How Do You Build a Brand (on Behind the Brand with Bryan Elliot) Pt. 2 March '22 Ep 495

Summary Notes


In this episode, the host and entrepreneur Alex Hormozi delve into the nuances of trust, relationships, and the balance of giving and taking in both personal and professional spheres. Hormozi shares his journey from being overly generous to finding an optimal balance, citing game theory research that suggests an 8 out of 10 on the giving scale yields the best outcomes. They discuss the importance of character and trust in business, with Hormozi emphasizing the value of skills and experiences that compound over time, advocating for long-term commitment to achieve financial success. Hormozi also touches on his strategy of holding cash, like Warren Buffett, to capitalize on market cycles and reveals his goals, including getting his wife Layla on the Forbes 100 list for self-made richest women and ultimately reaching a net worth of one billion dollars. He concludes with insights on branding as reputation, the long-term value of branding over direct response marketing, and the power of branding to command premium pricing.

Summary Notes

Warren Buffett's Investment Strategy

  • Warren Buffett, referred to as "Uncle Warren," holds a significant cash reserve for his company.
  • Buffett's company has 25% of its entire company value in cash, indicating a strategic reserve for future investment opportunities.
  • This strategy reflects Buffett's experience with market cycles and his readiness for the right moment to invest.

Looking Uncle Warren, right? He's got 150,000,000,000 in cash sitting right now. He's not worried about it. I'm like, he's seen more cycles than I have. So he's got 25% of his entire company value sitting in cash. He's waiting.

This quote emphasizes Warren Buffett's substantial cash holdings and his patient approach to investment, waiting for the opportune moment to utilize his cash reserves.

The Purpose of the Show

  • The show aims to discuss strategies to acquire more customers, increase earnings per customer, and retain them.
  • It also serves as a platform to share failures and lessons learned in the journey of business and personal growth.
  • The host started the show during a recession, which became a pivotal resource for recovery and learning.

Welcome to the game, where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe.

The quote outlines the core objectives of the show, focusing on customer acquisition, monetization, retention, and sharing experiences of overcoming business challenges.

Evolution of Personal Beliefs

  • The host reflects on past beliefs that have changed over time, questioning whether the same level of trust in people is still present.
  • The discussion pivots to the concept of trust and the balance between giving and taking in relationships.
  • A shift in personal behavior from being a complete giver to finding a more balanced approach is highlighted.

What's a deeply held belief that you had maybe three to five years ago, and it could be business or personal, but, like, something you. You really held to be true that you no longer believe?

This quote prompts a reflection on the evolution of personal beliefs and how past convictions can change over time, impacting both business and personal life.

The Giving-Taking Spectrum in Relationships

  • The host describes a natural inclination towards being a giver and the associated vulnerabilities.
  • The concept of "tit for tat" or transactional relationships is introduced as the norm for most people.
  • A shift from being an extreme giver to a more balanced approach is discussed, aligning with game theory research on optimal outcomes.

I think that what happened over my career is that I shifted from a ten to, like, an eight. And they've actually done a lot of game theory research on this and found that, like, eight out of ten is the proper amount of give take for optimal outcome.

The quote highlights the personal journey from being overly generous to adopting a more balanced give-and-take approach, informed by game theory research.

Defining 'Giving' and Intentions Behind It

  • The host ponders the difference between 'giving' and 'donating,' and the associated expectations of return.
  • The conversation explores various motivations for giving, including status, conscience, and personal fulfillment.
  • The host acknowledges the selfish aspects of giving but differentiates strategic giving from being taken advantage of.

It's interesting because I spent a lot of time defining words, and so I think it's worth looking into what the word give means, because what is the difference between giving and donating? One has no expectation of return. I would imagine with donation, giving might not necessarily have no expectation.

This quote delves into the nuanced meaning of 'giving' and how it may carry different expectations compared to 'donating,' sparking a discussion on the intentions behind acts of generosity.

Real Estate Deal and Integrity

  • The host recounts a real estate transaction where a large sum of money was loaned with a high-interest rate and secured against a property.
  • A story is shared about a discrepancy in invoiced interest, where the borrower chose to pay the correct higher amount against the advice of their lawyer.
  • The borrower's decision to pay the full amount owed built goodwill and trust for future business dealings.

And so he sent the money and he did end up getting more goodwill from me from that move. And so he was the one who ended up saying something to me when he flew out to we did like a celebratory dinner. He said, my dad always told me that you only get one name, so invest in it accordingly.

This quote conveys the importance of integrity in business transactions and how actions reflecting honesty can strengthen one's reputation and create lasting business relationships.

Hiring Based on Moral Character

  • The host outlines the core values for hiring at their company: unimpeachable character, sincere candor, and competitive greatness.
  • The emphasis is on moral character, with hiring decisions often made based on this criterion alone.
  • The host appreciates the Navy Seals' approach to assessing trustworthiness and applies similar principles when evaluating potential team members.

For us, the values that we And I think it changes by the type of company that you are. For us, it's unimpeachable character, sincere candor, and competitive greatness.

The quote lists the primary values that guide hiring decisions at the host's company, highlighting the paramount importance of moral character in their business philosophy.

Hiring Decisions and Understanding Individual Needs

  • Uncle Warren discusses the importance of recognizing a person's need to be number one.
  • He suggests that if someone needs to be number one, and that doesn't fit with the company's needs, he would pass on hiring them.
  • He emphasizes the value of asking questions to understand what a person truly wants.

"It's because I know him, and so I think know some people need to be number one, and we look for that, and if that's a need, then I would probably pass. Right?"

The quote explains Uncle Warren's hiring philosophy, which includes not hiring someone if their need to be number one could be detrimental to the team dynamic.

Assessing Character and Reliance on Partners

  • Uncle Warren admits to having been wrong about someone's character in the past.
  • He contrasts his trusting nature with Layla's ability to detect when something is amiss.
  • He relies heavily on Layla's judgment, especially when it comes to making decisions about their portfolio companies.
  • They have a rule in their marriage that they only make decisions if both agree.
  • Uncle Warren overrode Layla's disagreement once, which led to short-term success but long-term issues.

"I am still more trusting. I am still more like, you know what? He was having a bad day. Or like, you know what? Maybe I still will try. Because I think I empathize a lot with people who are in difficult situations because I have been in them, and I understand the difficulty."

Uncle Warren's quote reveals his empathetic approach to judging character, which contrasts with Layla's more discerning and perhaps less forgiving perspective.

Financial Trust and Management within Marriage

  • Uncle Warren discusses the complete financial trust he has in Layla.
  • He mentions that he doesn't know the exact amount of money they have and relies on Layla and her executive assistant for financial updates.
  • The conversation implies a division of labor and trust in their personal finances, with Layla managing the money.

"I don't even have a login. I don't even know how much money we have. I really don't."

This quote illustrates Uncle Warren's complete trust in Layla's management of their finances, to the extent that he is not involved in the day-to-day details.

Balancing Optimism and Realism in a Relationship

  • Uncle Warren and Layla balance each other's tendencies, with him being the optimist and her being the realist.
  • He acknowledges that their individual tendencies may be exaggerated because they each know the other will provide a counterbalance.
  • Uncle Warren uses the example of how they would adjust if one of them were no longer there, indicating a dynamic interdependence.

"I think we now over index to both of those polls more because we know the other person exists."

The quote indicates that Uncle Warren believes their individual characteristics are more pronounced because each partner compensates for the other's strengths and weaknesses.

Competitive Advantage and Information Arbitrage

  • Uncle Warren believes that competitive advantage often comes down to information arbitrage.
  • He explains that every business exists because one party knows something that another does not.
  • He gives an example of a cattle ranch owner who has specialized knowledge that their customers lack.
  • Information arbitrage is not just about having information but also about using it efficiently and effectively.

"The easiest is just information. Like, just know more than the other person."

Uncle Warren's quote encapsulates his view that knowledge is the simplest form of competitive advantage.

Opportunity, Scalability, and Total Addressable Market (TAM)

  • Uncle Warren discusses the concept of opportunity in terms of total potential units to sell, value to cost discrepancy, and competitive dynamics.
  • He emphasizes the importance of scalability and how he has leveraged different business models to climb the "opportunity ladder."
  • Uncle Warren outlines the four ways to expand the total addressable market: going upmarket, going downmarket, offering additional products or services, and expanding geographically.

"Opportunity is just a fancy word for leverage."

The quote summarizes Uncle Warren's perspective on opportunity as a form of leverage in business, where one uses their skills and resources to maximize potential growth and profit.

Market Expansion Strategies

  • Uncle Warren discusses strategies for businesses to expand their total addressable market.
  • Four primary market expansion strategies are highlighted: going up market, down market, adjacent market, and broader market.
  • The fifth strategy involves narrowing the focus to better understand and serve the customer base.

go down market from there. People who aspire to be hairstylists. Right. So it's like a pyramid. So you go up market, you can go down market, you can go adjacent market, which is what's similar to hairstylists. That probably has similar wants and needs. So it'll probably be like lash salon or nail salon. Nail salon, yeah, exactly. So that would be an adjacent market. Or I could go broader. So, broader is where you take all adjacent markets under one umbrella, which would be beauty. So it'd be like, I help all beauty type brick and mortar businesses that would be going broader.

Uncle Warren explains that businesses can grow by targeting different market segments, such as lower-end or higher-end markets, as well as adjacent markets that share similar characteristics with the current market. Broadening involves encompassing all related markets under a larger category.

Narrowing Focus for Business Clarity

  • Uncle Warren emphasizes the importance of businesses narrowing their focus to better understand their customer base.
  • Conducting a common factor analysis helps identify the top-performing clients and their common characteristics.
  • Narrowing the focus can lead to increased revenue by targeting the most profitable customers.

The reason that most times with businesses that I take on in the portfolio, it's actually the first step we do is we actually narrow it most times. And it's because they don't even know who they serve, and they don't know who they serve best. And so when you're starting out, one of the best practices you can do is the fancy word is a common factor analysis. But basically, what do all the best clients we have have in common?

Uncle Warren explains that narrowing the customer focus is often the first step in his approach to helping businesses. By identifying and understanding the best clients, businesses can enhance their revenue by catering to the most profitable segment.

Solving Customer Acquisition Challenges

  • Uncle Warren addresses the misconception of market saturation and the solvable problem of customer acquisition.
  • He suggests that often businesses believe they have saturated their market when, in fact, they simply lack strategies for customer acquisition.

And I get on with entrepreneurs all the time, and they're like, I think I've saturated my market, and I'm like, all right, what's your revenue? They're like $2 million a year. I'm like, okay, well, the market you're serving is a $60 billion industry, and you are making $2 million a year.

Uncle Warren challenges the notion of market saturation by comparing the entrepreneur's revenue to the overall industry size, indicating that the issue is not saturation but rather the need for effective customer acquisition strategies.

Business Acquisition Preferences

  • Uncle Warren prefers to work with business services, consumer services, and eLearning companies with licensing models.
  • He describes the common problems faced by these businesses, such as being too founder-led, low customer lifetime value, high churn, and over-reliance on one or two acquisition channels.

Yeah. So we work with business services, consumer services, ideally businesses that are elearning. Course. Like, I love licensing models, so I love low overhead. Yeah. High cash.

Uncle Warren reveals his preference for certain types of businesses, particularly those with low overhead and high cash flow, such as eLearning with licensing models. He also outlines typical issues these businesses face that he aims to resolve. Domain Purchase

  • Uncle Warren discusses the strategic purchase of the domain for $400,000.
  • He chose over due to its relevance to his target audience and the services he provides.

I It was 5.6 million... I thought about that. I told Layla, I sent her a proposal... I was like, so I was thinking, so I price anchored with marketing. And then I was like, we could also get, which is 400 grand. She was like, well, that seems much more reasonable because I anchored 5.6. But marketing I still sometimes think about, because I do like that. I like that domain.

Uncle Warren explains the rationale behind purchasing, including the strategic decision to anchor the price against the more expensive He also touches on the domain's relevance to his business and clientele.

Financial Freedom and Entrepreneurship

  • Uncle Warren shares his views on the fastest road to financial freedom and the importance of knowing oneself.
  • He emphasizes the value of skills and experience in various industries and the compound benefits they provide over time.
  • Uncle Warren also discusses the impermanence of legacy and the importance of adaptability.

I mean, the first answer that came, like, the bullet, like, the quick answer was knowing thyself, right?... Specialized skills are valuable independent of the currency or the economic climate... And so I think that a lot of people spend a lot of their time in paralysis trying to figure out what the quote, ideal opportunity would be when you won't know what the ideal opportunity is because you don't have a baseline.

Uncle Warren suggests that self-knowledge and skill acquisition are key to achieving financial freedom. He advises against waiting for the perfect opportunity and advocates for gaining experience through action, which leads to the discovery of opportunities.

Economic Outlook and Asset Liquidation

  • Uncle Warren shares his actions in response to inflated prices, such as selling companies and personal assets.
  • He discusses his strategy of holding cash and waiting for market conditions to change, drawing parallels to Warren Buffett's approach.

There was inflated pricings. I mean, a lot of people are really afraid of inflation, and I think that's super warranted... He's got 150,000,000,000 in cash sitting right now. He's not worried about it. He's seen more cycles than I have. So he's got 25% of his entire company value sitting in cash. He's waiting.

Uncle Warren explains his decision to sell assets during a period of inflated pricing and his current position of holding cash, similar to Warren Buffett's strategy. He suggests that holding cash provides flexibility to respond to market changes.

Addressing Scarcity and Fear Mindset

  • Uncle Warren differentiates between fear and scarcity mindset when discussing his family's concerns about his career path.
  • He reflects on his father's fear of failure and its potential reflection on family reputation rather than a scarcity mindset.

I don't think he has scarcity mindset. I don't think so... I think just fear. I don't think they're necessarily the same thing... I think my dad was afraid of what me being a failure would reflect on him. I don't think it had anything to do with scarcity.

Uncle Warren clarifies that his father's concerns were rooted in fear of failure and its impact on family reputation, not scarcity. He distinguishes between the two mindsets, implying that fear is an emotional response while scarcity is a belief about limited resources.

Profitability of Insurance and Big Businesses

  • Insurance is profitable because it involves paying for potential risks that may never occur.
  • Big businesses often have high gross margins, making them lucrative.
  • Exxon is highlighted as an example of a company with high net free cash flow, primarily due to selling oil, which has a high profit margin.
  • Companies like Facebook and Google make significant profits by selling "eyeballs" (ad space) that cost them very little.
  • The ethics of capitalism are briefly mentioned, suggesting businesses sell for market value and aim to reduce costs.
  • Long-term greed versus short-term profits is discussed, with an emphasis on making decisions that are beneficial in the long run.

"Insurance so profitable? Because you pay them for, I mean, it depends on what you pay. Thousands and thousands, thousands a year for something that may never happen."

This quote explains the basic principle of why insurance is profitable: customers pay for protection against potential risks that may not occur, allowing insurance companies to collect premiums without necessarily providing a payout.

"The point is, I've now learned to see this as like, when I see big businesses, the bigger the business, the more I realize that there's probably a very high gross margin opportunity."

Uncle Warren identifies a correlation between the size of a business and the potential for high gross margins, indicating that large companies often have lucrative profit opportunities.

Path to Financial Freedom

  • A common mistake is the desire to become a millionaire quickly, rather than steadily over a longer period.
  • A more realistic and achievable goal is to become a millionaire over a decade, with patience and consistent effort.
  • The concept of long-term greed is reinforced, suggesting that short-term gains might introduce risks that could lead to long-term losses.

"Biggest mistake that I see young people, or people who are young in the game making is that they want to become millionaires in 90 days."

Uncle Warren criticizes the impatience of those seeking quick wealth, suggesting that a more patient approach over a longer period is more likely to result in becoming a millionaire.

Importance of Saving and Investing

  • The conversation shifts to the importance of saving a portion of one's income and living below one's means.
  • Uncle Warren admits to not being an "Uber investor" and attributes his wealth to business ownership rather than investing.
  • The risks and rewards of business ownership are discussed, with an emphasis on the potential for both significant wealth creation and loss.

"So you're talking about taking $1,000 paycheck and taking 300 of it and putting it into savings and living on less, living under your means for nine years. And that compounds."

The quote suggests a strategy for building wealth through consistent saving and compounding, which can lead to significant financial growth over time.

Skills for Success in Business

  • Sales skills are crucial for success in business and translate to various aspects of life, including business, investment, and recruitment.
  • The importance of gaining diverse job experiences to build a skill set is emphasized.
  • Warren Buffett's advice on working for learning or earning is cited, suggesting that work should always contribute to personal growth or financial gain.

"I think most guys who have entrepreneurial tendencies could make 200,000 a year, 300,000 a year, becoming excellent at sales if you just learn that skill."

Uncle Warren highlights the value of sales skills, suggesting that they can lead to high earnings and are essential for entrepreneurs.

Definition and Building of a Brand

  • Brand is equated to reputation, or what people say about you when you're not present.
  • Building a brand should start from within, based on values and actions.
  • The Alex Romozi brand is described as having unimpeachable character, sincere candor, and competitive greatness.

"So I see brand as reputation, and I see reputation as what people say about you when you're not there."

Uncle Warren defines a brand as the perception others have of you in your absence, emphasizing the importance of reputation.

Financial Goals and Net Worth Categories

  • Uncle Warren shares his financial goals, including increasing net worth and achieving recognition on the Forbes 100 list for self-made richest women.
  • Different net worth categories are explained, ranging from high net worth to billionaire status.
  • The mission of documenting and sharing best practices for building world-class companies is highlighted as a driving force behind their efforts.

"The next goal would be billion. And that's just because if you look at how the high net worth is broken up..."

Uncle Warren outlines his next financial milestone and explains the classification of net worth levels, indicating a clear understanding of financial goals and status.

The Importance of Advertising and Branding

  • A distinction is made between direct response advertising and branding, with branding being a higher return on investment over a longer time horizon.
  • The shift from direct response to branding is discussed as a natural progression for established businesses.
  • The impact of branding on a company's value is exemplified by luxury brands like Louis Vuitton, which can command high prices due to brand reputation.

"I think that having the money in the bank enables more branding."

Uncle Warren explains that financial stability allows for a greater focus on branding, which can yield higher returns over time compared to direct response advertising.

Personal Desires and Goals

  • Wanting something is presented as a sufficient reason for pursuing it, without the need for further justification.
  • The upcoming book "100 Million Dollar Leads" is introduced, focusing on advertising and generating leads for businesses.

"Wanting something is reason enough. You don't need to justify. Why do you want that? Because I want to."

Uncle Warren emphasizes the legitimacy of personal desire as a motivation for pursuing goals, suggesting that the act of wanting is justification in itself.

What others are sharing

Go To Library

Want to Deciphr in private?
- It's completely free

Deciphr Now
Footer background
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon
Crossed lines icon

© 2024 Deciphr

Terms and ConditionsPrivacy Policy