The Game with Alex Hormozi
Stop Confusing Patience With Delaying The Inevitable | Ep 843
Thu, 27 Feb 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
Chapter 1: Why are parables significant in business lessons?
Like, what's been top of mind for me has been parables, all right? And I think the reason parables are so interesting is that they're very memorable, right? Like, remember stories better than just about anything else. And there was a parable that I've been thinking a lot about. It's two different ones, and they apply a similar lesson.
Chapter 2: What is the lesson behind the parable of the infected tooth?
And then I kind of want to just, like, juxtapose that against a lot of different scenarios. So... I will tell you the first parable now. You guys ready? So this is the parable of the infected tooth. So a CEO has a talented but toxic executive who drove short-term results but poisoned the culture. Her board and employees warned her repeatedly, but she kept this executive.
fearing the pain of removal and the dip in performance that would inevitably ensue after the removal. So quarter after quarter, you know, she would rationalize. She would say, well, next year, or after this big contract, or once I onboard this new customer, or after I hire, you know, fire replacement, et cetera, et cetera.
So then when she finally needed to fire him, she had to, morale then plummeted. And then project stalled, three key employees quit. And so she goes to her mentor and she says, see, removing him wasn't a good idea. And so then the mentor replied, the pain you feel isn't from removing the tooth. It's from letting it rot so long that it infected the jaw.
The extraction just revealed the damage that was already there. And so she realized that every day she delayed had made both the problem and its inevitable solution more painful. And so then the mentor added, remember, the mistake wasn't pulling the tooth. It was washing it decay and calling that patience. That's parable one. Parable two.
Chapter 3: What can we learn from the parable of the drowning ship?
The Parable of the Drowning Ship So a merchant owned a ship that sprang a small lake. The repair would cost him a month's profit. I'll fix it next quarter, he decided, taking on more cargo instead. The leak grew. Now repairs would cost six months of profit, significantly more. I'll fix it next year, he reasoned, taking even more cargo to make up for the lost speed because it was leaking.
By year's end, the ship could barely stay afloat. Repairs would cost everything he had. He then said, I can't afford to stop now, mortgaging his house to add yet more cargo. The ship eventually sank. Staying on the shore, a wise trader told him, the best time to exit a bad deal is when you first realize it's bad. The second best time is now. And so...
With both of those parables, I find them really telling because I want to now translate that into kind of real world stuff for me. So one of the most difficult and painful things that you have to do as an entrepreneur is that you have to replace anybody on your team.
But the further up they are in the organization, the more painful it is because typically if they are not a culture fit or there's a performance issue or a combination of both, the people that they hired underneath of them will likely also suffer some form of deficiency related to that leader. So it's almost like an entire tree branch of the company becomes rotten.
And it's not that they're bad people. It just might not be that they're a fit for the culture that you have at the business. What makes this so painful, and this is the thing that I find really interesting. I remember a pastor was telling this story. He said he was talking to a husband, and the husband had cheated on his wife. And so he was saying, you know, you have to tell your wife.
And he was like, I feel like it's really selfish for me to tell my wife and hurt her. He said, why should I hurt her? That feels like the wrong thing. Basically saying it would be almost a sin to hurt his wife. And so then the pastor said, the sin occurred when you cheated on your wife, not when you told the truth.
And so I kind of see it that way within a company, which is that when you have somebody who works for you or is especially a leader, You basically incur this debt, right? And so this is operational debt, leadership debt, management debt. There's different ways of saying it. But basically, you have somebody who's not there.
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Chapter 4: Why is it crucial to address team issues immediately?
And for every day that you don't replace that person, you incur more debt of what's going to come later. And that debt comes due with interest. And so it hurts even more. And that's something that I would say that it's taken me a long time as an entrepreneur to just come to terms with. It's just like when you see something bad, the moment to address it is immediately.
Because when you wait, it literally just gets worse. And so sometimes we wait until our hand is forced. But wouldn't it be better to not have your hand forced and then never have to get to that moment? And so I was giving this example to a new leader in the business who took over a department yesterday.
And he was going through some of the pains of having to like basically raise the standard, raise the bar, you know, cycle some people out who weren't really aligned with kind of the direction of just like high performance. And I said, so if I walked around here and I told everybody that they didn't have to use the bathrooms and they could just shit all over the building, they could literally shit.
And that's what I said. That was the expectation that I said. Well, the day that I come in and say, hey, guys, stop shitting in the building and use the bathrooms. Everyone needs to be like, what the hell, man? That's not how we've been doing things. You know, why are you changing the expectations? Why are you changing everything? Right. And. The reality is, who's the one whose fault it is?
Now, ultimately, it's always the entrepreneur's fault because everything within a business is your choice, either directly or indirectly. But under that assumption, the fault was from the manager prior, not the person who's basically paying the bill. And so it's like this person, whoever they are in the business for you, will basically run up this tab. They're just spending.
They're spending, and it can be money, but a lot of times it's spending goodwill, it's spending culture, right? You're basically doing this work at the cost of culture. And the thing is, is that the bill will come due. And the thing is, is oftentimes the person who runs the debt up and spends lavishly and gets everyone to love them is not the one who pays the bill.
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Chapter 5: How does leadership debt affect company culture?
And that's where it's really tough. Because like, if you're, for example, and here's the real, real, you may be this person. Like this may be you. And so you're going out there and you're splurging, right? You're saying everything's great. You guys are doing awesome when you know they're not doing awesome. All you're doing is kicking out a bill that you're going to have to pay later.
And the bill comes due with interest. And that interest is usually just the entire culture of the team has suffered. And so then you have to, it's like, it is like a decaying tooth. You have to pull it out, but then you got to scoop out all the gunk and all the root and everything else around it so that you can start fresh. And it's just been this was just top of mind for me.
And that's why I had these two parables that I I tried to put together around this. And and I guess that's the that was the moral of the of the story for this morning is that you you probably know who that person might be in your business. And, you know, the best day to root out cancer is the day it happens. The second day is right now.
And so I think that some of you may have some people on your teams and it may just be you that you need to have that talking to and say, like, I'm no longer going to stand for this. Because if we think about the job of the CEO or job of the entrepreneur, our job, in my opinion, above, I'd say we have two primary kind of roles overall. Number one is that we are chief allocator of resources, right?
We have limited resources in terms of time, money, human capital, people. And we have to allocate that limited amount of time, money, effort against unlimited potential things. And so the best entrepreneurs get the highest returns for the limited resources they have. Fundamentally, it's an exercise in resourcefulness rather than resources. The second job, in my opinion, is holding the bar.
And so fundamentally, this is a combination of the vision of where we're trying to go, but the bar is more about how we're going to get there. What are the ways that we choose to deem valuable? What are the behaviors that we say, this is how we want to do it? And your culture is a direct reflection of you.
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Chapter 6: What are the roles of a CEO in resource allocation and culture management?
And I think it's one of those really true, very harsh realities that if you don't like the culture, there's really only one place to look. You have to look at the leader. And it trickles all the way up. Whatever you deem acceptable,
what everyone will deem acceptable because there's no place realistically that you're going to be able to house 200 rules of behavior right and so what we do is we try to abstract that into a you know a few pithy aphorisms a few little quotes that say you know we're customer obsessed we're you know speed over everything whatever right but it's more so because if i look at somebody and say speed over everything
There's some inferences I can take from that, but it's not actually very good directions in terms of how do you act, how do you behave, right? And so we're expecting that someone uses their second brain cell to then reason for themselves in this situation, how do I balance all three of these values? And then what behaviors would ensue?
And so fundamentally, the reason that values can decentralize decision-making across an organization is that it's supposed to be a very high-level filter for what to do in situations that have not been prescribed, right? Like a traditional rule has a condition and then a behavior, if this, then that, right?
And so if we want, I mean, fundamentally, we could write a rule of behavior around everything that exists in the business. There's a couple of problems with that. One is it would take forever. Two is that it would then we'd expect everyone to then refer back to this book of rules, which would also be a pain. Three, the rules would be constantly changing and dynamic.
And so instead, we try and chunk up to values and we hope that in the gray, in the nuance, people can reason. But we're always, you know, flabbergasted at people's inability to use the second brain cell, as I like to say. And so it's like, what do you do? What do you do in this situation?
So I think that the biggest thing that happens as you continue to move on in your entrepreneurial career is your understanding of what talent means and what talent looks like. And so if we look at how quickly an entrepreneur will, like anybody who's listening to this, if you've had more than one business, which if you're an ADD entrepreneur, you probably have,
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Chapter 7: How can hiring impact the growth of a business?
Um, your first thing compared to your second thing, I'll bet your second thing happened way faster than your first thing. As in like you got to your old first things level in half the time, a third of the time, a 10th of the time, right? Because you knew how to beat all the bosses. And then you got into quote virgin territory where you're like, I don't know what to do from here. Right.
And in my opinion, especially if you build an organization, The where do I go from here part, a lot of it comes down to who do I hire from here and what do they look like? And so if we think about a company as the output of the collective intelligence of the people contained within it, which is one of my beliefs, I think Elon said something to that degree, not that like a couple of days ago.
But I've long held this belief. If you think about a business as a Christmas tree, let's say that there's four heads across and that's like the second rung of the tree and then the peak kind of goes a little bit above that. In many smaller businesses, the person who's learned everything is you, the founder. You did every single person's job, and then you try and buy some of your time back.
But what ends up limiting the business is that it's limited based on one person's skill and experience, because you know how to do everything, and you can do it better than them. But the limit of that business is purely based on your, basically, intellectual capacity.
And so you can make a significantly larger business if you can visually imagine, like, beefing up the, you know, the top part from, call it, four people to 20 people. All of a sudden, the hypothetical peak goes way, way, way, way, way up if that was the width of the peak, right? So the width of the part before the peak, the peak rises.
And so if you're adding people to the organization, you want it to be a net increase in overall intellectual capacity and or skills and experience so that every person who comes in actually adds to the peak, right? Adds more knowledge that other people didn't already have. And by doing that, it's just a really good razor.
It's like, does this person know things that other people don't know within the organization? Now, I want to be clear. Sometimes there are roles that are front level. It's likely you have the third sales guy. Then that might not be one of those.
But when we're talking about leaders, which are going to be the people who are going to increase the rate of growth of the business, because they're actually the people who can take things off of your plate or start new divisions, start new revenue, revenue streams. What most of us lack is a high enough standard.
And that's what I think really develops most over time as an entrepreneur is that like what happens is you just hire a bunch of people in the beginning. They have a pulse and they seem like they can speak a language that you also speak. And you say, oh, that must be all that is required in order to do my job or do this job. And then by pure dice roll.
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