I wish I’d known this 15 years ago. Would have saved me at least $200,000.
I grew up as an athlete where it was all about working as hard as possible. “First in, last out” as some coaches would say. Athletes like Michael Jordan and Kobe Bryant were idolized for their insane work ethic.
As I became an Entrepreneur I’d hear online experts like Gary Vaynerchuk glamorizing hard work, saying things like “respect the grind.”
In the 15 years since, I’ve heard over and over again, “money loves speed,” and “done is better than perfect.”
Often this was really solid advice. You’ll get your 10,000 hours in a heck of a lot faster if you’re working 10 hour days vs 2 hour days
There were a few times, though, when “take massive action” was actually the worst advice I could possibly get, and it cost me dearly.
Like when I spent 500 hours creating an online course which I had no idea how to market or sell. In fact, I didn’t even know if there was a market for it. I sold 9 copies and discontinued it.
Or when I started a real estate business and was offering to buy 100 houses per week, at the very start of the 2008 crash. Unbeknownst to me, tirst house I ever bought was, literally, in the most expensive week of the most expensive month, of the most expensive year of my city’s history. Every house I got after that prices were falling faster and faster. I didn’t have the bankroll, network, skill, or experience to support short-term losses like that. I had to get out. In all, I lost $200,000.
When the market hit rock bottom, I realized I’d be $200K richer if I would have done absolutely nothing and sat in my Mom’s basement and played video games for those 18 months instead of buying real estate.
It made me realize:
Massive action is a multiplier. If I’m pointed in the right direction, massive action multiplies success, and if I’m pointed in the wrong direction, massive action multiplies pain. We Entrepreneurs have one speed (full-tilt) and one direction (straight ahead). We don’t realize that just because we’re moving, doesn’t mean we’re moving forward.
It took a few years, but I painfully realized that different tools were needed for different situations.
It seems obvious now, but back then I was the proverbial hammer and everything looked like a nail. Failing and recovering a few times has made me realize:
Skill is knowing how to swing the tool. Wisdom is knowing which tool to pick up in the first place.
And, in my opinion, Wisdom is discernment born in the fires of experience.
This caused me to think deeply and create, ultimately, The Five Levels of 80/20:
1. Personal
2. Skill
3. Managerial
4. Executive
5. Investor
Copyright Tim Francis; 5 Levels of 80/20 is a registered Servicemark with the United States Trademark Office and this IP is protected by law. Please don’t use without written authorization.
Level 1 is how we show up in our personal performance. *Before* you start working for the day, how’s your energy? What’s happening in your family, friends, faith, fitness, diet, and health? Is your spirit light or heavy? How about your mind? Your body? Your conscience?
History abounds with people at the top of their game – be it sports, music, or business – but something breaks in their Personal level and the whole house of cards comes tumbling down. Think Tiger Woods, circa Nov 2009. When Personal tumbles, due to illness, death, divorce, or other, everything else often tumbles too.
Level 2 is Skill. Being the one to execute with proficiency. Selling, building a website, writing sales copy, teaching a yoga class, speaking live, etc, are all Skill-level activities. When we’[re in Level 2, we’re exchanging Time for Money.
Level 3 is Managerial. Leading others who have Skill. Making sure they’re clear on the goal, have the access and resources they need, and coordinating them with any other Skill-players who they may need to cooperate with. When we’re in Level 3, we’re exchanging Outcomes for Money.
Level 4 is Executive. Making the right decisions (including strategy, people, markets, etc), given the environment we’re in, to achieve the right mix of 4 outcomes: company Free Cash, enterprise value of company, happiness of teammates, clients, and vendors, as well as our own satisfaction. When we’re in Level 4, we’re exchanging Decisions for Money.
Level 5 is Investor. Making the right investments (including cash and sometimes advisory ability and/or connections) to multiply our money, sometimes to make a particular impact too. When we’re in Level 5, we’re – more or less – exchanging Money for Money.
So is going fast the answer? Or going slow?
It depends what level we’re at on the 5 Levels of 80/20.
The lower we’re at in the 5 Levels, the lower the risk, reward, leverage, and consequence.
Specifically, when we’re in Level 2, Speed is a wonderful friend. We can try things quickly, even if they’re half-baked, and get market feedback quickly. Because it’s a tiny test, we can easily pivot where needed. Speed is also your friend because you’re getting rapid reps in, blazing towards your 10,000 hours for mastery. Because there’s so little leverage here, if we mess up, probably the greatest penalty will be on ourselves, probably not tearing down entire teams of people and putting them out of work.
The higher we go, though, the game changes.
At Levels 4 and 5, risk, reward, leverage, and consequence are all very high. One wrong, major decision can sewer the entire company.
At these levels, Speed is your enemy. This is the domain of “measure twice, cut once.” Often changing course on a direction at these levels is slow, painful, and expensive. Where Level 2 might make 3 changes in a day, Level 4 can usually only make one change per quarter, and Level 5 can only make one change every quarter or two.
When we’re making a Level 4 or Level 5 decision, we’re literally deciding the direction of peoples’ lives.
Every business has what I call a “Labor Laser.”
Take the total working hours of your team over a Quarter and that’s your Labor Laser. 5 people working 40 hours per week, multiplied by 13 weeks in a quarter, and your Labor Laser is a shopping 2,600 hours. Let that sink in. The direction you choose for your business over the coming quarter will dictate the life force of 2,600 hours of life energy, time, skill, and potential, and once that 2,600 hours is deployed *it’s never coming back.*
Choose wisely!
I’m not an advocate to necessarily go fast or slow.
I’m an advocate for discernment, the ability to carefully considering our internal resources, the external environment, the timeline we’re working with, and then picking the right tool for the job.
Hopefully, with each decision, you can properly identify where you are in that moment in The 5 Levels of 80/20, and pick the right tool for the job.
I’m also not necessarily regretful of my mis-steps. They’ve all been powerful learning experiences, pointing me in an ever-truer direction, expanding my ability to build great businesses and advise my fellow Entrepreneur. They’ve literally been the fires required to gain discernment and build great models like The 5 Levels of 80/20.
Onwards and Upwards,
Tim 🙂
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