And you've been able to do that or demonstrate that income for like three to six months. If you do that, that's a very like math way of approaching it. That also is basically never the reason that people aren't quitting their job. Like that's a really set, like I have, I have, I have backlog. I've matched my current income with my part-time work. And if I just put my full-time work, I would probably make more. Very reasonable, but never actually the reason that people don't do it.
Interviewee: I was, I was thinking about the two sort of reasons why someone might quit something or feel like they want to quit. And one of them is clearly because it's hard and that's obviously not reason enough to quit. And then there's another one which you were speaking to there, which is, it's not moving me towards a meaningful goal, irrespective of how hard it is. Like a marathon, you're raising money for a charity you care about. It's hard, but you don't quit. And then there's, maybe if you're running a marathon for no apparent reason, you know, there was no charity, there was no one watching, there was no like fitness benefit, then that's a good, I guess, moment to consider quitting.
Interviewee: My story mimics yours in a way that I didn't realize. I didn't realize you went through a similar thing in terms of the parents' disownment. Yeah. No real great option to flee to, but feeling like the current path that would have led me to be, I don't know, a business management student was significantly worse on balance than taking the risk. But I think maybe a point of distinction is it didn't, I was so naive that it didn't feel like a risk.
Interviewee: So what's really interesting about that is the guarantee. And so a lot of times we don't look at what I call the don't, which is like the alternate path. And so if I had played out my existing path, I had a guarantee of outcome I didn't want. It was just out of delay. Whereas here, there's a chance that I can make it. And so one of the final kind of frameworks for making the decision was guarantee bad, chance at good. And I was like, well, I might as well take a chance. And I strongly encourage thinking about playing it out.
Interviewee: And so what I mean by that is like I think fear exists in the vague, not in the specific. And so when you say I'm going to quit my job and then what if this doesn't work? I'm going to failure. Tons of fear. If I say I'm going to quit my job and then I'm going to try and start a business and if the business doesn't work, I'll probably have a compelling story that I could tell for business school if I wanted to to show that I had some entrepreneurial slant. In the meantime, I could use that experience plus my job experience to probably get another or maybe even better job in the meantime and match or supersede my existing income. And the actual loss would be maybe the savings that I had saved up.
Interviewee: But if I'm younger or I haven't made as much money as I want, then that's never been the amount of money that would be material anyways on the grand scheme of what I would like to make. And in terms of living situation, I will, worst case, go back to my parents' house with my tail between my legs or sleep at a friend's couch because I have enough people that would be willing to put me up in a garage if I had to. And so it's like, okay, so my actual worst case scenario is just like, I have a cool story and maybe some shame that is self-inflicted because it's not like no one else cares really. But it's self-inflicted shame and maybe a detour or a different story that I have to tell later on in my career. Not as much fear there, right? But like the first one, like I'll fail, everyone will hate me and I'll die.
Interviewee: The first one sounded like it was written by your like amygdala, like the fear center. And the second one was pure like prefrontal cortex. It was all logic.
Interviewee: And I think that's, I actually, so I think you nailed it and said it way better than I did. But I think that's, I think going from vague to specific basically disengages your amygdala because it can't reason the logic chain of causation and causality of what's going to happen next in a chain of events. And so when you get into the specific of it, all of a sudden you're like, okay, I'm not going to be homeless and then shamed and die. Um, I might live in inferior living conditions for a short period, which by the way, when you're later on in your life, you'll look back and think of as the good old days because I can't believe I was couch surfing. I was pursuing my dreams, right? It's, it's only like in the moment that it feels bad. When you look back, like even I find this hilarious, like, like how long after you do something embarrassing, is it funny, right? Like at some point for almost all of us with enough time, the shameful experience becomes funny. And so if it is going to become funny eventually, it might as well become funny now.
Interviewee: And so, I have built acquisition.com on basically two primary theses, which are in the logo, which is, this is a fulcrum for leverage.
Interviewee: So I would say business ideas typically come from one of three Ps. So it comes from a pain that you're currently experiencing, a past profession, so the thing that you just quit or some of the jobs that you just quit, or passion. So something that you're inherently interested in that you would spend your time doing anyways.
Interviewee: And pain is usually, I think, in some ways, sometimes one of the biggest drivers, it's like you had an eating allergy and you couldn't find pancakes that dealt with your specific eating allergy. And you bet that there's a decent amount of other people with that allergy that also like pancakes. And so then you make pancakes that are delicious and amazing that also cater to people with that food allergy. And then all of a sudden, like you have a business based on pain.
Interviewee: I think that deep knowledge of the prospect is paramount or very important for creating exceptional products. And you can either do that by doing a ton and ton of research or by being the prospect. And there's a certain amount of like visceral feel that you'll know. Like if someone wants to make a nose product for breathing, I have tried every product since I was in eighth grade. So it's been 20 plus years, 30, whatever, a lot of years that since then and I've tried everything. And so I know the pros and cons of every product that exists on the market. And I can tell, because and I've done, it's not like, oh, I tried it for a day. It's like, I'll try things for a month at a time. And so I have so much time exposure to this problem that I have a lot of nuance in my opinion on what's wrong with the solutions. So I can formulate a way better hypothesis on how to fix it.
Interviewee: I met the guy who invested in Regal Cinemas, which is probably the biggest chain in the U.S. And it was when it was, there was a guy who had just won theater and it became the obvious COVID has disrupted that business. But, you know, for 20 years or whatever, they crushed. And he said, it was so weird to say that, oh, cinemas are going to make a comeback because they'd kind of been on a downturn or something like that during the time that he was making the investment. And he said, the reason I decided to invest in it was because this guy knew everything about the business down to how much the cost of a kernel of popcorn was. And he just knew it so, like the back of his hand that he was like, this guy can't fail. Like he just knows too much about this business to not have it work.
Interviewee: So Bezos has this great framework where he talks about missionaries and mercenaries. And so it's kind of like you have the guy who says, okay, I looked at market trends and this is a growing category. And, you know, I surveyed people and this was the, you know, the result that came back. And so I believe that if we time this product right at this point in the market, we'll achieve huge, you know, mass adoption, blah, blah, blah, blah. And it's like logic in your way through. And to be fair, some people do, you know, do make it work. But the missionaries, the ones that end up making the most money because like they do it sure for the money because the business has to have some economic engine behind it. But really because they viscerally experienced this problem and don't want anyone else to deal with that problem either.
Interviewee: And so like if I were to tell that story like you were saying, like when I was in eighth grade was the first year that I started really noticing I couldn't breathe at night. And so I learned how to fall asleep with my hand on my face like this so that my nostril would so I could fall asleep and my hand would stay because you there's no actually other because you can't hold your because you fall asleep, right? And so if I fall asleep with my hand like this, right, like I'm on the cap and I fall asleep like that, it keeps my nostril open and I can fall asleep and it doesn't move. And so that's how I learned how to sleep for years before founding like just like simple nasal strips and things like that. But there's tons of problems with those solutions that exist right now that I won't get into. But maybe someday I'll make a nasal product.
Interviewee: But I think in some ways... So this is actually a really good meta concept here which is that if you want to be compelling, a demonstration or a model is always more compelling than anything else. And so me even going through that entire narrative is taking everyone else who's been listening to this on some journey and it's like if you want to make a compelling pitch for a business it's like we pretty much just kind of went through one. And so that's really what it comes down to which you're like well what do I do with my business? It's like create your narrative of why you're even doing this and if you can explain to somebody why they should care about this problem or more specifically why you care about this problem
Interviewee: What do you think the cheat code is then so I've got my idea what do you think the cheat code is in 2025? To win at the game of attention like there's got to be some new rules here because we've got AI we've got new platforms we've got new media?
Interviewee: You know I'll give you a hypothetical business idea I'm going to be a personal trainer and I pick that because everyone can do it and it's a saturated industry if I'm a personal trainer in the 2025 how should I be thinking about building attention?
Interviewee: So I'll tell you what I wouldn't do first which is I don't think I try and out science the science people because like unless you have some PhD there is a PhD guy who's already jacked who's making content and so he's more knowledgeable and more jacked than you so you're not going to win there and so I think in the game of attention it's trying to find what is unique right and so how do you quote stand out when everyone's loud and this is going to sound trite but
Interviewee: your fingerprint is unique literally from a biological perspective but so is your life and your experiences and so there's there's real alpha or or benefit to be had above normal level of effort by leaning into you and so what makes every person unique is what makes their content unique and so trying to be like oh I want to make content like Alex is probably not the best way to do it because you're not going to beat me at being me but you'll beat me at being you and so it's basically your flavor of media
Interviewee: So like for me it's like you know what is you know my brand to model this it's like well I have elements of philosophy that are in my brand well do I need that no but that's like kind of me I obviously talk a ton about business marketing and sales promotion conversion those are all things that I spend a lot of time thinking about and so a lot of my content's about that fitness is a component of my life and so there's light sprinkling of fitness in my content also I come from a background of fitness with gym launch and the companies that I owned before that and so that would make sense and my wife Layla and so that sprinkled in and so like those are basically the components of my life and so that's what kind of shines through in my content I consume a ton of comedy and so sometimes you'll see some dry humor and dark humor that shines through but that's me
Interviewee: But I think what makes the truly unique personal trainer fitness brand is leaning into people being interested in you for being you and then being like by the way I have fitness stuff if you want to buy it from me and I think the key part is the vast majority of products and services are commoditized there's you're not you're probably not going to be significantly better than other trainers just being real you probably aren't but you will be different than them and we want to lean on I want to buy fitness from somebody and so I might as well buy it from her or I might as well buy it from him so you're taking basically the audience that would buy from anyone but your brand premium gets them to want to buy it from you
Interviewee: and it's it is the winning strategy for 2025 and it's I think it's leaning into it and the thing is is that everything in you wants to not do that I'm not really sure why
Interviewee: but I was having a conversation with Layla I want to say two nights ago or three nights ago I got a bunch of flack for some ex posts that I made and she just looked at me and she was like never dilute yourself because I was like maybe I was like maybe I shouldn't talk about this stuff like maybe I should just like you know I'll just lean off and she was like never dilute yourself like there are so many more people who need that message than people who are hating that message and she was like and if you're actually going to make a difference in a lot of people's lives there's going to be an equal and opposing force of people who want to reject that
Interviewee: you said a second ago you're not sure why that is but by very definition of it being unique that means that there is no blueprint yeah there is no person that's come before you and proven that it works so the courage of being yourself there's only one Stephen Bartlett so if I'm truly myself it's never been done before that means that the risks are unknown the upside's also unknown
Interviewee: and it's important for me as someone that follows your work that actually I see consistency because I've established Alex Amosie's values and anything that diverts from that is actually less valuable because as you say it's more like everyone else than the things I've had before but it's also it wouldn't feel true anymore
Interviewee: you know what's really interesting is navigating the gray and so there are contradictory ideals and this is what I kind of come back to when I'm like worried about these types of things which is like you've got mercy and you've got justice they're somehow opposed and they are both ideals so how can we believe in justice and also believe in mercy at the same time and so and I mean there's you can have variety and consistency like there's there's tons of examples of this right
Interviewee: And so I think about branding in general as basically a mosaic that you get to create and so like each piece of content is a little tile that has a single color on it and if you just see one piece of short content of Stephen Bartlett you don't really have an idea who Stephen Bartlett is but if you see a thousand of them all of a sudden you zoom out and you get to see the whole picture and I think that the colors that are in those mosaics and the proportion of how many yellows how many reds how many greens and where are they is what ultimately creates the brand
Interviewee: and so I had to just be okay with the idea that like I will change my mind because I will get new information because let's take the alternative stance if I get new information do I just keep parroting what you did before this is also an issue with politics right is that like he's flippy floppy it's like so they're not allowed to learn yeah you've been in politics for 20 years like you haven't learned anything like no stances changed like I feel like we should be able to do that and obviously brands don't work that way so it has to be gradual over time which I think if you were always you at all times it will be gradual over time
Interviewee: I think a lot of the time we end up over focusing on unreasonable people which is a war we can never win anyway because you say that to me I think I think it was like I had this guy the therapist on my podcast who I then spoke to after the podcast and he basically broke it down to me he was like there's 20% of people that just absolutely love everything you will ever do like you could say anything they're just super fans there's 80% of people that are actually he said there's 60% of people that are really reasonable they don't speak they just watch they're like reasonable and then there's 20% of people with no matter what the fuck you do they're going to be don't spend your life focusing on the 20% the quiet majority the 60% they don't tweet they just chill and then the 20% they're your evangelists but I find myself
Interviewee: so no matter who you are you're going to be disliked period because no one's liked by everyone so if we can accept that as a premise no one's going to be liked by everyone you might as well be disliked for being you than being somebody else amen at the most basic level the being disliked is a fixed cost and I think to take the opposite perspective I think it is far better to be disliked for being who you are than love for someone you're not
Interviewee: and one of the great entrepreneurs I interviewed on the podcast said to me when it comes to marketing and branding and this sort of attention conversation we're having she said to me that in order to reach your 80% you have to piss off your 20% or at least be willing to piss off your 20% it was Jane Warrung who's the founder of Dermalogica global beauty brand with I think hundreds of thousands of people and she sat and said to get to your 80% you have to be willing to piss off no actually fuck she said to get to your 20% you have to be willing to piss off the 80%
Interviewee: and you have to say like I'm on this side did you see that Nike ad? dude I was just going to say that I was just going to say that yeah the Willem Dafoe ad like what's yours is mine and what's mine is mine just like it was actually the first time that I'd seen something from Nike in a long time that I was like this is what built this brand and I think they had lost their way for a while with like the wokeism and all that stuff and I think it's like Nike means victory which means people have to lose
Interviewee: oh very hiring question yeah I'll tell you why I ask this question because when I look at my portfolio early stage first founders never seem to understand the importance of hiring and people yeah
Interviewee: yeah so I'll start with one thing and then I'll answer the question so I was talking to a mentor of mine and he said when I was in my 20s it was all about the destination he said when I got to my 30s I realized it was all about the journey he said when I was in my 40s I realized it was about the company and I was like I can't wait till you're in your 50s it's like what's the next one right but I thought that was such a great like such a profound shift in terms of how he thought about his business success because he was like I don't need to be a, you know, a decabillionaire it's like I'm cool where I'm at and now I just want to do it with people that I like and so to the question about people overall I believe that the potential of an organization is directly correlated with the aggregate intellectual horsepower of everyone contained within it
Interviewee: and so if you are the smartest person in the business then and you can do everyone's job better than everyone in your company then it means that the limit of the business is purely based on one person's horsepower and one person's life experiences and that will be the cap and basically it doesn't matter how smart you are you can't live a hundred lifetimes like you can learn quickly sure there's some people who can learn faster than others but you're not going to be able to live a thousand lifetimes and so as a business grows more expertise is required
Interviewee: Keith Rabois from he's one of the original PayPal mafia guys has a really good analogy for this and he talks about it in terms of barrels and ammunition and he says so as soon as you get some product market fit the business starts to grow and you say okay we need to start shipping things faster and this works the same with a services business a physical products business software business the concept's the same and so what happens is you then hire a lot of people and you assume that your throughput is going to increase proportionally so we have 10 people we hire 50 we should 5x our output and then you quickly realize that that is not the case and so what happens is there are people who are rate limiters for an organization and those are the barrels so think about like a Civil War barrel you know old cannon and you've got these cannonballs next to it he said most people are ammunition and so you bring more ammunition but you're still going to be limited by the one barrel capacity of how many shots can get taken by the barrel and so you need to find more barrels so you have to go from one barrel to two barrels two barrels to three barrels and that becomes an increase in capacity or throughput for the organization and there are very few of those in a different I can't remember the law but it's some organizational law but the square root of the number of people in a company generate 50% of the work so you have 100 people in an organization 10 people are responsible for 50% of the value that's created facts right anybody who's been in like you're like like preach and so the thing is is I think the real game of entrepreneurship is that your standards rise over time
Interviewee: And so say that again so if you have functions across an organization there are people who are going to drive results within that function and the first time you hire a salesperson for example you don't know what you're looking for and so you just hire a human who says they can sell and maybe they can maybe they can't and then you cycle you try to train them that doesn't work does work whatever and then finally let's say you cycle through three sales guys and finally you find a killer and then you have this pattern recognition you're like okay that's what I'm looking for and then all of a sudden you try and approximate that person or that archetype as much as you can and so when you start your second company you're like oh I can quickly staff up sales because I know what I'm looking for but then you're like shoot I've never really nailed sales manager yet and so then you cycle through you start you start whacking away at the boss and then you have to end up firing the boss at level because you're like oh god this didn't work and then six months are gone because you had to find them recruit them hire them train them and then find out they sucked and then start over again and maybe it takes 18 months to really find the right sales manager and then you're like okay I know what that looks like but I still don't have a director of marketing what does that look like and so it's basically developing this pattern recognition across all functions of the business so that you know what exceptional looks like and then over time what happens is as a business grows your ability to attract talent increases and so then your standards also grow and then you find out that there's even more nuance to this which is that there's a director of sales at a 1 to 10 million dollar level which is a different looking person from 10 to 100 million dollar level and it continues to go all the way up and so it's basically building this repertoire of identifying patterns and what if you talk to I would say more experienced entrepreneurs now they don't talk about building businesses it's like assembling them you just assemble the pieces and you just know that this is how it's all going to flow together
Interviewee: The simplest way of doing it so the simplest way of attracting somebody to your business when you don't know how to do the job or know who to look for is to unfortunately do the job yourself and then once you can break down the job we follow three D's which is document demonstrate duplicate that's how we train anybody so first you have to document everything that you do to successfully do the job and that's step by step into a checklist then you demonstrate so you do this checklist in front of the person that you're trying to bring on then they duplicate they do the checklist in front of you what's interesting about that three-step process is that you'll often find when you try to demonstrate following the checklist you don't follow your checklist and so then you have to adjust the checklist until you actually follow the checklist and then when you can consistently follow that checklist and get the output then you can have them do that checklist and so I think this is why bootstrap founders I think oftentimes will find they tend to know more about more things because they had to learn them in order to teach them
Interviewee: The other really interesting thing about what you said about accidentally finding that that star at three or four years in is that I think that happens to almost everyone well hopefully the people who end up making it it happens to almost everyone because then you realize oh my god like if I had four of these people like we could change the world can I say something as well the star hired stars and so I think her name's Katie Leeson of the ten people she then hired nine of them became the best people in my company and also I'm not going to say his name but someone else in my business a C player of the ten people he hired he and everyone he hired was fired
Interviewee: So one of the it's so as you go up in the organization with hires the risk and reward goes up and so that's something that a lot of people don't like talking about but I will which is if you hire somebody and let's say that they're not a cultural fit maybe they have the skills or they are a cultural fit they don't have the skill fit and they're a leader what you find often and it sucks is that everyone it's almost like it's like a tree that has an entirely rotten branch it's like you end up having to scoop out three quarters of what was underneath because you realize that they were ineffective or they just were against the actual mission of the business and it's harrowing and it's horrible
Interviewee: Yeah right and a year later and you're like it's still John you know what are we talking about here I remember asking at one such meeting does John know that you're unhappy with him oh yeah no so there's this quiet dissatisfaction which I think is a virus right right
Interviewee: and what no one wants to discuss is the fact that everyone else knows John sucks amen and that that becomes the minimum standard for what is acceptable for excellence in the organization and so I think like so if brand is what your reputation is externally I think culture is kind of what reputation is internally and so I define culture operationalized because I think culture is a very fluffy word what does that mean right it's the rules that govern reinforcement within an organization what do we reward what do we punish and so the thing is is that there's realistically there's like people have values because they're bundled terms that ladder up many behaviors if I said Rolls Royce probably would have some value that's quality over speed probably right and so they would have that but somebody would have to say like well what does that mean right well we hope that we use this as a decision making filter for how it affects behaviors on every situation so that when you're in the should I go fast or should I make it right you make it right and there are other organizations kind of like the speed justice and mercy speed and quality both of them are important and sometimes they sit diametrically opposed and so we have to say where do we sit in the gray so that we can duplicate decision making across the organization so that we can maintain the culture and so culture you know layless this is a lot but culture I think this is a Drucker quote actually culture trumps strategy like twice a week and every day on Sunday if you have a mediocre strategy but an unbelievable culture you will crush somebody who has a great strategy and a terrible culture because culture ladders up to performance and execution and almost every business is limited by execution not strategy most business strategy isn't that complicated like let's do a really good job so good that people tell their friends about us and as long as we have enough gross margin we'll make money it's not that hard right it's just that the doing it is the hard part
Interviewee: and so I think we're very big on rapid feedback in the moment because that's how you train behavior so if you look at if so there's tons of studies on this but basically if you want to train a dog right and you want it to sit if you have it sit and then immediately give a biscuit it learns really quickly if you have it sit and then wait 10 seconds before you give a biscuit it takes like three times as many repetitions for it to learn that the that the sitting gets the biscuit if you wait more than a minute it never learns really it you can see the learning curve the amount of repetitions just skyrockets until eventually there is no amount but here's where it gets crazy that biscuit is still reinforcing something just not sitting it's reinforcing the thing that just came before it so if we want people to do something we have to change it in the moment and so when we train and I think that we're we're a training organization we're very good at training whatever skills is engineering ways to give many feedback loops in a short period of time around specific skills
Interviewee: and so the easiest way to think through this I think is stop start keep so I'll tell you a real story so we had we had a we had a director level so a relatively high person in the organization who was having behavior issues said differently everyone thinks you're a dick and so he ended up making his rounds of the executive team and having a sit down with all of them because he was really proficient at the scale he's high performer like good at what he does just no one liked him and so he talks to four different executives and the behavior didn't change and so he finally came to to my office and he was like a little bit worried and he was and he was like am I gonna get fired and I was like no HR will fire you if you're gonna get fired you're not gonna meet with me like what are we talking about but when we sat down I said okay I want to be clear I want to decrease the likelihood that people call you a dick in the future I said does that sound like an agreeable goal he said yeah I don't I want that I was like okay good I also don't care if you are a dick I just care that everyone else thinks you are and so I just want to minimize likely that I get drawn into this ever again so the reasons that they are calling you a dick we need to dive into that because every other conversation you had with you know some of the leaders was just like hey man stop being a dick and the thing is is what do you do with that nothing you just get insulted and then you have nothing to do and so instead it's like okay when you cut people off when they talk stop start keep doing do this instead shut up so when someone else is talking wait until they finish and if you're not sure ask if they're done he's like okay when uh you give unsolicited advice on how they should run their department don't or ask if they want it if they say no don't say anything and so we identified three or four behaviors that he was doing and I said just do this instead and literally the next week we were like what happened to him he's like a new man and the thing is is that he wasn't a dick he just didn't know how to behave and so if you want to teach teaching has to come from conditions and a behavior and so if you're trying to get someone to be different you have to give them the conditions under which they need to change so when someone says this if this occurs there's a condition and then this is what you need to do and so the vast majority of training that exists does none of that it's just people shouting at each other insulting them and saying hey you need to level up you need to you need to get you know you need to increase your performance what does that mean and so I think one of the easiest ways to identify the actual behavior that's actually the tough part is like why do I think he's a dick why do I think she's lazy because I want to insult them but that's not so how do I help her it's like okay why am I describing her this way okay so when I slack she's she tends to be slow in her response so sometimes takes an hour sometimes three hours I'm like okay so I'm gonna gather that data and be like okay so when I talk to her I'm like I'm gonna have this this branch of data the next thing is when I get stuff you know projects from her they are incomplete I feel like they're not all the way fleshed out I'm like okay that's a second second bucket the next one is that when she shows up on zoom she looks disheveled I'm like okay so now when I talk to Sandy I'm not gonna say hey Sandy you look lazy need you to level up a little bit here otherwise we're gonna have issues and have to put you on a PIP performance improvement plan right instead of saying that just put her on the performance improvement plan without saying it's performance improvement plan and just say when you show up on calls change your background to like the standard company setting so we don't see your bedroom right and and make sure that from the waist up you look professional and what do I mean by look professional have a collared shirt and put your hair back okay now some people like how does that work in woke politics no idea deal with it in your country but you should have a culture where you can say stuff like that the second thing is that right now I need you to turn on slack notifications and I need you to respond within within 10 minutes okay during work hours after work hours fine but you know nine to five you have to respond within 10 minutes do you think you can do that yes and so the end goal here is like I will get everyone to stop calling you lazy and this is how we do it
Interviewee: I think it's great and I think that the amount of references that you go for is proportional to the importance of the role okay so Sam the co-founder of school when he so he was a non-technical founder who's school what is school sorry oh so schools school.com's a platform for building communities right now it's online but we have an in-person components that people can meet online they meet in person it's awesome and so that's the only investment that I have publicly associated myself with outside of acquisition.com so it's a very big deal something I believe in a lot because it's education it's for education and media meet um so Sam is the is the is the founder of school and he is not technical and so he knew that to build an exceptional software product you need world-class talent and so he interviewed 600 developers to find Daniel who had become the CTO of school and he asked everybody to know who the best coders were and then he talked to all those people and he asked them who the best coder they knew was and he talked to those people and then he asked them who they thought the best coder they knew was and eventually like Daniel's name came up as like god tier he's like if you can ever get this guy he'd be amazing and so he ended up finding a way in to find Daniel and then he ended up becoming a co-founder of school as well and what's interesting about that process is that it actually ladders into rapid learning
Interviewee: And so this is what a typical analyst will do as a consultant is like I would say for the space and cyber project that I did it's with 600 pages of notes from all the interviews that we did first step is you recategories all the news by category so it goes from raw notes to categorize notes then from there you distill and consolidate notes into where the what are the truths or the the most distilled beliefs that we have about these particular in this case weapon systems but it could be whatever and then from there you're able to generate your inferences for what the what it looks like when it's right what the problems are what potential solutions might be and then that's fundamentally how you say this is what we need to do next that's if you're trying to learn something but in talking to all those people it actually works the same way because the interview process the higher up the talent is the more I would encourage entrepreneurs to use it as a learning process as a consultant
Interviewee: and so I'm looking for and I'm interviewing for candidates I first I want to gather as much information as I can I want to drain as much knowledge as possible but I'm also really looking for the quality and quantity of metrics they track and behaviors that they do to influence those metrics so in the hypothetical problem that let's say we're trying to solve we have low click-through rates I'd be like okay this is the problem we have how would you approach changing it right and then that actually gets me to understand what they would do in the organization because it's very easy to say you know I'm gonna come in and let's say a sales director I'm gonna come in and I'm gonna I'm gonna improve the sales team I'm like okay cool what are you gonna do you know I'm gonna coach the guys up I'm like okay what does that mean and so just continuing to ask what does that mean how do you do that until they're like okay well I'm gonna meet with the guys every single morning and we're gonna do role play all right well how do you role play well we're gonna start with the script and we're like the more detailed they get the more I believe they can do it because they've actually explained what actions they will take if someone can't dial it into actions then it's very unlikely that they're going to take them and so what I just outlined is basically three core things so one is the quality and quantity of metrics that they track the second is the behaviors that they're going to do to influence this metrics and then laddering up to third how do those metrics and these behaviors influence the revenue in the business if they can explain that clearly you have a winner
Interviewee: they can explain that clearly you have a winner all of that is requires them to know if the person's not bullshitting yeah and also to know like what metrics matter right because someone could sit in an interview for my first-time founder say a bunch of big complicated words it sounds good I hire them and that's really what I'm trying to mitigate here is how do I not let a bullshitter pass me so assume I know nothing let's start there what do you think customer service means and so if someone really has expertise so Richard Feynman was famous for the physicist which is if you can't explain it to a child then you don't understand it well enough and so if they do confuse you then it means that they don't understand it or they're doing it purposefully neither of which are good scenarios
Interviewee: So I think there's the soft and the hard side right so the hard side is that is compensation maybe you don't have as much cash so it's like you're gonna have you know a few levers at your disposal so you have what do you pay them in cash what's their upside if there's equity or shares they're gonna give them this is obviously if it's software business you can and I'm you know it's probably worth segmenting this so if you're not in a software company which is probably the vast majority of people listening to this there are four elements within equity that that that exist you have control so who gets to call the shots you have risk what happens if everything goes wrong who's liable you have profits which is the cash flow the business who gets distributions and then basically sale or enterprise value when we sell or if we sell who gets to participate in that upside those are kind of the four elements of equity now the thing is is that you can obviously grant shares or you can give stock in a company that's one way of doing it but you can also basically contract run any of these things now most of the times they don't want the risk and they probably won't get the control if it's your company so you really just have profit and you have and you have upside in terms of a sale and so you can contract these things and there's lots of structure so I'm not gonna get into the legal around this but asking somebody what do you want sometimes it's just a very powerful way of beginning this and my favorite question for these types of scenarios is asking what would it take so when you have this guy it's like man it would be amazing like how do I sell this guy I just ask him what would sell you so say what would it take because I don't know he'll tell me and I love that frame because it assumes yes hmm it assumes you're going to come so what would it take how you
Interviewee: so many of the books that you you write and so much of the content you make centers on this idea of sales yeah and it is a sale isn't it totally and I always think about the Steve Jobs quote where he met with was it John Scully who was working at like Pepsi and he said you want to consist can continue selling sugar water for the rest of your life would you want to come change the world yeah how does that sort of emotional psychological element of the sale factor into persuading someone exceptional to come and join your mission
Interviewee: So I actually think it's I was talking to the CEO of butcher box about this particular thing last week I think it's a barbell strategy where you have people on either ends and very little in the middle interesting so I love lots of young hungry people who are here for growth and want to learn and are ready to work long hours and just go all in and the people at the call it the late the back half of their career that are here that they've they've made enough money they know they can get a job wherever they feel like it you're not doing them a favor by giving them a job and they're not what I my term I hate which is careerists they're not obsessed with their title they're not obsessed with their career path what their promotion plan is going to be they basically have a litmus test which is like I have to have make about this to get to come in and do this with you but they actually just really love the work and so these people are learning so the young people are learning and and overcompensating with tons of hours and reps and these people are bringing their experience to the game and creating significantly more leverage with strategy the people in the middle are the ones that tend to be the pain in the ass for everybody and I don't think and be clear here I don't think this is actually an age thing I think it's a perspective thing so it's just are you here for growth or are you here to share what you know and I think that it's the people in the middle that are like well I'm bringing something but I need some it's like this kind of tit-for-tat relationship that I would say the vast majority of people that don't work out are in that bucket
Interviewee: Yes you can fundamentally you can disrupt any industry if you don't know how it's supposed to go and so but that's I think that really teases out something we said at the very beginning which is starting from first principles which is what are the few things I know to be true and then basically forgetting everything else and when you build from those assumptions up you end up building lots of different paths of the mountain that may or may not have been trodden before I think one of the one of the one of the most corroborating things that can happen sometimes is that like you re-derive a solution that already works and you're like okay well now I know why this works right and I think but I think that's actually then you have more confidence in the path and you're like okay that's fine but now I know why we're doing this not just because other people did it but because I understand why it works and so I think it just comes down to what are the few truths that I know to be true and going all in on those things like I know that if customers love my product they are more likely to tell other people about it than if they hate it that I feel very confident so then we say okay what are the things that must occur in order to get someone to quote love my product aka increase the likelihood that they tell their friends about it or post about us and so now there's and you can break this and again this is where quality and quantity of metrics matter so it's like how how much more nuance can I break and break this up into small pieces so it's like okay at what time do we deliver these messages or around what experiences that have high likelihood of them posting can we decrease the friction around them sending friends how can we make it both easy and how can we incentivize it and so all of these components whether it's a service business a physical products business a software business it still works the same way is you know and for each each customer for example as we're taking someone through this I have four milestones that I look for which are the four R's so how do I get them to review my product how do I how do I well in order it'd be how do I retain them immediately how do I get them to review my product how do I get them to refer somebody and then how do I resell them and so they're basically those four R's is what I try and take every customer through it's a very simple framework right what do you think I was like oh man customer success what does it mean it's just like well these are the four things that I want to occur and so all I'm trying to do is reverse engineer what activities increase the likelihood that each of these four R's happen
Interviewee: This is the entrepreneur life cycle until you learn how to break free from it and so there are six stages you have stage one which is uninformed optimism this is where you see your friend or you see something online and it looks like
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