How To Use The 80 20 Principle For Business Growth By Working Effectively with Perry Marshall
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Ash Roy and Perry Marshall Video Transcript (This transcript has been auto-generated. Artificial Intelligence is still perfecting itself. There may be some errors in transcription):
Yeah. And the wealth distribution was always 80 20 and it doesn’t matter if they’re Marxists or socialists or capitalists or whatever. It’s a law of nature, right? So as a business owner, you’re either fighting it or you’re harnessing it. And the difference between fighting and harnessing is 16 to one because if you do the math if 20% of the people have 80% of the money and 80% of the people have 20% of the money, that means whether you’re the in-group or the outgroup is 16 to one. Yep.
So here’s my question, Perry. How do you know who that 1% is or what that 1% is of your activities that deliver 51% of your results or which is that 1% of your clientele that delivers 51% of your revenue?
Hello, and welcome back to the productive insights podcast. My name is Ash Roy. I’m the host of the productive insights podcast and the founder of productiveinsights.com and more recently the founder of getmetodone.com which is where you can find out more about the productive insights membership program that helps you to grow your business profitably and fast. Speaking of growing your business profitably and fast, today’s guest is one of the most expensive business strategists in the world. He’s been endorsed by Forbes and Inc magazine. He’s guided clients like FanDuel and Infusionsoft from startup to hundreds of millions of dollars. He founded the $10 million evolution 2.0 prize with judges from Harvard, Oxford, and MIT, launched at the royal society in London. It’s the world’s largest research science award. NASA’s jet propulsion labs use his 80 20 curves as a productivity tool. He’s reinvented the brighter principle and that has been published at the Harvard business review magazine. His Google book laid the foundations of the $100 billion pay-per-click industry. The ultimate guide to Google ads is the world’s best selling book on internet advertising. Marketing Maverick Dan Kennedy said if you don’t know who Perry Marshall is, unforgivable Perry’s an honest man in a field rife with charlatans. Perry’s consulted in over 300 industries. He has a degree in electrical engineering, which I believe is one of the hardest degrees to do and lives in Chicago. I’m delighted to welcome Perry Marshall from Perrymarshall.com, welcome Perry.
It’s great to be here. Thank you for having me. It’s really an honor and yeah, we’re going to talk about a bunch of stuff today including 80 20 which I think probably everybody’s heard it bandied about, but most people don’t really understand it in-depth, so this is going to be really great.
Yup. Perry has written this excellent book called 80 20 sales and marketing, which I highly recommend you get. You can either buy it in Kindle or in hard copy and it’s got some really valuable content in there, some of which we’ll be touching on in this conversation. So I recommend you listen up and a big shout out to my friend Jack borne, the founder of deadline funnels who introduced me to Perry recently. I really appreciate that. I look forward to having Jack on the show in the near future. Perry, it was a pleasure to meet you in Sydney when you were here recently. And in our brief conversation, we talked about the importance of focusing on the few things that really move the needle in one’s business. Now you’re the author of the book 80 20 sales and marketing, which we just looked at. If you’re watching this on YouTube, by the way, you’ll have seen it on the video. If you’re not, I recommend you check out the video version of our conversation. Now, the 80 20 sales and marketing book has some excellent insights into this approach, which looks at using your time most effectively. And specifically in chapter 12, you talk about the principle of the $2,700 espresso machine, which is followed by a case study around Joshua Boswell. So I thought that encapsulated that Pareto principle beautifully and it conveys it very effectively to our listeners. So I thought it’d be a great jumping-off point for today’s conversation.
Well, yeah, and see 80 20 is, it’s not just this like business rule of thumb or some abstraction that some economists came up with, uh, sure. It is all those things, but it’s actually the most fundamental law of cause and effect in practical everyday life. And so I remember the first time I grasp like what this really means. I remember jumping up in a coffee shop and going, wait a minute if that’s true,, this is going to change the whole way I see my business. I never ran home and I, I got out a bunch of little papers and reports and stuff from my business and I got out a calculator and I’m like, Oh my goodness, this is everywhere. Like I had never seen. It was one of these things where I didn’t use to see it everywhere and then all of a sudden I couldn’t see it anymore.
You know, like ignorance is bliss, but you can’t unlearn a truth. And so all of a sudden I was like, wait a minute, this is going to change what I say to my clients. This is going to predict how my business is going to grow in the future. Like it’s not just a thing that you look at in your rearview mirror. So let me tell you a couple of stories that will illustrate this. So my favorite 80 20 story is I have this friend named John Paul Mendocha and John dropped out of high school when he was a senior and hitchhiked to Las Vegas, much to his mother’s consternation. And he became a professional gambler. And like literally his mother was going to mass every morning lighting a candle for him, hoping that he didn’t get, you know, shot in an alley somewhere because he was really, I mean, I’m not joking, I mean he, he was with a dangerous crowd, but it took him a while to find the dangerous crowd.
And after like a few weeks of just being on his own in Las Vegas, playing poker for a living, you’d like, this is harder than I thought it was going to be. And so he goes to this gambling bookstore and he bumps into this guy named Rob and he finds out that Rob runs a professional gambling ring. And John says to Rob, so do you think you could teach me what you guys do? And he says, well, for a percentage of your winnings we can teach you what we do. And so they make a deal and they shake hands. And as soon as they’re done shaking hands jump in the Jeep, John, we’re going for a ride. So the jump in the Jeep and they’re driving down the highway and John says, okay, so how do I win more poker games? And Rob says, the way that you play, you win more poker games is you play with people who are going to lose.
And those people are called marks. You don’t go find other professional poker players. You want the kid who’s got $5,000 from his grandmother for when she died and flew here from Wichita, Kansas and thinks he’s going to get rich in Las Vegas. That’s who you want. And he says, so, so where do I find that guy? Where do I find the marks? And he says, here, I’ll show you. And he pulls into the parking lot of a strip club and they go into the strip club and there are women and rock and roll and all these biker dudes and you know, people drinking and lots of distractions and noise, right? Yeah. And he sits down and this guy Rob, he always carried a sawed-off shotgun with him everywhere he went, and he pulls this sawed-off shotgun out of his jacket. He holds it under the table.
He opens it up and then he slams it shut. So it goes. Yeah. And as soon as he makes that noise, there are a few people in this noisy club, like these biker guys over in the corner, they’re like, Hey, who? Who made that noise? Yeah. And everybody else is oblivious and the owner comes over, Hey, what’s going on over here? Nothing’s wrong. We’re just teaching the lad a lesson. Not going to cause any trouble says to John. John, did you see those guys turn around when they heard that noise? And he was like, “Yeah”, and he says, those guys are not marks, do not play poker with them. Play poker with everybody else. I love it. Okay, now, that is what in 80 20 sales and marketing, I call racking the shotgun and racking the shotgun is anytime anybody does anything that where some people respond in, some people don’t.
Okay. So like I was just talking to one of my members earlier today and they said they were talking about how my team is just learning when like a comment on a blog post is racking the shotgun. Right? So yeah, or in Facebook rates. So you put a Facebook post and somebody makes a comment and it’s inflammatory or it makes some really interesting point and then all of a sudden there’s this whole trail of little comments behind it that’s racking the shotgun. Even if you know one of your followers did it, like maybe what they said was more provocative than your Facebook post was. Or you send out an email and some people read it and some people don’t. And that’s racking the shotgun. Or some people get on the webinar and some people don’t, or some people listen to the podcast and some people don’t.
All of those things are racking the shotgun. Some people read the book and some people only buy it and put it on their shelf that’s racking the shotgun. So everything in marketing is racking the shotgun. Now how people respond to this stuff is actually follows a very, very predictable mathematical formula. And this was the thing that amazed me. And the easiest way to illustrate the mathematical formula is what I call the principle of the $2,700 espresso machine. So 80 20 math says for every thousand people who give you five bucks in buy a latte at Starbucks, one of them, we’ll spend $2,700 on an espresso machine, right? It’s almost like a law of physics and it follows the 80 20 rule perfectly. And if you carry it out, it says, well you got thousand people and you got, you got $5,000 from them in the form of lattes, but you can get another $2,700 from them in the form of that.
And for that matter, you know, you could have a $500 espresso machine and probably sell six or eight of them. And if you don’t, it means there’s something wrong. Your, your pitch was wrong or matching the message to the audience was, or you know, it’s the wrong kind of product. But if it scratches the same itch, that same group of people’s spend, a predictable amount of money on it. And so you can use this to make unprofitable businesses profitable. So we’ve all been to, we’ve all been to like the super-elite hipster coffee shop where they have all the poor overs and you know, the guy with the tattoos and the beard and everything makes all that stuff. And most of these guys are starving to death and they don’t know what Starbucks knows. Is that all the real money is probably made on the upsells.
Like the lattes merely keep the lights on and they, they pay the garbage and the electricity and the utilities, but they don’t actually make you any profit. All of the profit is actually made on that one customer in a hundred or one customers in 50 or one customers in a thousand who’s willing to spend a whole bunch of extra money to scratch the coffee itch. And you know what, the person that buys a $2,700 espresso machine, they might go on a $5,000 a Mediterranean coffee barista cruise where everybody drinks coffee all day long and they buzzed and they talk about, and they try the Arabica and they try this Sumatra and they try to you know and, and this is how people are. And, and, and so like, uh, when I give talks at seminars, one of the things I love to do is I’ll go like everybody who has shoes stand up so everybody stands up and I’ll say, if you own less than five pair of shoes, sit down. And then a bunch of people sit down and then they go, less than 10 sit down less than 20 and I start doubling the number. I don’t just go, I go 10 15 20 25 30 I go 10 2 040 80 160 okay. I’ve never done this. And had less than 150 shoes owned by somebody in the room. Wow. I did this at an entrepreneur magazine conference and one lady had 800 cheaps. Okay. And, and then I, I did it with domain names and one person owned 10 million. Well, what?
No, yeah. Now that was an outlier. You know, maybe you know, maybe most crowds, you would only find somebody you owned 10,000 or a hundred thousand but yeah, there wasn’t, you know, there was a guy, so this is true. 20% of the people own 80% of the shoes and 20% of the people own 80% of the domain names. But see 80 20 is recursive. So not only this, and this is the part that I never until it’s actually 2003 when I had this epiphany. It’s fractal. So it, so this actually explains the lady that has a hundred shoes, so 20% of the 20% own 80% of the 80% yep. Okay. So that means 4% of the people and 64% of the shoes
and 1% of the people own 51% of this year.
Yes. 1% of the people own 50% of the shoes and 1% of the people own 50% of the apartment buildings and 1% of the people own have 50% of the net worth and real estate and or airline miles or domain names or anything. Okay. And this is so predictable now, one of the ways that people con you is politicians always tell you they’re going to change this and they don’t and they can’t. And what Vilfredo Pareto, the original 80 20 guy when he figured out was it didn’t, he could go to Italy or Russia or France or Germany or the United States or anywhere. And the wealth distribution was always 80 20 and it didn’t matter if they were Marxists or socialists or capitalists or whatever. It’s a law of nature, right? So as a business owner, you’re either fighting it or you’re harnessing it. And the difference between fighting and harnessing is 16 to one because if you do the math if 20% of the people have 80% of the money and 80% of the people have 20% of the money, that means whether you’re the in-group or the outgroup is 16 to one. Yup.
So here’s my question, Perry. How do you know who that 1% is or what that 1% is of your activities that deliver 51% of your results, or which is that 1% of your clientele that delivers 51% of your revenue or profit?
Well, let’s start with what’s easy. What’s easy is you can always look in the rearview mirror and you can see what it was. And if you’re really paying attention, it always surprises you. Okay. So, so no matter who I’m talking to, you know there’s, you’ve got all kinds of people, you’ve got entrepreneurs, you’ve got salespeople, you got marketers, you got all kinds of people. If you are paid by results. Yep. I don’t care if you’re a real estate agent or an internet marketer or if you’re selling cars or whatever you do. If you get paid by results, then half the money you made last year came in three days. It may be on different days. Okay. It might be half a day here and another day here and half a day over here. But it came in big chunks. Okay. Or didn’t come and just some constant stream or you know, if, if you’re a real estate agent, 1% of the deals that you worked on need you 50% of your money.
It’s, it’s just, you know, within plus or minus a percent, it’s guaranteed to be that way. So you start looking and you go, Oh wow. I spent three weeks playing Pattycake with this customer on tech support or some silly thing. And I got like nearly nothing. And I’ve actually been doing this for years. So like I gave a keynote speech at a group of tax accountants one time and I said, okay, so how many of you, you have this customer and he pays you like 200 bucks a year and he doesn’t get his stuff into you until like April 14 which is the day before tax day and this massive shoebox of receipts and he sends you 87 different emails. Okay. And, and you’re like, if you think about it, you’re losing money by doing his taxes. How many and all these hands go up. I said, okay, I Perry Marshall, bestselling author, I give you permission to fire that guy.
No, you don’t have to be mean about it. You don’t even have to say that you’re firing him, but you can send them a letter and you’re going to go, Hey, you know, the new year is just around the corner and I’ve strategized with my board of directors and we’re changing our direction and there are certain accounts we can’t serve anymore. And unfortunately, yours was one of them. We’ll be happy to turn you over to a different accounting firm or, yep. Right. And you get rid of them and the minute you get rid of them, your hours go down and your income goes up because well you have to pay electricity and you have employees and you have taxes and you have overhead, you’re losing money.
This brings up a very important point Perry, and that is, I’ve seen a lot of my members in my membership program do this. And just generally in business we often hang on to clients that are hurting our business more than helping it. And the 80 20 rule, which is what you’re saying applies to your customer base as well. If your customers are chewing up a massive amount of your resources, they are actually hurting your ability to impact the world. Whatever it is that you’re trying to do in your business beyond just make a profit but also your capacity to serve the other customers that are not pulling you down. So you really need to be quite selective and clear about who you want to help and more importantly, who you don’t want to help or can’t help because they are just too resource hungry.
Yes. And to that point. So everybody has some version of that guy who only pays him $200 a year and consumes enormous amounts of time and is a pain in the butt. So everybody has that. You know what, most people also have, most people also have that customer who never calls you never emails, you never bug you, never consumes any tech support. And they send over a $20,000 purchase order once every six months and nobody, your office even knows what the do.
Exactly. And those are the ones, those are the ones you got to be pretty much worshiping at the alter of, for want of a better term. You’re going to be okay talking to them and telling them how, how can I serve you better because they are your best customers.
Yeah. You fly to Nashville and you go, Hey, can I take you out to lunch? Okay. You take him out to lunch and you ask them a bunch of questions, and you find out, Oh, you know, well they got this other program and they go to this other program and it’s so easy to do business with them. It’s so easy to get money from them. Okay. So if you’re, if you start getting rid of the first kind and then focusing on the second kind, Oh, which again, oftentimes these really good clients are not squeaky wheels in, they’re not high maintenance and they don’t trigger our reticulating activating system to pay a lot of attention to. It’s like the, so this is how you proactively use 80 20 is that, If there’s customer, if there’s a customer that gives you 20% of the money and consumes 80% of your time, it’s guaranteed that there’s another customer that gives you 80% of the money and it only takes 20% of your time.
Absolutely. Definition by definition. And you have to know, okay, since this is a law of physics, I can virtually be certain late 99% of the time this is going to be true before I even go looking for it. So if I go looking for it and I don’t find it right away, I need to look harder. Okay? So, so this is true of customers, but it’s also true of product lines. It’s true of employees, it’s true of product defects. So like 80% of the product defects only create 20% of the problems, but 20% of the product defects create 80% of the problems. And you don’t perfectionistic Lee fix every single thing that anybody ever complains about. You’ll be playing whack-a-mole for the rest of your life. You go, okay. So like with a software company, anybody who’s been in a software company, you get a feature, Crete, to death by your customers.
They want this feature and that feature and this other feature. And then it bruises the salesman’s ego every time they go, well, your control boards don’t have explicit messaging. And, and why don’t you guys have that? And it, they may not even need it. Yes. Right. But then all of a sudden you’re like, you’re calling your software development guy. You’re going, can you add explicit messaging? He goes, well yeah, it’ll take six weeks. Now, how important is that? And then you will you think it, it seems really important cause you just talked to the guy like okay wait, step back and 80 20 is mostly about what you don’t do. Yes. It’s more about what you choose not to do then what you do.
Yes. And to that point, America’s first trillion-dollar company, Apple has been known and often criticized for being very feature-poor, but I believe they tend to use features that are the most useful, that deliver the biggest bang for the buck as it were. So I don’t know what it’s like now because I haven’t been out of the Apple ecosystem for a long time, but when I last looked at it, you know, Android and PCs, they were very feature-rich. But you didn’t need a lot of those features. NFC is an example. Several years ago when NFC first came out, they all had NFC and Apple didn’t. And they will last guys on the block to have it, but it wasn’t being used as much.
That’s right. And Apple, what Apple does, Apple gives you the 4% of features or maybe the 20% of features that give you, you know, two thirds or 80% of the use and they intentionally leave out the other features. Right? So an iPad does not have a USB port. An iPad does not have printer drivers. They don’t want you to print from an iPad. It’s not for that. And Microsoft would tend to give people the option. Okay. And then, but see, where’s the problem? The problem is you have to hire a Microsoft certified systems engineer to come over your house and get the work right. Which adds this huge amount of negativity to the product. Right. And Apple wants people to be happy about their iPads. And so confines it, it’s like, so the important thing about an iPad is that a two-and-a-half-year-old sitting in an airplane can be playing games and not screaming.
Yeah. I’ll tell you what else is really fascinating to me about Apple Perry. Like this device that they call an iPhone, and I’ve noticed this about their product strategy, right? This thing they call an iPhone is not just a product, it’s a distribution channel, right? It’s a distribution channel for apps, for now, their Apple TV plus and yes, I agree that the innovation on the hardware side of things has dropped significantly, but this phone is now also the infrastructure for their payment system. This watch is infrastructure for probably biggest study they’re going to ever do or that has ever been done or is going to be done in the health space. These things do ECG and it’s been endorsed by the FDA. Now I’m not saying that they’re as good as an ECG machine in a hospital, but it’s a matter of time, right? And the data, this stuff is collecting.
I mean they’re, they are doing some breakthrough stuff in the diabetes area. So you know, you can wear these. This company comes to come out with a strip that talks to your watch and this thing is measuring your sugar levels second by second, minute by minute. Whereas right now the only technology that can give you your, your blood sugar levels if you’re, if you’re a diabetic is where you do the prick testing. You know, you pulled a glucometer. This thing is going to take the level of information to a different order of magnitude and I believe, are positioning themselves to become the Google maps of health. They’re creating infrastructure products, they’re building infrastructure that the world is going to need and depend on through these hardware products that are no longer just products, their distribution channels, their sensors that they do so many more things than just tell you the time.
They’re not doing this by accident. And so I want to generalize what you’re saying because what this is called is network effect. The network effect is when Uber attracts more writers, which attracts more drivers, which lowers the wait time, which attracts more writers, which attracts more drivers, which lowers the wait time. Right now at this minute, Uber is on the verge of being banned in London, and this has gone back and forth and back and forth and back and forth. My prediction is the consumers well banged down the doors of their members of parliament or mayor or whoever else and they’ll say, we want this back. Why? Because the consumer is as much a part of the business as anything in the business itself. Now, the network effect is not just for Uber because the network effect exists in small businesses too. It affects in all kinds. It exists in all kinds of small ways.
Okay. So for example, I have a discussion forum for my members and we’ve got, I dunno, something like five, um, probably more than 500 people that, that are in the Google route. Okay. Well what that means is that if you have an 80 20 orientation towards business, then that is a way, way, way better place for you to go than some other forum that only has 40 members, right? Because the likelihood of getting your actual question answered is exponentially better. Right? And now what Bob Metcalf, the inventor of ethernet, who actually is a friend of mine, he said that the value of a network is proportional to the number of members squared. Okay. So eBay is worth four times as much money if it has twice as many users. Why? Because every user, um, attracts vendors and every vendor attracts users. And so there’s this mutuality and most people are not accustomed to thinking this way, but there are all kinds of little ways in which you can incorporate network effect into a business. And the more of them use, the more you build a moat around your business that other competitors can’t get into. Good luck with starting another Uber.
Right? And now, I mean this is very interesting because this is one of the criteria that Warren Buffet uses to invest in businesses. And I’ve been a follower of Warren Buffet for a long time and I have had Apple stock for some time. I was going to sell my Apple stock at one stage because they weren’t doing so great. And then Buffet went into Apple in a pretty big way. And my recollection is he owns about 13% of Apple now. Now he’s never invested in tech stock in the past, including the fact that even though he’s good friends with Bill Gates and he’s pledged most of his wealth to Microsoft, Oh, sorry to the Bill and Melinda Gates Foundation. He’s never gone into Microsoft in a big way because he always said, I don’t understand tech so I’m not going to invest in it. But he invested in Apple and I suspect that is because one of his criteria, he has 10 but one of his criteria is, of course, they have 200 billion or 250 billion in cash holdings.
They’ve done share buybacks, but they also have what he calls a durable competitive advantage. And this idea of the network effect has existed for quite a while in that business because that used to be iTunes, that was the oval, you know the umbrella that held all their products together and now they are disbanding iTunes, but you know they’re coming up with the Apple glasses for example. There’s talk about that and the processing is going to happen on the iPhone, but the glasses are going to allow you to look at them, your emails and swipe and all that sort of stuff. The devices work in concert with each other and once you’re in that garden, the walled garden, it’s a beautiful garden. But you’re trapped in there because, Hey, if I want to switch to Android now it’s going to hurt. They know the switching costs are too expensive, but that’s how they wanted and I’m happy to be a captive in that walled garden. I’m not complaining, I’m just saying that that is how they have built such a powerful business. I mean they entered a business that was so commoditized. You know, the PC business was so commoditized when they came into it in the, in the resurgence and now they’re making obscene amounts of profits. I mean that was unthinkable when Jobs came in.
And so this is how 21st-century business now works and it’s based on feedback loops in 80 20 works because the feedback loops, so 80% of the traffic runs on 20% of the roads and 80% of the dirt is on 20% of your carpet because it’s where you walk and this is everywhere. So just about every column in any spreadsheet, every number in your business is somehow or another effected by 80 20 so it means you can subtract from the losing end, add to the winning end and it actually keeps going and going and going. You never really run out of 80 twenties to work on. And so if you understand 80 20 really well, you can walk into any company in the world and you can consult and you can find useful things to do and most of the time they will work.
Right. Let’s talk about 80 20 in terms of productivity and task selection. So my perspective has been an I advise my clients about this. His productivity to me is no longer about getting more stuff done in less time. Yes, it is a hangover from, you know Frederick Taylor and he did the time and motion studies on the factory floors and it made sense in the industrial age. But today we live in the information age and today I believe productivity is not about doing more things in less time, at least not in the known, I mean you still have the economic concept of productivity, the GDP concept. I get that that stuff probably is still factors of production and all that, but for you and I, productivity is about doing fewer things but the right things in the right sequence and it’s actually in that sense it is about doing less.
So my view is productivity is about better task selection and then being able to delegate or outsource the rest. Now in your book, I love how you’ve categorized your tasks and you say you’ve got your $10 tasks like cleaning and sorting. You’ve got $100 tasks, which where you can outsource those cleaning and sorting jobs. So that outsourcing tasks would say $100 task. You’ve got your thousand dollar task where you spend the time delegating complex activities to people and maybe creating systems and processes around that. And then you’ve got a $10,000 tasks, maybe like hiring great team members, which as we know Jobs was a big proponent of. And yeah, if you want to get a job with Apple, you’ve got to interview like for seven hours or seven, I don’t know, seven times. And I do agree that I don’t know what their phrases, you know, the more you sweat and on the training ground, the less you bleed in the battlefield or something. To me, hiring great quality staff is that activity. So can you talk us a bit through that framework of it was that absolutely loved it?
So I have a client, Nancy Slessinger and she is a hiring consultant and she says a bad hire cost you four to 14 times their salary.
And it doesn’t sound right at first until you really start looking at what are the effects of a bad employee. Like, what are the effects of a bad bookkeeper? Like I can, I can promise you, I know from a very painful personal experience that a bad bookkeeper will cost you a ton of money. I mean, I had a six-figure IRS fine from a bad bookkeeper once. Okay. It was the worst. It was way more money than I ever paid the bookkeeper. Okay. So
I’m a CPA actually. And so I understand the importance of that.
Oh yeah. Like you know, you a misreport somebody income or you feel to file their quarterly tax returns or you know, anything like these things can get you in trouble. And, or an employee who has a bad attitude or an employee who makes inappropriate sexual remarks and makes your emails, uh, employees uncomfortable and you don’t know this is going on in everybody’s too nice to tell you, but it’s hurting the morale and it makes them not want to come to work and it makes them not show up at meetings or make some resentful or they leave and you don’t even know why. Okay. All these things. Right. And so having really good team members, it’s, it’s hard to do. And one of my principles is it’s not an interview. It’s an audition. Yeah. Okay. If you ran a theater in, you wanted actors, you wouldn’t just interview them. If you had a band and wanted a bass player, you wouldn’t just interview them. Okay. So like, so I’ve got a client Sid Graph, he runs a window cleaning company. Yeah. He has something, he calls it a two week paid interview
which is, yes, you can work for my window company for two weeks and we do not consider you hired for the first two weeks and at the end of two weeks you can, you can say no to us. We can say no to you. It’s no big deal. Not going to make, you know, we’re not gonna say you were fired or anything like that. We’re just going to test out and see how everybody gets along.
That’s exactly what I do when I hire a new person, I give them a project and I work one on one with them. We’re a fairly small company, but I don’t introduce them to the rest of the team until I’m confident that they have the right attitude. They dot the I’s across their taste. It doesn’t matter if they make mistakes, but if they’re coming to the table with an open heart, with an honest desire to give and to learn, then I know that they’re taking the right boxes in terms of the culture. Because as I learned in my MBA, the culture in an organization is one of the most abstract things. But one of the hardest things to change. And once you damage it, it takes a lot of effort to restore it. So my view is I hire someone with the right attitudes. The skills are important, but not as important as the attitude. And then when I’m comfortable that they will gel well with the rest of the team, I will then introduce them to the rest of the team and welcome them into the family or the business, which I see as a family.
Yes, that’s, that’s right. And, and so if they come and wash windows for two weeks, you know their habits, you know how they wash windows, you’ve done all of that stuff. Yeah. And you don’t necessarily even have to have had a big long conversation with them because you know, well you know everybody’s going to sit down and eat lunch. You, you have the conversation then.
Ash: 00:39:23 Yes.
And then John Paul Mendocha that the gambling guy that I told you about, he has this rule and it’s the three meals rule. If you are going to get in any serious business relationship with somebody like they’re going to be a major vendor for you or they’re going to work for you or their can or you’re going to be a partner with them. Are you going to have equity in their company? Yeah. You should have three meals with them. I think it was in the third meal. If they’re putting on a front, the veneers gonna wear away and you’re going to see, well, Oh, how do they treat the waitress right. And you know, do they leave a nice tip and you know, do they say dis bearish during remarks about their other employees or business partners? You start, you figure this stuff out. And so it’s, it about shows, don’t tell and show, don’t tell is 80 20 too right? Because you know, talk is 80% and inaction is 20 and you care about the action part.
Absolutely. So Perry, the next thing I would like to talk about is your work with NASA’s jet propulsion labs. But before we jump into that, I just want to close off this concept or this importance of the $10,000 an hour task of hiring, but there are a few other similar tasks, you know, like I believe strategizing, maybe planning for the year, things like that. But can you tell our listeners a little bit more about some other tasks that are high-value tasks that helped a company like Apple go from virtual bankruptcy in the 80s to being the first trillion-dollar company in the US
so there’s a whole different way of thinking about productivity in, you know, now that we’re, you realize we’re only like 40 some days away from the end of the decade today when we’re recording this. I mean, you know, a new decade, right? So in the beginning, at the beginning of the third decade of the 21st century, productivity is a very, very different thing than it was in the eighties or the nineties okay. Because in the eighties or nineties we talk about pre-internet, there was a very finite number of things within, you know, on your desk so to speak. Yeah. Right. In. So, so the best thing you could do was stay busy because one of those things on your desk needs to get, it needs to be fixed up and tweet and organized or whatever. Okay. No, there’s an infinite number of things on your desk. Yeah, there is. Right. Like so to speak, right? An infinite number of tweets that you could go, blog posts you could go read or things that you could go do or advice you could take.
Okay. And so if your priority is just to be like busy or did just get things done you could work forever and never really do anything valuable for anybody. Right. Okay. So you ask what’s valuable? Well, so in 80 20 sales and marketing, I say there’s, there’s $10 an hour work. What’s that? It’s driving to the office supply store. It’s emptying your wastebasket. It’s vacuuming the floor. Okay. Then there are a hundred dollars an hour’s work. What’s that? Well, that’s helping out a customer, you know, that’s answering emails from important people. It’s, you know, stuff like that. Okay. Then there, what’re a thousand dollars an hour or $1,000 in our stuff is a thing that is actually strategic in improves the systems in the environment in which all of that work actually gets done. And then $10,000 an hour work is the highly strategic stuff. Now when you say $10,000 an hour, most people, they’re like, well that doesn’t compute like I can’t even imagine.
Hey, hang on, let me give you an example of negative $10,000 an hour work. Yeah. Dentist office, phone rings, Helen picks up the phone, can you hold, please put the person on hold. Okay. And then, and then two minutes later, is anyone helping you? Oh yeah. And then they say what they said before all over again. Right? Maybe there’s somebody else this time and then they get put on hold again and then they hang up and guess what? They were going to spend $30,000 unlike cosmetic surgery and they got put on hold three times and in the space of two and a half minutes, you lost a $30,000 sale. So 30,000 into two and a half minutes. How many dollars an hour is that? Okay? How many dollars an hour? Just hold music actually you, how many dollars an hour does wrong person answering phone cost you?
Yep. Okay, so like Helen can lose the dentist? $30,000 in two minutes. Right? Okay. Now if the dentist has several hours of staff meetings and they change with the voicemail system and the change of the phone system and assign everybody very carefully and everybody knows exactly how the phone calls are supposed to be answered. So, therefore, the number of people put on hold goes to almost zero and the number of people lost that way. It goes to almost zero. Those meetings were worth easily $10,000 an hour even for multiple hours of those meetings. Okay. Right? And now you go, well we don’t sell $30,000 dental cases. Okay, so you sell $3,000 things or you sell $300 things. The principle does not change. Yup, absolutely. And so the time you spend measuring things, thinking about them, examining the systems in which you operate, questioning your assumptions, that becomes thousand dollars an hour, $10,000 an hour work. And I say, you should spend time on this every day. You should spend time thinking about your work before you start. Okay? So in 1997, it was probably a great idea. To roll out of bed and start answering your email right away. Yep. In 2020 it is a bad, bad, bad idea. Yeah. So like the worst way to start your day here, let me show you the worst way to start your day.
Oh, okay. I pull cellphone into bed and then I open it up and I push the button and I start looking at stuff. I start reading emails. I start looking at Facebook. A worst possible way to start your day. What is the best possible way to start your day? Pen. That’s how I differ. That’s what I do.
Pen and paper and I just write about the outcomes that I want or the things that are important. By the way, if you’re watching this on YouTube, you know you can check out our channel, youtube.com/productiveinsights and this will be on there, but page 119 I’ve got up here, this has got that table of Perry’s and I really like it. One of the other $10,000 an activity, an hour activity he’s got here is public speaking and I’ve been doing public speaking lately and I can tell you that is really, really valuable because it does two things apart from establishing you as an authority. It also helps you to hone your skills in your, your knowledge, improving your USP, creating better offers. I mean creating good quality offers. So important today and creating an offer that really sings and related to that another, in my opinion, $10,000 activity is understanding your customer empathy. Empathy is one of the least used words in marketing that I’ve heard and probably one of the most important. If you can’t empathize, you have no business being in business.
Amen brother. And so and so. And I liked what you said about writing, like yeah, I know your phone is analog but you are digital, you’re analog, you and I, we are analog. There’s something about, okay, I have a 0.5-millimeter mechanical pencil, that is what I like to write with. It has an eraser on it and I can sit here and I can like, okay, what am I going to do today? What is important? And you know what many times we need to reevaluate every single day. What’s important depending on how things are changing around us. And we got to do 80 20 it’s like, what? What stuff am I just not going to respond to today?
So you decide what you’re not going to do first, right? And you create spaces. This is another thing. I think one of the best things that you can do is make space. If your day is crammed, crammed, crammed with activity, I guarantee you 80% of your activity is not doing anything good.
You know, Perry, in episode one 42 I think it was one 42 I spoke to Dr. Sweeney Pillay, who’s the assistant professor of psychiatry at Harvard medical school, and he talked about the power of the unfocused mind as a productivity tool. So you know if you’re listening to this, I recommend checking that out or in an episode on 145, I talked to Amy Porterfield about mindfulness, which is another great tool to help you improve your productivity. In inside my membership, I have this course where I teach the Eisenhower matrix where you talk with the four quadrants and the stuff that’s important but not urgent, which is where we don’t spend enough time and instead we spent time on our stuff that is urgent but not important things like answering the phone or whatever. Instead of spending time on the strategically important stuff, it’s that quadrant two stuff that gives us the major longterm benefits, the stuff that is strategically important and for which you need to create some space and often that space is just spaciousness, mental spaciousness. You have to be able to drop into your body and not constantly being the crazy buzzing of your mind. The people who in my opinion are going to win in 2020 and beyond. Are the people who are going to be ruthless at task selection and are going to say, well, this is what I’m going to do today and I’m going to actually take the time to do other things that bring me joy. So it can be fuel to do better work.
That’s, that’s exactly right. And a lot of people, feel guilty when they’re not running the hamster wheel. They’re like, Ooh, you know, Oh, I should be doing something. I know. Sit down, like bolt yourself to the chair and sit down with your piece of paper. Okay. And make some space right? And listen to yourself and figure out what you, what you really want to do. And like, stop this, you know, buzzing inside your head that says, Oh, you know, I gotta be, you know, I gotta be banging away at something. I gotta be typing at the keyboard I gotta be. Because here’s what that does. It fills a void in it superficially feels like you’re getting something done.
But at the end of the day, you’re completely exhausted and unfulfilled and you’re like where did the day go and what did I even accomplish today? And usually when you find yourself asking what did I even accomplish today? Usually, it’s because you didn’t start out by figuring out what is the one thing that is so important that if I didn’t do anything else it would still make the day totally worthwhile just to have done the one thing or I could have taken the rest of the day off because the one thing got done and most of the time we all have one thing where, Oh man, it might be super hard by the way. Okay, very well maybe, maybe almost impossible if I got that one thing is done. Like if I closed that one sale with that one customer, the rest of the customers all year. The rest of you wouldn’t even matter.
I would come home with a big slab of Mastodon meat on my shoulders and the village would share
Perry. So you’ve worked with NASA’s jet propulsion labs and they are using your 80 20 curves as a productivity tool. Can you talk to us a little bit about that and can you tell us how our listeners can find out more about you?
Well, so I got this email out of the blue from this guy and he says, Hey kid. And he was, I think he wanted permission, he wanted permission to re reproduce one of the images in the 80 20 book. And he said, yeah, I’m, I’m at jet propulsion labs and I’m, I’m teaching a productivity course and we really like your 80 20 curves around here. And, and I said, well, you know, can I tell everybody that you’re doing? He goes, while we are doing it, he says, you know, I can’t give you my PowerPoint slides because those are confidential. But absolutely like we’re using it. You can tell the world you’re using it. I’ve had several of these things come over the transom like that. Another one was getting an article published in Harvard business review, Italy. I was, this goes to that $10,000 an hour speaking thing that we talked about.
I had a speaking invitation to Italy, so it’s already going to go to Italy. And then the seminar organizer said, well, we’re featuring our speakers in Harvard business review, Italy. Would you like to write an article? Would that be okay? I’m like, yeah, that would be just fine. In fact, it was the first time I ever published the math for the 80 20 curves at all and you know, okay, what does this illustrate? Well, yeah, you know, I can tell you that if I had wanted to go directly to Harvard business review or directly to jet propulsion labs in Pasadena and get them to do anything. Good luck. Exactly. Okay. Do you know what I did? I did the 80 20 most important things that I could do. Yeah, okay. Which caused me to sell a lot of books and cause me to get a speaking invitation to Italy. So one of those books made it into NASA, one of those, you know, one of those books made it to, to the Italian people. They also translated my book into Italian. I didn’t, I didn’t cause that to happen either. Yeah. Okay. And look, there’s a certain amount of luck and you know, good fortune and Providence that happens in life. Okay. And you know anybody that makes it sound like you can control all these things is on drugs. You can’t,
I can’t get into NASA by going in, knocking on the door.
Yup, you’re right. Perry, we can control barely 10% of an external environment, but we kid ourselves, we’re thinking we can control more, but what we can control, we should really focus on. And that is about what tasks and where we focus our attention.
Yes. And you know what 1% of what you’re doing, you have complete control over and it’s hugely productive. And if you’re not aware of it, then too bad for you. If you are aware of it, then it’s, it’s like the customer that sends a $20,000 purchase order once every six months and you don’t even know who they are. Everybody with any real business has one of those. Or you have a restaurant and like there’s this guy that comes every in every week. Do you actually know who he is? Right, right, right. There’s somebody like that and you, you don’t even know who they are, so it’s just, it’s so much more rewarding when you’re like, you know what, I am going to be awake and alert to those top 5% things. I’m actually going to start measuring things. I’m going to start tracing cause and effect and I’m going to find out, Oh well, you know I, I spoke
at 10 different events last year, but the one that got me more customers than all the other ones put together was right when the blank is there is an answer.
Perfect. Well, how do people find out more about you Perry and what can they do to learn more about how can they get a copy of your book? How can they find out more about your 80 20 approaches?
Well, you can get an Amazon, but there’s an even better way. You get more stuff for less money. If you go to sell8020.com, S E L L eight zero two zero.com, yup. It will take you to 80 20 sales and marketing $7 in the United States, $14 international. We’ll ship it to you. We’re taping dollar bills to the book to get this in your hands because we’ve found like we did all the math and we found that it’s actually a good idea if people read this booking. It brings us clients and all kinds of stuff, so I want you to read the book. I’ll pay, basically pay you to read the book and you get extra videos and bonuses and additional things that you don’t get. If you buy the book on Amazon, you go to sell8020.com and you know what?
This book will change your life. It will change your life. I have a friend, he is getting ready to spend, I think it’s $120,000 on an MBA and I said to him, I said, okay, you will get as much value out of this one book is you get from half of your MBA classes put together. Okay, and you’re going to spend 60 grand on half of your MBA MBA classes and you can buy this book for $7 this it will totally, you will look out the window or at a spreadsheet or in your Facebook advertising account or whatever, your payroll and you’ll see 80 20s everywhere. You never used to see them and you’re like, Oh, there’s one, there’s one, there’s one, and you’ll start knowing what levers to twist and you go, Hey, wait a minute. There’s all this stuff I don’t need to do. There’s all these books I don’t need to read. There’s all these reports. I don’t need to write. Here are all these people. I don’t need to meet with them. It’s deliberate.
You know, Perry, inside my membership, I have this course. I ask all my members to go through in the first module is the Eisenhower matrix, which talks about, and then the second module talks about systems, which is one of those quadrant two activities, important but not urgent. The third one is the 80 20 rule and the fourth one is the Pomodoro technique to get yourself momentum. And the fifth one is about mindfulness, which is also designed to help you to stay proactive and strain the quarter into activities. So I think all of those ideas align with the 80 20 rule. Now I just want to really do a quick sum up before we finish up. Key action steps for our listeners. Every business and most phenomena that we see in the world are bound by the 80 20 rule. 20% of your effort delivers 80% of your results.
4% of your effort delivers 64% results. 1% of your effort delivers 51% of the results. The same thing applies to your clients. The same thing applies to the tasks you do. So think before you start working. Busy work doesn’t work anymore. The people who are going to win in 2020 and beyond are the people who are going to be intelligent about task selection and intelligent about client selection. Start your day, not by looking at your phone, but go analog with a piece of paper and a pen and draw, write, but plan your day, be deliberate, be conscious, create spaciousness in your day. My advice is maybe even building an hour to watch Netflix. If you work from home, I go for a walk on the beach or something where you don’t take your phone with you so your subconscious mind has an opportunity to actually present beautiful ideas and breakthrough concepts, which it would not be able to do if you’re continuously pouring over a computer or a phone.
Be aware of the network effect when it comes to building your business and building your products. Apple is a great example to look at. They have a tiered approach to their products. They have a product strategy and all the products feed off each other. When you hire people, think about it as an audition, not an interview. So approach it as you know you’re bringing somebody into your family and if you wouldn’t bring them home to be part of your family, don’t bring them into your business because your culture in your business is probably one of the most important things, if not the most important thing for you to be able to grow effectively and profitably. And finally focus on the $10,000 an hour activities, hiring being one such example. Another one might be public speaking or creating great quality offers. Probably the most important one though, in my opinion, is understand your customers so deeply and empathize with them so deeply that you know them better than they know themselves so you can really solve their problems in a meaningful way and you can be of service to them.
Amen brother. So yeah, 80 20 it’s the central principle of my entire business existence and you can’t get good enough at this. And you know there’s a yellow belt, white belt, green belt, brown belt, there’s a black belt, there’s a third-degree black belt, there’s ninth degree black belt. And so on. It’s counterintuitive at every step. It, it always defies your, your normal instincts, which is why it’s so powerful. So master it and it will make you very prosperous.
This was so much fun. Perry, if you’re open to it, I’d love to do it again sometime.
Yeah, let’s do it again sometime. It’s been fun.
Cool. That’d be well.