Throwback: Getting Bad Advice from Good People | Ep 907
In this episode of The Game, Alex Hormozi examines how entrepreneurs should approach business decisions by evaluating opportunity costs and potential financial gains. He shares his experience of selling his gym businesses, using it to demonstrate the importance of making decisions based on calculated potential rather than emotional attachment, and explains why waiting for perfect timing can lead to missed opportunities.
The episode also explores the topic of receiving and filtering business advice. Hormozi discusses why traditional financial wisdom meant for salaried employees might not serve entrepreneurs well, and emphasizes the importance of seeking guidance from mentors who have achieved the specific type of success you aim to reach, rather than just those who are generally successful or wealthy.
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1-Page Summary
Logical Decisions Based On Opportunity Cost and Upside
Alex Hormozi discusses how entrepreneurs should approach business decisions by carefully evaluating opportunity costs and potential financial gains. Drawing from his personal experience of selling his gyms, Hormozi explains that the key is to calculate the potential income loss from staying in a current venture versus the possible gains from pursuing a new opportunity. He emphasizes making these decisions based on realistic calculations rather than emotional attachments.
Committing To Decisions Without Seeking an "Ideal" Outcome
Once a decision is made logically, Hormozi advocates for swift and confident execution. He shares how he sold all his gyms within 120 days to pursue a new venture, despite receiving contrary advice. Hormozi stresses that waiting for the perfect moment can result in missed opportunities, and the opportunity cost of delay often outweighs the benefits of waiting for an ideal outcome.
Beware Of Advice From Non-entrepreneurial Minds
Hormozi cautions against following advice that might not align with entrepreneurial goals. He points out that financial strategies beneficial for salaried employees, such as focusing on cutting small expenses, may not serve growth-seeking entrepreneurs well. The context and perspective of advice matters significantly, especially when it comes from those who prioritize security over necessary risk-taking in entrepreneurship.
Seek Guidance From Those Who've Achieved the Success You Aspire To
Rather than simply looking for experienced or wealthy individuals, Hormozi recommends seeking mentorship from people who have specifically achieved the type of success you're aiming for. He challenges the common notion that being one step ahead of your audience is sufficient, instead advocating for learning from those who are many steps ahead and have built the exact type of business or wealth you desire.
1-Page Summary
Additional Materials
Counterarguments
- While evaluating opportunity costs is important, it's also crucial to consider non-financial factors such as personal fulfillment, social impact, and work-life balance.
- Emotional attachments can sometimes provide valuable intuition or signal alignment with personal values, which might be as important as financial calculations in the long term.
- Swift execution is important, but so is due diligence. Sometimes additional analysis or a second opinion can prevent costly mistakes.
- There may be times when waiting for a more favorable moment could lead to a significantly better outcome, especially if market conditions are expected to change.
- The advice from non-entrepreneurs, while perhaps not aligned with high-risk growth strategies, can offer insights into risk management and sustainability.
- Financial prudence, such as cutting unnecessary expenses, can be important for entrepreneurs to extend their runway and survive through tough times.
- Mentorship from those who have achieved specific success is valuable, but diverse perspectives can also foster innovation and prevent echo chambers.
- Being one step ahead can sometimes be more relatable and practical for those just starting, as the advice may be more applicable to their immediate challenges.
Actionables
- You can simulate decision-making scenarios using a "decision tree" tool to visualize opportunity costs and potential gains. Create a simple flowchart that branches out with different decisions and their possible financial outcomes. For example, if you're deciding whether to invest in new equipment, draw branches that show the cost of the equipment, potential revenue increase, and compare it to the status quo.
- Develop a "decision journal" to practice non-emotional decision-making. After each significant decision, write down the facts, figures, and logic that led to your choice, excluding any emotional reasoning. Over time, review your journal to assess the quality of your decisions based on outcomes. This can help you refine your decision-making process and rely more on data than emotions.
- Create a "mentor map" to strategically seek out mentorship. Identify the top five people who embody the success you're aiming for and research their career paths, strategies, and advice. Reach out to them or their circles through social media, professional networking events, or mutual connections, explaining why their specific expertise aligns with your goals and how you could benefit from their mentorship.
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Logical Decisions Based On Opportunity Cost and Upside
Alex Hormozi emphasizes the importance of carefully evaluating opportunity costs and financial gains when choosing to move on from a business or endeavor.
Know When to Move On From a Business or Endeavor
Hormozi highlights that making decisions about the future of your business ventures requires a thorough assessment of the financial gains and opportunity costs of both the current and prospective new venture.
Evaluate Financial Gains and Opportunity Costs of Current vs. New Venture
Hormozi shares his personal experience of selling his gyms to shift his focus to a more promising opportunity. He examined the financial aspects, notably the potential loss of income that could happen by not starting the new business immediately versus the profits from selling his current gyms. Hormozi’s calculations revolved around how much income he would lose if he stayed an additional year in his old business compared to what he could make in the first year of a new opportunity. After selling his gyms, Hormozi reports that he was able to replace the majority of his income in the first month with his new venture.
Hormozi stresses the importance of realistically calculating the math when considering moving on from a business. This includes evaluating expected earnings and looking at the outcomes of others who have undertaken similar paths. This calculated approach to assessing opportunity costs is portrayed as a means to make informed decisions—ones that are not based on clinging to the past or an emotional attachment to the current venture.
Prioritize Action and Commitment Over Perfection
Waiting For an "Ideal" Outcome May Lead To Lost Growth Potential
Furthermore, Hormozi suggests that business owners should prioritize taking action and committing to their decisions rather than waiting for an "ideal" ou ...
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Logical Decisions Based On Opportunity Cost and Upside
Additional Materials
Counterarguments
- Opportunity costs are not the only factor to consider; personal values, mission alignment, and long-term strategic goals also play a crucial role in decision-making.
- Financial gains are important, but so are non-financial factors such as employee welfare, customer satisfaction, and social impact.
- The success Hormozi experienced after selling his gyms and starting a new venture may not be replicable for everyone; individual circumstances vary greatly.
- Calculating expected earnings based on others' outcomes may not always be reliable due to differences in execution, market conditions, and timing.
- Prioritizing action over perfection does not always account for the need for due diligence and strategic planning, which can prevent costly mistakes.
- The assumption that immediate action always leads to growth potential can be misleading; sometimes, patience and timing are key to maximizing outcomes.
- The advice to weigh immediate profits against potential fu ...
Actionables
- You can create a simple decision matrix to evaluate the potential of staying in or leaving a business venture. Draw a grid and list the pros and cons of each option, assigning a numerical value to each based on importance and impact. For example, if you're running a small online store but considering a job offer, list factors like income stability, growth potential, personal satisfaction, and work-life balance. Assign higher values to factors that are more critical to you, and then tally the scores to see which option has the highest potential benefit.
- Develop a "future projection" habit by setting aside time each week to analyze your business's current trajectory versus a new opportunity. Use a spreadsheet to project your business's growth over the next year based on current data and compare it to the projected growth of the new opportunity. For instance, if you're a freelance graphic designer, estimate your income based on current clients and rates, then compare it to potential earnings from a new venture like starting a design course. This will help you visualize the opportunity cost of not pursuing the new venture.
- Engage in role-play scenarios with a trusted peer or ment ...
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Committing To Decisions Without Seeking an "Ideal" Outcome
Alex Hormozi advises a strategic approach to decision-making that steers clear of indecision and the quest for perfection.
Avoid Indecision or Fear Of Not Achieving Perfection
Decide, Then Execute Swiftly and Confidently
Hormozi believes that decisions should be made in a non-emotional state, and once the decision is locked in, one should go all in without hesitation. Drawing from his own experience, Hormozi talks about selling five gyms and shutting down another, actions he took despite them being seen as non-ideal. Nevertheless, he believed in the broader win in the larger picture of his life. Emphasizing the necessity of commitment to the new direction, Hormozi suggests taking quick and decisive action.
Once a decision is made logically and without emotion, Hormozi presses for swift execution, recounting how he sold all of his gyms within 120 days to pursue his next business venture. He underscores the significance of advancing decisively with a decision, remarking that any delay undermines his own certainty and strength in the chosen course.
Opportunity Cost of Delay Can Outweigh "Ideal" Outcome Benefits
Adopt a Bold Mindset and Prove Conviction
Hormozi illustrates the idea that waiting for an "ideal" opportunity can lead to missed potential income. By choosing to switch to a more promising opportunity immediately, he experienced financial gains straight away. He displayed conviction in his decision by selling the gyms and divin ...
Here’s what you’ll find in our full summary
Committing To Decisions Without Seeking an "Ideal" Outcome
Additional Materials
Counterarguments
- While swift decision-making can be beneficial, it's important to recognize that some decisions require careful deliberation and risk assessment to avoid costly mistakes.
- The advice to make non-emotional decisions may overlook the value of emotional intelligence and intuition in the decision-making process.
- The concept of committing to a decision without hesitation might not account for the need to adapt to new information or changing circumstances.
- The idea of ignoring second-guessing or hesitation could lead to overconfidence and a lack of critical reflection, which are important for learning and growth.
- Hormozi's approach may not be suitable for all types of businesses or industries where the cost of a wrong decision is very high.
- The emphasis on immediate financial gains may not align with long-term strat ...
Actionables
- You can set a personal "decision timer" to make choices more swiftly by using a simple kitchen timer or phone alarm set for a short duration, like 5 minutes, to force yourself to come to a conclusion before it goes off. This method trains you to think and act quickly, reducing the tendency to overanalyze and procrastinate on decisions.
- Create a "decision diary" where you log each significant choice you make, noting the speed of your decision, the outcome, and any opportunity costs you considered. This practice will help you reflect on the effectiveness of making quick decisions and learn from the outcomes, encouraging a pattern of confident and rapid decision-making.
- Develop a "bold move" challenge for yourself where once a week, you identify an area in your life or work where a daring dec ...
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Beware Of Advice From Non-entrepreneurial Minds
Hormozi warns about taking advice that may not align with one's specific entrepreneurial goals, emphasizing the importance of context and perspective in evaluating guidance.
Non-entrepreneurs' Advice Has Different Values and Priorities
Advice for Salaried Employees May Not Suit Growth-Seeking Entrepreneurs
Hormozi suggests that advice suitable for salaried employees often focuses on saving money and cutting expenses, like skipping Starbucks or dining out. However, he points out that such advice may not be beneficial for entrepreneurs who are in a growth-seeking phase of their business. This caution stems from the understanding that the financial strategies beneficial to an individual earning a fixed income might not align with the dynamic and investment-heavy nature of entrepreneurship.
Assess the Context and Perspective Before Universally Accepting Advice
Seek Guidance From Those Who Have Achieved the Success You Desire, Not Just the Experienced or Wealthy
Hormozi urges listeners to assess the context and perspective of any advice provided. He warns against heeding the cautionary advice typical of non-entrepreneurs who may prioritize security over the risk-takin ...
Here’s what you’ll find in our full summary
Beware Of Advice From Non-entrepreneurial Minds
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Clarifications
- In the context of entrepreneurship, the "growth-seeking phase of their business" typically refers to a stage where a company is focused on expanding its operations, increasing its market share, and scaling its revenue rapidly. During this phase, businesses often prioritize investing in strategies that drive growth, such as expanding into new markets, launching new products or services, and acquiring more customers. This phase is characterized by a strong emphasis on innovation, scalability, and achieving significant business growth within a relatively short period.
- In entrepreneurship, financial strategies often prioritize investing for growth over saving, contrasting with the focus on saving and cutting expenses common in fixed income scenarios. Entrepreneurs typically need to allocate funds towards innovation, expansion, and scaling their ventures, requiring a different approach than individuals with stable salaries. The dynamic nature of business ownership demands a willingness to take calculated risks and make substantial investments to drive growth and competitiveness. This contrasts with the more conservative financial approaches often recommended for those with predictable incomes.
- "Reflecting on his own experiences when starting out" indicates that Hormozi is looking back on the challenges and lessons he faced at the beginning of his entrepreneurial journey. This phrase suggests that he is drawing from his personal history to provide insights or examples related to the topic at hand. It implies ...
Counterarguments
- While seeking advice from successful entrepreneurs is valuable, non-entrepreneurs can also offer unique insights and diverse perspectives that might be overlooked but could be beneficial in certain contexts.
- Some principles of financial management and risk assessment are universal and can be applied to both salaried employees and entrepreneurs, so dismissing advice from non-entrepreneurs entirely may not be prudent.
- Risk-taking is indeed a part of entrepreneurship, but it should be balanced with sound risk management strategies that non-entrepreneurs might be more adept at due to their focus on security.
- Wealth and experience do not necessarily equate to current success or understanding of modern entrepreneurial challenges, so advice should be evaluated on its merits rather than the status of the individual.
- Entrepreneurs can sometimes be biased by their own experiences and may not always provide the most objective advice; non-entrepreneurs might offer a more detached perspective that could be valuable.
- The definition of success is subjective, and advice from those who have achieved a di ...
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Seek Guidance From Those Who've Achieved the Success You Aspire To, Not Just Experience or Wealth
Hormozi emphasizes the significance of seeking advice from individuals who embody the exact type of success you aspire to achieve, instead of merely looking up to those with experience or wealth.
Advice From Those Who Are Already Successful Is More Relevant and Insightful
Value the Guidance of Those With Experience
While experience is valuable, Hormozi highlights the necessity for advice that aligns precisely with one's entrepreneurial ambitions. He cautions against advice from high earners if their perspective does not match one's business goals. Moreover, he emphasizes that the insights from those who have reached the pinnacle of success you aim for are inherently more relevant and potentially transformative for your own journey.
Avoid Blindly Following Advice From Experienced or Wealthy Individuals Not Aligned With Your Goals
Seek Mentors and Models Who Successfully Built the Business or Wealth You Desire
Hormozi also addresses the prevalent internet marketing idea that being one step ahead of your audience is sufficient. He disputes t ...
Here’s what you’ll find in our full summary
Seek Guidance From Those Who've Achieved the Success You Aspire To, Not Just Experience or Wealth
Additional Materials
Counterarguments
- While seeking guidance from those who have achieved the success you aspire to is valuable, it's important to recognize that diverse perspectives can also offer unexpected insights and innovative approaches to problems.
- Success is not always replicable; what worked for one individual may not work for another due to different circumstances, timing, and resources.
- Solely focusing on the advice of those who have achieved a specific type of success might lead to a narrow understanding of business and personal growth, potentially overlooking broader lessons from varied experiences.
- Wealth and experience, even if not directly aligned with one's goals, can still provide foundational knowledge and skills that are transferable across different types of successes.
- The definition of success is subjective, and mentors who may not have achieved the exact success you're seeking could still offer valuable life lessons and principles that contribute to overall success.
- Over-reliance on mentors can lead to a lack of critical thinking and independence; it's important to also trust one's own instincts and learn from personal experiences.
- The availability of ...
Actionables
- Create a personalized mentor map by identifying the specific milestones in your desired path and pinpointing individuals who have achieved each one. Start by writing down the key achievements you aim for in your career or business. Then, research and list people who have reached these milestones, noting how their paths might align with yours. This could involve looking at LinkedIn profiles, reading industry publications, or joining specialized online forums where such individuals might share their experiences.
- Develop a 'success criteria checklist' to evaluate potential advice against your goals. Write down the qualities and achievements that matter most to you in a mentor or advisor. Before taking advice, check if the person giving it meets at least 80% of your criteria, ensuring their guidance is likely to be relevant and beneficial to your aspirations. For example, if you're aiming to start a sustainable business, your checklist might include 'has experience in launching eco-friendly products' or 'demonstrates a commitment to ethical business practices.'
- Organize a virtual roundta ...
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