Full transcript
0:00[Music]
0:04a flywheel this thing is really what
0:19made em azan good and really there's two
0:23types of there's two types of businesses
0:26and there's two there's two types of
0:28growth one is linear and one is
0:34exponential right there's two types
0:40we'll say this is one two and linear is
0:44what pretty much every single businesses
0:4699.9 oh no no no no no embassy no
0:48businesses are linear and what that
0:50means is their growth let's say this is
0:55growth measured in dollars and this is
0:59time right and it looks like this
1:12probably even makes that noise - so
1:16that's what most businesses look like
1:18this year let's say this is year one
1:21let's say in one year they grow to say a
1:25hundred thousand then they're like okay
1:28I kind of know the formula so year two
1:31we'll just do a double of that so they
1:33double double the staff double the
1:35whatever they make two hundred thousand
1:39didn't Eli okay we'll do is double with
1:41that and then three hundred thousand all
1:47right they move like that that's linear
1:49and you know what it's actually pretty
1:51hard to even do that most businesses
1:54don't even do that most businesses kind
1:56of go up linear and then stay flat and
1:59in decline all right some good
2:03businesses can pull this one off these
2:05are very rare but this still sucks this
2:10is linear no good company's a linear
2:14none of them zero look at their growth
2:16and no rich people's incomes a linear
2:19look at Warren Buffett's book of Jeff
2:22Bezos is look at any rich person on
2:24earth over all time and it won't be
2:28linear so this sucks
2:33and then exponential looks like this if
2:37we've got growth time dollars years
2:48looks like that so well you know it's
2:53going kind of linear and then it kind of
2:55goes BAM up like that that is what all
3:00good companies have so like just say bad
3:04good right this makes sense two types
3:10than the expen sure and I always
3:13wondered what the hell makes this
3:14exponential thing happen but how can you
3:17get there instead of that and what's
3:21also crazy is that with these businesses
3:25let's say you spend a hundred thousand
3:27on ads here and you're a hundred times
3:31bigger here but you don't have to spend
3:34anything on it it has totally different
3:37relationships in a business like this to
3:40make ten times as much you have to spend
3:41ten times as much in a business like
3:43this sometimes you don't have to spend
3:45anything and you can make a thousand
3:47times more all right these are the ones
3:50that that everyone gets rich on and
3:54these are the companies that are the
3:55best and I took me a long time to figure
3:59out how these damn things worked and
4:10it's all to do with having a flywheel in
4:13your business like Amazon does so I'll
4:15just show you Amazon's if we have growth
4:19then we have sellers selection then over
4:27here we're going to have experienced
4:30traffic
4:44there's a another amplifier here which
4:46comes up which is lower price lower and
4:51costs which leads to lower prices which
5:00then feeds that again alright so for
5:05every new seller that comes onto Amazon
5:07they bring a wider selection of things
5:11the wider the selection of things the
5:14better this experiences for a customer
5:17coming on and looking for things and the
5:19better that experiences the more people
5:22come and the more often they visit and
5:25then the more people that come in the
5:27more often they visit the more sellers
5:30come because there's more of a market
5:32there and then the wider the selection
5:34and then the better the experience then
5:37the more customers that come in the more
5:39frequent they visit and then what
5:40happens is they also because they have
5:43so much buy economies of scale they can
5:45lower they've got lower costs a server
5:48with if you have a server in the initial
5:51stages in a team of developers in the
5:54initial stages that might cost a hundred
5:56grand per year for the developers in the
5:58server with let's say a thousand
6:00visitors a month but then if you have a
6:02million visitors a day and you might
6:04still have the same team so the costs
6:07room the costs got shared over more
6:10units of scale and that means that
6:12they've got lower costs and then they
6:14can lower the prices and then when they
6:16lower the prices as well that makes the
6:18experience better which means that more
6:20people are going to come and really this
6:22all feeds growth and it spins like a
6:25flywheel in every time this every time
6:29one of these things gets better it spins
6:31faster and every time that happens the
6:35increase its bigger so not only is this
6:37happening faster but bigger every single
6:39time and that's why if you look at
6:42Amazon's value on the stock market
6:46that's why if you look at Jeff Bezos is
6:48near
6:49like that's how and it's like under
6:52stoppable really and all other
6:55businesses work like this to the big
6:57ones so with Google the more people that
7:01search on Google the more websites want
7:04to be found on Google the more content
7:06they create the more people search on
7:08Google the bit of the algorithms get the
7:10bit of the search results are the more
7:12people that suit right that's how Google
7:14has gotten so good
7:15everything's on it and the results are
7:18pretty damn good and so you know Google
7:22has a flywheel and also Facebook has a
7:26flywheel the more people are on it the
7:28more content they create the more often
7:30they're on it
7:30the more other people are on it the more
7:32advertisers want to sell on it you know
7:34it has a flywheel uber has a flywheel
7:37the more drivers that drive with uber
7:40the more the faster the time uber can
7:44get a driver to you if you pull out your
7:47uber and you look at it it could be
7:49three minutes if they didn't have much
7:51drivers it might be 20 and then you're
7:53not going to use it because you'll just
7:54get a yellow cab so the more drivers
7:57they have on over the more people come
7:59on to over and then the more people that
8:02come on to over the more drivers that
8:03come on to over and then it goes so it's
8:05same with your B&B same with all these
8:07things so all of them have a flywheel
8:11this is pretty make sense right in the
8:17flywheel is what creates exponential
8:19growth but what's interesting is most
8:21businesses the ones that have linear
8:23curves they have a negative flywheel
8:26they go down so I'll give you an example
8:33if you all use are done for you done for
8:39you services and one-on-one consulting
8:43as an example right seriously this is it
8:48this is why their model breaks so we'll
8:51say this is done for you or one on one
8:55all right I can't put that there because
8:59I need to put the flywheel stuff there
9:00but this is for done for you or 101
9:02and let's see here you've got attention
9:14to clients or attention on clients
9:21clients results new clients time alright
9:42so as soon as this reaches a certain
9:45limit for every new client you bring on
9:50you get less time and for every time you
9:54get every every time you get less time
9:57you can give less of it to your clients
10:00or it has to be spread thinner and the
10:03less attention you give your clients the
10:06less results they get and the less
10:08results they get the less new clients
10:11you get and so it actually it works fine
10:14up until the point but then it works
10:16adversely and it goes boom
10:18same with one-on-one consulting it has
10:24an anti flywheel
10:33so how does it end if you buy other
10:36people to do the work they just
10:43companies it gets less and less and less
10:53efficient for every new human that gets
10:55added how could it possibly get more
11:02efficient but this new there's never a
11:08time when when things get more efficient
11:10by adding more humans you know what I
11:13mean like generally that makes things
11:17worse
11:20I'll use a perfect example with the
11:22Yellow Pages anyone using them to manage
11:28their ads
11:37it's what Yellowpages thought
11:42Yellowpages actually had a flywheel when
11:44they had one book because for every new
11:47person that came the more people used
11:49the book the more people that use the
11:51book the more they could charge for
11:52their ads they had a system that was a
11:55was it has it was a flywheel and that's
11:58what how they made a ton of money and
11:59they were crushing it for a long time
12:01but then when things came online they
12:03thought oh let's offer services now bad
12:05move I'll give another example let's say
12:14you're a mechanic and you've got a shop
12:16let's say that you can do one job a day
12:19so if one customer a day and you know
12:22for every new customer you get up to 30
12:25is good making more money you're getting
12:27more utility from your machines your
12:30rent your time all that but then let's
12:33say you get 60 customers one month now
12:36every customer is going to have to wait
12:38twice as long or every job you do is
12:41going to have to be half as good which
12:46is gonna mean customers don't come back
12:48and customers don't come in the first
12:50place
12:51because you take a long time or you
12:53don't do a very good job so the training
13:02one is is interesting it's this tons of
13:05dynamics to it first of all you've got
13:07to think about it as a system with
13:10training it can handle a huge amount
13:13more volume because instead of
13:15delivering the advice yourself well
13:17really the model goes in different
13:19stages doing the work is the most time
13:22intensive thing there is after that
13:25one-on-one advice is after that like
13:28coaching is and then after that creating
13:31an automated product is right so each
13:37each system can handle more and more
13:39volume with really the same or less
13:43human resources
13:50yeah well it that depends on the program
13:52and everything right so ways that I've
13:56used I mean things which I've come up
13:59with and I started out with done for you
14:01when I experienced this exact thing
14:03right then I went to one on one
14:04experience this exact thing went to a
14:06hybrid sort of model it experienced the
14:08same thing each time though I got up to
14:10a higher plateau and then one huge
14:20breakthroughs have been like Facebook
14:23group that thing helps you really apply
14:29a bit of a flywheel because for every
14:33new customer you get there's the ability
14:36of someone's questions going to get
14:38answered faster and they're going to get
14:40more responses and better answers right
14:41so if every additional can you stop
14:44making that noise so for every
14:47additional unit of customers you get you
14:51actually your customer experience in the
14:53group gets better right and then you've
14:57also got to think about time so now that
15:01we're doing the recordings and all
15:03they're in our business the more
15:13mastermind events we do the more Q&A
15:15calls we do the more people that join
15:16the more questions that are asked the
15:18deeper our archives of content which
15:21means when a new customer joins the bit
15:23of the experience like never before
15:26were we in a position where new master
15:28my members could instantly watch an
15:31event so you attended two events did you
15:35say you watch both
15:41so you got to attend two events before
15:44attaining an event
15:46how many masterminds can do that but
15:52then I also thought about search that's
15:57another thing so with our search the
16:05more people that search the better the
16:08search results get because it has an
16:10algorithm in it optimizes it so the more
16:12customers we get the better the skits
16:13and the longer we have been in business
16:16the bit of the skits the more customers
16:18we get here the bit of these get the
16:20longer we've been in business the bit of
16:22the skits a lot same here to have a
16:26flywheel you have only one thing has to
16:29be true for you to have a flywheel and
16:31it is this
16:44for every one customer the experience
17:01must get better
17:17that's what makes it happen so with a
17:22mechanic up into a point he's fine but
17:29then every for every one customer the
17:32experience gets worse all right so if
17:40you have a machine where with every new
17:43one customer the experience gets worse
17:46you the worst thing you can do is try
17:50and get more customers that's actually
17:55not what you want to do and every single
18:01system in the universe has a threshold
18:03limit for example a basketball team I
18:05think this is what five players on the
18:07court or something yeah so imagine if
18:09you put a hundred is they're gonna get
18:12twenty times better probably no one will
18:15be able to score a point right so it
18:18doesn't it doesn't work like that it's
18:20probably yet its threshold right at five
18:22that's probably where it's where it's
18:23really good because people come up with
18:26these numbers based on things like
18:27that's right
18:35so this is the main thing you want to
18:41think about all the time how can we that
18:46this is called different things its
18:47network effects this is a network effect
18:50a classic example is if one person has
18:54one phone it is totally useless imagine
18:57the person who bought the first
18:58telephone now I'm gonna call them they
19:03ain't going to call no one that's an
19:07actual joke about network effects
19:09because this truly is useless because no
19:12one's gonna call you can't do it it's
19:14just not doing anything but the more
19:18people that have a phone the more people
19:20can call you the more people you can
19:22call so there is a network effect no
19:25one's like our men please don't add any
19:28more telephones like to the to the
19:30public but how often do people say that
19:33- like one-on-one consultants please man
19:35don't take you on any more clients you
19:38know I like the attention you give me
19:40you know what I mean
19:46so this is this makes sense
20:03yeah yeah I've had to keep finding the
20:08limit all the time and I just keep
20:10trying to think how can I get around
20:12this damn thing and then you know I can
20:13figure it out just like one on ones
20:16women we see when I started up people I
20:18used to do one-on-ones are not people
20:19and then you know it's fine at first and
20:23then they're more customers oh my god
20:25this thing is just out of control
20:26so I was like let's just force people
20:28onto the Q&A calls like Joker sherbet
20:32with his emails allowing people to do
20:34their you were allowing people to do
20:36emails right if you allow emails gets
20:40worse if you allow one-on-one calls
20:44worse those things make it worse if
20:53you're doing emails this is getting
20:55worse if you're doing call when I want
20:57cause this is getting worse
21:11sure there's tons of things so some
21:17other things we did is like I spoke
21:20about how a lot of like these some
21:23masterminds where the the teacher of the
21:25mastermind will recommend that everyone
21:28just be a carbon copy of demon right and
21:31then what happens is the opportunity
21:34might be good but then the only thing
21:36those people know how to do is create a
21:40mastermind teaching other people how to
21:41be them and the only thing their
21:43students know how to do is create a
21:45mastermind teaching their people how to
21:46do them
21:46we have an anti flywheel here all right
21:50this thing's going to blow up and so one
21:54key thing that that I had to do to
21:59really think about this could get better
22:01was the niche now this you can do niches
22:12within niches so if Andrew like I used
22:15to start off by teaching people how to
22:17start a digital marketing consulting
22:19business to fund the assess business
22:21alright that was how narrow my niche is
22:23who was in it at that point you're in it
22:26right and Paul Paul Ryan was in it - and
22:29you were in it yeah so that's literally
22:32how narrow it was back then
22:34because that's what I was doing and then
22:37it we inter but there's only so far I
22:39could go in that before I was like
22:40alright how to do digital marketing they
22:44which was mostly how to sell websites to
22:46local businesses then there was only so
22:48far that how to sell digital marketing
22:50retainers to local businesses and then
22:52you know it turned into how to start
22:55like a digital marketing consulting
22:57business now it's getting a bit more
22:58broad and now it could include SEO it
23:02could include website design and digital
23:03marketing for Adwords Facebook you know
23:05now I'm getting some more stuff in there
23:07and then it became like how to start a
23:12consulting business and really any niche
23:15I've made it broader every time and this
23:17time with accelerator 2.0
23:19we didn't tell recommend anyone any
23:23specific niche and then we get you know
23:27our variations like hunters so porn
23:33addiction consulting and then his one
23:35someone else saw that and did irritable
23:38bowel syndrome consulting someone else
23:40is going to see their and do something
23:41else so that's a flywheel right for
23:45every new customer who picks a unique
23:48niche we get better yeah
23:53someone saw that and got he got that
23:55idea from you video game addiction
23:57alright so fit that you can already see
24:00the flywheel spinning and it's just
24:02early days flywheel no nowhere near as
24:11bad ass as Amazon Swan but at least it's
24:15been in the right way and Andrew asked
24:22me about this who's like but I'm in
24:23accounting what am i doing all of us and
24:25I said yeah but there's niches within
24:29that I was like you know every different
24:32accountant is different there's tax
24:34there's there's all sorts of stuff and
24:36then there's the type of business that
24:37they might do it for there's the type of
24:39person they are there's there's all
24:41sorts of stuff right so in the beginning
24:44Andrew used to like just show people
24:46just do this honestly do this and he
24:49forced people to do like the same thing
24:51and he ended up with like you know
24:56you've got to kind of think about it
24:57like just a fishtank sort of thing and
24:59your students are in there these
25:00organisms and he was just producing like
25:04carbon and copy organisms that were all
25:06the same and that's not very good it'll
25:12work for a while but people who are just
25:14carbon copy they don't enjoy it that
25:16much because it's not really deem it
25:18doesn't this it's not you know it's not
25:20personalized that's why kids don't like
25:22wearing uniforms you know that's why no
25:26one wants to just be the same as
25:28something else that's why the suburbs
25:29with those houses are just the same two
25:31people who live in those places
25:35boo-yeah I hate those places but
25:38somewhere that has so much variation
25:40like in Europe like you know how it's
25:43all old and there's all this different
25:44stuff we're in New York how there's
25:46modern buildings old buildings new
25:47building is all like there's so much
25:49variation there that it people like it
25:53and so all of these place all of these
25:59things create Network effects or create
26:02a flywheel and Andrew was able to solve
26:05it still within the niche of accounting
26:07by stopping forcing all of his people to
26:10do exact the exact same thing he you
26:14know he he allowed people the freedom to
26:16take the core training and apply a piece
26:20of themself to it to create a unique
26:23variation and the easiest way to think
26:26about it is with you know with DNA you
26:36have an equation where you might have x
26:40and y all right so let's say this is one
26:49element this is another element well you
26:53want to think of pretty much you and
26:55your program is this and then every
26:58customer you have as this and this is
27:06program and what a lot of info
27:10businesses do is they take in a unique
27:14individual with their program and they
27:16force the x over the Y and they produce
27:19an X X all right
27:23and nowadays just creating X X is
27:25everywhere and all the X X's are
27:28creating as X X's and it's just going to
27:29this is going to blow up but with what I
27:36did with accelerator 2.0 and what
27:38Andrews done with his latest program is
27:40we producing x and y but every new
27:45customer that comes in is a
27:47one exit xbb right so they're taking a
27:53strand of this and applying it with them
27:56and creating something which is
27:58impossible that anything else is because
28:01every unique individual has their own
28:04thing which they bring and because
28:06there's no two people in the world that
28:08share the same DNA it's impossible for
28:10there to be you see this is the only way
28:14you can get a flywheel if you force the
28:19X X you will have the anti flywheel
28:29you