What the Wealthy Actually Teach Their Kids | Ep 876

In this episode, Alex (@AlexHormozi) explores how pretending to be successful often delays actual success, and why focusing on real execution always beats playing the part. He breaks down the difference between signaling versus achieving, emphasizing how chasing the appearance of success can lead entrepreneurs down the wrong path, while consistent action and value creation are what actually move the needle. Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast, you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned and will learn on his path from $100M to $1B in net worth. Wanna scale your business? Click here. Follow Alex Hormozi’s Socials: LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition Mentioned in this episode: Get access to the free $100M Scaling Roadmap at www.acquisition.com/roadmap

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Hormozi?

  And this is gonna ruffle some feathers. You want to prioritize earning over saving. So one of the biggest mistakes poor people make is they think they can save their way to wealth. But the truth is, it's better to focus on how to 10x your income than save an additional 10%.

• 0:19Alex Hormozi?

  What's going on everyone? I was thinking about the advantages that rich kids have for poor kids outside of money. And I actually think that the greatest advantages they have are non-monetary. It's changing how the kids think and changing their worldviews. And I think that's the gift of being quote "born rich." And I tried to break down some of the behaviors that I've observed between rich kids and poor kids, or rich parents teaching rich kids and poor parents teaching poor kids. And I think you'll enjoy it. I'm gonna show you why being a small business owner is the best tax deal in America. So let's say that your business nets you $100,000 per year in income, alright?

• 1:04Alex Hormozi?

  Now normally, you'd pay $14,600 in taxes if that's how you filed, right? So you'd have, call it roughly, $85,000 per year post taxes, and you pay somewhere in the neighborhood of around 15%. Not bad. But the thing is, is that as a small business owner, you can drop this all the way down to 6%. So let me show you how. So with your $100,000, if you're running your business out of it, then you probably have a phone. You probably have Wi-Fi. You probably have a car. You probably have insurance. You probably have gas.

• 1:41Alex Hormozi?

  You even have clothes to a certain degree, if you're wearing them in a specific way during meetings, that you can prove. You might use a portion of your house that you use specifically for work, that you designate. All of the costs of all of these things, you can take out of your $100,000. Now, let's say that all of a sudden, we take out, call it $53,000. I'm doing the math on purpose here, right? We take this out on top, and so then all we have left to get taxed on, because we expensed this... Is forty seven thousand. Well, on forty seven thousand dollars of income in the United States, you pay six percent. And so if you're gonna buy this stuff either way, you can expense it through the business, as long as there's some business purpose, which in all of these cases,

• 2:26Alex Hormozi?

  you would be using them for business. And you can legally pay significantly lower in taxes. That is why owning a business in America is still the best tax deal. If you're watching this video, you probably want to create generational wealth. And guess what? Generational wealth is passed through education, not assets. So let me prove it to you. It's not like rich kids are born with higher IQs. We already know that, right? So it's not genetic. They don't have bigger brains, but they do have advantages. So what are those advantages? It's two big buckets. It's declarative knowledge and procedural knowledge, which said differently is beliefs and skills, which is knowing about stuff versus how to do stuff. I'm gonna do my absolute best to share as many of these

• 3:11Alex Hormozi?

  in this video as humanly possible, starting with number one, don't despise wealth, which the Alex Hermosy translation is, don't hate money. AKA, don't hate money or the rich. Well, the easiest ways to stay poor is believe rich people are evil. And I'll tell you on a personal level, every single self-made billionaire that I have met, me personally, has honestly been great. And I think a big part of that is that they were self-made, because you have to be, right? You have to be understanding. You have to be somewhat of a people person. You have to learn how to influence. You have to learn how to promote. Like, these are all things that you must do. And so we live in this, this, this, this veil, right? And the media pushes this ethos that billionaires are somehow these evil people.

• 3:55Alex Hormozi?

  But all the ones that I've ever personally encountered have been honestly amazing. And they've gone out of their way to help. They've given first. And I would imagine that those behaviors are things that have gotten them where they are.

• 4:07Alex Hormozi?

  Real quick, guys, I have a special, special gift for you for being loyal listeners of the podcast. Leila and I spent probably an entire quarter putting together our scaling roadmap. It's breaking scaling into 10 stages and across all eight functions of the business. So you've got marketing, you've got sales, you've got product, you've got customer success, you've got IT, you've got recruiting, HR, you've got finance. We show the problems that emerge at every level of scale and how to graduate to the next level. It's all free and you can get it personalized to you. So it's about 30-ish pages for each of the stages. Once you answer the questions, it will tell you exactly where you're at and what you need to do to grow. It's about 14 hours of stuff, but it's narrowed down so that you only have to watch the part

• 4:51Alex Hormozi?

  that's relevant to you, which will probably be about 90 minutes. And so if that's at all interesting, you can go to acquisition.com/roadmap. R-O-A-D map, roadmap.

• 5:02Alex Hormozi?

  And so Naval had this great quote, which is that, "Understand that ethical wealth creation is possible. If you secretly despise wealth, it will elude you." Right? Like you can't hate rich people and then at the same time want to become one. Now, I mean, I guess you could, but it'd be kind of weird, right? And so some poor parents unintentionally teach their kids that money is scarce and that rich people are greedy or bad, right? Now, the flip side is that wealthy parents teach that money is everywhere and that creating value deserves some sort of reward through exchange. And that's the fundamentals of capitalism is voluntary exchange. The key word is voluntary. Two people choose to interact, choose to make a trade. And the beautiful thing about capitalism is both people say thank you.

• 5:45Alex Hormozi?

  It's one of the only things in human nature where people do things and both people say thank you. You go to the cash register, you buy the shoes, the store owner says thank you and you say thank you. Both people have a net positive sum from the exchange and that's how overall economies grow. And so if you want to grow your own personal economy, the idea is how can I create as many of these positive sum exchanges as possible? And if you do enough of those positive exchanges, like why would you not want lots of people to thank you? Well, because if a lot of people thank you, then it means that you were doing something good that people will exchange money for. And if you do that a lot of times, you'll have a lot of money. And so how did this somewhere get distorted? Now, a lot of that's media and you know, I'll try to make my own version of of media so that I can have a very small voice that says something a little different. But at the end of the day, money is just a tool. Right?

• 6:31Alex Hormozi?

  It allows you to exchange. It's literally just an intermediary for exchange. And as a result, it will lubricate the number of exchanges that you make. And so if you're somebody who tends to do bad stuff, when you have more tools to do bad stuff, you do more bad stuff. If you were a quote, good person, I won't even try to define that, but let's just say good person. Who has a tool, they will be able to do more good stuff. And so you're probably not going to be able to create generational wealth if you hate money. Point number one here. Right? But most people destroy their wealth, but most people can't even take a shot because they actually believe in one of the biggest lies that's out there.

• 7:15Alex Hormozi?

  That I think it might be proliferated more by poor people, but let's just dive into it. So number two is that passive income equals BS. Now let me explain passive to you means active to someone else. There's always someone who is active. And so it's less of a binary of active versus passive and it's a continuum. And so it's like, where do you live on this continuum? Let's say this is all active and this is all passive. It's very rare that you have things that are purely here. Now you can absolutely buy a dividend ETF and like, the only thing that's not passive about that is making all the decision and doing all the research in order to do that. And whatever work you did in order to get the money. But beyond that, yes, the difference that you get from that would be passive.

• 7:58Alex Hormozi?

  The thing is, is that most people who see rich people assume that they have all of this passive money that's coming in. But all the richest people that I know for sure have passive income, but they've got way more active income. And so most people are trying to like, get rich on passive when they're like, make active income cool again. Like I, I'll tell you a story. So I advise. Like we own an advisory practice as part of acquisition.com, right? Which is where it's functionally like management consulting. We got, you know, we go in, we look at a company. We help them grow. That's what we do, right? It's actually true custom work. It's not like, you know, courses and coaching or anything like that. It's like, we actually had that. It's unfortunate that the internet space just like automatically assumes that that's what everything is.

• 8:38Alex Hormozi?

  But like, all the guys that I have are ex Harvard, ex MBAs, ex McKinsey, ex PCG, ex Bain, like consultants, right? That work with big companies and that's because we can help companies grow, right? And so I, um, I work with some companies in a very, very, you know, acute format. Where I'll spend a day with call it like tennis founders and we'll go really deep on some of the strategies in their business. And they pay for that. And someone might see that and say, Alex, why would you trade time for money? Well, think about it like this. If I'm going to work, no matter what. So let's just say Monday through Friday, I work 12 hours a day. Okay, 60 hour week.

• 9:21Alex Hormozi?

  So if I'm gonna work Monday through Friday and I have something else that can make me more money for that time, why would I not do it? Because then I can turn around and take that active income and then say, hey, maybe I'm gonna take some of that and trade it for some money over here. It's a little bit left. It's a little bit moving that way. And over time, you just increase the amount that you make per dollar on the active side, per hour, excuse me. And then you have a percentage that goes on passive. But the thing is, is that as you become more and more skilled, your active will proportionally increase. And so don't be afraid of making active money. The TLDR is people will spend a hundred hours trying to make a hundred dollars a month passive, when they could have just made $10,000 getting paid for their active time. That's a bad trade.

• 10:05Alex Hormozi?

  And so what everyone seems to forget is that the people with passive income often had massive income first, right? It's like going to the gym. You have to put in the active work in the gym for a very long period of time before eventually you can have a passive body. Meaning like you can just work out once a week and more or less maintain your physique, right? But it takes a long time to get there. And so everybody trades their time for money. It's just about how much leverage you get, how much you get per hour in. And so max out your active earning hours first until you have truly gotten all your passive to the point where it can pass your current lifestyle. But the thing is, is and every single person who does make, I don't say every single person, the vast majority of people that I've met who've made a tremendous amount of money

• 10:48Alex Hormozi?

  usually have a period of time where they do the cocktails on the, on the beach. And then they come back and they say, yeah, that wasn't for me. To a person, like I'm talking like, I can't even think of one off the top of my head that hasn't said that. And so it's just this myth. And the thing is, is the myth keeps you poor because you make those trades. You spend a thousand hours working so you can make a thousand dollars a month rather than taking the thousand hours and thousand dollars, thousand hours and continuing to up level your skills, you can trade those hours for higher dollars. So I'll give you, I'll give you a business example for you. And this is, this is going to be a little bit, a little bit more advanced, but bear with me. So let's say that you've got the opportunity to have a $10 per month customer. Okay. And that person's going to stay for 60 months. Okay.

• 11:33Alex Hormozi?

  Now people would see this and say $10 a month. That means it's super low churn. And this must be a very valuable business, blah, blah, blah, blah, blah. If you could get that same customer to pay a thousand dollars upfront for a lifetime deal, should you do it? Yes, yes, a thousand dollars is worth more than 600. But the thing is, is that people obsess about this and forget about this. And they do this in their businesses and they do this with their time. And so, once you've focused on active income, you need to understand something that separates wealthy from everyone else who stays stuck. Number three, it's your fault. So let me explain, these three words will get you out of poverty. It's my fault. So one of the best ways to stay poor is blame everyone else for your problems.

• 12:17Alex Hormozi?

  And I want to be clear, it might not be your fault, but it still is your problem. And so maybe I should better say this to less trigger people, but it's your problem. And so no one else is going to solve it for you, right? Your trauma is real, your problems are valid, and absolutely no one is coming to save you. And once you accept that, you become dangerous. It actually doesn't matter if it's your fault. Nice, I didn't even say that, that was the next line. Well, I'll just keep going with it. It actually doesn't matter if it's your fault, but it is your problem. You have to solve it because no one else will. And that allows you to actually do something about it, right? My dad came to this country with a thousand dollars to his name, but he bought me a lot of lessons, including accountability. So if my father had been a hedge fund manager managing $20 billion,

• 13:01Alex Hormozi?

  I would have a very different life. Like, I knew what Baltimore rich was, right? My dad's a doctor, right? But then I eventually saw what Vanderbilt and New York money was, like New York finance money, New York real estate money. I was like, holy cow, right? And so I was rubbing shoulders with some of the world's wealthiest people when I went there. And it like completely shifted my worldview of like, honestly, just what is possible. Beliefs, declarative knowledge, knowing about something. I didn't know this was possible. I didn't know about this stuff. Investment banking, I had never heard of it. M and A, mergers and acquisitions, private equity. I didn't heard of any of this stuff. Literally, the highest income vehicle I had heard of at the time was just become a doctor. And doctors make good money. I like, I genuinely, like, my goal was a hundred thousand dollars a year.

• 13:44Alex Hormozi?

  So I say this so that you guys, like, don't think like, I somehow like, sprang into existence with billion dollar aspirations. Like, I just wanted to make a hundred grand. That was the goal for a while. And the thing is, is that average parents will blame the economy, the government, or the system. They say, you know, we have these disadvantages. It's harder for people like us. They'll say those things. And more importantly, their kids will believe them. And then as a result, change their behavior to make it antithetical or unlikely to them actually getting out. And so their parents hurt their kids to protect their ego. And I'm saying both egos, they hurt their, they protect their child's ego, and they protect their own ego. But if they were able to say, we're not rich because I don't have the skills,

• 14:28Alex Hormozi?

  and I never learned them, but I want you to. And I want you to learn about how wealth works. That's declarative knowledge. And then once you learn about how wealth works, then I want you to learn how to do it. And I will do everything in my power to put you in those rooms with people who understand it. And so how do you operationalize this? Going all the way to the bottom. You use what you've got.

• 14:52Alex Hormozi?

  So, once you figure out that it's your fault, because people believe, people wait for perfect conditions to start, when in reality, starting is the perfect condition. And that's when you can start actually making decisions that lead to wealth, like understanding principle number four, solve rich people's problems. You solve rich people's problems because they pay better. And when you solve rich people's problems, you get to charge rich people prices. And here's why this matters. If somebody got a hundred dollars in their bank account and you're asking for 50, you're asking for 50% of their net worth. So for them, it's a very important decision. But that same $50 might be less than 1% of a rich person's net worth. So they don't even care. It would just be the equivalent of trying to sell $1 to that person with a hundred dollars in their bank account, right?

• 15:36Alex Hormozi?

  They probably would barely even notice it, right? And so, most parents teach kids to get a job serving anyone who will hire them. Wealthy parents teach kids to target specifically high-value markets with specific problems that higher skills can help solve. And so, focusing on serving valuable markets, not just any market, is what they transfer to their kids. I mean, the easiest way to figure out where the money's at is to look at who's already rich and see what they're doing. Thing is, like, no one gets rich on passive income. They get rich on active income, and then it goes passive, and then they talk about it. But here's where most people go wrong. Even when they're solving valuable problems, they're obsessed with the wrong side of the wealth equation, which is number five. And this is gonna ruffle some feathers.

• 16:22Alex Hormozi?

  You want to prioritize earning over saving. So, one of the biggest mistakes poor people make is they think they can save their way to wealth. But the truth is, it's better to focus on how to 10x your income than save an additional 10%. Because the thing is, is that at the absolute hypothetical max, all you can do is save 100%. You could live on nothing, you could live on the streets and somehow show up to work, or whatever it is that you do to make money, and save 100% of what you make. The thing is, if you're making $30,000 a year, it's just like, it takes forever, even at 100%. And so, the, with how little they try to optimize their earning, because like, I'll give you a couple very easy examples. You can do the exact same job in a different city and make 30 to 40% more, and work remote. You can just work remote to a different company and make significantly more money.

• 17:08Alex Hormozi?

  And what's crazy to me is that people don't just like consistently apply to jobs that make more money, even just in the job market. Like, why wouldn't you? Like if you're incredibly poor right now, like someone will take a shot on you. And you know what? You might just learn something that you can take with you for the rest of your life. And you also get this crazy thing called experience, which also stays with you. You gain evidence. And so this is the simplest example I can give you. That is just what I explained was arbitrage. The other version is just an arbitrage of time. So let's say that you, instead of saving, let's say you have the option, let's say you have $500. This is actually a real question. Somebody messaged me and said, I have a thousand dollars in my bank account. What should I invest in? And they actually said, what stock should I invest in? It was a DM I got.

• 17:53Alex Hormozi?

  And it was so interesting because I was like, man, I can't believe he would ask me this question because it's so absurd. Like it misses the point, but like this is why I'm making this video, right? Is that that thousand dollars will literally never become anything. Now you might be like, man, if I put a thousand dollars in Bitcoin in 2013, let me, let me pull you off the ledge for a second. If you had put a thousand dollars into Bitcoin and that was the only thing that you put money into. So if you had done that, you would have $121,000. Can't retire on that. I mean, it's, I mean, you can live for a couple of years, but you're not going to do much with that. And so the point is, is that they're trying to hit, hit these meme coins. They're trying to figure out, you know, like whatever other BS.

• 18:35Alex Hormozi?

  The question automatically was wrong because he was optimizing around the wrong vehicle. He thought he was going to passive income his way or even hit it big. But the issue is that you can't retroactively look at one decision and say, what if I had put all my money in Bitcoin in that year? I would be so rich right now. And you wouldn't be for two reasons. Number one is that if they had gone up and doubled, you would have sold it. Number two, if you actually had done that, then you would have made another hundred other stupid decisions. And you have to factor in those decisions too. And so that decision-making calculus would be one of incredibly high risk. And so it's very likely that you wouldn't have made money at all because it wouldn't have been a thousand dollars.

• 19:18Alex Hormozi?

  You would have put $10 into Bitcoin because the other 990 you would have put into other 999 other stupid things. Right? And I'm not saying Bitcoin's stupid. That's not my point. The point is just that that would have been a higher risk decision at that time. So what do you do with your thousand dollars? You buy skills. Now, I say that and people are like, well, how do I buy a skill? Well, one is you can get paid to earn a skill when you get a job and you actually ask them, "Hey, I would like to learn these things." One, will you pay for it? Two, will you let me learn it from somebody else who already works here? And guess what? Most employers say yes. You know why? Because no one does that. Because everyone's lazy. Everyone's afraid. Everyone, they go, "I can't ask them if they'll pay for me to learn something." Why not? Like, think about this.

• 20:00Alex Hormozi?

  For me, if you make sixty thousand dollars a year and you're like, "Hey, can I learn this other skill?" And I would say, "Okay." Once you learn this other skill, let's say you want to go to a conference for two days that teaches a specific thing on TikTok shop, whatever, right? Like, okay, well, how are you going to use it and get back? Well, I think that if I take that, I could probably sell the books on TikTok shop. I'd be like, "Okay, I can see why that would make us more than five thousand dollars." Great deal, go for it. Now, what do I do? I'm happy to shell out the five grand because it'll make me more back. And you're happy to learn it because it makes you more valuable overall. Why would you not do that? Alternatively, you say, "Hey, Neil, you're really good at M and A. You know, at acquisition.com, do you mind if we have lunch? You're going to eat either way. I would love to eat with you. And if you want, I'm happy to tell you about the stuff that I'm good at on the media side."

• 20:44Alex Hormozi?

  And maybe Neil says no. But you know what? You can ask twenty other people. That's free learning. In terms of skills of like, you know what? My job force sucks. Everyone is stupid. My boss is an ass, whatever. Then what do you do with your thousand bucks now? So I just gave you free skills. I just love this example. I've used it before, but it's so good. Friend of mine's daughter, making minimum wage, wants to save money. He says, "Hey, why don't you just triple your minimum wage?" She says, "How?" He says, "Why don't you just go get a phlebotomist certification? It takes a weekend and it's five hundred dollars. And then you pass the test. And then after that eight weeks or whatever it is, right? You can then... Make three times your earning power. That's gonna save, that's gonna, that's gonna pay more dividends than any S and P,

• 21:28Alex Hormozi?

  any Bitcoin, any meme, anything. Because the thing is, even if you do hit it big, what do you do when you have a hundred thousand dollars after that? You're stuck. The thing is, is that you become the money faucet when you stack your skills. And so you can start at the lowest tier, which is like, will anyone I know teach me stuff? Above that, you've got YouTube videos where you can teach yourself, right? And there's lots of experts who are very good at teaching things on the internet that will help. Above that, you're like, okay, well, I have a job. Maybe I'll learn from somebody who works here and I know that these skills are valuable because my boss pays them more than they pay me and I'd love to learn it. On top of that, you ask your boss, hey, can I go somewhere where I will find out a skill that will make you more money? And guess what? I know that skill is valuable because he'll pay more for it.

• 22:09Alex Hormozi?

  And then if none of those other things, and if you're like, wow, those are four very legitimate paths to learning, duh. On top of that, then finally you say, you know what? No one I know in my business, outside of my life, and I can't find it on the internet, or I would need more personalized attention. Then you take that and you get a tutor. That's it. You go to certification, you get a tutor, you get a teacher. You learn. Like, that's how I learned Facebook ads. I just paid someone hourly, I said, teach me. And then I made way more back. And the thing is, is that real world skills like running ads, building landing pages, learning how to write copy, learning how to sell, these are all skills that are super valuable in the marketplace and available for free online. So if you're like, I'm making minimum wage, I'm making forty thousand dollars a year, I don't know how to escape. It's like, dude, pick one and stick with it.

• 22:54Alex Hormozi?

  That's it. And then ask people if they need it. And so if you did spend that money to draw blood, right? You earn way more from a tiny investment. That's why you don't save, spend more on the earning. And I'll tell you, I'll tell you a little secret. I spent 100% of my money every single month until I could not spend the money because I was making too much of it on learning more stuff. Real. So we're talking 20, 30, 40, 50. I just kept plowing it in because I kept getting a better return on that than anything I could put it into. And so I'll, I'll give you this little rule of thumb. The day you stop investing in education for yourself in skills is the day that you decide you're good enough and you don't want to grow anymore. So if you're not investing in anything now, then you've already decided that you don't want to get

• 23:37Alex Hormozi?

  better than you are. And so my favorite way of saying this is that instead of investing in the S and P 500, invest in the SME 500 because that thousand dollars triples your income versus turning from $1,000 to 1,100 a year later. Whoop de doo. Hey guys, first off, want to say thank you. There's one person who's been sharing this more than anyone, and that is you. The only reason this podcast continues to grow is because you guys are sharing it. And my only ask is that if this has provided value to you, or you think it would provide value to somebody else, more importantly, if you could DM it to them, if you could Slack it to them, if you could text them a screenshot or a link to this podcast, it is the only way it grows. And that's what fills the hole inside of my heart for the approval of others so that I can go to sleep at night. And that's why I really do this.

• 24:21Alex Hormozi?

  Anyways, enjoy the rest of the pod.

• 24:25Alex Hormozi?

  Now, once you start earning these skills, what else do our rich parents say? Reputation over everything. Trust is earned in drops but lost in buckets. Never trade reputation for money. You can only get one of them back. Poor parents focus on this month's bills. Rich parents focus on this decade's wealth building skills. Every deal I've done with someone who says they value relationships and morals above everything else has done the opposite. So I prefer dealing with people that just say they want to make money. And ironically, it tends to keep everyone honest. And so your reputation is your most valuable asset. And I'm willing to leave money on the table on this deal. So there are future deals. And so the moment you prioritize short term cash over long term investments,

• 25:10Alex Hormozi?

  you've already lost. So what you're, what you're, you're missing is the value of a story. So let me explain. So I was, I was studying Rockefeller and he was telling a story. To his son about how he made his first really big acquisition. So Rockefeller was the second biggest oil producer in a city in Ohio. I think it was Cincinnati, doesn't matter. He was number two and the number one guy was significantly bigger than him. And so he approached the number one guy and said, hey, I want to buy you out. The guy scoffed at him, laughed him off. And then he came back, he said, no, I'm serious. And he was like, all right, fine, let's talk. And so the guy said, I'm not going to sell unless you're going to give me an absurd amount of money. And so then Rockefeller lined up the financing and gave the guy an absurd amount of money.

• 25:54Alex Hormozi?

  In other words, he overpaid for the guy's business. And so after the deal was done, the other guy who was, you know, once the bigger guy was like, man, you overpaid for that thing like wasn't even worth close to that. And the crazy part is, is that when Rockefeller tells the story, he said, he was right. I overpaid for it. But what he failed to consider was that in the next 60 days, Rockefeller could say he was the number one biggest oil producer in Ohio. And as soon as that happened, he did 22 M and A deals in the next 60 days, rolling up everyone around him because he became the biggest player. And so that story, the delta between the value of that company was actually worth versus what he was willing to pay. That value is what John Rockefeller valued the story at. He might've even valued it higher than that.

• 26:39Alex Hormozi?

  And his return on that delta created the next 22 deals he was able to do. And I think we can all agree that it seemed to work out pretty well for him. And so people underestimate the value arbitrage that exists in a story. And stories also go both ways. And so if there's a story that's equal opposite of that, where you're like, hey, if I do this, I'll give you an example. I personally have zero issues ethically with, you know, girls who do OnlyFans or whatever else. And, and I'll, you know, I'll, I'll take the second to say like, I believe that people have their own choice. And as long as they're not hurting other people, they should be permitted to do it. Is it, is it the career path that I would necessarily choose? No, I wouldn't. I would try that. I would just try and find something else, right? But do I have any issues with that?

• 27:24Alex Hormozi?

  No, I don't. Now, of course, some people who listen to my stuff will be like, oh, that's terrible. Then amazing. I love that you have your own values. That's great. You don't need to attack mine. Point is, I've had multiple deals that have come to me that I've been not even necessarily in that space, adjacent to it, right? And honestly, met the people, amazing people, sometimes great business people. And I was like, I can't do the deal. I'm really sorry. And they're like, but I thought that you are very like, hey, you know, you're just like very, you know, everything, everything is what it is. We all die, whatever. And I was like, I am. I was like, the thing is, is that me even having to give the disclaimers I did is because not everyone that I do business with is. And so that reputation would follow me.

• 28:07Alex Hormozi?

  And so it's just, I'm not willing to make the trade. And so reputation goes both ways. And the thing is, is most reputational stuff is very irreversible. And so it's tough to, it's a, it's a one-way door. And so I would rather maximize as many one-way doors that are permanent and good than permanent and bad. So that leads to, well, okay, Rockefeller bought this story, right? He bought this element of reputation he was able to leverage. What else do rich people buy? They buy time. And time is a very amorphous thing, right? Because it really means like, I buy excess capacity so that I can reallocate that capacity to something that is going to get me a higher return than this inanimate object. And so I'll tell you a little, a micro story of this. How do you make this tactical?

• 28:52Alex Hormozi?

  So when I was single and in my early twenties, I hit at Chipotle over 500 times in one year. I didn't know that. I found out from my accountant. It was like, why do I have 500 transactions at Chipotle? I was like, well, he's like, you really got to cut down on this bill. I was like, why? He's like, you're spending so much money there. I was like, well, I don't buy groceries.

• 29:08Alex Hormozi?

  It's like, I don't prep food. I don't do any of that. And that amount of time that saves me, I was like, I can do sales all day. And one sale is 500 bucks and that takes 30 minutes. And so I'm happy to just do that. The thing is, is like, everybody trades time for money. Everyone does, whether they like it or not. Because, and I'll prove it, because we live in time and we get money over that same period of time. So all money you earn is related to some time that you spent getting it, deciding it. Doing a deal, whatever. There was some time. Now, it might not have been denoted in a time of you get this per hour, but you could say it took a hundred hours to make this deal and then I made the deal and I made $10 million.

• 29:50Alex Hormozi?

  It's like, okay, well, you took $10 million divided by 100 and that's how much you made. You made $100,000 an hour. Great. And so if there's something else that's worth more than $100,000 an hour, you should do that instead. Right? And so getting out of this mythology and just looking at like it's, and getting out of this black and white thinking and just thinking, okay, what are the facts? What are the observables? Right? And so let me give you the single best trade that you only get to make once in your life. It costs $1,500 a month. All right. I'm going to break it down for you. Like if you, if you replay any part of this video, this will be it. The best ROI you'll ever get for $1,500 a month is that you use that 1,500 to eliminate all time consuming human tasks and gain back all the productive hours. So let me tell you what it adds up to.

• 30:33Alex Hormozi?

  So let's say that food costs you $50, sorry, food costs you 50 hours per month, which is a lot. Food costs a lot of time. All right. And to get that food completely taken care of for you is about 800 bucks. Okay. What else we got? We've got cleaning the house. We've got cleaning clothes. Now, both of these, you've got cleaning the house is somewhere probably around 25 ish hours per month. You've got cleaning folding clothes, which is about 16. And if you're like, where are these numbers coming from? This is from the research on the internets. You can look it up on your own. It doesn't really matter though. You're going to get the point in a second. So that you can replace about $500 a month. You can replace this for probably about $200 a month.

• 31:19Alex Hormozi?

  And so what does all this add up to? Well, if you add all this stuff together, you're going to save 96 hours per month for a cost of $1,500. So rough math here, if you know how to make more than $15 per hour, this trade makes sense. Now I'm going to do you one better. Even if you don't make $15 an hour, if you take the 96 hours every month to try and learn how to make more than $15, $15 an hour, you can learn that in a month. And here's the, here's The here's the good news and the bad news. The good news is that this 100% works. The crazy part is that I talked to entrepreneurs who are making a million dollars a year and they don't even do this sometimes because they feel guilty about it. But they just, again, they believe they bind to the mythology, right?

• 32:02Alex Hormozi?

  And if you can't explain your beliefs, then they're not your beliefs, they're someone else's, right? And so you just heard this thing and someone got poo-pooed in front of you when you were a kid for for feeling fancy by having a maid and you say, oh, I'm never gonna have a maid when I grow up. But it's dumb. It's a bad trade. It's like you think about your business in one way, your costs and expenses and your income. And then when you think about your personal life, you're like, oh, I'll mow my own lawn. It's like, why? And so you can only, and I told you there's two things, who do these bad news? The bad news is that you can only make this trade once because you can't rekeep. Like if I could keep spending $1,500 and getting 96 hours back, my God.

• 32:36Alex Hormozi?

  That would be amazing, right? But it doesn't work that way. You can only do that trade once, right? That's because there's plenty of businesses that are set up. And there's plenty of other people who have fewer skills who are willing to do it for less. So if something doesn't buy you time, strongly consider not buying it. Stop buying so much stuff because at the end of the day, do you want to look rich or do you want to be rich? Right? And here's the here's a little plus one, a 201 advanced wealth for you. Rich people aren't impressed by stuff, by your Lambo, your Rolex, right? They're impressed by how rich you'll be in 20 years. Like if I see a younger guy who's flashing a watch, I just think, how silly? Like you could have taken that and then like you could have taken that in 20 years from now, that would have been something significantly bigger. Maybe a building or a business, right?

• 33:17Alex Hormozi?

  And so I remember the very first event that I ran for gym launch. And this is when I was I was a cash miller at this point. I pulled up and it was in Leila's car. So it was a it was a Prius, so we shared a car, a Prius with a cracked, a cracked windshield and a dent in the side door. And I pull up and all these people, all these gym owners are there because I'm I'm supposed to help them make more money, right? And I remember and you think they're like, oh, no, they're gonna think or they're gonna say something. Oh, no, they said something. So I remember this, this, this particular gym owner was walking as a group of them and they see me. Some of them keep going, one of them stops and then just beelines over to where I am, taking my stuff out of my car. And she says, I thought you were supposed to be rich. It's what she said, I thought you were supposed to be rich.

• 34:01Alex Hormozi?

  I remember it, you know, kudos to younger me at the time. I said, I said, don't judge my car. I said, judge my bank account and that worked. She was like, oh, okay, good way to think about it. Then we walked in, it was all good, right? But I remember that story because people do judge a book by its cover, but she was not very rich. And so she was judging me in that way. And so don't try to get, don't get poor people rich. Right. Cause poor people rich will keep you poor. So like, look at the zucks and the basissus, right? Like they dress like regular people. Now, to be fair, they, they try to brag in other ways with their $300 million yachts. But you know, relative to 100 billion, it's literally less than, I mean, it's less than 1% of their income, which is absurd, right?

• 34:43Alex Hormozi?

  And so I, I mean, I remember for me, I spent 16 months trying to figure out my Darwin outfit. Right. Five pieces that work for the gym, restaurant, work or the pool. Right. And sometimes I have to negotiate my winter restaurants that Leila wants to eat at because of the dress code. But at the end of the day, for me, I could travel for weeks with a small backpack, get my entire wardrobe in my bedside table. And so for me, that's more valuable. Now, I want to be clear, there are some people who like, you know, nice suits and stuff, and there's nothing wrong with that. And maybe in some season of my life, I'll do that. But I think the key is that you're doing it for you and not for anyone else. Quick recap. So don't despise money if you want to have it. Don't spend all your time trying to make passive income. Make more with the active income that you are currently making. The things that are preventing you are your fault.

• 35:29Alex Hormozi?

  And therefore they're your problem to solve and no one else will solve them. When you choose to start solving problem, solve rich people's problems. By doing this, you can start prioritizing your earnings over savings. So that you can take the money, so you can learn the skills to solve rich people's problems. When you do that, you start to build a reputation and you never want to sacrifice that reputation. Cause that reputation will compound. It actually compounds faster than anything else. And then, once that reputation starts compounding, you want to buy time, not stuff. So it continues to compound. So what makes you compound all this even faster? Avoid bad environments. Now, what's a bad environment? I would say a bad environment is any environment that decreases the likely to achieve your goals.

• 36:10Alex Hormozi?

  Right. And so Harvard research found that 99% of success is tied to your reference group. So this research has been cited all over the place, which is one of the longest, longest, longest studies on success is that there's a high correlation between your success and your reference group, AKA the five people that you compare yourself to. When you cut bad friends, it's not that you're being antisocial. It's that you're raising your standards, right? If you want to change your actions, the easiest thing to do is change your environment. Right? Average parents teach kids to get along with everyone. Right? Wealthy parents teach kids to ruthlessly create their circle. Like, I mean, I'll be real, like, there are some parents, and this isn't me poo pooing parents, but that basically let their kids hang out with anyone.

• 36:52Alex Hormozi?

  I mean, I could tell you, that was not, that did not fly in, you know, in my household. Anybody who was gonna hang out with me when I was a kid, I'm not saying, and obviously now, but like, I didn't know that my parents were helping me in that way when I was younger. Is that they made sure that the people that I was friends with were cool. And by cool, I mean like going somewhere, like not, not scrubs, right? If you're ambitious and young and your friends are, you know, parting a lot. And, and I think honestly, it's like, I don't even think it's parting a lot. If you're ambitious and young and you have friends who are less ambitious than you, don't be friends with them. And then find people who are more ambitious than you and don't let them be more ambitious than you. Because if, if your friends don't have goals, your goal should be to get new friends.

• 37:36Alex Hormozi?

  My fastest one-strike policy is if I feel like you're anything but stoked when I win, I don't need you. Like, I already have enough people rooting against me, right? It shouldn't, at the very least, my friends should root for me, right? And so friends root for you to win and to make you better. Enemies tell you to put your goals on hold and secretly hope for you to lose. Think about how wild this is. Let's say that the people in your life, like, do they increase or decrease the likelihood you achieve your goals? Now, don't think about intention, don't think about the reasoning, just ask yourself, this is a little bit of objectivism, this is how I see the world, which also makes it, it's far more powerful for predicting what's going to happen. Does this person increase or decrease the likelihood to hit my goal? If these answers decrease, when you have two or three or four of those,

• 38:20Alex Hormozi?

  you've got three or four people that are decreasing the likelihood to hit your goal. That adds up. Now, on the flip side, if you have multiple people that increase the likelihood to hit your goals, what do you think happens? You rise up. And so if someone calls themselves a friend but acts like an enemy, treat them like one. The most dangerous enemies are the ones who call themselves your friend. And if you define enemies as people who decrease likelihood to hit your goals, a lot of the people you think are your friends are your enemies. And on the other side, there may be people who actually are your enemies who might be your friends. If you're competitive with someone and all they do is drive you to do better because they're your frenemy, they serve real value. Maybe you are better friends with them. Kind of interested. When someone tells me they have a lot of friends, all I think is they just have low standards. And so why does reference?

• 39:05Alex Hormozi?

  So, so the question is, why does having a reference group full of ambitious and successful people help you? Right? I'll give you Alex's theory. So motivation is the equal opposite of deprivation. So let's say this is the goal and this is you. Okay. The greater the gap is between these things, the greater the motivation. So if I just ate lunch, I am not that motivated to eat because I'm not deprived of food. If I don't eat for three days, I'll be incredibly motivated to eat because I am deprived of food. If you haven't slept in two days, you're very deprived of sleep and therefore very motivated to sleep. Right? Now, how does that work with successful behaviors? Well,

• 39:49Alex Hormozi?

  if you, let's say money, because it's a simple one, right? Let's say you want to make more money.

• 39:54Alex Hormozi?

  If you are the wealthiest person of the people you compare yourself to, your motivation to make more money will be significantly lower. Now, to be clear, I'm not saying that's a bad thing. I'm just saying it will be. Now, if the people you compare yourself to, even if you're around poor people, make a lot more money than you, then your deprivation will be significantly higher. And you would think though, wait, shouldn't I, shouldn't the logic be that all poor people should be more motivated to make money? No, it's about who they compare themselves to. And if you are the richest of your poor friends, you might feel like a baller. And again, nothing wrong with that, but I only talk about increasing likeliness. Right? So I'll give you a real world example of this. So who do you think makes more money? And I'll tie it in. Married guys or single guys?

• 40:39Alex Hormozi?

  So ironically, people are like, I don't want that expense. I don't have a wife and kids. Well, married guys make more money on average. Kind of interesting. And married men with kids make more than just married guys. And so the thing is just, why would that be a thing? They make more money because they need more money. Right? They have more deprivation for money when they have four kids than they have no kids. Right? And when you have a wife and four kids, you gotta make more money. That drive is what drives them to make more. Now again, if they then also. That's an element. If they also compare themselves to people who made significantly more, they might make even more than that. And so it's not like, oh, wait, does this, are these, are these contradictory? It's like, no, they're additive, right? And so the problem is that most poor people know a lot of other poor people. And so they're not that poor relative to the people they know. Yeah.

• 41:23Alex Hormozi?

  So the deprivation to their reference group is basically nil. It's zero. And so they're, and so too is their motivation. And so most people are so busy looking for outside investments, they completely miss the most obvious opportunity staring them in the face, which is understanding what actually makes them money. So number nine. So middle-class families teach their kids that their home and car are assets. So the only money rules that matter to me are number one, spend less than you earn. I say this as duh, and yet so people will do it. B, buy stuff that goes like this in value. So if you spend less than you earn, you'll have some leftover. With the leftover, you buy stuff that will be worth more tomorrow. But that stuff that'll be worth more tomorrow might be a skill.

• 42:08Alex Hormozi?

  And the thing is, because the skill, like if you thought of a skill as an extra $1,000 a month, then wouldn't like, what investments can you pay $500 for one time? They make you an extra $1,000 a month for the rest of your life? That would be an insane investment. And that's what skills are. And here's what's even crazier. They're not taxable. You also can't lose them in a divorce. No government can take it from you. And it might be because my, my family fled from Iran during the revolution. And so we lost everything. The only thing we had was education. But that's why I'm so hard on this stuff. And then eventually, when this stuff makes you more than you need to live, you're good. Everything else is just bonus. And so it sounds obvious, but like, the thing is, is that simple things can be simple to understand,

• 42:53Alex Hormozi?

  but difficult to execute. Because that's where the heart is with this stuff. It's, it's not in the understanding. It's in the doing. I actually wrote this. People fail not because there's some magical list nobody has. They fail because it's an obvious list nobody does. So number 10 is rich parents have a higher minimum standard. So what does that mean? So there's a couple ways to think about this. So number one is that, like, Rich parents will talk in different orders of magnitude, in different increments. And so, uh, like this is the classic example of like Warren Buffett, uh, when asked to do a mic check, uh, was like one million, two million, three million. And it's just like, and I, and it was, it's this joke at the time, but I just, I thought about that because like, when I was a younger kid, I used to count my money in how many Chipotle burritos I could buy.

• 43:39Alex Hormozi?

  And then as I got older, it turned into, uh, a larger increment, which for me was actually the number of customers I had to sell in order to make something. And then over time, basically it's just number of, number of units of something that I've had to sell in order to get whatever I want. It's just the unit of thing has just, uh, stayed stagnant and the cost of those things have gone up. And so, rich parents simply won't allow their kids to go below or accept opportunities that are minimum, below the minimum. So I'll give you a different example. So there's a guy that I know who grew up rich, all right, super rich, New York rich.

• 44:16Alex Hormozi?

  And he has somehow been able to make, call it 400, 500,000 dollars a year for the vast majority of his adult life with basically no skills. Like he does nothing. Like I'm, I'm very confident, like he actually does nothing. And what's interesting though, is that like he's had to go from thing to thing because eventually people figure that out. But he will stand there in a negotiation and they're like, hey, you know, we'll, we'll pay you 385,000. He's like, I'm not working here for less than 450. And the crazy thing is, is because he just gen- like, like delusionally, just like he would rather be broke than be someone who makes less than that.

• 45:00Alex Hormozi?

  And so like, I think that is kind of the declarative knowledge, those standards that are passed down, like. That is probably some of the biggest gift. It's like, of course, you're not going to do that. It's not worth your time. And so they, they simply wait for better opportunities. That's really it. Like, they just won't say yes to something that's not as good and they'll just wait. And so like, think about it, think about it in a guys and girls scenario. Like, there are tons of poor guys who have, like, hot girls. And there's tons of ugly dudes who have hot girls who aren't rich. All right, there are, they exist, believe, they exist. What separates them from the other guy who's equally bad looking, who doesn't have the hot girl? The other guy just went on more dates or waited longer. He just kissed more toads, whatever you want to say, right?

• 45:44Alex Hormozi?

  Eventually, there's going to be some crazy, hot enough girl that's just like, you know what? He's my kind of ugly. And it works. And that's the thing that I think a lot of, uh, poor parents don't transfer their kids. It's like, there's significantly a higher amount of volume. And because they know it's possible, and rich kids aren't smarter than poor kids. They might be more educated, but not smarter. And so if them, why not you? And so another big difference between these, so this is number 11. I forgot to write down number 10, but let, we'll just, we'll say number 10, min standards. Actually, I'm going to add one more thing to that. So, uh, one more on, on minimum standards is that the measuring stick they use to measure is, is bigger. Right?

• 46:27Alex Hormozi?

  They're measuring increments, like, listen to the examples that people are talking about that they claim are a lot around you. So if the people, if you meet somebody and they're like, it was like a thousand dollars, right? Like, that thousand dollars, might, that's like them demonstrating that this is an increment that is meaningful to me. Like, you want to hang out with somebody who's, like, you always want to hang out with the person who has the, the largest increment that they measure things with, the largest measuring stick. And I'll give you a, a finance example from hedge funds in New York. They have a slang term for a million dollars, which is a stick. And so it's like two sticks, four sticks. Because it's such a common increment of money, hard to fathom when you didn't grow up around that. So, number 11.

• 47:10Alex Hormozi?

  There's four types of money, or rather, four sources.

• 47:15Alex Hormozi?

  They can use for leverage, alright? And this is super important. So you get poor a lot of times based on the type of money you use. So on the kind of like on little A over here is you can use debt, right? You can use consumer debt, you can use your credit card, loan shark, whatever, to buy stuff. You don't want to do that because not only does it cost you today, it costs you more tomorrow. The next is that you can use your savings. So this is your little nest egg, right? That's another place that you can finance whatever purchases you want out of. The third little bucket that we have is you can learn it out of your cash flow. So you make, you make a check, you get paid on Friday, you take some of that check before it goes into savings and you spend it. Okay, simple enough. And then the last is what I like to call new opportunities.

• 48:00Alex Hormozi?

  And the easiest way to explain this is I had a, I had a construction kitchen remodeler who didn't, who came out here, they were probably doing like five-ish million a year, something like that. And she wanted us to look at the business and have my team kind of like do a full analysis and be like, alright, this we need to change the markets. We need to change sales, whatever, right? And so it's not cheap. And she, she took on a project for an extra 150 grand. That was like a personal design project that she doesn't normally take on so that she could buy it and pay for it. And I remember thinking to myself like, she's gonna make it. Like she'll be fine because she already thinks about money the right way.

• 48:43Alex Hormozi?

  And this is a common trait I've seen among wealthy people. And if you're not wealthy yet and you're gonna adopt this mentality, then it increases the likelihood that you will make more later. So in reverse here, if you pay out of this, you're taking from the present. Here you're taking it from your past self, here you're taking from your future self. Here is the only place where you can take all of your existing flows. They can continue to get allocated to your investment goals, your savings goals, whatever it is. But then this money allows you to take advantage of a new opportunity. So you're like, okay, I want to do this thing. It wasn't in my plan and so therefore I'm going to do something that also wasn't in my plan to get it.

• 49:23Alex Hormozi?

  That's the magic. And I love this because this is how, so I'm biased here, is how I think about money. And so I, uh, there's a great, there's a great story of Paul McCartney, who was like, uh, he, he was with, was it Yoko Ono or whatever? And, uh, he wanted a swimming pool and she was like, no, or she, whatever, for whatever reason, he couldn't get it. And so he said, fine. He said, I'll just go write a song. And so she said, you're going to write yourself a swimming pool. And he said, yeah. And so write yourself your own swimming pool is he needed to go write a song. He knew if he wrote the song, he'd make the money for the swimming pool, he could have it. So of course he could afford it. He was a Beatle. He was crushing it. But it's the concept. And the thing is, is that's the thing is it's like, even when you have the money,

• 50:05Alex Hormozi?

  it's like, well, I've already allocated all this money and this is something that did I didn't expect. So it's totally okay to also do work you didn't expect to get it. Number 12, and this one, you're not gonna, you, this one will probably surprise it with you. So this is, this is sass. Spending is a skill.

• 50:23Alex Hormozi?

  So the only people we say you can't buy happiness haven't given enough away. And the reason is, is that spending money, using money is a skill. And so it makes sense that as you increase your income, and I think that the numbers have been updated. It used to be $70,000. Now it's closer to like, you know, 400 or $500,000 is the, is the cap on happiness. But that's usually because at $400,000, $500,000, that is what most people can fathom with their existing understanding of the world for ways to use money. And we're not even saying spending money, using money. And so you want to use money because it's a tool like a pro. And people don't even think about it like that. Of course you can, like, of course there's investments, but how can you spend effectively, right?

• 51:08Alex Hormozi?

  This is where you're constantly buying time, not stuff. And the thing is, is there are levels to buy. This is, call it my 101. This is my, this is my, you get up to, you know, a couple hundred thousand dollars a year. This, this level of spending, but most people stop there. You can keep going on this skate, right? You can get a house manager, you can have executive assistants, you can have multiple executive assistants, you can have drivers. You can have security that also help and do things for you. You can retire your parents. You can control your calendar even more aggressively. Like that you can fly private. Like there are plenty of other things that you can spend money on to ameliorate. A little vocab word for you, improve your life. And so I remember, I'll tell you the story.

• 51:53Alex Hormozi?

  So Leila and I, when we were, you know, coming up, I think at this point, we were probably make, it doesn't matter. We're making a lot of money, I'm just leaving it there. And we met with a friend of ours who's significantly older. And, you know, she's like, why do you always look like crap? And she was being a little bit mean, but she was saying that to, to Leila because she was like, you're always just dressed in gym clothes, right? Now, both of us came from fitness to like, that's all we owned was fitness clothes, right? And she said, why don't you buy nice stuff? And, and Leila was like, I just, you know, I just feel weird spending that much money on clothes. She's like, you have so much money. What are you talking about? And so she said, I'm going to take you shopping. She said, she said, you suck at being rich. That was actually what she said. And so she took Leila shopping. And so I remember Leila told me the story.

• 52:36Alex Hormozi?

  She, she, she walked into the store and she's like, okay, she's like, meet me at the, at the, at like Neiman Marcus or Chanel or something, whatever. And so she gets into Chanel and then she was like, come to the back. And they're like, she was like, okay. So she goes to the back and they had an entire room. All along, the whole sides of all the room, they had already pre-picked all the clothes to be only Leila's size. And they had like champagne and she was sitting there. Friend was like, all right, you're not leaving here without spending at least $30,000. And so Leila spent, and like Leila's like stomach dropped. She's like, oh my God. And so she spent 30, like $6,000 on clothing. Now, of course, my stomach dropped, but I'm like, what happened? But, but anyways, she, she spent the money.

• 53:19Alex Hormozi?

  And the point was is that this friend of ours had been rich for a very long time. And she was like, you said you wanted these things. So she's like, so get them, you know? It's just like, and again, you might be like, wait a second. I thought this is, this is antithetical to that. Leila likes that stuff. She would, she wears it, she, she likes this stuff. I obviously don't. And I think that that's. Like if you if you take anything from this, it's doing you, right? I think you acquire this money to do what? You're gonna die with it and then leave it to somebody else who's gonna blow it. So who cares, right? Like, I talk about this from the perspective of how do I optimize to get this outcome? Once you get the outcome, you can do whatever you want. But if you only optimize around money, you optimize around accumulation of a tool.

• 54:04Alex Hormozi?

  So you might as well also have the skill to use it.