https://www.youtube.com/watch?v=R7JOslrt51o

1 00:00:00.000 --\> 00:01:00.000 what's going on everyone alex was here
ceo of joomlas prestige labs and alan and a number of other portfolio
companies that we have we did 120 plus million last four years and i
have nothing to sell you so what i want to do is show you some of the
the lessons that we have learned along the way so uh volatility and risk
so i had a conversation with um somebody on my team and it was such a
good conversation i wish i had recorded it and so this is going to be my
attempt to break this down for you so this is if you are an entrepreneur
and you have a sales team you can send this to your sales team if you
are kind of still in the selling mode this will apply to you and if
you're an employee and you're looking at making more money and you want
to become wealthy this will also apply to you too all right so the
employee question came to me requested like a 15 minute time which i
knew it was something important because it doesn't happen very often and
so i was i was kind of looking forward i was like hey what's up man and
what was interesting in the first you know four to five minutes of the
call you know the person was just like i just really want to pick your
brain on like the direction of my life and i was like well that's a
really big amorphous topic like

2 00:01:00.000 --\> 00:02:00.000 what problem are we solving right which
is always if you ever talk to me it's usually like what problem are we
solving right because then we can start tackling it and i don't think
they knew what the problem that they were solving was because what it
was is in reality they had family members who were saying hey you you
shouldn't you shouldn't be in this job you need something that's more
secure all right and so as i dug deeper into this conversation there
were so many nuggets that came out of it that i think i've wrote them
all down on on a list and i'm going to try and hit as many as i can all
right and so the first thing was this person in particular is on our
sales team we have a lot of you know 20 plus sales people and they they
uh their family said you should get out of sales you need something that
is less risky all right and so the first thing i asked was do these
people who are giving you this advice make more money than you and he
said no and i was like rule number one do not listen to people poorer
than you about advice on money so for everyone who has family or friends
or parents who make less money than you or make the same amount of money
than you at a

3 00:02:00.000 --\> 00:03:00.000 at an older age uh don't listen to them
all right listen to people who make far far far more money i don't even
think you should listen to millionaires listen to billionaires i think
that's great advice from brian cardone listen to billionaires so number
one number two they had a misunderstanding of volatility and risk all
right this is a classic poor person thing all right so i'm going to
break this down for you with an example let's say i own an insurance
company okay and i know statistically that every nine years there's
going to be a super catastrophe there's gonna be a hurricane katrina
hurricane maria something that's gonna destroy everything and i'm gonna
lose a butt load okay now that means that one out of nine years i'm
gonna get destroyed but the other eight years i'm probably gonna make a
lot of money right right so the question is is my insurance business
risky the answer is no i'm going to make the assumptions that i have a
sound business model and margins and all that stuff but the reality is
that my insurance business is

4 00:03:00.000 --\> 00:04:00.000 not risky it is volatile those are not
the same things all right and so if you if you flatten out the curve
over the nine years and look at the growth that's going to occur in my
business based on those metrics i will be far better off than something
that might be less volatile less up and down but not grow as quickly
alright sales is an example of a highly volatile profession that still
is low risk and let me explain why who do you think is the most secure
in the company somebody who generates revenue or someone who costs
overhead someone who generates revenue so sales people are by definition
people who generate revenue which means they are the lowest risk in a
company now for them they may have more volatility from paycheck to
paycheck but in general people in sales generate make more money than
people who are not in sales all right and if you're good at sales even
more so which this individual is right and so

5 00:04:00.000 --\> 00:05:00.000 with the concept of volatility versus
risk i said what you should do if you want to decrease the volatility in
your life and get the upside benefit of your position is you need to
decrease your expenses to your salary all right so his salary and i said
now your salary is what you need to assume your is all you're going to
make now i'm not saying live on your salary i'm saying you should be
saving off of your salary now think about this let's say this individual
is living as it has a salary of let's say 40 000 a year all right now if
i can get them to live on 25k right a year then that delta can be
invested in the s p 500 and within 20 years they're top 1 percent crazy
i know and if you split where you live with other people and you really
try and live down you can do that faster right but the reality is that
this isn't all the person's going to make but you should plan like it is
because then what happens is all of this becomes gravy and even if you
have a bad month which there's no sales person in our company

6 00:05:00.000 --\> 00:06:00.000 that would not that would not make any
sales it does it doesn't even make sense right but even if you had a bad
month they still this person would still feel like they're making
progress towards their wealth freedom and independence goals all right
but the reality is that they would probably make you know another 100k
per year on top of that but now they've set up their lifestyle such that
their expense income ratio is so favorable that that they can save so
much of their money they get to their goal faster which is the next
point which is wealth and i've said this before and i will say it again
is not a number and this is one of the things that i had to tease out in
this conversation wealth is a ratio it's a ratio between how much you
spend versus how much you make it's inflow versus outflow not i need to
make x to be free now if you want to have a crazy lifestyle i have
another video about about what living like the ultra wealthy is but the
reality is it's a not that fun not definitely not fulfilling and i'll
tell you what is way more fulfilling having the freedom and the

7 00:06:00.000 --\> 00:07:00.000 peace of mind which is actually what
people want knowing that you're going to be set up for life and the way
to do that is to have a strong income to expense ratio and so this
individual if he's making 140 000 and he lives on 25 he's making nine
times more or whatever the math is there whatever six times six times
more he's making six times more than he's spending that's a great income
to expense ratio his wealth is going to build very very quickly right
and with that that extra money will more than cover his 25 000 a year
right like the 140 that or sorry the one 115 that he's saving in this
example right every year in pure cash he's already saving four and a
half years of income every year now let alone the fact that if he's just
gaining at 10 right s p is nine but like just for math sake let's just
say 10 that he's he's going to be generating himself compounding growth
with which means that in two years two years he'll be at 230 right he
would technically be able to retire on his current

8 00:07:00.000 --\> 00:08:00.000 income think about that right now if
you want to if you want to spend more then fine but literally there's a
24-month way of of saving your way to wealth right now would i want to
retire in 230 000 no but if you worked for a decade by the end of that
period of time you'd have two you know two point something right and at
that point then he could he could he can totally just retire and not
only that if he keeps his expense ratio at 25 000 maybe even bumps
himself to 40 or 50 000 which for most people is is a really comfortable
living you know it's like you're not doing anything crazy right and if
you do it that way life will be better now the next point that uh that
that came up was he was like okay well i've got i've got some debt um so
what should i do he's like so i've got student loan debt i've got credit
card debt that's that's about i can't remember i think it was 20 grand
right between both of those and i was like okay your student loans have
super super super low interest so let's not worry about those let's
worry about your credit card because the credit card has 16 compounding
and so you think about that

9 00:08:00.000 --\> 00:09:00.000 it's like a negative investment right
you've got something that's compounding against you versus something
that's compounding for you so the way to guarantee a 16 compounding rate
of return is to d is to take away the drags that are at negative 16 all
right so if you're in this situation the first thing you do is you pay
off your credit card debt all right number one after that you're going
to have your your student loans and then your investments the reality is
the student loans the interest because with the government's setting
them you know have set them up it's it's basically just it's the cost of
you learning this however long ago i think it's horribly uh unethical
that they they do student loans i think i'm so wildly against student
loans in general in what world would someone ever give an 18 year old
access to 200 000 who has no skills whatsoever to then get something
that has no return more than what their current earning potential is it
makes no sense and if you if you if you can't even bankrupt your way out
of it it is purely a scheme by banks to make more money purely it makes
you a slave to the bank for the rest of your life but there's no
interest on it and so i'm

10 00:09:00.000 --\> 00:10:00.000 not going to think about that for
right now all right so credit card loans first and then you stack into
investments now me personally i just don't like having any debt and so
if you want to it's a personal choice it doesn't even make mathematical
sense it makes emotional sense um you can pay off the student loans and
then everything else gets plowed into the s p 500 the reason i say that
is because warren buffett the advice that he's given the people who are
managing his will is that he just wants everything put in the s p 500
smartest investor of of all time that's what he's doing so i think it is
worthwhile advice and very easy to follow all right next one and you do
this every month it's called dollar cost averaging so that even when it
goes down and goes up you're going to participate at all times so when
it's overpriced you're still buying and when it's underpriced you're
still buying don't try and time it i have another video about trying to
time the market you're going to lose so just dollar cost average in and
then get rid of any of the anxiety around getting a good deal all right
next one so he's like okay i want to make uh you know i want to know how
i can grow all right so this is for anyone who's in

11 00:10:00.000 --\> 00:11:00.000 any company the closer you can tie
yourself to an acquisition channel the more valuable are the company
because you're you're driving revenue right and so what i what i
explained to him was i said listen you've gone through all my trainings
you know you know you know the different ways of getting clients pick a
channel that we're not currently using and in your in your off time try
and figure that channel out and we pay more for for leads or for sales
that come that don't that that someone goes and brings out brings in on
their own compared to stuff that comes in from our marketing right i was
like so you're going to get disproportionately paid for those uh off the
bat and then as soon as you figure out that system i said come to me and
say hey alex i figure out the system i figured this process is getting
us more clients i want to build a team and i think that i can show five
other guys how to do this and generate revenue and i just would like a
piece of all of their of their um of their sales and i would say
absolutely and so if he does this he would be able to two or three x's
income as a result of that right and so that is a way of figuring out
how to provide

12 00:11:00.000 --\> 00:12:00.000 more value now the next thing was a
debate i think this came up from the family too was going off on your
own right now obviously as the owner of the business you would think
that my incentive is to keep it keep everyone and over time my my
incentive has shifted my incentive is i want to to be the best human i
possibly can be and if that means that that this it's time for that
person to go and spread their wings then that's fine and i encourage
them and i and i wish them the absolute best and i mean that genuinely
because i never want to be the person who holds someone back from
accomplishing their dreams that being said understanding risk is
important so many many many many many people many many many of my
salespeople make more than many entrepreneurs do in fact it probably got
the stats i think the average small business owner makes like 78 000 a
year all right so if my salespeople make 150 or 200 000 a year and if he
does all this thing he could make five times what the average small
business owner makes five times five times and that's

13 00:12:00.000 --\> 00:13:00.000 income right that's what's important
and so sometimes you can see the allure and this is a classic employee
mistake is you look at all the revenue and you say oh that must be the
owners that must be alex's and every business owner who's watching this
is laughing to themselves because they know that is so far from the
truth that is is hilarious but but people still make that logical
fallacy and so for perspective if you if you are a 200 000 a year sales
person you own in my mind a million dollar business because if you're
running a 20 net margin after everything that and the thing is is it's
not just profit in the business but it's net free cash flows the amount
of money that you as an owner can take out after reinvesting in the
business right and so if you have a you if you're a sales person and
you're making 2000 a year it's the same as you owning a million dollar
business and so many times and in this instance depending on your skill
set you may not want to deal with hr and finance and and figuring out
fulfillment and generating leads on your own all the other aspects that
come with owning a business legal and all the other crap right

14 00:13:00.000 --\> 00:14:00.000 and so i'm not saying don't be an
entrepreneur obviously i'm an entrepreneur but i'm saying understand
adequately understand the risk and i think that if i adequately
understand the risk and being very very honest with everyone here i
don't know if i would have become an entrepreneur i really don't know
because i'm pretty risk-averse believe it or not and i think i've told
you i had a really good paying job before i uh before i quit and it was
because i was so miserable that i decided to do something else but i did
not have the typical entrepreneur story of like i was always bad at
school and i knew i had to do my like i didn't have that at all i was
good at school i got a good job and i i just i was miserable so i did
something else anyways next point oh last one okay so i'll give you
another saying to work off of track don't slack all right easy to
remember and so one of the easiest things that you can do to increase
your net worth is start by tracking it all right this is one of the
easiest things so right now every week i get a i get an email that has
every single one of my assets

15 00:14:00.000 --\> 00:15:00.000 every single one of my bank accounts
all of my portfolios and it has one number at the bottom and so i know
every week how i'm doing and whether i'm going up and up now you might
be like well man isn't the market volatile sure but i also have other
investments too etc but the point is especially the earlier on you are
you can you can decrease that cycle now you could do that every quarter
i'm just i tend to be obsessive about it i like looking at it because i
like making progress if right now you are the sole provider in your
household or you're a solo business owner or an entrepreneur or even you
know you have a seven or eight figure business right but you haven't
like your your actual net worth hasn't surpassed you know a million five
million tracking every day the cumulative amount of your bank accounts
is one of the single greatest things that i ever did ever like ever ever
ever and so it became this habit that first thing in the morning i would
open up my my my chase app i would and the nice thing is if you have one
of the big commercial banks

16 00:15:00.000 --\> 00:16:00.000 you can you can they give you
dashboards you can you can pull all your accounts in together so if you
have you know two business accounts and then you have a savings and
checking personal and then you maybe have like a portfolio all of that
stuff you can have in one place so it's actually pretty cool but anyways
i had an excel sheet that had all my assets on them all my bank accounts
all my investments and everything and i would take five minutes in the
morning and i would update it and every single and i did it daily so i
saw every single day and i could just scroll over time and watch my
bottom number continue to go up and here's what's magical about this is
that when you look at your bank accounts every day you start to get a
pulse on the flow of money you start to get a feeling for oh yeah
tuesdays is when this goes out oh yeah on the first week of the month
this is when this goes out but then what happens is all of a sudden
you're like hey i went down by 200 bucks let me examine let me
investigate and you look in there and you're like holy crap i've been
using the software for however long cancel right and so as soon as you
start doing this you'll start decreasing you plug the holes you'll
decrease the uh the outflows of money in your life

17 00:16:00.000 --\> 00:17:00.000 because you're tracking and not
slacking so as long as you're not a slacker become a tracker track your
net worth all right and so for this individual the the action plan that
i made for him so that he could create the wealth that he wanted was
this kind of recap for you all right number one track don't slack you
have to track your net worth if you wanted to improve so how can you
even track like how can you prove something you don't even know what it
is track track don't slack now your debt should also be on there so if
he's paying down debt his net worth will go up because right now he's
got 20 000 net so his net worth is negative 20 000 compared to his cash
right so boom track don't slack next pay off high interest credit cards
or high interest loan debt first next dollar cost average all of the
money that you that you make in excess of your expenses into the s p
mind you this is not investment advice i'll probably post a legal
disclaimer under the video do whatever the hell you want investment has
risks there's no guaranteed returns life is risky you know no one comes
out alive okay back to the

18 00:17:00.000 --\> 00:18:00.000 main point so dollar cost averages to
the s p and actively decrease your expenses as much as humanly possible
if you have a salary with variable compensation on top of it try and
save off of living off your salary and if that sounds crazy cool don't
be ordinary be extraordinary do things different because the average
person literally retires with nothing don't be like that you can be
different and the thing is is all of these things that we aspire for
which i made this other video about right all these things we aspire for
private jets exotic cars penthouses uh expensive clothing fancy
restaurants i can tell you firsthand they're not what they're cracked up
to be i like i like bj's and chili's more than i like ruth chris i
really like the cheap my cheap jorts more than any of the fancy pants
that are out of fancy pants um i can tell you that when i lived in a
1200 a month apartment um in in in albuquerque new mexico which is a
really nice place um i was happy as could be it my happiness is in no
way changed having the place that i have now i regret the exotic car
that i have and

19 00:18:00.000 --\> 00:19:00.000 private jets are wildly expensive and
you can you can get anywhere you want on spirit for way less all right
so decrease your expenses all right and um in terms of increasing the
income tie yourself to an acquisition channel try and find a new way of
acquiring customers that the business that you're currently in is not
doing do that and then build a team underneath of you that can do the
thing that you just learned how to do all right because then you will be
closer to what i call a rainmaker and rainmakers are always paid the
most in every business and understand that when you do that if you ev
getting to 200 000 a year you own a million dollar business it's the
same thing right except you have way less risk uh because if you want a
million dollar business you can work your ass off two months in a row
and become poorer whereas if you work your ass off for two months in a
row in a business you're gonna get richer all right and that's the
difference between being an entrepreneur and employees that a lot of
people don't adequately monitor the risk all right and finally
understand the difference in

20 00:19:00.000 --\> 00:20:00.000 volatility and risk overall something
that goes up and down a lot is not necessarily risky it's just volatile
and if you can understand that words matter and how you describe things
matter and understanding the definition of words you can put better
concepts and frameworks around your thought process and make better
quality decisions so anyways i hope you found this valuable this was a
great conversation i wish i had recorded it uh but hopefully you got the
the nuggets uh from that you can apply to your own life in business
keeping awesome leave a comment and i'll catch you guys next vid bye
