Hi, everyone. Sam Ovens here and welcome to this training module called Playbook For A New Epoch.

In
this training video, I am going to basically show you our Facebook game book plan and our strategy. By
that, I mean exactly how are we going to go about creating our campaign? Like what are trying to
achieve, what are our KPIs and what's the campaign structuring? What's our general strategy that we've
got, that we're using on the Facebook platform? Like any game or like anything, you have to have a plan
and you have to have a strategy. And just like in, say, with chess, for example, you would have a chess
strategy. Depending on how your opponent moved his pieces, that would depend how you moved yours
and you'd have these different plays that you would use and all of that.

That is what we're going to be talking about in this module right here, Playbook for a New Epoch, where
I'm going to basically walk you through my entire playbook and the most up-to-date playbook that I
have for Facebook ads. This is seriously light-years beyond where any other Facebook marketer I've seen
has been. So if you really understand this stuff and you really take it in and you're able to deploy this
stuff, you're going to be able to run laps around your competition and you're going to be able to scale
extremely high. Because these methods that I'm going to teach you in this video here, I have used to ...
in the multiple millions of Adspend, and up to sort of $30,000 a day in Adspend. So, not small numbers.
These strategies are also extremely reliable and it allows you to use just a small number of ads. You
don't have to keep refreshing your creative and doing all of that crazy stuff that everyone else tells you
that you have to do. So, let's get to work and let's take you through this playbook.

Here's what we're going to cover in this module. First of all, we're going to cover the Fragmentation
funnel's role in nature, our funnel that you should have built by now. We covered that in week four. So,
we're going to cover that funnel and I'm going to really show you its role when it comes to using
Facebook ads. How does it fit in with Facebook ads and how does it really integrate? What does it do?
Why is it so special? All of that.

Then, we're going to cover the scientific method and the search for blue swan DNA. I'm going to show
you our method for setting a hypothesis, then going out, submitting that hypothesis to the market for
testing and then collecting feedback, and then iterating our new hypothesis and keep going back in that
cycle to the market to keep testing and keep keying through different variables to find what works.
Then, we're going to cover anti-fragile architecture and asymmetrical testing. This is one of my secret
weapons and it's basically the way I structure and architect my campaigns. It's a huge lesson for anyone,
even people who have spend six figures, seven figures on ads. Anti-fragile architecture and asymmetrical
testing is going to teach you some big lessons.

Then, we're going to cover KPIs and their role in identifying the two swans. So, we're going to cover all
of our key performance metrics. I'm going to show you all of them, the hierarchy in which we look at
them, like which ones are more important than the other ones, what ones should we be looking at all of
the time. And the benchmarks, so where should your numbers be. How do you know if your numbers
are high or low? How do you know what's going wrong with your campaign, if it's not working? All of
that stuff. I'm going to give you a spreadsheet, which you can use in Google Docs or Excel to track your
campaigns day-to-day. It's got built-in algorithms and everything for calculating all of your KPIs. All you
have to do is plug the data in.

Then, we're going to cover the three stages of growing your blue swan empire. By that, I mean
growing ... We call a blue swan a profitable Facebook ad set. So, how we can really start growing and
propagating as many profitable Facebook ad sets as we possibly can, and that's what I refer to as the
blue swan empire. There's three stages to doing this and you're really working through all three stages
all the time. But in the beginning, we work through, sequentially, stage one, stage two, stage three. But
then once you're at stage three, you're kind of doing a mixture of all three all the time. So, it's really
important to know these.

And then I'm going to cover one of my most dangerous secret weapons, which is propagating and
splicing blue swan DNA. This is a tactic, which I have not shared before, and a strategy I haven't shared
before. It's extremely powerful. I basically show you how you can take profitable ads and really find the
DNA structure within them and then really propagate them. By that, I mean duplicate them and get
them to start breeding and then even splice them with new DNA, so that you can create offshoots of
originally successful ads. When you understand this last thing, propagating and splicing blue swan DNA,
you will be able to scale to the moon and back and then back there again, because it really is limitless.
So, you're going to learn some extremely powerful methods in this Playbook For A New Epoch video.
Let's get to work.

At this stage of the Facebook training, we've covered these three things. We started with fractal
Facebook evolution. In that video, we understood Facebook from a high-level view and we understand
its fractal nature and our terminology of blue swans and red swans, how the platform works, how the
algorithm works. All of that stuff and why having a proof of concept is essential. I'm going to say it again.
If you don't have a proof of concept, then Facebook is not the place for you to go. It will burn you alive.
You want to have an established proof of concept first before you touch Facebook ads.

Then, the second module was called Unveiling the Facebook Algorithm. In that module, we covered how
Facebook's algorithm works, how it thinks. We covered it in detail. Once you've watched that video, you
know more than even employees at Facebook know about the Facebook algorithm. We also discussed
why most people have Facebook all wrong and the mess of mistakes that people are making and how
they're really jamming the algorithm by only having one ad variation and one audience variation, and a
micro-targeted audience at that. And it's just totally wrong; that's the inverse of what you should
actually be doing.

Then, we talked about initial conditions and I helped you understand initial conditions and how
important they are and how they're really 10 times as important as the ad and audience itself. Then, we
discussed the forever-changing competitive environment and why variation is key. Variation really is the
key to Facebook and evolution and really evolving different combinations, working hand-in-hand with
the algorithm, trying to find that perfect combination in the current environment.

Then, we covered the third module, which is Facebook's book of lore. This is really understanding the
rules of the game when it comes to using Facebook, because the last thing we want to do is get our
account banned, which is what we call the mark of the beast. We talked about creating your account
and your fan page properly. So, setting up your business manager account, setting up your fan page,
creating a likes campaign to get enough likes, making sure there's posts on it and everything. Then, we
discussed creating a compliant website, having all the essential legal documents on there. Then,
following the basic rules for ad account survival, different things like don't use tacky images, don't use
different buzzwords, don't make income claims, don't call your audience out, all of those things.

Now, I'm sure all of you have gone through these videos sequentially and watched all of them in full.
One, first, then two, then three, before moving on to this video. If you are not one of those people, then
honestly, you need to go through this training in order. It will not make any sense unless you go through
this stuff in order, because, you know, we're going to be using words and terms and things that you
won't understand unless you've gone through and done these first. So, if that's you, don't be that
person. Go back and watch it. And if you have done that, now you should have a basic understanding of
everything and all the essential tools ready. Now, it's time to get into our game plan and strategy.

First up, let's talk about the Fragmentation funnel's role in nature. Do you remember our client
acquisition methodology? Here is a basic, high-level view of it. We have our Value Video, which is the
video which we create, which is in-between 10 and 30 minutes long, where we talk about what we have
to offer and everything and the problem and all of that. Then, they go and apply for a survey, and then
they schedule a call with us. We drive traffic into that funnel using both organic methods, which are free
methods, and paid methods, which is Facebook ads. Paid methods is what we're discussing all through
week five, which is Facebook advertising and really how to use Facebook ads in combination with our
Fragmentation funnel to achieve optimum results,

Specifically, our Fragmentation funnel. So, this is kind of a high-level, basic view, but now I'm going to
show you just a drilled-down version of it, where we really cover every page. So, it starts off with
Facebook ads and we use those ads to target different people, who we think are within our audience.
Then, those people click on those ads, they come to our landing page. Then, they go to our value video
and then a survey and then a call. Then, they become a customer. Now, I'm just going to quickly step
you through those, so you can see.

You can have a look at this. [Link]/case-study. This is the landing page. So, people come
from a Facebook ad. They click on it, then they come to this, our landing page. Then, they click here and
this thing pops up and they enter in their email address. Then, they see our value video. It says, "Step
One: Watch This Case Study Right Now." They watch this value video. This one's 21 minutes long. Then if
they want to, they apply for a strategy session, so they can talk to us and get some more help. They click
this button and then they schedule a strategy session with us. We use this little scheduling tool here.
And when it finally loads, the user enters in their information. They click next and everything, and then
they come to a survey. I'm just going to skip this for now, because it's loading too slow.

Then, they come to a survey that looks like this. They enter in all of their information. Then, the final
page looks like this. It says, "Awesome! Your strategy session is scheduled." Then from here, they're
automatically scheduled into our calendar. We then show up at the time they scheduled and we have
the strategy session with them. We take them through the [inaudible 00:12:11] conversion script and
they either buy or they don't buy. That is basically the entire end-to-end process, which I am talking
about here. We've got the ads, the landing page, the value video, survey, call, customer.

Then, this is the Fragmentation funnel with the math applied to it. With this funnel, it is really important
that we understand our numbers. Here's the rough sort of range that we see these numbers going
between and this is if it's successful. You know, you can have numbers totally outside of what I'm
showing you on the screen here. But if your campaign is going to be successful and if your funnel is
successful, then your numbers should all be within these ranges. So, we pay in between $1 and $3 per
click on a Facebook ad. Then, our landing page converts at 20%. This gets us a cost-per-lead, which is a
cost-per-email of $5 to $15. Then, the people watch the value video. So, we're basically paying $5 to $15
to view the value video.

Then, only really 5% of those people who watch it actually take us up on our offer and go through and
complete the survey. And then, they schedule an appointment with us in our calendar. Then, we
typically have like a 80% show-up rate, and this is people that schedule and then show up to the call.
Because typically, we cancel about 10% of applications, because they're not a good fit when we look at
their survey. Then, typically about 10% of people won't show up to the call. That's why we have an 80%
show-up rate.

This means that we're paying in-between $50 and $300 per call, cost per strategy session, CPS. Then,
when we talk to those people, we typically have a 20% conversion rate, call conversion rate here. That
means for every five people we talk to, one of them buys. That means that we have a cost-per-
acquisition, a cost-per-paying customer, of in-between $250 and $1.5 thousand. That's why your
product, your service, your program, whatever it is you're selling should be higher than these numbers
and then the difference between the two is obviously profit. That's really how it works. That's the math
behind it.

At this stage of the training, I'm assuming you have already built out and thoroughly tested your
Fragmentation funnel. Everything should be working correctly and tested on both desktop and mobile.
Back in week four, I showed you how to do it, gave you the template and everything. From this point on,
I'm really just assuming that you've already built it, you've tested it. You've got friends to test it to and
you're sure that it is solid. That, you must make sure before you progress through the rest of these
videos. And if you haven't built out your Fragmentation funnel yet, you must do that now before
progressing. Otherwise, this module — and all of the following modules — will make no sense and be of
little to no value at all.

For training and detailed step-by-step instructions on how to build the Fragmentation funnel, please go
to week four and then the Paid attraction methods video and the Assembling the war machine video.
Those two modules contain everything you need to set up your Fragmentation funnel. Step-by-step
instructions, templates, everything. We have a live demo of the Fragmentation funnel, which can be
viewed at [Link]/case-study. That just looks like this. So if we go to this, here is a demo of
the Fragmentation funnel. You can go to this link in your browser, go through it, check it out, see exactly
how it works. Then, we provide you with a link, so that you can actually download the Fragmentation
funnel with one click. That URL to go to is [Link]/clickfunnels, so that you can get this template
for the Fragmentation funnel for free, and you can download it with one click.

You just come to this page here, [Link]/clickfunnels, you click install your funnels. If you already
have a clickfunnels account, you click yes, I do. If you don't, you click no, I don't. Then, the page will look
like this once you've created our account. You can see that, number two, we provide you with a
Fragmentation funnel. You can view a demo of it here and then you can just install it here with one click.
Like I said, week four, these two modules here will tell you exactly how to set it all up. Paid attraction
methods and Assembling the war machine. So from this point on, I'm assuming that it's already built and
you've already got it.

Now, we're going to talk about the scientific method and the search for the blue swan DNA. What are
blue swans and what is blue swan DNA? Well, really, I've referred to ... a lot of times, by now, about how
our main role is that we're breeding blue swans. Our main job with Facebook ads is to breed blue swans
and grow the empire. This means to try different iterations of possible blue swan DNA strings, made up
of these variables, Audience-Message-Image. That's the string. That's what we call a blue swan DNA
string, because these things are stringed together. What we're really doing is we're trying different
iterations. You know, there can be any number of possible audiences, any number of possible messages
and any number of possible images. However, when combined together, some will work way better
than others and this is what we call the genetic makeup or the DNA string.
A blue swan is basically a profitable Facebook ad set. It means it's within KPI. A red swan is a non-
profitable ad set, and that means it's outside of KPI. What we're trying to do is breed blue swans, which
means profitable ad sets. Each ad set acts as a cell and it contains a string of DNA made up of Audience-
Message-Image. And if the cell is healthy and produces a desirable ROI, we call it a blue swan and we
breed more of them from the healthy DNA string. Because if a DNA string is healthy and the swan is
blue, that means that, you know, the DNA makeup of that swan, it is probably the right DNA makeup for
more blue swans. So, that's why it's important that we look at the string. If the cell is unhealthy and non-
profitable, we call it a red swan and we cull it from our population. That means we turn it off, we delete
it and we want to look at the string as well, to make sure that we know what sort of strings work and we
know what sort of strings don't work.

It's pointless to guess the DNA string for blue swans. You just can't come into Facebook and then just
kind of guess at what the right sort of string of Audience-Message-Image is. You will be shooting totally
blind. It will take you way too much time to find something out and you might not even find something
out. You know, we need to get a headstart before coming to Facebook. That's how it works. So, it's
pointless trying to guess, and we must get the initial conditions from our established proof of concept.

I know I've said this so many times now I'm probably sounding like a robot, but Facebook is no place for
you if you don't have an established proof of concept. And by that, I mean that you must have at least
three paying clients and they must all have purchased the same offer from you. So, you should have a
niche-offer result combination and that should be proven with three paying customers. If you have that,
then what's present inside there ... There'll be a fractal pattern that's present in that proof of concept
and it'll help you to take a good guess at what it's going to be a correct Audience-Message-Image string.
Then, that's how we're able to get a headstart with Facebook, because we know something.

We've got a proof of concept we've actually been testing. We've been doing strategy sessions, talking to
people, collecting feedback. We have information learned, and so then we come to Facebook and we
extract that fractal pattern from our proof of concept. We load it into Facebook and try scaling it up. We
set the initial conditions and then we work hand-in-hand with Facebook's algorithm to optimize
different variations and find out what works and what doesn't work. That's what we refer to as breeding
blue swans.

So, how do we go about finding the correct DNA? Well, do you remember our scientific method, which is
basically we have a thesis, an antithesis. Then we have the synthesis, which becomes the new thesis,
because it feeds back around and then it happens all over again. This is basically the master algorithm of
all evolution and everything. It's how your brain works, it's how everything works, with this simple
algorithm. It really just looks like this. We've covered this multiple times throughout the entire training
so far, and in week one, with the natural law and the consulting equation.

When we're trying to build a successful consulting business, we're basically looking for the right
combination of Niche-Offer-Result variables. That's what really makes a successful consulting business,
when you get the right Niche-Offer-Result variables lined up. The only way you get those variables lined
up correctly is when you're doing testing. So, you have to set a hypothesis. You go out to the market and
you're testing by doing strategy sessions, talking to people, collecting feedback, iterating your
hypothesis. You're creating a new one and you just keep going. That's our scientific method. Eventually,
that process always finds an optimal combination of these three variables and when you achieve that,
that's when you have a proof of concept. That's when you start getting customers, making a lot of
money and the better optimized these three variables are, the more money you make and the easier it
is to sell. That is how business works and that's how our consulting businesses work as well.

Then, another one, which we talk about in the Mindset training, is how we have our current situation,
which is us now doing what we're doing, thinking what we're thinking. Then, we have our desired
situation, which is out in the future, and then we have an action, which we do and that brings about the
new situation, which might be the desired situation or it not might be. Then, we receive feedback from
that and then we're able to iterate. And next time we want to achieve that desired situation, well, we
take a different action based on the feedback we got from the last time? This is how human being
optimize, it's how ... It's how everything in nature optimizes. This is basically how your brain works.

Then, we have two key things, which the human brain can do. That is setting a hypothesis. So, we have a
goal hypothesis and an action hypothesis. How it works is, you know, we're sitting in our current
situation, where we are right now. Then, we have these desires and these dreams and these things we
want. That's really our goal hypothesis; that's what we set a goal for. Then, what we do is we start ... We
look out into the future and we're like, "Okay. We want to achieve this goal."

So then, our brain comes back to sort of now and it's like, "Okay. Well, what actions are we going to
take, so that we can achieve that goal?" And you start hypothesizing about what possible actions might
work together to achieve that goal. Once you've set the goal hypothesis and the action hypothesis, well,
then you actually take action in real life. Then, when you take action, the new situation comes about and
it either is or isn't in alignment with the goal. Either way, you receive feedback and you are able to
iterate and try again. Each time, you get closer and closer to it. This is how we optimize with everything
in life. It's not just us. It's algorithms, like computer algorithms, Facebook's algorithm, different
organisms. You know, everything in the world pretty much uses this model.

And when it comes to Facebook ads, we're constantly optimizing for the perfect combination of
variables in the current environment and this combination of variables, we refer to as DNA. We also
refer to it as a DNA string and this string is made up of these three variables, Audience-Message-Image.
Basically what Facebook's algorithm is doing is it's keying through hundreds of millions of different
variables and the variables it's playing with is audiences, messages and images. It's playing with these
and it's trying to find the right combination to get a specific result. And with Facebook, the main result
it's trying to get is clicks and it's trying to get people over to your website. It's also trying to get people to
opt in, into their email address and take action on the offer that you're providing.

So, Facebook's constantly optimizing what audience should see, what message, with what image. It's
trying to find the best match. And so, if your message and image doesn't resonate very well with your
audience, well, then Facebook's going to prioritize another advertiser above you, and they're going to
get more traffic. So, constantly, we're trying to find the best combination of these variables, because
then Facebook is going to give us the majority share of all the traffic.

On Facebook, the advertiser that has the most powerful combination of these variables win. They take
all the traffic. And if you don't have very good combinations of their variables, you pretty much get no
traffic or you actually do get none at all. This is why it's important to start with a proof of concept, so
that when we start creating these combinations of variables, we have some idea what we're doing and
we're not just shooting blind. Just like how our brain works, we want to set a results hypothesis and we
want to set an Audience-Message hypothesis, because we're going to take the action when we launch
our ads. You know, we're going to actually create ads, we're going to create different combinations of
images. We're going to find different combinations of audience and we're going to push it live and we're
going to test it in real life, and we're going to get results. But before we go and do it live, we want to
form a hypothesis, because that is how our scientific method works.

We start with the hypothesis. Then once we've done that, then we take the action and then we see how
the action aligned with the hypothesis. And based on that, we iterate and adjust, based on the feedback,
and we get better and better every single time. That's our method for optimization and it is seriously
powerful when you use it properly. First of all, we need to set these hypotheses. We need to figure out
what we're actually aiming for in terms of results and then what we believe is going to be a good
combination to try and achieve those results.

To be clear, here is our workflow. So, here's our scientific method workflow, step-by-step. There's really
five steps to it. Before we touch Facebook, we need to form a hypothesis for both the results we expect
and the combination of Audience-Message required to achieve those results. In order to form a
hypothesis, we must have an established proof of concept. Without a proof of concept, you may as well
burn your money. You know, I've made this point and I'm pretty sure it's clear by now. Then, when
you're forming your results hypothesis, we must hypothesize about the results we expect to achieve
with our experiment. So, you know, if you were in a science lab and you were going to do an
experiment, before you go and do the experiment, you hypothesize, you take a guess at what you
think's going to happen and all of that. Then, you do the experiment and then you compare. That way,
you keep working that way.

So, to help you understand the benchmarks and what to expect, I've provided you with these
worksheets, so that you can really get a clear idea. Because most people, when they go to Facebook,
they have no idea what to expect. Their results hypothesis, even if they want to set one, they have no
idea what to aim for. They don't know what's possible and they don't know what the right numbers are
in order to achieve profit. So, you guys are really miles ahead of everyone else, because I'm going to give
you these resources, so you know exactly what to aim for. I'm essentially helping you set your results
hypothesis right away.

This spreadsheet's available for download, beneath this video in the resources section. It's called Your
Paid Client Attraction Metrics, or Paid Attraction Metrics. You can download it as a Microsoft Word file,
Microsoft Excel file. However, I recommend you use Google Docs. You just click on this link here and
you'll open it in Google Docs and boom, you've got it open. That way, you can update it here and it's
always live online. You can access it from your browser.

On the first tab here, you'll see it's called Performance Dashboard. Here, we've got our average student
performance benchmarks. And so, we can look here at these different things. For example, clicks. If you
want to have a successful campaign and a successful Fragmentation funnel, you should be within these
two numbers. One's low, one's a bit higher. You should be somewhere within these ranges, for all of
these different things. Otherwise, if you're outside of these ranges, there's a high chance that you're not
making any money and you're actually losing money. So, I've provided you with these, so you know
exactly what's going on.

With clicks, our click-through rate is in-between 0.5 and 1%. Then, our landing page conversion rate's in-
between 20 and 30%. Our video conversion rate's in-between 5 and 10% and our call show-up rate's in-
between 80 and 90%. Then, our call conversion rate's in-between 10 and 20%. That means that our cost-
per-click's in-between $1 and $3. Our calls-per-lead's in-between $5 and 15%. Our-cost-per-survey's in-
between $50 and $300. Our cost-per-call is in-between $55 and $330. Our cost-per-acquisition, our CPA,
is in-between $275 and $3,300.

Then, based on these numbers ... These are kind of like the funnel numbers and the ad numbers and all
of that. Based on these, your return on investment, which is what we call the Polaris [inaudible
00:31:43], is the most important thing. It should be in-between 100-200%. That means you're getting at
least 2:1 to 3:1 on your money. So, if you spend $1,000 on ads, you should get back $2-3,000 in sales. So,
those are the sort of numbers you should be aiming for. You should be, initially, aiming to get leads and
you should be aiming to get clicks at around this cost, and leads at around this cost, and strategy
sessions at around this cost.

Then, once you've got enough of these things, then you should be aiming to pick up customers for in-
between this price here. Here is everything you need to know. This makes it really simple, because this
allows you to set your results hypothesis right now. So, you're really aiming to get ... You know, your
results hypothesis should be to get clicks in between $1 and $3, leads in between $5 and $15, strategy
sessions in between $55 and $330, and then customers in between this and that. The price of your
monthly service or your program or whatever it is you're selling should exceed these numbers you've
hypothesized. I'm pretty sure everyone gets that.

And so, that is how we form your results hypothesis. Then, step three is you want to form your
Audience-Message hypothesis. So, we must hypothesize about the combination of Audience-Message
variables we believe will work together to achieve the results hypothesis. The only way to do this is if
you have an established proof of concept. I know I've said this to death now, but you have to have a
proof of concept. Otherwise, you have no idea about what's going to achieve these results. So, the
Niche-Offer-Result combination present there will provide you with all the essential clues. When you
have a proof of concept, it means you have a Niche-Offer-Result combination that works.

What happens, the way fractals and everything work is when something works and you've got at least
three customers, there should be clues in there as to what is going to work on the Facebook platform.
You should have done strategy sessions. You should have spoken to people. You know their objections,
you know their hot buttons, you know everything by now and you should have collected a lot of
feedback on your worksheets. Then, we're going to really go looking at that stuff. That stuff's going to
help us create our Audience and Message hypothesis. That's going to help us choose different
audiences, where we think our people are, and it's going to help us create different messages, which we
think is going to resonate with these people.

Then once we've formed the results hypothesis and then the action or the Audience-Message
hypothesis, that's perfect. Now, we've set both of these things. Now, we're ready to take it to the
market and actually test it in real life. This is step four, testing. Once we've formed the results
hypothesis and the Audience-Message hypothesis, it's time to submit it for real-life testing on the
Facebook ads platform. Then, what we do is we launch our ads. We launch a variation of different ads
and audience and images, and then we leave it for a few days and we observe the results. After about
three to four days, we come back into Facebook and we see how our experiment went. Some of our ad
sets will be within the KPI hopefully and most of them are probably going to be outside of KPI. If they're
in KPI, that means they're blue swans. They're good; we can leave them. If they're outside of KPI, it
means they're red swans, means we've got to turn them off and delete them.
Then, step five is iteration. Once we have observed the results of our test, we collect feedback about
what worked and what didn't work. So, we want to write down what audiences worked, what images
worked and what messages worked. Then, we want to write down what things didn't work and we want
to constantly keep track of what worked and what didn't work, because we basically want to do more of
what worked and less of what didn't work. This is really simple, but this is literally what we're doing. This
is all of what business is. I know it sounds so simple, but you know, people go and make things so
complicated.

This is our scientific method workflow. This is what we're doing. We're just doing it over and over and
over again. Each time, we're getting better and better and better and learning more and more and more.
So, this is a basic overview of it.

Now, we're going to talk about anti-fragile architecture and asymmetrical testing. So when we're testing
our hypotheses and looking for successful combinations of blue swan DNA, we need to be aware of our
downside. What's downside, you might be thinking. We constantly need to be aware of our downside.
Here, I'm going to explain exactly what it is. When advertising with Facebook ads, it doesn't matter
whether we're testing, running ads that work or ads that don't work. Everything we do costs money.
Now, in order to use Facebook ads, we've got to pay. It costs money. Every time someone clicks, we
have to pay Facebook.

Upside. Well, upside is what we call the money we make from profitable Facebook ads. For example,
you might spend $1,000 on ads and we might make $3,000. We would call the $3,000 we made as
upside. So, that would be $3,000 upside and there would have been $1,000 downside, because we
spent that. That means that there would be more upside than downside, which means that we make a
profit of $2,000.

Then, downside. Downside is what we call the money we spend or lose from unsuccessful Facebook ads;
also, money we spend on successful ads. It's still downside because it costs us money. An example is we
spend $1,000 on ads and we might make $0. Well, we'd call the $1,000 we lost downside. So, I'm pretty
sure you get it. Money spent is downside, money made is upside, right? You want to constantly be
aware of this.

It is of extreme importance that we always know our upside and downside when advertising on
Facebook. Facebook ads is no place for creative, artistic and emotional thinking. I've seen so many
people lose their shirts on Facebook, because they think something looks cool or something looks cute
or whatever, and it doesn't work. I see so many people lose their money. So, Facebook ads is a strict risk
and reward game, where the people who know their numbers take all. They take everything. And the
people who ignore their numbers, they lose their shirts and everything else. At all times, you must
understand how much you have at risk and you must be totally fine with losing money before making
money, because that's how it works. By this, I don't mean huge amounts. But, you know, when you're
using Facebook, quite often you're spending hundreds of dollars before you see any money come in.

Sometimes, you're spending thousands of dollars before you see any money come in. That's how it
works and you really have to get your head around that before you use it. Because otherwise, it will
freak you out and you constantly will think that it's not working and taking your money, because when
you're using it, you're paying before the results come back. Sometimes, in the beginning, where you're
trying to figure out different combinations and you're testing, well, you're going to be spending a few
thousand dollars and all of those thousands of dollars are going to be going towards finding out what
works. So, you really have to be aware of upside and downside. Otherwise, you know, Facebook can
take all your money and it'll leave a bitter taste in your mouth. You'll probably never use it again. But
when you know how to use it properly, it'll make you rich.

How do you calculate downside? Well, when advertising on Facebook, 100% of the money you're
spending all the time, you should assume that it is at risk. What I mean by that is you could lose it. You
know, every dollar I'm always spending on Facebook, I assume that there's a chance that that could be
lost. It's like an investment, you know? If you buy a particular house or some real estate or whatever,
that money could be lost. But you analyze it and you think that the maximum that you could lose is this,
because the price of the property couldn't possibly go below this, right? You do these calculations. But
with Facebook ads, I mean, it is possible that all the money you're spending could just go and you might
not get anything back in return. So, you always want to understand this.

You should look at your bank balance and your cash flows and determine the amount you can safely risk
each month for ads. This is crucial. You want to look how much money have you got in your bank
account. Then, you want to look at how much money are you consistently making each month? Now,
Facebook isn't a place to go if you don't have any money and if you're not making any money, because
it's just going to make you poorer and it's going to freak you out. It's a place to go when you've got some
money to bet and you also have some cash flows to replenish that money.

We aim to make profit and ROI, return on investment, every-time. However, you must prepare for the
worst case at all times, which is, you know, you lose everything. And the reason why I say this is because
it does something you emotionally, when you prepare like this. You know, I learned a lot of this from
investing. The worst thing you can do with investing in Facebook ads is to get emotional. And so, the
worst investors are emotional ones. The worst investors are the people who bet all of their money on
stuff and they need it to work. Whenever you need something like this to work, it won't work. So, the
last place you want to put your last thousand dollars or your last $500 is Facebook ads, because when
you come to Facebook ads and you're expecting a miracle and you're expecting it quick and you really
need it to work, your emotions are going to cloud your judgment and it's not going to work for you.

When you set a budget with Facebook and ... You're fine. You work out that your business is going to be
fine and you're going to be fine if that money is lost, then it sets you up mentally. Because obviously,
we're not aiming to lose that money, but if it does happen, we're not going to be in panic. Because, you
know, it'll still suck but it won't be the end of the world. We always need to make sure that we're
running like this, because if we run the other way around, your emotions are going to cloud your
judgment. You're not going to be able to make any good decisions. So, the first number you want to
figure out is that. How much can you risk?

The first number you need to be aware of is your testing budget. This is the amount of money you
allocate towards testing and finding the right combination of variables to produce a profitable campaign.
This is when we're initially testing, we're testing our hypotheses, we're trying to find out a combination
that works. This particular period of testing, if you don't have a proof of concept, it will never work. So,
that's that. If you do have a proof of concept and you go into the testing period, well, it can cost in
between $1,000 and $3,000 to find the right combination of variables. Now, it can cost this and it can
cost more, but this is just a rough sort of range. So, you really don't want to touch Facebook until you've
got at least, really, two grand. Once you've got two grand and you're like, "Okay. I'm happy to use this
money for testing. I understand that I could lose it all but I also understand that it could make me a lot
more," I mean, that's when you're in the right position to financially touch Facebook as a platform.
The second number you need to be aware of is your daily budget. This is the amount of money you
allocate towards advertising each day. You can calculate this by taking the sum of the money you can
safely lose, divided by 14 days. What you want to do is write that number down right now. You want to
pause this video right now and you want to calculate all of these numbers. So, first of all, how much are
you able to spend, how much are you able to risk each month? Look at what's in your bank account,
look at how much money you're making each month from your business, and then figure out are you
able to risk two to three thousand dollars to test Facebook ads? It's either a yes or a no. If it's a yes, then
you can do it. Awesome. If it's a no, then well, you need to keep saving and you need to keep using
organic methods before you can touch Facebook. Simple. You can do it if you've got less money, but it
won't work for you. I'm just going to be completely straight with all of these things.

Then, the second number you need to determine is your daily budget. So, if you calculated that you
could risk $2,000 a month, you looked at your income and you're like, "Okay. I can risk two grand a
month," well, you'd take $2,000 and then you would divide that by 14 days. That would give you $142 a
day. Your daily budget would be $142, because you could lose that money for 14 days before you would
have to stop. Then, the third number you need to be aware of is what we call a hard stop. This is at the
point where you must pause all of your ads, because you have hit your downside limit.

And what I mean by this is ... This is ... In the beginning, you calculated how much you could safely risk
each month. You worked out that number by looking at your bank balance, looking at how much money
you're making and you came up with that number. Well, that's how we calculate our daily budget and
then we can only lose that for 14 days before we've going to stop our ads. However, if we're making
profit, we can go for longer. But that's the maximum we can lose each month before we have to stop.
It's important that you figure out this hard stop number, because if you ever get to it, well you've really
got to stop. Because otherwise, you can get yourself into trouble. You know, you don't want to keep
going and then you can't pay rent and you can't do all this other stuff. I mean, that's just irresponsible.
That's why we set these hard stops before we even touch Facebook ads, so that we know what our
downside limits are.

When you do this, it will just make Facebook easier for you. You're not going to lose your shirt with it. I
mean, you're going to be much more calm and non-emotional about it. You're going to be actually acting
like a professional investor. That's how you make a lot of money with Facebook. If your hard stop was ...
Let's say you could lose $2,000 a month and that's $142 a day if we divide it by 14 days, that means that
you could lose $142 a day for 14 days without any income on your ads. That would be your limit.

You're probably thinking, "Well, how do we keep track of this?" Well, first off, we define what these
numbers are. That's what you should have done in the previous slide. You should have paused the video
and written those numbers down. Then, we track each day's results using our Paid Attraction Metrics
spreadsheet, and this is the spreadsheet available for download beneath the video. I just covered it
before. It's called Paid Attraction Metrics and we use it to track our performance each day. I'll just pull it
up again and I'll show you exactly how we use it to track our downside.

So, we've got the performance dashboard on the front tab. Then, if we go into month one here, you set
the date and everything and you put your Adspend in here and you calculate these numbers the day
after each day's advertising. So the morning after, you're reporting on yesterday's data, because we
need a full 24 hours to aggregate all these numbers. You've put in the Adspend, the Impressions,
Relevant, CPM, Clicks, Click-through Rate, all of this stuff. Now, everything in gray, you don't need to put
in. The little formulas that I plugged into the spreadsheet do all of the gray boxes for you. All you need to
plug in is the white cells. And if you hover over these things, it tells you what each one is. You can see
these things are popping up. All right?

When you plug all of this in here, you'll have this column here, which is called P&L. Profit and Loss
balance. This box here is how we track our downside. When we're looking at this, when we need to
stop, when our hard stop is hit, this would look like this. It would say -$2,000. So, if you ever saw that in
your P&L column, then that's when you've got to stop. Immediately when you see this, you have to go
into your Facebook ads account and you just have to turn everything off. You have to pause it because
you've hit your hard stop limit. Even if you get clients and you're making money ... You know, this
number might go up to 10 and whatever. But then you might hit a slump and you might go down. Now,
you're coming down into ... you know, as soon as you hit this here, that's your hard stop. You have to
stop. This is why we set that number, because we want this to be as high as possible, but we need to
have a hard stop on our downside. Otherwise, we can get ourselves into financial trouble. This is what
all professional investors do. It's what everyone who knows what they're doing and is smart with money
does. You always calculate your downside and you set a hard stop there.

That is how we do that and that's how you track it. It's pretty simple. You need to be disciplined and
report on your numbers every day. If you set Facebook ads up and then you forget about it for a week
and then you come back ... Well, it might have taken more money from you than you thought it was
going to. You have to check on it each day and you have to report on your numbers each day. You have
to be very disciplined like that. At all times using Facebook, you must keep upside and downside in mind,
even when you create your campaigns.

Now, for one of my secret weapons. Now I want to show you one of the most powerful things that I
have created when it comes to using Facebook. It's something that I call anti-fragile architecture and
asymmetrical testing. The way I think about ads and the way smart people think about investments is
like this. You've got your downside and your upside. The downside is this here, where we can see these
negatives and we've got this trend line going down. You can see this is losing, minus dollars, down. And
then we've got upside, which is above the line. These are all the pluses. This is money that we're making.
It's profit. The nature of every single investment you're ever going to do, as a human being, is that
there's always going to be downside. For sure, it's an absolute fact. There's always going to be downside.
There is not always upside. Not every investment has upside.

What you're always looking at is something called asymmetry here. What asymmetry means is it means
that both sides aren't symmetrical, so it means that one side's way bigger than the other side. You're
always looking for risk-reward situations, where the downside isn't that big, but the upside is huge.
Because if you do take the downside, which is likely a lot of the time, then the upside has to more than
pay it back. If this downside here was the same size as this upside, then it means that we would make
$0. And if the downside was bigger than the upside, it means we'd lose money. So, this is what you have
to think about when you're using Facebook ads. All the time, you have to know what the downside is
and what the potential upside is, because only then are you setting it up properly so that you can
actually make profit. There's a special way that I architect these campaigns in order to do that.

Anti-fragile architecture and asymmetrical testing. So, when structuring our campaigns, we want to have
asymmetrical risk-reward, where risk is minimal and reward is uncapped with no limits. To do this, we
run multiple variations of ads with multiple images to multiple large audiences, all with the lowest
budgets possible. So, we set our budgets on these ad sets and these variations pretty low. I mean, it's
not as low as it can go, because I know how low we can go and actually still make it work. You know, you
could put 50 cents in there, but it wouldn't work, because clicks cost more than 50 cents, so you're not
going to really get anywhere. But I know the numbers and I know as low as you can really bid on stuff
and actually get it to work, and I'm going to share those numbers with you later. But why we want to do
this is we want to have lots of different variations with a really low budget and this way, we can test lots
of combinations and we are never really going to lose that much money, because we have set small
budgets for everything.

We're getting lots of exposure with two different combinations, but with a very little downside. We also
hard stop our losses. Now, we also know how much we can possibly lose before it's bad. We have that
P&L column in our Paid Attraction Metrics spreadsheet, so we can constantly keep track of that. As soon
as that hits -$2,000 or whatever your number is, well, you've got to pause. You've got to shut it off,
because now you're hitting your downside limit. The cool thing about Facebook ads is that we have this
limited downside, where we have small budgets and we've got a hard stop on our losses, which means
that we can't really lose infinitely, because we've stopped. We've got a hard stop. There's only so much
we can possibly lose, but there is infinite amounts that we can possibly gain. So, there's huge asymmetry
here, because when things work, we can make millions and millions and millions; but when things don't
work, we hard stop our losses at two grand or whatever your number is. That's how we get asymmetry
here.

This way, we can test thousands of variations with limited downside. Then, as soon as we find winning
combinations, we can scale them up with almost uncapped upside. That means we can start scaling.
When something's profitable ... If we put a dollar into Facebook and we get out five, we're going to
spend as much money as we possibly can, because, I mean, why would you not? If you put a dollar in a
machine and got out five, would you just take your $5 and then walk away? You'd probably try putting
more dollars in and see how many times you could do it for. Then, you'd probably start trying to put a
hundred dollars in and so on and so forth. Well, that's how it works. That's how Facebook works and
that's how I'm going to show you how to set it up.

Now, we're going to talk about KPIs and their role in identifying the two swans. Imagine this for a
moment: Your friend asked you to drive your car from your home to a location you've never been
before, and you must drive completely blindfolded. Would you do it? The same is true if you use
Facebook ads without knowing your KPIs. And you might think, "No, no, that's not the same." It's almost
more dangerous to use Facebook without knowing your KPIs than it is to drive a car blindfolded.
Without KPIs, without knowing your KPIs, your Facebook ads account is headed straight for a tree, just
like if you're driving blindfolded. And just like driving blindfolded, you won't have any idea you're about
to crash until you've crashed and you've broken your neck. Same with Facebook.

If you don't measure your KPIs, if you don't know them, then you might actually think that you're
making money. You might actually think things are going okay, because different people are clicking on
our ads, liking them. You're getting some emails and what not. But you could be headed straight for a
tree. The only way you'll know whether you've crashed is when you actually crashed, so it's a really
horrible situation to be in. I see even pretty smart people making this mistake. They think just because
people are opting in for their information and they're getting emails and leads, and they think just
because people are liking their stuff, that it's worth it. But you don't know whether it's worth it unless
you're selling something. The only true test for advertising is profit. Nothing else.
That's why KPIs are so important. You never want to run ads just to get things like email opt-ins. You
know, I hear people do this all the time. They create PDFs or they create free reports or they create
tripwires or all of these crazy things. Then, they advertise them and they're like, "Yeah. This is going well,
because I'm getting leads for like two bucks or I'm getting leads for a dollar. I'm list-building. I'm doing all
of this." Well, honestly, that's stupid behavior. You never want to do anything just to get emails, because
all of the emails you're getting might be wrong. They might never buy from you and then that's a total
waste of money. So, this is why we need to keep track of the numbers. We need to know our KPIs.
Otherwise, we're not going to know that we've crashed, or we might not know that we're heading for a
tree until it's too late. The moral of the story is, basically, don't use Facebook ads without knowing your
KPIs.

So, what are KPIs? Well, KPIs are key performance indicators. When using Facebook ads, it is mandatory
to use KPIs to track the performance of your ads and your Fragmentation funnel. Every day, you must
check your ads and plug your key numbers into the Paid Attraction Metric spreadsheet, so that you can
gauge your performance. The spreadsheet provides benchmarks for all KPIs, so that you can compare
your numbers with other students and see where your campaign or funnel is breaking down. Like I said,
this is available for download beneath the video. Your KPIs are here. It's these average student
performance benchmarks. These here don't change; these are set. However, when you enter in all of
your numbers here, these numbers here will change, because this is your performance.

What you're doing here is trying to compare your numbers here to these numbers here, and see where
you're outside of KPI and where you're within KPI. Where you're outside of KPI, well, that's where your
funnel or your ads are broken. That's where you need to drill down and start fixing it, finding out what
the problem is, trying to fix it until you've got all of our KPIs in alignment with the benchmarks. Once
they're in the benchmarks, you should be making profit. It's as simple as that. I've really made it as
simple as I possibly can here. I've given you all of the numbers, all of the calculations, all of the
benchmarks, everything. That's how we use KPIs.

Now, we're going to talk about using KPIs to identify the two swans, red swans and blue swans. A blue
swan is a Facebook ad set that is within KPI and a red swan is an ad set outside of KPI. We need KPIs to
accurately identify whether an ad set is a blue swan or a red swan, because without KPIs, we're driving
blind and we have absolutely no idea. Worse yet, we will treat red swans as blues and blues as reds. So,
this is the sort of messed-up stuff that can happen when you don't use KPIs and you don't track stuff.
I've seen people think they've found a profitable ad set, and they start spending more money. They start
duplicating the ad set that they think is profitable. They start turning off other ad sets, which they
believe aren't profitable, based on their gut. And then later on, it turns out that they turned off the
things that were working and making the money, and they started spending more money and growing
the things that were losing the money.

That might sound crazy to you. You might be like, "Well, that would never happen." Well, honestly, if
you don't track your KPIs, you have absolutely no idea. You don't even know. Like I said before,
Facebook advertising is all about the numbers, not the emotions. So, it doesn't matter if you think an ad
is cool, pretty, cute, or even if you are absolutely certain that the ad that you've got is going to work. It
doesn't even matter if you think an ad is working, because only the numbers can judge. Only the
numbers can actually tell us whether something is working or not. Blue swans and red swans all look the
same unless we have KPIs. KPIs are the only things that can show us what a swan is, red or blue. If we
just try and use our eyes and no KPIs, we have no idea what we're looking at and we might even muddle
them up and get them back-to-front.
Now, we're going to talk about growing your population of blue swans. And by this, I mean finding ad
sets that are profitable and then starting to grow them, starting to duplicate them and propagate them
and really scale it up. Our main objective with Facebook ads is to grow our population of blue swans, as
I've said. We do this in three key stages. So, let's take a look at these three stages right now. The three
stages of breeding blue swans.

Stage one, which is where we're going to start, is called testing for blue swans. The first stage is to test
our hypotheses by submitting different ad angles, different ad images and different audiences to
Facebook for testing. We do this by ... We identify ad sets within KPI and we keep these, which are blue
swans. We identify ad sets outside of KPI and we delete these, red swans. Then, once we've done that,
once we've done enough of that and we've actually identified some blue swans, then we would start
scaling. However, if we don't identify any blue swans, well, we've got to keep iterating and testing until
we do find blue ones. We can't scale until we've found blue ones. Otherwise, what we'd be doing is
scaling red ones and exponentially scaling our losses. So, we have to keep testing in this stage one
process until we've identified enough blue swans. Later on, I'm going to show you what enough really
means. I'm going to define these things, show you exactly what enough means. But for now, you just
need to get your head around the strategy.

Then, step two, once we've done that, is called scaling blue swans. Once we've created enough blue
swans from testing, we can start scaling. To scale, we find the most successful ad sets and we duplicate
them multiple times, changing the budget and age range as variations, while keeping the proven
Audience-Message string the same. So when we have a profitable ad set, which is a blue swan, within it,
there's a DNA string. It's made up of an Audience, a Message and an Image, and these combination of
variables work together.

Now, what we want to do is we want to start duplicating these, because it works, so we want to make
more of them. However, we want to create just a tiny, little micro-variation in it. We don't really want to
change the string, because we know the string's good. So, we want to just create a tiny, little variation,
just to kind of trick the algorithm so that it thinks it's an entirely new string. Our way of doing that is by
changing the budget, because Facebook's algorithm takes the budget into account. If you have two ad
sets at say, $20 ... Well, if you have one ad set at $20 and it works, it's a blue swan. So if you duplicate it
and set it at $20, well, Facebook might think that it's the same ad set and it will just treat it as if that's
really one ad set, even though, to you, it looks it's separated into two.

But what happens is when we change the budget, it fools the algorithm. It really tricks it. If we have one
at $20 and then the next one we create at $28 or $$23 or whatever, just any random number that's not
$20, then the algorithm puts it in a different category and it considers that a different string. But it's only
slightly differentiated because it still has the same string. It's still got the same Audience-Message-
Image, but just the budget's changed a little bit.

Most people don't understand that just by changing the budget, you're changing a variation in the
string. We're also ... When we duplicate it, we're changing the initial conditions. We're exposing the
string to a different environment and different initial conditions. So, sometimes it's possibly to actually
have a profitable ad set and have a blue swan, and duplicate it three times and see all three duplicate,
cloned copies fail and be red swans. Sometimes, that can confuse people, because they're like, "What? I
thought I found the right DNA string. How did it fail?" Because each time you're duplicating it, it's not
just a carbon copy. It's not a clone. You've got new initial conditions and those are more important than
the ad itself. You've also got different budgets and all of that. Each time you duplicate it, you might think
you're just cloning the same thing. You're cloning the string, but the initial conditions are different and
that can make all the difference.

So, what we want to do is we want to duplicate these things and just change the budget a little bit.
Sometimes, we change the age range too. So, if we were targeting 16 or 18-55-year-olds, whatever, we
could change it to like 18-53. It's barely like we've changed anything, but again, we're kind of tricking the
algorithm and Facebook thinks it's a totally different string. And so, we get to keep the DNA string the
same, but we get to make it different in small, little ways. That's how we scale it. We start duplicating
this, because if we see it's proven once, we want to keep duplicating it. That's how we really scale up.

Once we work through these two phases here, phase one and phase two — or stage one and stage two
— and we're constantly testing new things, and then when we find ones that work, we're scaling them
up. Testing new things, scaling them up. And after enough of this, I mean, you'll be ... Very quickly, when
you do this properly, you will be scaled right up and your problem will not be Facebook ads. Your
problem will be hiring people and trying to get systems in place to manage all of the customers that you
have.

I can scale Facebook ads so fast that within one month, I can pretty much break my entire company.
That's pretty much what I did last year. I scaled up so much, so quickly, that I pretty much broke my
entire company. I had to hire ... It's taken me the last eight months to hire enough people to catch up
with the demand. So once you learn these methods, your problem isn't going to be scaling and making
money. Your problem is going to be trying to hire people and catch up with the scale. This is the part
that becomes actually pretty easy.

Then, stage three is managing blue swans. So, as we scale our blue swans, we need to constantly check
on them to make sure they're still within KPI and trending the right way. To keep the population of blue
swans healthy, we constantly duplicate the healthiest ones while deleting the unhealthy ones to keep
refreshing the population. We want to take from the bottom and add to the top all the time. Just
imagine you've got a fish tank or something. You constantly need to be kind of draining the bad water
out and adding the new water in. You need to constantly keep it fresh. You can't leave it sitting stagnant.

Because even if you have a whole collection of blue swan ad sets and they're working fine one day, if
you just leave them, then eventually all of them will die. All of them will turn into red swans. Just
because something's a blue swan one day doesn't mean it's going to be a blue swan forever. You know,
the environment's constantly changing and based on the initial conditions, we don't really know what
the evolutionary stream is going to end up with for these different swans. So, it's important that when
they do work, that we duplicate them. We try and get them to breed. And then when we duplicate
them, as different swans get sick and whatnot, it doesn't affect us so much because we're constantly
adding new ones to the population.

That's a very important lesson. When you're managing blue swans, you have to be looking at them all
the time and seeing which ones are kind of getting sick. You need to be adding new, healthy ones into
the population more frequently than ones are getting sick and withdrawing from the population.
Because that way, you're always keeping your audience ... or you're always keeping your population of
blue swans constant or, better, you're constantly growing it and it's not declining. So, that's an
important lesson to learn.
In the beginning, if you're just setting up this stuff, we're going to work through these one, two, three
stages sequentially. We're going to do testing. Then once we've done that, we're going to scale. Then
once we've scaled, we're going to manage. Then once we've kind of managed it and we've got it to
where you want it to be, it's going to be a constant process of all three of these things. You know, even
for me today, after doing Facebook ads for years, every day, I'm really testing new things. I'm scaling
different things and I'm managing things. I'm turning things off. I'm duplicating different things. Once
you get to stage three, it's a constant sort of cycle of doing all three of these things to keep the
population of blue swans fresh, active and growing and all of that.

Now, let's talk about the big mistake everybody makes. And there's a lot of them with Facebook ads, but
this one is a big one and you'll see how blindingly obvious it is when I explain it here. The big mistake
everybody makes with Facebook ads is assuming a profitable ad set will always be a profitable ad set.
They create different ads and they're testing. Then, they find some that work. They turn off the ones
that don't. Then, what they do is they're like, "Yes. I've found it," so they just might increase the budget
or something, and then it's working and they're like, "Yeah. This thing's working."

Then, you know, a week goes by or whatever. Maybe four days goes by, more of the time. Then, it stops
working. And then when it stops working, they assume that the ad no longer works and they refresh the
creative. "Oh, yes. The ad is broken. I know what happened. You know, I had this ad and it was working
and now it's not working and the ad is broken." I can see how someone made that assumption, but
they're wrong. And so, the last thing you want to do is refresh the creative. When I hear people say this,
I'm like, "Man, this person doesn't know what they're talking about."

A good example to look at is nature to really see what the correct method for us to do is. In nature, the
environment is always changing and a genetic trait that is helpful in one environment can be harmful in
another. We can see this with example, like penguins, for example. You know, penguins, genetically, are
made for cold weather, right? That's their environment, so they've got good genetics for a cold
environment. However, if you put them in the desert, they don't have very good traits. So, traits aren't
just good traits. Traits are only good when compared to an environment. You know, humans are good
on earth, but we're not good underwater. However, fish are good underwater. They're not good on
earth. The environment changes everything.

With Facebook, the environment's always changing. You know, new advertisers, they're coming in and
they're advertising. Niches are changing, Facebook's changing. Different preferences are changing, the
economy's changing. It's a forever-changing environment and just because something worked at one
stage doesn't mean it's going to work in a new stage, because the environment's literally changing. So
because the environment is always changing, just because an ad set works right now doesn't mean it will
continue to work forever.

Eventually, all blue swans will die. I've seen some blue swans hang on for four months, which is pretty
insane. Most ad sets don't last anywhere near that long. But even those ones, those things which you
think are like thoroughbred race horses, you're just like, "Whoa. This thing is working and it's been
working forever." Even those, they stop working. You know, eventually all blue swans will die. In nature,
healthy genetics survive longer than unhealthy genetics. And because of this, they tend to propagate
and produce offspring.

If you remember back to week four, how we talked about natural selection and all of that stuff. We
talked about how, for example, there might be brown beetles and green beetles. And if there's a
predator in the environment, like a bird, and it's got a preference for green beetles, then the green
beetles are going to get eaten first. So, the brown beetles are going to live longer. They're going to have
more babies and everything. So eventually, there's going to be more brown beetles than green ones.
Eventually, there won't be no green ones at all, right? Very simple example.

If you've got the right genetics, if you're a beetle, well, then you're going to live longer. Typically, when
they live longer, they're going to propagate. They're going to have offspring. And so, that's what
happens in nature. The healthy genetics and the preferential genetics, they tend to reproduce. When
you have a blue swan, the last thing you want to do is keep it running till it dies and then create a
completely new one. This is what everybody does. You know, people have an ad set that works, and it's
profitable, and they're like, "Yes. This thing's working." Then, they just leave it until it dies and then they
create a totally new thing. This is pretty mad.

And while the blue swan is healthy, it should propagate and produce offspring of its own, just like how
things do in nature. So when you have an ad set that's working and it's profitable, while it's healthy,
working and profitable, you want to start propagating it. You want to start duplicating it, cloning it,
starting to reproduce it, because you know eventually that healthy blue swan's going to die. So, while
it's alive and while its DNA is good and everything, you want to start duplicating it out. That way, if
you're constantly duplicating the good DNA, then you're constantly doing what organisms and
everything do in nature, which is adapting to the environment and reproducing when things are good
and not producing when things are bad. That's what we're doing. You know, we're not trying to
duplicate and scale out red swans; we're just turning them off. But when we find a blue one, we don't
just want to look at it and be like, "Oh. This thing's working," until it's not working, which is what
everyone's doing, which is pretty crazy. But we want to duplicate it. We want to propagate it.

This next thing is one of my most dangerous tactics. I've never really shared this one before, but I
decided to share it in this training. It's something that I call propagating and splicing blue swan DNA.
With DNA, with all sort of organisms, they propagate, which means they breed. You know, they
reproduce. Then, there's splicing. Splicing is when you take a DNA strand and you cut it and you combine
it with another DNA strand. So, you start splicing the DNA. You start creating genetic mutations and
different variations of different DNA. That's what we can do with our blue swans.

Like I said, in nature, healthy genetics survive longer than unhealthy genetics. They produce more
offspring and their genetics spread. If we have a blue swan ad set with a healthy Audience-Message-
Image DNA string, why on earth would we age it out until it does, without giving it the opportunity to
produce offspring? That's just cruel. This is what everybody does. They find a blue swan ad set, run it till
it dies, and then they create a brand new one and they repeat this process every four days forever. They
just keep refreshing the creative. It's madness. When you have a healthy blue swan, you want to
propagate it by duplicating it and splicing its DNA. First of all, I'm going to show you and I'm going to
discuss the strategy of propagating blue swans. Then after we've done that, I'm going to explain the
strategy of splicing blue swan DNA. They're two different things.

Propagating blue swans. So when you have a healthy blue swan ad set, you don't want to just use it until
it dies and then replace it with something new. That's silly. While the blue swan ad set is healthy, you
want to start propagating it by duplicating the ad set and creating micro-variations, just by changing the
budget and the age range. That's all that necessary, because we know the main string is healthy. So, all
we're trying to do is just create little, tiny variations, because we don't want to just create totally
different strings, because we've got a high chance of getting that wrong. That's why creating new ads all
the time is stupid, because you're going back to the drawing board again. When you've got something
that's working, you already know its DNA structure. You just need to just create little variations of it.
Tiny, little iterations. You're going to start propagating it out and that's why we duplicate it and change
the age, change the budget and just keep duplicating like that.

The thing that no one understands is that no duplication is ever the same as the original blue swan. It
has completely new initial conditions. In its initial four days, it's exposed to different environments and
into a totally different environment compared to the initial blue swan, even though it comes from the
same DNA structure, and it has bred into a new environment. It has the same DNA string, but it's
different, which is perfect. It means that it's got the good DNA string, which means it's got a high chance
of working, but at the same time it's different, so we have some sort of variation. Most people don't
understand you can have variation this way, but you can and when you do totally understand this, it'll
change the game for you, because it really is infinite, how many times you can start propagating things.
You just have to change those little things around and you can create infinite amounts of blue swans just
from initial blue swans.

The second method is called splicing blue swan DNA. Another method for propagating blue swans is to
splice the original blue swan's DNA with a new mutation or variation to create a similar but different
offshoot of the original blue swan. So, you know, if we've got a blue swan and it's got a structure of
Audience-Message-Image in its DNA string, what we want to do is we want to just splice it by just
changing one of those variables. We don't want to change all three, because that's too risky. We want to
just start playing with just changing one little variable, just a little bit at a time and see if we can create
an even better version or a version that's on par or the same or whatever.

To splice blue swan DNA, we change out any of the three variables that make up its genetic structure,
which is made up of Audience-Message-Image. So, we're just trying to swap one of those things. We can
take a successful ad and we can run it to a new collection of audiences, to find new combinations. So,
this would be taking or an ad and an image, and that's two parts of three in the string, and then just
changing it to a whole bunch of different audiences. Because then, we know that this combination
works, but now we're going to run it to all those audiences and we might find some more audiences that
work just as well or maybe even better. We can take a successful ad and run it with a new collection of
images. So, we might keep the Message and the Audience constant, but we might just put in four new
images. We might find a new image that works better than the original image. We might actually
improve the DNA and we might get an even better blue swan.

Then, we can create a new variation of the message itself, while keeping the audience and the image
constant. So, if we keep audience and image constant, then we could write a new angle and we can do
this in lots of different ways. We want to look at the original angle, because it worked, and then we want
to create ... Sometimes, we create a longer version. So, if we had a short version, then we're just create
a long version of the short version. Because we know the short one already works, so we may as well try
a little iteration that's long. Or if we had a long one, we could create a short one, or we could just try
changing around the angle just a little bit. So, we can create different offshoots of this original DNA,
which is proven to be successful. This is what we call splicing the blue swan DNA.

The key is to keep two variables constant and iterate just one variable at a time, so that you can keep
track of cause and effect, because the key with Facebook is we always need to know what cause is and
what effect is. Once we lose cause from effect, we're doomed. That's what I call tying Gordian's knot.
You know, once you've done that, you're screwed. Why we keep two variables constant and just change
one is because if it doesn't work, then we know that that was that third variable. However, if we're to
change two variables and it doesn't work, well, we don't know which one it was. We don't know
whether it was the audience or the message, for example, because we have no idea. That's why you
always have to keep two constant and change one.

You wouldn't change the message, the image and the audience, which is what every person does when
they refresh the creative. They create a completely new thing all over again. That's pretty silly. You just
want to keep two constant, change one. That way, if it works, you know why it worked, which is good.
And if it doesn't work, you know why it doesn't work. That's all you really need to know, because you
can never really get lost when you know why things work and why things don't work. You know cause
and effect and that's what you need to constantly keep in mind.

You can have a lot of fun splicing the blue swan DNA like this. We've taken ads that are profitable and all
we've done is just taken the image out and we've just turned it black and white. Or sometimes, we've
turned it HDR, just with Photoshop or something. Or sometime, we've zoomed it in. Or sometimes,
we've just flipped it horizontally, so that it's just facing the other way. We've just created these small,
little genetic mutations of this original ad that was working well. Sometimes, we make it better or we
create a new offshoot, which is doing just as well. And then, when that one starts to do well, we can
start propagating that one and duplicating it. We can just keep creating variation from the initial
conditions.

So, you can see just from having one ad, you can create variation in so many different ways. You can just
have ... You could just create five ads, run them. Find three that are working, turn off the two that
aren't. Then, based of those three that are working, you can start duplicating them and changing just the
budgets and the ages. That's propagating out a whole bunch of stuff. Then, once you've kind of done
that to as far as you can really take it, then you can start splicing the DNA. You can start changing
images, the audiences, the messages just a little bit. Then, that will create a whole new breed and a
whole new species of blue swan. And then once you've done all the splicing, then you can start
propagating the ones you spliced. Then, you can go back to the other ones, that you had just
propagated, and then you can start splicing them. You can just keep going back and forth, between
splicing and propagating. You will never, ever, ever run out of possible variations. I mean, it really is
limitless.

Once you have a new mutation of blue swan, you can propagate it through multiple duplications and
then splice its DNA again and again. Once you truly understand what I just explained, you will see that
the variations and scale is truly limitless. So, I know what I might have just explained ... You know, it
might have confused some people or whatever, if you haven't used Facebook before or anything. Or,
you might be like, "Why is Sam talking about swans and DNA and all this stuff?" It's honestly way easier
to think about it the way I have worded everything. Blue swans, red swans, DNA, that sort of stuff,
because it allows you to think of it as you're trying to just grow some, trying to farm some blue swans,
compared to trying to run ads. Because when you look at the ad terminology and everything, you can
get confused.

But when you constantly draw a parallel between that and the blue swan thing, it makes it very simple.
And when you truly understand what I just showed you how to do, and when you truly understand the
power of this playbook — which I just showed you — you will know that it's pretty dangerous. You can
do a lot of damage with this playbook. By that, I mean you can really scale. You know, you can scale into
the millions of Adspend. This year, I plan to have our Adspend up to $100 grand a day, so we're going to
be spending. This isn't even making, this is spending. We're going to be spending $100 grand a day. We
should be making like $3-500 grand a day. That's how far I can take it, just with this playbook. This is the
very playbook that I am using, and just through splicing and propagation and all of the different things
I've shown you in this playbook. So, it's a very powerful playbook.

You might have to watch this video a couple of times to truly understand it. Or when you start
advertising on Facebook, come back to this video and watch it again after you've started. Because it's
one of these videos that, for some people, it will really resonate with them and they'll totally get what
I'm saying; and for other people, they might not really get what I'm saying until they've tried Facebook a
couple of times, and then it will make sense. Don't forget about this one. Because I know, at the right
time, when people will see this and understand it, they will know how powerful this stuff is.

That's it for this video. Thanks for watching and I will see you in the next one right now, which is where
we're going to set our ad hypothesis. Then, after that, we're going to set our audience hypothesis. That's
where we really start taking action and we start creating some ads, picking out some audiences and
getting ready to launch our campaign and really start breeding these blue swans and growing our blue
swan empire. So, that's it for this training. Thanks. I will see you in the next one.