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.
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.
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.
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.
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.
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.
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.
For us, the values that we have@acquisition.com. 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.
"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.
"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.
"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.
"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.
"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 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.
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.
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.
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.
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.
I looked@marketing.com. 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 acquisition.com, 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 Acquisition.com, including the strategic decision to anchor the price against the more expensive Marketing.com. He also touches on the domain's relevance to his business and clientele.
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.
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.
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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.
"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.