Why Constant Changes Kill Growth | Ep 862

Alex Hormozi (0:00)

There are probably a hundred things that you have on those notes, and each of them you're like, this could give me 5% more, this give me 10% more, this give me whatever. If I know them and have a 20% guaranteed cost, that whether it works or not, I'm going to have this happen, it changes what things I'm willing to take a bet on.

So how was this morning? Good? Yes? Tactical? Okay, good, that is the objective. And hopefully it puts a little more context on what I was talking about yesterday, which is, all right, there's probably a hundred questions you could have potentially asked, but ideally, or hopefully, you ask the questions that you think could get you the highest return. And that's fundamentally why we laid out that way. To frame this Q&A, I want to go over a couple of small things and then we'll kind of dive into it. So one of the big ones is, everyone here probably has a lot of notes from this morning and yesterday. And when you get back in your car or you go on the plane, you're going to open up your laptop, you're going to open up your notes, and you're probably going to open up some sort of fresh document and be like, okay, what am I actually going to do?

Right, because you have all these ideas. And kind of the objective for me, when I think about how to prioritize within a business, aka strategy, it's making sure that we get those one to three things that we're going to change correct. And I want to introduce a little bit of a concept that's taken me too long to understand, and it's really, really hard, which is this. There's a lot of things that you can do to grow the business. You have a lot of ideas that you're coming off from. And so let's imagine that this line represents your current revenue level. Whenever you make a change in the business, my estimation is that we see about a 20% decrease in revenue as a result of a change, especially if it's a manual change. We're changing a sales process, we're changing a customer service process, something that involves humans. We're changing something that they're doing. We'll typically see a 20% decrease guaranteed simply because of the cost of change. But once I kind of realized this, it changed what things I decided to choose to change to begin with. Meaning, there are probably 100 things that you have on those notes, and each of them you're like, this could give me 5% more, this give me 10% more, this give me whatever. If I know them and have a 20% guaranteed cost, that whether it works or not, I'm going to have this happen, it changes what things I'm willing to take a bet on. And so for me, my kind of minimum litmus test for this, is I need to see at least a 20% bump, or believe I can see a 20% bump from any implementation that I'm going to run, or I'm not going to take the guaranteed 20% loss. And part of this comes into something called ICE, which is kind of an investor terminology, but basically of impact, confidence, how likely, like how big of a difference is it going to make? How likely is that to happen? And then you've got ease, which is basically the value equation without speed. And so if we're looking at any of the implementation that you're thinking about putting in the business, I'd be like, okay, how big of an impact do I think this could have? How likely do I think this is to occur? And then how fast and how easy do I think I can make it happen? And so typically we'll organize it in that way, and you'll probably figure out pretty quickly, if I were to implement two things at once, what do you think would happen? Right? And so you'd have two negative 20% decreases. And so the end result of basically taking this ideology to its natural extreme means that you basically can't change that many things in the business and expect this to grow. And so that end result for me has been, and I'm going to be crude on purpose, is that some shit stays fucked. And so there's a lot of things that I would love to do to improve this experience for everyone here. I've got a list many pages long. But every time I do implement a change, it negatively impacts the next group because it was a change. Now the next one after that, it starts to recover and come back up because the team learns whatever that process was, they get better at it, and then maybe the one after that, it goes even higher, and that's great. And so, what happens is like, I've gotten addicted to not changing things because people tend to, because the flip side is if you change nothing, so let's say you have no change that occurs, you'll have something usually that's in like the, like a 2 to 3% increase, that happens pretty much no matter what. Because people just get better at their jobs. Sales guys just get a little bit more comfortable, customer service guys get into a rhythm, like it just works, and it just works a little bit better because most people like to make their jobs easier, and so they tended to do it a little bit better. That's what specialization of labor is all about. And so I would encourage you that when you have this list that you're going to have for your one, two, and three that you're going to go home with, think about ICE when you're putting that together, and make sure that you're going to make your biggest swing worth it. If you have a change that can get 2x the business, then yeah, take the 20% tip, no question. But there are some changes that just aren't good enough to be even worth the guaranteed cost. Does that make sense? This took me a really long time to understand, and is almost like, I would say, like a stepbrother to the focus on the macro scale of business model focus. Let's not start a second business, which probably a third of you have. But even within the business, it's staying focused on keeping the main thing the main thing. And the hard part is, is it's hard. Because the thing that's often limiting you in the business are hard problems. New things are easy problems, because you can always just whip something up and promote it and make money. But the hard problem is like, okay, I can't scale past this current level because I need to recruit like three really niche employees. Well, you're going to have to do it either way. And so you might as well just confront the hard that's in front of you. And so being able to spell that out to myself and be like, this is the hard. The hard is the not knowing how to do this thing, and I have to figure it out. And not knowing where to find these people, but I'm going to have to figure it out. And so it's like taking all that energy where you're like, I don't know how to do this, so I'm just going to do the thing I know how to do. Which is, I say this and I see like all the smiles, and like nods in the audience right now. But you have to keep fighting that muscle. Because in a lot of ways, it's almost like an addiction for entrepreneurship. It's like we like to do new things. And also like addiction, you just have to fight it every day. This is just because a lot of you guys are going to be implementing some of the things that you walk away from here. I just want to make sure, number one, that the few things that you choose to do, that they're absolutely worth it. And that many of the things on that list, I'd rather you just forget about. Because after you do the first three things, all the pieces on the board are going to change. You're going to have new resources, new problems. And number four, five, six, seven, eight might not be... Once you do one through three, number four might not be number one. You'll have another thing that will be number one that you didn't even think about, which is why I'm not super obsessed with very long-term planning. So I thought this might be a good primer before we get into this, as a good way of thinking through this. And this is like, I wish I could transfer this to you, because this is probably from a skill perspective. One of the things that has made me the most money is basically just saying, I'm not going to do new things. And if I'm going to do it, it better be worth it, because I'm going to pay a price immediately with my team being confused, feeling whiplash, saying, what is this thing? I didn't feel like it was communicated well. It doesn't matter how well you communicate. It's not communicated well enough because they don't immediately know it. Okay, cool. Let's do Q&A's. All right. So you had 107,000, you went to get to a million.