00:00:00There are only four ways to get money.
00:00:02Steal, inherit, marry into it, trade for it.
00:00:05If you have morals, you probably don't want to steal it.
00:00:07And if you're watching this,
00:00:08you probably aren't going to inherit it.
00:00:09And even if you are, you probably don't want to wait
00:00:11until your parents die to get it.
00:00:12And if you're a guy, you're probably not going to
00:00:14marry into it.
00:00:15And even if you do, do you really want to be owned
00:00:16by your wife's family?
00:00:17Which means in all likelihood,
00:00:18if you're watching this video,
00:00:20you'll likely only have one option left,
00:00:21which is to trade stuff for it.
00:00:23And trading stuff for money,
00:00:25I made a million dollars 106 times in a row in a weekend.
00:00:28I also own a portfolio of companies that trade stuff
00:00:30for money that did over $250 million in revenue
00:00:33last year at acquisition.com.
00:00:34Now, within the element of trading stuff for it,
00:00:37there are six ways to structure those trades.
00:00:39And in this video, I'm going to break them all down
00:00:40and show you which ones to avoid and which ones to go for.
00:00:43And I'll do them in reverse order of bestness.
00:00:46Now I said there's six.
00:00:47The last two are God tier setups that only can work
00:00:50in very specific circumstances.
00:00:51But that being said, let's start with number one.
00:00:54So scheme number one is I work,
00:00:58then you pay.
00:00:59This is a very classic arrangement.
00:01:02This is a very standard W-2 employment agreement.
00:01:05So the trade is no matter what happens,
00:01:08I get paid outside of getting fired.
00:01:11So as long as I don't get fired, I get paid.
00:01:13And so I trade risk for reliability in this construct.
00:01:17And as much as the entrepreneur talking heads want to say,
00:01:20being an employee nowadays is riskier than owning a business,
00:01:22that's not really true because if it were,
00:01:24then everyone would own them and be rich.
00:01:26And that is not the case.
00:01:27And as a fun fact, the average business owner,
00:01:31like almost half of business owners don't make
00:01:32any money at all.
00:01:33That means they work the whole year
00:01:34and end up poorer than they started.
00:01:36Crazy.
00:01:37And that's because them's the stats.
00:01:39But the median is about the same
00:01:40as minimum wage in California.
00:01:42So as much as people want to believe
00:01:44that all business owners are rich, that is not reality.
00:01:47And so this is the lowest risk,
00:01:50but most reliable way of making money.
00:01:53The second way of trading stuff for money,
00:01:56a little bit better on our risk reward.
00:01:59Number two is you pay as we go.
00:02:02So if you think about the first one is you front,
00:02:07like you work and then you get paid no matter what.
00:02:11This one, it happens in parallel.
00:02:13So as I work, I keep getting paid.
00:02:15This is very typical for contractors.
00:02:17So sometimes it's like half now, half later,
00:02:20or I get paid along these milestones
00:02:22as long as these things kind of occur
00:02:25throughout our time period.
00:02:26So this is super typical
00:02:27for independent contractors and vendors.
00:02:29So the work is ongoing, you pay me ongoing,
00:02:31you pay me some now, some during, some at the end,
00:02:34half now, half later, et cetera.
00:02:36Now the pros of this is that you front load some of the money.
00:02:39The cons is that people hire vendors
00:02:41way faster than employees.
00:02:42And so let me give an example.
00:02:43So employees have a 3.9 year average tenure,
00:02:48and that's according to the US Bureau of Labor Statistics,
00:02:51versus a three to 12 month engagement
00:02:53for an independent contractor,
00:02:54and only one to three months for temp gig.
00:02:57So that means that you have five times
00:02:59the annual turnover for vendors compared to an employee.
00:03:02And so as much as people are like,
00:03:03man, it's so much less risky to own your own business.
00:03:06It's like, well, you're turning over five times faster
00:03:08than if you were an employee.
00:03:09So not actually true.
00:03:11So we covered our lowest tier in terms of risk and reward.
00:03:14I work then you pay.
00:03:15Now we get paid as we go,
00:03:16which leads us to our third tier, which is you pay.
00:03:24Then I work.
00:03:28So for example, I get paid in full upfront,
00:03:30and then I begin.
00:03:31And you can only do this when you own a business.
00:03:34So I'll give you a simple example.
00:03:35Surgeons, right?
00:03:37They say, hey, you're like, hey, I want to get surgery.
00:03:39And they say, great, pay for the surgery.
00:03:42And then I'll do the surgery.
00:03:43Like, have you ever seen a surgeon say,
00:03:44I'll do the surgery and then you can pay me later?
00:03:46It doesn't really happen.
00:03:47And so typically the more leverage you have,
00:03:49the further up this pyramid you can go,
00:03:52because you can ultimately command your own terms.
00:03:54And so these are increasingly better terms
00:03:56with the caveat if you know what you're doing, right?
00:03:59And so another structure for this that you can use
00:04:02is one that I call as a business owner layaway.
00:04:05So that means that you say,
00:04:06hey, I'll start doing this work on your patio.
00:04:08I'll start painting your house.
00:04:10I'll start helping you with your marriage,
00:04:13whatever the hell it is.
00:04:14You just start paying now.
00:04:15And once you've paid up, we'll begin.
00:04:17And I will tell you right now, having done this before,
00:04:19having an unlimited payment structure,
00:04:21which is what layaway affords you,
00:04:23you say, oh, I can make any payment plan work.
00:04:25And people like light up.
00:04:26They're like, oh really?
00:04:27And you're like, yeah.
00:04:28Like, well, you know, how much can you afford?
00:04:29And they're like, okay, I could do 50 bucks a month.
00:04:31You're like, great.
00:04:31So it's a $600 thing.
00:04:33It's gonna take you a year.
00:04:34You can pay it off in a year.
00:04:35And then after that we'll start.
00:04:36And then they're like, oh, I have to pay it before we start.
00:04:38And you're like, yeah, what'd you expect?
00:04:39I was gonna just go work for you
00:04:41and then you're gonna pay me?
00:04:42And they're like, oh, okay.
00:04:43Well, I can split it 300 now, 300 next month.
00:04:46I'm like, great.
00:04:51And then they start.
00:04:52People will pay for speed
00:04:53and layaway is a lever to force that on them.
00:04:56Also, if they ever pay and then they'd fall off,
00:04:58you didn't lose anything.
00:04:59You just got paid.
00:05:00All right, so you take no risk by doing this.
00:05:02The only risk you have is that
00:05:04they might not finish the payments obviously.
00:05:06The other one is that you have
00:05:06a third-party financing company.
00:05:07They can do this.
00:05:09But fundamentally all of these things
00:05:10mean the same thing in different ways.
00:05:12And I like using them all.
00:05:13Just think about them as tools for the job, right?
00:05:15And so if you are the type of person who gives your time,
00:05:19like a surgeon would or an attorney would,
00:05:21some attorneys, for example,
00:05:22they say, okay, pay me first a retainer.
00:05:24And then I will draw down from this retainer.
00:05:26And then I'll tell you when to re-up.
00:05:27They still get paid before they work.
00:05:29So you can tell where you're at
00:05:30in terms of leverage and earning
00:05:32by where you sit on this pyramid.
00:05:33Real quick, I'm gonna show you the exact 10-stage roadmap
00:05:36from zero to a hundred million plus
00:05:38that less than 1% of companies finish.
00:05:40I've now done multiple times.
00:05:42And so I can say with a lot of confidence
00:05:43that these are the stages as headcount increases
00:05:46that you need to get through.
00:05:47And I broke each of these down
00:05:49by eight different functions of the business.
00:05:51What the constraint feels like,
00:05:52like what are the symptoms of it when you're going through it
00:05:54and then what steps we actually took to graduate.
00:05:56And we've done this across software, physical products,
00:06:00service businesses, brick and mortar, all of this.
00:06:03And it works.
00:06:03And it's my gift to you.
00:06:04It's absolutely free.
00:06:05And so the link's in the description,
00:06:07but you just go acquisition.com/roadmap.
00:06:09Just enter your info and it'll spit it right back to you.
00:06:11All free.
00:06:11Drum roll, please.
00:06:13Number four.
00:06:19So this one is one of my favorites,
00:06:21which is when X happens, you pay me.
00:06:26Now you'll notice that with this one,
00:06:31things occur and you get paid,
00:06:33which is divorced from your time commitment.
00:06:35Not to say you won't put time in,
00:06:37but the way that you get paid
00:06:39no longer is reliant on how much you work.
00:06:41And so for example, a rev share, a profit share,
00:06:44an outcome-based bonus, accelerators,
00:06:47an equity deal fundamentally works the same way.
00:06:49Like why does ownership pay better?
00:06:51Because if the business does well, then I get paid.
00:06:55That's how it works.
00:06:56And these are almost always percentage-based or milestones.
00:06:59Now there isn't as much risk with this model
00:07:03when you know what you're doing.
00:07:04So if I say you don't pay me until your top three
00:07:07in Google Maps rankings,
00:07:08that means I can get paid the moment that occurs.
00:07:10And if that takes five seconds for me, awesome.
00:07:12It just completely divorces my compensation
00:07:15for how much time I work.
00:07:16And instead puts it on my ability to create an outcome,
00:07:20which is predicated on skills.
00:07:23So in a consumer example, you could say,
00:07:25"Hey, if you lose 20 pounds, I get paid more."
00:07:27You could say, "Hey, if you get ready a bikini show
00:07:30by this time."
00:07:31It could be, "Hey, if we finish the project on this date
00:07:34or if you get your ads run up, running and profitable
00:07:38by this time for every amount over X."
00:07:41Agencies are classic with this.
00:07:42Like X percent of spend, you have consulting agreements
00:07:45that are percentage of profit or revenue.
00:07:46There's tons of different ways to structure these things.
00:07:48But all of them are, when this happens, I get paid.
00:07:51Now, I said I have two God tier or S tier versions of this.
00:07:55'Cause you might be thinking, shoot,
00:07:56I work then you get paid.
00:07:57I understand why that's the lowest one here.
00:07:58It's super reliable, but I'm not gonna get a lot of upside.
00:08:01You pay as we go.
00:08:02Okay, we're kind of in lockstep here.
00:08:04You pay then I work.
00:08:06Okay, I'm a little bit more leverage.
00:08:07When X happens, you pay me.
00:08:09Now, if there's a through line for this whole video,
00:08:13it's that you will be compensated in proportion
00:08:15to the risk you're willing to take.
00:08:17And the key is the perceived risk
00:08:20that you're willing to take on.
00:08:21Because the people who do this well
00:08:23have it be very risky for other people
00:08:26and not risky at all for them.
00:08:27And so the market overcompensates them
00:08:29because the market perceived this as very risky.
00:08:32This is fundamentally what investors call mispriced bets.
00:08:35And so if you buy distressed debt, it looks risky.
00:08:38But there are guys like Howard Marks
00:08:39who've made billions of dollars
00:08:41by buying what other people perceive as risky
00:08:43when it's not as risky as they perceive it.
00:08:45And so many of these things are distortions of reality
00:08:48for you when you're going through this
00:08:50because you perceive, like I said earlier,
00:08:52that this is lowest risk and it is true.
00:08:55But there are also risks that are not mentioned,
00:08:57which is the risk of not achieving what you want in life.
00:09:00And so I think that Peter Thiel said this best.
00:09:02He said, "If Elon had even one of the companies
00:09:05he had be successful,
00:09:06we would have said that he was unbelievably lucky."
00:09:08He said, "Having two of them be successful,
00:09:11it doesn't even make sense."
00:09:12He said, "And it makes you really wonder,
00:09:14what does he know about risk that we don't?"
00:09:16And I really thought about that because like fundamentally,
00:09:18I was thinking it's like, there are really smart people,
00:09:20they're really hardworking people.
00:09:21It almost never correlates with how much you get paid.
00:09:25But how much risk you take on certainly does.
00:09:27And in a deal, which all of these things are transactions,
00:09:31the thing that is always the overarching umbrella
00:09:34that you always have to come in with is who's got the risk.
00:09:37And the more you shift that risk in your favor,
00:09:40the more you get paid.
00:09:41And this also happens at the employee W2 level.
00:09:43If you go in and say, "Hey, this job was advertised
00:09:46for $100,000, I'd be willing to do the work for 60
00:09:49if you give me an upside of 180."
00:09:51They're like, "Huh, if these things occur,
00:09:56I would like to get paid more."
00:09:57So you can start shifting your terms
00:10:01and taking on some of the risk,
00:10:03which you can only do when you're good.
00:10:05So let's go to number five.
00:10:07Number five is, drum roll please,
00:10:09what happens when all you do
00:10:14is buy and sell risk itself?
00:10:15So how does that actually happen in practice, right?
00:10:20Well, there's an entire industry,
00:10:21one of the oldest industries in all time, called insurance.
00:10:24And what's beautiful about this particular model
00:10:27is that when nothing happens, you still get paid.
00:10:29And once the nothing has happened, that is now profit.
00:10:32Every month that nothing happens, you still get paid.
00:10:35And there is no delivery besides the agreement
00:10:37that you take on the risk.
00:10:38And so what's interesting about this
00:10:40is that this insurance predates the tax code.
00:10:43Some of the oldest companies in the world
00:10:45are insurance companies.
00:10:45And I'll give you a little razor that I use
00:10:47when I think about building businesses,
00:10:49is I look at the companies that have been here the longest.
00:10:51And when you see a company that's been here 100 plus years,
00:10:54that means that they've gone through World War One,
00:10:56World War Two, after the microwave, after the television,
00:10:59after the social media, computers, internet,
00:11:01they've made it all the way through.
00:11:03That means that they have a way of taking on risk well
00:11:08and being compensated for it.
00:11:11And so no one is better at being compensated for risk
00:11:14than the people who buy and sell it.
00:11:16And so what's interesting about this particular thing
00:11:18is that insurance is a reverse lottery.
00:11:20Is that everyone is paying for a reverse ticket
00:11:23that if they get the bad thing to happen,
00:11:24everyone else chips in.
00:11:26Now, what could be above that?
00:11:29Where you literally just get paid to take on risk.
00:11:32Well, all of these risks that we've talked about
00:11:35are almost entirely financial risk.
00:11:38But is there a risk that society values more than
00:11:42financial risk?
00:11:43The answer is yes and no.
00:11:45But the answer in terms of money is an absolutely yes.
00:11:48Which is what body takes on physical risk?
00:11:53The government.
00:11:55Because they have a monopoly over violence.
00:11:58We wouldn't be able to do any of these things
00:12:00if we did not have borders and we did not have troops
00:12:02to protect them, right?
00:12:03And so in exchange for them carrying the biggest risk
00:12:08of all, we as contributors to society pay our taxes.
00:12:13And so the taxes, what's beautiful about this
00:12:18is that no matter what, you pay me.
00:12:23(laughs)
00:12:25When you're the tax collector, you get paid no matter what.
00:12:28Now obviously, you have to make money in order to get taxed.
00:12:32But for everyone who does make any money,
00:12:34they gotta pay 'em, right?
00:12:36And so the reason they're able to enforce this
00:12:38is because they have a monopoly on violence.
00:12:41So the same force they use to repel our enemies,
00:12:43they also use to enforce their laws.
00:12:45So my team just asked me, how do you move up this
00:12:47and take advantage of some of the four, five, and six levels
00:12:50if you're a business owner or even a cell printer?
00:12:52So number one is royalties.
00:12:54The reason they were called royalties
00:12:56is 'cause they were paid to the royals.
00:12:58Which means it comes off the top.
00:13:00And so whenever you're trying to get paid,
00:13:01you wanna go higher up.
00:13:03You wanna get paid no matter what.
00:13:04You wanna get paid first.
00:13:05You wanna get paid without economics.
00:13:07So if you're doing a profit share,
00:13:09it's way better to have a rev share.
00:13:10Why?
00:13:11Because somebody can play around with their profit,
00:13:12they can overspend, but a rev share is the revenue, right?
00:13:14Top line's top line.
00:13:15So that's where royalties, licensing, things like that
00:13:17can be very, very valuable.
00:13:19Now, what are we doing there?
00:13:20Is basically, we, if we set up a deal like that,
00:13:24it means when X happens when you make this money,
00:13:26you pay me, period.
00:13:27So we're further up the count.
00:13:28What about this risk one?
00:13:29So a couple things.
00:13:30One is that you can sell insurance without being an insurer.
00:13:34Now, I wanna be clear, follow the law,
00:13:36blah, blah, blah, wherever your area is.
00:13:38But you can absolutely sell a guarantee.
00:13:41You can absolutely sell a warranty.
00:13:43These are all things that are elements of risk.
00:13:45If you look at Apple, AppleCare,
00:13:47I think is a gazillion dollar insurance play
00:13:51where they just say, yeah, yeah, like,
00:13:53just in case your screen cracked,
00:13:54which of course they say,
00:13:55we don't cover all of these other things,
00:13:56and then they just get paid the whole time basically for air.
00:13:59And so you can always inject these things into a business,
00:14:02no matter what type of business you have.
00:14:04Obviously the physical things like home services,
00:14:06things like that, the warranties become more obvious.
00:14:08But in a services business, not as in building stuff,
00:14:11but doing stuff for people,
00:14:12the risk that you're going to take on is
00:14:15if something goes wrong, if something is delayed,
00:14:18if it's more difficult than expected,
00:14:20these are all things that you can choose
00:14:21to take on for a premium.
00:14:23Now, finally, no matter what you pay me,
00:14:26very tough to have as a business.
00:14:30But if you, I would say the way to think about this
00:14:34is control of the money flow.
00:14:37And so if you move up the pyramid,
00:14:40like a franchisor typically will have an agreement
00:14:44where they control the money.
00:14:45Now, some franchises structure differently.
00:14:46The better franchises, they get paid
00:14:51and then remit payment, the remainder to their franchisees.
00:14:55A different company, a business like that
00:14:56is like payment processing.
00:14:57Payment processors always get paid.
00:14:59Why?
00:15:00They control the money flow, right?
00:15:02They, you cross, you know, you process your card,
00:15:04they take their slice and then they remit payment.
00:15:07And so you can still move your way up here.
00:15:10Now you can make an argument when X happens,
00:15:11as in like when I process a payment, this occurs.
00:15:14But I think that as we're moving up this thing,
00:15:16it's like, is there a world where they don't get paid?
00:15:17Not really.
00:15:19And so this is how I think about increasing leverage
00:15:23within the business.
00:15:24It's just simply shifting around where the risk sits.
00:15:28And if there's risk that's on the table
00:15:29that isn't accounted for, that I'm comfortable taking,
00:15:32I'll always wanna take it on
00:15:33'cause it's typically mispriced.
00:15:35People will be willing to give you way more money
00:15:37than you think the risk is really worth
00:15:38'cause people are always afraid.
00:15:40Jeff Bezos said this and I love it.
00:15:41He said, "Humans overestimate the downside
00:15:44and underestimate the upside."
00:15:46And if you think about this from a tax perspective,
00:15:48Peter Lynch was one of the best traders of all time.
00:15:50He had 30% compounded returns for like 15 plus years.
00:15:53He said, "When you think about investing," he said,
00:15:55"A stock can only go to zero."
00:15:57He said, "But it can go infinitely high
00:15:58in the other direction."
00:15:59And so if you buy it at $10, well, you can lose this 10 bucks.
00:16:01He said, "But it could become $1,000."
00:16:03And so in thinking about this is the part
00:16:06that people misprice risk is that they count
00:16:08in number of failures rather than the absolute return.
00:16:11And so if you have, and this is also Jeff Bezos' quote,
00:16:14and notice that there's a common theme
00:16:15among really good entrepreneurs
00:16:17is that they understand risk better than most people,
00:16:19which typically means that most people
00:16:20don't take enough of it.
00:16:22The story that I start my first book with,
00:16:26I'll read it to you 'cause I think it's fucking awesome.
00:16:29Who doesn't wanna read it, right?
00:16:31"Outsized returns come from betting
00:16:35against conventional wisdom,
00:16:36and conventional wisdom is usually right.
00:16:38Given a 10% chance of 100 times payoff,
00:16:41you should take that bet every time,
00:16:43but you're still going to be wrong nine times out of 10.
00:16:47Now we all know if you swing for the fences,
00:16:49you're gonna strike out a lot,
00:16:50but you're also gonna hit some home runs.
00:16:52The difference between baseball and business, however,
00:16:55is that baseball has a truncated outcome distribution.
00:16:58When you swing, no matter how well you connect with the ball,
00:17:01the most runs you can get is four.
00:17:03In business, every once in a while,
00:17:05when you step up to the plate, you can score 1,000 runs.
00:17:08This long tail distribution of returns
00:17:10is why it's important to be bold.
00:17:12Big winners pay for so many experiments.
00:17:14We take risk to get reward."
00:17:17Like we have to take risk in order to get reward.
00:17:19And where you get best rewarded
00:17:21is where the world perceives you
00:17:22to be taking on far more risk than you really are,
00:17:25which you only really have happened
00:17:26when you're either lucky or you're good.