24 Rules in Investing Ep 487

In this episode, Aksham Mozzie, a successful entrepreneur with a net worth exceeding $100 million, shares his 24 rules of investing, aimed at guiding business owners in growing their companies. Mozzie emphasizes the importance of caution in deal-making, advising against proceeding with investments that elicit doubt or feel rushed, and insisting on having multiple options on the table. He distinguishes between investing and trading, underscoring the need for a long-term horizon for true investing. Mozzie also highlights the value of due diligence, clear contractual terms, and the significance of reputation over charisma. He advises listeners to leverage these principles for better decision-making and to achieve outsized returns over time, while also stressing the importance of peace of mind and reputation in business dealings.

• Hesitation or unease is a strong indicator not to proceed with a deal.
• Saying 'no' should be more frequent than saying 'yes' in business decisions.
• Wealthy individuals view business as a strategic game.

"If you are unsure or you're uneasy, you get one of these, like tiny, like, I'm just not sure if I'm gonna do it. Don't do it."

This quote emphasizes the importance of trusting your instincts when feeling uncertain about a business decision. If there's doubt, it's safer to decline the opportunity.

• Business is likened to a strategic game by the wealthiest people.
• The podcast aims to document and share lessons learned in business growth and investing.

"The wealthiest people in the world see business as a game."

Alex Hormozi equates business to a game, suggesting that it requires strategy and a mindset that enjoys the process of growing and making decisions.

• Investing decisions should be guided by principles.
• Using principles consistently leads to better outcomes over time.
• The 24 rules of investing are structured as if-then statements to aid decision-making.

"And the reason they're structured that way is that we make many decisions, countless decisions, every single day."

Alex Hormozi explains the rationale behind structuring the rules of investing as if-then statements, highlighting their purpose in simplifying daily decision-making.

• It's crucial to only invest an amount that you can afford to purchase multiple times.
• A conservative approach to investment sizing can prevent overexposure to risk.

"If you can't buy it twice, don't buy it once."

This quote advises on the principle of sizing investments prudently, suggesting that if you're unable to afford purchasing something twice, you shouldn't purchase it at all to avoid taking on too much risk.

• Insurance products can mitigate a wide range of risks.
• Specific concerns can be addressed by purchasing appropriate insurance.

"If you're worried about it, you can buy insurance for it."

Alex Hormozi highlights the availability of various insurance products as a tool for managing specific risks that concern investors.

• Always seek external validation for deals that seem too good to be true.
• A second opinion can reveal overlooked aspects of a deal.

"If a deal feels like a grand slam, get a second opinion."

This quote underscores the importance of due diligence and the value of a second opinion when an investment opportunity appears exceptionally favorable.

• Recognize all possible ways to lose money in a deal before proceeding.
• Knowledge of potential losses is essential for informed decision-making.

"If you don't know how you can lose money, don't do the deal until you do."

Alex Hormozi stresses the necessity of understanding the risks and potential losses involved in an investment before committing to it.

• Avoid making decisions under pressure or in haste.
• Feeling rushed is a signal to step back or avoid the deal entirely.

"If it feels rushed, don't do it."

The quote advises against making investment decisions when there is a sense of urgency, as this can lead to mistakes.

• Having multiple deals to consider is better than having just one.
• A lack of options can lead to biased assessment of a deal's value.

"If you only have one deal on the table, don't do the deal."

Alex Hormozi compares having only one deal to having limited dating options, suggesting that scarcity can distort the perceived value of an opportunity.

• Buying with the intention of selling is trading, not investing.
• Investment is characterized by a long-term horizon.

"If you buy with the intention of selling, you're not investing, you're trading."

This quote differentiates between investing and trading, with the former being a long-term commitment and the latter being a short-term transaction.

• Investing and trading are distinct from running a business; they require different skill sets.
• Confusing investment strategies with business strategies can lead to trouble.
• Investors may not excel in business, and business people may not be adept at investing.
• The skills required for each are different, although there may be some crossover of beneficial principles.

"Where you get in trouble is where you're trying to apply business stuff to investing versus investing stuff or investing stuff to business."

This quote emphasizes the importance of recognizing and respecting the differences between business acumen and investment strategies to avoid misapplication of principles from one domain to the other.

• Partnerships can prevent mistakes by providing balance, especially when one partner is overly optimistic.
• Effective partners should provide counterbalance rather than simply agreeing.
• Decisions should be unanimous; if partners do not agree, they should not move forward.
• This principle applies to both business and marriage, underscoring the importance of consensus.

"If we don't agree, we don't do it."

Alex Hormozi stresses the importance of mutual agreement in partnerships, indicating that he avoids making decisions unless there is consensus, which has saved him from many mistakes.

• Complexity in deals or investments should be a warning sign.
• Lack of understanding increases risk; simplicity and comprehension reduce it.
• If something feels complicated or beyond one's understanding, it's better to pass on the opportunity.
• Avoid the allure of seeming sophisticated by engaging in complex deals without full comprehension.

"If it's complicated, pass. If it feels above your head, it probably is."

This quote suggests that one should avoid engaging with investments or deals that are too complex to understand, as this can lead to high-risk situations and potential losses.

• Fear of missing out (FOMO) should trigger caution rather than haste in decision-making.
• Emotions like FOMO can impair judgment, so it's important to slow down when feeling pressured.
• Consistently applying this principle can lead to better decision-making and greater long-term returns.

"Fomo means slow down, all right? So if you feel that emotion, you're like, I'm going to miss out on something. Slow down."

Alex Hormozi advises that feeling FOMO is a sign to take a step back and reassess, rather than rushing into decisions that might be regretted later.

• Without thorough due diligence, it's not wise to proceed with a deal.
• Lack of information should be a deal-breaker.
• Making decisions based on hype or incomplete information is akin to gambling.
• Skipping due diligence on one opportunity may save you from losses on others.

"No diligence, no deal."

This quote encapsulates the principle that one should not engage in a deal without adequate due diligence, emphasizing the importance of having all necessary information before proceeding.

• A clear business model or proposal is essential before entering into a deal.
• The model should outline growth, improvement, and value addition.
• Assumptions within the model should be scrutinized for their reasonableness.
• Without a model to evaluate, it's not advisable to make a deal.

"No model, no deal."

Alex Hormozi insists on the necessity of a business model to analyze the feasibility and projections of a deal, implying that without such a model, the deal should not be considered.

• Timely and meticulous communication is critical in business dealings.
• Setting and meeting expectations is key to building a good reputation.
• If a potential partner is non-responsive or inconsistent, it's a sign to avoid the deal.

"If someone's non responsive in the deal process or slow to respond, no deal."

This quote highlights the importance of communication in business transactions and suggests that poor responsiveness is a strong indicator of potential issues in a partnership or deal.

• Investments or purchases that cost peace of mind are not worth the trouble.
• The long-term cost of losing sleep or worrying is too high a price to pay.
• Decisions should factor in the impact on one's well-being.

"If it costs peace of mind, don't buy it."

Alex Hormozi emphasizes that no investment or purchase is worth sacrificing one's peace of mind, suggesting that the mental and emotional toll should be a critical factor in decision-making.

• Alex Hormozi advises against buying anything that costs your peace of mind.
• Emphasizes the importance of mental tranquility over material possessions.

don't buy something that causes you to sell your peace of mind.

This quote highlights the principle of prioritizing mental well-being over acquiring goods that may lead to stress or discomfort.

• Alex Hormozi requests listeners to rate, review, and share the podcast.
• He emphasizes that there are no advertisements or sales, and spreading the word is the only support he asks for.
• Sharing the podcast could potentially change the world for someone else.

the only ask that I can ever have of you guys is that you help me spread the word so we can help more entrepreneurs make more money, feed their families, make better products, and have better experiences for their employees and customers.

Hormozi expresses that the listener's support through reviews and sharing is crucial for the podcast's mission to help entrepreneurs succeed.

• Stresses the importance of actions that build personal reputation and brand.
• No neutral moves: every action should contribute positively to one's reputation.
• Reputation has long-term compounding returns in various aspects of life.

If it doesn't build your reputation, don't do it. No neutral moves.

This quote encapsulates the strategy of only engaging in activities that enhance one's reputation, avoiding actions that don't contribute positively.

• Prioritize past performance over potential when making decisions.
• This applies to hiring, investing, and business transactions.
• Past performance is the best predictor of future performance.

No track record, no deal. Pick performance over charisma.

Hormozi advises to choose individuals with a proven track record over those with mere charisma, emphasizing reliability over potential.

• The concept of sticking with what has proven successful in the past.
• Encourages doing more of what you're good at rather than seeking unnecessary variety.
• Recognizes the potential of luck but suggests leveraging areas where one has been successful.

If it's the same thing you've always done well with, do more of it.

This quote suggests that one should focus on and expand upon the areas where they have experienced success, rather than diversifying into unfamiliar territories.

• Advocates for cautious borrowing, highlighting the inherent risks of debt.
• Debt can amplify returns but also losses.
• Encourages under borrowing to avoid the risk of losing everything.

Always under borrow, because any number, no matter how big it is, multiplied by zero, is still zero.

Hormozi warns about the dangers of over-leveraging and the importance of conservative borrowing to ensure long-term financial stability.

• Emphasizes the importance of asking questions and fully understanding investments.
• Suggests defining terms, using visual aids, and seeking examples to grasp concepts.
• If you can't explain it simply, you don't understand it well enough.

ask stupid questions, define terms, draw pictures, see examples. And if you can't draw it back, you don't get it.

This quote encourages deep comprehension of investments or concepts by questioning, clarifying, and visualizing information to ensure a solid understanding.

• Adopting a stance of ignorance can be strategically advantageous in conversations.
• It allows you to ask basic questions which may reveal deeper issues or misunderstandings.
• Playing the fool is a way to learn the unknown 20% even if you're familiar with 80% of the information shared.

"Always play the fool, because there's oftentimes you won't be pretending to be posturing, and you will learn, because even if they tell you stuff, and 80% of it, you already know the 20% you didn't know, you still get better from the conversation, and it allows you to ask obvious questions."

The quote emphasizes the benefits of feigning ignorance to uncover new information and to encourage others to explain concepts in simple terms, which may reveal their own lack of understanding.

• For those with significant investable assets, being part of the General Partner (GP) is crucial.
• Negotiating a slice of the GP allows for more control and a better position in investments.
• The speaker has adopted a rule to only invest if they can be part of the GP.

"If we're not in the GP, we're not in the deal."

This quote outlines a strategic investment principle for high net worth individuals, suggesting that having a stake in the GP leads to better investment outcomes.

• The character of the person you're dealing with is paramount.
• A bad partner will find ways to subvert even the best agreements.
• Trusting one's instincts about people is important; if unsure, it's better to walk away from the deal.

"If it's a bad person, it's a bad deal."

The quote captures the essence of the importance of the personal character in business dealings, indicating that a bad person will ultimately lead to a bad business outcome regardless of the contractual terms.

• Contracts are essential for setting clear expectations in business relationships.
• Avoiding contracts suggests an unwillingness to address potential difficult situations.
• Handshake deals are outdated and risky; contracts should always be in place.

"No contract, no deal. But live in the world as though there were no contract."

This quote highlights the speaker's stance on the necessity of contracts for clarity and protection in business, while also advocating for operating with integrity beyond the contractual obligations.

• Contracts should be negotiated thoroughly with a defensive mindset.
• Once agreed upon, one should perform as if the contract didn't exist, exceeding the terms.
• The contract is a fallback for when terms are not adhered to, but one should aim to maintain the spirit of the agreement.

"Live as though the contract doesn't exist. Negotiate it as though it's the only thing that matters. But then after it's done, it's done."

The quote advises on a balanced approach to contracts: be stringent during negotiation but operate with generosity and good faith once the contract is signed, aiming to never have to resort to the contract because of exceptional performance and conduct.