Becoming One of Zero (w Tom Bilyeu) Pt. 2 Sept. '23 Ep 643



In a conversation between Alex Hormozi and his guest, they delve into the complexities of entrepreneurship, the importance of embracing uncertainty, and the power of branding and promises. Hormozi emphasizes the need for entrepreneurs to become comfortable with the unknown, as guaranteed outcomes would negate the essence of opportunity. They discuss the distinction between beliefs, values, behaviors, and traits, highlighting how values act as behavioral shortcuts and can be honed like skills. The discussion also touches on the influence of emotions on behavior, the concept of frame of reference, and the significance of accurately predicting outcomes. Hormozi shares insights from his viral video on scaling companies, advocating for a focus on skills over intangible traits and underscoring the measurable impact of 'soft' business elements like culture. The conversation reveals Hormozi's pragmatic approach to business, favoring action and results over the pursuit of understanding underlying reasons, and his belief in the transformative potential of entrepreneurship to address societal problems through efficient resource allocation.

Summary Notes

Entrepreneurship and Uncertainty

  • Entrepreneurship is characterized by uncertainty and the lack of guarantees regarding success.
  • Entrepreneurs must become comfortable with the uncertainty of their efforts and the possibility that their time may not yield the desired outcomes.
  • The absence of a guaranteed outcome is what differentiates entrepreneurial opportunities from more certain ventures.

"That, in essence, is what entrepreneurship feels like, is uncertainty of whether or not all of the time that you've put in is actually going to work out."

The quote emphasizes the inherent uncertainty in entrepreneurship and the need for entrepreneurs to accept this as part of the journey.

Defining Concepts: Frame of Reference

  • The concept of "frame of reference" is discussed as being crucial to understanding and changing behaviors.
  • Alex Hormozi and Tom Bilyeu discuss the importance of defining terms when discussing complex ideas.
  • Tom approaches change through beliefs and values, while Alex focuses on behaviors and traits.
  • There is a debate on whether focusing on beliefs and values or on behaviors and traits is more effective in achieving desired outcomes.

"Frame of reference, love. Speaking of things that need to be defined. Frame of reference to me are your beliefs and values."

Tom Bilyeu explains his interpretation of the term "frame of reference," linking it to beliefs and values, highlighting the importance of defining concepts in discussions.

Values, Behaviors, and Skills

  • Alex Hormozi suggests that values are essentially a set of behaviors that people exhibit in response to certain situations, which can be trained like skills.
  • Tom Bilyeu argues that while adherence to values can be trained, adhering to the wrong values can lead to negative outcomes.
  • Both discuss how emotions are tied to beliefs and values and how they can impact behavior.
  • There is a discussion on the impact of one's frame of reference on their perception of the world and the outcomes of their actions.

"I think it's, well, value. So if we were to, like, when it's like, I have these values, a value is just a behavioral short code. When this happens, I do this."

Alex Hormozi explains his view that values are essentially behavioral shortcuts that dictate how one acts in certain situations, and that these can be trained like skills.

Frame of Reference and Perception

  • The frame of reference is likened to a pair of glasses that distort reality, and everyone has a unique distortion based on their experiences and choices.
  • Tom Bilyeu discusses how people's frame of reference is shaped by a lifetime of experiences such as reward, punishment, and approval.
  • He emphasizes the importance of becoming aware of one's frame of reference to shape it intentionally and improve the prediction of outcomes.
  • The conversation touches on the difficulty people have in recognizing the subjective nature of their perceptions and emotions.

"The frame of reference. The best analogy would be to say that your frame of reference is a pair of glasses that you put on that distort the living shit out of the world."

Tom Bilyeu uses the analogy of glasses to describe how one's frame of reference distorts their perception of reality, and how this affects their ability to achieve desired outcomes.

The Importance of Action and Skills

  • Alex Hormozi stresses the importance of action over the analysis of emotions when it comes to achieving outcomes.
  • He discusses his viral video on scaling companies and how he used to believe entrepreneurs were limited by skills, character traits, and beliefs, but now sees these as trainable skills.
  • The conversation covers the significance of soft skills in business and the challenges in measuring them.
  • Alex shares a practical example of how his team improved their video production by breaking down and operationalizing the behaviors of a successful team member.

"All I care about is whether I do what I need to do to get the outcome. And if I do the thing and I don't get the outcome, that means there's another variable that I haven't controlled or I don't understand."

Alex Hormozi emphasizes the importance of focusing on taking the necessary actions to achieve outcomes, rather than getting caught up in analyzing emotions or intentions.

Dissecting Success and the Process of Improvement

  • Tom Bilyeu expresses admiration for Alex Hormozi's ability to simplify complex problems and focus on actionable steps.
  • Alex shares his process of revising his book, striving for clarity and simplicity, and aiming for it to be relevant for 100 years.
  • He describes how he seeks feedback, challenges his own work, and iterates until he cannot improve it further.
  • The conversation explores the concept of reinforcement, both environmental and through feedback from knowledgeable others, as a means of learning and improvement.

"I have exhausted my level of skill and understanding. Like, I can't make the book better at current."

Alex Hormozi discusses reaching a point where he has pushed his skills to the limit in the process of creating his book, indicating a moment of completion when no further improvements can be conceived.

Identifying Problems and Leveraging Feedback

  • The discussion turns to how Alex identifies issues in his work, either through a feeling or by recognizing a discrepancy between his understanding and what is presented.
  • He talks about the importance of pattern recognition and successive approximation in learning and generalizing from past experiences.
  • Alex and Tom discuss the role of immediate feedback in learning and the environmental context of training for better retention and application of skills.

"The feeling is because of pattern recognition. I know this isn't right because it hasn't been right. It looks like something that has been right again in the past."

Alex Hormozi explains how a feeling of something being off is often due to recognizing a pattern from past experiences, which signals that there may be an issue to address.

Testing and Iteration Process

  • Focus on what changes are needed to make something work, rather than why it didn't work.
  • Utilize experts when available but be prepared to brute force through testing.
  • The importance of breaking down the binary concept of success and failure into a continuum.
  • The process of running ads and making cold calls is not a binary yes or no but a measure of "how well."
  • Using first principles to analyze what needs to happen for a customer to make a purchase.
  • Importance of visibility: Customers must see or hear about your product to buy it.
  • Engagement is critical: Customers must engage with the product through actions like opening emails or clicking ads.
  • The necessity of having contact information to follow up with potential customers.
  • Rejecting the idea of stages of awareness and focusing on the direct correlation between seeing a product and purchasing it.
  • The belief that if all variables were known, sales conversion could be 100%.
  • The process of identifying what to sell, who to sell it to, and how to advertise.
  • The concept of advertising as making something known, with only four fundamental ways to do it.
  • The process of writing books with statements that are beyond reproach.
  • The methodology of analyzing where the breakdown in the sales funnel occurs and addressing it systematically.

"Yeah, so I think it's breaking down. Didn't work from binary to a continuum."

This quote emphasizes the importance of viewing the outcome of tests not as a simple success or failure but on a scale of effectiveness, leading to more nuanced improvements.

"Behaviors. They have to see it. They don't see it or hear it. They will not buy it because they won't know you exist."

Visibility is crucial in marketing; a customer must be aware of a product to consider purchasing it.

"All we know is that when they see this thing, they take their wallet out and they purchase, period."

This quote rejects complex models of customer awareness and focuses on the direct action of purchasing.

First Principles and Deterministic Universe

  • Discussing the importance of first principles in business scaling.
  • The idea that the universe follows deterministic principles, implying predictable cause and effect.
  • The distinction between knowing why a behavior occurs and knowing that it will occur.
  • The concept of behavioral cause and effect as a basis for predicting customer actions.
  • The debate over the existence of free will and its implications for morality and marketing.
  • The methodology for identifying the next logical test to run in business, using the theory of constraints.
  • The focus on the constraint that allows the largest increase in throughput with the smallest incremental change.
  • The role of experts and repetition in refining the business process.
  • The concept of leverage in business and the different forms it can take.

"I want to make sure that I'm saying things that are beyond reproach."

This quote highlights the desire to base business strategies on indisputable first principles.

"The rate at which you can identify the most meaningful next step or the most likely to be successful next step is also intelligence."

The ability to determine the next best action in business is seen as a form of intelligence.

"Every system is constrained in some way, and then if you simply identify what the constraint is and deconstrain it, it will grow until its next natural constraint."

Understanding the limiting factors in a system allows for targeted improvements that lead to growth.

The Concept of Leverage

  • Leverage is defined as getting more output for the input.
  • The four C's of leverage: collaboration, capital, code, and content.
  • The concept of using leverage in advertising to amplify the reach and impact of marketing efforts.
  • The strategy of focusing on the part of the business process that offers the most significant incremental improvement for growth.
  • The importance of identifying and utilizing leverage in constructing and structuring a business for success.
  • The distinction between a licensing model and a course in the context of business offerings.

"Leverage, as we define it, is the difference between what you put in and what you get out."

This quote defines leverage as the efficiency with which resources are converted into results.

"The better and better we get at this code. You can write an app one time and then unlimited amount of people can use the code or use the app."

The quote illustrates the concept of leverage through code, where a single effort can have unlimited applications and benefits.

"I've done it more times."

This quote suggests that experience and repetition are key factors in achieving better outcomes in business.

Business Model and Market Testing

  • Alex Hormozi discusses leveraging economies of scale in advertising for gym owners.
  • He explains how his company could absorb the cost of testing ads and then distribute successful ads to a large number of gym owners.
  • This approach allowed individual gym owners to benefit from tested and effective ads without incurring the high costs of market testing.
  • The business leveraged media to distribute costs across many gyms, making it highly profitable.

"We could do that one time and 1000 gyms can do it at no incremental cost to us. And so it is a very profitable business."

This quote highlights the efficiency and profitability of Hormozi's business model, where the initial investment in ad testing is amortized over many clients, significantly reducing the cost and risk for each individual gym owner.

Transition to Licensing Model

  • Alex Hormozi had a moment of desperation where he offered a high price for his services to a potential client, who accepted.
  • He had already considered the licensing model before this interaction.
  • Hormozi wanted to provide more support and service than a traditional franchise model for a lower fee.

"Had you already thought of it as a license model or you do those first, like whatever, 150 grand that you made with the seven people or something."

The quote is about Bilyeu asking Hormozi if the licensing model was premeditated or a result of the situation. Hormozi confirms he had already considered it, indicating strategic foresight in his business approach.

Understanding the Essence of Business

  • Tom Bilyeu emphasizes the importance of understanding the true essence of a business or model.
  • Hormozi has a unique ability to distill business concepts to their core elements.
  • Understanding the essence is crucial to identifying opportunities and creating leverage.

"You just have a real ability to break things down to what I'll call the essence of the thing."

Bilyeu's quote acknowledges Hormozi's skill in simplifying complex business ideas to their fundamental principles, which is essential for strategic decision-making and innovation.

Business Opportunity Analysis

  • Alex Hormozi simplifies business analysis to potential units sold, gross profit per unit, and competitive dynamics.
  • He considers lifetime gross profit rather than just recurring revenue.
  • Hormozi evaluates business opportunities based on scale potential, profitability, and market competition.

"Number of potential units sold, gross profit per unit, and then what I'll call competitive dynamics as the third part."

Hormozi's quote summarizes his approach to assessing business opportunities, focusing on the potential scale and profitability while accounting for the competitive landscape.

Business Model Selection

  • Hormozi discusses the process of selecting the right business model when starting out.
  • He advises choosing a problem that already has a market and a known customer base.
  • The focus should be on what to sell and how to get customers, rather than a detailed business plan.

"I don't think any business I've had has had a business plan."

This quote reflects Hormozi's practical approach to entrepreneurship, where he prioritizes the core aspects of what to sell and customer acquisition over formal business plans.

Tactical Steps for Starting a Business

  • Hormozi provides concrete steps for starting a business, including establishing a legal entity, opening a bank account, and setting up payment processing.
  • He categorizes businesses into selling products, services, software, or content.
  • The easiest business to start is a service business due to low entry barriers.

"Once you have those three things, you get a stranger to give you money in exchange for doing something for them."

The quote outlines the fundamental transaction that marks the beginning of a business, emphasizing the importance of exchanging value for money.

The Importance of Focus

  • Alex Hormozi emphasizes the skill of focus in entrepreneurship.
  • He describes the emotional journey of uninformed optimism to informed pessimism, despair, and eventually, informed optimism and achievement.
  • Entrepreneurs must learn to persist through challenges and embrace uncertainty.

"Focus is a skill. I can train someone to do it."

Hormozi's quote suggests that focus is not just an inherent trait but a skill that can be developed and is critical for entrepreneurial success.

Marketing and Book Launch Strategy

  • Hormozi discusses his book launch strategy, which involved using every method outlined in his book.
  • He demonstrated the effectiveness of his advertising methods by applying them to his book launch.
  • The strategy included reaching out to people, running ads, affiliate marketing, customer referrals, and employee involvement.

"I used every method in the book, all eight, for the book launch."

The quote illustrates Hormozi's commitment to proving the concepts in his book by applying them in a real-world scenario, which led to a successful book launch.

Building a Brand

  • Tom Bilyeu points out that Hormozi's successful book launch was not just about the launch tactics but also the years of brand building leading up to it.
  • Building a strong brand is a long-term effort that can amplify the impact of specific marketing strategies.

"The reason that all of that worked so well isn't what you did at the time, it's what you did for the years leading up to that moment."

Bilyeu's quote highlights the cumulative effect of consistent brand building, which can significantly enhance the effectiveness of marketing campaigns and product launches.

Importance of Brand Building and Content Creation

  • Brand building and content creation are crucial for generating goodwill and associating positive values with oneself or a company.
  • Content should be structured and formatted effectively to engage and retain audience interest.
  • The longer the period before making any ask from the audience, the better.
  • Branding involves associating known concepts with unknown ones to create a memorable impression.
  • Strong branding can influence behavior and is valuable for directing consumer actions.

"And one of the concepts in the book is making content. And I talk about how I structure content, how we pick topics, how we pick headlines, how we format it, how we do all those things so that people can use that and make content for themselves."

This quote emphasizes the importance of content creation and outlines that the book provides a guide on content structuring, topic selection, and formatting, which are essential for effective communication and audience engagement.

"But brand is basically teaching. It's associating something people know with something they don't know."

Alex Hormozi explains that branding is an educational process, creating associations between familiar and unfamiliar concepts, which helps in building brand recognition and loyalty.

"So if every single person recognizes the Nike swoosh, and I can take a water bottle and then put a Nike swoosh on it and triple how much I can charge for it and still get more people to buy it, then you can measure the strength of the brand by the difference in price between the commoditized version of it and the branded version of it."

This quote illustrates the power of a strong brand, exemplified by the ability of the Nike swoosh to significantly increase the perceived value and price of a product.

The Role of Promises in Business

  • Keeping promises is vital for building trust and predictability with an audience.
  • A history of fulfilled promises can lead to a higher likelihood of audience compliance with brand requests.
  • Brands should strive to meet or exceed expectations consistently to maintain customer trust.

"I try to make many promises and keep all of them. And the more times you can make promises and keep promises, the higher the likelihood people will ascribe to you for being somebody who is predictable in a good way."

Alex Hormozi stresses that consistently keeping promises can lead to being perceived as reliable and trustworthy, which is beneficial for long-term brand reputation.

The Impact of Emotional Engagement

  • Emotional engagement is a powerful tool for creating memorable experiences and driving behavior.
  • Events and launches that evoke strong emotions can lead to better recall and word-of-mouth promotion.
  • Manipulating emotions during a launch can be a strategic move to enhance the perceived value of the offering.

"Memory is driven by emotion. And so I took this roller coaster approach because I also wanted to subvert the audience."

Alex Hormozi explains that by intentionally taking the audience on an emotional journey, he aimed to create a memorable experience that would be talked about and remembered, thereby enhancing the value of the event.

The Business of Problem-Solving

  • Businesses are problem-solvers that can make the world better by addressing various issues.
  • Entrepreneurship is a key driver for innovation and efficient resource allocation.
  • Capitalism, while not perfect, is seen as an effective system for incentivizing problem-solving through competition.

"I do think that entrepreneurship is the way that we solve problems, and I think that there's usually an innovative way to solve any problem if we have enough knowledge to do so."

Alex Hormozi believes that entrepreneurship is fundamental to problem-solving, and with the right knowledge, innovative solutions can be found for most problems.

The Philosophy of 'One of Zero'

  • The concept of 'One of Zero' represents creating unique content and taking a path that sets one apart from others.
  • It symbolizes exceeding definitions and expectations by being unique and promise-driven.
  • The brand associated with 'One of Zero' stands for skills, values, and behaviors that are distinct and admirable.

"They're like, this isn't even one of one. They're like, this is one of zero. And it was like, that's it. For 18 months, I've been looking for a saying or an ism that was short and could encapsulate many of the values, skills that can be learned that I believe are important, and that one of zero concept, which I love, because also, from a math perspective, one of zero, one divided by zero, is undefined."

Alex Hormozi introduces the 'One of Zero' concept, which captures the essence of being unparalleled and writing one's own path, highlighting the importance of individuality and integrity in business and content creation.

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