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0:00How important in this game of building and starting is people? >> Oh, >> very hiring question. And I'll tell you why I asked this question because when I look at my portfolio, early stage first founders never seem to understand the importance of hiring in people. >> Yeah. >> And I bang my head against the wall trying to convince them that actually the game they're playing is in the word company, group of people. >> Yeah. So I would I'll start with one thing and then I'll answer the question.

0:27So, I was talking to um a mentor of mine and he said, "When I was in my 20s, it was all about the destination." He said, "When I got to my 30s, I realized it was all about the journey." He said, "When I was in my 40s, I realized it was about the company." >> And I was like, "I can't wait till you're in your 50s." [laughter] Like, "What's the next one?" Right? But I thought that was such a like such a profound shift in terms of how he thought about his business success because he was like, "I don't need to be a, you know, a decillionaire." He's like, "I'm I'm cool where I'm at. Um, and now I just want to do it with people that I like." And so to the question about um people overall, I believe that the potential of an organization is directly correlated with the aggregate intellectual horsepower of everyone contained within it. And so if you are the smartest person in the business then and you can do everyone's job better than everyone in your company then it means that the limit of the business is purely based on one person's horsepower and one person's life experiences and that will be the cap and basically it doesn't matter how smart you are you can't live a 100 lifetimes like you can learn quickly sure there's some people who can learn faster than others but you're not going to be able to live a thousand lifetimes and So as a business grows more expertise is required. And I think the easiest litmouth test for this is if you look at the richest people in the world almost none of them own 100% of their business.

1:53So number one most of them don't even own 50. Like most of them are small percentages. Jensen Wing's at 4% for Nvidia. Basos is at 7 or 9% for for Amazon. Uh I think Elon's at 20 for Tesla. Like small percentages. And it's because it takes a lot of horses to take a chariot to the moon, right? And so basically, as you put in more intellectual horsepower, the potential peak of the business goes so much so much higher, so much faster. Keith Rabois from um he's one of the original PayPal mafia guys has a really good analogy for this. And he talks about it in terms of barrels and ammunition. And he says, "So as soon as you get some product market fit, the business starts to grow and you say, okay, we need to start shipping things faster." And this works the same with a services business, a physical products business, software business, the concepts the same. And said, so what happens is you then hire a lot of people and you assume that your throughput is going to increase proportionally. So we have 10 people, we hire 50, we should 5x our output. And then you quickly realize that that is not the case. And so what happens is uh there are people who are rate limiters for organiz or organization and those are the barrels. So think of like a civil war barrel, you know, old cannon and you've got these cannonballs next to it. He said most people are ammunition and so you bring more ammunition but you're still going to be limited by the one barrel capacity of how how many shots can get taken by the barrel. And so you need to find more barrels. So you have to go from one barrel to two barrels, two barrels to three barrels.

3:18And that becomes an increase in capacity or throughput for the organization. And there are very few of those in a different um I can't remember the law but it's some organizational uh law but uh the square root of the number of people in a company generate 50% of the work. So you have 100 people in organization 10 people are responsible for 50% of the value that's created. facts, >> right? Anybody who's been in a like you're like of preach, right? [laughter] And so the thing is is I think the real game of entrepreneurship is that your standards rise over time and it's unfortunate because we we hear things that other entrepreneurs tell us it's all about the people stupid and then you're like sure but look at my and it's like no you're not hearing it and I don't know there are some I think Williamson talks about this how there's like some lessons that for some reason it's like we have to learn for ourselves. I still believe that that it's like we can operationalize this at a lower level so that we don't have to learn it for ourselves. Like I'm convinced. I haven't figured it out yet.

4:14But um so every entrepreneur can can can can resonate with this which is every business that I've started I've gotten to the success of the business prior way faster. And I kind of liken it to a video game where it's like you beat level one and then you know you you get to level two and it's like you spend months trying to beat this boss and you finally figure out how to beat the boss and it's like great and you spend another three months getting beating boss three and let's say you start the game over with a new character. It's like you just zoom through level one, two, and three and then you get to level four and you're like shoot now I got to spend time. It's like virgin land like I don't know how to beat this yet. And so I think that that happens for archetype finding for skill and talent within an organization.

4:54And so >> say that again. >> So if you have functions across an organization, there are people who are going to drive results within that function. And the first time you hire a salesperson for example, you don't know what you're looking for. And so you just hire a human who says they can sell. And maybe they can, maybe they can't. And then you cycle, you try to train them, it doesn't work, does work, whatever. And then finally you, let's say you cycle through three sales guys, and finally you find a killer. And then you have this pattern recognition. You're like, "Okay, that's what I'm looking for." And then all of a sudden you try and approximate that person or that archetype as as much as you can. And so when you start your second company, you're like, "Oh, I can quickly staff up sales because I know what I'm looking for." But then you're like, "Shoot, I've never really nailed sales manager yet."

5:35And so then you cycle through. You start you start whacking away at the boss and then you have to end up firing the boss at the level because you're like, "Oh god, this didn't work." And then six months are gone because you had to find them, recruit them, hire them, train them, and then find out they sucked and then start over again. And maybe it takes 18 months to really find the right sales manager. And then you're like, okay, I know what that looks like, but I still don't have a director of marketing. What does that look like? And so it's basically developing this pattern recognition across all functions of the business so you know what exceptional looks like. And then over time, what happens is as a business grows, your ability to attract talent increases. And so then your standards also grow. And then you find out that there's even more nuance to this, which is that there's a director of sales at a $1 to $10 million level, which is a different looking person from $10 to $100 million level. And it continues to go all the way up. And so it's basically building this repertoire of identifying patterns. And what if you talk to I would say more experienced entrepreneurs now, they don't talk about building businesses. It's like assembling them.

6:37You just assemble the pieces and you just know that this is how it's all going to flow together. And that fundamentally is basically what I try and decode within the content that I have so that it's like here's a pattern for how you recognize this. Here's a pattern for a recognize this so that you can just move faster through the levels um to get to where you want to go. And so to loop back to the original question which is how important are people in an organization? People are the organization. And so if you ever want to build enterprise value, it's building the collective consciousness of the organization, the skills, and how they collaborate together towards a specific outcome. And so knowing how to staff that up is the job.

7:16I think the reason why first-time founders feel like they have to learn this lesson themselves is because everything you've just said is an unknown unknown. Like they don't even know that they don't know it. So they stumble. They hire the sales guy because they were their friend from high school. And then [ __ ] and then they go through the pain. And I say this because I'm so unbelievably passionate about it. I went through the same BS. I hired my friend who worked at Prada to be our account. I hired a guy I met at Rap Battle to be my marketing director who who was literally playing video games for a living at 30 years old. Um, and I went through this whole thing and then at maybe 3 four years into my first business, I accidentally hired someone great [laughter]

7:52>> like through no intention of myself accidentally. I saw the net and I thought, "Oh my god, over the coming years I learned that the game, the fundamental game here is, as you said, assembling the best group of people, how founder, >> can I put a system in place >> to to make sure that even though I don't know what a good salesperson looks like, yeah, >> even though I don't know what an ex good person looks like, I still attract them to my company."

8:20the simplest way of doing it. So the simplest way of attracting somebody to your business when you don't know how to do the job or know who to look for is to unfortunately do the job yourself. And then once you can break down the job, we follow 3Ds which is um document, demonstrate, duplicate. That's how we train anybody. So first you have to document everything that you do to successfully do the job and that's step by step into a checklist. Then you demonstrate. So, you do this checklist in front of the person that you're trying to bring on. Then they duplicate.

8:54They do the checklist in front of you. What's interesting about that three-step process is that you'll often find when you try to demonstrate following the checklist, you don't follow your checklist. And so, then you have to adjust the checklist until you actually follow the checklist. And then when you can consistently follow that checklist and get the output, then you can have them do that checklist. And so I think this is why bootstrap founders uh I think often times will find they they tend to know more about more things because they had to learn them in order to teach them. Now what's really interesting about what you said about accidentally finding that that star at three or four years in is that I think that happens to almost everyone. Well hopefully it happen the people who end up making it. It happens to almost everyone. Um because then you realize oh my god like if I had four of these people like we could change the world right. Can

9:38>> I say something as well? The other epiphany revelation I had was the star hired stars. >> Yeah. >> And so I think her name's Katy Leon. Of the 10 people she then hired, nine of them became the best people in my company. And also I'm not going to say his name, but someone else in my business, >> a C player. Yeah. Of the 10 people he hired, >> yeah, >> he and everyone he hired was fired. >> So one of the it's So as you go up in the organization with hires, the risk and reward goes up. And so that's something that a lot of people don't like talking about.

10:09But I will um which is if you hire somebody and let's say that they're not a cultural fit, maybe they have the skills, uh or they are a cultural fit and they don't have the skill fit and they're a leader, what you find often and it sucks is that everyone it's almost like it's like a tree that has an entirely rotten branch. It's like you end up having to scoop out three quarters of what was underneath because you realize that they were ineffective or they just were against the actual mission of the business. And it's it's harrowing and it's horrible. But I try to give this analogy um to my team because we've had to do it in every business. We like it happens. It's just part of business is if somebody goes to the bar and you're at the club and somebody racks up, you know, just ordering shots for everybody, shots, shots, shots, shots, shots, and then that guy dips, that guy leaves.

11:01We all have to pay the bill in the moment. When we pay the bill, when we scoop out the deadwood, when we scoop out the rot from the organization, it feels horrible. But that pain isn't because the scooping out the rot is bad. It's because we planted it on bad ground or because that guy ordered all these shots but couldn't afford it. And I have a different analogy because I really want to drive this home because I think it's important is that in the in the relationship world, if one spouse tells the other spouse, hey, I cheated on you.

11:32I had an affair. That moment is incredibly painful for both parties. And so what it makes you think is, oh, this was wrong to tell the truth, but it's not wrong to tell the truth. What's wrong was cheating when you tell the truth is when you make it right. And so the pain that you often have to encounter in the organization feels wrong but is right because that was you're you're writing a wrong and that's where the pain occurs. And that's why so many businesses stay stuck is because they have this affair, they have this person, and they're unwilling to have that hard conversation or multiple in order to make it right. And they stay stuck for years.

12:09>> Real quick, I'm going to show you the exact 10-stage road map from zero to 100 million plus that less than 1% of companies finish. I've now done multiple times. And so, I can say with a lot of confidence that these are the stages as headcount increases that you need to get through. And I broke each of these down by eight different functions of the business. what the constraint feels like, like what are the symptoms of it when you're going through it, and then what steps we actually took to graduate. And we've done this across software, physical products, uh, service businesses, brick-andmortar, all of this, and it works. And it's my gift to you. It's absolutely free. And so the link's in the description, but you just go acquisition.comroadmap, just enter your info, and it'll spit it right back to you. Offering.