Dr. Alan Barnard: If You’re Not Using the Theory of Constraints, You Need To Watch This!

Have a process of ongoing improvement. And to constantly improve a system, you just need two skills. How to identify and overcome constraints and secondly, how to identify and overcome conflicts. And conflicts is essentially where the rules come in. I have a rule that local optimizers or short term optimizers versus a rule that global optimizers figuring out those right rules, coming up with ways of resolving conflicts and win, win. That's what fear of constraints is all about.

So I read the Goal by Ellie Goldratt I don't know how many years ago. And honestly I was a bit confused and I felt, well, maybe I'm kind of a dumb guy or something, which is, you know, of course, many of you know that I don't have very expensive world knowledge in all areas. So I read the book, but I saw how many testimonials and how many companies that this book in the theory of constraints and this concept and these ideas and this methodology had transformed in profitability, in teams and everything. And Jason introduced me to Dr. Alan Barnard about. This was just a short while ago, less than two months ago maybe, or is it over two months ago? Yeah. And we had. And he's like, he's using this for addiction. And then I ended up having a conversation with Alan and it was fascinating and I was like, wow, this is very interesting. And so we've had several conversations and Jay Abraham, who is highly. You can see a video testimonial of Jay talking about how much of a genius Dr. Allen is. And Jason uses pretty much theory of constraints in everything. And so what I'd like to do here, Jason, many of you know Jason. If you don't, he's the top webinar guy in the world that I know. He's done over 200 million in webinars at this point. He did the biggest Internet launch. Just how many months ago is that? December. And they did 58 million, almost 58 million in sales. And he's. We did genius webinars here. The guy's brilliant. And I said, why don't you come? Because you know this. I mean, you know Alan personally, you know, so I'd like you to come up and introduce him properly. And I'm going to give you this and then we'll bring him on. So come on up, give it up for Jason Flavin.

I'm going to.

Unless you really don't want to, then I can read that. But if you're okay with that, I'd like you to do it.

Yeah, I read better than you do.

Anyway, I know that's why I'm having you do it.

You're the webinar guy.

So.

Welcome to the live webinar with Jason flavin.

Pleasure. So, Dr. Alan Bernard is an entrepreneur, philanthropist, strategy advisor. I didn't know that.

Cool.

Research scientist, app developer, author, coach, lecturer, podcaster, and lifelong learner, Alan's considered one of the world's leading decision scientists and theory of constraints experts. Alan is the CEO of Goldratt Research Labs, which he co founded with Dr. Ellie Goldratt, creator of Theory of Constraints and author of the Gold. His research focuses on understanding why good people make and often repeat bad decisions and how best to avoid these. From his research, Alan and his team at Goldratt Research Labs has developed a range of of award winning harmony apps that help organizations and individuals make better, faster decisions when it really matters. GRL's clients include Fortune 500 companies, government agencies, and people from over 70 different countries that are using their apps to make difficult life and business decisions. Please welcome Dr. Alan Bernard.

Thank you.

Awesome.

Thank you, thank you.

And you know, when I met him this morning for the first time we've had Zoom survey, I had no idea he was this tall. Says that to you, right? Like I didn't realize you're this tall. So awesome. Well, welcome to Genius Network. Where would you like to sit?

I'll put them in the middle. Okay, great.

So let's start. Here's why I'd like to do this. So, Jason, you have some great ways of framing this. We'll ask him a few questions. But then I'd like to. Once people here kind of get the concept, I'd like to open this up for everyone here. And my goal in the next. I will take an hour to do this. For the rest of the session, I'd like you to walk away here with a couple of elegant ideas that will profoundly change the way you think about your business, maybe make you more profitable, more efficient and more effective, and hopefully happier. And we can even touch on a little bit about the addiction stuff. And you'll be here all day tomorrow, too? Yeah. Great. So I guess let's start with the obvious one. What the heck is theory of constraints? How do you define that?

So in science, you call something a theory when it's just a simple explanation of why something is important and useful. So you hear a theory of evolution, you think they're going to have to tell me, what is evolution and why is it important and useful? So the idea of theory of constraints is why is a constraint of a system really important? And useful. And it's basically important and useful for five decisions. And that's the link between fear of constraints and decision making. So the first decision is how do you set ambitious but achievable goals if you don't know what's the constraint of the system? A constraint is simply a resource that you don't have enough of to meet the goal that you've set. It's as simple as that. So how would you set a goal if you don't know what's limiting you? Right. If you know what's limiting you and what's the potential for improvement? It's possible to set both ambitious and achievable goals. If you think about like decision making itself, right? How long does it take you to make a decision? But our constraint is our limited attention. If you have everything that you need, you can make a decision within a couple of seconds. That's the improvement potential. So the same for business, right? If you know your constraint is in the market or it's in the capacity or supply side or on the cash site, you know, what's that limit? You can set achievable but ambitious goals. So that's the first decision. The second one is how do you judge the impact of any change on the system? It's a really hard problem to solve in complex systems because small changes can have big impact. It turns out that by knowing the impact on the constraint, you know the impact on the whole system. If it makes the weakest link stronger, the whole thing becomes stronger. So that's the second decision. The third one is how do you decide what to focus on? You have limited attention, right? What do you focus on? Focus on the constraint, Focus on the weakest link. The fourth one is how do you know what rules to use to manage this whole system? Because most of the rules are local optimization rules or short term optimization rules. It turns out that the rules that optimizes the constraint of the system, whether it's the market or capacity or supply or cash, whatever you don't have enough of to meet the goal. The rules to optimize the constraint also optimizes the system. So it's like this magical hack. If I can just find out where the constraint is, I figure out how to better exploit or elevate that constraint. I have the rules that will give me global optima. And then the last decision is how do I know when to change the rules is when a constraint moves. It's as simple as that. So that's essentially a constraint is really important and useful in order to help me make those five decisions.

How did Elie come up with this?

Dr. Ellie he was studying transfer of energy and found out that there was in the transfer the flow of energy through any system. There's this thing called a singularity that determines the rate at which energy can flow. And kind of there's a long story about how he translated that, but kind of the short version as a cousin of his own, the little chicken coop manufacturing, he was basically destroying the family cash reserves because this thing was losing money all the time. And Elie was contacted via the aunt and said, you know, you and your brother, you're both clever. Come see if you can help him make money from this business because he's losing all of our money. He said, well, what's the problem? He said, I always have either too much or too little demand and I always get it wrong. There's a lag to create demand and there's a lag to create capacity. I can never figure it out and kind of instantly recognize that there was a problem in that there was this one machine, the bottleneck machine, the singularity where that governs the right that what you can supply, you can't over commit. You can use that machine capacity to commit and make reliable commitments and then make sure that that machine is never starved or blocked and that gives you the highest throughput. And he ended up building a big software business around that very complex way of scheduling really complex plants by just scheduling the bottleneck. So that's kind of how he discovered this and he wrote the Goal as a marketing brochure because people weren't getting it and then just it just spread.

How many copies of that book sold?

The estimates vary. Somewhere around 10 million. It's considered one of the 150 best selling books of all time. That's how successful it is. You know, if you look at most of the big organizations, they at the heart of it is, you know, Amazon was built on that. That's what he. It's like that is one of the three books. I listened to the discussion with Chip Wilson the other day. Lululemon guy, right? He said he built his business based on that, so it's massively successful. I think the one thing that's missing is the subtitle of the goal is A Process of Ongoing Improvement. Boogie for short Process of Ongoing Improvement. And what Ellie wanted to tell with that title and subtitle is that's the real goal. It's to have a process of ongoing improvement and to constantly improve a system. You just need Two skills, how to identify and overcome constraints, and secondly, how to identify and overcome conflicts. And conflicts is essentially where the rules come in. I have a rule that local optimizers, or short term optimizers versus a rule that global optimizes. Figuring out those right rules, coming up with ways of resolving conflicts and win, win. That's what fear of constraints is all about.

So what's a local?

What's a global.

Let's define these in plain English.

Sure. So local optimization rules are things that give you a short term benefit or benefit for one part at the expense of the system. Addiction is a local optimal rule. Right. It gives you instant relief in that moment, but it has a long term major negative for the system, which is us and those people that we surround ourselves of. But it's hard to control that.

Let me say this too, because I talk to. I mean, I know some very smart people, people that are considered the top in the, in the entire world in the field of addiction. Many of them are personal friends of mine. And so it's rare that I hear something in the field of addiction that's like. I've never heard that before. That's a very interesting. And that was one of the most intriguing things when New York. So I wanted to just frame this because I'd love for you to just talk a little bit and we can talk about business obviously too. But I'd love for you to frame that because it's. It's such a. It was so insightful.

Yeah. Something that probably most of you will recognize is how many of you multitask. How many of you know that multitasking is the worst possible way of getting work done. You see the problem? The fact that we know something is bad by itself is necessary but not sufficient to change it. And that's. Throw her the mic too.

And what did you say is, Ollie?

I use it when I procrastinate.

So when you, you're not doing what.

You need to be doing, you're procrastinating.

Actually doing a bunch of things, get you going, get you your brain going. So then you can actually focus on doing something. But I use multitasking to get going when I don't want to do something. Right. So there's, there's lots of reasons why we multitask, but the essence is that the worst possible way to get work done. Just a few years ago, we thought that that was the best way to get work done. Right. We actually interviewing people based on how good you were at multitasking. What's fascinating when you study people. Most people suck at multitasking. They're not good at doing even two things, never mind one thing. And those that are actually good at doing two or three things, they never multitask because they're aware of the negative consequences. So it's a good example of something that in the moment, locally, it feels intuitively like it's the right thing to do, right? To say yes to somebody asking you to do another thing. It's very easy to start something, right? But for the system, it's really, really bad. And that's a common characteristic of a global optima rule, is that it's very counterintuitive from the local perspective.

Can you give an example?

Hey, I hope you're enjoying this video and I want to let you know that I have a new book that's come out and if you'd like to get it absolutely free, there's a link below in the description. Or you can wait till the end of this video or you can Simply go to joe'sfreebook.com and you can get a copy there.

So multitasking is one of them, another one. Another one that we've just recently had is the allocation of resources. So imagine you have five teams, five projects. How would you allocate your resources? The most instinctful thing is do one project per team, right? The best possible way is put all five team on the highest priority project. Right? It's a form of multitasking. But at an organizational level, as we spread our resources too thinly, we don't focus and finish.

Can you talk about breaking things down to their simpler elements and why that counterintuitively doesn't work?

Yeah, I think that there's a. One of the quotes that have driven me my whole life is this Jean Baptista Pere that said, you know, the aim of all science is to substitute visible complexity with invisible simplicity. Right. If you think about E equal to MC squared, it's probably the most simplest correlation that you can find between free variables, right? But it explains a tremendous amount of complexity. And that's essentially what we all search for in science is I'm searching for the inherent simplicity within decision making, within the achievement of impossible goals, within the achievement of making impossible decisions. So where it goes wrong is when you break things down to make it simpler and you end up trying to solve problems in isolation or try to improve things in isolation. There's a assumption that the sum of local optima is a global optima. If I can improve each function of my business, then I will improve the whole business. It's simply not true. Right. And that's where the counterintuitive part comes in, is that if I can find a constraint and I improve that thing, that's the way to get improvement for the whole system. So that's one of the common mistakes is when we get overwhelmed, we try to break things down into simpler parts, try to solve the individual problems or, or improve each of the parts. But it never gives you global optima. You have to remain at that global optima level and find out what's that one thing that is limiting me from improving the whole system at the moment.

Can you give an example of where you help the business do that?

We were doing a massive project with one of the largest book publishing companies in the world. You're just talking about books, right? And I was given an opportunity to meet the CEO, brand new guy into a position. It was at a time where the book publishing industry were panicking like crazy because of Amazon, right? Electronic books is much easier to copy. So they were worried that their volume of sales is going to drop down dramatically. And the pricing, Amazon was dictating the price to the book publishers at 9.99. They were selling it to Amazon at $14, $15. Amazon was losing money on every single book that they were selling, but they wanted to dictate it. So the book publishing industry was at a panic. I was given an opportunity to meet the guy for five minutes. We were implementing constraints in their back office, the operation side. And he said, well, how what you do can help me? Because if you imagine if you have a limiting belief as the CEO, that limiting belief becomes the limiting belief for the whole system, right? So I said, so how did you convince the board to give you this job? Because I know there was a lot of competition. He said, I was the only guy that committed to doubling the net profit in the next three years, right? $1.5 billion business, 150 million net profit, most profitable book publisher at that time. And in this chaos conditions, he's willing to say, I'm going to take it from 150 to 300. So I said, wow, what's your plan? So he said, well, we'll have to double sales, right? I said, wow, how are you going to do that? Well, we have to get more books going to more markets. I said, okay. And he says, well, where's my limiting assumption? I said, it's very simple. You think that margins are fixed. That's the problem. You think that in order to double your net profit, you have to Double sales. So he said, okay, I don't understand, how else can I do it? I said, well, if you have $1.5 billion in sales, you're looking for another $150 million of profit. What would be the simplest, fastest way of getting that is increase the average selling price of the books by 10%. That's going to give you $150 million. Your variable cost, fixed cost won't go up. It will all drop to the bottom line. And I said, by the way, do you think that customers care whether they pay 20 or $22 for a book? Fuck no. Right now imagine the amount of effort and risk that you're taking trying to get your whole organization to double sales versus let's do a couple of experiments and see if we increase the average selling price by 10%. And that doesn't necessarily mean I'm increasing the price of the book. It just means that I give less discount. Probably one of the only industries that start discounting their product at the launch. They don't even know what the perception of value is and they discount it immediately. Right. So I said, but let's assume that won't work. What's the second best way is to increase volume. But how much volume do you really need to double profit to say, all I need to know is what's your variable cost? Total variable cost.

Right.

Not allocated over it and stuff, just total variable cost? He said, about 50%. So I said, if I want $150 million of additional profit, it means I have to increase my sales to 300. Right. Because if I can do it with the same operating expenses, the rest of that 150will drop to my bottom line. And they ended up achieving that goal within one year. Something that they would not just theoretically, but practically in those conditions would probably have been impossible.

Wow, interesting. So Jason, explain how you utilize this the most in selling and marketing, because I think that'll make sense to people sitting here.

Yeah, I'm not so scientific as the doctor Allen is, obviously.

Right.

And so I took it more as a viewpoint to look at how to create marketing. So you take an average customer in our space, grow your business. It's always build the business, make the business bigger, yada, yada, yada. It's always more, more, more, more, more. We're going to make tomorrow better. We're going to make tomorrow better. And my theory was always from theory of constraints was, well, what is the constraint? The constraint isn't the future. The constraint is the point present. So what are the problems that my prospects are facing in the here and now and how can I speak to them? So instead of trying to have a business make a million dollars, how do we get you your next customer? And so my focus and my viewpoint went to a localized level of what I thought was the most important bottleneck in the prospect's thinking. And how could I destroy, remove that obstacle? My theory that I had based on your theory was if I remove that obstacle, then the sell will happen automatically. If they don't have a reason to say no, then they will say yes. So where everybody's looking at, how do I get them to say yes? I just say, how do I stop them from saying no? And so in every single strategic meeting that we have, every single thought experiment that we run in our company, we always try to take the invert position. It's not like, how much does this cost? It's like, how much does this cost if you don't buy it, not just how much does it cost if you do buy it. So that's the main way that we use it at a practical level. But the other level that we always use it at is exactly what Dr. Allen is saying. We don't just assume that this one way is the way that's going to grow the business. We try to take a holistic approach and we try to say, here are seven probable ways in which we can create this business. Now let's run the actual math. And of those seven probable ways, which one seems most likely? It's the difference between deterministic thinking and probabilistic thinking. And so we run those models and those scenarios that I learned reading the goal and studying Dr. Allen. And we make hypotheses and we test them, which is very not common in business. I've discovered, like, entrepreneurs are allergic to like experiments and testing. And it's crazy, you know, now the laboratory rats, the clinicians, they're allergic to doing it in the real world. So you have a disconnect. Yeah, you do, right? You got geniuses over here that are just dissecting rats. And then you got entrepreneurs over here that are just making hip fire decisions like CEOs of billion dollar companies. Napkin. Mathing it out, right. And so we tried to figure out a model that could bridge those two together. And so intuitively I knew the answer that Alan was going to say for that example with the book, because we were doing, we have a little business together. And I told Alan, because we're doing a webinar, and I go, you got to show it, because People aren't going to believe that a 10% increase in price will result in 100% increase in your net profit. It just doesn't seem to make sense. But nonetheless, there it is. And that example didn't necessarily mean you had to raise the price from 20 to 22. What they discovered is they were using the middlemen, the distributors, and they were giving them bulk purchasing discounts and they clawed back a little bit of that. So the combination of two actions of clawing back a little bit of the bulk purchase discounts, increasing the price a little bit, running localized tests was sufficient enough to make the biggest impact into the bottom line. And so what I know reading the goal was in every single situation, there is one thing, there is something that is not obvious on surface, that if you use it will have a more dramatic effect than everything else. It's like Price's law. Have you ever heard of Price's law? The square root of the workforce produces the amount of production. So if you got 1,000 people, what's the square root of that? Man, you guys suck at math. Let me make it easier. What's the square root of 110? Oh, thank God. Okay, so 10. So 10 people in an organization out of 100 will produce 50% of the results. And so the reality is if you have like 10 decisions to make, or let's do nine for the square root of that, three of those decisions are going to produce at least 50% of those results. It's Price's law. So you use these different models. At least that's how I think about it creatively. And we run a series of tests on a simple level to determine if they actually play or if they don't play. Because what do we miss? What didn't we also account for? So tell the example, Alan, about the ore in the ground.

I shared this morning this idea of impossible unless it's sort of the story how I came up with it. I'm invited to go and speak to a mining group, walk into a room like this. But 60 huge mining guys, right? I'm pretty tall, but I see from the body language the last thing that I want to hear is a lecture about some theory. So before we start, during the coffee I said like, what's the issue here? Why all of you guys look so upset? I said, we have a target of 12 million tons a year. We in month four, we had 3 million tons. We're already a million behind. If we continue, we'll end up at 9 million. Most of us will be fired. We'll have to pay penalties on contracts, etc. I said okay, I get it. So I stand up. I said I was planning to give you guys a lecture about debottlenecking, but here's the issue. So I dropped a little curve. You know, you have to get to 12 million. You're running at 3, at about, you know, 750amonth, etc. There's that gap. How are you going to get there? We don't know, else we would have done it. So I said okay, I'm just going to do two things for you today. Ask you to write down on a flip chart what's the number one thing that's consuming your limited management attention and budget. That's our ultimate constraint as entrepreneurs is our limited attention, right? So what consumes your limited attention and that of your team and the limited budget that you have? And now imagine that big mining group. How many initiatives do you think they were that were consuming their attention and budget? When they got to a hundred, I stopped them, right? I said okay, now what I'm going to do is I'm going to ask you a really unfair question. Below the belt question. We've just agreed that the number one problem that you have is you are not making enough tons. Agree. If you can't solve this problem, nothing else matters. It's the one thing that makes the whole difference. They said yes, said okay, I want to go right down on those flip charts that's now stacked around the room. How many additional tons is that initiative going to give you? What do you think happened? Three of the initiatives actually would have helped them to bring more tons. Only three out of that hundred. So I said guess what we're going to do? Stop the majority of them like right now. Because without that all that you are doing is you asking people to do something more. You're asking them to start another thing. Whereas most of your limited attention and budget is already occupied. We immediately agreed what we're going to stop. I said okay, but that doesn't yet help us to know what to go and do now. So I call up the first group manager, he says, responsible for exposing the ore. I said how are you going to get from an average of about 750,000 tons a month to 1.25 million because remember you, you've fallen behind so you need to catch up. It's not just good enough to get to 1 million, you have to go more. And this big guy standing in front of me. And remember I have no intuition or experience in mining, right? Nothing. So imagine yourself in that position. There's no silver bullet that some magical way of rescheduling the plant or whatever. So I said, how are you going to do it? He said, it's fucking impossible, else we would have done it. And I stood in front of him and the only thing that came up was I said to him, it's impossible unless. And he looked at me and I looked at him. We stared at each other for a couple of minutes, probably a few seconds really. And he said to me, if this was my mind, this is what I would do. I would go and get a bunch of land moving equipment. There's this area there, these idiot accountants. And he pointed me to the accountants tell us it's unprofitable. Go and mine there. I said, great, so let's do the numbers. How much worst case is this, these equipment going to cost you? He gave me a number. It's like, you know, a million dollars a month. I said, worst case, how many additional tons will you get from this? He gave me the numbers. We multiplied at $100 a ton. It's like, do you want 20 million and spend only 1 million? And that by the way is if you have to make a big decision, if the worst case cost is still better than the worst case benefit. What a fantastic decision.

Can you say that again?

If the worst case cost is still better than the worst case benefit, it's a hell yes decision like this. We actually suck at predicting the likely outcome, but we're pretty good at estimating the best and worst case outcome. And that's generally all that you need to make really complicated decisions as you estimate the best and worst case. So immediately it was approved and then we went to the next operation because we don't want the bottleneck to now move to another area and we get kept on this process of impossible unless. And then we repeated it at levels, right? This was all executive level. Then we repeated it up to the operator level and they all came up with ingenious ways to make the impossible possible.

There you go. So yeah, give Ben Hardy and Mike.

First question is there. What would you have you produced resources or an easy book to something that's. I know you might have a bunch of academic papers. Where's the easiest way to get this information?

Tell them about your app. What?

Tell them about your app. So we've developed a range of apps that you can download. Some of them are really simple. Some of them are much more sophisticated. Like we developed an app that allows you to create the digital twin of your full supply chain. So Microsoft used that app to create a digital twin of their full global supply chain for all their physical products. Right. They produce keyboards, mouses, hololens, etc. And what you want to do is you want to test your strategy. There's only real two business strategies is find a way to reliably and profitably sell whatever I've produced. That's one strategy. Sell profitably and reliably whatever I produce. So I'm treating my capacity as the constraint. And I'm saying to the marketing and sales guys, we decide what we're going to produce, you find the market for it. That's one strategy. The other strategy is only produce what you've actually sold. So with digital twins, you can test all of that in terms of reading materials. I have a YouTube channel. There's a lot of information there. The goal is a fantastic book as a quick introduction, but probably YouTube is the fastest way of learning these basic things.

Well, you have the personal app though, too.

Yes.

So talk about that.

So it's called Harmony Decision Maker. And what we discovered is there's various type of decision mistakes that we make. There's four of them, and we've developed an app for each of them. The first one is we don't realize the extent to which strong emotions impact our decisions. So is there a really simple way to find and challenge those strong emotions? So the reason why we procrastinate is an exaggerated fear of loss, effort, or risk. The reason why we often overreact and make really bad changes or choices is an exaggerated frustration with the current status quo or an exaggerated expectation of the future. So the app is just a very fast way of helping you discover those things. And what it does is if I take a practical example, somebody that smokes, and you say to them, why do you smoke? Right. There's two reasons. It's not because they're not aware of the benefits of stopping or the negatives if they don't. It's because they believe that smoking helps them to cope with stress or anxiety. Right. So the exaggerated fear of losing that ability is what really blocks them. On the other side, you say, what are you scared of will happen if you literally stop today? Never again. As some of them might say, I'm worried that I will replace it with an even worse addiction. Right. I'll overeat, I'll gain weight, whatever it is. So that's a very simple way of just by asking the person the right question, like impossible, unless it's the same type of question. It's impossible for you to quit smoking unless. Unless I can find a better stress coping mechanism and unless I can find a way to prevent me from finding another addiction. Right. So answering the asking the right question moves that assumption, that belief from the subconscious to the conscious. You can't challenge an assumption or belief in a subconscious mind. But being asked the right question, especially if you had to write it down in a workbook, what's your reason for doing this? Good people make bad decisions for good reasons. Our objective of the app is to find out what's your good reason. And when you write it down, the app will go, really? Is that really true? And even if it is true, is there not another way of satisfying that need, etc. So that's what the app does is it guides you through these sort of five decision mistakes and at the end of that, you've made a much better, faster decision. So start off with what's the problem and why is it really important that prevent the mistake that we have and commonly wasting our attention dealing with things that are unimportant or we can't do anything about. Similar to your talk, the second one is what's the options I have and what's unique pros and cons of each of the options that make it such an impossible decision? Do something, don't do something, do something, do something else. Step three is, okay, what are all the options? Can you come up with a better option? One that has more upside, less downside? And then step four says, pick one of those four options that you've developed and see what are all the yes buts. So use your intuition. Use the intuition of others to tell you why this will never work. But for every yes but raise a yes and right. That makes the solution more robust. And then the last step is designing an experiment to go and try it out. Try out this option. The biggest insight I had was we don't learn from experience, we learn from experiments. You touch a hot stove plate, right? How long does it take you to learn? Yeah, quickly. But imagine if that hot stove plate burnt you just a day later. In reality, there's lags between causes and effects. That's why it's so hard for us to learn the right lessons. A good experiment is something that explicitly have stated the assumptions. If I do this, then more customers will buy. Okay, how can we try and test it in the simplest, fastest possible way? So my quote, that sort of governs, that is always check your assumptions before you act. Unless acting is the only way of Checking. So always check your assumptions before you act. Unless acting is the only way of checking. We can sit here and argue about what's going to sell your book, right? Yeah, that's kind of analysis. And we should do that and then come up with a few strategies and then we go and test it to see what actually works.

Totally.

Very good. Very good. You know, when I.

Let's see.

There was hell no or yes decisions where you describe little upside, high risk, high upside, low risk. Explain that. Because I think if you gave people a model of how to make better decisions, because every single person here has an opportunity that they want to reach. There's obstacles that stand in the way. There's. There's dangers that are real and then psychological, where we're getting ready to go into, I think, you know, a financial crisis. We're already on that path. And there's going to be a lot of changes and there's going to be a lot of decisions that people are going to maybe have to make and some that will be extraordinarily difficult. And if there is a framework that you could provide to help people to become more capable of knowing how to make decisions and which ones are hell yeses and which ones are hell nos, that would be valuable.

So I have to give a lot of acknowledgement to Nassim Taleb, the guy that wrote Black Swan, Fooled by Randomness and a book called Anti Fragile. If you haven't read it, you have to read it. As you might know, he was an options trader. Right. And an option is a right without an obligation. When I read that, I think any change that we make in our life or in our company is like an option. We have a right to make the change, but we don't have an obligation. So which options should I exercise? I always have options. Which one should I exercise? And all options traders will tell you an option that has a big upside if it works and a small downside if it doesn't is a hell yes decision. Right. What would you wait for? Especially if you find that situation where the worst case investment of cost is still lower than the worst case benefit. Right. The hell no decision is one that has a small upside if it works, but a big downside if it doesn't. And the way that we teach this is think about playing the lottery versus Russian roulette. Right. What makes it challenging for decisions is we don't differentiate between the probability of the success and the impact of success. So what's the probability of playing the lottery and winning at it? One in A million, right? Whatever the number, should you do it? No, it makes no sense to do it. Why waste? Right. What's the downside if you fail? You lose a couple of dollars. What's the upside if you win? It changes your life, right? Now think about Russian roulette, right? What's the probability of winning at Russian roulette?

12.5%.

5 out of 6. Like that's your probability of winning 5 out of 6, right? Should you do it? Should you do it? No. Why? What's the impact of failure as you lose your head, which is quite an important part, apparently that's the ideas. And it's amazing how often we exercise options that have a small upside if it actually works and a big downside of a dozen. Two quick examples, having an affair. Like, what's the maximum upside? Even if this person is, you know, amazing in bed. Right? What's the downside? That's one. From a personal perspective, from a business perspective, I was recently phoned by CEO of Fortune 500 company. Said my chairman said I should call you. I said, okay, what can I help with? He said, well, they're planning to have layoffs. He's going to announce 10% layoff. I said, why? He said, well, our earnings per share is 10% below market expectations. So I said, oh, that makes perfect sense. You know, you probably thought that you wouldn't have. Your team wouldn't have committed to a target if they didn't have enough resources. So if you only got 90% of that target, they must have 10% at least. Waste, wasted capacity. He said, great. Could you phone the chairman and explain? I said, no, let's just think a little bit forward. I want to ask you to think about what's the maximum upside of 10% layoffs. So I said, the people that you are planning to lay off, how much of your total revenues do they make up? You said, about 20%. So the cost of those wages are about 20% of your revenues. So I said, so 10% cut in 20% will give you an increase in net profit of 22%. That's the maximum upside that 10% layoffs will give you. I said, now think about the maximum downside. Strikes, losing your top people, competitors, grabbing market share. Is that a good decision? No. So I think it's just a. That is a held no decision. Anything that has a small upside of it actually is going to work and a potential big downside. And don't make a PhD out of trying to predict the probabilities of the downside. You Can't. All that matters is what's the worst case scenario. And then think about if that's your only option to exercise. What will I do if the worst case happens? So that's kind of a simple way of making really complex decisions. Just think about, hell yes. Big upside of the it works. Small downside if it doesn't. Hell no. Small upside if it actually works. Big downside if it doesn't. Then we teach us even at schools, right? Like how best to respond to a bully. There's a couple of options, like tell my parents, tell the teachers, fight back, go to another school run. Right? Couple of options, like which one of those options will have the biggest upside if it works and the smallest downside if it doesn't. And which option will have the smallest upside if it works and the biggest downside. And that simplicity helps us make really, really complicated decisions.

So don't punch the bully in the face unless.

Was that helpful to help you think about making decisions? So let's take some questions from the audience because we have about 15 minutes or so. So whoever has their hand up, just go ahead and throw them a mic. Michael.

Sure. Okay, I'll go first. Earlier you mentioned kind of the local short term relief. Would you explain that?

More like a kind of like a.

Band aid, like a temporary fix.

So the temporary fix is.

Will work right now, but it will.

Create more problems in the future.

Yeah. There's a useful framework to think about when you're making decisions. E plus R equal O. Right? Events plus response, equal outcome. You're going to have positive and negative events that happen in your life, Right. What determines the outcome is whether your response is positive or negative. A negative event with a negative response gives you a double negative. Negative event with a positive response gives you neutral, basically dampens it out. But there's also the other side, which is a positive event with a negative response. Like somebody says, oh, you look amazing, they go, what do you want? Right. Just worked it out. We need those positives to compensate for the negatives, right? And then the last one is a positive event plus a positive response gives you a double positive outcome. So when we have those moments, we don't actually respond. We react and our reaction is automatic, very fast. That's a part where if you are addicted, right. There's something that's causing the anxiety and you get immediate short term relief. But you are in automatic mode and reactionary mode. So if you can just find a way of pausing that moment, right. And say, how do I need to respond to this on a call the other day, Corrado, he is the CEO of Comstock Mining. He's done what Joe want to do with Cleto, right? Turn around the whole mining community, etc. And I said to the guy, you look amazing. Because he used to drink quite heavily and overeat quite a bit. He's Italian. And he gave me a story. He said, just one question has changed everything from. It allows him to escape out of that automatic cycle. I said, what was it? He said a neuroscientist that he was working with said to him, you only drink for two reasons. You thirsty or you anxious. So every time you reach for a drink, just ask yourself, am I thirsty or anxious? If you're thirsty, drink water.

Right.

If you're anxious, find another way of dealing with anxiety. And then you realize, oh, my God. God. The same thing is true for his overeating. You only eat for two reasons. You're hungry or you're anxious.

Right.

So it's those simple questions that if you can intervene in that little space before you go into automatic mode or shortly after, you realize that can change everything. Yeah.

You know, one thing, you know, in the recent loss of money that I had from. Yeah, anyway, it's the crypto world.

I.

Thought about this, like, okay, if I can respond positively. And I've actually been in quite a good mood about the whole thing too. So when I was in active addiction, I was always reacting. I was not responding. And when I'm in recovery, I'm responding. And if I find myself dipping into reaction, it becomes a warning, like, beep, beep, beep, beep, beep. You know, it's like a. You know, it's like on your car when you're back, if you have one of those cars that beep when you back up. But it's just a warning signal. And I. When you're in reaction mode, you don't even hear the warning, you're just in it.

But there's always that moment where you catch yourself, right? You open up the pack of crisp and you wanted one, and now you've finished half the packet or the ice cream or the bottle, liquor, whatever it is. For me, a useful analogy is like one of the big questions in decision making is, when do you let go of something? So there's an expectation gap. You had an expectation, it didn't work out as you expected. That expectation gap will cause anxiety. And there's only a couple of options we have to deal with it. One is you can find someone or something to blame, right? Actually useful to reduce the anxiety, but not that useful in terms of learning what, what to do in the future. Or you can lower. You start lowering your expectations. Yeah, right.

That's.

That's one way of dealing with, like, when do I let go? And for me, a useful analogy is thinking about picking up a heavy weight right now. It stretches you to try and see, like, how heavy of a weight I can pick up. It's like, how, how ambitious can I make this target? I wanted to make a lot of money from this thing, so I lifted up this heavy weight. What will happen if you try to keep on to this weight? At some point it will start being painful. Right. It's like holding on to a strong negative emotion of disappointment or anger. Like, there's a reason why we experience that emotion because it helps us get stronger, become more resilient, like holding that weight. But at some point it stops helping. And it's at that moment when you realize it's no longer helping me to hold on to this negative emotion because we all get angry and disappointed and find someone to blame or whatever. And it's useful up to a point. And it's kind of like an inverse U shape. Right. There's a point of too little blame, too little feeling of anger or disappointment. But then if you keep on feeling angry disappointment, there's a plateau at the top where it's no longer helping you. But if you keep on going, it now starts. It's. It's taking away all the attention and motivation that you need, not just to capitalize on other opportunities, but actually to see them. Right. You literally become blind to other opportunities when you are so engrossed in negative emotions, it takes up so much of your attention and energy, you literally can't see other things. And that's why it's so easy to fall into that trap and it's hard to get out of it.

Yeah. I'll tell you, even the conversation this morning about massages and yoga and the foot, all of this stuff is about energy because it's not really about managing time, it's about managing energy. And if you're very lethargic and you don't feel good, it's just going to take you three times as long to do anything. But if you feel, feel really good for food, because I love. I mean, hell, I wish I could eat fricking pizza all day long and that sort of stuff, but I used to. And I've gone through different stages of doing this where I would put on the refrigerator a little post it Note that says, nothing tastes as great as being lean feels. Nothing tastes as great as being lean feels. And I would say etching my brain that, you know, I love the taste of stuff, but I like feeling lean. And when I don't, because there are times in the moment where I like my vice. If I do have a vice for food, it's like popcorn made with coconut oil.

Fucking delicious. It just tastes so good.

And I would literally, I could eat it every day, it tastes so good. But I was like, if I eat it every day, it's just not, you know, it's just not good. Good for you. And so it's. So there's that. And then the other thing that helped me with food is there was this interview with this guy that was on a Survivor show where the student lived on the land and literally killed his food. And I mean, lived in the land, like Paleo days. And the interviewer was asking, how do you season your food? And the response was, I season my food with hunger. And I was like, that's a great analogy. So it's like, I use it in business, keep yourself hungry, because it doesn't just apply to food. And so therefore I don't want a lot of seasoning on stuff because if you condition yourself to have your taste buds always requiring comfort and the best taste, then all of a sudden you start smothering your food with a shit ton of useless calories. And so I think I apply that not just to food, but just life in general.

One of the reasons why we often get into things that we ultimately get addicted to is an assumption of, you know, I deserve it, I'm entitled to it, I work really hard, right. So I should be able to have that piece of pizza or whatever it is. And it's again, it is reframing it as I deserve that versus I deserve not to overdo it. Right? I deserve to have it, but I deserve not to overdo it because then it becomes negative. Yeah, really, really negative. When you overdo anything, it becomes negative.

Now let's do Grant, who's online. Thanks for being here, Dr. Allen. I love Theory of Constraints. I've read a lot of the books and I think it's awesome. And I love. So there's theory of constraints, applications for decision making, production projects, distribution. Have you seen anything good for services businesses? I run a services business.

Many of us do. Be curious if you have thoughts on that. Yeah, there's a great book and I'll text you the name afterwards. It's written by one of my friends Dr. John Ricketts when he was at IBM they turned around a whole global services division of IBM, made it one of the most profitable divisions inside by applying the theory of constraints. It's tough because in a service business you can't have a constraint. Right. Because what will a constraint do? It cause a backlog. The bottleneck will cause a backlog. And when the backlog becomes too long, people leave. So it's understanding how much of every resource I have that's enough not to cause too long of a backlog. So and that's something that we can do with our simulation models, right. As you can put in all the parts, you press the play button and see what will happen to the backlog. A kind of a counterintuitive imagine you decide whatever you're currently doing, it's like you're ready to retire. You go buy a gas station and you do some basic market research. You find out that say they consume 100,000 gallons of fuel and one pump can pump a hundred thousand gallons per week. Right. Demand is 100,000, supply is 100,000. How many pumps do you think you will need to ensure that the queue never gets so long that people leave?

Right.

What do you think? Five times is the number? Right. The average utilization of a gas pump, if it goes over 20%, causes the queues to become too long. And how you can apply this in your own life is if I asked you how long will it take you to do a one day task? What should be your answer? It depends is the right answer. If you're doing nothing else than one task will take one day. But if you're already 50% utilized, it will take two days. Right. Half of your time is already taken. If you 75% utilized, that one day task will take four days. How long will it take if you're already 99% utilized? A hundred days. That's why one day tasks end up taking 100 days because we constantly overloading resources.

Yeah. Dean Jackson has this unit of time thing. I don't know if Dean is still on, but it's such a great know exactly what you're talking about. And therefore you've explained how I spent so much of my time running around like a chicken with my head. Like you know, the whole spinning plates and you're going, you know it's like.

Yeah, it's a, a kind of a rule of thumb for most industries is gas stations is an exception, but kind of 80% utilization is a magical number. Comes from queuing theory where if you're plotting the utilization of a resource source against the lead time. There's a point where there's zero demand, so the utilization is zero. Then you increase the utilization and it stays flat for a long time. But at about 80%, it becomes exponential. So if you think about traffic, right, if you had to drive to Los Angeles, it might take you five hours. But during peak traffic, that same journey could be 10 hours. Same if it could take you 50 minutes to get somewhere, suddenly, it could take three hours. It's when it crosses that we call it chaos zone, chaos condition, where the utilization is just too high and suddenly the backlog grows and grows exponentially. So probably the number one advice that we always give entrepreneurs, not something that they don't know, but as a reminder, you are the bottleneck for your company. You are the constraint, and more specifically, your limited attention is the constraint. The worst person to overload is yourself. Always have enough protective capacity and using that 80, 20, it's kind of. If you have to schedule your time, keep Fridays open.

Okay, let's do this for time. So we'll go to Ben, we'll go to Caddy Ann, then we'll go to. All right, so go ahead.

Okay. I know he had a question.

Thank you.

Okay, my question was, when you're establishing what you're framing as an impossible goal, how do you find the singularity? Essentially the whatever it is, the one thing, how do you. Once you've identified the goal, I guess in your determining. In this case, let's just say Joe wants to sell either a million books or 10 million books, and we can frame out how impossible versus impossible. But how does someone like him or me identify the singularity, the one thing that then makes that possible?

So there's a sequence that you want to go through. So in the initiative that we collaborating, we're creating an ambitious target out there that most people would consider unrealistic or impossible, which is how to turn your top line into your bottom line in a very short period of time. $10 million business making 1 million. How can I get 10 million profit, right? So the first thing that you have to do is once you've set that really impossible goal, as you ask yourself, do I have enough customers to be able to meet that? Do I know how to get enough customers to meet that? If you say no, guess what's the one thing solving that problem, right? Whether you for profit or for purpose, it doesn't matter. It's the same sequence, right? I have a goal to help a million people. It sounds impossible. Do you have enough people that want you to help them. No, guess what, you're one thing. Once you say now I have enough people then to say, do I have enough capacity to provide that? No, guess what, you're one thing, then whatever the supply is that you need to be able to produce your product or service to meet the needs of the customer to achieve your goal, then that's the next thing. Do I have enough capacity? Internal. Then it's do I have enough supply? And then finally do I have enough cash? So that's one way of doing it is to think about it sequentially. What most businesses do is they sell, set up an ambitious goal that means that they will not have enough of anything. They don't have enough market, they don't have enough capacity, they don't have enough supply, they don't have enough cash. So they fire fighting all the time. Our advice to them is very counterintuitive, is lower the goal until only one thing becomes the constraint, right? And that's then where you start. But that's the process of ongoing improvement is set. This very ambitious goal, the more ambitious it is, the more useful. Because if I asked you like what you asked this morning, how many ways are there to increase your net profit by 10%? A lot. How many ways are there to increase it by 100%? Much fewer. So the higher I make my goal, the more likely I am to find a one way, right? And I want to pick that one thing that even If I'm only 20% successful at it, it's enough to achieve the goal.

Yeah, good stuff.

Real quick, is that within the theory of constraints that if you hire the target to a certain level, you can then find the simplified answer, like where is that? Where can I find more information on that specific thing you just said?

It's not well written. So well.

But here's the problem, right? So Ali, unfortunately he got sick and he died young. And so Ellie's last major project was this top line and the bottom line. How do we take their 10 million gross that produces 1 million net and give you 10 million net? How do we turn the gross into the net? So Ali had this ambitious idea to do that and he launched it with like a video sales letters of all things. And back in. Was it 2005 or 2006?

Yeah, 2005, 2005.

And then it picked up a huge amount of traction and all these big companies are like totally in. Ellie would bring him into like a four hour or an eight hour event, do the whole dog and pony show to explain it to them and say, hey, we're looking for a few customers that we can do this with internally. But then Ellie got sick and he passed away. And so Dr. Allen had sat on this idea for 15 years. And then he heard a webinar interview that I was on and I talked about theory of constraints. And he reached out to me and he's like, I got this thing. You want to play with it? He's like, oh, Jay Abraham's on board, Rich Shepherd's on board. And we're like, all right, let's try it out. So we're in the process right now of taking this out there. I say we. He does 99% of the work. Right. So it's Dr. Allen's vision. We're trying to get it out there into more people's hands. Because the best thing is we did this. Like, we had like 43 businesses that we went through with this of all sorts of varieties. It was super fascinating. And the idea though is if we got him to focus on. I don't care what the excuses are, but if you do say 2 million, we had businesses on there. Alan, you know the numbers better than I that were doing like 2 million gross and we're doing like $2 net.

Yeah.

So how do we turn a two dollar net into like a 2 million dollar net in like two years? Well, we would have that conversation. We would take a look at that and try to figure that out. And then we would work backwards from there. So we're still caught up and validating it through experiments right now. So we don't have the clear cut path, but it's still so useful just to have them have those questions that can be asked.

Can we.

Let's.

Let's try to wrap up in 10 minutes. Just for timing. We'll go over because I know there's people from different parts of the world that are actually on Zoom right now. So it's late for them and we will have. For everyone here, we will have networking. So let's do Patty Ann and then whoever else has. Go ahead, Patty.

Thank you, Joel. So, Dr. Allen, nice to see you again. We had a really nice conversation about a week or so ago. I feel like this is my second tutorial, so I appreciate that. I guess I want to ask. This might be very simplified, but to go back to the addiction, a way of treating addiction. And we were talking about emotion. And the most important relationship is with yourself. People are flooded with information, overwhelmed, anxious, and perhaps most importantly, or as a result of so disconnected from who they are. So how does this theory address that? And we talked about hence war, right? Because people are not making decisions.

As I mentioned, the link between fear of constraints and addiction is this idea that our ultimate constraint is our limited attention and what and who we pay attention makes all the difference. So addiction is one of those things where because you're in automatic mode, you don't realize it, but the majority of your attention is going to the wrong things. And it's really, it's like Gabor Mate says, it's not why the addiction is why the pain and that the addiction is our attempt at solving the problem, it's not the problem itself. So for me, that simple framework of E +R =O is a really useful framework even for people that are struggling with addiction or even considering self harm. Some time ago I was asked like what's the worst possible decision you can make? And I said three of them. It's considering taking your own life or somebody else's life. Like why do you think that that's the best option? Secondly is suffering like harming yourself or somebody else, either physically or emotionally. But the third one is misallocating your scarcest resources. And there's a connection between those, is that when we are in reactive mode, we constantly giving our attention to things and people. That doesn't help. So to remind yourself what's the outcome I want and is this response I have to the event that just happened, is it going to get me there? Does it stand any chance of getting me there? So I think it's providing people with a simple framework to understand is already useful. The second thing that we share with them is good people make bad decisions for good reasons. So give yourself some credit. The fact that you have an addiction, there must be a good reason for you to do it. What is that good reason? When we treat them as idiots, as if they don't know that there's harm in doing it or harm if they don't stop. I mean that's just ludicrous. That's not going to change anything. It's helping them answer the question, what are you getting from it? Right? Have you got an exaggerated fear of losing that or an exaggerated fear of the effort or risk of doing something else? So just asking them the right questions can have already make a massive impact on the suffering that they experience. Because they often blame themselves and feel very shameful. And that's how they often don't get out of those loops. Because they try a program, they fail. The program manager says to them, like the 12 step program. The actual success rate of the 12 step program is 5%. 5%. They claim it's 50%. Do you know why? Because they say we've had 50 successes out of the last hundred that completed the program. How many started the program?

Thousand.

So not only the success rate is really bad, but the people that fail are left harmed because they told that there's nothing wrong with the program. There's something wrong with you. You don't have the willpower, you don't have that right. So for me, it's like there must be a better way where we can dramatically increase the success rate and at the same time ensure that those that are not successful at least won't be harmed. And I think being able to communicate these simple frameworks in clear terms that they can understand and make sense of their own behavior and then help them develop better options, I think that's the way to go.

So what's the constraint with addiction recovery treatment right now? What's the constraint?

I think the fact that there's all the programs have got too many steps. Whenever you add steps, you add opportunities for failure. Right. So it's like free secrets. Why is free secrets better than 10? Because the chances of getting all 10 right is close to zero. So if I have a 12 step program, if I knew nothing about addiction and somebody would say to me, what do you think of this 12 step program? I go, it's too complicated, can't work. But especially if you're not clear about the 12 steps, you're not clear about how to actually apply it. You want a three step program that can be done in a couple of hours. So to get fast feedback about what, whether it's working or not working. If you're going to tell me it's going to take me a year to go through a 12 step program, when do I know it didn't work one year later? That's awful feedback. Right? We learn from fast feedback. So to me, that's kind of the idea of how fear of constraints linked is its focus. And fast feedback focus on the one thing at any point that can make the biggest difference in your business, in your life. But then design experiment where you can get fast feedback to check if your assumption was right.

Yeah, you know, this is a compact which will take a longer conversation than what we have time for now. 12 steps actually came from the Oxford Group based on it and Carl jung. They had four steps and the four steps were not getting recovery and Bill W. And Dr. Vaughn through that whole process created 12 steps. And when they first started 12 steps in the 30s, they said 100 men and women, but it was really 77. But they rounded it up so it would sound better, but they wouldn't let people go to the program that actually didn't do the steps. And they had a very high success rate. And what has happened with what you're saying? I agree with when it's tied into treatment centers. I think most treatment centers, frankly, suck. Some are great. A lot of them suck. A lot of them are very exploitive. And the only thing that makes most treatment actually work is the fact that they cart people off to 12 step groups while they're in treatment. And if it wasn't for the 12 step groups, the real success rate of most rehab would be dismal. And so when people do this, because I often say to people, because I'm a big supporter of 12 Steps, but what 12 Steps, 12 Steps doesn't deal with is almost anything related to food. Right? Because that's why you see a lot of people 12 steps guzzling coffee, eating donuts, smoking cigarettes and all that. And hardly anything with trauma. But looking at where it started in the 30s, they didn't understand it back then, right? And I always tell people it's not an attendance program, it's a step program. If you just attend a 12 step group and you don't do the steps, I use the analogy of like going to the gym and not lifting the weights or getting on the cardio or whatever and saying gyms don't work, gyms work if you actually do it. So part of it, as I think about this with you, is like, if you make it. Addiction is such a complicated thing. I think there's four things you need. And people have heard me talk about it. I write about it in my book in order to get sober and stay sober. And sobriety isn't even the issue. The addiction is actually a source of pain. And it hurts to be alone. And most people in addiction, or deep depression or anxiety, even if they could be surrounded by people, feel very alone and isolated. The reason I think there's so much workaholism with entrepreneurs is it's very isolating. Many entrepreneurs are surrounded by people, but they're not surrounded necessarily by people they feel connected with. And everyone's looking up to them to make all the decisions. Inside almost every entrepreneur, someone slowly going crazy or quickly going crazy. And so it hurts to be alone. And when you're hurting, fuck, man, you're going to look for some compulsive way to scratch the itch and doing a business deal or eating food or drinking or gambling or whatever helps satiate that. So I believe there's a real key here with what you're talking about. It's a matter of integrating it. And like the conversation earlier about EMDR, you know, 12 Steps has a lot to do with the sponsor. It has a lot to do with the recovery in the group. There's some 12 step groups that are very unhealthy and some that are amazing. And I went out, you know, in my, one of the weird things that I did in my addiction, I would go out and hire the top therapists in the world thinking the therapist was going to do the work for me. It's like the Jim Rohn thing. You can't hire someone to do your push ups for you, you know. And I got more recovery in free 12 step meetings. When I finally got broken down enough to fucking pay attention and listen to where I resonated with it. So it's like I find myself defending 12 step groups, but at the same time they're, you know, now we're anonymous. I mean, it was brilliant to have it be anonymous because all the shame attached with it where don't go into a meeting and say your first or last name. No one cares about who you are. You're here because you want to get help. Whereas today, where we're starting to understand that more, I think the more people that actually do have influence can actually say, yeah, I was hurt by it. And so I think anonymity is helpful in certain stages. You know, I always often say, you know, there's a time to disclose. You know, there's a difference between secrecy and privacy. And you know, and so, you know, there's a lot to this. But I think the theory of constraints are, is applicable and I want to explore this and go deeper because I.

Know we don't have much time, so I'll be brief on this. But so the idea is 12 steps you can. It's doing exactly what Alan talks about earlier with theory of constraints. It's trying to break it down into simpler and more manageable components. So therefore there's some efficacy to it and it's effective than most other existing treatments. Just like there's businesses that run that do okay and do really good. What Alan wants to do by applying the theory of constraints is not to take these individual pieces and try to build a system that's kind of good. He wants to take whatever the percentage rate is right now and do the same thing that we do, top line to bottom line. And there's a solution and nobody's really looked at it from that angle. And so that's what's exciting about it. So there's a way that we can still honor what 12 step represents. Result is free. I mean, so that's kind of cool. But how do we apply theory constraints to take something that in every single. It doesn't matter the treatment, the recovery rate is abysmal, it's terrible. It's single digits. There's got to be a solution that it can be double digits, 50%, 70%.

There's a quote that probably you can all apply to whatever program, product, service you're offering, which is from the author of Little Prince, Antoine de Pare. He said, a design is perfect not when you cannot add anything, but when you cannot subtract anything.

What is that called?

The author of the Little Prince, he's got complicated Last time. I'm probably pronouncing it Antoine de Paris. So a design is perfect not when you cannot add anything, but when you can't take anything away. So how the four steps becomes 12 steps is we keep on adding things because we find cases where it doesn't work or don't work fully. And over time we build this complex monster that has zero percent chance of actually succeeding in the majority of the cases. It takes a lot of courage to go in the opposite direction. To say, is there really only one or two reasons why people get addicted? And if that's true, like what is the bare minimum insights we have to give them and support we have to give them to back up that so that they're not lonely, that they get support. And you know, is that a three step program forced it? I don't know. But you know, it has to be much simpler.

Yeah, whatever gets the person to the connection. And when you know, like the ability to sit with the pain. Who was talking earlier to Byron when you're talking about doing nothing, like it's really hard for addicts to be alone doing nothing. It's like this, you know, I always define addiction as something that you want to do or that you don't want to do. Do that has negative consequences that has compulsivity attached to it. So, you know, you're doing things. I don't want to do it. You know, it's like there's this line in this. Remember the crazy kind of hardcore industrial band Big Black? There's a song called Bad Houses and there's a line that says, I Tell myself, I will not go even as I drive there. And that line perfectly depicts addiction. I'm not going to do it as you're driving there to do it, you know, and in that driving there to do it, there's something you're trying to get away from, even if you're driving into hell, you know? And there's a sign, a little painting on the wall out there that a girl that I helped with addiction recovery years ago, she painted for me. It says, sobriety didn't open up the gates of heaven to let me in. It opened up the gates of hell to let me out. And, you know, walking out of hell, whatever that is, metaphorically, there's a period where you have to endure pain that the behavior or the substance was satiating and numbing you to it. And I think when Dr. Don Wood does his thing, he's going into that atmospheric conditions of someone's life, and he's altering the way they perceive and feel and interpret the atmosphere. And I think there are quicker, faster. I mean, it's the same reason.

I think those could be the three things, right? It's the idea of connection, feeling that you're not alone, feeling that somebody has your back, feeling that somebody believes more in you than what you believe in yourself. That's definitely at least one step. The other step is what Don's. You have to find a way of seeing. Where is that memory being triggered that's causing me to overreact all the time. And if there's some physical way that we can reduce that. But a third part is the understanding is to view yourself as a good person that has made a bad decision for good reasons. What are those good reasons? Because unless you address that, it's gonna repeat in the future. That's why I use the atmospheric conditions. That's right.

The people can hear. Even though that doesn't magnify, it allows anyone online to hear.

So I use it, just like you said, to get to the understanding that you couldn't have been in any different based on the way your life happened. And I explained that if I lived your life the way you lived your life, I would be where you are. How could I have done it any differently? It's a code that God built. And you've got a giant computer on the top of your head that coded this message, and it runs on an automatic program. All we have to do is reset the code. I use the example if every time you hit the M key on your computer, your computer shut off. You wouldn't say I got a bad computer. You say, I got a coding problem. But if you went to your computer therapist, they'd say, don't touch the M key. Stay away from words with M's in them. Right. Because M's are bad. It's not, it's just a coding error.

I realize that assumptions and beliefs are not good or bad, they're helpful or harmful. Henry Ford's famous quote, whether you believe he can or can't, you write, well, if I believe I can walk across a tight wire between two buildings and I didn't put in the time to exercise, it's a really harmful assumption to have. Right. But if I did and it's going to cause me to try to speak in front of a group and I realize, you know, I'm not going to die, then it's a very helpful assumption. So that's a different way of looking at it. I think just as a summary because I know we've shared a lot. This theory of construction for me is about two things. It's focus on the one thing, but it's, it's not just about what to do, it's about what not to do. Things that are actually causing you harm and can cause other people harm is finding those things first because they occupy almost all of your attention in dealing with them or the consequences. So it's the same in your business. It's like that things of what can I stop doing? It's so important because that's where you're going to get the scarce resources from that you're lacking. The limited attention, the limited budget, whatever it is. And then the second part to the focus is the fast feedback is to get into the mode of designing experiments that you can get quick feedback about what's working and what's not working. And the things that's working, double down on them. The things that's not working, check them, challenge them, try to improve them, but if not, then let them go.

That's great. I want this to be the starting point of an ongoing conversation on this because this is such a new introduction to you now talk about your apps and other resources that people can use to integrate this into their businesses, into their lives.

So we have a range of decision making apps. They're available on our website, hulk harmonyapps.com and you know, as part of. Joe has been incredibly kind to invite me here, you know, as part of me giving back. Have a look at those apps. If there's anybody that of you that think you can benefit from it, if it's going to be for charity or for nonprofits or whatever. We'll give all the apps away for free, plus training to help you. And that goes all the way from an app that is, you know, 40, 50 bucks in an app store to one that's potentially a couple of hundred thousand. So if governments can gain benefit from our supply chain digital twin because it can help them secure food resources, we're happy to give all of that stuff away. So that's a place to go to. Harmonyapps.com There's a lot of fun simulations. One of them maybe to end off with is something so counterintuitive. Imagine you have 100 people in a village, each of them $100. They start off with $100 and they trade with each other every day for 100 days long. They all have a 50, 50% chance of winning or losing. So every day they trade with somebody different. When they trade, they have a 50, 50% chance of winning or losing. If they win, they win 20% of whatever their wealth is on that day. If they lose, they lose 20% of their wealth. What do you think would happen after 100 days in terms of the wealth distribution? So they perfectly equal on day zero. Right. When we play the simulation, it's shocking to see that in just a hundred days the gap between the richest and the poorest becomes something like 20,000 times. Now that's another application of theory of constraints because it's understanding about what to control strengthen the system and how if you have sensitivity to small starting conditions, you can get this very non linear behavior. But the implication of that is imagine if we remove all the discrimination in the world, are we going to see any difference in the wealth gap? No, because of that it's a mathematical quirk where small things get amplified over time. So it's those type of things where. So if there's somebody that can benefit from that app and you know, decision making, we're happy to give all of that stuff away.

Great.

Awesome.

And then just to ask Dr. Wood.

Just to repeat, the biggest upside has the greatest.

Okay, so repeat the question for him or for Dr. Wood. Okay. Could you repeat what he said?

Yeah. So a good option to exercise a good change to make in your life for your business is one that has a big upside if it works and a small downside if it doesn't. That's a hell yes. Right. If it has a big upside, but also a big downside, that is only a good option if you have a lot of cash buffer. Right. So be very careful of that. Because even the biggest companies can fail overnight. Right. Crypto is just like a different example. It's very interesting. There's a mathematical formula behind it. So just to break even after a bad transaction where you lost, the mathematical formula is the break even gain is equal to one minus the loss over the. Over the loss. So it's. If you could lose 5% in a transaction, it'll be 5% over 95%. So 5% is the loss over one, minus the loss. Right. 5% over 95%. You'd have to make 5.2% for the next transaction just to be break even. But if you could lose 50% on one transaction, it will be 50 over 50. The next transaction just to break even will require 100% gain. So that's why you want. It doesn't matter how big the company is. You want to stay the hell away from something that has big downside, even if it has big upside potential. Because it can literally kill you overnight.

John Raymond's just walked in. He loves to speak publicly. Do you use theory of constraints in your business? Theory of constraints? Theory of constraints. I'm not familiar with it really.

Okay.

And by the way, he sold one of his companies for 500 million and he's a big investor and he owns Bronze Studios which did the Joker movie, the highest grossing rated film in history. And he's a badass and he's a very smart. He's on vacation. He's a genius network member. But he decided to go on vacation here because of craziness that happened in Cancun. He decided to come to the Nice where, Cayman Islands. I thought he'd say, okay, whatever, same shit. No, I'm kidding. And he's like, stop by to say hello. And a lot of people here know.

John, but he's I think great entrepreneurs does it intuitively. Yeah, yeah, yeah, absolutely. Intuitively. It's like, what's the one thing? And making sure that when you make decisions, don't be tempted by decisions that are small upsides, big downsides. Go for those things that have big upside, small downsides.

Give him a mic throw, John, because there's people online, they don't want to hear what you say. No. One term I am familiar with is a power law return. So I don't know if that's exactly what you're talking about. What does that mean? Since I literally just came in. But the idea that you want to spread out your risk amongst many opportunities, but those opportunities should be ones that have outlier potential to return. A power law. In other words, they won't make up for the portfolio. They'll create generational wealth if they work out.

Yeah. A good example of that is to think about, say your parents retire or you retire with a million dollars. How should you invest it? Right. So one option would be to invest it in a low risk fund that can give you 10% return per annum. Right. So what's the best upside that you can get from that investment? 10%, $100,000. Right. What's the worst case scenario? Even if it's a low risk, you could lose everything. Right? Now think about another option where you put off that 1 million. You take 900,000, you invested in something that you can't lose at all, but you take the hundred thousand remaining and invest it in something that can give you a ping leverage. So now look at the best case, worst case, worst case scenario, you lose the hundred, you'll be left with 900. That's a worst case, best case. You'll turn the 100 into a million. You'll be left with, you know, 1.9 million. It's very counterintuitive if you don't think about it from a point of view of the power law, which is think about leverage is I want upside leverage, but I don't want downside leverage. You can be killed like this with downside leverage. If you don't, if you don't de risk it, great.

And we have to like, you'll be around tomorrow. And plus Nick was, he never says any smart shit anyway. But did you have a question or a comment? And you have to use the mic, just do that and this will be the last one.

So if it's looking at maximum upside, minimum downside, according to that, buying a lottery ticket seems interesting because you might only lose a dollar or a couple dollars, but the max upside. So where do you take into account variance and expected return in your framework for decision making?

Yeah, that's part of the cost of it because it's not just the cost of buying the ticket, it's everything else related to it. So it's also cost and effort required versus what the upside benefit is that you're getting. And of course, if you're dealing with complex environments, it's really hard to predict if. And that's where we use simulation models. We can run the simulation model. You can run thousands of replications and see what will be the range of outcome. It's almost like predicting a tornado. You can't predict it exactly where it's going to be. By when, but you can predict the range and that's often enough that we need to be able to make a good decision. It's like, what's the best case, worst case scenario? How can I create the conditions that will increase the probability of best case? How do I protect myself against the worst case?

Yeah. I mean, the lotteries, the real upside is for this, the state that sponsors the lottery, because they can't lose.

Yeah.

That's why it's a better deal for them than it is for you. So that should be your tip. Don't play games where the person creating the game has better upside and less downside than you do.

Yeah. You know, there's that Albert line. You know, some games in life, the only way you win is you don't.

Play most games in life.

Yeah. So thank you. Okay. I hope you found that video awesome and useful. So if you want to get a free copy of my book, I want you to click here. And if you want to watch some more videos that will be useful and awesome, click here.

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Do it now.

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Thank you.

Watch them.