The Test I Put Lawyers Through Before Hiring Them Ep 325

Summary Notes


Alex Hormozi emphasizes the importance of choosing the right people to guide and support one's business and personal wealth, highlighting that integrity and skill are crucial traits in advisors. He shares insights from his own experience as a business owner with an $85 million portfolio aiming for a billion in revenue. Hormozi outlines a process for assessing advisors' integrity through extensive interviewing and ensuring aligned incentives, while skill evaluation involves personal education and expert consultations. He concludes with the profound notion that true success lies in being surrounded by people who genuinely care for you, even in perilous times, suggesting that trustworthiness often trumps sheer expertise.

Summary Notes

Selection of Key Personnel

  • Selecting the right people is crucial for personal success and business trajectory.
  • Importance of having a reliable team, including lawyers, accountants, and investment professionals.
  • Alex Ramosi emphasizes the impact of mentors and advisors on his success.
  • Trust and skill are the two primary traits to look for in people who provide counsel.
  • Alex Ramosi shares his approach to evaluating these traits.

"Selecting the right people can make or break your life and the trajectory of your business."

This quote highlights the importance of choosing the right individuals for one's personal and professional circles. It sets the stage for discussing the significance of having trustworthy and skilled advisors.

Importance of Integrity

  • Integrity is essential for trust in professional relationships.
  • It's not sufficient to have integrity; advisors must also prioritize the client's best interests.
  • Alex Ramosi considers integrity as the first character trait to seek in counsel.

"So the first is integrity. And I know that might sound silly, but when you think about it, you need someone who you can trust."

Alex Ramosi identifies integrity as a foundational trait for anyone providing counsel. He emphasizes the need for trustworthiness in those handling your affairs.

Importance of Efficacy

  • Efficacy refers to the skill set and ability to deliver desired outcomes.
  • Trust alone is not enough; the person must also be competent in their field.
  • A balance between integrity and skill is necessary for effective counsel.

"The second is efficacy or their skill set."

This quote underlines the importance of having advisors who are not only trustworthy but also highly skilled and effective in their respective areas of expertise.

Trust and Skill Balance

  • Trusting someone's intentions does not guarantee their competence.
  • High skill levels also come with the risk of being manipulated if the person lacks integrity.
  • The goal is to find someone who has both the client's best interests at heart and the skills needed to achieve their goals.

"So let's think of different scenarios here. So let's say you might trust your mom implicitly, but she doesn't have the skill of knowing much about how to structure insurance policies or trusts or investments in tech startups, right?"

This quote provides an example to illustrate the need for a balance between trust and skill. It shows that personal trust does not equate to professional competence.

Alex Ramosi's Personal Experience

  • Alex Ramosi owns a portfolio of companies with significant annual revenue.
  • He aims to document the journey from $85 million to $1 billion in annual revenue.
  • Sharing lessons learned is a key purpose of his channel.

"And for those who don't know me, my name is Alex Ramosi. I own a portfolio of companies that does about $85 million a year."

The quote introduces Alex Ramosi and his business accomplishments, providing context for his insights on the importance of selecting the right people for business success.

Selection of Advisors and Counsel

  • Alex Ramosi emphasizes the importance of interviewing multiple advisors to gain a broad perspective.
  • By gathering information from various sources, one can make a more informed judgment.
  • The analogy of Julie in the gym illustrates the confusion that can arise from limited perspectives.
  • Diverse opinions from advisors provide a spectrum of advice, preventing narrow viewpoints.

"One is I always try and interview as many advisors as humanly possible, all right? And I do that because I'm going to get as much information from each of the council during this process that will give me perspective from which to make a judgment, right."

This quote highlights the strategy of interviewing numerous advisors to collect extensive information, which aids in making well-informed decisions.

Understanding Incentive Systems

  • Alex Ramosi discusses the significance of aligned incentives when seeking advice.
  • He points out that incentive systems may seem aligned on the surface but can be misaligned in reality.
  • The example of a realtor's incentives illustrates how their goal may differ from the client's best interest.
  • Understanding the true incentives of advisors is crucial for assessing their advice.

"So let me give you an example. So in the real estate market, if you're a realtor, for example, you may think, oh, this realtor has my best interest at heart, right? Because they have an incentive to sell the house. And so that is why they're going to get compensated. So they want to sell it for as much as possible."

This quote introduces the concept of incentive misalignment using a realtor as an example, where the apparent incentive to sell a house for the highest price may conflict with the incentive to sell quickly.

Realtor Incentive Breakdown

  • Alex Ramosi breaks down the financial implications of a realtor's incentive to sell a house quickly versus for a higher price.
  • The difference in commission between selling at market value and selling quickly at a lower price is explained.
  • The discrepancy between the importance of a higher sale price to the client versus the realtor is highlighted.
  • The example serves to illustrate how incentives can dictate the behavior of advisors.

"And so for them, the, the $50,000 decrease to drop you from 500 to 450 means that they're going to give up $2,500. So they're going to make 22,500. So let me ask you a question now, in the reverse, if they sell for 525, they're going to get 27,500, right? And so it's a $5,000 swing off of a $25,000 nut for them, and one of them might take them three months, and one of them might take them a day. So what is their incentive?"

The quote provides a detailed explanation of how a realtor's commission is affected by the sale price of a house, demonstrating that a realtor may prioritize a quick sale over the client's financial gain.

Importance of Audience Support for Podcast Growth

  • Alex Ramosi emphasizes the significance of audience engagement for the growth of his podcast.
  • He requests listeners to help spread the word about his podcast to assist more entrepreneurs.
  • The act of rating, reviewing, and sharing is posited as a way to potentially change the world for someone else.

"The only ask that I can ever have of you guys is that you help me spread the word so we can help more entrepreneurs make more money, feed their families, make better products, and have better experiences for their employees and customers."

The quote highlights the purpose behind the request for audience support, which is to extend the podcast's reach and positive impact on entrepreneurs.

Aligning Incentives in Business Relationships

  • Alex Ramosi discusses the importance of aligned incentives when working with counselors or advisors in financial, legal, or insurance matters.
  • He emphasizes integrity and incentive alignment, suggesting a tiered commission structure as a way to align incentives.
  • The proposed structure incentivizes advisors to achieve higher results, aligning their goals with those of the entrepreneur.

"And so now they're highly incentivized to push, and now your incentives are aligned because each increment for you is worth almost as much it is to them."

This quote explains how a tiered incentive structure can motivate advisors to work harder for higher results, ensuring their goals are in sync with the entrepreneur's.

Assessing Skill Set of Advisors

  • Alex Ramosi outlines a three-step approach to assessing the skill set of potential advisors or consultants.
  • He suggests educating oneself by reading books on the topic, bringing a trusted person into discussions, and conducting multiple interviews to gauge expertise.
  • The approach is likened to qualitative research, and it is stressed that many people skip this crucial step.

"And so when you do these interviews, and this is the lazy part, this is what most people don't do is they won't do this work."

The quote suggests that conducting thorough interviews to assess the skill set of potential advisors is often neglected, which is a critical step in making informed decisions.

Importance of Diligence in Financial Decisions

  • The decision of where to invest can greatly influence one's net worth over time.
  • People often spend less time on investment decisions than on planning vacations.
  • The significance of these decisions necessitates careful consideration of who to work with.

"That one decision can be one of the most, if not the biggest influence on your total net worth over a long period of time."

This quote emphasizes that a single financial decision can have a profound impact on long-term wealth, highlighting the importance of making such decisions with great care.

Criteria for Choosing Financial Advisors

  • Assessing integrity and skill are critical when selecting someone to manage investments.
  • Integrity ensures the advisor has the client's best interests at heart.
  • Skill is necessary to effectively manage investments and fulfill promises.

"Do I think this person is integris? Do I think this person has my best interest at heart? And then two, do they have the skill to deliver on that promise?"

Alex Ramosi outlines two key questions to ask when evaluating a potential financial advisor, focusing on their integrity and competence.

Incentives in the Financial Industry

  • Many professionals, such as those in insurance and mortgage brokering, may have incentives misaligned with clients' interests.
  • It's crucial to consider both the integrity and skill of the advisor due to prevalent conflicts of interest.

"In the insurance industry, they're kind of incentivized to rip you off. It's pretty terrible. And there's a lot of industries like that, mortgage brokers are incentivized to rip you off."

Alex Ramosi points out the unfortunate reality that some industry professionals are motivated to act against their clients' interests, which underscores the importance of being vigilant when choosing an advisor.

Framework for Selecting Trusted Advisors

  • The decision-making framework involves evaluating integrity and skill.
  • The impact of these decisions on net worth and financial future is substantial.
  • Trust in advisors should be paramount, akin to trusting someone with your life in extreme situations.

"These types of decisions can make the biggest impact on your net worth and your financial future simply based on who you decide to work with."

Alex Ramosi emphasizes that the choice of financial advisor can significantly affect one's financial trajectory, making the selection process critical.

Warren Buffett's Perspective on Life and Success

  • Warren Buffett lives a life similar to most people in his daily habits.
  • He measures success by the number of people who truly love him at his life's end.
  • The true test of love and friendship is willingness to help at personal risk.

"He defines a successful life based on the number of people who truly love you when you die."

Alex Ramosi shares Warren Buffett's measure of a successful life, highlighting the importance of deep, genuine relationships over material success.

Defining True Friends and Trustworthy Business Partners

  • True friends are those willing to help without regard for their own safety.
  • This powerful perspective can be applied to choosing business partners.
  • Trust in intentions is sometimes more important than perfect efficacy.

"Would this person hide me if the Nazis were coming? And that's been such a powerful frame for me to think through."

Alex Ramosi elaborates on a profound standard for judging character and trustworthiness, which he applies to both personal relationships and business dealings.

Preference for Trust Over Perfection

  • When faced with a choice, trusting the person's intentions may be preferred over their perfect ability to deliver.
  • It is better to work with someone who is trustworthy and competent rather than someone who is highly skilled but whose intentions are uncertain.

"I would rather have somebody who I trust, their intention, and I have eight, an eight out of ten on the efficacy than somebody whose intentions I am unsure of. And they have a ten on ten of the efficacy."

Alex Ramosi expresses his personal preference for trustworthiness and good intentions over flawless capability, suggesting that integrity is a critical factor in business relationships.

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