Podcast

The Universal Methodology Of Growing A Small Business With Michael E. Gerber

TWS 25 | Growing A Small Business

 

When people start a business, it’s often because of a dream or a vision. As people learn different processes, systems, and methodologies, dreams get bigger and growing their once small business becomes a necessity. Co-founder of Michael E. Gerber Companies and author of best-selling book The E-Myth, Michael E. Gerber opens our eyes to the reality of scaling a business. He shares his deep understanding of the entrepreneurial space to drop some old school knowledge that still holds true until today, where people are transitioning to the digital age. He discusses great philosophies and methods that can be applied by anyone, on any business, at any time.

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The Universal Methodology Of Growing A Small Business With Michael E. Gerber

This is an episode you are going to thoroughly enjoy. First, before I get to the guest, I’m curious about what you have been taking away from this season. I’d love to know if there’s been something that you’ve had as a struggle in business or in your career, in your profession that the content of the interview, whichever episode helped you to have a breakthrough habit, a realization, something that struck a chord that you’d like me to know about. This episode is the longest episode that I’ve ever done, but since this is the season on entrepreneurship, there’s nobody better than the godfather of the modern entrepreneur, Michael E. Gerber, to be my guest. Michael E. Gerber, for those of you who do not know, has written a number of books and has a goal of doing 300 and he’s 83 years old. He wrote The E-Myth and The E-myth Revisited and a number of other books. You are going to see that at 83 years old, the amount of energy this guy has is contagious and it’s just a living proof about age not necessarily being a restriction for being passionate and being purpose driven.

You’re going to learn that over the course of Michael’s career, because he started his career at the age I am now at 41, regardless of the amount of technology and the change in business, the change of environment, businesses starting, businesses going out of business. You’ve had dynasty business that are no longer in business. Regardless of how much the business and entrepreneurial landscape has changed, there are some universal truths and principles that haven’t. I believe that if you study cases long enough, if you’ve studied people long enough, you’re going to see patterns. There definitely are patterns when it comes to business success and business failure. I’m not saying that our modern times and the technology that exists and the different types of business isn’t important. However, there are some fundamental universal things to be aware of when it comes to the success associated with entrepreneurship. If you like what you learned, go onto iTunes and give us a good review. That would help. I hope you enjoy.

Michael, thank you. I’m so excited for this interview. I’m so inspired by what you’ve done over the last many years and what you continue to do, whether it’s your books or seminars, you have this energy and drive within you to improve everyone’s life. Thank you so much for what you’ve done and what you continue to do.

I’m excited also to hear your story, but we’ll save that for another time.

Every company on the planet is a system called “this is how we do it here and this is why we do it that way.” Click To Tweet

When I was preparing to do this, I did research on the word entrepreneur. There are a couple of different stories, but the French economist, Jean-Baptiste Say, who’s famous for Say’s Law, “Supply creates demand instead of demand creates supply.” He created that term, the entrepreneur. I believe that you popularized it. You set the stage for that word and how it’s been taken to the masses. What’s interesting is Say’s definition of the entrepreneur is the adventurer. I love that word because in your books, in your interviews, that is definitely you to a T, what you inspire in others. Looking at the last many years and what you’ve achieved, what were those emotional seeds, experiences that caused you to put your foot on the ground, draw a line in the sand and commit to bringing your message to the world?

It was very clear to me. I got into the business of dishes you might say accidentally. My brother-in-law owned a small advertising agency in Silicon Valley. That was a time way back then in the mid-‘70s when Silicon Valley was exploding with growth. A lot of what we call technicians, people who knew about the technology, high tech, were starting small businesses of their own like Apple, Google, you name it. My brother-in-law was having difficulty with some of his clients who were having difficulty converting the leads he created for them through his advertising into sales. He asked me one day if I would come with them to visit one of his clients. I said obviously because I wasn’t interested in business then. I was in my late 30s, early 40s. I said, “I don’t know anything about business.” He said, “You do. You know more than you think you do. Trust me and let’s go visit Bob,” the guy who he wanted me to meet, “See what happens.”

I said, “Fine.” That is my nature. I start stuff without any understanding of what’s going to happen because I trust that something will happen. It’s only a question of whether I’m open enough to see it and to appreciate it. Which I’m saying to every single person I ever have worked with or companies I have ever worked with, I call it a blank piece of paper and beginner’s mind. When I met Bob, it was obvious I didn’t know anything about business, but he didn’t either, and he owned one. It was astonishing to me that I did know something about business. I knew that selling is a system and I learned those years earlier when I sold encyclopedias door to door, knock on the door and there’s mom or there’s dad or whatever and so forth and it began. It began with this script. I was a complete novice. The guy who was telling the story about come work for us as an encyclopedia salesman, it was Americana, “Read this, memorize this and come back tomorrow.” He gave me about a fifteen-minute script. I had been practicing the saxophone with a great saxophone teacher and all I did was memorize scripts, which was a solo by Charlie Parker or solo by Stan Getz or whatever.

Part of my teaching in the music was to learn how to play that and have learned how to play that sounding like Charlie Parker, sounding like Stan Getz. It wasn’t just to memorize it. It was memorize it, internalize it, and then extend yourself to the style of the one who created it. In any case, I told Bob, “The reason you’re having a problem is you hired sales engineers. You thought they had to understand the technology, they had to understand the engineering, and they had to understand the product and sales because they had experienced selling. Neither is true. In fact, it’s your greatest single problem because you hired people you thought understood sales, but they didn’t. They understood the technology, they had experience selling, but they’d never been taught how to sell in a way that works. You needed a selling system.” Bob said, “What’s the selling system?” I said, “It’s exactly what I said. It’s a process. It’s a system. It’s a methodology. It’s the language. It’s the words. It’s the process by which any novice, anyone who passes the test can master the process by which you sell through them your product to the consumer you’re selling it to.” Bob said, “Do you know how to do that?” I said, “Sure.” He said, “Will you consult with me and teach me how to do that?” I said, “Sure.”

We negotiated a price and Ace then picked me up because he had dropped me off for this conversation. He said, “What happened?” I said, “He hired me. I’m now a sales consultant.” He said, “Michael, how can that be? You don’t know anything about his business.” He said to me what I had said to him before he introduced me to Bob. I said, “I do,” so that’s what I did. That was so effective with Bob that he asked me to meet with another one of his clients and then another one of his clients. It became obvious that none of them understood what I spoke about as an entrepreneur. They didn’t identify with entrepreneurship. They identified with the, “Technology,” of what they were selling and them as a technician, as I then called it, suffering from an entrepreneurial seizure.

TWS 25 | Growing A Small Business

The E Myth: Why Most Businesses Don’t Work and What to Do About It

In short, they went out to create a business out of it, out of what they knew. What they didn’t understand is what they didn’t know. That’s what I brought to them. What they didn’t know was far more important than what they did know. That gave birth to the E-Myth, the entrepreneurial myth, the entrepreneurial seizure to start your own business thinking that because you knew how to do the work, you knew how to create a business that worked. It was creating such pain and suffering in so many small businesses that I simply realized this is why I’m here. This is what I was meant to do. I never even imagined it before my experience with Bob and then my experiences with all the other folks that I then began to work with. I walked into McDonald’s and I went into McDonald’s to have a hamburger and fries on my way to my next client.

It blew my mind. Understand, I say it blew my mind. I never got my hamburger. I never got my fries. I was so stunned by what I saw for the very first time, what I was talking about and what was missing in every one of those small businesses. I saw a system. The business was a system. It was a visual system, an emotional system, a functional system and a financial system. I walked out of that McDonald’s with that picture in my mind. I can do that. In short, this is not about me doing it. This is about creating a system for doing it and I can create an enterprise out of them. That brought the whole thing to its natural conclusion at the very outset of what I call the Michael Thomas Corporation. I was Michael, Thomas was the guy who Ace was going to have replaced me because I decided I couldn’t stay there in Ace’s advertising agency. I had to create my own company to do what was absolutely critical, which now I call the Eightfold Path, which then I called E-Myth Mastery, and set out to do that. Tom was the guy who was supposed to replace me in Ace’s company who said, “Where are you going?” I said, “I’m going to do this on my own.” He said, “I want to go with you.” Tom went with me to create the Michael Thomas Corporation, a business development firm and the rest is history.

There’s something interesting about the experiences we as humans and we see opportunities to make a difference. It’s almost like this chemical reaction that happens inside of us that we want more of that. As I’ve read your books, as I’ve tried to understand entrepreneurship, it’s this idea of blinders and patterns and I think we all resort back to what’s familiar to us. Fear adventure, fear of the unknown. With your experience over multiple decades, even though in the business world, there are definitely some changes with what impact you make. Are the patterns different that people have when it comes to being an entrepreneur? Are they the same?

It’s a great question because nobody ever asks me that. If they did, they wouldn’t agree with the answer I’m about to give them. To them everything has changed. Meaning with the internet, everything changed, etc. With the brilliant creation of software, everything’s changed. The reality is nothing’s changed despite the fact that “everything has changed.” That’s why that first book, The E-Myth and then the book that followed, The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It was published in 1992. The E-Myth, the founding book, was published in 1986.

I’m talking about ‘92. Think about that. What’s happened since 1992? Everything has changed. The truth is nothing has, and I say that because The E-Myth Revisited is one of the top five bestselling books on entrepreneurship and small business of all time. Every year since it was published in 1992, it sells more books than it did the previous year. It’s the only book on the planet that you can say that about. Why has it sold that many? We’ve never marketed the book. It’s all word of mouth. Essentially, somebody who’s read the book, you read the book, you say to somebody who hasn’t read the book, “You’ve got to read this book,” and you have done that. I’ve not met you before but I know you have. That’s true of just about everybody who reads the book.

Entrepreneurs create something you would never even imagine you could create and discover something that you would never imagine existed. Click To Tweet

They speak to a friend, “You’ve got to read The E-Myth.” It goes on and on. They read the book or don’t. If they read the book and if they do the book, which is a significantly different thing they do the book, they can’t help but say to anybody and everybody who’s either got a lousy job and is thinking about creating their own business going out on their own, they can’t help but say, “Have you read The E-Myth? That’s what they call it. They don’t call it The E-Myth Revisited. They simply say, “Have you read The E-Myth?” Notwithstanding the fact that I’m sure you know I’ve written, published now over 30, “E-Myth,” books, each of them dealing more deeply with the subject, like awakening the entrepreneur within and the introduction of the dreaming room.

What you spoke about getting deeper into the process is what all of my books, our coaching, our mentoring has done over the years, albeit it is not about the changes that have occurred in business. It’s about going deeper into the original protocol, the dream, the vision, the purpose, the mission, the job, the practice, the business, the enterprise. However I speak about it, it’s absolutely essential as it was for Bob, that very first guy who I consulted with, coached about in “sales.” It became obvious to me that Bob didn’t understand what a system was and therefore I had to address everything Bob, not just what his salespeople did, but his lead generation, lead conversion, client fulfillment, financial system, management system, operating system, etc. Unless I’ve dealt with every single one of those components of the overriding system that exists in every company, no matter whether it was 1977 or now, The E-Myth lives at the heart of it.

I think we should go into a few of the things you said because what’s interesting is it’s even more important now than it was then. Now, there are more distractions, more noise. There are more options. There are more things that pull people as far as what would make a difference in their business. It could be, “I need to improve marketing. I need to improve sales conversion.” There are many different polls people have, but what I hear you saying is that the patterns of human beings haven’t changed much. Maybe could you walk through the ideas that you’ve been talking about the hierarchy of growth, starting with those initial stages and why a person’s understanding of not just themselves, but then as they bring on people themselves as it relates people? That would be compelling. It starts to show the importance of systems so that you have degrees of certainty as you grow.

Speaking about the totality of the system, Apple is a system. Google is a system. Facebook is a system. McDonald’s is a system. Every company on the planet is a system called this is how we do it here and this is why we do it that way. You’d be astonished how few small business founders, owners, operators understand what I said. You’d be astonished to see how few literally have a dream. When I said it, a dream, a vision, a purpose, a mission, you understand that is a sequence. Meaning I have to have a dream first. The dream is a great result I intend to produce by founding this small business. What is that great result? They have to know that great result. When I started the Michael Thomas Corporation with Tom, before we ever started the company, we sat with each other day after day asking the questions we needed to ask in order to come up with the answers we need to internalize so that we could communicate them clearly.

The first in that process was the dream. What’s our dream? What’s the end game we’re pursuing here? The dream was a great result we were to produce. We had to first understand the great result our company is being created to produce before we ever could then discuss what our vision was. Understand people typically just the thing that I’m using different words to say the same thing. I’m not. I’m defining something indifferent. The vision, once I understood what the great result was and the great result, the dream for the Michael Thomas Corporation way back then in 1977 that has persisted throughout these years since we founded that company. The dream was to transform the state of small businesses worldwide. In order to transform the state of small businesses worldwide, we had to transform the state of entrepreneurship worldwide. Once we accomplished that, we would have then transformed the state of economic development worldwide. That was obviously something that if we could do it, would have a more than a profound outcome than anything we could do in the Michael Thomas Corporation, the first business development firm of its kind. It’s the first business coaching company on the planet. Nobody had the dream that we had.

TWS 25 | Growing A Small Business

Growing A Small Business: The E-Myth is the absolute replicable turnkey system that can be applied to every single small company on the planet, no matter what it does.

 

I read it or heard you say it once. They talked about this like entrepreneurial seed bits that are in all human beings. I interviewed the Founder of Upwork before Upwork became the company. One of the claims that they have was in the Philippines and how it brought $250 million of increased GDP because of Upwork. That entrepreneurial seed sits in everyone wanting to improve their life, wanting to improve the life of other people. That’s profound. Essentially one of the things that you’re talking about, which is establishing that dream, which I believe everyone has.

We say that religiously over all these years. As it’s said, we’re born in the image of God. That’s what’s said. It’s said in every religion. It was said first in the Jewish religion. It is the truth that we speak to everyone we’re talking to. We’re essentially saying, if we’re born in the image of God, as it’s said in the Old Testament and the New Testament, as it’s been said for thousands of years, if we’re born in the image of God, then born to create. Every human being is born to create. None of us are taught how to create or how do identify what we’re here to create. We’ve never been taught that. Our parents weren’t taught that because our schools don’t teach us that, because they teach us exactly the opposite of that, we are not capable of truly understanding what that means or even worse doing it. What we’ve been doing is awakening the creator within, the entrepreneur within because that’s what an entrepreneur is. An entrepreneur is a creator. An entrepreneur isn’t functionary. There’s no organization chart that says, “This is the entrepreneurs.”

If you watch the movie Steve Jobs, Steve Jobs said to Wozniak, “Wozniak, you’re brilliant at what you do in the orchestra. I create the orchestra.” The difference is huge. It’s beyond description in one way and we set out to describe it. When we say awaken the entrepreneur within, we’re truly saying awaken the creator within and inspiring them, teaching them, training them, guiding them, coaching them, mentoring them to pursue their true reason for being here on earth. What we’re saying is in every single one of you can discover what that is if you follow the process we’ve created for you to discover what that is. Within my books, I describe, discuss, pursue and define the process that’s critical to awakening the entrepreneurial, what Walt Disney called Imagineer, within. To create something you never even imagined you could create, would create, to discover something you never even imagined existed was possible, was your calling. To be able to do that goes so far beyond the technical as to say the technical part isn’t important.

The imagination of creation is the most important part of the seeding of any and every company or anything on the planet. The first part of that is the dream. That’s awakening the dreamer within. The second part is the vision. Let’s awaken the thinker within because now that I’m going to create a company whose intent is to transform the state of economic development worldwide in a very specific manner, form, shape. I now have to understand what my vision is. Which means I have to be able to see them, how that will appear on the planet. We call that the second step, which is the vision, which ours was to invent the McDonald’s of small business consulting.

At the very beginning, in 1977, when we discovered what our dream was, we then created what our vision is, which is to transform the state of small business. It was to create the visual contextual model for how we’re going to do that. That was to see it by describing it as the McDonald’s of whatever the dream ultimately said it was going to do. The McDonald’s of personal growth and McDonald’s of whatever it was. The third was the purpose. Everybody thinks the purpose is the dream, but no, the purpose isn’t the dream. It’s the third part of the dream, which is to make it possible for every small business owner who came to us to be able to create a successful company doing what their dream called for them to do. It’s doing what their vision called for it to be and to be as successful as a McDonald’s franchisee or better in the operation of that company.

Until small business owners understand the dream, vision, purpose, and mission, they would never be able to successfully grow a company. Click To Tweet

We would turn out these successful people up to the last point and the last point of the dream, vision, purpose, and mission was the mission and the mission was the system. The Michael Thomas Corporation, we invented the business development system that would enable us to realize our dream, our vision and our purpose. The system was how to create a business development process that could be applied in every company on the planet. When we got done with that work and began to communicate that to every single small business, we called on the door to door, straight commission salespeople in the Michael Thomas Corporation exactly as though they were selling encyclopedias. In exactly the manner I described, selling our dream, our vision, our purpose and our mission. Essentially telling every small business owner that until they understood the dream, the vision, the purpose and the mission, they would never ever be able to successfully grow a company of one, which is what every human being is when we’re born. An economy of one, a company of one into a company of 1,000. It’s like from a company of one to an enterprise of 1,000 becomes then the model through which we incite our new client to understand that growth is not something that maybe you do.

Growth is the only reason you started a company in the first place, that it is incumbent upon you. If you’re going to presume to be an entrepreneur, to grow a turnkey methodology that lives at the heart of your company, a dream, a vision, of purpose, a mission, and be able to expand that worldwide. In short, whatever you create is meant to grow effectively worldwide, just like McDonald’s did. You understand you’re now Ray Kroc. You’re not Jerry Smith. You’re now Steve Jobs. You’re not stupid. You’re now blessed with the process through which entrepreneurs create great scalable companies. That was the entire meaning of everything we’ve been doing since the very beginning.

This is where I go back to our brief dialogue around business then in business now because business now has a lot of shiny objects. Based on what you see and observe, are these missing components, this sequence of creation still absent with a lot of companies that are formed and created these days?

Absolutely, without a shadow of a doubt.

Can you be successful as a scalable business without these steps, without going through step 1, 2, 3, 4?

TWS 25 | Growing A Small Business

Growing A Small Business: By becoming a generalist and applying your method on every single circumstance you come face to face with, you discover the universality of your methodology.

 

If you look at every single scalable company I’ve mentioned, Steve Jobs and Apple, all I’m defining is what every single one of them does. I call it the Eightfold Path. I’ve redefined it in my terms, but only because I’ve taken them all apart and identified in every single small business imaginable how to organize all of that process into a process that works every single time. A process that works every single time it’s applied. Applied is a key ingredient of that because what’s required is for example what our most truly astonishing clients, and when I call them clients whether they’ve worked with us in our coaching process, our mentoring process is unimportant. Many of them simply bought the book, read the book, and then did the book.

You understand, you’ve got to buy the book, you’ve got to read the book, and then you’ve got to do the book. I’m saying that anybody who buys the book, reads the book and does the book, that does the book is critical, but the read the book is critical and the buy the book is obviously critical. You’ve got to do those three things. Ken Goodrich, who’s the Founder of an HVAC company, a contractor who failed in his first interim of growing an HVAC company. His dad hired him when he was ten years old. His dad was an HVAC contractor. Ken held the flashlight at night when he was fixing an air conditioner. Ken was introduced at the age of ten to what his father did. When he went on to college for four years in business and finance, from the age of ten through his four years in college, he worked in that business and did each and every job.

When he graduated from college, he was offered a job by all of the companies who hired college graduates to come to work in their bank, in their financial services company, in their whatever as a beginner. When he heard what they were offering him, he said, “You mean I went to four years of college to be offered only a third of what I’ve earned part-time fixing air conditioners? Why would I do that?” They said, “We don’t know but you’d have a career.” Ken said, “That’s the dumbest thought I have ever had. I wasted four years.” He went back not to work for his father, but to buy his father’s business ultimately. His father died and now Ken owned it and he began to apply what he thought he knew to operate that business until the IRS shut him down. Suddenly, he realized he didn’t know anything about the business of business, despite the fact that he’d been working in one from the age of ten and he’d been going to college to learn about business, to get a degree in business and finance. None of it had anything to do with what he had to do in order to be successful in his small business.

He was given a gift at that juncture. The gift was The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It. He sat down and read it and then read it again. He began to apply it in the business. He started anew from the very beginning, just Ken doing it. Now following The E-Myth Revisited, step 1, step 2, step 3, etc. Literally applying it day by day, he had the book, he said, in his back pocket. Ken, unlike most people on the planet, admits he read The E-Myth Revisited 39 times. That first HVAC company he created, he committed to selling it in three years for $1 million. In three years, he did sell it but for $3 million. It blew him away. He decided to wait a bit. He started a new one with the intention of selling it for $3 million. He did, but he didn’t sell it for $3 million. He sold it for $4 million. Ken had the book in his back pocket and practiced it day after day because it was the secret to how he got paid $3 million and the secret for how he got paid $4 million. He said, “I can do this again and again. I get this.” He’s applying my book step-by-step. At the end of that process, he had sold, built, designed, launched and grown 24 HVAC companies, millions upon millions of dollars.

He said, “Why am I selling them? Why don’t I just keep them and grow them?” That’s what Ken did. I’m speaking with Ken to a large association of service businesses, to the owners, about 1,500 of them in Las Vegas to tell that story. We’ve done that story through nineteen different vertical markets, written a book for each of those vertical markets, The E-Myth Chiropractor, The E-Myth Optometrist, The E-Myth Plumber, where my co-author is someone who literally did it. Think about the same book, The E-Myth Revisited, applied to every single vertical market. When we’re done publishing those books and bringing those books to every single vertical market on the planet, we’ll have transformed the state of small business worldwide. We will transform the state of entrepreneurship worldwide, we will transform the state of economic development worldwide so that small businesses don’t fail at 90%, but succeed every single time.

Buy the book, read the book, and do the book. Click To Tweet

If they buy the book, if they read the book and when they do the book like Ken Goodrich did, like the founder 1-800-GOT-JUNK?, like the founders of Infusionsoft did, like the founder of BNI did on and on. How miraculous that is. Our system doesn’t do exactly what Steve Jobs did, but I can guarantee you if Steve jobs had read The E-Myth Revisited, he would have done it in exactly that way and it would have created an astonishing result. That’s what I’m saying to every single person who’s reading this now, every single person you’ve spoken to over the years you’ve interviewed. That effectively The E-Myth is the absolutely replicable turnkey system that can be applied to every single small company on the planet, no matter what it does. Provided they have a dream, a vision, a purpose, a mission, a client fulfillment system, a client acquisition system, a franchise prototype that can be replicated faithfully every single time.

The prototypical franchise system every great growing company needs to design, build, launch and grow, plus a management system and leadership system, that will create a great growing company that can replicate its success time after time. Whether it’s doing that in Portugal, Miami, every country worldwide like McDonald’s, Apple, Google, etc., it works. Ergo, you can literally learn how to work it in such a manner that will enable you to scale it in the most uber-successful way. To truly become the great entrepreneur that resides in potential in every single one of us.

Michael, it’s been going through my mind is something I heard you say and you’ve written about, which is stop reading and start doing, which has resonated as you’ve been speaking. It’s also something that I’ve learned, which the idea of mastery is. I think a lot of people were influenced in the United States, especially to master things cognitively, get the information. There’s a degree of physical mastery, which is due to taking the information and doing something over and over. This is definitely the place where we needed to talk about some new business that you have at Radical U. It essentially takes the information that’s in The E-Myth and puts it into a directional set of tutorials and curriculum. It’s those potential entrepreneurs, existing entrepreneurs or small business owners can use that to put in practice what you’ve been talking about.

Radical U is our entrepreneurial development school online. It’s essentially a five-year school. I’m going from a company of one to a company of 1,000. It defines every single step of the way through a video tutorial and homework the student needs to do. By doing the homework, they’re shaping their dream. They’re shaping their vision, etc. to the point where they’ve grown an enterprise. Effectively, what we’re saying is if you have the dedication, if you have the patience and you have the determination. If you have the will to follow our methodology, we will teach you what every single human being on the planet must know and must do in order to create any company of whatever size to realize your dream. It’s the great result you’re setting out to produce. To realize your vision, the form that dream will take, in a brick and mortar or online business.

The purpose for which you’re doing it so that every single one of our students online can become successful in a limited fashion as a McDonald’s franchisee or even in an expensive fashion. It’s to mirror the success of a Ray Kroc or Steve Jobs, the Google boys and so forth. Pick one. It doesn’t make any difference whether it’s brick and mortar or whether it’s online, whether it’s this or whether it’s that. The process is universal. That’s our point. The process, the methodology from step one to step five to step eight is exactly the same no matter what company you’re going to start. Once you realize that, you suddenly liberate yourself from all the false promises that are made on the internet from internet marketers who are essentially telling you stories, which are built upon what everybody says to them, “I want to do it fast. Can I do this in a week? Can I do this in a month?” They say, “You can.” In short, mirroring the stupid desire everyone has when it comes to the word success. Mostly what they want is a financial success. They may want to make gobs and gobs of money.

TWS 25 | Growing A Small Business

The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It

When you go on the internet, what you were going to see is an immense number of people say, “We’ll teach you how to make gobs and gobs of money,” as though they, and of course they can’t. They can’t because nothing called gobs of money happens in a week, in a month, in a year. It happens over time and it happens steadfastly when you do step 1, step 2, step 3 and master each and every one of them on the way. We’ve been telling the truth for now since 1977. There are a monstrous number of people who have copied what we say, but then say, “Now you can have it quickly.”

Michael, I want to hit on two things that keep going through my head. The first one has to do with what you’re saying right now, but I’m going to talk about the first. There are so many of these sequence patterns in life. I think going back to Maslow’s Hierarchy of Needs, there’s a sequence by which people seek things, the physiological safety relationship, self-esteem. There’s a process and a system to that. There’s a hierarchy and you can’t skip steps. I read something which was the eight or nine levels of intimacy, which is going in all of your relationships where if you skipped steps, it could be considered assault. The step 1, step 2, step 3, there’s this sequence of events. I look at also to our life in general, humans in general, we’re all born the same way. We have to learn how to walk. We learn how to crawl before we walk. Learn how to speak, learn how to interact. You can’t skip steps.

It occurs to me why would anybody think that there isn’t a sequence and a pattern to a thriving business, a certain sequence, certain steps that you take starting with one and ending with the latter one. This brings me to my final point, which is money. This entrepreneurial flash in the pan, giving people gobs of money, as you put it. In my experience, people aren’t seeking money. They’re seeking some emotion and state they associate with having money. You have talked about this, starting in your first book, which is the idea of contribution and legacy and making a difference as being that driving force. Those are the two things I wanted to say. Would you mind speaking to that as we conclude?

Absolutely and I would say that the reason why most people don’t realize that it’s a process, you have to walk before you run, etc. They don’t want to have to think that. They don’t want to have to think that it’s going to be hard work. They don’t want to think that they’re going to have to learn how to do this before they can ever learn how to do that, whatever this is and whatever that is, whatever the process is. All I’ve learned in my education and my education with respect to myself, education has been to identify what that process is. Only by doing it, testing it, validating it and then orchestrating it, we’re able to come to that conclusion. Understand what we’ve learned, earned, and earned it by practicing it. It’s by practicing it not only in our business but practicing it in every business to discover the universality of it.

If it were not universal, then it would be specialized. Everybody believes you’ve got to become a specialist, that’s what everybody tells everybody. You’ve got to become a specialist. I’m saying you’ve got to become a generalist. By becoming a generalist and applying it in every single condition and circumstance, you’ll discover the universality of this methodology to achieve a truly human resolve that lives inside of you authentically, which must be honored every step of the way. This is hard teaching because it’s teaching something that most people are not prepared to do. It’s like I’m becoming a Navy SEAL. Thousands applying, hundreds are accepted and those hundreds are already masters in the world they live in. Now they’ve got to go to school and it becomes dozens. Not thousands upon thousands who want to, not hundreds upon hundreds who have been accepted into, but only the ones who have passed the test to. Think about that. From thousands upon thousands to hundreds. What’s in between? What’s in between is the stamina, the persistence, the will to overcome all of the obstacles that are naturally incumbent for you to get there so that you can be there having passed through every test along the way. The tests are identically the same. That’s important for us to know. The tests are universally the same.

Michael, isn’t it interesting that most of the vital truth of life is inherently paradoxes? Especially when it comes to growth and the achievement of success, love or fulfillment. You experience the other end of that like the yin and the yang, you experience the other end of the spectrum. It’s incredible where you look at what it takes to have a successful business. We obviously don’t have time to go through the different roles a leader plays in a business. There are these different steps that are taken. The transition, as you’re saying, there’s tension, there are anxiety and the idea of the will to succeed, overcome challenges, overcome adversity in and of itself gives you that reward and fulfillment. Without it, there would be no reward or fulfillment.

Without it, there wouldn’t be any. They would simply be superficial. It’s making a commitment to lead an existentially true, authentic life and to discover what it is. I’m beginning the process of writing another book. I’m always writing another book, but one might say, “I’ve already read your book.” That’s only because you haven’t truly gone through the process. To understand that you might’ve read the book and it was essential as the first step in this process, but it’s never enough until you do the book. You’ve suddenly discovered that what you thought the book was about was different than what the book was about. The book I’m committed to now write is mastering the mind of a master. I want to imagine a book called Mastering the Mind of a Master. That’s the entire process. It’s not of a lot of masters. It’s of a master because once you find one, understand I’m not saying I’m that one. I could very easily say that because that’s what all my beyond fans would tell you. I’ve gone through the trouble of defining the process through which one must think like a master, which calls for one to do what one thinks like a master.

In order to create what one thinks as a master that I’ve taken the trouble to pursue that my entire life. Here at the age of 83, halfway through that passage, I can say, been there, done that, failed at that, succeeded at that, mastered that, etc. It’s only that I’ve mastered that you should pay attention to because that’s the product of my will, of my love, of my pursuit to create a great growing enterprise that can transform the state of human beings worldwide. All I’m saying is by saying, “Look up to me,” that’s not the point. It has nothing to do with me. When I speak about it, I call it not Michael E. Gerber. It did hit, I didn’t. It lives within me.

You need stamina, persistency, and will to overcome all obstacles that are naturally incumbent for you to pass every test along the way. Click To Tweet

You’re documented in so many different areas of media, but you’re known to say often that one of the main transitions of the leadership of successful founders is when it’s no longer about you. You should chart as soon as possible.

That’s why the whole personal branding BS. I’m saying BS because it’s appealing to the ego. I’m the one and you’re going to see it immediately. You can immediately see it if you’re capable of seeing it. Most of us aren’t capable of seeing that because we’ve never grown beyond that. We’ve said enough about it. I think all of it. I think that in fact what we should do if you are open to it is have part two of this conversation and maybe even part three. In the process, something will come out that the folks you are speaking to will realize what wealth is as opposed to the wealth they think it is.

Honestly, I would love those conversations and those follow-ups because wealth is one of those totally misconstrued things. I think that people these days that have acquired or achieve what they had considered at one point material wealth realize that it’s not what they were seeking. There are so many different aspects to a life where if you were to measure those and be willing to give them up, the material things are what would be given up first. Not health, not relationships, not spirituality, but material things. It sounds so cliché, but the most important thing is that life has nothing to do with material wealth. I look at a person directing what they assume a successful life is based on our conditioning in school, in the workplace, has become superficial. I look at definitely that we need to do some follow-up because wealth is achievable. I think that the overwriting sail that propels that ship forward can be discovered so much sooner than it’s usually discovered, which is typically toward the end. If it can be understood, accepted and acknowledged in the beginning, it can make the journey so much more fulfilling.

Without a doubt and then becomes the question, “How do I say that?” All the same words are used in all of the personal growth, personal development mantras that are spoken by so many people that it all becomes the same. It’s how then to speak it in a way that it all becomes compelling. The truth about what we speak about. When I say we, I mean we have The E-Myth sword that what we speak about is original. It had never been said before. I can promise you it’s still not being said. It’s being shared, but only to the degree, the one who’s sharing it perceives it, not as it’s being delivered authentically. It’s true. You’ve got to get into it deeply. That’s why I say the process. I have a dream. I have a vision, and the expression of what a dream is and the expression of what my dream is and the etc. You’re suddenly experiencing the process that one has to go through. That’s what we do in Radical U. Radical U is a 52 weeks a year video session and each of those sections is designed to produce one result. Imagine when somebody enrolls in Radical U as a student, the first module of Radical U is the dream. Remember Dr. Martin Luther King, I have a dream set in Washington, DC? You can watch that. Everybody reading can watch that.

When you watch Dr. Martin Luther King saying that, when you experience what he says and how it comes through to you, you can for the very first time experience how incredibly alive that dream was to him. That’s how alive your dream must be, albeit your dream is different than his. The minute you hear him say, “I have a dream,” and you see that flood of people in Washington, DC listening to the expression of his passion, you realize he died for that. You understand he was shot for that. That’s how dangerous that dream was as it was perceived by the powers that be. That’s how huge that he dared to dream that in a world that did not permit one to dream that. When you listen to him now, as he expressed it way back then, you begin to feel it. Not as he did it, not even close to what he felt what he said it. You at least can understand and appreciate how deeply he felt it to commit his life to it. All the dangerous places he took it to. That’s what you’re setting out to do as an entrepreneur. That’s what’s missing every single time I speak to one.

Sometimes, because I’ve read that dream and then you hear the audio, you experience the video and they’re different experiences. Words are words. It’s information without execution, like what you’ve been talking about, having the information but not doing anything. It’s been the doing, but then it’s the conviction and being behind that creates this magnetic energy that inspires and compels and leads others. That’s why his influence will never ever die.

We could’ve gone on and on only because you’re literally deeply listening. You weren’t just interviewing me to get some stuff out. That wasn’t where we were.

No way. I prepared a bunch of stuff and I got through maybe a bullet point and a half.

I know you did. We made a connection here. I know it can go much deeper. As it goes much deeper, you’re going to have a profoundly deeper impact upon the people who visit you. As you began to have an impact, your dream is going to become formed in a way that you can see in better than you’ve ever seen it before. That dream is going to direct everything you do. The dream is the very first thing I had the dream. I read what Dr. Martin Luther King said, I heard what Dr. Martin Luther King said, and I saw him as he said it. Each and every one of those were different experiences, but absolutely necessary for that dream to come alive. It was great speaking to you. Thank you for your time.

This has been incredibly inspiring. Let’s definitely do a follow-up because I’d love to have a part two and a part three. We don’t need to spend time talking about the best ways for the readers to connect with you. We’ll just give your main website, it’s MichaelEGerber.com.

It’s Michael@MichaelEGerberCompanies.com.

That’s where they can access books. Radical U can be accessed from there. That’s the hub.

As we have further conversations, Patrick, at a different level, we’ll also find a way to connect us, you and them in a way that we all are sharing in the experience. I would like nothing better than that.

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About Michael E. Gerber

TWS 25 | Growing A Small BusinessMichael E. Gerber is the founder of Michael E. Gerber Companies and E-Myth Worldwide. He has had nearly 100,000 business/coaching clients over his career and has consistently been called “the World’s #1 Small Business Guru” — the entrepreneurial and small business thought leader who has impacted the lives of millions of small business owners and hundreds of thousands of companies worldwide for over 40 years.

He is the #1 New York Times’ bestselling author of The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It, Awakening the Entrepreneur Within: How Ordinary People Can Create Extraordinary Companies, The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It, E-Myth Mastery: The Seven Essential Disciplines for Building a World-Class Company, The E-Myth Real Estate Investor: Why Most Real Estate Investment Businesses Don’t Work And What To Do About It, The E-Myth Contractor: Why Most Contractors’ Businesses Don’t Work and What to Do About It, and the new book The E-Myth Chief Financial Officer: Why Most Small Businesses Run Out of Money and What to Do about It.

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Minimizing Failures And Maximizing Success In Startups With Mike Moyer

TWS 24 | Minimizing Failures In Startups

 

How can you achieve business success with lesser money and lesser failures? Mike Moyer gives us the answer to this question. Mike is the author of eight books that provide structured advice to people who want to solve specific business problems like splitting equity in their startup company or delivering an awesome sales pitch. In this episode, he reveals what he discovered in the startup and entrepreneur world about minimizing failures and maximizing successes. He also shows how we can solve problems with the least amount of money possible and how we can value our cash.

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Minimizing Failures And Maximizing Success In Startups With Mike Moyer

My guest is Mike Moyer. He is the author of Slicing Pie: Funding Your Company Without Funds. There’s an updated version which is Slicing Pie Handbook. He also has a cool software that is used to equitably track the non-cash expense side of things. It’s a very fascinating book and software as well. His reach is huge and you’ll read that in the blog. Most startups end up in a legal dispute because most partnerships or most companies start as partnerships 50/50 or 33/33/33. It’s cut down the line depending on how many founders there are. Mike figured out a way to equitably track it. He sells thousands of books a month. He also works around the world. The book has been translated into multiple languages. You definitely want to pay attention to this. There’s relevance to the content of these things we get into any size of the business of how you value something that’s not necessarily cash related.

Also, if you want to stick with me to the end, there is something that I was sent for my birthday by my mom and it was based on an archeological dig in New York City. These bottles were pulled up and it has to do with an ancestor of mine that formed the original mineral water company in the United States. I’m going to tell you a little story at the very end of the blog. If you like what you’re reading, go back and check out the previous episodes on entrepreneurship and also the previous seasons as well. Go on to iTunes, give us a good review. That always helps to keep us present for those that are looking for ways in which they can broaden their perspective on wealth, strategy, entrepreneurship and other things financial. I’m going to get to my interview with Mike. I hope you enjoy it.

Mike, it’s awesome to have you on. Thank you for taking the time.

You’re welcome.

I’ve known you for a few years and connected with you at different events. You have an intriguing way in which you look at entrepreneurs. It’s more of what entrepreneurs don’t usually realize when they’re starting because they’re so focused on the idea and the product. Why don’t you talk to the audience about what you discovered in the startup world, the entrepreneur world and how you’ve helped them and guided them to minimize failure and maximize success?

TWS 24 | Minimizing Failures In Startups

The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses

In general, many entrepreneurs want to go out, raise a lot of money, grow fast and grow big. If you look at our heroes of Mark Zuckerberg, eCompanies, awesome entrepreneurs, these celebrity entrepreneurs, it’s so unlikely that it’s not worth worrying about. I was shooting for the fences all the time. I’ve made a pretty decent living as an entrepreneur. I’m proud of making a living as an entrepreneur. I hit singles and doubles, not home runs all the time. Most entrepreneurs that make a living as an entrepreneur do so by singles and doubles and unconquerable troubles. Because people are always swinging for the fences, they always want to grow as fast as they can, raise lots of money as fast as they can. They cause a lot of problems.

With the bootstrapping concept where you can re-invest, the idea is to invest a little amount of money as possible to get the most return or the ROI. How do you solve your problem with the least amount of money as possible? The Lean Startup book on your desk is a great tool and a great concept. The one thing that I encourage you to change with the concept, instead of a minimum viable product, you made it a valuable product. By valuable I mean the minimum you can charge for. I see a lot of entrepreneurs building products, giving them away for free and having free beta testers. This whole process creates a false sense of value creation. I know you can give it away for free and now pay for it. Will they pay for it? One of the big things that have been missing with the equation often is capturing revenue very early on.

The other side that I like to work with entrepreneurs on is the whole idea of what are your cost structures? What does it cost to run your business if you are running it? Entrepreneurs think they can finance themselves by not paying for stuff. Everyone finance themselves by taking out loans or selling equity or earning money where they have to pay bills. Startups think they don’t pay the bills. This idea of we can finance ourselves by not paying for stuff gives us a false sense of what our costs are. When we taught student entrepreneurs, “We can undercut the big boys because our costs are so low.” Your costs are low because you’re not paying yourself, you’re not paying rent, you’re working in your dorm room. Those are real costs that you’re not paying for some reason and think you don’t have to. You want to know what those costs are so that you can always buy-in your business. Those are the two areas that I focus a lot on. The third one is how you divide up equity in a startup company.

Get into that because that’s what initially intrigued me. It’s the way in which most companies I would assume start typically in a simple divided in half or 50/50. Some of the things you said are vital because there often isn’t a consideration for all the value involved in a startup company. Can you go through and walk through that whole theory or idea and maybe use some examples?

An equity is the first deal people do. The first they needed to do is sit down with partners and say, “How do we split the equity?” As you said, “I’ll go 50/50.” The majority of startups go 50/50. They say, “We’re buddies or we’re friends, let’s go half and half.” They’ll say, “It was your idea. You’re more important than me so you get 51% or 60%.” No matter what number you pick, it’s going to be wrong because things always change. The only way to get your equity a bit accurate is to effectively predict future events. My equity is based on what you’re going to do in the future. You promised to work full time, for instance. You promised to work hard to give me a lot of customers. You promised that you’re going to build a great brand or you promised you’re going to invest money. I promised you that it’s going to be worth a lot of money or that we’re going to raise money.

Giving away free beta testers creates a false sense of value creation. Click To Tweet

If I can predict the future, I could get it right. Because I can’t predict the future, I can’t get it right. That’s the biggest mistake people make is they go in on this and divide equity in advance with the work being done. Because they can’t predict the future, they have to renegotiate later on. Renegotiation means something along the lines of, “I don’t feel like I have enough equity. Give me some of your equity or reduce your holdings.” People who have equity more than they deserve rarely bring it to people’s attention. If you have less than you feel like you deserve, you always bring it to people’s attention or you feel miffed or taken advantage of.

One of the problems we have is if I gave you 50% of my company and you do all the work, your motivation level goes way down. If I give you 10%, you may feel good about it for the first six months, for the next six months, you don’t feel too good about it. If you have a 50% cut and I renegotiated a 30% cut and you’re still doing the same amount of work, it’s a problem. No matter what happens in the future, it’s going to be wrong. It’s fundamentally a flawed system. All the advice we hear along those lines is plain wrong. It’s extremely calculating mistakes. The attorneys I’ve talked to estimate that 60% to 80% of all equity deals end up in a dispute that requires legal intervention. That means the chance of your equity split failing is greater than the chance of it succeeding.

This is a problem that I personally dealt with throughout my career and made me petrified to work with partners. When I did, I often got screwed. One time I was on the receiving end of the equity split. I got more of what I deserve. It was great. I made a lot of money. It’s fantastic, but I didn’t deserve it. Most of the time it’s just me getting screwed because I didn’t know better. Now I know better. The Slice of Pie model, which I’ve written several books about is the solution to that problem. It solves it 100%.

It even extends to intellectual property, office space and cash contribution. You have a way to value monetarily in a sense like with slices of pie. You have a way to value everything that goes into a company, whether it’s the market value of one of the founders who is taking a 50% pay cut, whether it’s office space and you even talked about college students. They’re paying rent. There’s value there if it’s being used partly for a startup. Talk about how you discovered all of these different pieces to a startup that were valuable, that weren’t necessarily taken into consideration with the traditional model.

You can’t say what the future’s going to hold. There are these unknowable things and predictions about the future. What is it going to be worth? If I think it’s going to be worth $1 billion and I’ll give you 1% of that, you’re going to be rich in your wildest dreams. What most people don’t realize is everything has a fair market price. Most established companies pay their bills. You are in business. You pay your bills. I’m in business, I’ll pay my bills. Everyone’s bill is paid, but startups don’t pay their bills. The value of something is what you would have paid if you did pay. If McDonald’s wants to build a restaurant in my garage, they have to pay me. If a law firm wants to license my likeness for their logo, they can pay.

We do pay for employees. We do pay for rent. We do pay supplies and equipment. All these things have fair market values. It’s the price that you would pay if you could pay because you will be paying when you can pay. If your company has $100 million in financing, you’re going to pay for your rent. You’re going to pay for your salaries. You’re going to pay for your travel expenses. Everything has a fair market value. The part that’s we’re going to focus on is what would we pay if we could pay? I always ask the same question, what would I pay if I could pay and I keep track of that. By keeping track of what I would pay, it gives me a feel for what my company cost structure is going to be when it becomes full force. Because when I reach break-even, that means I’m paying for everything. I can’t reach break-even if I’m not paying full salaries. I can’t reach break-even if I’m not paying my rent because I’m overstating profit and understating expenses. A break-even implies a fully loaded expense report and income statement, income and expenses. That’s a starting point.

TWS 24 | Minimizing Failures In Startups

Minimizing Failures In Startups: A break-even implies a fully loaded expense report and income statement.

 

You have online software. Your book talks a lot about this. You have a way in which you quantify that value where there isn’t money to pay it. You’re able to quantify it so at some future point in time, it will have essentially an equitable stake going forward.

The thing I’m thinking about is a game of blackjack. Do you know how to play blackjack? Let’s pretend that you and I go play blackjack together not as opponents but as a team. We’re friends so we’re going to split the winnings 50/50. We don’t know if we’re going to win. We don’t know how much we’re going to win. We don’t know how long it’s going to take to win. All we know is that we’re going to be friends. We have a good time playing the game. You go to a table and we each have $1 on the same hand to blackjack. The deal is two aces. We’re going to split the aces and double down. I’m out of cash and you’re not so you put $2 more down. You’ve bet $3 and I bet $1. We still don’t know if we’re going to win or how much we’re going to win and how long it’s going to take them.

The future is still unknowable. What we’re certain is you got $3 and I bet $1. If we win, does 50/50 sound fair? It should be 75/25. That is logical, it is obvious, it’s unambiguous. There’s no other way to think about it. I got to deal for 50/50. I could sue you and probably win because you agreed to it, but because you agreed to it and legally enforced it, it doesn’t make it fair. What’s fair is that your share of the winnings should be based on your share of the bets. When you contribute to a startup, it’s exactly the same thing. The bet is betting profits or capital gains of the company. The value of the bet is equal to the fair market value of our contributions. If you’ve worked for me for a year and you’re worth $100,000 and I don’t pay you, you have essentially bet your salary.

You may bet less than your salary. You’re going to bet a portion of your salary. If you have taken a 50% pay cut, I pay you half your salary and you’re betting the other half. If I use your garage to run my company, I don’t pay you rent. You’re paying the value of the rent. If you bring a screen-printing press that you had in your basement to give to the company, you’re betting that fair market value of the screen-printing press. If you buy plane tickets and hotel, I don’t reimburse you, you’re betting the value of those expenses. If you can contribute and you’re not paying for fair market value, it becomes a bet. It’s very simple, your share of the equity is based on your share of the bets.

One thing that wasn’t mentioned is cash. Let’s say somebody partnered that isn’t going to actively work in the company but puts cash in. How do you value cash or is it the same type of value as if somebody took a pickup? Is it the same type of value?

Equity is often used as a tool for incentives. It’s a lousy incentive because you’re going to have to work harder. Click To Tweet

There are two kinds of contributions. There’s non-cash contribution, which are things like time, ideas, relationships, things that don’t require you to take cash out of your pocket. The cash contribution is cash out of your pocket. If I paid you $100 an hour to work for me and you want to buy something that costs $100, how many hours would you have work in order to earn that money?

I already know the answer. It’s for two hours because I have to pay taxes on it.

When I pay you, I pay Social Security taxes and employment taxes. When you receive the money, you pay income taxes. When you buy the thing, you pay sales taxes. You have to work for two hours. Cash is more scarce and has higher taxation than non-cash.

It’s contributed after those taxes.

If you gave me $100,000, do you want me to think twice before I spend it? That is why I want you to think twice. You have to align the interests of the investor and the entrepreneur. In Slicing Pie, there’s a unit called a slice. It’s a fictional unit of the amount of contributions like a poker chip. For every dollar non-cash you contribute, you’re betting two slices. For every dollar in cash, you’re betting four slices. I call those normalizers or multipliers. That formula smooths the difference between cash and non-cash. It reflects a great deal of risk we take when you start a company. That’s how you account for it. When we reach break-even or Series A, your share is equal to your slices divided by all the slices, just like in poker, it was your chips divided by all the chips.

TWS 24 | Minimizing Failures In Startups

Slicing Pie: Fund Your Company Without Funds

I know we’re using different words to describe certain things. I have a couple of your books. This is the actual handbook, Slicing Pie Handbook. Maybe talk about the successful experiences you’ve seen by groups using this model. Do you have any off the top of your head that uses this where it’s been equitable and they went on to raise more capital and everyone was happy?

One of my favorite examples is a company called CloudSploit. There’s a case study on my website about it. This is the guy who had an idea for a company and he posted it to Reddit. Some guy posted back saying that was a good idea. The two of them have never met each other. They used Slicing Pie to start their company. Months later they raised money. It’s a pretty substantial company now. In 2010, I had published the first white paper on Slicing Pie and distributed it to entrepreneurs as far and wide as I could. In 2012, I wrote a book called Slicing Pie. In 2015, I wrote the Slicing Pie Handbook, which is the better one. It’s been translated into twelve different languages. I’ve sold thousands of copies every month all over the world. I have thousands of users of my software. I never once have I heard it not work. I never once heard of a single incident where it couldn’t solve the problem.

As I said before, 68% of all traditional deals wind up using legal intervention. Slicing Pie when used properly works every time. It’s a universal model like blackjack works the same in any country. It doesn’t matter. Fair is fair. If our dad gave us a cookie and said, “Split it up boys,” the only fairway is put it half and half because we’re both equally paid nothing for the cookie. If you bought the cookie, you can eat the whole thing. Fairness is not a matter of opinion. It’s a matter of fact. There’s only one version of it. That book has been used all over. It was translated into Persian for the Iranian market, which is a very different culture and very different economy. It’s the same model there as it is anywhere else.

I saw a presentation from a gentleman from Saudi Arabia. It was fascinating because the stereotype of that country is it’s this war-torn and very antiquated culture, but they have thousands of startups. There’s a huge entrepreneurial drive there.

There has to be because stable employment is not as easy to come by.

That will create an environment for entrepreneurs. For startups, hopefully, everyone’s resonated with some of these points. Is there relevance to existing companies that are maybe a couple of years old and they want to scale? It may require a capital contribution, debt or more risk. How have you worked with existing companies that are maybe taking things to the next level but already established?

It used to be that capitalism is the only means of production. Now it's about renting or borrowing. Click To Tweet

If you’re already established, your stock theoretically has a value already. Once you share some of the value, you don’t need Slicing Pie. Slicing Pie assumes you have a zero evaluation. I can’t divide it by zero so I don’t know. There’s no way to value the stock so I can’t see how much it costs to buy so I can’t sell it. Once you have a valuation of your company, you can use the stock price of your company. If your company is not paying full salaries and not paying expenses like a startup company, your company is likely overvalued and you will not break-even. In order for a company to have value and not be on paid bills that do something pretty spectacular, like super loyal customers for instance, that people are willing to invest in. Established companies can use their stock price.

Equity is often used as a tool for incentives. You’re going to have to work harder. It’s a lousy incentive. Giving equity to someone in an established company is a waste of time. If you don’t value it enough to buy it or somehow acquire it by not getting paid, giving it to you is not going to make you work harder. If you have shares of Apple computers, you have them because you bought them. If you had to work for Apple computers, the fact you own the shares should not impact in any way, shape or form on how hard you work for them. What will impact them is if you work for them where you get paid salary and a particular bonus and how you’ve managed. Your ownership in Apple does not matter. What it does show is you believe in Apple. You think the future is bright, but it doesn’t mean that you’re not going to work. If you weren’t willing to buy Apple shares, you might still work the hardest for them. It just says you don’t believe in them.

By giving it to you, I gave you something you don’t value. When you give equity incentives to people, it doesn’t have the same impact as people think it does. What’s useful is if established companies have a good bonus program, good goals, milestones planned out and manage them better. Throwing equity out usually doesn’t work. If you’re giving equity, you should always give the opportunity of getting employees to buy into the equity using their salary like, “I’ll pay you a bonus of $10,000. You can either buy equity with it or not.” Those who can buy equity are showing an interest in the company. The difference between publicly-traded companies and private companies is private companies are harder to buy. Not everyone can buy them so if you have the opportunity to buy, it’s a good option for companies.

Have you done much work with Carta, the equity management software?

Capshare and Carta, there are a number of these companies that manage the equities, but equity becomes so complicated so fast that Excel becomes a lousy tool for it. Carta and Capshare are all great companies. Once your shares have a value, it’s a good tool to use. Slicing Pie is you use before you reach that point. One of the things that those companies do well is they manage different classes of stock and stock options. When the money starts coming through investment, it starts getting pretty convoluted in terms of how people are covering their own butts. They create different classes of stocks, stock option programs and different preferred shares. There were all kinds of rules. Each one of those classes of stock has to be tracked. Otherwise, it’s confusing. In the beginning, we’re all in the same boat. Your dollar of risk is worth the same as my dollars risk. I have to treat you the same. I can’t give you a special class of stock if you’re on my team. Slicing Pie assumes I’m going to give out plain vanilla common stock to dispense. Once the investor comes in, they can add on the rules on top of that. You’ve got to decide as a startup if those rules are worth the investment.

TWS 24 | Minimizing Failures In Startups

Minimizing Failures In Startups: We don’t have to own a factory or a machine. All we got to have are our brains, and the tools are all there free for the taking.

 

One of the people I interviewed a few months ago was one of the founding developers of Carta. I found the philosophy they have is pretty interesting. The CEO has this theory about how work has evolved over the years where it’s gone from a very indentured servant in medieval times to slavery to now paycheck and ultimately with equity. In using their platform, it does make it easier to manage, understand and value. What do you think is the future of how equity is handled based on what you’re paying attention to?

It’s getting complicated enough that those programs are important. What we’re seeing is it used to be that capitalism is the only means of production. Now it’s about renting as the means of production or borrowing as the means production or leasing it. We don’t have to own anything these days. We don’t have to own a factory or own a machine. All we got to have is our brains and the tools are all there free for the taking. Those things all have a value and just because we’re not paying for them doesn’t mean they’re not valuable. To the extent that we can use the equity to acquire these things is important. Bitcoin, those are tools that we’re seeing more and more of. In the early days when you’re starting out, you don’t need super tight security around these things using to keep track. I hope the future of startups is fair equity splits. Many companies are getting to unfair deals and it’s a heartbreaker. I won’t go to use Slicing Pie once they take their pie to move onto Carta, Capshare and things like that.

Mike, this has been awesome. What would you say are some things that entrepreneurs need to learn more about Slicing Pie? What are the best ways to go about doing that?

The website is SlicingPie.com. It’s always up and running. We have a software called the Pie Slicer, which tracks your pie in real-time based on contributions. Think about you can do accounting in Excel if you want or you can do it in QuickBooks. Slicing Pie is the QuickBooks for equity split. Accounting tracks what you do spend. Slicing Pie tracks what you don’t spend. The things you track on Slicing Pie are things that you should track anyway, which are your payroll and your expenses. The book is available in several languages. Wherever your local jurisdiction is, there’s usually some resource for you.

I’ve used the software a couple of times and it’s simple, straightforward and aligns right with your book and what you teach there. Mike, this has been a great conversation. Is there anything else that you think is relevant to share with entrepreneurs? I know you teach in that space. Do you still teach at Northwestern or another university?

Fairness is not a matter of opinion. It's a matter of fact. Click To Tweet

I teach entrepreneurship at Northwestern University these days. One of the things I always keep in mind is fairness is not a matter of opinion. It’s a matter of fact. It’s either fair or it’s not. Anytime anyone says base your split on some future assumptions, always think, “How can I get a fair answer?” There’s only one way to do this. There are two ways of splitting equity. There’s unfair and there’s Slicing Pie.

Mike, thanks for all your time. I appreciate it. This has been great. The best way to buy your book is on Amazon or through your website?

It’s on Amazon.

Congratulations on all your success. I didn’t know that there was that much popularity. It’s awesome. It’s been translated in multiple languages and you’re selling thousands of copies a month.

Thanks for having me. I appreciate it.

Here’s a story around this bottle. Clean drinking mineral water was big in Europe apparently. My ancestor was Samuel Hanbury Smith. My middle name is Hanbury and my son, Jack, his middle name is Hanbury as well. He was one of the original ancestors that came over from Sweden. He was a doctor and he came over, was originally in Ohio then went to New York City. He founded this mineral company. For those of you who have seen the Greatest Showman based on PT Barnum, there’s a character in there, Jenny Lind. She’s the one that funded my ancestor. She’s the original investor. She invested the equivalent of about $500,000 now, $3,500 back then.

This was the first company that he built his plants on. I’m trying to get more information on it. There’s a bunch of history there. Mike told me, “You should get the intellectual property, the websites, the URLs and the domains. It could be in the public domain. Start a little company and maybe you have it as one of those novelty water companies.” I did that already. I reserved the domains and going to go about getting the IP if it’s available. I’m going to involve my kids as well. I’ll keep you posted on that. It was a novelty, especially coincidental given the fact that we’re talking about entrepreneurship. I’m going to put my entrepreneurial mind to a new test and involve my kids and we’ll see what happens.

That’s what I wanted to share with you. I hope you tune in next time. We have more exciting guests on the docket. This one is trailblazers of the entrepreneur writing space. He is Michael Gerber who wrote E-Myth and the E-Myth for pretty much every major profession that’s out there. You will enjoy that interview. Definitely check that out. It’ll broaden your knowledge of how a company’s structures work and how entrepreneurship works. You’ll get a kick out of it.

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About Mike Moyer

TWS 24 | Minimizing Failures In StartupsMike Moyer is the author of eight books that provide structured advice to people who want to solve specific problems like splitting equity in their startup company or delivering an awesome sales pitch. He mostly writes and speaks about business and entrepreneurship.

In addition to writing and speaking, Mike is the founder of Fair and Square Ventures, LLC where he invests in early-stage ventures and provides consulting focused on management and revenue generation. As an entrepreneur, Mike has started a number of companies including Bananagraphics, a product development and merchandising company, Moondog, an outdoor clothing manufacturing company; Vicarious Communication, Inc, a marketing technology company for the medical industry; Cappex.com, a site that helps students find the right college and MosquitOasis which creates camping gear for kids. In addition to his experience as an entrepreneur, he has held a number of senior-level marketing positions with companies that sell everything from vacuum cleaners to financial data services to motor home chassis to luxury wine.

He teaches entrepreneurship at the University of Chicago Booth School of Business and Northwestern University. Mike is the author of Slicing Pie, Pitch Ninja, How to Make Colleges Want You, College Peas, and Trade Show Samurai. He has an MS in integrated marketing from Northwestern University and an MBA from the University of Chicago. He lives in Lake Forest, Illinois with his wife and three kids.

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Objectivism And The Success Of An Entrepreneur With Dr. David Kelley

TWS 23 | Objectivism

 

Objectivism is the belief that certain things, especially moral truths, exist independently of human knowledge or perception of them. On today’s show, Dr. David Kelley describes the concept of objectivism and its four pillars, as well as the most common, refutes for these tenets. He also discusses the relevance of objectivism as it relates to the success of an entrepreneur. Dr. Kelley is a professional philosopher, teacher, and writer. He is also the Founder of The Atlas Society and the author of numerous works in philosophy, politics, and culture.

Listen to the podcast here:

Objectivism And The Success Of An Entrepreneur With Dr. David Kelley

We are still talking about entrepreneurship and I had an awesome opportunity to speak with Dr. David Kelley. He is the Founder of The Atlas Society that he founded in 1990. He’s been a huge advocate of objectivism and has written a number of books. He has a lot of accolades. The Atlas Society has a mountain of information on their website. I really liked the way he described the ideas of objectivism. What he sees the involvement of the Atlas Society in regards to younger entrepreneurs and seeing around the world, whether they describe their activities and their philosophy as objectivism or not still understand its basic tenets. That is causing this entrepreneurial type of drive toward improving someone’s life and improving the world in general. I understand that there are some things we talk about that are somewhat controversial depending on what your perspective is. I would encourage you to read the part where I talk about language. How important it is to use the right words and language to describe what the actual meaning is because these days, things are taken out of context and misconstrued and so forth.

Regardless, it was a great conversation. You guys are going to learn a lot. For those of you who have not read Atlas Shrugged yet, I think this is going to be one that inspires you to do so. Maybe for some who haven’t read it in a while, I inspire you to read it again. You guys are going to enjoy it. If you like what you read, go back and read to the previous episodes in this season. Also, get onto YouTube as well. We have all of our episodes and video. You would enjoy that if you’re visual learners. Thanks for all the support. You are amazing. If you have some time and you like what you’ve read, head over to iTunes and give us a good review. It definitely helps, especially as the way in which finding podcasts has been more difficult. High ratings definitely increase the amount of presence that we have and help us increase our audience and also share up with a friend too. We’ll talk to you next time with another amazing guest. His name is Mike Moyer and he wrote the book, Slicing Pie.

Dr. Kelley, it is such an honor to have you on the show. Thank you so much for taking your time.

It’s a pleasure to be here, Patrick. Thank you.

The first thing that I’m so impressed by is how much of your life and your energy has been focused around advancing the philosophy of objectivism with The Atlas Society and other groups. Would you be able to tell the audience what were the events and circumstances that led to your decision to make that dedication?

I read Ayn Rand in high school at a time when I was thinking about what I wanted to do with my life and what my values were as many people at that age do. It bowled me over that she had developed ideas that speak on to the roads that I began to explore. She had gone much further down those roads. However, what led me to read her in the first place was at what became clear as an emerging interest in philosophy as a branch of knowledge. That’s something I wanted to study. I went to college to study philosophy. You didn’t expect that I would remain as committed to objectivism theoretically as I was when I went to college. Every challenge that from other philosophers, from my professors, I see Ayn Rand had a good answer to. I never saw a reason to change. The reason I stayed with it, my interest I went to grad school, I decided I wanted to teach. I ended up teaching at Vassar College for about ten years and I sent the kids in New York. Afterwards, I continue to write in philosophy and started the organization. I founded The Atlas Society in 1990 as a way to provide information to people who are interested in Ayn Rand’s ideas.

At the time, it already was one major and other minor organizations, but I felt what objectivism needed was a more open and exploratory way of approaching the ideas. The idea that philosophy should grow. Ayn Rand was a genius, but she didn’t discover everything there is to know. We launched The Atlas Society to do research, to do education, to do some advocacy, not at the electoral level, but in terms of political philosophy and finding for capitalism, not just a political but a moral ideal.

Thank you for going through that. Maybe a little further into the topic of objectivism, how would you describe that to the neophyte, the novice that may understand general philosophy, but not objectivism? How would you go about explaining that?

You put a trough of government money out there and the pigs are going to show up. Click To Tweet

I would normally explain it in terms of four pillars. The one that most people are familiar with is that objectivism believes in capitalism. The minimal government, individual rights, free markets, rule of law and government is an empire, but it does not get into the economic game. It protects property rights and contracts but otherwise, it leaves people free to engage in any mutual exchange that both parties want to do. That was the political ideal. That’s pillar number one. Very importantly, this is what I think distinguished Ayn Rand from some other advocates of capitalism, is that she felt it had to be based on a view of the individualism as moral philosophy. That individuals have the moral right, it’s morally proper for them to act on their own judgment and to act for their own benefit, pursuing their rational self-interest. She was an opponent of the ethical doctrine of altruism, which emphasizes sacrifice, helping others, self-sacrifice. She said, “No.” She was very comfortable with the idea of benevolence. In proper cases, helping others when it’s deserved. That is not the core of life. Pillar number three, being a producer, creating value by the use of your own mind in the service of your life.

Not just the monetary rewards, but also what we call the spiritual or emotional rewards of pride in what you’re doing, self-fulfillment and exercising your capacities. She was somewhat distinctive when she talked about this pillar, the idea productiveness as the central value of life. She was somewhat unique and that she thought any production was good. You could be an artist, writer, political leader, businessman, merchant, trader or banker. They were all forms of productive work, all honorable when well done without fraud or dishonesty. She opposed the idea that somehow the arts and other professions are good or honorable and making money is this lowly thing. No, she thought it was a great value. That’s why in her major novel, Atlas Shrugged, the heroes were all people in the business. They ran railroads, they had steel companies and so forth.

The three pillars are capitalism, individualism, including egoism, if you want to call it that, pursuit of self-interest. Third is productiveness, creating value as a core part of a rational life. Finally, the absolutism of reason. She believed that reason was our only guide to knowledge and action, as opposed to faith or emotionalism. That’s why I’ve said rational self-interest. In that respect, she was a secular philosopher, as an advocate of reason exclusively. She did not hold with any form of religious faith or any other faith that was not based on reason.

That’s a great description as far as the pillars are concerned. I would say in what I’ve seen in their research and the reading I’ve done, there are a lot of opponents, those that criticize the idea of capitalism and objectivism. What do you see are the most common refutes for these tenets of objectivism?

Let me start by saying there are many people who object to objectivism or to capitalism in particular on the grounds that it’s selfish. It is. Ayn Rand was an advocate of what you call The Virtue of Selfishness. That was the title of one of her books. What she meant by selfishness is not grasping, exploitative and narcissistic way of living or personalities that are often conceived that people associate the term with. Self-interest means pursuing your best self, your best life by rational standards in which that involves production. It involves treating other people fairly by mutual exchange to mutual benefit, whether we’re talking about economic exchange, but even in friendship and love.

Those relationships are hugely important to us as people, but we need to remain ourselves even in a very close relationship. I think part of the problem here is if people don’t understand what you meant by self-interest. In terms of capitalism, the one objection that I’d worry about a bit is that people say, “This isn’t ideal.” If people were all objectivists committed and acted in accordance with these values, sure the world would be a lot better, but people are not like that. We have crony capitalism. Whenever you get people together and give them any option to cut corners, some people will. My best answer to that question is that we have a mixed economy in which the government has a lot of power over companies and increasingly over our personal lives. In terms of what we eat, what we smoke or whether we smoke and so forth.

Once you have that power in the hands of the government then people are going to try to take advantage of that power to get special privileges because they support a candidate, they get some benefits in return. They clamor, subsidies or regulations that will harm the competition. You know this better than I do. There’s a huge element of cronyism, but that’s largely because the opportunity has been created for that. You put a trough of government money out there and the pigs are going to show up.

The intention behind capitalizing on those opportunities in and of itself revolves around self-interest and selfishness.

TWS 23 | Objectivism

Atlas Shrugged

That is a more conventional type of selfishness. People are looking to build their own nest.

I had an interesting experience. I have two teenage daughters and my wife is Latina and once a year, her friends come over and they have a big party. We’re not allowed at the house that night. I usually take the kids up to Park City because the rates are low and it’s beautiful up there in the fall. My daughter asked me a couple of questions and the first one was fascinating. It relates to this topic because of the misunderstanding of words. She said, “Dad, if somebody has never been able to hear, how do they describe things in their mind? What words do they use?” It was interesting because if somebody who’s never heard words, they probably don’t use words. It’s the understanding of meaning, which is the most important thing. Words are a way of describing it. I agree with you in regards to how individuals have misconstrued the nature of capitalism or objectivism because of a confusion of words and the words’ meaning.

That’s certainly true that people hear the word capitalism and they think that refers to what we have is not pure capitalism. It’s not laissez-faire capitalism. It’s a mixed economy with some large socialist elements like Medicare is a socialist enterprise run by the government. Public education is a social enterprise. We’re not living in a consistently capitalist world. Getting to meanings is hugely important. That’s one of the things that I am particularly interested in because my main interest in philosophy is the theory of knowledge, how we acquire knowledge? How we validate our knowledge? At the core of that is how do we form concepts that we then express in words? How do we form abstractions like the economy, capitalism, good and bad? Your daughter raises a fascinating, psychological question and I don’t know enough about deaf people. I think what I do know is that children tend to learn language rapidly and virtually. Every child who’s ever existed has learned the language and picked it up somehow. With deaf children, they may not be able to hear or speak their language, but there’s sign language if they’re given a chance, they will pick that up.

It was a fascinating dialogue. I wanted to ask you because you’ve had such an extensive career and probably met a lot of people. What are maybe some examples of individuals, groups or someone that may have opposed the ideas of objectivism? Because of an interaction with you or relationship with you or the groups that you’re associated with had that a-ha moment, the epiphany, that awakening.

Many people when they first read one of Ayn Rand’s novels, in particular, have this momentous feeling. The effect is, “This is so right.” Many people say, “She put in words but I’ve believed all along but I didn’t know how to say or was maybe afraid to say because it runs against the beliefs that I was hearing from people around me.” I’ve seen that over and over again with students and with older people. One of the gentlemen who served on our board of trustees at The Atlas Society for many years was already a very successful businessman and then he read Atlas Shrugged. The fact that he read a thousand-page novel in the middle of his busy life and career running a company is pretty amazing. He got in touch with Ayn Rand and then help various projects to help spread the ideas. The point is it’s not for teenagers, which is one of the little snarky things people say about objectivism which is not true. There is something powerful about the way Ayn Rand put ideas. The depth and clarity combined with the emotional power of an ideal. It’s very striking.

I would say, as I’ve earned about marketing, storytelling and business, I read Atlas Shrugged, whether it’s the hero’s journey with John Galt is that the core character and how his journey happens in the different things that he says and other characters and their role. It is fiction, but it paralleled to what society was likely at that point in time but also, it continues to be that way. It’s the understanding of the world that we live in and then that world, but then also the way in which the story is told is fascinating. That’s where for the audience who have not read Atlas Shrugged, it’s quite a large volume of work, but it is profound the impact that it has on your ability to understand life at a more magnified level. Going to where my curiosity lies, there have been cases in which you’ve maybe seen where those that did have influence that was able to read or talk to you or become open to these ideas that have made a difference and has been more influential than someone in college or someone that is a budding entrepreneur reads. Have you seen some significant cases that stand out in your mind?

I know many people. When I founded the organization, part of my job was to get in touch with leaders of other think tanks that at least some overlap with our ideas. I’ve met and talked with many of them over the years. For example, we are having our annual gala in New York City and John Stossel will be there and a number of other people who are maybe not card-carrying objectivists in a sense. They love the ideas and they appreciate the power that those ideas hold and the degree in which they could be effective in moving the country more toward a greater level of freedom.

In terms of whether we’ve had that movement, I don’t know. I like to think that Ayn Rand had some influence. She certainly had some influence over the growth of libertarianism as a political philosophy and that is expounded by Cato Institute and Reason Foundation. The number of other think tanks. We’ve had some degree of deregulation. We have had some change in tax laws that lowered the extent of government expropriation. I think the libertarians who were leading the march on that and Ayn Rand was one of the main inspirations for that movement.

Public education is a social enterprise. We're not living in a consistently capitalist world. Click To Tweet

That’s what I love about your initial comments when you talked about the more openness you had instead of the rigidity of how objectivism was in the very beginning. The flexibility to see how it relates and influences the example you used more libertarian and more economics business movement, which I completely agree with because there’s relevance. It may not be wholeheartedly pure objectivism. At the same time, some of those tenets are going to forward the influence that it has on our overall society.

This is a strategic choice that anyone who’s involved with objectivism has to make. Do you work with, collaborate with the people who share some of your ideas but not all? Do you have to have a complete agreement? I thought in my mind it’s clear that the only way to get ideas out is to be incremental about it. To open the doors to people, to come to take what they can from the philosophy and hope that those seeds will grow into something good in their lives and whatever they go on to do and politically in terms of a greater movement and support for a freer system.

The season that we’re in is entrepreneurship and the nature of that. I look at an understanding of objectivism and ways in which that entrepreneur or entrepreneurial organization could be magnified. What do you usually teach or understand the relevance of objectivism as it relates to the success of an entrepreneur?

There are many ways. One way I like to describe the objective is moral code or ethics. In terms of being an entrepreneur in your own life that is taking the viewpoint that you own your life. It’s yours but you’re also totally responsible. The buck stops at your desk. On the one hand, you’re entitled to everything you earned and you should enjoy it, but you’re also responsible for the risks and the losses. In that respect, I think entrepreneurs at wholeness, especially honored places from an objective standpoint because they are striking out taking a road. No one’s going down before and incurring risks, they hire people, they raise money. They have to inspire confidence, but they have to then succeed. It takes a lot of courage. It takes a lot of integrity, rationality and talks about productiveness as a value. Most entrepreneurs I know spend enormous numbers of hours getting off the ground. Atlas Shrugged is a good Bible for entrepreneurs because it taps and it expresses a beautiful language. It expresses the values that most entrepreneurs have and pursue.

I was going to give that second part of this story with my daughter is the next morning after we had that initial interaction, she was paying attention to the hotel that we were at. This is a unique hotel where it’s in Park City, but you have to take this elevator up that go to this top of the Hill. She started noticing and she said, “Dad, how does something like this happen? How is it created?” The brilliance of kids and how their minds are thinking is fascinating to me. It allowed me to have a conversation to talk about the elements and the material for everything has always existed. It had to do with a human being’s mind to figure out ways in which they could provide value to others.

It’s also the infrastructure that protects intellectual property rights and how businesses are transformed. A person has a degree of certainty associated with what they create. Because there’s an investment required, there’s time involved, there’s putting a team together that there’s a certainty that there will be output. There will be something remunerated. Going through that process allowed her to understand government, laws and property rights. I look at where the minds of children are. The jury’s out that typical education is way behind. Being able to access data to understand facts, you don’t have to memorize it. You don’t have to keep your brain filled with that information because it’s at your fingertips. It’s exploring other ways in which to solve problems and create opportunities. It gives me a lot of confidence in kids, teenagers and even those in the Millennial generation to see the world. The things that are going on and actually taking action to provide opportunities for themselves, but also see that it could provide opportunity and value to others. It was a very serendipitous experience I had with my daughter, given the fact that I have you. I’m sure you get to see those examples a lot.

I do. One of the things that are a constant with me, I live in the middle of a city in an apartment building. I look out my window and all around me. I see nothing except manmade streets, cars, buildings. People, of course, they are natural in a certain way, but they are educated by and engaged in activities that are manmade, artificial and invented by someone. I’m looking at an enormous amount of intelligence embodied in that brick building over there, in the automobile passing below, the guys who are repairing the street. In addition to appreciating the property rights contracts and investments that lie behind all that, it’s also worth thinking about the human soul that is out there, the intelligence and the commitment that went into making the world that we all live in.

That’s a great way of saying it. I look at the same thing with emerging markets, whether it’s Africa or even the Middle East, despite its chaos, there’s so much entrepreneurial activity there and also in Asia. It’s interesting to see a generation that’s wanting more for themselves that wants to get out there and take their ideas, take who they are and bring that value to the marketplace. At the same time, there are lots of chaos and turmoil. There’s also so much to celebrate because it’s not the US anymore, but a lot of other emerging markets are following suit to a degree.

TWS 23 | Objectivism

Objectivism: The buck stops at your desk. You own your life. It’s yours, but you’re also totally responsible.

 

That’s all good. I’m happy to see it.

Dr. Kelley, thank you so much for your time. Would you mind telling the audience the best ways to either follow you or support The Atlas Society or learning more about objectivism? What are some ways that they can do that?

The best way is to go to our website, AtlasSociety.org. We have done probably thousands of articles, courses, videos. We have been producing some very short videos that are called Draw My Life videos where we personify something like envy, money or some topic we want to talk about. The videos are very captivating. They usually get a million views at a minimum. That’s a good entry point to learn more. We also have courses you can take and articles you can read. Probably the best thing to do would be to sign up for our newsletter. Once a week, we send out a bulletin on what’s going on. You can opt in and see if you like it.

Our nonprofit organization is supported by donors. We do not accept any government money. We have a very strong board of trustees who themselves are major contributors but also oversee the operations and to preserve the integrity. If you like what you see, I would definitely urge you to even contribute right on the site. There’s a donate button in the corner of every page. Also, get in touch with us. We get letters all the time and we’ll try to answer as many as we can. Sometimes include me. I’m officially retired, but I’m still on the board and I’m still working in various ways. I wish all of your readers all the best and I hope that part of that best will involve checking out Ayn Rand and Objectivism and The Atlas Society.

Dr. Kelley, thank you again. I wish you well. Let’s connect sometime in the future. 

I look forward to it. Thank you.

Take care.

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About Dr. David Kelley

TWS 23 | ObjectivismDr. David Kelley founded The Atlas Society in 1990 and served as Executive Director through 2012, before serving as the Chief Intellectual Officer, where he was responsible for overseeing all the content produced by the organization: articles, videos, talks at conferences, etc.

Dr. Kelley is a professional philosopher, teacher, and writer. He is the author of numerous works in philosophy, politics, and culture. After earning a Ph.D. in philosophy from Princeton University in 1975, he joined the philosophy department of Vassar College, where he taught a wide variety of courses at all levels. He has also taught philosophy at Brandeis University and lectured frequently on other campuses.

Kelley’s philosophical writings include original works in ethics, epistemology, and ethics, many of them developing Objectivist ideas in new depth and new directions. He is the author of The Evidence of the Senses, a treatise in epistemology; and The Art of Reasoning, a widely used textbook for introductory logic.

Kelley has lectured and published on a wide range of political and cultural topics. His articles on social issues and public policy have appeared in Harpers, The Sciences, Reason, Harvard Business Review, The Freeman, On Principle, and elsewhere. During the 1980s, he wrote frequently for Barrons Financial and Business Magazine on such issues as egalitarianism, immigration, minimum wage laws, and Social Security.

His book A Life of One’s Own: Individual Rights and the Welfare State is a critique of the moral premises of the welfare state and defense of private alternatives that preserve individual autonomy, responsibility, and dignity. His appearance on John Stossel’s ABC/TV special “’Greed’ stirred a national debate on the ethics of capitalism.

An internationally-recognized expert on Objectivism, he has lectured widely on Ayn Rand, her ideas, and her works. He is the author of Contested Legacy: Truth and Toleration in Objectivism, an account of divisions among thinkers influenced by Ayn Rand.

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Achieving Financial Literacy And Freedom With Sharon Lechter

TWS 22 | Financial Literacy And Freedom

 

Everybody wants to be financially free, but are they willing to take action? For today’s segment, financial literacy expert, keynote speaker, and best-selling author Sharon Lechter teaches about financial freedom in its barest definition and shares how you can achieve it. Sharon co-authored the international bestseller, Rich Dad Poor Dad, and fourteen other books in the Rich Dad series. She recalls the inspiration that started her into financial education and how this literacy can be a catalyst for change. She also touches on the power of association and reveals the secrets to successful entrepreneurship. The choices that you make today shape what you will become tomorrow. Take action and don’t miss this podcast episode.

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Achieving Financial Literacy And Freedom With Sharon Lechter

Our guest is an interesting one. You will enjoy the interview. It’s Sharon Lechter. Sharon is the former CEO of Rich Dad and Pay Your Family First. She’s an entrepreneur and a number one New York Times international best-selling author, philanthropist, international speaker, mentor, licensed CPA and chartered global management accountant. She co-authored Rich Dad Poor Dad, which is why you must be thinking about her name. She also co-authored with Donald Trump and Kiyosaki in Why We Want You To Be Rich. Also Greg Reid who we interviewed, she co-authored a book with him called Three Feet From Gold and also Outwitting The Devil, Think and Grow Rich For Women, Success and Something Greater: Your Magic Key. She’s written a lot of books and she’s written quite a bit.

She was in Columbia and had some cool things to say about that. I do a lot of work with the Rich Dad organization, mainly their Rich Dad Advisors. I have great relationships with all of them, with Tom Wheelwright and Andy Tanner, the Cashflow Wealth Summit which is an annual conference is 100% online. I never had the chance to meet Sharon Lechter although I know she was part of the Rich Dad story. I came to gain a good feeling about her as well as respect and adoration. The influence she had on Rich Dad or the influence it had on here and vice versa, I know it’s mutual.

She’s out there doing good and I believe she has some sound principles she talks about and we recommend you to go her website. She’s definitely mission-driven and still has a lot of work to do. I hope you enjoy the interview we had talking about the theme of entrepreneurship. She definitely is one that has seen many of those. If you like the show, we would love your feedback on iTunes. iTunes started deleting podcasts in general, hopefully not our podcast yet and hopefully never. They’re definitely restructuring some of the podcasts stuff on iTunes. If you would head over and support us, that would be amazing. All you have to do is give us a review and subscribe.

Sharon, thank you so much for taking the time to do this interview. I’m excited to talk to you about entrepreneurship because you have extensive experience in that arena.

Thanks, Patrick. I’ve been around a long time. I have done a lot of things.

Which says a lot. I’m hoping we can get to some of that. The first that I’ve been intrigued by is I’ve discovered that there are these universal variables or principles that determine the success or failure of a business or an entrepreneur. What are a few of those variables that you have discovered along the way? You’ve seen probably thousands of businesses, lots of success but also lots of failure. Have you come to some of those conclusions?

Certainly. One of the biggest ones is every entrepreneur, they’re in love with their product or their service, their idea, the deliverable of their company but too few of them take the time to build the foundation around that business. Everybody wants a successful business, but in order to make that successful business scalable and then ultimately saleable, you need to have the foundation around it. Some of that part is boring because you have to have the right legal structure, you have to have the right agreements, you have to have the right business systems and most people don’t think about that. It’s very important when you are a young entrepreneur to make sure you have a team around you and mentors that can help you build the business structure so that you can create and scale your success.

Getting to that point though, most entrepreneurs or business owners will start because they have a product or a service. Other than finding an amazing all-star team to put together right out of the gate, what are ways in which you’ve seen someone go through stages of a business to get to the point where they realize, “I need a team, I need some structure and I need to set up my operations this way?” What’s usually the process that an entrepreneur goes through before they have that realization?

The first step is you do start small. I invested $1,500 in our first print run of Rich Dad Poor Dad and continued to reinvest in the profits of the sale of the book so we can continue growing and expanding to a multimillion-dollar operation. It’s making sure you understand the needs that you have and then also that power of association is something that I talk about a lot. We were taught in school to do things on our own. Entrepreneurs typically they have their passion, they have their talent, they have their product and they feel they have to do everything themselves. The power of association is what’s going to speed your way to success.

When you're an entrepreneur, everybody's looking to you for the answer; it can get lonely and scary. Click To Tweet

In today’s world, it’s almost a necessity that you have the right people around, the right people that are going to help you market, the right mentors. It’s so important to have a mentor that can guide you around the pitfalls that other people fall into and open the Rolodex. When I have my mentoring clients, I want to make sure that they are looking at what that next level is, not where they are now but where they want to go and who can get them there the quickest. Do I know someone I can introduce them to? Is there a new association, somebody that can help them market their product? Entrepreneurship is a constantly creating environment but with that underlying structure, what you create stays and continues producing for you.

A few things that are interesting around people and having different people with different skillsets, different abilities. How do you go out finding the right person? How do you identify them? Resumes by now are understood as not necessarily the whole truth and nothing but the truth. How do you go about determining if it’s the right person?

There are lots of levels. If it’s an employee, I say hire slow, fire fast. You want to make sure that the employees that you’re bringing on understand your vision, understand where you want to go and that they have strengths where maybe you have weaknesses so they can fill that in but there’s a shared initiative. Let them be an entrepreneur within their job. Part of it is understanding what they’ve done in the past, what their strengths are and then giving them the opportunity to grow within the business. Not just hire them to do the same thing every day and give them the opportunity to own their jobs so that they feel that level of contribution.

In today’s environment, I talked to business owners all the time. If you’re not creating that entrepreneurial environment for the Millennials, install a revolving door because they want to feel like they have ownership over their life and what they’re doing even as an employee. When you’re looking at building your business advisers, does the accountant that you use have experience in what you’re doing so that they can bring their experience to the table to help create greater value for you. Is the attorney you’re using somebody that is an expert in what you do so that they can make sure they’re supporting you, that they’re not learning on your dime? Do you have a mentor who’s challenging you as well as supporting you?

Being an entrepreneur can be very lonely. You may have been a professional in a group of other peer professionals and if you had a question, you walked down the hall and walk into somebody’s office, but when you’re an entrepreneur, you’re the top. Everybody’s looking to you for the answer. It can get lonely and scary. That’s why it’s important to have those people that you and they may be in different industries, but if they’re going through the same growing pains, they may be able to help you deal with issues that come up and help you get past it. It’s a comfort to know that you have people out there that are supporting you in your success as you’re supporting them in theirs.

What are maybe some of those organizations that you have seen best support those leadership and entrepreneur roles? I totally agree with you.

There are quite a few that are regional. They may have a group in your area that may not be national. There is YPO, Young Presidents’ Organization. There’s YEO, Young Entrepreneurs’ Organization. There’s NAWBO, National Association of Women Business Owners. It’s for the women business owners who have more established businesses over $1 million. WPO, Women Presidents’ Organization, I’ve been on their national board and a member of for over twenty years. It’s an incredible organization of peer mentoring. There’s BNI, there’s LeTip. All of these are organizations are there to create and support and inter-networking and supporting each other in businesses. In addition, there are other probably local and regional organizations right here in Arizona. There’s one that’s more of a technology-based group. Check it out. Look out and find out. Talk to other people and what organizations they belong to.

That’s awesome because we haven’t mentioned any of those types of networking groups often. We’re talking about a lot of entrepreneurial principles but as far as networking, it’s always best to learn off of the experience of others instead of having to experience it yourself sometimes.

Experiential learning is so much better than book learning. If you get it from someone else, you save yourself the heartache of learning that lesson the hard way.

One of the things that I find intriguing is the notion of leadership. I find leadership an interesting principle. How have you come to characterize leadership and good leadership and maybe even bad leadership?

TWS 22 | Financial Literacy And Freedom

Financial Literacy And Freedom: Experiential learning is so much better than book learning. If you get it from someone else, you save yourself the heartache of learning that lesson the hard way.

 

There are so many thought leaders on the topic of leadership but from my perspective, I try to make things simple. A leader needs to know when to listen. A leader needs to know when to support. A leader needs to know when to make a decision. There are times when your function is that of a cheerleader, letting your team do what they do best and cheering them on. You duck when there’s praise, but you stand up when there’s criticism. There are times as a leader that you have to be the pit boss. You need to make the tough call. You need to call someone who are not performing. A leader always has the vision of the company, but also has the heart of the team and makes decisions based on both.

I would say one of the biggest things that I’ve faced is when you do have to make those critical tough, tough calls, I value the principle of co of kindness. Sometimes the managerial, dictatorial stick, for whatever reason, it’s never resonated with me. For those that experience those feelings, what are some rules of thumb to abide by to hold the line, tow the line but also do so with a degree of kindness as opposed to the proverbial stick?

The greatest talent of leaders being able to listen. Certainly, I know when I was a member of a team, if I knew I had the environment to be heard, no matter what the outcome was, I would respect it because I know I was heard. My thoughts and my suggestions were taken into consideration. As a leader, there are times when you have to be the decision-maker and you have to do what’s right for the company. Sometimes that means somebody on the team is in the wrong seat on the bus and probably if you sit and meet with them and you help them find something that’s better for them, they’re going to be happier in the long term. A toxic employee creates a toxic environment. That doesn’t mean as a leader that you can’t do it with passion and that’s how you communicate with them. Maybe it takes a little more time than a dictatorial leader will, but it ends up being better in the space in the long-term because an employee that is unhappy in their job may stay unhappy in that job. That’s not good for them, it’s not good for the company and it’s not good for the leader.

Part of that comes back to the first question you asked me is if you had the right business systems, the right code of conduct, the code of honor, things that imply what your business is for, what you believe the code of conduct is and an employee is not performing. If you can manage to the system, it’s a lot easier than manage to the personality because it keeps the emotion out of it. I had a client, a very successful dentist, he’s having a terrible time with her Millennial employees. She was very much more 8 to 5, “Don’t use your cell phone when you’re at the desk.” We sat down and I said, “Why don’t you have a code of conduct? When the next time you have a problem, you say, ‘Which one of these do you think you violated?’” It can almost become comical because I say, “I blew number five.” “What are you going to do about it?” It takes that angst, that emotion out of it because you’re pointing to a piece of paper, not to a person. That’s something that I share with all of my clients. Think of McDonald’s, you take out a little bit of that emotion and when you have high emotion, you have low intelligence. If you can manage the emotion, you’re going to get better results.

I’d love to hear your story. What are maybe some resources to point to, to understand what a code of conduct or code of honor is, how it’s created and then maybe get into some business systems? Are there some resources or guides that would help someone that’s listening that may have a smaller business that does not have established systems and would want to explore establishing?

Certainly. My husband’s an intellectual property attorney. He’s been by my side and he’s the legal mind behind many of the businesses I’ve built and created, this global brand as well as Rich Dad and many others. We put together a course called Essential Components of a Successful Business. I’m not intending this to be a commercial message, but I’m answering your question. We have that course. You can find it at SharonLechter.com because we couldn’t find it anywhere else. It’s like a college MBA class on how to build every aspect from the legal structure, understanding intellectual property, how to protect it and leverage it, business systems, how to raise money, different ways to use other people’s money, other people’s time, other people’s resources, understanding marketing and communication strategy and how important that is to have the follow up and the follow-through.

People talk about follow-up. Following through is usually the problem. It’s understanding every aspect of business systems from the moment somebody answers the phone, to following through on emails, whether you have a funnel, making sure that the customer experience is there and systems on how are you going to pay your bills, how are you going to collect money, what is your system so that you can stick to it, so that you have an organization that can be duplicated or scaled. Those systems are so important. It’s all held together by you as a leader, your team and your vision, your mission of the company. Once you can solidify that, you have an asset. That business becomes an asset. It’s no longer a job. It’s an asset that can operate with or without you.

From a system standpoint, there are so many different industries out there, different types of businesses, whether it’s product-related, service-related. Have you found that business systems are mostly universal or do they vary from industry to industry?

They vary between a large manufacturing company versus a service company. It is unique to the style of business that you have. Think operations manual, that’s step one. How does your business operate? How do you source your goods? How do you source your components? What are the financial terms related to that? Is it in time delivery or do you want to hold a certain number of days of supply down to how much of this do you have components? Who’s going to combine them? What’s the quality control procedures? What’s the return procedures? What are you going to do in handling defective merchandise? What is your return policy?

All of those and that’s a small piece of the types of systems that you have. Your operations manual is your first step in defining what’s missing within your business systems. I’ve got clients or people that have gotten all excited because they’ve got a big order from Costco or from QVC. They spent and they went and mortgaged their house to get the money to create products to be on QVC to find out that it all got dumped back to them. They lost a fortune because they got this high emotion. They didn’t have the systems and the financial intelligence to understand the importance of managing your cashflow.

Oftentimes, saying yes can get you in trouble. The entrepreneurial curse is you want to say yes to everything, but you should only say yes to a few things.

Financial freedom comes when income from your assets exceed your monthly expenses. Click To Tweet

A lot of people say yes and then figure out how. It can be a nice thing to say, but it’s a hard thing to do. You have to make sure you’ve got the financial wherewithal to follow through and then it’s the right thing for you and your business.

There’s a book that I read, Ready, Fire, Aim, and I see the point behind it. At the same time, there are also some drawbacks to approaching big decisions that way. Talk about what your story is and what gave you this bug. Clearly, you’ve had so many different experiences, whether it’s writing books or running businesses, consulting within numerous industries. What gave you that bug and what has kept it alive?

I started my profession as a CPA. Even from the very beginning of my career, I was inside companies of all different industries and saw how they did things right. Probably more importantly saw a lot of them did things wrong. It gave me this base of understanding of business operations and systems and what it takes to be successful in business. Fast forward a few years, I get married and meet the inventor of the talking book. I was able to take that and apply that in-licensing strategy around the globe. We had a new technology. This was back in 1987 before a child had any electronics. We were the very first electronic in a child’s hand. To get the parents to trust us, we partnered with companies like Disney, Warner Brothers, Sesame Street.

Understanding that power of association that helps validate you and elevate you when you needed it most allowed us to grow a very successful company that exploded over the four years from $1 million to $9 million to $23 million to $52 million in sales. Selling that company, we moved to Arizona. This was back in ’91 and in ’92, my oldest son went off to college and came home from September to December. He came home in December with a credit card debt. We didn’t even know he had a credit card. He got to college and there was a table saying, “Free pizza, free money,” and other one, “Free T-shirt, free money.” He had a good time his first semester in college. That was when he came home. It was December of ’92, we said no to bailing him out and we made him figure it out on his own.

It’s probably one of the better decisions we’ve made as parents. That was December of ’92 and that’s when I dedicated the rest of my career to financial education, financial literacy and entrepreneurship education. My passion now is as strong as it was in December of ’92. The way that I’ve done things that built the Rich Dad organization over ten years to be the largest personal finance brand in the world because of the need. I grew up in a very entrepreneurial home. I didn’t understand that everybody didn’t think the way I did. Financial freedom comes when income from your assets exceed your monthly expenses. It’s that simple. You want to invest your time in buying, building or creating assets. Once those assets get to that point, you’re financially free. It doesn’t need to be millions of dollars.

When I met Robert Kiyosaki, he was only making $100,000 a year. He lived in a two-bedroom condo. He had two small apartment complexes and it generated $100,000. His living expenses were $30,000. He was technically financially free. That message is what more people need to understand because people think financial freedom is when you’re at $10 million. No. You can become financially free if you focus on buying, building and creating assets. That has been my lifelong passion. I had fifteen books with Rich Dad. I’ve done four books with the Napoleon Hill Foundation, Three Feet from Gold, Outwitting the Devil, Think and Grow Rich for Women. Success and Something Greater, the reason I wrote this book is I want people to wake up that success means different things to different people.

We have some content that has never been published from Napoleon Hill, but we also highlight close to twenty people that have created success in their industries, all from different magic keys or secret sauce, whatever you want to call it. Their focus and their definition of success is different, but then they also always gave back that success and something greater. The reader is going to see these different stories of success and one may not relate to them at all but the next one can go, “I can do that.” I want to empower people to realize that you are where you are now because of the choices you made before now. If you want success in your life, start making different choices because it’s never been easier to start a business. It’s never been easier to promote a business. It’s never been easier to create success in your life if you do it with the right information.

From 1992, you have grown and it’s awesome that this book is coming out. At the same time, what trapped your son in 1992 it seems that the educational system, the business environment has continued to grow as well and not necessarily providing the financial education for individuals to achieve that end of financial freedom. What do you see in the Millennial generation or what do you see in the environment now that gives you hope? I’m talking mostly in the United States, but the indoctrination of kids and how they’re trained to be employees, trained to be managers, what are some signs that you see that things are changing, that kids are waking up? The Millennial generation, I find extremely fascinating because it’s totally different than all previous generations and they haven’t bought in as hard as a lot of other generations have. What else are you seeing maybe besides the Millennial generation that gives you hope?

There’s a positive and a negative. Millennials now and the younger generation, they recognize that there’s no job security. They recognize that there’s not going to be a 30-year career with a gold watch. They’re not going into it with that expectation, which means they also have more demands. You have to make sure you understand as an employer that it’s not just the paycheck, it’s the environment. If you want to build loyalty in your employees, you need to understand what they want, what they’re looking for and make them feel ownership in what they’re doing with your company. In addition to that, the school system itself is still behind the times. We’ve succeeded in some states, Arizona, we now have personal financial educations as a requirement for high school graduation. It’s not enough and we’re still working on that degree.

We talk about how the rich get richer, the poor get poorer. That’s because they learned about money at home, not at school. If we truly want to level the playing field for students and people around the world, providing that financial education is what’s going to give kids an equal footing. As we see these kids coming up, a lot of people say, “They’re lazy. They don’t want to do anything.” There are those individuals in every generation. I see young people eager to take control of their own lives, eager, recognizing that there is no job security. We will always need employees. Companies will always need employees. If you are in the market and with our low unemployment right now, it’s even more important to create an environment where your employees are proud to be part of your company. Proud to be there, proud to want to work for you and create success. As an employer, as a leader, sometimes you have to be more creative as to how you maintain that environment of excitement even if it’s a corporation and environment of entrepreneurship.

TWS 22 | Financial Literacy And Freedom

Financial Literacy And Freedom: If you want success in your life, start making different choices and start building your business.

 

Sharon, you’ve provided so much information. Tell the audience how they can get your new book and also access some of the resources that you have available. Maybe talk one more time about the business course that you have available on your website.

Thank you so much. I appreciate that. SharonLechter.com is my website. I’m also Sharon Lechter on Facebook, LinkedIn, Twitter, Instagram, everywhere. On my website, you can find more information about several online courses I have. One is the Essential Components of a Successful Business, which I spoke about earlier with my husband. I have a Financial Mastery Course that is also very in-depth getting you from being financially stressed to financially secure. I have a Play Big course, which helps take you to the point where you are financially free. All of those are available. I also have another course on Think and Grow Rich for Women.

For free, I have a podcast, Play Big Movement with Sharon Lechter and then I also have a private Facebook group, Play Big Movement with Sharon Lechter. I invite you all to join all of those. The book Success and Something Greater is available through Amazon. If you want to have a special gift related to you defining your own personal success equation, you can go to Bit.ly/successequation. It’s not a sales pitch. It’s a download of walking you through your own personal success equation, your passion, your talents, your powers of association, what actions you can take and most of all having faith in yourself, faith that what you’re doing is needed and necessary and faith that you can succeed.

Sharon, this has been amazing. Thanks again. Any final words of wisdom?

I want to thank you, Patrick, for what you’re doing. The more information we get out there energizes people to take action. I literally came home from Columbia and the folks down there, South America, they’re so eager to learn. They’re so excited. They were there before the doors open. They stayed until after the doors closed. They were so eager. I think we need to get people energized, particularly in the United States, to take the action. Many people are waiting for it to come to them. Don’t wait, make that decision and go out and create your success.

When the spectrum is wide as far as having freedom and not having freedom and being pushed in certain directions, especially from a country and political standpoint, it’s amazing how much freedom is valued, how much education is valued, how much other perspective is valued. I have tremendous hope for South America. Columbia has made its strides.

It’s amazing. It’s like the beginning. It’s on the upswing. It’s very fast-growing economy with people that are so loving and excited and eager to learn. I’m looking forward to seeing how the economy there grows.

Sometimes those countries have to experience some pretty rough times in order to turn things around and have a shift for the better. That’s awesome you were down there and were able to give them value.

Thank you. It was wonderful. They were incredible people. It was incredible seeing the progress.

I know it’s making a difference and I look at countries like Venezuela and I know Argentina is having issues too. It’s one of those things where you have the Columbias of the world and you have other countries that are making these drastic changes, it provides that flagship and a beacon of hope for the other countries that are their close neighbors. Thank you again for your time, Sharon. Best of luck on everything. We’ll get the word out on all the resources that you mentioned as well as your books.

Thank you, Patrick. Thank you for all that you do.

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About Sharon Lechter

TWS 22 | Financial Literacy And FreedomSharon Lechter is internationally recognized as a financial literacy expert and keynote speaker. She is a New York Times Bestselling author, successful entrepreneur, philanthropist, and licensed CPA and CGMA.

Sharon has been a pioneer in developing new technologies, programs and products to bring education into people’s lives in ways that are innovative, challenging and fun, and remains committed to education – particularly financial literacy and entrepreneurship. In 1989, she helped the inventor expand the electronic book industry to a multi-million dollar international market.

As founder and CEO of Pay Your Family First, a financial education organization, Sharon has served as a Presidential Adviser to Presidents Bush and Obama on the topic. In 2009, Sharon was appointed to the National CPA Financial Literacy Commission as a national spokesperson on financial literacy and was reappointed in 2014. Sharon is also a Founding Chancellor for Junior Achievement University of Success and was appointed by Arizona Treasurer Kimberly Yee in 2019 to the Arizona Financial Literacy Task Force.

Sharon co-authored the international bestseller Rich Dad Poor Dadand 14 other books in the Rich Dad series. Over 10 years as co-Founder and CEO, she led the Rich Dad Company and brand to global success. In 2008, when the economy crashed, she was asked by the Napoleon Hill Foundation to help re-energize the teachings of Napoleon Hill. Her best-selling books with the Foundation includeThree Feet from Gold, Outwitting the Devil and Think and Grow Rich for Women. And her fourth book, Success and Something Greater was just released in September. She is also featured in the movie Think and Grow Rich: The Legacy.

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Lessons From Fighting For Your Business And Entrepreneurial Life with George Foreman III

TWS 21 | Boxing As Transformational Experience

 

We all need transformational experiences in our lives to bring more sense to it. For George “Monk” Foreman III, he turns to boxing as his way of becoming better in handling situations both in business and our personal life. Founder of EverybodyFights and serving as a business manager and Executive VP of George Foreman Enterprises Inc., he peels off the layers of fighting and how it can be applied to the business world. Moreover, George gives some interesting notes on how fighting helps us handle conflicts in a positive way and why it is popular regardless of the negativity around it. With this, he encourages you to believe in yourself and that the fighter in you can win.

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Lessons From Fighting For Your Business And Entrepreneurial Life with George Foreman III

It’s my pleasure to welcome, George Foreman lll. His nickname is Monk mainly due to his brother is having the same name as him. It’s awesome to have him on. I’m looking forward to this interview. Monk, thanks for joining us.

I’m glad to be with you. Thanks for having me.

The initial question I had as I was preparing for this, your background and experiences are definitely unique and how it applies to the business and entrepreneurial world. Why has fighting been so popular from an entertainment standpoint for probably thousands of years, whether it’s boxing, MMA, wrestling, martial arts, ice hockey. What are your thoughts around that?

Most things that people are afraid of but at the same time would love to not be afraid of is entertaining. When you get a chance to observe others who are aligned with your morals and standards succeeding doing those things, it allows you to experience them vicariously. Sometimes we enjoy hating that person too but being able to experience the rush, the ups and downs through someone you identify with, doing something that you’re terrified to do that you wish you could do, I don’t think that ever gets old. Fighting is one of those things that when done properly and by the rules, especially with the sport, there’s something honorable about it. That’s why it’s a sport and not something that’s illegal in most states. There’s point in a good fight and there are points where everybody can relate. Your back is against the wall. You got knocked down, you get back up, you look the guy or the gal across from you and say, “You’re going to get it.” You want to run, you’re intimidated, you have a bad shake and have to fight and you turn around and you have a comeback.

There are rules, there’s TKO or Technical Knockout or sometimes you break the rules and you lose because of that. You can have the judges or the referee on your side. You’ve got to have good advisers and people to put you back together when you mess up. I think all of these things also resonate with culture, business culture, entrepreneurship culture, sports culture in general. There are a lot of layers that we can peel back but if nothing else, it’s the thrill of observing something that we’re terrified but would love to do.

I look at what I would say gives a person a rush both from a growth standpoint, but also a rush from a fear standpoint. It seems like it’s two ends of a spectrum and a fight is one of those times when there’s going to be both. There’s going to be what people fear most and what people thrive for, which is winning, growth and excelling. It’s an interesting dynamic because you definitely have the proverbial fight that we face multiple types of fights, but then the actual physical fights. Maybe as it pertains to your experience, what are some of those fights that all people face?

Number one is deciding what victory is and it changes. In competing with someone who’s not on your level mentally, physically and spiritually in terms of character, you’ve got to get an objective to win in competing with someone who’s your peer or a legend, maybe you’re the underdog. Being able to compete, win, lose or draw and not lose yourself and be someone that you’re not, that’s a W. Number two is telling yourself, “There are certain things I’m not going to do at all.” In boxing, you would say, “I’m not going to hit below the belt or bite an ear off. If I can’t win by following the rules and being authentic to who I am, then I’m okay not getting the objective win because I need the moral win.” Name your price and stick to it. The last one I’ll say is responding to conflict is everyone’s challenged. How do we respond? We go down the stairs in our $1 million, $2 million condo and the doorman is using the restroom. He doesn’t come out quick enough to tell you where your mail is. That’s not a real conflict but how do we handle that?

You could set your day off the wrong way by handling it wrong and being rude. When they come back, you can turn it into an opportunity to get to know the person a little bit more and let them know like, “I’m late.” You can move on. That’s one element. You see some of this stuff that we see on these security cameras with celebrities, elevators and the stuff they pull and they get in trouble. It can turn around pretty quick. At work, you’re a public company and it’s quarterly report time and you could hit your numbers by pushing the top line in making more revenue and more profit, or you can hit your numbers by laying off people that don’t deserve it. Laying off people at a time where the business is going to suffer, what do you do? Do you keep them on and not hit your numbers and tell the truth to the board? It’s a conflict. How do you handle conflict?

The last thing are the little things like with the relationship. I believe all great relationships are built on being better on the other side of conflict. You have to practice from day one with someone that you engage with to figure out, “How do I get good at resolving conflict with this person?” No matter how much I love them, when it rains, you’re going to get wet. There’s going to be conflict. Can we look at each other at the other side and say, “We’re stronger?” That’s not magical. You have to practice it. As our relationships go our lives and if we can’t get good at solving those type of conflicts, we’re not going to get anywhere. Those are the things like how you respond to conflict and how well you are resolving it and being better on the other side of it. That couldn’t apply more to boxing and MMA. The only way you could apply more is outside the ring.

It’s a fascinating point because there’s so much parallel between the physical sport of fighting and the business world. There are a lot of things within an untrained fighter’s fight that’s mostly instinctive. They don’t have necessarily a strategy. They use that animal instinct to survive. In business as well, I often see at least in my experience that the untrained business person and the inexperienced entrepreneur is also going to instinctively respond to conflict. It’s the training around that. Maybe as you have lived these two parallel lives, the fighting life and business life. How do you take some of your training in the physical fighting life to the business and entrepreneur life?

Most things that people are afraid of, but at the same time would love to not be afraid of, is entertaining. Click To Tweet

What I learned in the ring is that the minute the bell rings, there’s conflict. It’s a fight. You’re in there, you can’t hop out. You have to forfeit and no one wants to fight you ever again. You get in there and it happens and you get hit. You’re supposed to say, “My plan is not to respond when he wants me to respond. My plan is to make him do what I want him to do and then take advantage of those actions.” There is persuasion, misdirection and all these things involved, but I’m not trying to guess what he’s going to do and then respond based on his response. A great coach once told me, “Don’t let his body language change your body language.” That comes from having the confidence in your preparation, having the confidence in your strategy, the general overall confidence in yourself and because somebody does something to you it doesn’t mean you need to get them back right away.

Going in that same thread I learned from one of my dad’s sparring partners. He sparred with my dad when he was a professional fighter. He worked for my dad as a sparring partner in the ‘80s and ‘90s and also with me. He would laugh as he said, “Everybody I sparred if I got them with a good shot, they’d get me right back or maybe the next round or the next day.” George would get me back two weeks later. I think in business, there are some people who thrive on getting you off balance in a place where you’re uncomfortable and taken advantage of you.

That could be forcing a negotiation to be done in a week when you need two weeks or drag you out in negotiation for nine months that could have taken two months. People are trying to get you out of your comfort zone and taking advantage of the mistakes you’ll make outside of your comfort zone. Being patient enough to fight your fight, do things on your terms, not do what people think you’re going to do and create opportunities to catch them off guard, all that I get from boxing. The end result is back to my original point, patience, confidence all these things come from preparation. I think that will be the core principle I get from boxing.

I’m assuming you work with a lot of non-fighters, those that haven’t had necessarily the experience that you’ve had. Are they able to as quickly develop those attributes and values or do you see it more challenging?

They are, I think you’ll see some parallels. There are some people who have a gift. They are working hard. They have a good chin. They can take a lot of abuse. They have all these things, but you still have to train. What I have done is taught by isolating. If I need to teach you patience, then you need to be able to get in the ring and have you spar for six rounds and not throw one punch. That means you’ve got to survive when someone’s trying to attack you at all times. There are no repercussions for them making a mistake when they attack you. You develop your defense. We have to say, “You have one punch you can throw and you have to protect yourself with that one punch in your defense.” That builds the confidence that you only know that you can defend yourself when you’re forced to. You only know that you can survive a fight with one hand because sometimes you break your hand in the fight if I teach you. It’s little things that force people to develop those skills. Putting them in positions where they have no choice but to use this skill that you want them to develop and have confidence in.

TWS 21 | Boxing As Transformational Experience

Boxing As Transformational Experience: All great relationships are built on being better on the other side of conflict.

 

In fitness, we use the term the Necessity for Technique as opposed to teaching someone like, “You’ve got to do it this way. Your form, your back, your arch, your hamstring, your gluteus minimus.” Instead of your gastrocs and throwing terms they’ve never heard of, treating them like they’re so inadequate every time they tried to do a kettlebell swing or squat. I apply that in business and managing employees, etc. Putting them in a position where they have no choice but to use the quality that you’re trying to ingrain and do it over and over again. Then it will become a tool.

That environment, which is ripe of friction, definitely transforms people. At the same time, I’ve also seen individuals back down from a fight. The leader and the way in which they are getting a person to experience that, not just go to school and get a degree and train, but to actually experience it is paramount. You as a leader, managing and training other people, leading and inspiring other people, how do you get them to believe that the fighter in them can win?

Put them in situations that they think are impossible for them to overcome, but that they would have to struggle to overcome. The simplest example to demonstrate their point, even if I tell a guy, “You’ve got 30 seconds left and this workout is over.” Or a woman I’m training or anyone and they get to that 30 seconds and they’re coach said, “Give me all you got for ten seconds.” Right at that 30 seconds I’d say, “Give me ten more.” Right at that moment they’re like, “I don’t know where that came from and I’m about to throw up, but I did it. I was sure I couldn’t do it.” That’s a very layman example. Putting them in a situation where it’s like, “I need you to program 30 classes for me.” I know that it takes two days, but they do it in one and a half. You can go deeper with that, but the point is everybody loves a superhero. If you watch Superman, Batman, any of these comics, the equation is very simple. Put the superhero in a situation that’s impossible to get out of and somehow they get out of it. That makes us inspired. We grew up loving these.

You manufacture those situations for the people under you or the people that you’re nurturing or mentoring, even sometimes the people above you and say, “I don’t know how you’re going to get out of this, but I believe in you.” You know they’re going to figure it out. You don’t want to set them up to fail over and over. You have to be careful what you put in front of them. Giving them a little bit more than they think they can bite off and digest and be the person to egg them on to do it. On the other side of that, you find a person that becomes infinitely confident that they can do a little bit more than everyone expects, including themselves.

With your different business ventures, how have you come to develop your businesses’ culture? What are some of the values you’ve discovered along the way with both your professional sports career and then getting into the business world? How have you established the vision, culture, the careers of those that come and work for you? Explain that dynamic.

In business, there are some people who thrive on getting you off balance in a place where you're uncomfortable and taken advantage of. Click To Tweet

A couple of things. Number one, lead by example. Part of leading by example is when you make a mistake, say you made a mistake. Make sure everybody knows that you admitted it, you called it out and we went like that, “I made a mistake. That admission of making a mistake did not fix it. We’re sitting in this mistake and it’s my fault.” As a leader, you have to be able to say that. Even after you make a mistake, it keeps people watching everything else you do that’s not a mistake and wanted to emulate it. They know you have the humility to admit when you’re wrong. Outside of all the positive things that you do that you want them to emulate, you also need them to admit when they’re wrong because we don’t have the truth. We can’t fix it. To me, that’s the biggest breakdown of a lot of cultures. There’s so much posturing. People are not taking responsibility for mistakes that nobody even knows why the company is failing. They’re not growing as fast as it should be. There’s no truth.

Number two is, hire for character not for credential. Obviously, depending on your business that you need a base level of skills that you don’t want to stop what everybody’s doing to teach this person. Maybe use a computer, can read a Word doc, Excel, like a base level of skills depending on your business. In construction, that’s different. Be willing to teach them to do everything else that you need them to be a master at. If you do that, then you’re opening up the ability to hire people that are going to emulate the type of culture you want, communicate the way you want. Dealing with your customers the way you want, handle conflict the way you need to when you’re not around, which you can’t micromanage and grow. The technical stuff, you teach them that as opposed to hiring someone with the credential and technical, who destroys the efficiency of the rest of the team.

To recap, that’s leading by example, have the ability to teach people the technical skills you need beyond the base and allow yourself to hire for character. The last thing is, at which point you’re not unable to recruit every person by face, make sure that it’s only the people that you believe in that are recruiting those people. Never let it go a step past that. If you do recruit the person recruiting, you’re going to run into an issue.

From a leadership standpoint, who do you look to as those iconic leaders in your life that have inspired you to be a leader?

I grew up in a church reading the Bible. I’m far from a minister. This is not a religious conversation. Even throughout the entire Bible, there are different figures that are prophets and they have this ability to speak to the people who only understand point-blank objective, like A plus B. Speak to those people and give them something, but at the same time be able to speak a step higher to people who understand analogies and concepts. My point in that is tailoring your communication to meet people where they’re at. That I got a lot from some of the different figures in the Bible, how they were able to speak in parable and at the same time speak in objectivity or tactical, very simple language and have two lessons. That’s important because everybody communicates differently and you need to be able to communicate across all different communication types, visual and audio. Doing it and letting people watch you do it by written.

TWS 21 | Boxing As Transformational Experience

Boxing As Transformational Experience: Tailor your communication to meet people where they are at.

 

Number two, in that story, you find a lot of the leaders using conflict as an opportunity to teach people what the culture is all about. In our business, when it’s time to fire somebody because they keep going wrong, I love the opportunity to say, “Is there a restructuring that I need to do?” Maybe the person’s boss is not having a good month or good six months. Maybe that boss needs a break and that person under them would actually be happier. Maybe the person needs two weeks off. Using these moments of conflict where everybody thinks they know what you’re going to do and say, “No, there might be plan A or plan B. There might be a plan C.” Showing people how we do things. I had a gentleman who’s been stealing for three years. On the third time I said, “The business needs 30%, 70% goes in your pocket. Let’s do the math. What’s our 30%? Bring that 30% back and let’s keep it moving.” He has a family to feed. At the end of the day, he made a mistake. He stole $1,000. We can get past that and it’s horrible to steal. Even the thief said, “You want to make it right, we’re going to move forward. Life goes on.” That’s an opportunity to let them know what your culture is about. Not all culture should be that way.

When we’re talking about money, people deserve an opportunity to make it good. Not millions of dollars where people lose their houses, but a few $100, people deserve to be forgiven. Using conflict as an opportunity to preach your culture, I get that from some of the religious texts. Outside of that, everybody else, you just never know. You see what they do on TV. My dad, I take a lot of inspiration from him. George Conrades, he’s the chairman of Akamai. I learned a lot from him. He was a former IBM executive. Those are the people that come to mind.

I love to know about some of the business ventures you’re up to. Thanks for sharing that. I know you took a moment to think through that. I look at how we learned, there are certain people that inspire us, motivate us, touch us and we ultimately want to emulate them. For most people, it becomes their parents or religious leader, at least in my experience. I was intrigued by your response to hiring people that have character. I love that because I would say that the school system typically teaches kids that their grades and their degree, the different skills that they’re learning is where the value is. Not necessarily in the type of person they are developing, that character developing skills, developing their natural gifts. How do you go about hiring someone for character? What do you do different than the stereotypical interview?

First, I’ll let them walk in the door. I try to let them ask, “Is there something we can do? Can I work here?” They always had that benefit. I try to somehow find a way to identify people within my organization assuming you’ve started that it might be a good fit. You can always do that in terms of interviewing them. Number two, I like to give high-stress projects. It’s for them to start off with like, “I’m not sure if there’s a fit here, but we have a two-month contract opportunity you can do.” I throw it at them and see how they handle all the things that go wrong. Let’s say they’re supposed to do graphics and they’re going to pump out flyers and they don’t have high-resolution photos for the faces in the flyers, how do they deal with that? Do they say, “We need a photographer?” Or do they say, “I can’t do it because I don’t have the photos?” I know that’s not my person right away. I give these opportunities to see how they handle conflict if possible.

Recommendation for people to put the reputation on the line helps. Sometimes you have to ask questions and people typically will tell you who they are if you listen. Questions like, “What’s been the hardest challenge in your life?” If they say, “The hardest challenge was my mom took away my credit card my first year of college and I had to get a job.” I’m not saying they’re a bad person, they actually might be a fit, but they don’t know conflict yet. Then you know what real conflict sounds like. Asking questions like that to understand how they perceive conflict and also how they resolved it. That lets me know what they think the right way to resolve conflict. For instance, if a person has an under-performing employee and they tell me a story about it and I’m like, “What did you do?” They said, “I put him on probation and made him crawl back.” Maybe that’s great if we’re a financial firm. In my world, I’d want to hear that he went and took him to lunch and listen. Even if you still fired him, the fact that he knew the first step is to listen will make a big impact immediately in terms of hiring.

Fighting is one of those things that when done properly and by the rules, especially with the sport, there's something honorable about it. Click To Tweet

Let’s end with explaining what businesses you’re in, what you’re focused on and how our community and audience can learn about you?

Everybody Fights is my baby. I like a lot what’s going on in the media world and I have a high interest in getting into that space. The primary goal for me is to make boxing available to as many people as possible. It’s important for everyone to have one or two transformational experiences in their life. Things like rock climbing is somewhat transformational. Training like a boxer for six weeks is transformational. Learning to meditate and learning to use silence as a response is transformational. I want Everybody Fights to be a part of as many people’s boxing experience as possible, whether that’s your audio fitness, through trainer certification and our locations. That’s my primary goal. They can find us at EverybodyFights.com.

Monk, this has been awesome. Thank you so much for your time. We’ll make sure that we get the word out. Are you a coming out West with your gyms yet or is that still in the works?

We’re close to closing on a location in Orange County. We’ll see how that goes. We’re working on a deal to open up a number of locations in the Mountain Time Zone and looking at Northern California as well, so we’re getting there.

Congrats on all your success.

Thanks a lot and thanks for your time.

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About George “Monk” Foreman III

TWS 21 | Boxing As Transformational ExperienceGeorge “Monk” Foreman III is an entrepreneur, professional boxer, trainer/coach, founder of EverybodyFights, and son of a businessman and former two-time heavyweight champion George Foreman.

He serves as the business manager and Executive VP of his father’s business empire George Foreman Enterprises, Inc. He also starred on the E! network’s reality series Filthy Rich: Cattle Drive. He opened a boxing fitness gym in Boston called “The Club by George Foreman III”.

In an effort to further promote the core beliefs of the gym’s culture George eventually changed the name of the gym to EverybodyFights. In 2016, the company received a series-A investment from Breakaway in the form of $4 million and soon after announced the opening of another location in Boston.

Since then, Everybody Fights has opened 5 locations and plans to open over 20 new locations by 2020 for growth in other major cities across the U.S.

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