How to make smart decisions more easily

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Alex Hormozi
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Video Transcript:
I want to talk about why it's so hard to make important decisions. I've learned this from running my portfolio of companies, which is Acquisition. com, which as of 2024 did over 250 million in aggregate revenue.
My plan for you is what makes these problems so hard. I'll explain in examples of two different businesses of owners who are facing extremely difficult decisions themselves. And then I'll give you a decision-making framework that'll save you a ton of time.
You know what? It's not even a decision-making framework. It's like this is what I think through and it's made these decisions easier.
Because if you think about this and this is the big this is the big meta point. The speed of growth is going to be predicated on your speed of decision-m and your speed of decision-m is predicated on how clearly you can think. If you can think clearly, you can decide quickly.
If you can decide quickly, you will grow fast. Because think about how much time you get locked into these moments where you're like, I don't know what to do. And that's a week, that's a month, that's a quarter, that's years where people just stay stagnant.
And it's usually because they have one thing in front of them where there's two hard calls and they're not sure what to make. And the only thing easier than making the decision is not making it at all, which means you pay the real price of never achieving what you ultimately want. I wanted to make this live, this broadcast, if you will, because I had a really good conversation last week with an entrepreneur and something came up that I know affects all of us.
The entrepreneur was dealing with kind of a rock and a hard place decision, right? There's two two paths you could do and apparently there's a cost on either side. I thought this was such an interesting thing because most of the biggest decisions in life are scary because you've already made all the easy decisions that you can make.
Most of us when there's an easy and obvious decision that has almost no downside and all upside. We make those as fast as we can. Most of our lives are spent with only hard decisions left.
The only way to make a hard decision and easy decision is to let life make it for you, which is what the vast majority of people do. But letting life make the decision for you is typically not a very good way to live life. Or at least you're not going to get what you want.
You're going to get what the roll of the dice gives you. The big idea is that the things that are obvious and not risky you have already done. What's left are the things that are obvious and risky.
It's because these types of decisions involve tradeoffs. And I'll say this again, like you almost never get something for free. Obviously, it's not always trading time.
Sometimes it's trading risk. It's trading money. It's trading decrease in performance.
is trading something for something else and you've been stuck for a long period of time. Then what you're trading is being stuck for either getting better or getting worse, but you're making a trade and you're hoping that obviously it gets better. This guy was relatively new to business.
He'd been doing business for called 18 months and was doing really well. So he just done a million dollars in revenue. And to be clear, I'm not saying that's an expectation anybody should have that if their first 18 months they're going to make a million dollars in revenue.
But obviously he was doing a good job. And one of the things that was a real issue for him is that he was attracting a lot of beginners for his products and services. It became clear that he both wanted to attract higher level customers and those customers were better.
So he enjoyed it more and it was better for the business. Now sometimes it's like I enjoy these people more but they're not better for the business or vice versa. But in this instance it's a clearly this is what he wanted and was better.
The problem was 80% of his revenue was coming from a different set of customers that he didn't like as much that wasn't as good for the business. what is the apparent conflict, right? What's the apparent trade-off that he has to make here?
If we want to get these customers, it means we have to start saying no to these other ones. But if I say no to these other ones, my revenue is going to go down. So, what do I do?
What most people do is they just stay there forever and that's it. Like, they just stay stuck and they just do this. They look back six years later and nothing has changed in their life because they changed nothing.
With this individual, I said, "Hey, there's a number of things we have to do. One of them is we have to change your ads so that we start messaging the right type of prospect. " If you can't say, "Hey, tired of your job?
" It's like that's going to attract people with jobs who are tired of their jobs. If you're frustrated with your business, then you're going to have different concerns. And so, he wanted to be going after business owners, not consumers.
And so, it's like all right, we have to talk in that language. Now, the second thing is he had a book about how he quit his job. I was like, if you're going to write a book, it should be about your business, not your job, because then you will get people with businesses.
So, you had to change the lead magnet. Now, the third thing is it's like, okay, well, you can't also just sell your existing price point because it won't make sense because the cost of getting a business owner compared to get cost of end consumer might be 5x or 10 times more than that. So, we have to make sure the economics of the business work.
Now, if you're thinking about this, you're like, "Wow, there's a lot of changes. " It's like, "Yeah, he said he didn't want to keep scaling existing business. " He's got to make the trade.
Now, the alternative to that trade is that he's just dissatisfied. When I actually spell out both sides, I'm like, "Well, shoot. How can I make today feel worse so that tomorrow feels better?
" And that's what ultimately gets me to make those jumps. And I would love to tell you that the big decisions in my life I made because I had this big passion pool, this massive vision in front of me. But the reality is most of the time it was because my present became so painful for me that I was like anything is better than this.
Even if all of us rewind the clock and think about when we started entrepreneurship, right? Like you take the leap because you want more freedom and to make more money. But neither of those happen right away.
It's kind of one of those like in order to have an investment pay off, your bank account must go down before it comes up. The number in your bank account goes down when you make the investment and then over time it comes back higher than it was. When you lift weights, your muscles don't get bigger.
they get smaller and then bigger. You supercompensate. There's usually a step back that must be taken in order to take steps forward.
The only guaranteed thing is that if you never take that step back, you will never get the outsized return of taking the steps forward. I think about this because there's so many hard decisions in business. Of course, advertise more.
Yeah, duh. We'll do that. But that's not super high risk.
Where do these risky decisions come up? It's when you've made all the easy choices. So, if you're like, "Okay, well, I I need to get better people.
" Okay, we can't just wish for it. So, we need to start adding friction into our process, right? We need to start disqualifying customers and we have to start qualifying our avatar to the same degree.
If we want to raise price because we're like, you know what, I don't have enough good people in my business. It might be a pricing issue. Hear me out.
Let's say that you have more demand than you can handle and you've got a team that's spread thin and you're thinking, "Okay, I need to increase my team because I have this demand, but I can't increase my team because I don't have the money to do it. " D. What's the problem?
Well, you've got to step one, raise your price. If you're supply constrained, you've got more than you can handle. Then we can decrease how much is coming in by raising price.
By raising price, what's the next thing that happens? Well, now we have more cash flow because we raised the price. We're making more for the same thing that we were doing before.
That cash flow does what? It allows you to pay and advertise higher compensation so you can attract the talent you need to get people in so that you can no longer be supply constrained. And so, usually there's two or three order consequences that have to happen.
Now, each of those have quote risk, but the alternative is what? You stay there. You stay stuck.
You're going to spend money knowing that the ROI will go down and you'll make more money. So, I'll give you an example. So, a lot of business owners, especially on the smaller side, when they're starting out, maybe they're, you know, a hundred bucks a day, $1,000 a day, $5,000 a day, they get to this arbitrary price point of what they're spending on advertising, and they're like, I can't spend beyond that.
And the reality is that usually the return goes down in terms of relative return, but their absolute return goes up. So, let me say it differently. If someone said, "Hey, if you give me $10,000, I can give you $100,000.
" I'd be like, "Well, that's a great deal. " I'm like, "Can I give you a million dollars at that? " And they're like, "Oh, no, no, no, no.
If you give me a million, I can only make you an extra million. " And I'm like, "Wait a second. So, if I give you a million, you give me two million, so I make 1 million in profit.
If I give you 10 grand, you make me a hundred grand. Which would you rather do? Don't think about this too long.
You want to give the million so you get two million. Why? Because you made a million dollar in profit versus $90,000 in profit.
Of course, it makes more sense to do that. But the thing is the relative return will be lower. That little note that it's especially common in smaller businesses.
I used to work with I mean obviously with gyms, right? What happen a lot of times is a gym owner would cap their spend, right? So I'll give you how this would work.
So, let's say that in order for them to cover all the costs in the gym, they need to sign up x number of members per month. What they would do is spend as little as possible to get those x members and then be like, "Okay, I broke even, but I can't spend more money because I'm breaking even. " It's like, dude, you have to spend more money because you're getting to break even on that spend.
Everything above that is the gravy. But people because they downregulate their goals based on the difficulty of achieving them from a very tactical perspective. Something that has given me such outsized returns in my life is actually spelling out the trade.
Spell out the trade. I talked to a lady last week who had a bunch of businesses and so she had five different businesses she was running and she was doing like a million or $2 million a year, whatever. When I talked to her about it, she's like, you know, the problem is like I can grow things but I get really bored really quickly.
And I was like, okay, well, first off, there's nothing wrong with that. And I super mean this because I'm not the should guy. I'm not the you should do this, you should do that.
Do whatever the hell you want. There are certain paths that are better for optimizing for specific outcomes. And so a lot of people don't even know what outcome they're optimizing towards.
If you just have make more money as the goal, guess what? Very hard to focus with that because everything makes more money. You get super spread thin because everything you can make a logical argument makes more money.
But it won't make you the most money because the most money is going to come from focus. Now, when I spelled out the trade-off for this lady, I said, "Listen, option A, you keep doing what you're doing. " And you say, "I prefer more novelty in my life.
" And I'd be like, "That's amazing. Just understand that the trade is you're not going to build something super big, and that's okay. You have to really want to build something really big.
And if you really want to build something big, the trade-off is you don't get the novelty in your life. So, which one would you prefer? " And that's what it comes down to.
And if you're like, "You know what? I would rather have this big outcome than the novelty. " then great.
Then you know what you're paying for when you have those moments of boredom, what you're getting for it. You know the trade you're making. Now part of the difficulty of these trade-offs is that what do you think she gets immediately?
Novelty. What do you think she gets at a delay? The big business.
And so she has to pay the price of boredom today to get the big business she ultimately wants. Or she doesn't have to pay well the price she pays is that she doesn't get the big business today. But in both instances, she doesn't get the big business.
But in one of them, she gets the benefit of the ADD, of the squirrel brain, right, of monkey mind, of trying all these different things, tasting all this different stuff. And again, I want to be clear, do whatever you want. But I only say this from my own experience of you will limit yourself by spreading yourself too thin.
And here's the real kicker, and this one's nasty. The better you are in general, the more capable, more able, the more potent you are as a human being, the more things you can multitask and do decently well at, you're still giving up the aggregate upside, which is almost always 10 times bigger than your current spread thin version. And that sounds like a crazy number, but like I went from a couple million bucks a year, again, this is rough numbers, I don't remember the exact ones, of when I had nine different things that were going on.
And I have my launch business, agency 1, agency 2, one for chiropractor, one for dentist, and I have my six locations, lot of different businesses, one CEO. And I'm like, I'm a big CEO. As soon as I just consolidated all of that into one, I basically 10xed how much I was making roughly.
And the thing is, I've seen this pattern. The problem is people aren't willing to prune the garden. There we go.
Prune the tree, right? They're not willing to cut the branches off to let the whole thing grow. Back to the original owner that I I was talking about at the very beginning, when I had my conversation with him, it became clear that this is what he ultimately wanted to have.
And so when I've been able to convince business owners to do the thing they ultimately want to do, it's just spelling out what my trade is. Know that when you have hard decisions in front of you, there's nothing wrong with that. It means if anything, you've picked all the easy paths.
You've already cut the lowhanging fruit off. You've already made the easy ones that have almost no trade-off or the trade-offs are so obvious or benign that you're like, obviously I'll make the trade. But what happens later is you get to real irreversible decisions.
You have or rather difficult to reverse decisions. At that point, you have to put your big boy pants on and say, "I got to make a trade. " Because the only thing that is guaranteed is that if you want everything from life, you will get nothing.
That is my little message of the day. The hard choices that you have are hard because you've used up all your easy decisions already. And wishing that they were easier does not make them easier.
And you've got to pick and you've got to live with the consequences. And I will say this, the more irreversible decisions you make, the better you get at making them. But you got to start.
So that's it. Rock and roll. Appreciate you.
Taco Tuesday. I don't know what that means, but just go for it.
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