The Power of Focus and Playing The Game (on Leveling Up with Eric Siu) Pt. 1 Aug ‘23 Ep 634

In this episode, the host, Alex, underscores the importance of authenticity in content creation, advising against becoming an "algo whore" for algorithmic trends and instead focusing on brand-aligned expertise. He shares a failed collaboration with a Crocs designer, highlighting the pitfalls of misaligned business expectations. The conversation shifts to the complexities of running a holding company, where Alex reveals his hands-on approach at HoldCo, contrasting it with the detached Berkshire Hathaway model. He emphasizes the significance of growth partnership, selective deal-making, and leveraging core competencies to enhance enterprise value, as evidenced by a successful intervention in a teeth whitening chain. Additionally, Alex and his guest discuss the strategic use of content for deal flow generation, the nuanced understanding of love and respect in his marriage with Layla, and the meticulous approach to content production, including the critical role of compelling hooks and the rejection of content that doesn't meet personal or brand standards.

• Alex emphasizes the importance of staying true to one's brand and expertise when creating content.
• Advises against discussing topics one is not knowledgeable about or pretending to be someone they're not.
• Stresses that content should be authentic and reflect the creator's genuine interests and knowledge base.

"And so a lot of people will do anything for the algorithm. But, like, if it's not on brand for me, if it's not something I'm an expert in, I'm not gonna talk about it."

This quote reflects Alex's belief in the importance of content authenticity and expertise. It is relevant to the theme as it advises content creators to avoid chasing trends at the expense of their brand integrity.

• Alex recounts a failed collaboration with a company for branded crocs.
• He was initially excited about the collaboration but backed out due to a misunderstanding regarding payment and pricing.
• Highlights the importance of clear communication and shared expectations in business partnerships.

"And then he was like, well, just tell us how many you want, and here's the bill. And I was like, there's some massive misunderstanding."

The quote indicates a communication breakdown during the collaboration process, which led to Alex's decision to not proceed with the partnership. It illustrates the potential pitfalls in business collaborations when expectations are not clearly aligned.

• Dan introduces the concept of holding companies (Holdcos) and the recent interest in them.
• Alex discusses the complexity of running a holding company and the two models of operation: decentralized (Berkshire Hathaway model) and hands-on growth partnership.
• The conversation sheds light on the strategic decision-making and selectiveness necessary for a successful holding company.

"But part of the reason that we have basically the complete opposite model is that the deal flow that we have usually wants our help to grow."

Alex explains the rationale behind their hands-on approach with portfolio companies, emphasizing their role as growth partners rather than passive investors. This quote is relevant as it outlines one of the operational models for holding companies and the strategic considerations involved.

• Alex outlines the criteria for investment, including company size, founder dynamics, product viability, and market fit.
• He emphasizes the importance of a company's potential for growth and the specific competencies where the holding company can add value.
• Discusses the rigorous process of selecting companies to invest in, from initial application to final deal closure.

"We want you to be very specifically incompetent, as in incompetent in all the ways that we are excellent."

This quote succinctly captures the investment philosophy of Alex's holding company, which looks for companies that lack certain competencies that the holding company excels in, thereby creating a synergistic relationship. It is relevant as it reveals the strategic approach to selecting portfolio companies.

• Alex attributes the success of their deal flow to content creation.
• He details how content helps in pre-qualifying potential deals by allowing companies to familiarize themselves with his business philosophy and practices.
• The discussion highlights the importance of content as a tool for business development and the efficiency it brings to the deal selection process.

"All of our deal flow comes from content."

The quote emphasizes the significance of content creation in generating business opportunities for the holding company. It is relevant as it demonstrates the power of content in attracting and pre-qualifying potential investment opportunities.

• Alex describes the specialized functions within the holding company, including subject matter experts in various business areas.
• He discusses the process of codifying business plays and the focus on major levers for growth.
• The conversation reveals the ongoing process of honing business strategies to maximize efficiency and value creation.

"We've got like, a three playbook that it's like, we can ten x services companies."

This quote illustrates the strategic focus on specific business plays that have been proven to significantly increase the value of service companies within the portfolio. It is relevant as it provides insight into the operational strategies that drive growth and success in a holding company.

• Alex contrasts the focus required for a holding company versus operating individual businesses.
• He explains the distinction between working in, on, and above the business.
• The discussion underscores the importance of focus and the strategic positioning of a holding company as a separate entity with its niche and customer base.

"I own the holding company and that's my work."

The quote clarifies Alex's perspective on his role in the holding company, emphasizing that his focus is on the overarching entity rather than the individual portfolio companies. This is relevant as it speaks to the theme of focus and the distinct nature of holding company operations compared to direct business management.

• Alex discusses the stress and challenges of operating nine companies simultaneously.
• He lacked understanding in leadership, management, and communication.
• Alex emphasizes the importance of operational knowledge and not just acquisition skills.

"Yeah, it was horrible. It was so stressful because, I mean, I had nine companies worth of employees. I just didn't understand how to operate. I didn't understand how leadership worked. I didn't understand management. I didn't have one on ones. I didn't have a communication cadence, and I was the rainmaker for all the businesses."

Alex's quote reflects the overwhelming experience of managing multiple companies without proper leadership and management skills. It highlights the necessity of these skills for successful operation, not just the ability to acquire companies.

• Buying businesses has become fashionable, likely due to many retirements and a surge in supply.
• Alex warns against buying businesses as a trend without understanding how to run them.
• He cautions about people selling courses on buying businesses without having made money from the practice themselves.

"Well, right now, buying businesses is, like, in vogue. I don't really know why it got in vogue, but my best guess is that we have so many people retiring right now that there's just a huge supply spike, and then a lot of people who'd never made their money buying businesses, selling courses on how to buy businesses."

Alex explains the current trend of buying businesses and the potential pitfalls of following this trend without the necessary experience and skills. He also criticizes those who sell educational courses on the subject without having successfully practiced what they preach.

• Alex discusses content creation as a tool for business growth and leverage.
• He emphasizes the importance of unique content that showcases actual business experiences.
• Alex shares his strategy of focusing on content that only he can provide, based on his real-world business ventures.

"I mean, I think the big thing is we try and focus on content that only we can make. That's the big single throughput line. If someone else can make this piece of content, I don't want to make it."

This quote explains Alex's content creation strategy, which is to produce unique and exclusive content based on his own business experiences that cannot be replicated by others. This approach aims to generate more authentic and compelling content.

• Alex has shifted from minority investments to seeking majority stakes in companies.
• He discusses the concept of 'deal fit' and the long-term nature of finding the right investment opportunities.
• The feedback cycles in investing are lengthy, and Alex prefers majority stakes for faster implementation of changes.

"We have moved towards bigger and bigger chunks of companies. Right now, we target 49% with most of the deals. We just did a majority deal two months ago, and so we're now doing both minority and majority."

Alex outlines his current investment strategy, which involves acquiring larger shares in companies, including majority stakes. This approach allows for more control and quicker decision-making.

• Alex has expanded his media team to focus on producing high-quality content.
• The team aims to create content that demonstrates what they do in companies, which is unique to their experience.
• They plan to centralize the media team in a new headquarters and produce more content in the future.

"We will be pushing out a lot of content and it will be really good because you said one thing earlier, but I love this statement, but it's like the second throughput would be too good to fail because that buddy of yours can."

Alex expresses his ambition to produce content that is of such high quality that it is 'too good to fail.' He believes in creating content that stands out due to its inherent value and uniqueness.

• Alex discusses the shift in social media towards a TikTok-like algorithm, where engagement metrics are paramount.
• He believes that good content will naturally attract viewers without the need to perfectly optimize for the algorithm.
• Alex stresses that consistency and quality in content creation are crucial for success.

"In my opinion, all social media has switched to the TikTokification of social media. I actually think it's good because what it does is subscribers mean nothing, followers on Instagram mean nothing. They're literally just a vanity metric now."

Alex explains the current state of social media algorithms, which prioritize engagement over follower counts. He suggests that this shift levels the playing field for content creators, making content quality the most important factor.

• Alex and Dan discuss the efficiency and output of creating content for social media.
• Alex explains that recording direct-to-camera for two hours can produce approximately 100 shorts.
• Dan acknowledges the volume and asks about the expected output from their conversation, to which Alex estimates around ten shorts from a two-hour discussion.
• The conversation highlights the strategy of maximizing content creation by focusing on direct-to-camera sessions.

"Whereas if we do a vlog day, they're going to get three or four shorts from a full day, but they got to go through like 8 hours of content. Whereas if I do like 2 hours of direct camera, we have like 100 shorts."

This quote illustrates Alex's approach to content creation, emphasizing the efficiency of direct-to-camera filming over vlogging for producing short-form content.

• Alex discusses the financial aspect of their media strategy, indicating that their monthly spend has doubled from the previous year's $120,000 to approximately $240,000.
• Dan inquires about Adsense earnings, and Alex confirms they do earn from it but not enough to break even.
• Alex views media as a loss leader, which indirectly supports their business by funding a money-losing media team.
• The conversation underscores the long-term investment perspective in media spending, with Alex stating, "All marketing loses money until it makes you money."

"It's probably double."

This quote refers to the increased monthly spend on media, showing the growth and scale of their media investments.

"Media is just like a loss leader if you want to consider from that perspective. We lose money on media, which is funny because people are like, he makes money on his $2 book, which by the way, Amazon one takes. You get paid like $0.30 on a book that's $2. But anyways, that just goes to fund the money losing media team."

Alex explains that although their media operations are not profitable, they serve a broader purpose in the business ecosystem, with the example of the low earnings from book sales being used to support the media team.

• Alex reveals that half of the 24 letters of intent (LOIs) they receive from content lead to actual deals.
• He mentions that their deal qualification process has become more refined, leading to potentially higher deal flow but with the same number of deals closed.
• Dan asks about the craziest offers Alex has received, and Alex responds that those who make such offers usually lack anything of value.
• Alex emphasizes the importance of simple contracts in plain English to avoid miscommunications and excessive lawyer fees.
• The discussion touches upon the practical aspects of deal-making and the benefits of direct communication between entrepreneurs to resolve issues quickly.

"About half."

This quote indicates the conversion rate of LOIs to actual deals, which is a significant metric in assessing the effectiveness of their content in generating business opportunities.

"Honestly, the people who make the craziest offers usually don't have anything of value to offer."

Alex's response to Dan's question about unusual offers suggests that the most outlandish proposals often come from parties without substantial value to contribute to a deal.

• Alex describes the content ideation process, where his team brings ideas based on their interest in his content.
• He outlines the different time-based categories he uses for content topics: far past, recent past, present, and manufactured.
• Alex and Dan discuss the recording schedule, which involves two full days a month and detailed pre-production for each video.
• The conversation explores how Alex's team integrates insights from various departments into the content production process.
• Alex shares his anticipation for the impact of the new headquarters on team collaboration and content creation.

"The team brings everything from like, because they'll watch this podcast and then they'll be like, dude, that story was interesting. Can we do a thing on that?"

Alex explains how his team sources content ideas by identifying interesting elements from his existing content, demonstrating the collaborative nature of their ideation process.

• Alex discusses how his team members absorb his way of thinking through proximity and exposure, a process he refers to as osmosis.
• He shares his anticipation for the impact of in-person interactions at the new headquarters.
• Alex emphasizes the importance of observing how he handles bad news, as it provides a more impactful learning experience than a standard operating procedure (SoP) could.
• The conversation shifts to storytelling, where Alex details the structure of a good story and how he has worked on improving this skill.
• Dan and Alex discuss the critical role of hooks in content and Alex's approach to refining hooks to maximize engagement.

"I think it's osmosis."

Alex attributes the team's alignment with his thinking to the natural absorption of his mindset through ongoing interaction, highlighting the importance of team immersion in leadership style.

"The storytelling component was something that I really worked hard on, and I have continued to work hard on for almost probably six years."

This quote reflects Alex's dedication to mastering storytelling as a crucial element of effective communication and teaching, underscoring the value he places on this skill in content creation.

• Alex enjoys strategizing for content creation, aiming for broad appeal with business principles.
• They focus on creating hooks that will attract a wider demographic.
• The process of strategizing is seen as a game and a learning experience.

ess one and then it had the philosophical principle and then it way outperformed. And so when we're thinking about our hooks, we'll probably go wide business principle rather than any of the other versions of that, so that we can get a wider demo. But anyways, this just like strategy. Yeah, I just enjoy the game. I think it's fun to learn this stuff.

The quote explains the rationale behind choosing business principles as content hooks to appeal to a broader audience. Alex expresses enjoyment in the strategic and learning aspects of content creation.

• Alex was attracted to Layla's mind before developing romantic feelings.
• He offered her a job with a significant pay raise and pursued her for a month before she accepted.
• Their relationship began with working together and evolved into romance over time.
• They got married before being "in love love" and later decided to prioritize their marriage over business for happiness.

Well, I liked her mind first. I mean, I pitched her on working for me the first time we met and I was like, hey, this might not work out, but you should totally work for me and we can make a bunch of money together. And I just said, like, plain black and white. I'll pay you twice as much as you're currently making. But still, look at the offer independent of me. It should make sense for you.

Alex describes his initial interaction with Layla, focusing on her intellectual appeal and offering her a job with a significant salary increase. He emphasizes the business aspect of their early relationship.

• Alex and Layla's love was founded on mutual respect.
• They had a unique relationship dynamic that differed from Alex's past relationships.
• Layla's acceptance of Alex's personality and interests was key to their love.
• They made a conscious decision to prioritize their marriage, which improved their happiness.

And that, to me, was probably the most unique aspect of my relationship with her was that I just respected her and she respects me.

Alex highlights the foundational respect in his relationship with Layla, indicating it as a unique and crucial element of their partnership.

• Alex and Layla are open to the idea of having children but are not actively planning for it.
• They are comfortable with adapting their marriage to include children if it happens.

Layla's still young. We have time.

This quote indicates that Alex and Layla are not in a rush to have children and are comfortable with their current situation, leaving the possibility open for the future.

• Alex's content team is US-based, primarily on the west coast.
• He emphasizes understanding brand and creating content that aligns with it.
• The team avoids becoming "algo whores" and focuses on brand-consistent content.
• Alex advises content creators to focus on their areas of expertise.

I mean, early. But I think the big thing that everyone messes up with the content and even the quote going cheap is that they have to understand brand.

Alex criticizes the common mistake of undervaluing brand understanding in content creation, emphasizing its importance over cost-cutting measures.

• Alex's enjoyment of content creation depends on his rest the night before.
• The team balances content that Alex likes with what the audience and algorithm favor.
• They conduct split tests for headlines and thumbnails to optimize reach while maintaining brand integrity.

It really all depends on how much I've slept the night before.

Alex acknowledges that his rest influences his enjoyment and effectiveness in content creation, highlighting the importance of personal well-being in the creative process.

• Alex's team works to make business education accessible while maintaining brand values.
• They reject content that could harm others or misrepresent the brand.
• Alex values content that benefits everyone involved and aligns with his character.

But the thing is, they will send me thumbnails and headlines and I'll be like, that's not true. Or, I don't like how this makes the person that we're talking about in the video sound.

Alex discusses the importance of honesty and respect in content, rejecting anything that could misrepresent the truth or negatively portray others.

• Alex chooses podcasts based on the quality of the interviewer's questions.
• He prefers in-depth, researched questions over repetitive origin stories.
• Alex enjoys good conversations and is selective due to the high volume of requests.

I will do podcasts if I think the person who's doing the interviewing has good questions.

This quote explains Alex's criteria for accepting podcast invitations, emphasizing the importance of quality questions and interviewer preparation.

• Alex sees growth as a consequence rather than a goal.
• The focus is on creating high-quality content that can help someone.
• They ensure consistency and quality in their output, trusting that it will lead to desired results.

I see the compounding as a consequence of what we're doing rather than the goal.

Alex expresses his perspective on growth, viewing it as a natural outcome of consistent, high-quality content rather than an explicit objective.