Timothy Ferriss: Less Work and More Productivity

Also in the US in different gyms and different arts ranging from fair techs for Muay Thai In San Francisco at the time to where I train now which is aka American kickboxing Academy of Javier Mendez and My particular Brazilian jiu-jitsu coach Dave Camarillo so the martial arts for me and martial sports have been integral part of developing the personality traits and behaviors and attitudes I think that have translated to other areas of my life and that certainly also relates to reducing anything whether it’s work or fighting for example to a certain core set of basics and principles that I think can be applied and are often forgotten. So it’s been, it has been and continues to be a very central part of my life. Outstanding. Well it’s always great to have a success story from within the industry here on the on the Sounds of Success.

You’ve done really well for yourself with your new book which I just completed reading the four-hour work week. A very interesting book and that’s really what the topic of this interview is about. I’d like to get started by saying here that you write in your book that you are earning about forty thousand bucks a year working 14 hour days. Now you’re making about forty thousand bucks a month working four hour weeks. How is this possible and how can school owners increase their income using your strategies?

Well, it’s possible. I’ll answer that in a slightly indirect fashion and then directly because I think that the initial impulse, of course, is when hearing the four-hour workweek is utter disbelief. And I would have had the same response in 2003 or so when I was in Silicon Valley putting in, like you said, the types of hours eighty to a hundred hours a week as an employee and high-tech startup and then at the CEO of my own company. But the reality is that most business behavior and in fact most rules and obligations that we set for ourselves are really just social agreements or common practice and what I found over three years when I interviewed people ranging from billionaire CEOs all the way to single mother employees is that the top performers in other words those people who were able to get the most output for the least input were almost always doing things dramatically differently when compared to the vast majority.

So the book aims to teach people how to test assumptions in their business, in their industry, in their life and also to recognize that the the best way is to sell them the most common way, or the most frequently practiced way. For a martial artist, or a martial arts school owner, specifically, I’ll point to a few things. There are generally a lot of shoulds in any industry, or have tos. I have to have a child’s program. I have to have, now that yoga is popular, let’s say yoga meets martial arts, female class, there are a lot of assumptions about what has to be done and what should be done. And I encourage school owners to really reduce that to numbers. What I mean by that is even within a customer base, you’ll find that it’s likely 20% of your customer base produces 80% of the profit.

[04:45] And let’s say 20% of your product offerings or service offerings, whether that’s an approach shop, you could look at a percentage, which percentage of profit each product contributes. I think that you probably find that two or three items are contributing the vast majority of profits. Right. Becoming very quantitative about identifying the 20% of activities that are yielding 80% of your desired outcomes, or the 20% of students. And then really focusing on minimizing and eliminating the static and the noise that distracts you. from profiling those products or students and then multiplying them. And that would be on a base level one of the fundamental principles called Pareto’s Law, also called the 80-20 Principle. But I think part of what is also very important is to really shift from an effort-based model of evaluating work to a results-based and systems-based method of thinking.

So no matter what you do, I feel in a business, even if you have no plans of expanding beyond a single location, you should ask yourself, if I were to want to franchise this and have 500 schools, how would this current setup need to change?

What would the systems be that I would need to put in place to make it that scalable?

And I think what that does is it it teaches you and forces you to remove yourself as a bottleneck so that if you’re handling a certain type of decision or administration that wouldn’t be possible if you then had two schools, three schools, ten schools. You need to decide exactly how ideally, either number one, you can eliminate it entirely, right?

So an example of that might be if you’re doing in-house bookkeeping and processing, then you would outsource that to a processing company. So you’ve eliminated that function completely. That would be in an ideal circumstance. Or secondarily, how do you provide a set of instructions to someone so that the process is effectively idiot-proof?

And that’s not meant to insult anyone. It’s meant to, however, imply that you want to have a business that is process-driven as opposed to people-driven. And I know that that runs in the face of a lot of conventional knowledge. The fact of the matter is it’s extremely difficult to find superstars for every role in every school. And it’s far more effective if you give them, if you give anyone, almost anyone who has the right attitude, a set of instructions so that they can without fail produce the result you want them to produce. And if you look at some of the most successful schools, whether that was fair text at the time for kickboxing or there’s some really amazing schools up near Sacramento here in California. I mean, there are lesson plans. There are systems in place for promotions, both among employees and among students.

And a very useful exercise for school owners is thinking again, returning to this sort of McDonald’s model of franchising, which is not meant to be an insult in any way. One of the most refined models, or Starbucks, whichever you want to look at, there’s certain standards that they have set in certain systems. So if you have to draw, for example, an organization chart that would represent how each school would be organized on a personnel level, what would the different functions be?

[08:22] What would the hierarchy look at? Where do you fit in?

And the question of where you fit in should only correlate to your unique abilities. In other words, most entrepreneurs overestimate both their ability to do multiple things and underestimate other people’s abilities to handle those functions. So if you look at, let’s say, one or two things that you are exceptionally good at, that should correlate to your essential job function. And everything else should be delegated to someone else. Now when I said delegate to someone else, I’m just going to run with this for a second, then we can come back to the Q&A. That doesn’t mean, and again, this is this is looking at results and not confusing the means with the end. It doesn’t mean that you have to have a lot of full-time employees. And this is another thing that people, an assumption that people make that can be very damaging long-term.

It’s working on a very large number of permanent employees, full-time employees, before they have the cashflow to sustain that payroll. And rather than doing that, you can bring in contractors to handle certain functions, whether that’s a direct marketing campaign, or an affiliate program with restaurants in the neighborhood, or gyms in the neighborhood where you can offer additional services to your students without necessarily building your own in-house gym, for example. All of these things can be done on a trial basis where you test the approach, you quantify the result, and then again, you can go back and ask yourself, okay, at these 10 tests that I ran, which were failures, which were successes. Of those that were successes, which contributed 80% of the additional enrollments or profit for this given time period. And then you eliminate the rest and focus on those few things.

Those would be a few recommendations. Those are excellent recommendations and time tested at that. Tim, talk to us a little bit about this new subculture called the new rich that you wrote about in your book. the four-hour workweek. What is the new rich?

The new rich is a growing demographic. It’s really a very large group. It’s just dispersed so people don’t recognize it as a group of individuals who recognize that in a digital world, time and mobility are currencies in addition to income. So the value, the lifestyle output of your income is really only, it’s multiplied to the extent that you control time and location. Meaning that if you look at, for example, an investment banker makes $500,000 a year and has all of the external symbols of financial success, like the nice car, the nice house, he or she probably spends very little time enjoying either of those items because he lacks or she lacks the one most valuable non-renewable resource of all, which is time. So the new rich are people who recognize that, for example, if you control your time and location, it would be possible.

And you understand systems thinking in the case of a martial arts school order. You could set up a system which would remove you as the decision-making bottleneck, replace you as an operator, with you as a manager or even better at owner, at which point, just as one example, it’s getting kind of chilly depending on where you are. It’s at least winter time here in San Francisco and much colder on the East Coast. Well, let’s say you want to go to Argentina for two or three months because it’s the middle of summer right now. You go to Argentina, you get three times the value of your money because of the currency discrepancy. It’s very safe. You can live there because almost anything that you set up with systems properly can be managed online certainly or via phone whether that’s a regular phone line Sure, technology Right, that then puts you in a position where many of your expenses are in pesos you’re earning in dollars and then perhaps you also have a syndicated licensing program in a place like the UK and let’s say you develop a program like for example body crunched something came up new zealand and spread throughout the world and engines and their main revenue models license what you develop something you can then license to the uk that means that you’re earning in pounds you’re also earning dollars and your expenses at least your personal expenses are in pieces start to play with geographic arbitrage that results in a number of things you have these many retirement essentially there

[13:03] Retirement but broken up into pieces and spread through our life as opposed to reserve for the end as a redemption. And you also just get much more playful and curious about the world in general and really taking advantage of the experiences that you want to have without postponing it in this deferred life plan where retirement is the objective. Because anyone who’s intelligent and hardworking enough to to found a even moderately successful martial arts school, I would propose really is never going to be able to retire because inactivity is not the objective and if you put someone in a position where they have nothing to do or they’re sitting on a beach in Thailand rubbing cocoa butter on their stomach, it gets old in about 48 hours and that’s from interviewing extremely high net worth individuals who retire.

They just get bored, I think is what you’re saying. So what you find is people retire, let’s say they work themselves to death until 50, 60, they retire, finally they can enjoy life, and then they get bored in 48 hours and it kind of defeats the purpose of waiting. And the last thing I would point out among the new riches that they recognize that a long life is really not a guarantee. And a career that is successful enough to give you several million dollars to provide a nest egg sufficient for let’s say 20 year retirement is also not necessarily guaranteed. So it makes more sense according to them and also certainly in my opinion at this point to redistribute retirement throughout life so that you have these peak experiences built in and scheduled just like you would build in and schedule business appointments and business I could see a lot of people listening to this right now just nodding their head up and down going yes Tim that sounds great to me.

In your book you talk about Parkinson’s law and this is a concept that I think is critical for martial arts school owners to understand. I mean martial arts instructors as you know they’re entrepreneurs you know they go out they start their own business but I think they’re just eaten alive by Parkinson’s law in many ways and they don’t even realize it. Tim talk to us a little bit about Parkinson’s law and how this factors into this equation of the four-hour workweek. So Parkinson’s Law is the corollary to the 80-20 principle. So in the 80-20 principle, we’re limiting the tasks to the critical few to minimize the time that we need to spend on getting maximum output. Parkinson’s Law is where you limit the time to focus, to force you to focus on the critical few. So another way to put it, and this is really how Parkinson’s Law is generally explained is that Parkinson’s Law dictates that a task will swell in perceived complexity and importance in direct relation to the time that you allotted.

All that means is that, for example, we’ve all had the experience, or many of us have had the experience of two different experiences. Let’s say that you at any point in your life had to write a term paper. Well, the longer you have to prepare for that term paper, the more of a mental monster it turns into. And you know, nine times out of ten you end up writing it the night before, which is not ideal. But a second example would be the day before you go away for vacation. What happens?

[16:23] The day before you go away for vacation, you take all these things you’ve been postponing and get them all done in one day. And that have been on the to-do list, getting shuffled from one day to the next for weeks or in some cases months. And what this means is that there’s very little relationship as much as people would like to think otherwise. There’s very little relationship between having more time and getting better results. In fact, the more time you have, the more likely you are to over-complicate, over-analyze problems or objectives and find creative ways to postpone them. What I propose is that you take any type of large task or perceived large task like opening a new school or developing an entirely new curriculum for your school for example or a marketing campaign. Break it down into smaller milestones just like you would in let’s say software project management or product development.

And then you have extremely tight deadlines for these smaller steps. And you’ll generally find that under the the pressure of an imminent deadline, the output, the end result is inevitably of higher quality than if you had more time. Hard to believe is very true. Well, yeah, and if you give an employee a month to do a project, they’ll take 30 days, and if you give them two weeks, they’ll take two weeks, and if you give them seven days, they’ll take seven days, and so on and so forth. And I think that that’s just critical to understand no matter what kind of business you are operating. Just by happenstance, we’ve got the entire NAPMA membership base listening to this, and they’re all running karate school. schools, but still a critical point to understand. In your book, you talk about in an area that a lot of people in today’s society have more than they’ve ever had before, but for some reason they just feel incomplete.

Can you expand upon that a little bit, please?

Absolutely. So I really feel as though in the overworked culture that that’s reflected in the United States. It’s really accelerated, especially in the last number of years for several reasons. You have a focus on achievement, which would, let’s just say that’s the attainment of objects or experiences that you, that have the potential to give you pleasure. And there’s an undervaluing of appreciation. So if obtaining or payment is in some way getting to the point where you have these things or these experiences that have the potential to give you enjoyment, I would say appreciation is actually getting enjoyment out of those things. And in order to have appreciation, you require time. And so let’s just say that your dream has always been to have a Porsche. And this is an example. from a personal friend of mine, who makes several hundred thousand dollars a year, and was finally able to get his Porsche.

And because he’s on call 24-7, brought into the office on Saturdays by his boss, etc., he only put on about 1,500 miles on his car, was able to drive it a few hours a month, maximum, and finally sold it. So he was not able to drive any appreciation or enjoyment from the fruit of his labor. And the the income is just a vehicle. I think that’s another reason that many people feel incomplete is they mistake income for the objective, but income is a vehicle. It’s a symbol. So currency, I mean the dollar bill itself, right, three quarters cotton and then one quarter, I forgot the last component of it, I think it’s linen. It’s a piece of paper that represents value. It represents value for what you can trade it for. So the income is a vehicle not for purchasing things, okay?

[20:20] And then you’ll see what I mean by this. So in the case my friend bought the Porsche, but the Porsche doesn’t have any intrinsic value. It’s the experiences that that Porsche gives you, or the experience that travel gives you. So really what we’re after with income is a certain set of experiences. And time and mobility is certainly time is the limiting factor here. So what’s very important is that people begin to recognize that time once spent cannot be regenerated. Income can be regenerated. It’s a renewable resource. So it’s very important to plan life, so to design your life, and that’s a big topic in the book, lifestyle design, actively, just like you would plan a career or business so that you have the tools at your disposal to have these experiences when you choose to have them.

So that would be an explanation of the current state of affairs. That’s a very good explanation and the very reason why so many people feel so incomplete. I think it’s because their focus is so much on work and earning money that they let everything else go, including their health, and that’s not a good thing. You know, I want to talk about this area of risk a little bit. You had some interesting points in the book on risk. As it pertains to a martial arts instructor, one area is that many instructors want to quit their day job and go full-time into martial arts business, but they’re afraid to take that leap of faith. What advice can you give them about taking risk?

Well, I would say that I have a background in linguistics and language acquisition, and I really, one of the things that that learning other languages has taught me or the gift it’s given me is an appreciation for English and also somewhat of a radar for dangerous ambiguity. So I think the term risk itself needs to be defined very carefully before we use it much. And the way that I’ve defined risk as an entrepreneur, certainly, I’ve started a number of companies, the potential of an irreversible negative outcome. Okay. So for example, and then that’s how you compare risks. So if you stay with your day job indefinitely, okay, which is by nature, so if you never quit your day job, that’s permanent outcome. All right. And what would be the negatives associated with that?

So that is a hundred risk factor. That is a foregone conclusion, right?

If you start your own school, what is the likelihood of an irreversible negative outcome?

Well, let’s just say that you’re putting $25,000 at risk or you need to quit your job so you’re sacrificing $25,000 of potential income over, let’s just say, a six month period. Well, that’s your opportunity cost, but is it irreversible?

And the answer is almost always no. So let’s just say you quit your day job, you lose $25,000 $25,000 of income. Maybe your wife gets pissed off at you or your husband gets pissed. Pardon my French. That’s fine. It’s a stressful experience, but there is such a thing as good stress, eustress, EU stress, the opposite of distress, so the stimulus to grow. And if it doesn’t work, then you can always revert most likely to restarting the type of job you have beforehand. So I would encourage people to really get very specific about defining risk. And then I find that one of the best ways to do that is what I call fear setting. Just like goal setting, I feel that with goals, it’s not possible to achieve a goal until you have a very specific outcome defined with a timeline.

[24:13] And similarly, it’s extremely difficult to overcome your fears and apprehensions, let’s say about starting the business, until you very specifically define those fears. Failure is not specific. Just like I want to be successful. It is not specific. It is so overused as to be meaningless. I want to be successful means nothing. So do you want to be financially successful?

If so, what is that number? Because I know plenty of people who have 10, 20 million dollars who feel unsuccessful because the person they live next to us 200. It’s all right. So you need to define this. So if your fear is failure, what does that failure mean to you?

Okay. And when you when you start asking these questions, very quickly, you realize, all right, once you define that worst case scenario, how would I cope with that worst case scenario, and then you realize it’s completely reversible, or it’s completely fixable, it might take four weeks, but the potential risk is, let’s say, six months of time, $25,000 of opportunity cost. The potential benefit though, if it pays off, if it works, the potential benefit is completely life changing. So if you weigh those two hand in hand, it’s obvious that the risk, so to speak, is well worth it. And that’s what I’ve found in my life. Exactly. It’s all how you look at it. That’s a great response, Tim. It really is. You had some very interesting viewpoints on the subject of time management. Some viewpoints that would make certain individuals cringe, I think.

But nonetheless, you had some great points. Talk to us about your thoughts on time management and explain how this plays a significant role in a four-hour work week. Well, it’s a good question. Time management, I really am not a strong proponent. of time management per se simply because in a digital world where you have the potential for infinite interruption and infinite minutia, it really is impossible to consume and organize all of the information that is imposed upon you. I agree. All of the manufactured emergencies also that are imposed upon you by other people, if you allow that to become status quo. As such, one of the common characteristics among the top performers I interviewed and continued to interview for my blog, for example, is single-tasking, the ability to single-tasks. What does that mean?

Single-tasking is the opposite of multitasking. So it’s identifying the critical few, separating them from the trivial many, and establishing barriers so that you can complete those few tasks from start to finish without interruption. And so really what it comes down to is not so much time management, but prioritization. So prioritization and reestablishing barriers. And part of that is learning to let things wait, they can wait. So for example, if the choice is between let’s say spending an additional 45 minutes to finish a task that will allow you to be satisfied with your output for the day or running home to grab that DVD to return to Blockbuster to avoid the $5, $10 lay charge, which should you choose?

Of course you should choose the first. And that’s just one example, but it’s very important, I think, for any business person to get good at allowing small bad things to happen in order so that they can make the important huge things happen. And I find that that is inevitably necessary. So let’s just say you need five people send you emails that say, this is really urgent, I need to hear from you immediately. Absolutely mission critical. And you take a look at it and you have a a fair feeling that it can wait or if it can’t wait that whatever the outcome is, whatever fails as a result of it, is something that you can tolerate, something you can weather, then there are times when it’ll be important to do that so that you can sit down and let’s say you have two hours left before completing that important task, even if it’s not urgent, developing the habit of focusing on the important as opposed to the manufactured emergencies that seem urgent is really critical.

[28:44] It’s a common trait. Again, this is not me theorizing. This is the outcome of the research and looking at the people who are really ultra successful. When you look at somebody who makes $50,000 or somebody who makes $1 million a year or somebody who makes $20 million a year, the way that they think about things, the way that they frame their life, the rules that they set for themselves are very very, very different. Can you give us maybe an example of that?

I know you’ve given us many, but give us another example. How does a guy like Bill Gates respond versus the guy that works at a supermarket making $35,000 a year as the manager?

Well, I would say probably a lot of examples, but Bill Gates, from what I understand, there are a few things. He never has meetings to decide problems. He has meetings to solve problems. So before he has any type of meeting, everyone informed and the fewest number of people necessary to form a solution will come to that meeting and there will be a very clear agenda with a stop time. There’s always a stop time to his meetings. So he’s very good at protecting his time. Gotcha. Secondly, most people at that level will read some of their email, for example, but respond to almost none of them. So it seems like such a small thing, but it’s a huge thing. Well, it all adds up. Yeah, if you do a time audit and look at where you’re spending the majority of your time, most people will be spending many hours each day on email.

And the fact of the matter is that email is a mode of communication, just like a phone, just like the post itself. And you don’t respond to every piece of mail you receive in your mailbox, you certainly don’t necessarily pick up each phone caller or respond to each and every phone call you receive. And the same should hold true for email. So you find that just because it’s immediate, it creates the illusion that there isn’t a cost associated with taking 30 seconds to respond to every email, but it’s a cumulative damage. And I think that people like Bill Gates are aware of that. they recognize that the small things are sometimes the very, very big things. That’s a great point. Yeah, so the fact that someone like Bill Gates will say, you know what, I understand the hourly value of my time, like my ability to generate income, and let’s just take the example of a school owner.

If they were to spend an entire day, sit down to let all the phones, their phone go unanswered, to ignore all their email for a full day, stop putting out fires, and put a sign on the door saying no interruptions and sit there and simply sit down and do all of the analytics to decide exactly how many dollars a profit are being produced from each marketing vehicle and then put together let’s say a six month plan with budgets on how they’re going to reallocate money to the few things that are actually making a measurable impact. How much money did they just make from that one day?

Versus handling all of the various interruptions that would have come into fill that void otherwise. And when you take a step back and then calculate it, that time, let’s say those eight hours might’ve been worth $10,000 an hour. So once you realize that, and let’s say you come to the conclusion that by not answering the phones, you’re losing money, but maybe it’s $1,000. Well, perhaps that trade is very well worth it. And you start to look at things in very quantitative terms. And I think that it makes some very hard decisions very easy once you do that. Great point. I was meeting with my office manager yesterday and I kind of said, so how’s your day going, Melissa?

[32:35] And she kind of looked up at me with this weird look and she said, I have 635 emails today. And that wasn’t arbitrarily picked. That was like the number on the screen. And she was trying to go through them and you really gotta watch out with that email. I think in your book, Tim, didn’t you say that you only check email like once a week or something?

I have multiple email accounts depending on what type of business, so to speak, is coming to those accounts. So just like I would have a home address and then a business address. I have an email for a very private email for for friends, for family, and also for close business associates. Then I have a separate primary email which is read by assistants, in fact, and I give them a Word document which is a description set of rules that I follow when I check my own email. And I just sit down and put to paper the questions that I asked when I decide how I’m gonna handle specific types of the email. So I essentially took my brain, took my process, put it on paper, and then taught this assistant. And that would be an example of externalizing a process.

So I never check that email. She calls me once a day at 4 p.m. and has a list of to-dos or items that need my input, and it takes about five minutes, five to ten minutes each day, instead of taking the time that’s required of her to filter that, which is, let’s say, eight hours. Then I have other types of emails. So it ranges. With some types of email, I’ll check them once every two to three weeks. In some cases, it’s an assistant or someone else checking it for me. And then in others, I would be checking it once or twice a day. So today I’ve checked email once. I think the bottom line is that you could spend all day long on email and never leave the house if you wanted to. So you have to kind of control it or else it will control you.

Let’s talk about this area of discipline. You’ve mastered this area of working less and earning more. But do you ever find it hard to follow your own rules?

It’s always hard. I’m not going to lie to anybody. But it’s hard in a good way in the sense that if you talk to anyone who has, let’s say, 5% body fat, So, you know, and I know quite a few of them, I mean, including guys that AKA who are professional UFC fighters. Just because they consistently have 5% body fat doesn’t mean it’s easy for them. It means that they’ve created a set of rules and created a certain set of environments that makes it easier, if that makes sense. It’s easier and they have a certain system for making it easier, but It’s still a conditioning process. That’s the way I like to look at discipline, at self-discipline. It’s a process of conditioning yourself to recognize the benefit and rewards of behaving in a certain way that is counterintuitive.

And so for me, for example, if I don’t have a Blackberry, I don’t have a phone with internet access because I know that if I did have email in my pocket at any point in the day, I would check every five minutes. Which is what 27% of Blackberry owners do. So what I try to do whenever possible is modify my environment so that the decisions are made for me. Using the set of priorities and rules that I would otherwise need to use. self-control to implement. But it’s really a conditioning process. So for example, if you find that it’s very hard for people, give you an example, on a training diet if they’re trying to cut down to a certain weight class, in some cases it’s very difficult for them to lose starchy carbohydrates. So rice, bread, etc.

[36:48] And what you find though is after three or four weeks, you don’t really have the desire to eat those foods anymore because you’ve exited the withdrawal period and now that is your new default habit. You will probably have slip ups occasionally but it’s a system that you can correct and now you have a new set of rules that you don’t work. And I think that’s also true with, for example, email. Are there times like once once every blue moon when I’ll sit down and get stuck in the inbox. Absolutely. But I know because I’ve already tested it and I’ve been through the withdrawal period that if push comes to shove, so recently I was in Japan filming a pilot for a television series, I didn’t check email at all. I checked no phone for two weeks.

I was absolutely radio black out for two weeks because I needed to focus. And I came to the decision that I was willing to sacrifice whatever was necessary to sacrifice to get this particular project done because it was absolutely at the top of my priority list and had the potential as a life-changing variable. And I came back and there were some angry people and there’s all this stuff that I’d missed. There were some radio interviews I’d missed. And you know what?

It was all okay. None of it was fatal. Almost all of it was reversible. I had to make a few apologies and everything was fine.