Confidence Emerges From Action and Embracing Financial Loss
TL;DR
- Confidence in financial capability emerges from demonstrated competence through action, not from pre-existing belief, validating skills by achieving tangible monetary results.
- The willingness to incur financial losses directly correlates with the potential for greater financial gains, framing losses as a necessary cost of expansion.
- Acting as if one possesses a desired trait or skill, even without belief, can lead to developing the actual competence and subsequent confidence.
- Focusing on the desire to expand and make more money, rather than fixating on the fear of losing it, unlocks greater financial opportunities.
- Significant financial losses, such as a $10 million investment failure, can be viewed as tuition paid for valuable lessons that refine decision-making processes.
- The decision-making principles used to make money remain consistent even when outcomes are unfavorable, highlighting the need to learn from process failures.
Deep Dive
Confidence in one's ability to generate wealth stems not from pre-existing belief, but from demonstrated competence achieved through action, even when that action involves financial loss. This process of acting despite doubt, experiencing outcomes, and thereby building competence that naturally cultivates confidence, is crucial for wealth accumulation. The willingness to incur financial losses is directly correlated with the potential for gains, as focusing solely on avoiding loss stifles opportunities for expansion.
The core mechanism for wealth creation involves taking action, even without initial belief. Leila Hormozi recounts her first $1,300 sales experience at age 21, which shifted her perspective from needing belief to needing competence. This competence is built through doing and observing results, leading to confidence. For instance, if someone wants to achieve a higher level of income, they can act as if they already possess that capability. This "acting the opposite" approach, as described by Stephen Hayes, allows individuals to work towards embodying the desired state. The anxiety that often accompanies new wealth, a feeling of waiting for it to disappear, is a natural byproduct of this transition. This anxiety is then overcome by understanding that financial success involves risk.
The willingness to lose money is presented as a prerequisite for making significant amounts of money. Hormozi explains that the amount one is willing to lose directly correlates with the amount they can gain. Focusing on not losing money constricts one's mindset, shifting it away from expansion and toward self-preservation. While it is important to be prudent, an excessive focus on loss prevention can lead to missed opportunities for growth. This perspective is illustrated by a $10 million investment loss, which, while painful, was viewed as a necessary cost for achieving other significant wins. The decision-making principles, though sometimes leading to unfavorable outcomes, remain the same, and lessons learned from failures can upgrade the process for future success. This highlights that even with sound decision-making processes, not every outcome will be positive, but the overall strategy for wealth creation involves embracing this inherent uncertainty.
The key takeaway is that financial confidence is an emergent property of competence, which is forged through action and the acceptance of potential losses. Embracing risk and learning from financial setbacks are not obstacles to wealth creation, but rather integral components of the process, enabling greater gains by fostering a mindset of expansion rather than fear.
Action Items
- Act as though competent in a new skill: Practice the opposite behavior of current limitations to build competence and subsequent confidence.
- Track investment losses: Quantify the financial cost of 3-5 poor investment decisions to understand the price of gaining larger returns.
- Measure decision-making formula effectiveness: For 2-3 significant investments, analyze the decision process used for both successful and unsuccessful outcomes to refine future strategies.
- Calculate correlation between willingness to lose and gain: For 3-5 business ventures, estimate the potential loss versus the potential gain to inform risk tolerance.
Key Quotes
"What shifted for you to believe you were capable of making money? I made money. I, I, I'm not kidding. So like, I, until I, I, I'm actually for me, it started with sales, which was like, until I made a sale myself, like my first purchase is a personal training sale. I made a personal training sale and it was a $1,300 package. And I was like, I'm 21 and I just like, I just got $1,300 from words that came out of my mouth to somebody. And I was like, oh my god. And then I was like, I don't, I don't need to worry about money again. I know how to make money. And it was such an empowering feeling."
Leila Hormozi explains that her belief in her ability to make money originated from her first successful sales experience. Hormozi highlights that this initial sale, a $1,300 personal training package at age 21, was a pivotal moment that shifted her perspective from worry to empowerment. She realized that the ability to generate income was a skill she possessed, which then removed her anxiety about financial security.
"I think that continued at each level, right? And so it's like, okay, I know how to make $1,300. Do I know how to make $20,000? Do I know how to make $50,000? Do I know? And so at each time, I didn't believe that I was able to until I did. But I think that I took the action."
Hormozi describes a progressive growth in her financial capabilities, emphasizing that confidence in earning larger sums followed actual achievement. She states that she did not believe she could earn higher amounts until she took action and succeeded at each new financial threshold. Hormozi asserts that taking action was the catalyst for overcoming self-doubt and validating her earning potential.
"There's a, there's a term that, uh, I think Stephen Hayes coined, which is like acting the opposite. It's like, if you want to be the opposite of what you are today, act the opposite first, right? And so, I have just continued to use that time and time again, which is like if I want to be something, I don't need to believe that I am first, and I don't need to think it, uh, because that I've a very hard time doing. But I can act as though I am the thing, and then work my way into it."
Hormozi introduces the concept of "acting the opposite," attributed to Stephen Hayes, as a strategy for personal transformation. She explains that to become something different, one should first embody that desired state through action, rather than waiting for belief to precede it. Hormozi finds this approach more effective than relying on internal belief, allowing her to integrate new identities by acting them out.
"I'm educated enough now to know that you have to lose money to make money. So like, you know, it's, it's a funny because me and Alex were talking yesterday, I was saying, and he's he's counting up every loss we've had this year. And I was like, but look at all the gains. Yeah. I, I'm, I'm so much like, with when it comes to money, I'm like, I, I'm just like, that's the cost of it. The cost of making money is that you're going to lose some."
Hormozi articulates a perspective on financial risk, stating that losing money is an inherent part of making money. She contrasts her view with someone focused on accumulating losses by highlighting the gains, framing financial setbacks as the necessary cost of doing business. Hormozi suggests that accepting potential losses is crucial for pursuing greater financial rewards.
"I've just seen that there's a huge correlation with how much you're willing to lose with how much you're willing to gain. Because if you're constantly saying, I don't want to lose, that's where your mind's focused, rather than I want to make more. I want to expand. So it's like, yes, uh, I want to make sure that I'm not being stupid with my money. But I don't want to be so focused on not losing money that I'm not, I'm not opening myself up to the opportunity to make more."
Hormozi draws a direct correlation between the willingness to incur losses and the potential for financial gains. She argues that an excessive focus on avoiding losses can limit one's capacity for expansion and greater earnings. Hormozi advocates for a balanced approach, where prudent financial management coexists with an openness to opportunities that may involve risk.
Resources
External Resources
Books
- "Make Money Easy" - Mentioned as a new book to help create financial freedom and abundance.
People
- Leila Hormozi - Host of the episode.
- Lewis Howes - Host of the Daily Motivation Show.
- Alex - Mentioned in a discussion about financial losses and gains.
- Stephen Hayes - Coined the term "acting the opposite."
Organizations & Institutions
- State Farm - Mentioned as a resource for life's milestones and choosing coverage.
Websites & Online Resources
- Make Money Easy Book dot com - Website to obtain a copy of the book "Make Money Easy."
- Greatness dot com slash newsletter - Website to sign up for the Greatness Newsletter.
Other Resources
- Marie Callender's classic chicken parmesan bowl - Mentioned as a convenient and delicious meal option.
- Daily Motivation Show - Podcast where Lewis Howes hosts.
- School of Greatness - Main podcast where full episodes are available.
- Greatness Plus channel - Channel offering exclusive content and ad-free listening.
- Greatness Newsletter - Newsletter providing inspiration and life improvement tips.