How the Top 1% ACTUALLY Make Their Money | Ep 811
On The Game w/ Alex Hormozi, Alex explains the key driving forces behind wealth disparities between countries and individuals. He asserts that nations investing heavily in education and technology can boost productivity and economic growth, while individuals looking to build wealth must master core skills like building, selling, and leading.
Alex identifies these three skills as crucial for wealth creation, with the wealthiest 0.1% excelling at all three. He also explores strategies this elite group employs to multiply their wealth, such as strategic risk-taking, ownership stakes in successful ventures, and continuous reinvestment of earnings into developing valuable skills and acquiring productive assets. The episode provides insights into the mindsets and methods of the ultra-wealthy.
This is a preview of the Shortform summary of the Dec 23, 2024 episode of the The Game w/ Alex Hormozi
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1-Page Summary
Wealth Disparities Driven by Education and Technology
According to Alex Hormozi, the wealthiest countries prioritize investing in education and technology, allowing them to boost productivity and economic growth. By capitalizing on resources like time and labor through education and advanced technology systems, countries like the U.S. and Singapore can generate significant economic value. In contrast, Hormozi states that less developed nations without robust education and technology lag behind in productivity and wealth.
The "BSL" Skills for Individual Wealth Creation
Hormozi identifies three core skills - building, selling, and leading (BSL) - as crucial for individual wealth generation:
- Building involves creating products and services that solve customer problems, both logically and psychologically.
- Selling is about effectively communicating the value of one's offerings and converting prospects into customers through tailored strategies addressing their pain points.
- Leading encompasses the ability to align and direct teams to execute building and selling efforts at scale.
Mastering all three BSL skills, rather than just one or two, unlocks the greatest earning potential, Hormozi argues. The wealthiest 0.1% excel at all three, leveraging them to maximize economic output.
Wealth Multiplication Strategies of the 0.1%
The top 0.1% amplify their wealth creation by:
- Investing heavily in expanding their BSL skills and using technology to increase productivity.
- Taking strategic risks by forgoing guaranteed income for greater potential returns, and acquiring ownership stakes in other successful BSL businesses.
- Continuously reinvesting earnings into further developing their skills or acquiring productive assets, as they see themselves as their own best investment.
Hormozi cites examples like Steve Jobs and Bill Gates retaining significant ownership in their companies after IPOs, which fueled massive wealth growth through this reinvestment strategy.
1-Page Summary
Additional Materials
Clarifications
- The BSL skills - building, selling, and leading - are essential abilities identified by Alex Hormozi for individuals to create wealth. Building involves creating valuable products or services, selling focuses on effectively marketing and converting prospects into customers, and leading entails guiding teams to scale these efforts. Mastering all three skills is key to maximizing earning potential and achieving significant wealth growth.
- When individuals take strategic risks by forgoing guaranteed income for greater potential returns, they are choosing to invest their resources in ventures that may not provide immediate or assured profits. This approach involves accepting uncertainty and the possibility of losses in exchange for the potential of higher financial gains in the future. By prioritizing long-term growth over short-term stability, individuals aim to maximize their returns through investments or business decisions that carry higher risks but also offer greater rewards. This strategy is often seen in entrepreneurship, investing, and other financial activities where individuals seek to achieve significant wealth accumulation by taking calculated risks.
- Acquiring ownership stakes in other successful BSL businesses involves investing in companies that excel in building, selling, and leading to diversify one's portfolio and leverage the expertise of those businesses for potential financial gains. This strategy allows individuals to benefit from the success of multiple ventures and gain insights into different industries and markets. By holding ownership in such businesses, individuals can participate in their growth and profitability, contributing to overall wealth accumulation. This approach is commonly used by successful entrepreneurs and investors to expand their influence and wealth beyond their primary ventures.
- Continuous reinvestment of earnings into developing skills or acquiring productive assets involves taking the profits generated from one's endeavors and putting them back into activities that enhance personal capabilities or acquire resources that generate more income. This strategy aims to improve one's abilities or expand their business operations, leading to increased productivity and potential for higher returns in the future. By prioritizing ongoing learning and investment in assets that can generate wealth, individuals can build a sustainable pathway to long-term financial growth and success. This approach is often seen as a key factor in the wealth accumulation of successful entrepreneurs and business leaders.
- Steve Jobs and Bill Gates retained significant ownership in their companies after IPOs, meaning they continued to own a large portion of the shares in their respective companies even after the companies went public. This allowed them to maintain control over the direction and decision-making of their businesses, as owning a substantial stake gives individuals influence and power within the company. By holding onto a significant ownership stake, Jobs and Gates were able to benefit greatly from the success and growth of their companies, as the value of their shares increased along with the company's performance. Retaining ownership after an IPO can be a strategic move for founders and key stakeholders to align their interests with the long-term success of the company and potentially reap substantial financial rewards as the company prospers.
Counterarguments
- Education and technology are important, but other factors like political stability, infrastructure, and access to capital also play critical roles in a country's economic growth.
- The assumption that less developed nations simply lack robust education and technology may overlook the complex historical, geopolitical, and socio-economic reasons for their situations.
- While BSL skills are valuable, not everyone has equal access to the resources or opportunities needed to develop these skills.
- The idea that mastering BSL skills is the key to wealth may not account for systemic barriers that prevent many from achieving such mastery or success.
- The strategies employed by the top 0.1% may not be replicable for the average person due to differences in starting capital, networks, and opportunities.
- The focus on individual wealth creation might underplay the importance of collective action and societal support systems in wealth generation and economic stability.
- The narrative that taking strategic risks always leads to greater potential returns can be misleading, as it may not emphasize the potential for significant losses and the reality that many entrepreneurs fail.
- The reinvestment strategy of the top 0.1% may not be feasible for individuals with less wealth, who may need to prioritize immediate financial security over long-term investments.
- Using Steve Jobs and Bill Gates as examples may not represent the typical experience, as they were exceptional outliers in terms of timing, innovation, and market conditions.
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The role of education, technology, and national policies in driving wealth disparities at the global, country level
Alex Hormozi delves into the strategic practices of the world’s richest countries and how their focus on education and technology contributes to significant wealth disparities globally.
Wealthiest countries invest heavily in education and technology, boosting productivity and growth
Countries with the highest GDP per capita, like the United States and Singapore, prioritize education and technology development
Hormozi indicates that the most affluent countries, like Luxembourg and Singapore, which rank high in GDP per capita, prioritize investments in education and technology development. This prioritization allows these countries to improve productivity and experience substantial economic growth.
Investing in education and technology allows countries to leverage their most basic resources - time and labor - to drive economic value
According to Hormozi, by capitalizing on fundamental resources such as time and labor through education and technology, countries can significantly enhance the generation of economic value. He suggests that all countries have similar basic input factors, but what sets wealthy countries apart is how they utilize these factors.
Less developed countries without robust education and technology systems lag behind in producti ...
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The role of education, technology, and national policies in driving wealth disparities at the global, country level
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Clarifications
- GDP per capita is a measure of a country's economic output per person, indicating the average wealth or income of individuals in that country. It is calculated by dividing the total GDP of a country by its population. This metric helps assess the standard of living and economic well-being of a population on an individual basis. Wealthier countries with higher GDP per capita generally have more resources available per person for things like education, healthcare, and overall quality of life.
- Capitalizing on fundamental resources like time and labor means making the most effective use of these essential elements to drive economic value. In the context of the text, it implies that by investing in education and technology, countries can optimize the productivity of their workforce and the efficiency of their operations, ultimately leading to economic growth. This strategy involves leveraging time and labor through advancements in education and technology to enhance output and generate wealth. By improving the skills and knowledge of the workforce and implementing technological advancements, countries can maximize the potential of their human resources and increase their economic output.
- The disparity between developed and less developed nations refers to the significant differences in economic prosperity, infrastructure, technology, education, and overall quality of life between countries with advanced economies and those with emerging or developing economies. Developed nations typically have higher levels of industrialization, income per capita, and access to resources like education and technology, leading to greater economic growth and stability. In contrast, less developed nations often struggle with poverty, limited access to quality education and healthcare, inadequate infrastructure, and lower levels of technological advancement, which can hinder their ability to compete globally and impro ...
Counterarguments
- While investment in education and technology is crucial, it is not the sole factor in a country's wealth; other elements such as political stability, governance, natural resources, and historical context also play significant roles.
- High GDP per capita does not necessarily reflect the distribution of wealth within a country; there can be significant income inequality despite overall wealth.
- The assumption that all countries have similar basic input factors like time and labor overlooks the vast differences in infrastructure, social systems, and historical legacies that impact how these resources can be utilized.
- The focus on GDP per capita as a measure of success may overlook other important aspects of development, such as environmental sustainability, social welfare, and quality of life.
- The narrative that less developed countrie ...
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The core skills of building, selling, and leading that drive individual wealth creation
Alex Hormozi lays out the vital "BSL" skills—building, selling, and leading—as key to generating economic value and individual wealth.
Mastering the "BSL" skills of building, selling, and leading is crucial for individual wealth generation
Attaining excellence in the foundational skills of building, selling, and leading, Hormozi argues, is crucial to individual wealth generation.
Building involves creating products and services that solve customer problems
Hormozi explains building as crafting things like software or bridges, or assembling services that solve customer problems. He introduces the concept of trimming and stacking to assess multiple solutions, and the delivery cube—a framework to evaluate customer effort, medium of problem-solving, and desired response time. He discusses the importance of not just solving a logical problem, but also the psychological aspect, referring to Rory Sutherland's insight on elevators and mirrors. Hormozi notes that solving one problem often leads to another, emphasizing the creation of a product ecosystem to resolve multiple customer issues simultaneously. He also explores the idea of creating products that are either 10 times more expensive or one-tenth the cost but still yield the same outcome. Apple’s ecosystem is presented as the exemplar of this approach.
Selling entails effectively communicating the value of one's offerings and converting prospects into customers
Selling is about convincing people to trade money for what has been built. The process encompasses managing perceptions, so prospects recognize the value of the offering regardless of its inherent quality. Hormozi places importance on the initial "call out" in grabbing a prospect's attention and recommends starting with a narrow focus and expanding over time, using Facebook as an example. He advises specificity in advertising to convert a higher percentage of an audience and suggests asking customers directly what they want to hear or to review competitor complaints to address those issues in advertising. Understanding customer pain points is instrumental in tailored selling strategies.
Leading encompasses the ability to align and direct teams to execute building and selling at scale
Leading, the third skill, involves directing many within a company to do various tasks, thereby amplifying building and selling efforts. Hormozi emphasizes leadership as a high-leverage meta skill, enabling access to others’ skills and aligning them behind a common goal. He cites Steve Jobs as an example of a leader who amplified his impact through the capabilities of his team. Hormozi discusses effective leadership as clear communication and direction of behavior to yield high returns, as well as the importance of eliminating wasted communication.
Developing excellence in all three BSL skills, rather than just one or two, unlocks the greatest earning potential
Hormozi ...
Here’s what you’ll find in our full summary
The core skills of building, selling, and leading that drive individual wealth creation
Additional Materials
Clarifications
- The Delivery Cube framework is a concept introduced by Alex Hormozi to evaluate customer effort, the medium of problem-solving, and desired response time when creating products or services. It helps in understanding how customers interact with a solution and the factors that influence their experience. By considering these dimensions, businesses can tailor their offerings to meet customer needs more effectively.
- Apple's ecosystem is a term used to describe how Apple integrates its hardware, software, and services to create a seamless user experience across its products like iPhones, iPads, Macs, and Apple Watches. This integration allows for easy connectivity and synchronization between devices, encouraging users to stay within the Apple ecosystem for a consistent and convenient experience. By offering a range of products that work well together and share features like iCloud storage and iMessage, Apple fosters customer loyalty and retention. The ecosystem also includes services like the App Store, Apple Music, and iCloud, providing additional value and functionality to users within the Apple ecosystem.
- The term "initial 'call out' in selling" typically refers to the first point of contact or interaction with a potential customer where the seller aims to grab the prospect's attention and initiate the sales process effectively. This initial engagement is crucial as it sets the tone for further communication and influences the prospect's perception of the product or service being offered. Sellers often use various strategies such as compelling messaging, targeted advertising, or personalized outreach to make a strong initial impression and generate interest in what they are selling. This step is essential in building rapport, establishing credibility, and ultimately converting prospects into customers.
- A high-leverage meta skill in leadership means possessing an ability that significantly amplifies the impact of other skills and efforts within a team or organization. It involves leveraging this skill to enhance the overall effectiveness and productivity of a group, leading to greater outcomes and success. This meta skill allows a leader to access and align the talents and efforts of team members towards a common goal, resulting in amplified results beyond what individual efforts could achieve. Leaders with high-leverage meta skills ca ...
Counterarguments
- While mastering BSL skills can be important, it's not the only path to wealth; some individuals achieve wealth through inheritance, investment, or other forms of passive income.
- The concept of building products that are either significantly more expensive or cheaper but yield the same outcome may not account for the complexities of market demand and consumer behavior.
- Selling based on managing perceptions might raise ethical concerns about manipulation or misrepresentation of product value.
- The focus on selling and leading may undervalue the role of collaboration and teamwork in wealth creation, where collective efforts rather than individual leadership can be the key to success.
- The idea that leadership is about directing others to execute tasks could be seen as an oversimplification, as modern leadership theories often emphasize empowerment, inspiration, and servant leadership.
- The emphasis on individual wealth generation may overlook the importance of social responsibility and the impact of business practices on the community and environment.
- The assertion that the top 0.1% excel at all three BSL skills might ignore other factors that co ...
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How the top 0.1% leverage these skills, take on risk, and multiply their wealth through investment
The wealthiest individuals, or the top 0.1%, invest in expanding their building, selling, and leading (BSL) skills and in technology to increase productivity, take on more risk strategically, and reinvest their earnings in further skill development or in acquiring productive assets.
The top 0.1% invest heavily in expanding their BSL skills and using technology to increase their productivity
Hormozi points out that the wealthiest individuals focus on honing their skills in building products, selling them effectively, and leading teams. To drive their success, they develop these skills to a high level and employ technology to enhance their productivity.
They continuously seek to develop their abilities in building, selling, and leading, often by learning from experts
The top 0.1% are relentless in their pursuit of knowledge and skills development, frequently learning from experts to continuously improve their capabilities in building, selling, and leading.
They leverage technology to boost the efficiency and scale of their building, selling, and leading activities
Through the use of technology, these individuals scale up the efficiency of their activities related to building, selling, and leading. Hormozi exemplifies that coders can write code faster with new technologies, highlighting that the top 0.1% use technological tools to increase productivity in various aspects of business.
The top 0.1% also strategically take on more risk to amplify their wealth creation
The top 0.1% accept the trade-off of guaranteed income for the potential of greater upside returns, and they invest their earnings into ownership stakes of other successful BSL-driven businesses.
They are willing to forgo some guaranteed income for the potential of greater upside returns
By forgoing guaranteed income, the top 0.1% aim for higher returns, a practice Hormozi notes as a way to amplify wealth creation.
They invest their earnings into acquiring ownership stakes in other successful BSL-driven businesses
Examples provided, like Steve Jobs and Bill Gates, illustrate how retaining significant ownership stake ...
Here’s what you’ll find in our full summary
How the top 0.1% leverage these skills, take on risk, and multiply their wealth through investment
Additional Materials
Counterarguments
- The focus on the top 0.1% may not account for systemic advantages or inherited wealth that also contribute to their success, not just BSL skills and risk-taking.
- The narrative may oversimplify the complexities of wealth accumulation and ignore factors like market conditions, regulatory environments, and luck.
- The idea that the top 0.1% continuously develop their skills may not reflect the reality that some may rely on established networks or existing capital rather than personal skill development.
- The emphasis on technology as a productivity booster may not acknowledge the digital divide and the fact that access to cutting-edge technology is not equally available to all.
- The strategy of taking on more risk is not universally applicable; for many, the potential downside of risk-taking could lead to financial ruin rather than wealth amplification.
- The concept of forgoing guaranteed income for greater returns may not be a viable option for individuals without a financial safety net.
- The practice of investing in ownership stakes of other businesses assumes access to opportunities and capital that many do not have.
- The idea of reinvesting earni ...
Actionables
- You can enhance your BSL skills by setting up a peer learning group with friends or colleagues. Start by identifying individuals interested in developing similar skills, and organize regular meetups to discuss books, articles, or online courses you've all studied. For example, one month you might focus on building skills by working on a group project, the next on selling by practicing pitches with each other, and the following on leadership by sharing insights from a leadership book or course.
- Boost your productivity by automating routine tasks with accessible technology. Explore free or low-cost automation tools like IFTTT or Zapier to connect different apps and services you use daily. For instance, you could automate the process of saving email attachments to a cloud storage service or scheduling social media posts, freeing up more time to focus on BSL activities.
- Diversify your investment approach by starting a small side business. This could be as s ...
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1-Page Summary- The role of education, technology, and national policies in driving wealth disparities at the global, country level
- The core skills of building, selling, and leading that drive individual wealth creation
- How the top 0.1% leverage these skills, take on risk, and multiply their wealth through investment
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