17. Michael E. Gerber: Author of The E-Myth Revisited

Hello, Book Thinkers family, and welcome to episode number 17 of our brand new podcast, Book Thinkers: Life-Changing Books. During each episode, I interview some of the world's top authors, and as a listener, you can expect to discover new books, new mentors, and new resources that you can use to achieve more and live better. In this episode, I have the pleasure to interview the author Michael E. Gerber. Inc. magazine calls Michael the world's number one small business guru. the entrepreneurial and small business thought leader who has impacted the lives of millions of small business owners and hundreds of thousands of companies worldwide for over 40 years. Michael is the author of the New York Times mega bestseller for 2 consecutive decades, The E-Myth Revisited, and 9 other worldwide bestselling E-Myth books concerning small business entrepreneurship, leadership, and management. Our conversation touches on that mega bestselling book, The E-Myth Revisited, which is one of my all-time favorite business books, and also his new program Radical You. Without further ado, please enjoy this amazing conversation with Michael E. Gerber. Well, Michael, thank you so much for joining the Book Thinkers Life-Changing Books podcast today. For those in the audience that don't know who you are, can you tell them a little bit about yourself?

You mean there's anybody in the audience who doesn't know who I am? If they don't, they should. I believe that Hello. Hello. Well, I'm Michael E. Gerber, the author of the E-Myth books, uh, the founder of E-Myth Worldwide, the creator of Radical You, and an extreme outreach to literally millions of people in business, the smallest of the small, the people who are struggling to get over the chaos that exists in the world today and has existed Despite what we think the pandemic has caused, has existed for year after year after year after year over the 40 years that I've been doing this work.

That is quite the life resume. And you brought up a good point in that I've— so for everybody listening, I read the book, I think, 2 times prior to this conversation, and then I just read it last week. And the entire time that I was reading it last week, I was reading it through the lens of this pandemic that we're experiencing, and we read about how small businesses are shutting down, but the statistics that you actually give in the beginning of the book would dictate that that has been happening for a very long time. It's been very hard, despite what you see on social media, to actually start and run a business, a small business.

Yeah, it's very, very hard, and it's very hard for the obvious reasons that I talk about in all of my books. that the people who start businesses started them for the wrong reason. They started them— start their businesses out of dissatisfaction with the job they've got. And they say to themselves, I can do this on my own and get rid of the boss. And then they create themselves the boss and now they're working for a lunatic.

Mm-hmm.

And they have no idea. of the problem because they thought the problem was the boss, when in fact they simply became the problem they left behind. They didn't realize what an entrepreneur truly must become in order to create a great growing company. So that's what all of my books were about, a great growing company, how to go from a company of one To a company of 1,000. Yeah.

And whenever I communicate the message from The E-Myth Revisited to my friends and family, whenever I elevator pitch it and try to explain it, I say, imagine you're a barber and you don't like the person that owns the shop. So you say, well, I'm great at cutting hair. Let me start my own barbershop. And now all of a sudden you went from being a technician and we'll go into that in a minute to being, you know, that's only one of your 12 potential roles. Now you've got to do marketing and you've got to negotiate the lease, hiring, firing. And all of the other things that a real entrepreneur has to go through. So you call that the entrepreneurial seizure, right?

Yes, absolutely. And by entrepreneurial seizure, I'm essentially saying that they went out to start a business of their own. And that's the entrepreneurial seizure. I'm going to create a business of my own, get liberated from the boss, become free to do what I wish to do and what I love to do. And effectively what that means is free to cut hair for myself and take home all the money.

Yeah.

So I've heard this repetitively, literally hundreds of thousands of times. Now I understand the barber is simply standing in for everybody else, whether that be the shoemaker, whether they'd be the whomever, whatever. It doesn't really make much difference because every single one of them are technicians suffering from an entrepreneurial seizure to create a business of their own and become liberated from the tyranny of control under someone else. And they believe that now they're going to be free to take home all the money. And what they come to realize is there ain't that much. if any at all. And so the E-Myth is that. It's the entrepreneurial myth. And the entrepreneurial myth that entrepreneurs, people who start their own business, are truly extraordinary individuals. And the reality is something quite other than that. So I think I spoke about in The E-Myth Revisited about the prior year, where some half a million companies shut their doors. Well, last year, Nicholas, I think the number is 550-some thousand companies closed their doors. And that was before the pandemic. So understand, before the pandemic— BP, before the pandemic—

Yeah.

They were shutting their doors. Imagine what it is now with the pandemic. And then everybody will blame the pandemic for that.

Mm-hmm.

But it ain't the pandemic, folks. It's the pandemic of stupidity. And I say stupidity simply to get people to pay attention because it's such an aggravating word. We haven't a clue what to do to create a great growing company.

Mm-hmm.

And everyone needs to learn how to do that. And that's all I've been doing for these past 43 years is teaching everybody what to do about that. So think about it. When I say I've been doing, understand I really mean it's been doing.

Mm-hmm.

My companies have been doing. My companies literally launched the very first small business coaching enterprise on the planet all those years ago. And that's our focus today, to wake everybody up to this problem so that we can begin now that we're shut down What a gift.

It is a gift.

We're shut down. Now we're finally free to say, I've got the time to do it right. So that means getting ready after the pandemic, after lockdown, getting liberated to go to work on our business, as I say in E-Myth, Not in our business, to transform the state of how we do business in a way that will enable us to grow from a company of 1 to a company of 1,000. And that's the beautiful, most exquisite thing that's possible for every single human being to grow from a company of 1 to a company of 1,000. Once you understand the system. And there's a method to that madness that everybody can use. So we here, you and I, Nicholas, are speaking to every single influencer on the planet to say to them, call us, call us, call Michael E. Gerber. Come into sync. with our movement. And it is a movement today. I just turned 84.

Wow.

It's a movement today. You understand? To transform the state of small business worldwide is a movement today. It's not a business. It's a movement. And to the degree every single person who's listening to us right now understands that that book you're Holding right there, The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It, actually launched this movement all those years ago. But now we're thick in the midst of it. Because everybody is conscious of the disaster of the epidemic. We can now bring them to become conscious of the true epidemic. The epidemic of ignorance. The epidemic of ignorance, which has cost us more than this epidemic ever will, and will continue following this epidemic, this pandemic, this horror that we all are dealing with today. Every single one of us has the resources we need to transform that. So I absolutely— and I'm going on and on, and I'm sorry, Nicholas.

No, it's terrific.

I'm absolutely imploring every single person who's listening to us to ask Michael about Radical You. What is Radical You? Radical You is available to every single person within the sound of our voice today for $10 a year. Now hear me, $10 a year to join us in year 1 in the Dreaming Room online in Radical You to discover your dream, your vision, your purpose, and your mission. Your dream, your vision, your purpose, and your mission. Year 1 of Radical You, a 5-year school for entrepreneurial development within reach of every human being on the planet today. Hear me, 5 million students in Radical You over these next 2 years. 5 million students online learning what we have learned over these past 43 years to transform the state of small business worldwide. Whether you own a business, whether you Um, want to own a business, whatever you're doing, you got to join us in Radical You. Just spend $10 and you're in. And I'll be meeting with you every week. Hear me, live, to literally blow your mind live, as well as all of the education you're going to receive in Radical You to understand what a dream is, what a vision is, what a purpose is, what a mission is, what a job, a practice, a business, and an enterprise is. enterprise are and how to go to work on yourself in order to create something you can't even imagine right now.

Well, you know what? I am sold and I will be— for everybody listening, you can participate with me because Radical You— I believe in this problem and I want to read to everybody the statistics that you give at the beginning of this book and they have become more emphasized and worse. What you say is that each year in the US, around 1 million businesses are started. And after 1 year, around 40% of them close their doors. And now that number is up. And so after 5 years, over 80% of the ones that started have failed. That's 800,000 of those businesses have failed within the first 5 years. And then you go on to say, now let's look at the successful ones, right? They've made it forever.

False.

Now, out of those 200 that survived, 80% of them will fail within the next 5. And so I'm saying that to reiterate just how important it is to understand that entrepreneurship is not this rugged individualism, this stoic against all odds battle, because even if you're talented, even if you're motivated, you will get crushed unless you implement systems. And we'll go into some of that now. We talked about—

This is so important. This is so, so, so important. And Tony Robbins, I'll apologize to you in advance. This is not about Tony Robbins. This is not about wham, bam, thank you, ma'am. This is not about becoming the hero of everybody's life because you stand up strong and tall and speak strong and tall about who you are and what you do and why you do it and so forth and so on and so forth and so on. This ain't about personal growth. This is about something significantly deeper than personal growth. This is about spiritual growth. This is about truly understanding. If it's said we were born in the image of God, as it is said, if you read your Bible, if you read Torah, if you read Genesis, it is said we're born in the image of God. So I've just elected to believe that to be true. And so if I've elected to believe that we were born in the image of God, then it means every single one of us were born to create. And if we were born to create, because of course in the image of God, our Creator, then of course we were born to create a world fit for God. And what would a world fit for God Hear me, we don't learn that in school.

I love this. Yeah.

We don't learn that anywhere. Yes, we might hear about it somewhat in church or a synagogue. You understand, we may, but we really never do, because even in the church, it isn't understood how to grow from a church of one to a church of 1,000. to a church of 10,000, to a synagogue of 500,000. It isn't taught. It isn't taught anywhere. Well, we teach it. We teach it in the smallest of the small. The smallest of the small is our focus. And if, in fact, you understand this, to go to work on your life, to go to work on your life, not in your life, like everybody's talking about, To go to work on your life, to transform your life, to transform what you do and how you do it, and the way that it impacts every single human being you come into contact with. Can you imagine? We can transform the state of the world. Every single one of us have the power to do that. Just turned 84. I said that before. I just turned 84. It's a milestone. You understand to have a dream, a vision, a purpose, and a mission, to understand that Ray Kroc was 52 years old when he launched McDonald's, to understand the profound reality of that, to understand the passion that has to be born within that and the process that has to come out of that passion in order to go to work on it. Step 1, step 2, step 3, step 4, the process.

Well, we'll get into McDonald's in just a second. I want to, for everybody listening, I want you to describe the difference because I think it's very important to understand the next steps, but the difference between a technician, a manager, and an entrepreneur, because when I first learned about those, that battle going on within me, it was very eye-opening.

Yes. Well, the technician obviously is the doer. The barber you're talking about is a technician. You and I are technicians. Here we are doing it, doing it, doing it, doing it. That's what technicians do. But it's also, in our case, what entrepreneurs do. Because entrepreneurs are the key communicators of an organization, the life force of an organization, the ones who stand behind the dream, the vision, the purpose, and the mission of the organization. But the technicians are the doers. The technicians are all the kids you meet at McDonald's. Doing it, doing it, doing it, doing it. The technical work that has to be done in every company, no matter how small, no matter how large, the technicians are critical to get the work done. But without managers, those technicians will do what technicians almost always do, is run amok.

Hmm.

And so without the managers, there is no effective system through which the technicians are to perform their holy task, whatever that task might be, to produce the holy result, whatever that result might be, at a McDonald's franchise. And every single one of you know what that technician does, because you go there to get the food and the nourishment that you get at McDonald's in order for you to have lunch, have dinner, have whatever it is you're going there for. And so you understand without the technicians, nothing gets done. But what you must absolutely understand, without the manager, it isn't controlled.

Mm-hmm.

So the quality of McDonald's— quality I'm speaking about is persistency and consistency The consistency and the persistency of McDonald's makes it today the most successful small business in the world. And when you think about the most successful small business in the world, with now some, I don't know, 39,000 McDonald's hamburger stands worldwide, think about it. Started from one, just one. The franchise prototype in Des Plaines, Illinois. Get it right, get it right, get it right, get it right, get it right. Document it, systematize it, orchestrate it so that in fact we can repeat it, repeat it, repeat it, repeat it a million gazillion times. Get it right the very first time in our franchise prototype so I can get it right the second time when I open the second store, and then the third time, and then the fifth time, and then the 20th time. You understand it becomes that easy. Because all we're doing is replicating the system that works, that is managed by a manager, that is delivered by the technicians who work in McDonald's. And as those technicians become the stars that they must become at McDonald's, they either stay as technicians or they become managers. And they're taught The management system. And as they're taught the management system, they then apply the management system in the first layer of management in McDonald's, and so forth and so forth, as the hierarchy moves them along. And effectively, the chief executive officer of McDonald's today is one of those kids who started out all those years ago doing it, doing it, doing it, doing it the McDonald's way. He wasn't one of the kids who left. He was one of the kids who stayed and grew up in the system. The system is the solution. The system, I'm saying to every single one of you, becomes the truly copacetic, magnificent model for how we live our lives here, in quotes, at McDonald's or Starbucks or any place like that in the world. And every single one of you can see it. And all we're saying is, that's what every small business owner can learn. Every single one of you can learn. And imagine if you actually did learn. Then it's simply a question of what's your dream, what's your vision, what's your purpose, what's your mission? My dream is to transform the state of small business worldwide. And in order to do that, we have to transform the state of entrepreneurship worldwide. And once we do that, we then get to transform the state of economic development worldwide. And that's why I'm speaking to you.

Well, I love it. And then, then at the top of the hierarchy, there's the entrepreneur.

Well, the entrepreneur is the creator. The entrepreneur is what Walt Disney called the Imagineer. The entrepreneur is the creator, the Imagineer, the force for good. The entrepreneur is the one who sees the vision, sees the dream, sees the purpose, sees the mission, Defines it, defines it, defines it. In our case, our entrepreneurial dream was to transform the state of small business worldwide. We said that in 1977. Our vision was to invent the McDonald's of small business consulting services. Now I could go into what that means, what that looks like, how that, etc., and so forth, but I want you to get The sum and substance of it.

Mm-hmm.

The vision was to invent the McDonald's of small business consulting services. Turnkey, replicable, just like McDonald's. That's what we did. Our purpose was that every single small business owner who's attracted to our story, attracted to our paradigm, could effectively become as successful as a McDonald's franchisee, or some of them, to the degree they are moved to, as a McDonald's franchisor.

Mm-hmm.

And finally, the mission. And our mission was to invent the business development system that made the dream, the vision, and the purpose possible. So I have a dream, I have a vision, I have a purpose, I have a mission. The entrepreneur is all 4. The entrepreneur is the dreamer, the visionary, the thinker, the storyteller, and the leader. The dreamer, the thinker, the storyteller, and the leader. Those are the 4 personalities of a great entrepreneur. And so our job is to then awaken the dreamer, the thinker, the storyteller, and the leader of everybody we're speaking to right here. And we know how to do that.

But you say when, you say when most business owners start, they're only 10% entrepreneur, 20% manager, and probably 70% technician, right? And that's why so many of them are failing.

And of course, you know, because the entrepreneur we're talking about, the Ray Kroc, the, the founder of Starbucks, etc., and so forth, those are sense that mere tiny fraction of the people who start their own companies. Everybody else are technicians doing it, doing it, doing it, doing it, doing it. And they will always stay small or go out of business. And so effectively, we're awakening the entrepreneur within every single person we're speaking to. That's the job, to awaken the entrepreneur within every single person we're speaking to. That's what you do every time you have a podcast, every time you speak to a thought leader about whatever they're writing about. That's what you're really doing. You're stimulating your viewers to awaken their passion for growth.

Awaken the entrepreneur within, right?

You got it.

Yes. And so I love that. And so as we, as we become more entrepreneurial by implementing these systems, reading your book Radical You. I thought what was really interesting is part of that turnkey revolution, all successful businesses look sort of like the franchise model when you strip it down because they all have the same documentation. Like even think of newer businesses like Uber in every city across the entire US or internationally, they have the same documentation, the same information systems, the same logos, the same branding, the same t-shirts. Like You know, that entire system can be replicated everywhere you go. And of course, what I love about it is, you know, the system is the most important piece.

Well, it's the core to growth. But you understand the system is a product of the dream, the vision, the purpose, and the mission. So what's critical to know is that at Uber, there was a dream, there was a vision, there was a purpose, and there was a mission. And then of course it was simply implementing that dream, that vision, that purpose, and that mission. And it's implementing it as a system. Call it the Uber system, call it the Starbucks system, call it the Microsoft system, call it the Apple system, call it whatever you wish to call it. If it ain't a system, it can't be replicated. Because if everybody's doing it any way they wish, It is impossible to create a brand. It is impossible to attract people to it. It's just chaos. And then it looks just like America looks today.

Yeah, I guess. Chaos.

Chaos on the streets. Chaos on the streets. Chaos on the streets. And you might say, that's what they call freedom. That's not freedom. That's anarchy. It's chaos on the streets. What's the method of it? Madness. What's the method of madness? Anger. What's the method of anger? Get even. What's the method of get even? More chaos. And so understand, that is the opposing force to creating wealth, to creating joy, to creating all of the extraordinary capabilities that every single human being possesses the right and the ability to create. That's what we're here to do. Literally, to truly express our freedom to create, born in the image of God, Born to create, born to create a world fit for God, born to create this most stunning, responsible, remarkable outcome for families, for children, for— and on and on and on and on. But you, you get my point. You get my point.

Well, yeah, I love it. The antidote to chaos almost in any area of life, especially entrepreneurship and small business ownership, is foresight and systems implementation and management. And so it'll work in government, it'll work for a society, but it'll also work in your coffee shop or your barbershop or your little sales company.

Of course it works for the smallest of the small. That's what's so incredibly important to understand. It works for the smallest of the small in every ordinary, um, product or service or capability or desire. It works, for example, in cleaning houses. It works, for example, in— just name it. Name any work that anybody does, and it's there waiting to be turnkeyed, to be created as an extremely competent capability to go beyond anything that's ever happened before. That's what I'm saying we all have the ability and power to do.

And so why is it so difficult as a society? Uh, because it's so clear when you go through the book and you've impacted millions and millions of people, but why as a society do we lean towards chaos? Is it—

Well, because—

Because we're lazy or something?

Because it's inbred in us. Do you understand? We live in chaos. We haven't orchestrated the process by which a child is grown. We haven't treated our children as though they were created in God's image. We haven't regarded the possibility of our children to become great creators themselves. And because we haven't, our parents haven't either. And because our parents haven't either, their parents haven't either. And so if in fact we begin to look at the reality of the way we are grown here in these United States of America, where in fact we have the greatest economic capability of any nation in the world ever, and look how broken we are. You understand that something seriously is missing in what we do and how we do it and what we know.

Systems management is— it's tough, but it's extremely important. And as a young business owner, small business owner, you know, your book has had a huge impact on my life. And Radical You, I imagine, is going to accelerate that process for me.

Absolutely.

Well, I'm a believer in the mission, like I said. And, uh, one, before we wrap up, I have a couple more questions for you.

Okay.

And these are a little bit, uh, these are a little bit selfish, but, uh, one thing that I think is really interesting going through the book this most recent time is that when you're a small business owner and you have a couple of employees, uh, or a couple founding partners like my business, you say it's very important to develop an org chart And then the second piece behind that is that you want to create position contracts. So can you talk about what that means for everybody that's listening? Because I think it's something we all overlook.

Yes, but you left out step number 1.

Uh-oh.

Step number 1 is your primary aim. Your primary aim is critical. So without your primary aim, you have no, There, there. You understand? That's where everything we've been talking about originates from. My primary aim. My primary aim is what I'm going to say at my own funeral.

Hmm.

My primary aim is what I'm going to say at my own— it's what Nicholas is going to say at his own funeral. Nicholas is going to show up and give his own epitaph. And he's going to say to every single person there at his funeral, let me tell you who I am. Let me tell you why I am. Let me tell you what I did. Let me tell you why I did it. Let me tell you what I hope will happen to you. So that's the beginning of all this. So the second is your strategic objective. Your strategic objective now is how you Take your primary aim and you relate it to the extreme purpose of your company. So the strategic objective defines where your company will be when it's finally done. And then your organization chart. And then in your organization chart, the position contracts. The position contracts, you might say, are the strategic objective for each function within your organization. And to the degree you don't have those functions clearly outlined, specified, documented, orchestrated, communicated, there is no organization. to the organization that you're leaving behind. And that's what you do with all of that.

Yeah, I love it. And because you're leaving the window wide open for chaos to enter your business, you're like, come on in.

Yeah, of course. You understand, without that structure, there's no means of communicating to every single person who's coming aboard. Let me tell you who we are. Let me tell you what we do. Let me tell you why we do it. Let me tell you what our strategic objective is. Let me tell you how we were created and the primary aim of the founders of our company. And so what moves us energetically to become the best that we can possibly be in the world that we're here to serve. And so you understand, if you're able then to communicate that in a way I'm communicating And then I can demonstrate it, demonstrate it, demonstrate it. Let me talk about your function. Let me talk about your role. Let me talk to you about the standards by which every single one within that function in our company will be held accountable, will be held responsible. Let me describe the difference between accountability and responsibility and so forth and so on. So you suddenly have a management Language that you can effectively communicate to everyone who joins you. Understand, the minute you have that, Nicholas, you're creating a logic, a logic for everything you do. It's the logic for everything you do that's so horrifically missing in everything we do. Therefore, our jobs become meaningless. As opposed to meaningful. Our job, Nicholas, is to provide meaning for everything we do, for everything we aim to do, for every outcome we're committed to produce. And suddenly we're creating a world filled with meaning and filled with organization And filled with orchestration and filled with a search for a better way continuously. And as you communicate this, you suddenly realize that your people say, holy shit, nobody has ever spoken to me like that before. Wow. So much to learn. So much to become.

Well, I bet those 800,000 that fail within the first 5 years lack meaning, you know, and the ability to communicate it. I'll bet my bottom dollar on that.

You got it.

Yeah.

So Nicholas, thank you very, very much for having me. Perhaps we'll do this again sometime in the future. Would love to.

Absolutely. You've got, you've got some other books that I want to read and I'll dive into Radical You and we can line up another conversation once you hit those $5 million in the next 2 years.

You got it. So listen, E-Myth Revisited. The next book you want to read is Awakening the Entrepreneur Within. And the third book you want to read is Beyond the E-Myth: The Evolution of an Enterprise from a Company of One to a Company of 1,000. That's the trilogy. So you read those 3 books. Now I've written over 30, But you read those 3 books and you get the essence of it. So I'm saying to every single one of you, read The E-Myth Revisited first, read Awakening the Entrepreneur Within second, and read Beyond the E-Myth third. And it will be, wow. Because then you're going to understand what we're doing at Radical You. The minute you understand that, you put your $10 down, you're home free. Because we're going to give you all of this, all of this to put to work in your life and in your business in a way you can't possibly believe.

Well, your mission is clear and I love it, you know, and it's, it's great to sit across from somebody even virtually right now who believes in what they're doing. And it just comes right out of you in a, in such an energetic and fun way. So thank you again for coming on the show. I really appreciate it.

My delight, Nicholas. Thank you very much. And congratulations. You do lead by example and persist in leading by example. Become what it is I speak about. And as you become what I speak about, you will go beyond what I speak about and you'll become another instrument In the transformation of entrepreneurship worldwide. I so welcome you to the party. Thank you.

That is a wrap. Thank you so much for listening to my conversation with Michael. As with every valuable book I read, I organize my biggest takeaways with the Book Thinker's Smart Retention mobile application. Once my notes are organized and labeled in the system, I can revisit them whenever I want. And with my favorite books like The E-Myth Revisited, I turn on my systematic reminders so that the system can optimize my retention. Now it's not enough to read your favorite books one time and then move on. You should extend your experience with each book using spaced repetition and make sure that you're flexing those neural pathways way more often than you are today. And so to learn more about our app and how you can use it to retain and implement more from the books you love, check out www.bookthinkers.com or go subscribe to the app for $5 a month on either Android or iOS. So as always, remember that real learning requires education and behavior change. With that, I'm signing off and I can't wait for you to listen to another episode of Book Thinkers Life-Changing Books.