The Game with Alex Hormozi
6 Levels Of The Money Ladder And How They Effect Your Business | Ep 856
Mon, 24 Mar 2025
Wanna scale your business? Click here.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.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
Chapter 1: What are the six levels of the money ladder?
The wealth or money ladder. There's six levels to this and I'm going to break it down. This fundamentally changed how I saw, how I priced my payment terms and fundamentally how I saw money flowing through a business. Welcome back to the game. I have an old concept that has reemerged. This is something that I thought a lot about in the year that Layla and I were selling Gym Launch.
Chapter 2: How does money flow within the economy?
And it's basically just how the flow of money is prioritized. And so I think if there were like a wealth principle or like a woo-woo idea that I have ever subscribed to, this would be it. I don't really know what would make it woo-woo, but wealth principle certainly has that ring. But it's actually that there's some mechanics behind how money flows within the economy.
And the privileges that certain types of businesses or agreements set in motion cause a disproportionate amount of money to stick to those entities that follow this structure. And so I see this more as a continuum than I do a specific rule. And I'll break it down. But it's basically the relationship between payment and work.
There are kind of six varying degrees along this continuum that I've kind of identified. I have noticed that as I have become wealthier, I've moved up kind of the continuum here towards the ultimate extreme. Let me take this out of the theoretical and put it into the actual or real life.
So at the lowest end of this continuum, you would have somebody who works now, takes on tremendous personal risk and gets paid later. All right. Now, normally you'd think, oh, wait, isn't that, you know, the results of like, isn't that, you know, delayed gratification? Well, not when it comes to the flow of money within an economy. And so I'll kind of explain.
Chapter 3: What is the role of employees in the money ladder?
And so what's the word for somebody who falls into this category of rules? Well, the answer is an employee, right? They will front, you know, two weeks of work, sometimes a month of work. They'll work up front and then they'll get paid later. Right. And that's a pretty standard agreement that's existed for a very long time.
Chapter 4: How do independent contractors differ from employees?
As I walk up this ladder, think about both of those variables, the payment and the work, and you'll see how they shift. And obviously the goal or the ideal is to go as high up the ladder as you can. And so the level above that would be an independent contractor. So this is somebody who functions like an employee. They do work and they get paid.
But sometimes the nature of the payment and the timing of that payment can be altered. And so, you know, a common setup might be half now, half later. Right. And so you can see how how this works. So they get paid half now. They work and then they complete work and they get paid the other half. And so it's a little bit more smoothed out. compared to the employee situation.
Chapter 5: What advantages do in-demand professionals have?
Now, that would be the second lowest on our rung of wealth. Ah, the plot thickens. And so what are these remaining tiles above this? So above that, I would consider the in-demand professional. And so what happens in this situation? So this would be a specialist of some sort, or you go to a heart surgeon, or you just go to a doctor in general, whatever. You pay first. And then they do services.
And sometimes, depending on the leverage, you pay now and get services later. You know, if you have a surgery, just to use that to keep that example going, you might pay today and your surgery might be for three months, you know, from now. And so from a cash perspective, that business's advantage compared to one where they have to, you know, work first and get paid after.
Chapter 6: How do banks operate in the money ladder?
So we're plotting along here. Now, hopefully the goal isn't to really think, oh, I need to jump to this next rung. It's more like, how can I alter how I ask for money within the business that I exist or the services that I sell so that I can... make my money flow more advantageous and ideally have more of that money stick to me within the economy. So now we go what I call above the line.
So those are kind of like the three levels as I see it for an individual. Right. But as you go up the ladder, you have the leverage of organizations. Right. And so I would say the the level above that is banks. So let me let's play it out. So a bank gets paid immediately, and they always get paid first. Meaning, there's something called a capital stack.
Chapter 7: What unique benefits do insurance companies provide?
But essentially, if you buy a house, you don't really buy a house. The bank buys it for you, and they get the house. And if you're a good banker, typically the rule of banks, if you didn't know this, is that you should be able to recoup your money in at least three ways. And so that creates collateral for the bank to do lending. And that's typically how they do it. They'll be like, you have a
guarantee. We also have the house, which is payment. And if they can, they'll get a third way. There, it's like they kind of cover their downside and they will get paid no matter what. And they take on some risk at a later date. And so you can see how work shifts. It's like, how much work is there? Well, less than in some of the first three scenarios I gave.
Chapter 8: Why do old businesses like banks and insurance thrive?
And you continue to pay for that thing every single month and they get more than the money they put in. Now, what level is above banks? Ah, I think there's two. And so I will break them down. The next highest up or second highest, if you will, on our money ladder or continuum is insurance.
So the reason I think this is interesting is because banks, insurance, and the final example that I'll give you are establishments that are hundreds of years old. And when I see something that's lasted for a very long time, I think that they must have some superior setup or agreement implied or or explicit for how money should flow to them.
And like this is just stuff that I think about on Sunday afternoons. But insurance, if you think about what it is, it's like, let's say I buy insurance, right? So I, you know, I buy insurance, I pay today and I may or may not receive something back in the future based on the agreed upon terms.
To use the simplest example for insurance is like if I buy life insurance today, I'm literally just going to give money. for a 100% margin box of air that may or may not be redeemed at some point in the future. If I do this for 20 years and then I stop, they literally just got all the money for nothing. Like, wild.
And in the unfortunate circumstance where something does occur, and some of the terms of the agreement for some reason were broken, they still get all that money for nothing. And all the compounding and growth that occurred as a result of that. And not to mention, insurance, the float that they generate is tax-free.
which means that all the money that they have to keep, which insurance companies basically act like investing accounts, except they don't pay taxes because they predate the tax code. This is why I look at very, very old businesses because they have survived wars. They have survived different leadership within the world.
And when I see that, I'm like, they must have a robust system for getting paid, right? Otherwise, these things wouldn't exist. And so you're like, okay, well, what's even better than getting paid now and getting paid for a long time and maybe or maybe not even have to pay anything back? Well, I think the final is, I would say, three categories, government, God, and franchisors.
And what do these companies get? What do these establishments get? They get, which is a term that is more commonly used, royalties. And the reason I think they're called royalties, I'm going to make a bet here, is that they were given to royalty. They were given to the kings of the kingdom, right?
The nature of a royalty is kind of interesting because you get paid always, and you get paid off the top, and your work is questionable. So what does the government do for us, right? Now, this is not intended to be some sort of political point, but I just like to see how money works, right? What do we get for what we give? to the same degree. Religious establishments, right?
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