Why Working Harder Won’t Make You Rich - Codie Sanchez
In a Nutshell
The core message is that most "business owners" are actually self-employed slaves to their companies, trapped by ego and the addiction of being needed. The key distinction is between founder mode (doing everything yourself, being indispensable) and owner mode (building systems, hiring people better than you, and making yourself replaceable). The most important takeaways are that you need two core metrics to run your business, should pay yourself market rate immediately, and that the transition from self-employed to owner requires giving up the dopamine hit of saving the day.
These notes were generated by AI and may contain inaccuracies.
The biggest lie people are told about getting rich is that it is about looking rich rather than actually getting rich. On social media, people display their success level, but their balance sheet would tell a very different story. Rich is defined as two things: having enough money to live the life you want, and actually liking that life. Naval's definition states that success is having what you want out of life, and happiness is the same thing.
Many business owners trauma-bond over the belief they should be miserable when running businesses. The idea that being rich or being an owner has to be miserable is a significant lie. Many people love the idea of working for themselves until they realize they become trapped by their own business. 46% of business owners are not profitable, and 64% of those who are profitable make less than minimum wage in California. The average business owner makes between $40,000 and $60,000 per year, while minimum wage in California for full-time work equals approximately $75,000 to $78,000 annually.
Most people do not need to take their job home with them or stress about making ends meet inside their business. The speaker receives criticism for advocating buying businesses instead of starting them, primarily because starting a business is extremely difficult and most fail. The businesses that succeed require owners to work for three to four years before eventually making money. Having a profitable business puts someone in the top 10%. A business making $1 million per year places owners well above the top 1%, though they typically take home around $150,000 annually. A $10 million per year business represents only 0.01% of all businesses.
Most people should work in someone else's successful business before considering starting their own. Anyone could potentially become a business owner with enough childhood trauma, caffeine, sleep deprivation, and obsession, but that does not mean anyone should. The speaker observed during nightlife work that many people had the ability but lacked the capacity or disposition required. The sacrifices demanded, especially in the beginning, are substantial. The challenges become more complex over time, but momentum serves as a powerful force. The Dunning-Kruger effect creates particular difficulty during the messy middle period.
Most businesses fail not due to cash problems but because the founder gives up. Venture capital firms prefer two or three founders because the likelihood of burnout exceeds that of employee burnout. The alternative path involves owning part of someone else's business, which people overestimate as difficult. Business owners frequently complain about finding competent people, yet many believe the current generation lacks toughness. Anyone can carve out equity in someone else's business if they become super valuable, making them a business owner. Cheryl Samberg and Bali Savvasian are examples of people who became worth hundreds of millions of dollars as CTOs without being traditional founders.
Early in her career, the speaker had what she calls the hero complex in business, believing she had to be the savior in everything or the business would fail. She was a huge Richard Branson fan because he lived an adventurous life while building businesses, including traveling in a hot air balloon across the world. When invited to his island, she declined because she told herself she did not have time and the business would fail without her. Activities like water biking and being without her phone for multiple days seemed impossible given her business demands. Since then, friends have attended similar events, made business deals, and met power players in ways that created asymmetric advantages. The business was doing approximately $5 million per year at the time, growing and profitable, with no actual fire to put out.
The amount of responsibility that is actually ego is substantial. Business builders wrap their identity in titles like CEO, founder, or creator. Eventually, every business will have a giant gaping hole of failure, leaving founders alone wondering why they started and worried about failure. If identity is entirely tied to the business, failure in one aspect means personal failure. Branson has had approximately 60 businesses with multiple huge failures. Wrapping identity in one thing likely holds many people back. It took the speaker approximately 15 years to realize that employees might be more competent than assumed and better at certain tasks.
There are 12 types of owners, with the three most common being the closer, the ball hog, and the visionary, identified through surveys of approximately 15,000 people. These three types share a similar story arc: working for someone else who would not listen, wanting to do things differently, not fitting into the mold, becoming relatively unemployable, or being faster, better, and stronger than others. The closer excels at selling anything. The founder wills something into existence, creating products that did not previously exist. The visionary sells dreams and must sell a vision bigger than what employees could see independently to succeed as a CEO.
The arc for almost everyone involves being highly qualified, good at business, outperforming others, not being listened to, and then executing independently. The problem is that all of this focuses on the individual rather than leadership, building real businesses, and implementing systems and processes, which typically falls to number twos and number threes. Founders must learn these skills, especially when creating their own organizations.
Great founders hate repeating themselves, which leads to creating systems that enable scaling. A single salesperson might reach a few million in sales, but that represents the limit without systems. They love one thing about their business more than anything else: selling clients on the problem being solved rather than the product itself. They must create belief that others can follow through on the dream. Many entrepreneurs struggle here, claiming there are no A players available, yet A players will not want to work for C players. Being a winner is necessary to attract winners.
Being indispensable is not a compliment to founders. Revenue should have nothing to do with the founder personally. The more founders drive revenue themselves, the less they have a business and the more they have a highly paid job. The entrepreneur pyramid has three levels: at the bottom, entrepreneurs do everything together; in the middle, managers handle things with micromanagement and oversight; at the top, CEOs do very few things while the team handles everything else. This represents the generalist to specialist curve, moving people from doing many things moderately well to having specialists who run everything exceptionally well.
The most dangerous addiction for a founder is being needed. Feeling capable of coming in to save the day and close deals provides significant dopamine. Approximately 95% of companies owned are by men, who typically want to be needed for the business, while women typically want to be needed by their employees. The very thing that enabled someone to become a founder becomes the reason they will never succeed. One founder built a nine-figure business that would fail due to one person's fault because he refuses to step aside and hire people better than himself. Many avoid hiring people better than themselves due to guilt, shame, or fear they might take over the position.
Finding people who are competent, hardworking, and have initiative represents an unbelievably rare skill set. More founders struggle to find such candidates than to find them and then fear bringing them into the organization. The fear is often subconscious. Charlie Munger's insight suggests that many people are not skilled enough at setting up incentives properly. The reason for fearing someone being better is often the inability to corral them effectively. With proper incentives, almost anyone can be hired and directed appropriately.
There are only five reasons why anybody does anything in business: making money, gaining relevance, wanting to lead a team rather than remain a doer, achieving significance through higher titles or hierarchy, and obtaining work-life balance or freedom. The biggest mistake founders make early on is assuming everyone is like them. If incentivizing themselves, they create compensation plans showing millions of dollars in potential earnings. However, showing someone a plan with work-life balance, Fridays off, and a foosball table would not interest them if money is their primary motivator. In Austin, freedom often matters more than money due to the local culture.
All employees take personality tests, an approach stolen from private equity. Private equity requires every employee to take personality tests and then aligns their incentive compensation plans accordingly. Hiring someone who values balance and freedom but excels at creative insight, engineering, or product creates a win. Placing them on a compensation plan focused solely on money causes both parties to lose. This represents a dance that varies with each individual.
Significance and relevance are probably the most overlooked incentives. Many people today claim titles should not matter and warn against title creep, but this is not always true. Someone who values a high title could receive less money and less time off in exchange for the title. Many founders in the industry list founder, entrepreneur, or visionary next to their name despite businesses making only $30,000 per year, because significance matters to them. Relevance differs slightly, with approximately 15% of 100-plus employees at the media company and advisory business caring about impact and relevance. Some left private equity because they did not want to die on Wall Street doing deals and wanted to feel their work meant something. These individuals often receive less pay but gain more impact.
The transition from founder mode to owner mode requires founders to initially become psychologically fused to the company, working harder than everyone, knowing every customer, and taking every call. This intensity serves as the fuel that gets the company off the ground. At some point, the rules reverse, and founders must dismantle that identity to become owners. They must tolerate other people doing things differently, lose the dopamine of saving the day, allow other employees to become more important or make mistakes, permit customers to form relationships with other people in the company, and accept that the ultimate evidence of success is that things can go perfectly well without them. Entrepreneurship rewards narcissistic levels of self-belief in the beginning, but ownership punishes narcissistic levels of self-importance when growing up.
Being the hero is equivalent to taking heroin, representing an addiction to the business. Continuing to be the hero is considered a four-letter word at the company. The best way to serve employees is to ensure the business succeeds, which requires flipping the entire script from the common advice that one must serve employees.
Being the hero in your business is actually heroin. Self-employed is what 95% of businesses are. Most businesses don't have any employees, and even those that do have such micromanagement oversight that you're addicted to Slack, your wife and friends know it, and you feel good every time you get the dopamine hit of a ping.
The only reason you can own a ton of businesses today is because you never want to be self-employed again. It was miserable. It probably led to stress of feeling like for the last 5 years, what if the business couldn't go on without you.
If you're self-employed, that means either the fulfillment of the product, the sales of the product, or the distribution of the product falls entirely in your hands. If any one of those three falls entirely in your hands, you're still self-employed. You need to remove those first.
To be an owner, you need the number one thing most business owners don't have: transparency. You should not hire great people and get the hell out of their way. That's actually a disaster because they're never going to care totally as much as you about your business.
Most owners are flying in an airplane without a cockpit and without a dashboard. You need to see inside of your business the most important metrics every single day.
There are two types of scorecards that matter. Activity-based scorecards are what you can control: has your team reached out to all the people that they need to, has your team done a number of cold calls, emails. Outcome-based scorecards are whether you're hitting revenue goals, close goals, conversion rates, churn down.
Most people only measure the outcome-based goals with very few predictions, so it's hard for them to project out what the future might look like. Very few people measure activity and outcome and have forward-looking projections.
Your business should really run on two main oars. North stars don't work because you end up pulling a boat left, right, left, right and the team gets whiplashed. If you only have one oar, you go in a circle.
You need to focus on some top-of-funnel metric like followers, leads, etc. Most businesses have two metrics that you can run your entire business on. If you're an auto mechanic, you might care about average order value and car count.
Everything's Pareto's principle. The 80/20 rule is almost everywhere. Most of us get overwhelmed because we try to do 55 things and then realize that no, Facebook ads, cold calls are going to drive most of our conversion and leads.
The two metrics go down to each team. Every team has two metrics. There are only seven parts or business units in every business from finance to ops to marketing to sales, so that means 14 metrics total, but there's a leader in charge of each one.
If something doesn't roll up to those two core metrics, don't talk about it until you're hitting $100 million in revenue because you don't have enough cash to do it.
76% of small businesses now use AI per Goldman Sachs. 10,000 small business voices survey, yet only 14% have it fully embedded in core operations. Everyone's dabbling but almost nobody has actually rebuilt their operations around it.
AI is not that important for most small businesses. What's a lot more important is answering your phone, responding to emails, answering texts. Most small businesses respond on average 18 to 24 hours after they get a lead.
80% of the reason why you win versus somebody else is that you just respond faster or you come up quicker. If you're choosing between AI and response time, it's response time all day.
Pay invoices as quickly as possible. If you pay the graphic designer the moment they send the final version, the next time you need to go back to that graphic designer, they will remember they didn't even need to chase you. That puts you straight to the top of the list even if you're getting charged the same rate as everybody else.
If you're good at something and you say to someone you're going to come and work for them for 30 days and give them everything, if you're as good as you say you are, they're not going to be able to let you go. They're going to have to pay you.
You can call out the game and if you don't deliver, you've taken on all of the risk. Between paying invoices quickly and working for free for 30 days, these have been step change business hacks that keep on working two decades later.
The law of reciprocity is super underused in both sales and employment. When you go to the car dealership they give you a hot dog and a Coca-Cola even though most of the time you don't buy a car because there's an innate human belief that if somebody gives us something, we've got to give them something in return. The higher the value of what you give, the higher the belief that you have to give something in return.
Most people don't show enough proof. There's nothing you can say that would be stronger than showing live what this tastes like, showing live what somebody looks like who just had it. If you want to get a job and get paid really quickly, one of the best ways to do it is to show proof.
For a salesperson, show your calendar, show the list of people reached out to, show your process and CRM. Show what you would do with what they've got. Most people that get hired have to do a project, paid, to show their process.
Your first hires are almost always going to suck because you kind of suck when you start. There's the hiring matrix with three steps: find them, know what they look like, know how to close them.
The known candidate matrix has five things that tell you whether someone has a high likelihood of being successful: proven experience, sector experience, size, problem set they've already nailed, and whether they know anybody in your sphere. A top performing candidate ranks 25, a bottom performing one ranks zero.
Most employees are house cats. They work 9 to 5, don't want to work too much harder than that, they're not going to go out and find their meals. The cheetah is your 20%. Those are your killers, but you don't need a whole company full of cheetahs. They're really expensive and hard to manage.
You should hire divas every time you can because actually divas are the ones that perform over time, but you're going to hear the most complaints about them. Anybody who's really good is impossible to manage. You couldn't have a company of 80% of them because you drive everybody crazy.
The only way to consistently find great people is first referrals, second recruiters, then third websites. Your best recruiters ever will be your employees because you've built a culture that isn't terrible and they will come because they want to work with other people just like you.
Don't do hourlong interviews ever. You would never have an hourlong meeting to recruit somebody until you know you're obsessed with them and want to have them on. Even then, set it as a 30-45 minute meeting. 15-minute meetings are totally underutilized.
If you don't have a list of questions that you ask and everybody on the team has set questions, and all the notes get accumulated and stackranked and scored, you're hiring wrong.
To find an A player, by and large they're determined by how hard of things have they ever done. Ask them what's the hardest thing they've done lately in the last 90 days, what has kept them up at night, what has pushed them further than they thought.
When interviewing candidates, ask about the hardest thing they've done recently. Someone who says "hot yoga retreat" likely won't handle intense work environments well. The question "When was the last time you couldn't go to sleep because you wanted to work on something so badly?" reveals true passion. Slow responses or excuses about sister's bachelorette party flights indicate the candidate isn't a winner.
Amjad from Replit created the concept of an anti-sale for new employees. The fastest company to go from zero to billion dollars in sales, he went eight or nine years with zero revenue. The anti-sale appears on his website and states: "Do not join if you do not love hard things that almost break you." It also includes a stance on open source versus closed source technology.
Daily Wire uses a recruiting page with an inappropriate meme front and center, making it clear what values they stand for. The meme serves as a recruiting test - if you don't find it funny, you're not the right fit. The same polarizing approach could work for any ideological company.
For most companies, the anti-sale should include what top performers agree with that mid-performers would get upset about. For aestheticians or salon workers, it might be: "If you're obsessed with the newest hairstyles coming out of Hollywood" or "If you think Taylor Swift's got swag, then this place isn't for you."
When Elon bought Twitter, he posted looking for people who want to attack the hardest problems in the world. He stated there would be very little rest, 80-90 hour weeks, no PTO, and people would "work harder on the biggest problems to try and create the new town square." The posting specified: "If you're interested, apply here." This attracted a specific cohort of people for whom this sounds appealing.
The world splits into people who want to "send it professionally" and people who don't. When someone sees intensity described honestly, it reminds them they're allowed to own their intensity rather than "gently into the night." The key insight is that people may not dislike being intense - they may just dislike the current things they're doing.
Most people, if they could do what they really want to do, would go full bore. Everyone has experienced getting lost in something, losing track of time, entering flow state, and becoming obsessed with making, building, reading, or watching something.
Some people are serial obsessives - stacking obsessions side by side across their life. Examples include getting in shape, running nightclubs, DJing, business, CrossFit, Thai boxing, yoga, podcasting, moving to America, becoming obsessed with a country, then the beverage industry and CPG, and now cinematography and building. The obsessions have been relatively linear, building dominoes that compound.
The residue of past obsessions hardens into identity. What you are is the residue of your past obsessions - elements that aren't still active but become part of your personality.
- Discipline: friction accepted - "I will pay the price. It's going to hurt, but I'll pay it."
- Motivation: friction removed - "I want to do this thing."
- Obsession: friction inverted - "I can't not do this thing. I have to. I'm pulled toward it."
Obsession won't last forever. The fear that "I have no work-life balance and it's never going to end" misses that this fuel will run out at some point. The freest discipline and motivation comes during obsession.
When obsessed, people get selfish about their obsession without thinking about connecting dots to create leverage over time. The solution is building chains so obsessions lead to freedom, money, and options. Having a "someday maybe" list on your phone helps manage distractions - a list of things you'd like to do one day but aren't going to do right now.
Focus works like a laser - the wider it is, the less intense it is. Narrowing focus allows winning. The caveat to being obsessed is figuring out how it leads to freedom or money, making it an option in the future.
Obsessive people probably never slow down - they change lanes. Instead of going 50 mph on the highway when the speed limit is 75, they go 75 on something they want to do. An example would be transitioning from being a "ball hog" who closes every deal to selling one-to-many through content.
Business fundamentally involves selling something for more money than you pay for it. The seven segments of business can be changed to different parts. The question becomes whether to sell a job to another human or build a business that runs without you.
The Puritan work ethic suggests that if you achieved something but didn't suffer, it doesn't count. The mentality requires being first in and last out. This belief has kernels of truth that make it pernicious. After a while, you can't lead from the front anymore.
The highest point of contribution isn't always being on the front door at 1 AM freezing - it might be dealing with DJs, bookings, and accounts at 9 AM. The transition requires separating your value-add from suffering.
When transitioning responsibilities, frame conversations around what the other person wants rather than your highest value. The conversation with a doorman might go: "Brad, freezing out there today. People are going to be rowdy. I feel like I should be out there, but I know you've been doing this for X months. You're a pro. You don't actually want me over your shoulder because you want us to earn more and bring more people in."
Most people operate as either dictators ("You have to do this") or doormats ("I'll do it, I'll be fine") with employees. The winning approach involves being persuasive enough that people do what you want without realizing it was your idea. This requires psychological sales, priming, and set and setting.
When having difficult conversations, choose timing and environment carefully. Don't have the conversation when someone is outside freezing and already pissed - bring them inside, make them comfortable, bring them hot coffee, and prime them to feel important before the conversation.
The same principle applies to personal relationships - rational explanations don't work when someone is raging. Wait until they're no longer pissed, hand them a glass of wine, sit down together, and then discuss perspectives.
Most people dislike conflict, and many leaders struggle because it requires substantial training. When addressing performance issues, frame the conversation as a collaborative win-win discussion rather than conflict. Sit down and explain that you want both parties to succeed, then clarify the specific metrics you're responsible for as a manager and the employee is responsible for meeting. When metrics aren't being hit, explain the business reality: "If we don't hit our 90-day numbers, how do you think I can keep running a business and paying everybody?"
Run all businesses on 90-day sprints because humans work in natural cycles. Use quarterly cycles to set clear expectations and check in every 30 days. If numbers aren't being hit after 90 days, the conversation becomes about whether continued employment makes sense. Be fair to all team members rather than making exceptions for favorites. This approach eliminates the vague corporate speak about feelings and HR involvement, replacing it with direct discussions about performance expectations and consequences.
Founders should immediately delegate administrative work like email responses that virtual assistants can handle. Stop personally reviewing automated reporting, scorecards, and numbers. Stop approving any invoice less than 1-10% of revenue depending on business size. Use expense tracking tools like Ramp instead of manual invoice approval. The open door policy myth should be abandoned because it puts leaders on everyone else's schedule rather than their own.
Establish boundaries where employees can only access you when they bring three elements: the problem, a potential solution, and the risks associated with potential solutions. If someone brings only a problem, they're not ready for the conversation and should work on it more before approaching leadership. This prevents leaders from becoming constant problem-solvers and forces employees to think critically before seeking help.
The worst leaders are those who seem nice but never help employees make more money, progress in their careers, get better, or get promoted. Many people work for such leaders and wonder why they hate their jobs and don't earn what they want. Being direct about performance expectations is more valuable than maintaining a false sense of niceness that ultimately harms everyone's financial prospects.
Pricing problems are actually confidence problems. Most people price according to market rates without questioning whether competitors know how to price correctly. Value-based pricing involves charging 10-30% of the value created for clients in savings, revenue, or freedom. Many entrepreneurs have a "murder complex" where they believe not charging premium prices makes them good people, when the real concern should be whether they're providing enough value rather than whether they're charging too much.
A study found that pricing experts were no better at determining correct prices than random people, and actually priced 15% lower. This occurs because of the wallet share phenomenon where most people only price 10-15% higher or lower than what they personally could afford. This creates a subconscious bias that restricts pricing based on the founder's own income level. Employees typically have a 30% lower pricing range than owners think they do, meaning employees may be unconsciously dragging down profits by 30%.
Artists and dreamers almost always underprice their services because they view charging more as greedy. This is why the Ownerscore assessment was created at ownerscore.com to identify whether someone operates as an artist or closer type, allowing for tailored business advice rather than one-size-fits-all recommendations. Following advice from people whose lives you don't want and whose skill sets you don't possess leads to poor outcomes even if the advice itself is sound.
Founders should pay themselves market-rate salaries immediately, even if it requires treating it as a loan initially. Many founders spend years not making money while thinking they have profitable businesses, when actually the only profit is their own unpaid labor. Market rate can be determined by researching salaries for similar company sizes, industries, and locations. If you can't pay yourself market rate by year two, something is fundamentally wrong with the business economics.
Despite record numbers of businesses being created (5 million last year versus 200,000-500,000 in 2019), there are fewer profitable businesses than ever before, and entrepreneur wages continue declining. Many entrepreneurs appear successful online while actually being poorer than most employees. The question becomes whether founders would still want to own their companies if nobody knew they founded them.
Ben Francis owns 70% of Gymshark, which he completely bootstrapped. Worth approximately 2 billion pounds (about 3 billion dollars), he stepped away as co-founder and CEO during the growth from 100 million to 500 million in valuation, then brought in the former Reebok CEO. The key insight: "When your aspirations for the business are bigger than your aspirations for yourself, you'll become a successful entrepreneur." This means caring more about business success than personal ego.
Not everyone needs to start their own business from scratch. Risk-averse individuals can stack cash first, build on the side, invest in businesses, or become number twos in existing companies. Approaching business owners with an offer to work as an operator for below-market salary plus equity can lead to legitimate ownership without the challenges of starting, finding, and positioning a new business.
Success in business requires wanting customers to succeed more than yourself, being a mentor whose mentees become bigger than you, and investing in employees who will outperform you. Antonio Gracias made $40 billion on SpaceX partly because he maintained relationships even after being ousted from PayPal, later receiving funding from those same relationships. Rich people think in terms of leverage and investment rather than their own labor, feeling no shame about making money from others' work.
People with workhorse identities wrapped up in working long hours often miss investment opportunities where others work harder while they earn passive returns. In a portfolio of 33-36 companies, the businesses requiring the most investor attention are typically the losers, while winners operate independently. Bad leaders spend excessive time with underperformers instead of enabling top performers and recruiting more winners.
When ready to transition from being owned by the business to owning it, the first hire should be a trusted number two or right-hand person. Bill Perkins famously required two assistants before investing, explaining that his investment wasn't for the founder to do minimum wage work. The choice becomes whether to sound right or win, emphasizing that having junior people handle routine tasks enables focus on high-value activities.
A chief of staff is one of the most underrated hires for anyone making seven figures plus. This role is not much more expensive than an assistant, and it serves as training for a number two position. Aad serves as the chief of staff and is described as a standout performer who previously worked with Chris in Iraq as his interpreter during Chris's time as a Navy Seal.
During the pull out of Iraq, Aad's life was in danger and he faced prosecution. Chris had to call in numerous favors to get Aad out of the country. After arriving in the United States, Aad immediately worked two jobs simultaneously at Starbucks and the grocery store to pay rent. Once he obtained his green card, he applied for and joined the Marines, finishing first in his class. He then became an electrical engineer and was planning to work at AMX for an internship program.
Aad was hired despite having no background or knowledge in the chief of staff role. The decision was based on recognizing his character and drive during a breakfast meeting. He was described as a "killer" who was hungry and willing to grind, even without experience. When offered the position just 20 minutes after leaving their house, he accepted immediately without needing to hear the pay details.
The philosophy is that hungry individuals who would "kill to just be next to the owner" or "next to one of the winners at the company" don't need to be paid premium salaries initially. Once they start outperforming, compensation increases accordingly. These types of hires have consistently become the people who eventually run companies.
Ownerbook.com is hosting a massive giveaway during the book launch that includes giving away a million dollars in cash and prizes live at the event. The goal is to have people make money during the launch itself, rather than focusing solely on book sales numbers. The initiative includes Oprah-style business grants for business owners, productivity-related prizes, and partnerships with charities such as the Navy Seal Foundation. The charities will receive live videos and access to resources they wouldn't otherwise have due to book purchases. This approach is described as potentially the first million-dollar book launch.
The episode concludes with mutual appreciation and congratulations between the host and Codie Sanchez.
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