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Like what's been top of mind for me has been parables all right and I think the reason

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parables are so interesting is that they're very memorable right like remember stories

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better than just that anything else and there was a parable that that I've been thinking

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a lot about it's two different ones and they apply a similar lesson and then I kind

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of want to just like juxtapose that against a lot of different scenarios so I will tell

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you the first parable name you guys ready so this is the this is the parable of the infected

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tooth so a CEO has a talented but toxic executive who drove short-term results by poison

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the culture or bored and employees warned her repeatedly but she kept this this executive

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fearing the pain of removal and the different performance that would inevitably ensue after

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the removal so quarter after quarter you know she would rationalize she would say well

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next year we're after this big contract or once I onboard this new customer or after

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I hire you know fire replacement etc etc so then when she finally needed a firehead she

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had to more I'll then plummeted and then project stall three key employees quit and so she

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goes to our mentor and she says see removing him wasn't a good idea and so then the mentor

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the pain you feel isn't from removing the tooth it's from letting it rot so long that it

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infected the jaw the extraction just revealed the damage that was already there and so she realized

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that every day she delayed had made both the problem and it's an inevitable solution more painful

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and so the mentor added remember the mistake wasn't pulling the tooth it was washing it decay

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and calling that patience that's parable one parable two the parable of the drowning ship so

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merchant owned a ship that sprang a small lake the repair would cost him a month's profit

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I'll fix it next quarter he decided taking on more cargo instead the league grow now repairs

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would cost six months of profit significantly more I'll fix it next year he reasoned taking

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even more cargo to make up for the lost speed because it was leaking by a year's end the ship

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could barely stay afloat repairs would cost everything he had he then said I can't afford to stop

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mortgaging his house to add yet more cargo the ship eventually sank staying on the shore

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a wise trader told him the best time to exit a bad deal is when you first realize it's bad the

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second best time is now and so with both those parables I I find them really telling because I

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want to I want to now translate that into kind of real world stuff for me so one of the most

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difficult and painful things that you have to do is entrepreneurs that you have to replace

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anybody in team but the further up they are in the organization the more painful it is because

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typically if they are not a culture fit or there's a performance issue or a combination of both

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the people that they hired underneath of them will likely also suffer some form of deficiency related

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to that leader so it's almost like an entire tree branch of the company becomes rotten and it's

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not that they're bad people just might not be that they're fit for the culture that you have

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with the business what makes this so painful and this is the thing that I find really interesting

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I remember a pastor was telling this this story he said a lot he said he was talking to a husband

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and he the husband had cheated on his wife and so he was saying you know you have to tell your wife

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and he was like I feel like it's really selfish for me to tell my wife and herter he said why is

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it why should I hurt her that feels like a wrong the wrong thing basically saying you'd be

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almost a sin to hurt his wife and so then the pastor said the sin occurred when you cheated on your

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wife not when you told the truth and so I kind of see it that way within a company which is that

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when you have somebody who works for yours especially a leader the you basically incurred this

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debt right and so this is operational debt leadership debt management debt there's different ways

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of saying it but basically you have somebody who's not there and for every day that you don't

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replace that person you incur more debt of what's what's going to come later and that debt comes

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due with interest and so it hurts even more and that's that's something that I would say that it's

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taken me a long time as an entrepreneur to just come to terms with it just like when you see something

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bad the moment to address it is immediately because when you wait it literally just gets worse

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and so sometimes we wait until you know our hand is forced but wouldn't it be better to not have

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your hand forced and then never have to get to that moment and so I was giving this example to a

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a new leader in the business who who took over a department and he was going through some of the

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pains of having to like basically raise the standard raise the bar you know cycle some people

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out who weren't really aligned with kind of the direction of just like high performance and I said

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so if I walked around here and I told everybody that they didn't have to use the bathrooms and they

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could just shit all over the building they glitters shit and and that's what I said that was the

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expectation that I set well the day that I come in and say hey guys stop shitting in the building

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and use the bathrooms everything to be like what the hell man that's not how we've been doing

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things you know why are you changing the expectations why are you changing everything right and the reality

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who's the one whose fault it is now ultimately it's always the entrepreneur's fault because it's

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everything within a business is your choice either directly or indirectly but

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under that assumption right the fault was from the manager prior not the person who's basically paying

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the bill and so it's like this person whoever they are in the business for you will basically run

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up this tab right they're just spending they're spending and it can be money but a lot of times

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it's spending good well it's spending culture right you're you're basically doing this work at the

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cost of culture and the thing is is that the bill will come do and the thing is is oftentimes the

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person who who runs the debt up and spends lavishly and gets everyone to love them is not the one

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who pays the bill and that's where it's really tough because like if you're for example and

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and here's the real world you may be this person like this may be you and so you're you know

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you're you're going out there and you're you're you're splurging right you're you're saying

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everything's great you guys are doing awesome when you know they're not doing awesome all you're

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doing is kicking out a bill that you're going to have to pay later and the bill comes do with

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interest and that interest is usually just the entire culture of the team has suffered and so

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then you have to it's like it is like a decaying tooth you have to pull it up but then you got to

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scoop out all the gunk and all the root and everything else around it so that you can start fresh

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and it's just been this was just top of mind for me and that's why you know I had these two

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parables that I I tried to put together around this and and I guess that's the that was the moral

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of the of the story for this morning is that you you probably know who that person might be in

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your business and you know the best data to root out cancer is the day it happens the second

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day is is right now and so I think that some of you may have some people on your teams and it

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may just be you that you need to have that talking to and say like I'm no longer going to stand

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for this because if we think about the job of the CEO or job of the entrepreneur our job in my

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opinion above I'd say we have two primary kind of roles overall number one is that we are chief

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allocator of resources right we have limited resources in terms of time money human capital

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people and we have to allocate that limited amount of time money effort against unlimited potential

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things and so the best entrepreneurs get the highest returns for the limited resources they have

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fundamentally it's an exercise in resourcefulness rather than resources the second job in my opinion

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is holding the bar and so fundamentally this is a combination of the vision of where we're trying

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to go but the bar is more about how we're going to get there right what what are the ways that we

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choose to deem valuable what are the what are the behaviors that we say this is how we want to do it

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and your culture is a direct reflection of you and I think that's it's one of those really true

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very harsh realities that like if you don't like the culture there's really one place to look

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right you have to look at the leader and it trickles all the way up right like whatever you deem

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acceptable is what everyone will deem acceptable because there's no place realistically that you're

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going to be able to house 200 rules of behavior right and so what we do is you try to abstract that

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into a you know a few pithy aphorisms a few little quotes that say you know we're customer obsessed

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we're you know speed over everything whatever right but it's more so because if I look at somebody

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and say speed over everything there's some inferences I can take from that but it's not actually

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very good directions in terms of how do you act how do you behave right and so we're expecting

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that someone uses their second brain cell to then reason for themselves in this situation

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how do I balance all three of these values and then what behaviors would ensue and so fundamentally

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the reason that values can decentralize decision making across an organization is that it's supposed to

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be a very high level filter for what to do in situations that have not been prescribed right like a

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traditional rule has a condition and then a behavior if this than that right and so if we want

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I mean fundamentally we could write a rule of behavior about everything that exists in the business

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there's a couple problems with that one is it would take forever two is that it would then we'd

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expect everyone to then refer back to this book of rules which would also be a pain three the

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rules would be constantly changing in dynamic and so instead we try and chunk up to values and we hope

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that in the gray in the nuanced people can reason but we're always you know flabberg at that

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people's inability to use the second brain cell as I like to say and so it's like what do you do

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right what do you do in the situation so I think that the biggest thing that happens is as you

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continue to move on in your entrepreneurial career is your understanding of what talent means and

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what talent looks like and so like if we look at how quickly an entrepreneur will like anybody who's

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listening to this if you've had more than one business which if you're an ADD entrepreneur you

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probably have your first thing compared to your second thing I'll bet your second thing

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happened way faster than their first thing as in like you got your old first things level in half

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the time a third the time a tenth the time right because you knew how to beat all the bosses and

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you got into quote virgin territory where you're like I don't know what to do from here right and in my

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opinion especially if you build an organization the where do I go from here part a lot of it comes

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down to who do I hire from here and what do they look like and so if we think about the the

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a company as the output of the collective intelligence of the people contained within it which is

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one of my beliefs I think Elon sets something that degree not that like a couple days ago but

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I've long held this belief if you think about a business as a Christmas tree if I let's say that

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there's you know four heads across and that's like you know the second rung of the tree and then

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the peak kind of goes a little bit above that in many smaller businesses the person who's learned

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everything is you the founder you did every single person's job and then you try and you know buy

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some of your time back but what ends up limiting the business is that it's limited based on one

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person's skill and experience because you will know how to do everything and you can do it better than

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them but the limit of that business is purely based on your basically intellectual capacity

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and so you can make a significantly larger business if you can visually imagine like beefing up the

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you know the top top part from call it four people to twenty people all of a sudden the hypothetical

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peak goes way way way way up if that was the width of the peak right so the width of the

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the part before the peak the peak rises and so if you're adding people to the organization you want

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it to be a net increase in overall intellectual capacity and or skills and experience so that every

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person who comes in actually adds to the peak right adds more knowledge that other people didn't

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already have and by doing that you will it's it's just a really good razor is like does this person

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know things that other people don't know than the organization now I want to be clear sometimes

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there are roles that are front level it's likely you have the third sales guy then that might not

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be one of those but when we're talking about leaders which are going to be the people who are going

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to increase the rate of growth of the business because they're actually the people who can take things

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off of your plate or start new divisions start new revenue revenue streams what most of us lack

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is a high enough standard is that and that's what I think really develops most over time as an

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entrepreneur is that like what happens is you just hire a bunch of people in the beginning they have

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you know a pulse and they seem like they can speak a language that you also speak and you say oh

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that must be all that is required in order to do my job or do this job and then by by pure

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dice roll pure chance you will hire somebody who's actually pretty good and then all of a sudden

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you're like man if I only had five seras like this company be so much bigger and so what happens

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is your bar raises and one of the most difficult things about transferring from one entrepreneur

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another kind of like between generations is pattern recognition and so there are some lessons and

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I think Williamson talked about this and I actually really liked the frame which is like why is it

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that some lessons we have difficulty transferring whereas other ones are immediately accessible

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I'll give an example like if I needed to teach you how to cold car teach you how to do outreach or

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teach you how to sell it's a it's a very easy to transfer skill right but if I had to teach you

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let's say that money isn't going to make you happy it's like you hear it but you're like well I'm

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going to find out for myself right and so it's like what separates these types of and I and that's

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more of a statement than it is skill but anyways the zoom out thing here is that pattern recognition

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amongst people I think is one of the harder things to transfer from one quote generation to

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another or for me to transfer via zoom right is they're like hey you know I remember I met

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I met I mean I met a lot of number two's people who have they're like hey this is my COO this is

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my whatever and within like one minute I'm just like yeah this isn't the guy but it takes the

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entrepreneur two years to figure that out and so this is in my opinion where people stay stuck

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this is why they stayed the same level for an extended period of time is that they don't know what

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they don't know it's the unknown unknowns that kill you it's not the known unknowns it's the

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unknown unknowns it's the what is the sales director supposed to look like what is the VP of finance

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supposed to look like what is my first sales guy supposed to look like you don't know and so then

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you waste six months hiring somebody training them maybe it doesn't work out and then you have to

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start it over again and then you do it again and then it doesn't work out and then you start

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again and then finally on the third shot you get it right and you're like oh my god this is what a

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salesperson should look like and it takes you that 18 months to do one thing recognize a pattern

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it's a set of behaviors a set of skills that somebody exhibits that you can say ah this person has

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this and that is now what I'm gonna look for this archetype in new people and so you level up as

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an entrepreneur and so I think a lot of the levels of entrepreneurship are about who not how and

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figuring out what does this person look like and I would say conversely how quickly can I get people

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out when I know they're not it and I think that speed on both side is what ultimately dictates the

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growth of the company because taking a hypothetical extreme year if you're the absolute best people in

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the entire world in each of the positions or functions within an organization at your stage of

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growth your company would grow probably insanely fast and so then the question becomes like if

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that if that's true then what who do you need to become in order to get those people and what skill

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sets and behaviors and even what vision do you have that people who are high quality find compelling

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so those are my two little my two little parable anecdotes for the day just just food to think on

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for you guys it's something that was kind of top of mind for me and I think a lot of the mistakes

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that I've made as an entrepreneur have been betting too long on someone that they were going to be

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different or recognizing that someone was insufficient and then keeping them for a long period of time

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Leyla and I have also worked recently to eliminate two-week notices so basically if someone says that

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they want to quit we just want to let them go immediately because we actually suffer more as a

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business with a cancer if somebody who doesn't want to be there just poisoning everyone around them

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once they've basically it's like they're like I'm out the door and let me tell you how much you

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know this place sucks whatever and I think a lot of that is because people don't have the emotional

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maturity to say like hey I'm going to break up with this girl and she can be a great person just

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not a great person for me most people can't do that most people have to in order to justify their

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decision shit talk their ex-girlfriend shit talks their ex-boyfriend or whatever in order to feel okay

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about that decision because they probably did have some conflicts right if they work there for

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an extended period of time and then they ultimately decide not to work there they have to like feel

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good about it and so to their way of feeling good about it is making everyone else feel bad and

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this is something that we've worked pretty hard on is like when we when we hear it now we actually

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just get them out I would rather suffer the whole or the vacuum then then have the cancer kind of

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like take even more root and plant more seeds while it's going or while it's on the way out the door

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so that's a that's a tactical nugget that I would say that I've changed about my behavior with

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relation to the parables that I was telling earlier so hopefully that can at least you know save

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one of you guys a massive headache when it comes around your business I also saw you had the

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parable of the bread maker if you wanted to go into that well I'll tell you guys that one pretty

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quickly I mean it'll for everybody who's like starting out it'll probably be a little bit more

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applicable for you the parable of the bread maker so bread maker sold the best bread in town for

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one copper coin so you worked 18 hours daily but barely survived so one day an old merchant walks

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up to him and and sees him turn away customers when he runs out of bread which he does all the time

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and so the merchant goes to him and says hey double your price and the baker says that's impossible

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lose all my customers and the merchant who's much wealthier than the baker says just try it

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and so reluctantly the baker decides to listen and he does so doubles his prices

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and so then the next day he loses half his customers but he made the same amount of money working half

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the time and so now that he had half of his time back with his free hours he experiments it on new

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recipes new ways to bake the bread new ingredients and the bread got even better so all of a sudden

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over time now the customers that he lost he got some of those back but he got even more customers

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so now he's selling out yet again but at double the price but now he's working 18 hours yet

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so the the merchant goes up to the baker and says hey double your price is again so he does yet

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again he loses half his remaining customers but the profits now rise all right because he's now

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done two doubles he's at 4x and ultimately at this point the customers stayed

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died the quality of the price and so by a year later of this process of continuing to to improve

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the product he ended up selling the same amount of loves as he used to but at 4x the price

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and to people who really loved and treasured his craft so he worked last he earned more and he

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loved his work again and so the the moral of the story is that basically the price you charge

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you you tell the world to value your product at that price and the world will believe you

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and so for some of you and i've overheard this there's been an unwillingness to are like a

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fear around raising prices so i want to like put some of that some quell some of those concerns

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so number one worst case scenario you can just change it back all right like not a huge deal you can

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just change the price but not a big deal second the risk of not raising your price like everyone

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to talk about the risk of raising your prices but what are the risk of not raising your prices

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the risk of not raising your prices is that you work all the time and make no money all right you

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attract the worst customers you attract people who demand even more for every dollar dollar off

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that that you give them and so fundamentally what i'm going through is the the virtuous virtue versus

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vicious cycle of pricing right and the thing is is that your conviction also goes out and because

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you have a higher gross profits you can spend more on the product and on the experience to make it

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even better you can also attract better talent because you may have more money left over so there's

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all these cascading down to your effects now if you're a technology platform fine it's a little

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bit different right but the vast if you have any kind of services that you're rendering it's almost

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always in your best interest to try and be premium seller rather than a budget a budget dealer

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the only way to be in the service business and try to win on price is that your entire competitive

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advantage has been built on the lowest cost basis possible like that's that like and if you didn't

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start that way you're one you're basically just at a race to the bottom to go out of business

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so the the counter intuitive thing which is raise your prices often feels like it's the riskiest

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but it's actually the least risky thing to do because you will attract people and you will

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signal to the marketplace that you are like other premium providers who sell fewer customers

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and ultimately provide a better experience the thing that's a mind mind trying to be PG here but it's

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a mind fuck is that when you raise your prices you will hear no more more often but you will make more

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money and that's what I think is people really twisted you will you will have more people turning you

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down but you will make more money think about the opposite if you make it free you never hear now

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or just about never hear now and then you just want to end everything because it sucks right and so

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at the absolute extreme you only have one customer who's 100% your business and so for sure there is

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a sweet spot right as you continue to raise prices but if you had some sort of certainty that

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that one customer would never leave then it would be the most efficient business model in the world

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you'd find the person you could pay the most to guide the thing the most and then that's the

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business and then you could just absolutely over deliver like crazy that person obviously there's

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a sweet spot and the parable exists really just to point out that when you have fewer customers it

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doesn't mean you have a less healthy business it often gives you back resources not just

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money but time to improve their experience and ultimately reinvest with your focus and attention

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into making the product or service better and so for the vast majority of you there's so many

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businesses that are mispriced so I'll give you a couple of like little telltale signs here

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if you're getting on the phone with prospects and you're over 50% close rate you're probably

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mispriced now if you're the founder and you're the one selling it's normal for it to be a little

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inflated but if your team selling over half of people they get on the phone with the price is

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probably too low and so I'd say the sweet spot this is just my rule of thumb is about 30 to 40%

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is kind of the benchmark and so big picture you just need to do the math you can't always do the

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math when you have small data and so this is me just giving you a rule of thumb of what I have found

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is that usually closing about 35 ish percent is it is kind of like okay we're doing okay here

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right you get much above mid 40s it's like maybe we're a little high if you're like in the 70 to 80

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percent you almost certainly have a double or triple in pricing capacity available to you a double

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or a triple very a huge amount of pricing is kind of it's kind of there does this depend on the

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elasticity of the good sure but for most services consumer and business services uh that is a good

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rule of thumb to go by that that I use