Ignorance, Difficulty in Scaling, and Finding Talent (on BiggerPockets) Pt. 2 Aug '22 Ep 501

Summary Notes


In a deep dive into the intricacies of business scaling and personal development, Alex Hormozi and co-hosts Rob and David explore the value of investing in oneself over traditional investments. Alex emphasizes the importance of enduring short-term discomfort for long-term success, whether in business, fitness, or personal growth. The conversation covers the significance of aligning oneself with revenue-generating activities and the necessity of continuous education to overcome ignorance and skill deficiencies. They also discuss the benefits of robust training programs for employee development and the impact of company culture on retaining top talent. Alex shares insights on recognizing and nurturing 'superstars' while cautioning against cultural misfits, regardless of individual performance. The dialogue also touches on the psychological aspects of entrepreneurship, including the challenges of relinquishing control at various growth stages and the personal reflection required to address business issues. Alex's approach to business is mirrored in his personal life, with a disciplined focus on work, fitness, and efficiency, exemplified by his streamlined dietary habits.

Summary Notes

Personal Philosophy and Goals

  • Alex's personal goal is to achieve wisdom, which he defines as the ability to discern truth and see beyond what is apparent.
  • He expresses the importance of understanding circumstances and having discernment.
  • The podcast aims to discuss customer acquisition, increasing customer value, retention strategies, and lessons from failures.

"My goal in life was to be wise. When I was really young, I was like, I want to be wise. And wisdom is seeing what other people cannot say. It's understanding the circumstances and having the discernment to see what is true and what is not."

The quote emphasizes Alex's lifelong pursuit of wisdom and his understanding of it as the ability to see the deeper truth in situations, which is a foundational aspect of his personal philosophy.

Talent Acquisition and Training

  • Alex discusses the relationship between the nature of work and the type of labor required.
  • He explains the competitive advantage of having a robust training program for less skilled labor.
  • The cost-effectiveness of training in-house versus paying a premium for pre-trained talent is highlighted.

"So, for example, like, frontline work in general, you're going to get lower skilled labor. And so it becomes a competitive advantage to have a very good training program, because then you're getting the work done for less than the market."

Alex is explaining how companies can gain a competitive edge by training lower skilled labor internally to perform at a high level, thereby reducing costs compared to hiring pre-skilled workers.

The Role of a COO and Delegation

  • Rob shares his experience hiring a COO for his education brand, which allowed him to reduce stress and fulfill family needs.
  • He describes the relief of no longer having to handle logistics himself, realizing the value of hiring competent people.
  • The COO's journey from a customer to a key team member is detailed, demonstrating the importance of internal development and recognizing potential.

"And I really feel the moment that they accepted the offer, I was like, oh, I can finally stop saying no to everything, because anytime I have a new idea or something, new that I want to do with my program, I would immediately say, oh, yeah, but the logistics on that are a headache."

Rob is expressing how hiring a COO has freed him from the burden of logistics, allowing him to focus on innovation and new ideas without the immediate concern of implementation challenges.

Recognizing and Retaining Superstars

  • Alex talks about the rarity and value of recognizing "superstars" within a company.
  • The importance of retaining top talent without compromising company culture is stressed.
  • He shares wisdom from a mentor about the continuous improvement of talent acquisition and the need to have the humility to let go of control.

"But superstars, when you find them, you have to hold on to them and you have to find a way to. Now, mind you, the big comma here is that as long as they do not break the culture and you're not making exceptions for them from a cultural basis."

Alex is highlighting the delicate balance of nurturing superstars in a company while ensuring they do not negatively impact the overall culture, which is crucial for maintaining a healthy work environment.

Scaling a Business and Leadership Challenges

  • Alex describes the different challenges at various revenue milestones when scaling a business.
  • He emphasizes the need for leaders to relinquish control at each stage and the psychological difficulty of doing so.
  • The conversation touches on the personal growth required of CEOs to delegate effectively and the importance of humility in leadership.

"Once you're at three to ten, you're already out of the. I have to cry my face off in terms of hours in because at some point the amount of work that has to get done surpasses your ability to work, which means you have to work through other people."

This quote explains the transition from working hard individually to the necessity of working through others as a business grows, highlighting the shift in leadership style required to scale effectively.

Reflections on Personal Growth and Business Challenges

  • David relates the discussion to his own experiences, recognizing that business issues often mirror personal ones.
  • He admits to struggling with delegating responsibilities and maintaining momentum in scaling his businesses.
  • The conversation reveals the common challenge entrepreneurs face in letting go of control and trusting others to lead.

"Yeah, like, it keeps on coming back, that every issue I'm having in business is a reflection or a symptom of an issue I have with myself."

David is acknowledging the introspective realization that his business challenges are often indicative of personal areas for growth, which is a common theme in entrepreneurial self-development.

The "Hidden Funnel" of Talent Acquisition

  • Alex introduces the concept of a "hidden funnel" for employee acquisition, paralleling it to the customer acquisition funnel.
  • He outlines the steps for acquiring and nurturing talent, emphasizing the importance of a systematic approach to building a team.
  • The discussion underscores the need for businesses to have structured processes for recruitment and employee development.

"But if you think about what has to happen to acquire a customer, right? So you have to do some sort of lead generation. There's some sort of lead nurture. There's some sort of sales, there's some sort of delivery, and then there's some sort of retention, and then some sort of ascension, right? So those are kind of like the steps that you take through for a customer. Well, the same funnel exists on the other side of the business, which is, as the business grows, you need to have a funnel to acquire talent, acquire employees."

Alex is drawing an analogy between customer acquisition and talent acquisition, suggesting that businesses should apply similar funnel strategies to both areas to ensure growth and success.

Key Theme: Talent Acquisition and Retention

  • The job market for top talent is extremely competitive, with the best candidates often finding a job within eight days.
  • Companies need to have a fast and effective hiring process to attract and retain the best employees.
  • The interview should be viewed as a sales process, where the company sells itself to the candidate.
  • Onboarding is crucial for integrating new hires into the company culture and explaining operational details.
  • Retention and ascension are the final stages, focusing on keeping employees motivated and providing career growth opportunities.
  • Businesses need a concurrent internal funnel to build infrastructure and support incoming leads and customers.
  • Consistency in hiring is key to moving from one-off hires to a systematic hiring process.

"The best talent finds a job in eight days. Eight days from the day they start searching."

This quote emphasizes the fast-paced nature of the job market for highly skilled individuals, highlighting the need for companies to act quickly in their hiring processes.

"The sale is the interview, right? And with good talent, it should be a sale."

The quote suggests that interviews should be approached as an opportunity for the employer to persuade top candidates to join their company, recognizing the bargaining power of skilled job seekers.

"How do we retain them and continue to get them motivated? And then is there the opportunity for ascension?"

This quote highlights the importance of not only keeping employees within the company but also ensuring they have opportunities for career advancement, which is essential for long-term retention.

"Most people build this front end, and they don't have a concurrent funnel that funnels into the Business to build the infrastructure of the business to support the leads and customers that are coming in."

The speaker points out a common oversight where businesses focus on external growth but neglect the internal processes necessary to support and sustain that growth.

Key Theme: Enhancing Personal Value and Career Development

  • Investing in oneself is crucial for personal and professional growth, often yielding better returns than traditional investments.
  • Understanding and addressing one's skill deficiencies is essential for career advancement.
  • Identifying revenue-generating activities within a business and aligning one's skills with them is a strategy for increasing personal value to an employer.
  • All roles within a company, including back-office functions, can contribute to revenue generation and cost savings.
  • Employees should learn to assess their deficiencies and strengthen their weakest links to enhance their overall value.

"They should be putting every dollar they have into themselves rather than an index."

This quote advises individuals to prioritize self-improvement and skill development over passive investments, as personal growth can lead to greater financial returns.

"A system will grow until it's constrained... most people add potential to a system, but they don't actually increase the throughput of the system."

The speaker is referencing the theory of constraints and applying it to personal development, suggesting that people often fail to address their weakest skills, which limits their overall career growth.

"A good product person is going to say, I can decrease our churn, which is going to increase your LTV."

Here, the speaker provides an example of how an employee can directly tie their role to the company's financial performance, thus demonstrating their value and justifying their salary.

"How do I tie what I do every day to making more money in the business? You connect that dot and then you improve that connection."

This quote summarizes the strategy for employees to increase their worth: by linking their daily tasks to the company's revenue and continuously improving that linkage.

Key Theme: Building Skills and Overcoming Personal Weaknesses

  • Strengthening individual skills is akin to strengthening the links in a chain, where the focus should be on the weakest links to improve overall capability.
  • Employees should identify and work on their personal skill deficiencies to bring more value to their employers and potentially earn more.
  • The analogy of strengthening one's body at the gym is used to illustrate the importance of addressing weaknesses in a systematic way.

"I can't even get a bicep workout because my wrists would get tired before that muscle would."

This personal anecdote demonstrates the concept that before achieving a larger goal (like building biceps), one must first address and strengthen the weaker, supporting areas (like wrists).

"Is that close to what you're describing that people have with their own personal skills, that maybe they want to get to this part in bringing value, but they've got these weak links. They have to strengthen before they get there."

The speaker is asking for confirmation on the analogy between physical training and skill development, suggesting that employees must first overcome their weaker skills to achieve greater success and bring more value to their roles.

The Role of Educators and Accepting Responsibility

  • Educators often want to claim responsibility for their students' successes but must also acknowledge their role in students' failures.
  • Education builds upon foundational knowledge that individuals already possess.
  • The goal of educational programs should be to make progress, not just immediate financial gain.
  • Overcoming ignorance through education is a critical first step in entrepreneurship.

"But the thing is, if you take responsibility for everyone's success, you have to also take responsibility for everyone's failures."

This quote emphasizes the dual nature of responsibility that educators must accept: they are involved in both the successes and failures of their students.

The Process of Acquiring Knowledge and Skills

  • Education is likened to a chain with missing links; each course or program adds links but may not complete the chain.
  • Progress is measured by the number of links gained, not necessarily by immediate financial outcomes.
  • The final piece of knowledge that leads to success may come from various sources, and it's important to appreciate the cumulative learning process.

"And so you pay down that time tax of ignorance through education."

This quote highlights the necessity of investing time in education to overcome ignorance and progress in one's entrepreneurial journey.

The Importance of Focusing on Inputs and Personal Growth

  • Success should be measured by the effort and investment in oneself, not just financial outcomes.
  • Personal growth and focusing on the process are more important than immediate results.
  • Alex shares his personal approach to success, emphasizing continuous education and the pursuit of wisdom.

"And so I think if people can make that shift based on them being the investment that they are making, then they will always see the return."

Alex suggests that individuals should view themselves as the primary investment, ensuring a return in the form of personal and professional development.

The Value of Education in Increasing Earning Capacity

  • Investing in education is crucial to increase one's earning capacity.
  • Practical examples, such as acquiring a phlebotomy certification, demonstrate the tangible benefits of targeted education.
  • The path to success involves identifying skill gaps and seeking education to fill those gaps.

"In my opinion, 100% of anyone's money, especially sub 30, should be invested in only one thing, which is increasing their earning capacity."

Alex advocates for young individuals to invest all their resources into improving their skills and knowledge to enhance their ability to earn more.

The Practical Application of Skills and Experience

  • Building skills through experience, mentorship, and education is essential for success in business.
  • The process of skill acquisition can lead to empowerment and opportunities for advancement.
  • Understanding the flow of money in a business is a fundamental skill for success.

"You just have to watch the path of the money from click to close, cradle to grave."

Alex points out the importance of understanding how money moves through a business, from attracting attention to closing sales and retaining customers.

Encouragement for Entrepreneurial Education

  • Alex and David encourage listeners to spread the word about the podcast to support entrepreneurs.
  • Education is defended against criticisms, emphasizing its importance in providing a foundation for hard work.
  • The discussion concludes with a call to action for listeners to leave a review and share the podcast.

"The single thing that I ask you to do is you can just leave a review. It'll take you 10 seconds or one type of the thumb."

Alex asks listeners to support the podcast by leaving a review, which can help reach and impact more entrepreneurs.

Importance of Understanding Business Revenue

  • Alex emphasizes the significance of comprehending business revenue and its impact on personal value within a company.
  • Understanding revenue streams can lead to better opportunities and growth within a business environment.
  • Business owners, even small ones, possess knowledge that can be valuable for learning and advancement.

"If you can follow the money and get yourself close to the money, you will become more valuable."

The quote underlines the idea that proximity to revenue generation within a business can increase an individual's value and opportunities for growth.

Competition and Collaboration in Business

  • Rob discusses the competitive nature of business and the potential for collaboration, even among competitors.
  • Alex and Rob agree that competition should not hinder friendships or collaborative growth in the business realm.
  • They highlight the importance of focusing on personal growth and helping each other rather than being overly competitive.

"We can only help each other grow."

This quote reflects the belief that mutual support in business can be more beneficial than competitive rivalry.

Demographics and Psychographics in Marketing

  • Alex introduces the concept of psychographics in addition to demographics when targeting a market.
  • He explains that different values and vibes attract different customers, even if the service provided is the same.
  • Understanding the psychographic profile of potential customers can help in tailoring marketing strategies to specific audiences.

"Like anyone can do Airbnb, short term rentals. Right? So somebody might be attracted to you, someone might be attracted to me, someone being attracted to David."

The quote illustrates the idea that different people are drawn to different personalities and values, affecting their choices in a market with similar offerings.

Leveraging Experience and Capital in Real Estate

  • David praises Alex for sharing valuable insights that can lead to financial success and facilitate real estate investment.
  • He emphasizes the importance of having capital for real estate ventures and encourages listeners to reflect on Alex's advice.

"This is like legit, really gold information that I think can change lives."

David's quote acknowledges the potential life-changing impact of Alex's shared experiences and advice on accumulating capital for investment purposes.

Book Recommendations for Real Estate and Business

  • Alex shares his favorite real estate book, "Crushing it with real estate apartments," and discusses its impact.
  • For business, he recommends "Ready, Fire, Aim" for those struggling with scaling, and books by Patrick Lincioni for operational insights.

"The book called the Motive changed my life and is what got me to break through that."

Alex cites a specific book that profoundly influenced his entrepreneurial actions and helped him overcome business challenges.

Entrepreneurial Mindset and Success Factors

  • Alex identifies the ability to endure short-term discomfort for long-term achievement as the key to success in various fields.
  • He applies this principle to multiple aspects of life, including personal health, relationships, leadership, and financial success.

"The ability to deal with short term discomfort for long term achievement."

This quote encapsulates the core mindset Alex believes is necessary for entrepreneurial success and personal growth.

Personal Habits and Efficiency

  • Alex discusses his personal habits, focusing on efficiency and minimizing distractions from his work.
  • He shares his experience with eating at Chipotle frequently due to its convenience and time-saving benefits.

"It was way easier for me to just get Chipotle twice a day."

The quote highlights Alex's prioritization of efficiency in his daily routine to maximize productivity.

Utilizing Social Media and Content Creation

  • Alex and the hosts discuss the use of social media platforms like TikTok for content creation.
  • They explore the misconception that TikTok is solely for dancing videos and emphasize its potential for delivering short-form, valuable content.
  • Alex stresses the importance of understanding the platform and audience to create impactful content.

"It's just about whether you can deliver value in an entertaining way in 60 seconds or less."

Alex's quote suggests that the essence of successful content creation on TikTok lies in providing value within the constraints of the platform's format.

Final Remarks and Contact Information

  • Alex invites listeners to check out his podcast and social media channels for more content.
  • The hosts also share their contact information and encourage the audience to reach out with any questions.

"You can just search the game on any place that you listen to podcasts, Spotify, Apple, all that jazz, Stitcher, all the weird ones."

Alex provides information on where listeners can find and engage with his content across various media platforms.

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