Level 1 - Foundations of Wealth
Ah, this is the blueprint to becoming a millionaire, and I’m going to walk you through the levels of becoming one. Level one is the fundamentals of wealth creation, and we’re going to start with: What even is a millionaire?
What is a millionaire?
It’s someone whose net worth, excluding their primary residence, is in excess of a million dollars. For example, let’s say you own a $1 million house, and you owe $500,000 on it. If you had nothing else saved up in your bank account, which we would hope that you did, but let’s just say you had nothing else saved up, then your net worth would be $500K. In this instance, you would not be a millionaire.
Assets - Liabilities = Net Worth
Now, let’s call this a $1 million house, and then, if you owed nothing on it, your net worth would be a million dollars. Now, there’s a difference between having a liquid net worth versus a net worth. A liquid net worth is assets that you can trade in and out of. So, if I had a million dollars in cash in my bank account, versus owning assets that were worth a million dollars, those are different things.
Net Worth \(\neq\) Liquid Net Worth
You might be wondering, how does Alex have any authority to speak on the subject? I’ll tell you why. I became a millionaire in my early 20s. I had my first cash million in my bank account when I was 27, and I crossed $100 million in net worth by age 31. So, I became a millionaire 100 times in a row, so I can tell you how to do it at least once. And I’ve helped over a hundred other people create million-dollar-plus net worths over my career. And those are just the ones that I know about, let alone all the people in our community who have done a lot better than that.
Equity
So, we go to step two in this little journey of ours, which is equity, because there are two ways that you can become a millionaire: you can earn your way there or you can own your way there. And the faster way is to own your way there, and that’s what I’m going to walk you through. So, I’m going to walk you through both examples: earning your way there, which is how I first thought it was, versus owning.
You can earn your way there, or you can own your way there. The fastest way is to own your way there.
So, if I want to earn my way to a million, then I’m going to need to make $2 million over X period of time, and then divide that by two because of taxes, to get to my $1 million. Let’s say, making $200,000 a year, and if I make $200,000 a year for a decade, that’s assuming that you save 100% of your income. You’d be able to earn your way to $1 million in liquid net worth.
\(\$1\text{M} = \$200,000\times10\text{ Years}\times50\%\)
Assuming:
- $200k annual income
- 50% tax rate
- Saving all income after taxation
On the other hand, you can own your way, meaning that you own assets, either you know which could be businesses or real estate, which are probably the two most common assets that people own who are trying to invest. When I say ‘invest,’ when you are an entrepreneur, you are investing; you’re just heavily indexed on one stock, which is your own. Let’s say that I create a business that gets to $250,000 per year. In some instances, I might be able to sell this company if it was truly automated and had a team of people that worked without me needing it. I could sell this at probably a four times multiple, and this is again that would be a very good multiple for a business that is doing that kind of profit. This is actually a small amount of profit for when we’re talking business sales, but that would get us to a $1 million net worth.
\(\$1\text{M} = 4 \times \$250,000 \text{ Net Income}\)
Assuming:
- Equity sale at \(4\times\) multiple of annual net income
- Automation and/or Team in Place
All right, because we own 100% of this business that makes $250,000 a year in profit without us working at all, and we could sell that for $1 million. So, you can see the difference here. It’s like, okay, well, one of these takes 10 years; this one is just how long does it take me to automate the creation of $250,000 a year? And so, what’s interesting here is that almost the actual income between the two is almost identical, but as soon as you achieve it, you almost already have the net worth. Because here, time is working against you because you have taxes and your living expenses that are cutting out of this every single year, whereas here, you get the multiplier without your living expenses, with time being an ally for you.
Aim to build a system which generates $250,000 per year using automation and/or people.
Which takes us to the next step on our journey.
Don’t diversify
Diversification is for weenies. Diversification, to quote Uncle Warren, is a hedge against ignorance. You only diversify if you don’t know what you’re doing. The more you know, the less risky it is. I am actually approaching diversification from a focus perspective, which is: what’s the one thing that you’re going to invest your most valuable resource in? Because when you’re early on, you don’t have that much money. So, your most valuable resource isn’t your money; it’s your time and your attention. There are two ways we can allocate it.
“Diversification is a hedge against ignorance” says Warren. “Your most valuable resource is your time and your attention” say’s Alex.
V1: We do little allocations like this: I’m going to look at crypto, day trading, FOREX, flipping houses, long-term investing in real estate, Airbnb, and starting an ATM business. I’m going to look at… you get the idea, right?
So, let’s say this is you, and this is your time and attention that you have to pursue any new opportunity. You say, ‘I need seven income streams because the average millionaire has seven income streams.’ So, you spread yourself thin between seven different opportunities, and while doing that, you multitask, trying to fill different cups at the same time with different colors. You’re waiting for one of these things to take off, right?
You have to see which one of these will work; but the reality is, it’s not about which one will work. Any of them could work if you put the work in. But you have to reach a threshold. Once you get to the top, the extra cash starts spilling over, and you actually have a profitable opportunity.
Which one of these cups is closer to spilling over: you going in on one thing, or spreading yourself between seven? The reason this myth continues to proliferate is that it’s absolutely true that people who are the wealthiest have multiple income streams. However, what’s not true is how they got there. The wealthiest people in the world go all in on one income stream and keep adding it up over and over again until it overflows. Then, once it overflows—because they’re making so much money from their one opportunity—they start diversifying back between the other different ways.
But they made their wealth focusing on one thing, and then they maintain their wealth by distributing it. You don’t make money by splitting your attention; you make it by focusing on the one thing that matters most.
You don’t make money by splitting your attention; you make it by focusing on the one thing that matters most.
V2: “You say, ‘What do I really like?’ Well, I do have experience doing this one thing, and so I’m going to ignore all of these other opportunities and just go all in on one thing.
The reason I’m such a big advocate of focusing your attention on one thing is that this is where you get disproportionate returns. Because I think it’s very arrogant to think that your 10% of your attention, where you’re not even that good at business to begin with, spread between 10 things, is somehow going to compete against somebody who’s putting all of their effort into one thing.
Here’s the fallacy that most people who are starting out don’t get: They think, ‘I’m going to try all of them and see which one works out.’ Or rather, ‘I’m going to try to start multiple things and see which one takes off.’ But the reality is, all of them could take off, or none of them could take off; it’s solely based on which one you work on. So, it’s not about which one will work; it’s about which one you will work on.
It is not “Which one will work?” It is “Which one will you work on?”.
You want to go as fast as possible through the “I have no idea what I’m doing” phase, so you can get to the “I do know what I’m doing” phase, and “I understand the risks that are associated with this,” and “that’s why I don’t want to diversify, because I actually get outsized returns here.”
Five stages you go through when you’re considering a new opportunity
There are five stages that you go through as an entrepreneur when you’re considering a new opportunity. Phase one is called uninformed optimism. This is where you are uninformed, but you’re like, “Man, this opportunity sounds so great. Look at all these people making all this money.”
#1 Uninformed Optimism
And so, then you dive in, and then you get to something called informed pessimism. You’re like, “Oh wow, this isn’t as easy as I thought. There’s all these other things that they didn’t talk about in this ad, or in this highlight reel that they showed me on this YouTube short, about this person that made $1,000 a day going from nothing from her home,” right?
#2 Informed Optimism
So then what happens next is you keep working on it, and then you get into the valley of despair (sad face, sad face). This is where most people quit. And this is what most people do now… They find another one of these things to get into, and they go all the way over back here, because they think, “Oh no, this one has doo-doo on this side of the fence, so I’m going to go to the other side of the fence where the grass is green.” But what they don’t realize is when they get into that side, it’s completely made of manure, and that’s why the grass is so green, right? There’s poo on both sides; you just didn’t know about it until you got there.
#3 Valley of Despair :(
All right, and so what happens is people keep repeating the cycle over and over again, and they never make progress. And so here’s the thing: when you do find something that you’re like, “You know what, I kind of like this. Okay, this is harder than I originally thought. I need to keep learning. Wow, this is actually really hard. There’s a lot more pieces to this than I understood at the beginning. I guess this is why everyone isn’t rich,” then something magic happens. You then start to have informed optimism. You now start to realize you’ve wrapped your arms around whatever the opportunity is or whatever thing you’re pursuing, and you’re like, “Okay, I haven’t gotten there yet, but I understand the math. I understand the process of getting from where I am to where I’m trying to go.”
Ultimately, this is what I’m trying to do with this blueprint for you. If I can help you tackle as much of this, or at least compress the time that it takes you to get here, that’s a big victory for me.
# 4 Informed Optimism
And then you finally get to the final phase, which is achievement. This is when you actually accomplish externally what you set out to do. Most newbies fall out between these stages and then start this process over again. As a result, most people only relive this cycle over and over without ever making it to the achievement phase. This naturally leads you to the next stage, where you have no desire to diversify because you now understand the process.
# 5 Achievement
What do you do when you’re here? You reset the target and you say, “This is where I want to go next.” And because you’ve been through this process once, you understand that, you know what, me going after this 10 times bigger goal sounds amazing. I’m going to find out there’s some stuff that sucks, there’s going to be a period where it’s going to really suck, and it’s going to feel hopeless because I don’t see how to get through it. I’m going to keep chugging and then understand how to get there, and then I’m going to get there. I’m going to repeat the process.
So now, we go to the last part of level one of becoming a millionaire.
The Long Game
If I told you to build the tallest tower you possibly could in 10 seconds, here’s what you might do: Boom! 5, 4, 3, 2, one, time. Right now, imagine I told you to build the tallest building you possibly could in 10 days. You would probably say, “You know what, I can probably get some more boxes. How flimsy is this, right? Like, how stable is this? Do you think this is going to last a long time?” Probably not, so I might build it piece by piece from the ground up with more stable bricks from day one, and I would keep doing it this way, right? And I’d keep adding and keep adding and keep adding, and then when 10 days came, I might be five stories high.
And so, the reason this is such an important frame shift for people is that the fact that they’re in a rush causes them to build the thing they want to build differently. The fastest way to get to this tall is to build it the exact way I did earlier: stack it end to end, up to this point. But if I then said, “I need you to build something that’s 10 stories tall,” you would never get there. And what happens is, people get stuck, right? They get stuck at this level, and they can’t add another one on top. And they stay here, and they’re like, “Why can’t I get my million-dollar business to $10 million?” And it’s because you built it wrong to begin with.
And so, as much as this sounds painful, sometimes the fastest way to get to 10 million is to start back at zero and build it right to begin with.
I talk so much about the long game, about making sure that you’re building it the right way because this thing is never going to last. And so, the hardest thing about building something right is that, in the beginning, you need to have something to sell. You need your amazing, valuable thing. And then, that’s a megaphone. It’s terrible. But then, you need to advertise it to let people know about stuff, and then you start making sales. But the problem is, people get to this point and then think, “Oh, I need to do more marketing and sales, right? Because that’s what made me money.” But the problem is, the more you market and sell, the more people actually find out that this is not a gift, and this is actually a big pile of… And so, what happens is, now you’ve got people who buy this thing and tell their friends, “This thing stinks.” And then, over time, it becomes more and more expensive for you to advertise because your reputation stinks.
And so, the right way to build it is to understand that you have to build the thing first. And then, you’ve got to let people know about it. But then, you don’t crank on this. You keep fixing this thing until this guy becomes a happy camper and tells his friends. And until that happens, you keep making this thing better. And this is the same thing as if I did this and just kept gassing it. That’s me, vertically building the tower and then reaching a max that I can’t go past anymore. Versus building it so that I get people to say, “Wow, this thing’s amazing.” And so then, they also tell people for me. So that when I get to that point, I actually built it with a huge base of foundation, and I can keep stacking on top of it. And that’s the difference in terms of mindset and perspective of how you actually build something that’s going to last.
The focus should be on continuously improving the product or service until customers are genuinely satisfied and become advocates for the business.
Then along the way with your team and the people that you hire, rather than saying, “Hey, I just need a body in the seat. I just need a person to do this thing,” you’re like, “Who here has talent?” And I might interview 20 people for one role, rather than three, so I get the right person. If you feel stuck all the time and you can’t make progress, you usually need to go back to the beginning and realize that you built a vertical business that had no foundation to begin with.
Interview 20 people for one role, rather than three, to get the right person.
And now, we have our foundation built for level one of wealth creation.
Level 2 - Make a Million
Level two is all about the actual tactics of getting to making your first million and it starts with finding a hungry crowd.
Find a Hungry Crowd
Let me explain what I mean by ‘find a hungry crowd.’ This guy started a business selling hot dogs, and he was given one wish from a genie for what competitive advantage he would be able to have. The first thought he had was, ‘Maybe I’ll make my hot dogs cheaper.’ The genie shook his head and was like, ‘No.’ He’s like, ‘Hm, what if I made my hot dogs taste better?’ Then, the genie said, ‘No, don’t waste your wish on that. Maybe I’ll just make mine the fastest cooking so I can serve the hot dogs faster.’ The genie said, ‘That’s not what you want to waste your wish on.’ The genie looked at him holding the hot dogs in buns in hand and said, ’It’s not about the hot dogs. If you want to build an amazing business, you want to put your hot dog stand on the best corner in front of a starving crowd because if your hot dog stand is on the corner, it doesn’t matter how cheap they are, how good they taste, how fast they cook. The moment that hungry crowd walks out and sees your hot dog stand, you’re going to sell it every time.
So right off the bat, I want to talk about two key concepts when it comes to finding a hungry crowd. One is that we have to understand that the market is always going to be the strongest variable in how much money you make. Right? If you’re selling toilet paper during COVID, you’re going to sell out, right? Because it didn’t matter how good your toilet paper was, there was a starving crowd. And so, supply and demand, which is one of the reasons that we have it as our logo, is the strongest force in all of economics and business. It is the core thing that everything else is built on. And so, you have to understand that the market is number one.
If I was trying to sell services to newspaper companies, well, newspaper companies are decreasing by 25% per year, compounding negatively in the wrong direction. The next lever on this is the offer that you give people. Right? If you have a superior offer, then if you’re in a normal market, that’ll be the next lever that you have. If I say, “Hey, start for free, and I only get paid if you get some sort of result,” and it’s a truly free, low-risk, amazing value, and you get results tomorrow offer, then you’re going to sell 10 times, 100 times more than someone who just has like a “you pay me and maybe you get results, and maybe you don’t” type of service or product.
The final thing is your ability to persuade. Ideally, go after a really big market with an amazing offer and be a hell of a persuader. But the thing is, you can be terrible at persuading and have a terrible offer and say, “You can only buy my toilet paper in 80-roll chunks, or I’m not going to sell it to you,” and still sell out during COVID. But if it’s not COVID, then it’s, “How can I make the toilet paper offer that I have significantly more compelling?” And if all the toilet paper offers look the same, then it just comes down to how well I can persuade people to buy mine. That’s concept one when it comes to finding a hungry crowd.
Concept two is the four things that I look for when I’m actually trying to find that market. Number one is I want people who are in pain. You want to make sure that the people that you were selling to are in desperate need. They don’t want but must have the thing that you were selling. The second is that they must have the ability to buy, so purchasing power. So, a friend of mine had a business where he helped people who are unemployed fix their resumes so that they could get a job. Now, you might be like, “Oh wow, tons of pain, absolutely,” but the problem was he kept trying to grow this business, and he couldn’t grow it because they were all broke ’cause they didn’t have a job.
The third factor that I look for is easy to target. Because at the end of the day, even if you have somebody in lots of pain who can buy your thing, if you can never find them, it doesn’t matter. They’re never going to buy your things; they’ll never know you exist. And so, if I have the choice between two different marketplaces, and one of them is like nurses, incredibly easy to find, or something that is way harder to find, like psychedelic Aztecs in, you know, Croatia, way harder to target. And you know what? They might have a huge pain and lots of purchasing power to buy my thing, but if I can’t find them, it’s irrelevant.
The fourth point you want to have is that you have a growing market. Now, I gave the example earlier about the newspapers, right? So believe it or not, a good friend of mine actually had a business that sold a rev share model to newspapers. So, he was an amazingly persuasive guy; he had an amazing offer, which is zero risk. He just said, “Let me get a percentage of the revenue that I bring to you.” Alright, so these two things were completely maxed out, but he couldn’t figure out why his company wasn’t growing. Every year he was beating his competitors and gaining more customers than they were, but still slipping away in terms of his ability to grow. And it was because the entire marketplace as a whole was shrinking. And so, you want to make sure that you have all four of these things. You can’t just have three of them, or two of them, or one of them. You need to have all four.
1 Avatar, 1 Product, 1 Channel
And so, when you’re thinking about what thing you want to sell, start with who you want to sell it to. So, you have your hungry crowd. Now, what do you do? One avatar, one product, one channel. This is the simplest formula to getting $2 million plus. All you have to do is find one person that you want to help. It’s just making sure that you’re very clear on the one very specific person that you are going to help. That is the avatar. The next thing is, you want to give them one product. The reason I say it’s one product is that a lot of people overcomplicate their businesses too early. They’re like, “Man, if I want to double my business, I should sell them three things, right? And then I’ll get them to buy more stuff.” But the thing is, if you’re under a million dollars, you’re just adding a ton of complexity when you don’t even have that many customers. So, most times, you’d be better served sticking with the one thing that you’re selling and saying, “How can I sell three times as many to the exact same person?” And that becomes the problem that you solve.
But most people get confronted with these issues and then go for the easy route. Again, this is like that building where you can add something on top really quickly, but it doesn’t create the skyscraper that you want. Instead, you want to think, “How can I do more?” The third variable here is the channel. Now, it doesn’t matter what channel you’re currently acquiring customers on. You can hit a million dollars plus on literally any channel that you advertise on without going onto new channels.
So, if you do outreach, then you reach out to people 10 to 1 to get customers, whether that’s cold calls, cold emails, DMs. You can expand and continue to get more customers with that one channel. If you post content, you can keep posting content on whatever channel you’re on and just do it better. Post more content, post better content, and by doing so, you increase the amount of customers, still with only one money-making product.
Or let’s say you’re running ads. Obviously, if you’re running ads, you can just spend more money on the ads, provided you’re doing it profitably. And if you can’t expand past a million dollars a year profitably with paid ads, you have a business problem, or you have a pricing problem. You don’t actually need to add another channel because then it again complicates your business. Because you’re like, “Okay, well I’m currently doing 500,000 a year on YouTube. You know what I’m going to do?” You might think, “Oh, I’m going to start doing cold emails, right, as my next way of getting customers.” Well, that majorly complicates your business when you’re this early on.
Now, you might be thinking, “Wait, shouldn’t I have diversity of how I acquire customers? I thought you said that was a good idea.” It is, but you’re so small it doesn’t matter yet. Because you’re not looking at a potential acquirer who’s going to try and look to decrease risk for you, you just need to get better at doing the one thing that you do well, because you’re really probably not that good yet. And as terrible as that may sound, it’s probably real. Alright, and so the fastest way to get to the million is to build it right from the get-go and not overcomplicate your business, which means you pick one avatar, one product, and one channel that you focus on until you get there.
Offers
So now we go back to our tactics of building our first million dollars. The next thing at level two is our offer. Now, I wrote an entire book on this thing, “$100 Million Offers.” It answers the question, “What should I sell?” And it’s because that’s the most common question that I get asked every single day by people who are trying to start a business, which makes sense. What am I supposed to sell? So, I call this the value equation.
Now, fundamentally, you’ve probably heard all over the internet, “You need to provide value. You’ve got to give value,” right? But the question is, what is value? And after doing a lot of studying and figuring this out between our portfolio companies, it actually comes down to four variables. Variable number one is the dream outcome. What the dream outcome is for whoever the prospect that you pick is the way that you can compare two different dream outcomes is how much more valuable they think one outcome is versus another.
If I were to talk to a 30-year-old man and say, “Hey, I can help you lose weight or I can make you a millionaire,” most guys would value being a millionaire more than, let’s say, being handsome. There are different outcomes that people will ascribe different values to, and that’s just a very extreme example. Well, let’s use the weight loss example and let’s switch it to women. If I have one ebook that helps someone lose weight and then I’ve got a one-on-one personal training program that helps someone lose weight, it’s the same dream outcome. So then, what determines which one is more valuable? Because the ebook might be 50 bucks and be overpriced, and the personal training might be $5,000 and be underpriced. How can you make that discrepancy because there’s more value? Let me explain.
The next one is perceived likelihood of achievement, meaning when I buy, how likely do I think I will get what I want through buying. If I buy a $50 ebook on good meals that I can cook that are healthy, maybe I’ll get some food that I might like in here, and I can feel a little better about myself. But they don’t realistically think that they’re going to all of a sudden transform their entire body from a $50 ebook. Now, if you sign up for personal training for a year, you probably have a way bigger perceived likelihood of achievement, and so you value it higher.
Now, both of these elements, the dream outcome and the perceived likelihood of achievement, are the things that you want to increase in your communication with a prospect. You’re saying it’s really, really likely that you’re going to get this thing that you really, really want. The next two variables of the equation are the painful side of the equation, which is what does someone have to give up in order to get it.
So the first thing that we have is time, and there are two elements of time: there’s micro and macro. Micro is how long is this going to take every day? There’s a certain amount of time that’s going to take on the micro for them to experience the result. Right, so if I’m talking about the lady who’s doing personal training, she might have to go to the gym three times a week. That’s going to take time. She might have to prepare food. That’s going to take time. That’s on the micro level.
On the macro level, how long is she going to have to do these micro commitments in order to get the macro result that she wants? She might have to lose 50 lbs, and it might take her 18 months. So, macro, the goal is, I want this to be as little as possible: micro time, and I want this to be as short as possible on the macro, so that when I say, “Hey, you’re going to get the dream body you want,” you absolutely know that you’re going to get it, and it’s going to happen really, really fast.
So, the next thing is effort and sacrifice. Effort is what you have to start doing that you weren’t doing, that you don’t want to do as a result of the purchase. Sacrifice are things that you have to stop doing that you wish you could do but can’t do anymore as a result of the purchase.
And so, for our lovely young lady, she’s going to have to sacrifice Margarita Mondays and Taco Tuesdays. She’s no longer going to be able to do that, even though she wants to do that. She’s going to have to sacrifice sleeping in on the weekends, and she’s going to have to start waking up early and working out and eating food that she doesn’t like.
And so, effort and sacrifice tend to be dual sides of the same coin. Whatever you have to start doing, you typically have to stop doing something else. The top side we try and increase, the bottom side we try and decrease. We want to get it to zero because, if you think about this in a hypothetical extreme, the perfect offer that would have the absolute most value would be the biggest, most compelling dream you can possibly imagine, that you’re absolutely guaranteed to get instantly with no effort.
So, if I said you can click a button on my website and then look down at your abs and then have a six-pack, that would be the hypothetical extreme value. Now, people can get that through personal training, changing their diet, and waiting 12 months, but because of this, the value is significantly decreased because there are costs associated. Understanding all four of these variables is how you craft offers that get people to say yes and give you money.
Because, oftentimes, the most expensive part of the offer that you have isn’t the money, it’s the other things that they have to start doing as a result of the purchase. Those are called hidden costs. If I have a marketing agency, okay, and I do content for people, alright, and when I start doing content, I say, okay, it’s going to take us 60 days to ramp up, we’re going to start having two calls a week for an hour, you’re going to have to fly out to my studio, and we’re going to record, and it’s going to take 60 days before you’re going to start seeing any kind of traction.
Imagine that offer comp compared to somebody who says, “You don’t need to do anything. I can just draw stuff on my own, immediately start posting, and your phone’s going to ring today. We shoot which one’s more valuable.” It’s still the same core services, but how we wrap them make them probably 10 times more valuable than they were before.
And that’s why I understand these variables, and making the right offer is so compelling on your road to your first million. The reason this was my first book is that offers are about strategy. Offers are one of the largest levers that you can pull with any business because it actually affects all departments. When you change the offer, it changes how you market. When you change the offer, it changes the sales script, the sales process. When you change the offer, it changes what you deliver. It literally affects everything.
And so for us, we always try to nail this with our portfolio companies at Acquisition.com. To be clear, we don’t sell coaching. We invest in businesses and buy them. For context, our average portfolio company over the first 12 months 1.8x its revenue and 3.01x its profit, and over their first 24 months, they 2.88x revenue and 4.7x profit, meaning that they disproportionately drop the increase in revenue to their bottom line because we make sure that the thing that we are selling is as valuable as humanly possible.
Marketing and Sales
So, the next on our journey of wealth, riches, glory, status, and all things amazing is marketing and sales. If you think about this from a sequence perspective, you have to make the thing and then promote the thing. Now, making the thing is $100 million offers, which leads to the next question: who should I sell it to, AKA getting leads? You get leads through advertising, which is the concept of my second book, $100 Million Leads. Then, you get them to buy. But, the thing that people mess up is that they think, “Okay, I’m going to do more of that.” But what you actually need to do next is go back to here, fix the product, and keep making it better. Then, promote it more, come back, fix the product, make it better, and it becomes this virtuous cycle.
So, if we need to understand how to market and sell, then it means that you have to have one advertising method. There are eight ways you can advertise: four that you can do and four that other people can do for you. You can do warm outreach, which is reaching out one-to-one to your friends, or post content one-to-many but to people who know you. You can run paid ads, which is doing one-to-many to strangers, or do one-to-one to strangers, which is cold outreach. If you’re like, “Man, no one’s buying my thing,” I can guarantee you that you’re not doing enough of these core four. Period. That’s it, because these are the only four things that you can do to advertise.
The next thing is that you can get referrals from customers, which are lead getters. Next, you can have employees who help do the core four for you. You can have agencies who run the core four for you, make content for you, do outreach for you, all of those things. You can hire another business to help you with. And then finally, you’ve got affiliates, which some people call influencers, some people call endorsements, but it’s somebody who already has an audience, already has a business, and that you compensate in some way to do the advertising for you, the core four, to let other people know about your stuff.
These are the eight ways that you can advertise anything to anyone, and the nice thing is, when you’re starting out for your first million, just pick one. Once you pick the advertising method that you want, and let’s say you’re using lead getters, you have to learn one of the core four to then get lead getters. And that’s okay, that’s fine, that’s part of business. These will always give you more leverage than the first four, and that’s okay, but you have to start with these first.
So let’s assume that you’re just going to stick to the core four in the beginning because you’re like, “I don’t want to involve other parties,” which I recommend, especially if you’re starting out and you’re like, “You know what? I’m going to post content.” That’s what you’re going to do, that’s your method. Alright, now you’re going to have all these people who like your posts, comment on your posts, DM you personally when you make content that they find compelling or interesting, and say, “Hey, I love your help on whatever this thing is.” Then you transition into sales.
Now, it’s so important for founders who are starting a company to be integrally involved in both of these processes. The reason you want the founder to be integrally involved in the beginning is one, it’s cheaper, and especially when you have less cash, that makes sense. Two, these are skills that are going to be required for you to succeed over the long term, so you’re going to want to understand them at a tactical level. Because when you bring someone else in in the future, these lead getters, whether it’s employees, agencies, affiliates, or whatever, you can teach them the right way to do it. And when they say, “Hey, that’s not possible,” you be like, “No, it is. Let me show you how.” And then you have a litmus test of who’s legit and who’s not, who’s going to help you on your journey, whether you’re hiring them or you’re incentivizing them. It works the same.
When it comes to the sales side, we want to get into a choreographed process, knowing what step one through letter Z of the process looks like, to get someone from, “I think this might be interesting,” to giving you money. But if you don’t know what you’re doing first, you have to throw stuff on the wall and see what sticks. And a lot of it’s just going to be your gut in the beginning, and figure out, “Whoop, that didn’t work. Whoop, that didn’t. Oh, that one actually got a response. Alright, that’s step two.” And you keep trying until you get to step three, and then you keep trying until you get to step four, until eventually, somebody gives you money, and then you backtrack and say, “What happened with this person? Did they do these steps? Great, now I’m going to try and recreate that as many times as I can.” And then that becomes your process.
And that process repeats at each micro level, too, because that might be three or four steps to get to the conversation where someone might give you money. And then, what do you do in that conversation? Well, when I ask this question first, and this question second, and this question third, it’s more likely that they ultimately buy. So, if you don’t follow a script in the beginning, you better make one, because if you’re going to eventually get out of sales, which you should if you want to scale, then you’re going to be able to teach somebody else how to sell, too. And one of the biggest issues early on is that the founder is the most convicted about the product, and you should be; it’s your company. But people who come after you are never going to be as charismatic or as convicted in the thing that you have as you are, which means you need to follow a process to maximize the likelihood that the prospects they speak with ultimately purchase.
Paying Yourself
The next level in our blueprint, or journey to wealth, the mountain of Mordor, and by Mordor, I mean more money, is paying yourself.
How much should you pay yourself? When should you pay yourself? Of all the topics we’re going to talk about today, this is probably the most subjective. The reason for that is because it underlines one key concept that is 100% personal, which is risk tolerance, which is how much risk are you willing to take individually.
One of the regrets that I have earlier on, as I continued to double down on my gym chain, was that I took all the profit from each gym and kept putting it into the next gym, and I basically took nothing out for the entire time. Now that’s super risky. I was living on nothing, living cheap, I was eating cheap, I had a cash car that I owned outright, and I just put everything I had, spending every hour of my day, growing my business. Eventually, though, I ended up losing all the money from selling all my gyms and was left with nothing.
And if I had taken out some cash during that period of time, I would have had two benefits. Benefit number one is that when you really try to take out cash flow from the business, you’d be amazed at how much cash flow just magically appears. So, I like having bank account PRS be a good personal goal for every entrepreneur, even if the increment that increasing is small. It does two things: one, it forces you to take cash out of the business, so it forces cash flow. The second is that it forces you to decrease your spending personally.
And I have a strong belief that as you’re coming up, learning the discipline to spend less, if you increase the cash flow that you take out of the business and you spend less over time, then your bank account has nowhere to go but up. And I can promise you that when you have a very full bank account, business decisions become less stressful, and when you make less stressed decisions, you make better decisions. I do believe in taking some money out of the business along the way because let’s be real, you’re going to live a long life and then you’re going to die. And if you double down every single minute until the day that you die, you’d build the most Enterprise Value; you live a really shitty life. So, at some point, you have to balance the investment versus consumption of life itself or the fruit of your labor. That is why I’m a believer in at least allocating a certain percentage of the cash flow from the business to you personally, a healthy way of thinking about this that we have for some of our, uh, heavy capital-intensive businesses, meaning like brick and mortar chains, which is one of the biggest parts of our portfolio.
This is one back-of-napkin way that you can use: 33% goes to you, 30% goes to growth, which is new locations, and then this is rainy day, this is cash reserves for the business, cash reserves for you, and this is for a new location. Another way of doing it is something called a watermark. We know that we need to grow two locations, and this is a proxy. It doesn’t have to be two locations; you could be hiring two people, hiring two reps; it doesn’t matter, two more developers if you’re a software company, it works the same. Two more per month cost $X, we have Y profit, so all we do is we say whatever the profit is at the end of the month, we subtract this, and then we have a watermark above which we always leave in the account, and then everything else we distribute.
This cash flow, that’s a different way of doing it. This is a little bit more aggressive if you want to maintain a certain growth rate. This one is a little bit more flexible; it really depends on you and your tolerance for risk. And that’s one thing that I’d say I pride myself on in terms of our ability to help portfolio companies and newer founders who are creating their first kind of generational wealth. These are hard conversations to have and a really important conversation to have, and you want somebody who isn’t a financial adviser who’s trying to get you to take as much cash out so that they can invest and get their 1% fee. You want somebody on the same side of the table. You’d be like, “I get where you’re at, I can see where your wealth is,” and also sees over the next 24, 36, 60 months what it looks like for us to just have that one big bloop so you never have to work again.
We’re now approaching the second level, the pinnacle of our second level, which is setting goals, and I think this is a really disinterested topic. Most people think like, “Oh, I need SMART goals or specific goals.” I’ll show you how I do that. Alright, so rather than focusing on outcomes, we focus on activities. So the goal shouldn’t be what happens, but the goal should be what we do.
I had a buddy of mine; they started doing 10 grand a month, 20 grand a month, 30 grand a month, and then he would fall off, and I was like, “Why do you keep falling off?” He said, “Well, I make the money, and I hit my goal, so then I ease off the gas,” and I said, “It’s because you’re defining your goals the wrong way. I see you as not hitting your goal every time you’re not doing the activities.” So I said, “Make the activities the goal, and then you’ll hit it every time, and more.” So then he flipped how he saw his own success into simply, at the end of the day, did he do all the things that he said he was going to do at the beginning of the day? And then you can actually control your inputs, because inputs are what drive outputs. Don’t make the goal outputs; say, “What am I going to do that would be unreasonable that I don’t hit these outputs?” So, for example, my inputs might be, and this is one of my favorite ways of thinking about advertising, something that I call the Rule of 100.
So the rule of 100 simply states that if you do 100 primary actions over 100 days, you’ll usually get the first result that you ultimately want. Now, you hook people by saying you’re going to get the first result you want, but the key point is that you’re doing 100 actions. One of my little monitors that I would share with you is, count in hundreds. Alright, so when a lot of people are like, “Man, I did the thing,” how many hundreds did you do? If I was doing more reach outs, I’d say, “Cool, reach out to 100 friends a day.” If I’m doing cold reach outs, I’d say, “Cool, reach out to 100 people a day.” If I’m making content, “Cool, make 100 minutes of content every day.” If I’m running ads, I’d say, “Run $100 a day,” and each of those are activities that we can say these things will drive these outputs. They make that the goal, and so at the end of the day, you can say, “Yes, I did it,” or “No, I didn’t do it,” not “Did I make a sale?” Because no matter what, even if you didn’t make a sale today, you should still do your 100 inputs so that you can make two sales tomorrow.
So, the second con I’m going to talk to you about when it comes to goals is how we actually set goals for portfolio companies, and it’s not the way that you think, but it is something that you’re going to recognize because we actually use the scientific method. And here’s how it works: four simple boxes. One is, what problem are we trying to solve? A lot of times, we spend the most time on this part of this because a lot of times people are like, “Oh, I think we need to redo our logo. Why? What is that going to accomplish? What constraint are we alleviating?” Right, because for us, we back our goals into the constraints of the business. Because let’s say that conversion rate on our homepage is not a problem, well, then why do we need to redesign the logo? “Oh, we don’t.” One of my favorite ways to solve problems is to decide they’re not a problem to begin with. So this is column number one, which is what problem we’re solving.
The second is, what’s our hypothesis? Which is an “if-then” statement: X, then Y. So what that means is, I say my hypothesis is, if our website has low conversion, that’s the problem that we’re solving. My hypothesis is that if we redesign the website, we will then get increased conversions. And then all we have to do is say, how do we measure X and Y? How do I measure that we redesigned it? I could say yes or no, I did it, or I could say that we hold a split test every Monday that we run over the quarter. That would be the X, that’s something I can say yes or no, we did, and then Y, my conversion rate. Let’s say we’re at 10%, and then I would say, is it greater than 10%? Yes or no.
And then, finally, the last thing is: Did we do it? And then, did it work? We figure out the problem we’re solving, we figure out what our hypothesis is to solve it, we determine how we’re going to measure whether or not we did it, or whether or not it happened. And then, we ask, “Did we do the thing? And then, did it happen?” Because if we did not do the thing, then it wouldn’t matter, and we’d have to repeat it later and solve the problem, “Why are we not doing this thing?” But if we did do the thing, then either it improved it, or maybe we redesigned the website and the conversion rate didn’t improve. So, either that might not be the constraint, or our hypothesis was wrong. And so, this allows you to iteratively improve the business.
Level 3 - Stay Rich, Get Richer
So, we covered the fundamentals of wealth creation, and we talked about how to create our first million. Now we’ve got it, and at level three, we’re going to talk about staying rich and getting even richer.
Getting Rich Once
So, one of my mentors, who was ex-Goldman Sachs, told me about something one of his mentors at Goldman Sachs said: “You should only have to get rich once.” That saying has really stuck with me. It implies that if you play the game right, you should only have to play it once. After that, you should be playing with house money the whole time, and never take bets that could make you lose everything. In other words, never bet the empire on a pot of gold.
This is the very first pass in understanding that $100 million offers outside returns often come from betting against conventional wisdom. And conventional wisdom is usually right. Given a 10% chance of a 100 times payoff, you should take that bet every time. Sure, you’ll still be wrong nine times out of 10. We all know that if you swing for the fences, you’re going to strike out a lot, but you’re also going to hit some home runs.
The difference between baseball and business, however, is that baseball has a truncated outcome distribution. When you swing, no matter how well you connect with the ball, the most runs you can get is four. In business, every once in a while, when you step up to the plate, you can score 1,000 runs. This long-tail distribution of returns is why it’s important to be bold. Big winners pay for so many experiments. That’s a concept from Jeff Bezos.
So, if you do hit it out of the park, you shouldn’t want to have to bet everything on it again to stay rich. When you get that one winning bet or that one ball that comes in and you knock it out of the park, you should be able to win for good. That’s why one of my favorite sayings when it comes to wealth building is this: Fortunes are created by taking huge risks with small amounts of money, but fortunes are preserved by taking small risks with lots of money.
We talked about why you should only have to get rich once. And if you are going to swing for the fences, you still need to be very sure that once you hit it, you never bet it all on black again. This leads us to our next point.
People
So, one of the key concepts in marketing is the Quad Marketing Calendar. Think of this as internal and external to your business. On one side, you have prospects, and on the other, customers, candidates, and employees. It’s essential to market in all four directions at all times. Most people focus solely on advertising to prospects. They invest all their resources to convert these prospects into customers. However, this approach neglects other crucial areas.
For instance, you need employees to deliver services or products to your customers. That means you also need to market to attract candidates who can become your employees. This highlights the dual-sided nature of advertising. As you grow your customer base, you also need to expand your workforce. Additionally, if you want customers to make repeated purchases, you must market directly to them. So, you advertise to prospects to gain customers, to customers to encourage repeat business, to candidates to become employees, and to employees to keep them engaged and educated. This enhances their ability to provide value to customers, ultimately increasing your enterprise’s value.
Often, you might feel like a genius with a thousand hands, particularly if you’re adept at converting prospects into customers. However, you might struggle to turn candidates into employees and to train those employees to improve. The more you focus solely on customer acquisition, the more overloaded you feel, as there’s no one else to help you.
Let’s consider two scenarios: the ‘Genius’ scenario and the ‘Enterprise’ scenario. In the Genius scenario, you might be making $5 million top line and $2 million in income annually. This adds a million to your net worth after taxes. However, this scenario lacks enterprise value because it’s just you, the genius, with a thousand helpers. You own a business that provides value to customers, which could be sold to someone else. If your business doesn’t require your constant work to provide value, it means it wouldn’t require much effort from a potential buyer either. This makes your business a more valuable asset.
And so, if I took a business, for instance, with a thousand hands making $2 million a year, and I didn’t increase the revenue or even the profit, but I simply removed the genius and made the structure of the business genius— the people who work inside of it and the processes, the systems that they follow genius—then I add $1 million to the net worth of the person who owns it. And so, one of the fastest ways to create wealth is to make the thing that you have reliable, to make it risk-free, and ensure that it will last.
Even if it took you two years to do that, for you to get $10 million of Enterprise Value or net worth gain, you’d have to make $20 million of income to get to that same $10 million. But meanwhile, while you’re building it, you’re still also making money. This scenario is what we basically do for the majority of businesses that we acquire. We often take businesses doing $2 million, $3 million, $4 million, $5 million, etc., and then take them to this side and say, “Hey, let me show you what it looks like at $10 million with a 7x multiple.” And so, now you go from a one or two or three million dollar net worth to a $70 million net worth. And that is how you get wealthy, this is how you get rich.
Now, I want to be clear: you can absolutely get to a million a year in profit with not a lot of people or even just on your own. With the increase of AI and automation, we’re going to see more big companies with fewer and fewer head counts. But until the day General AI comes in and just crushes everyone, people are still required to get to where you want to go. So, if you want to not just make a million bucks or a couple of million bucks and you want to get to $10 million, $20 million, $50 million, $100 million, and beyond.
Reputation
You got to get the people side right, and now we go to the reputation side. Ooh, a fun one. Imagine all these flowers as different life experiences that you’ve gone through. If you look at them all here, this isn’t a bouquet; this is just a lot of things put together. Now, when we do this and we combine them all, we now have something much closer to a bouquet. When you put all of your personal life experiences, your skills, and your character traits together, you create a bouquet. In other words, you create a reputation. But a bouquet doesn’t really exist. All we did was we associated things that were separate and then we put them together. So, you can strengthen your reputation by putting more and similar types of experiences together. So you’re like, “Oh, he’s got a strong interest in this thing.”
Now, if every single one of these would be different and some of these were weeds, it would be a lot harder to understand what is the point of this thing. Let’s say that you had a drunk driving accident. Right, all of a sudden, how different does this bouquet look? Which shows you how one negative experience in your life can actually affect how people see the rest of everything else. So, when we’re thinking about brand or building a reputation, I like to think of as what flowers do I want in my bouquet? And which things am I ultimately trying to emphasize or not include at all? And what associations are going to be ones that strengthen this, and which are going to be ones that break it apart?
So, reputation is a different word for saying what a brand is. And a brand is simply an association between something you know and something you don’t know. When we’re building a brand, you want to associate all the things that you want someone to think about you with the thing that they don’t know yet, which is you. Now, for me, the more my personal brand has grown, the more I have transposed Acquisition.com association with me.
And so now, when my team goes out to the airport and is wearing a hat that says Acquisition.com, common people are like, “Dude, can I buy that hat from you?” because they’ve gotten value from my videos and my books. They see an association with that value and they want to pay for it. But if this just had a random shape on it, they would have no desire to pay $50. If this actually happened, one of my directors of HR at the airport and a random person came up and was like, “Can I pay you $100 for the hat?” And she said no, obviously, because that’s not how our brand works. You’ve got to earn it. So, the idea is that that is fundamentally how branding works.
If I’m Louis Vuitton, right? I’m going to do the world’s worst Louis Vuitton symbol. If I’m Louis Vuitton, what do I do? I get Kim Kardashian to wear my clothing or carry my purse, and then a lady who doesn’t have status says, “Man, I want to be like her, but I can’t buy Kim, so I buy the thing that I’ve associated with Kim.” And then when I wear it, I’ll have the status by proxy from her. That’s fundamentally how the luxury market works, but it’s also how every market works.
Now, why do brands drop celebrities when they make a racial slur, or they get into an accident, or they get arrested for fraud? Because that becomes an association that people do not like, and so they say, “I don’t want to associate our brand with that.” So they say, “We’re going to break this association.” So, when you’re building a brand, it’s being very particular about what and who you want to associate with.
If I have a porn star next to me and I have a porn star co-host, you’re going to think very different things about me, even if the material is exactly the same. You might be like, “That’s flawed. Welcome to humanity and psychology.” Right? It doesn’t matter whether it’s flawed or not.
I can just tell you that this is how it works, and so when you’re building a reputation, especially in the B2B or the B2C space, you want to provide value. Right, we talked about value creation earlier, and so it means that you want to give things that people want, you know, a fast and easy way for them to consume that’s risk-free. And so, when we do that, you compound customer surplus. The street word for that is Goodwill, which is what amount of value did someone get in excess of what they paid for. So, let’s say I paid a dollar for something and I feel like I got $5 worth of value. Right, everything here between the two lines is customer surplus or what we like to call Goodwill.
But the interesting thing about this is that if I do this over and over and over again, these things aren’t additive. In my experience, they’ve been multiplicative, meaning if I keep providing something good, and that’s why it’s so hard as a brand to decide when do I want to monetize something. Because the thing is, is that the next time you provide even more value when people think that you’re going to monetize, they love you that much more, and you get that much more reach and more Goodwill. So that the next time, it’s basically reinvesting but rather than reinvesting capital, you’re reinvesting Goodwill.
Because what I can tell you is that Goodwill compounds faster than revenue. You can build a 100 million brand in 3 years, and to build $100 million in revenue might take you way longer than that. And that’s because if you just focus on providing Goodwill at scale, you get a disproportionate return. The Rock was able to overnight build Teramana into a 6 billion-dollar company, simply based on his brand, and similarly, a beauty brand built her beauty line into a billion-dollar brand. Conor McGregor with Proper 12, billion-dollar brand. George Clooney, billion-dollar brand.
And so they understood this concept, which is that this will grow faster, and so they disproportionately invest early into this. So that later they can monetize and do the right hook, the big bloop to the audience. And to quote Uncle Warren, it doesn’t matter how much goodwill you have, any number, no matter how big it is, multiplied by 0 equals z. So if you make a bet in the investing world that you then lose all the money, and you had 30 years of good investing making, and you go all in on one bet and you lose, you lose it all. You undo 30 years of good decisions with one bad decision.
And that’s the thing a lot of people calculate when they think about their personal brand. If we’re going back to these flowers, like I had earlier, if I have this one broken flower, it forever affects the way this bouquet looks. Imagine you gave this to your wife or your girlfriend, and you said, “Hey, here you go.” You’d be like, it’s such an eyesore that it distracts from all the other flowers that you have. And so, that’s why making sure that you never risk your reputation to make the short money, so that you can let the goodwill keep compounding, let the party keep going, is one of the smartest and hardest long-term business decisions.
Cuz believe me, if I start an OnlyFans tomorrow, I’ll bet you probably make a lot of money. It’s like, but it would be like this broken flower, and it would permanently affect how people perceive it and the brand that I also want to build.
Compounding
So now we finished reputation, and we’re going to talk about compounding, one of those big fancy words for investing, about how to get rich and stay richer. Compounding is when something multiplies unto itself. Alright, so if I have a $100 and it compounds at 10% a year, next year it’ll be at $110, the year after that I add 10% of this number which is $121, right? And then the next year $133, and so forth. And you notice that even though the time between these intervals remains the same, the actual amount that we’re growing continues to rise proportionally to how much we have. Which is how Uncle Warren can have a $1 billion and still make another $15 billion this coming year, right? It’s because he understands the power of compounding and they call it the eighth wonder of the world.
In the last decade, Warren Buffett has made more money than he made over the rest of his career, and that’s because the longer you do it, the better it gets. Which is why some of these early wealth building fundamentals are so important. Compounding only unlocks if you have a long-term perspective. Because this early, first four years I mean decent, but not bad. But if you do that over 30 years, it becomes unbelievable. And it’s also why you have to not diversify. Because if we were then splitting this up and saying, you know what, maybe I’m going to stop this, we’re interrupting the compounding process.
Equity is one of the single greatest compounding vehicles because you can reallocate capital within the same vehicle, right? And a simple example of that would be like if I have 10 locations and I can grow by 10% every month, then I go from 10 locations to 11 locations, and next month I get 12 locations, next month I get 13, and by my 20th month, I can open two locations. I get to 22, then 24, and it compounds because by that time, you’ll have built out the infrastructure to sustain a faster pace. So Panda Express, they added 600 locations this year. They had 2,000 at the beginning of the year. That took them 45 years to get to. This is one year they grew more in this one year than they did in any prior year before that. And that’s why you just have to stick with it for a long period of time.
And this is one of the things that people don’t realize about restarting. When you go from year 10 to year 11, you might be incredibly bored with your business. But if you go from 100 million to 110 million, you grew by 10 million. Even though this new thing might sound more exciting in year 1, the likelihood you go from 0 to 10 million in year 1 is really unlikely. And so, this is where all of the compounding is unlocked, even though it’s incredibly boring. But if there’s one thing I can have you write down: boring is what makes you rich.
One of my favorite quotes from Charlie Munger is that the money isn’t made in the buy or the sell; it’s made in the wait. And the wait is the hardest part because you have to sit with your hands in your pockets and decide that the original plan that you had was a good plan. The hard part of the plan is sticking with the plan, not doing the plan. Like, deciding that you’re going to work out isn’t hard. Deciding that it’s going to be 3 days a week for the year isn’t hard. It’s continuing to do it for that entire time is what makes it hard.
And I wanted to find a term for you that has been really helpful for me, which is patience. Right, a lot of people say, “Be patient, be patient.” What does that actually mean? Being patient simply means figuring out what to do in the meantime. As I make this video, I am being patient for my stocks that are growing right now. While I’m making this video, I’m being patient for the goal that I want to lose some fat. While I’m making this video right now, I’m being patient for some of our portfolio companies to capitalize on the reinvestments that we’re making. But I’m making a video. And so, what you have to do is that when you stick to the plan, sometimes the best thing you can do is ignore it and let it be, which means that you don’t interrupt the compounding process.
And there’s a famous study that studied patience and impulse control. There’s one big learning that I think all of us can learn from. So, there was a test called the marshmallow test. They took little kids and put a marshmallow in front of them. They wait 30 minutes, and then they can eat the marshmallow.
Now, if they eat the marshmallow during the 30 minutes, they didn’t get a second marshmallow. If they were able to wait 30 minutes and not eat the marshmallow, then they would give them a second marshmallow at the end. So, they got double the reward simply for waiting 30 minutes. Now, what was interesting is that they studied the difference between the kids who could resist and the ones who couldn’t. Obviously, long-term, they figured out that the people who could wait and delay gratification were the ones who were more successful.
But the strategies that they used to delay were not that they stared at the marshmallow and used their willpower. The kids who were successful did a number of different things. Some of them went to a different side of the room; they just distanced themselves from the marshmallow itself. Some of them started singing songs to themselves. Others took the marshmallow and put it in their pocket so they couldn’t see it anymore. So, the big thing is that they had the skills to figure out what to do in the meantime.
And so, the more skilled you are, the more ways you can win. And that’s why building skills is so important. It’s important because it allows you to be patient. It gives you something to do in the meantime while you allow your master plan to come to fruition, without thinking that you’re smarter than you are to begin with. So this concludes almost the “Get Rich or Die Trying” sex, AK level three of wealth building. So let’s… oh wait, Alex, you laughed. That’s an excellent observation.
Enjoy Your Wealth
That brings us to the very last level, which could even be above the levels—the level above the levels—on the business, not in the business. You know what I’m saying. Enjoy your W. Let’s talk about it. In my opinion, there are really just two levels of wealth. Level one is that you have all of your personal needs taken care of. The second level of wealth is the unlimited level of wealth, which is that you just always want to keep using money to make more money, and that means that you’ve progressed from solving your personal needs to playing a game.
And so, I think what a lot of people do is they can never figure out what enough is for them. There was a period in my life earlier on where I was like, okay, let me figure out all these rich people things. I bought a Bentley. I was like, let’s go out to all the nicest restaurants every single night. But the thing is, to live like the 1%, it’s actually not that expensive. If you fly private, it costs about $50,000 per month. If you want to eat out every night of the week at the nicest restaurants, you know, $500 dinners every single night, it’s $15,000 a month. If you wanted to, let’s say, lease a Lamborghini or something, payments are probably 5 grand a month.
Right on top of that, let’s say you want to go and buy designer clothing. So that’s another $115,000 per month. Let’s say you spend $5,000 a month on a nutritionist and another $55,000 a month on therapy and a performance coach. Whatever. All right, let’s just call it a cool $100,000 per month of expenses. Oh, we forgot to mention where we live. Let’s live something of a ball. Let’s put another 50 grand a month on here, so $150,000 a month is just under $2 million a year in income. Now that’s after tax, right? So, maybe close to 4 million a year in income. Now, that’s a good amount of money. It’s actually not a lot in the massive scheme of things.
And what I mean is that you can ball out all the way, balls to the wall, for the rest of your life on this level of income. What I would encourage you to do is actually figure out what is good for me. Maybe it’s worth it to taste these things and see which of them you actually enjoy. And I think it was really doubtable for me to buy the belly and realize I didn’t care, and then just I gave it back 6 months later. I sold it back at a loss. So, I think the big TLDR here is that you need to figure out what your personal dream list is. A lot of people have these huge goals like, “I want to be a billionaire.” It’s like, why? Because you can just make this for the rest of your life and ball out. But real, real, you can probably live incredibly comfortably on $50,000 a month, like still 1% living, unbelievable wealth looking stuff for $50,000 a month after taxes.
So I think if you put what does food look like, what does travel look like, what does clothing look like, what do experiences look like, what does health look like, and you start putting an actual number to it, you realize that what you actually need to satisfy your personal needs is just to give you less than you originally thought. And so that brings me to the next level of this, which is the game itself. Now, there’s a reason that my podcast is called The Game, and it’s because at this point, I play the game because I enjoy the game. And so the whole concept of enjoying your wealth is not about not working. And I think this is one of the big myths. You might feel that way now because you hate what you do, and the fact that you hate what you do is one of the reasons they might not ever get the wealth you want. And so it’s not about not working; it’s about getting addicted to freedom.
And freedom again doesn’t mean you don’t work; it means you have the option to work. And so, I believe that humans are at our best when we do work that’s worth doing, when we have purpose that we derive from the effort and the toil that we put in every day. You get weaker when you don’t have an opposing force that’s as strong as you. If you lift weights and you never lift even close to your maximum, you eventually start losing muscle. And I think it’s the same thing with mental strength. Unless you’re continually raising the bar, you eventually atrophy; it’s use it or lose it.
Most of us want to become the best versions of ourselves, and in order to become the best versions of ourselves, we have to increase the difficulty of the level that we’re playing on. Imagine playing a game that you’ve beaten 100 times, and then you put it on the easiest level; it gets boring. We think we want easier, but we don’t. We want to do things that we enjoy more, and enjoyment and easy are not necessarily the same thing. So, if we’re trying to enjoy our wealth, it’s finding the things that we can lose ourselves in for the rest of our lives and being okay with the fact that that thing may shift over time in terms of what it looks like or what it feels like.
And if you fast forward all the way to the end of the movie, as a reminder, you die and you can’t take any of it with you. Even if you finish your life with this big pile of money at the end, you still have to push it over the edge of the cliff, right where it just falls off to other people whose hands are here because you’re… yeah. And so, reminding myself of that fact every single day reminds me that the whole point of the game is to play the game, and by playing the game, we win the game. Because the best games in life, and I’ll finish with this, the best games in life are infinite games, not finite games. And I’ll tell you the difference.
The point isn’t to get married; the point is to stay married. When it comes to business, the point isn’t to win at business; the point is to stay in business and literally keep playing. And so, when we think about the greatest games that we play as humans, we have to take this infinite frame or we fool ourselves into a false finite prison. We keep wondering why we don’t feel like we’re winning when we get to the finish line because we never realized that there was no finish line to begin with. The fact that we were playing the game secured our victory by its very nature.
This realization helped me reframe how I thought about spending my time so that I could enjoy my wealth. The point for me is to stay in business and see who I can become in this process. The point is for me to see what it looks like at 20 years of marriage with health. It’s not that, like, “Cool, I’ve been training for 20 years, I’m in decent shape.” I wonder what it looks like when I’m healthy at 50. Because if you’re only in shape for 6 weeks of your life, or 6 months of your life, or even 6 years of your life, who cares?
If you only have a good marriage for a few years of your life, who cares? If you’re only in business and then go out of business really quickly, and you get out of the game, who cares? Which is why the biggest highway that you can have, and this is from Winston Churchill, “You win as long as you never quit.” And so, that’s how you enjoy your life and your wealth. And there’s your blueprint.