Summary of Josh Kaufman’s “The Personal MBA”: Everyone can gain the knowledge and value of an MBA without spending the time and money needed to enter business school; this is the paradigm that Josh Kaufman conveys in his book, “The personal MBA”, of which the review you’ll discover here.
By Josh Kaufman, 2013, 477 pages.
This review is written by guest, Claire ESCALA, from the blog ClaireESCALA.com.
Chronicle and summary of the book The Personal MBA
Favorite excerpt from The Personal MBA
“Self-education is, I firmly believe, the only kind of education there is.” – Isaac Asimov
Foreword by Olivier Roland
INSEE noted that only a quarter of self-entrepreneurs had managed to generate a continuing stream of income, and that, on average, only 10% of them earned more than minimum wage.
The average income of other entrepreneurs is 14,000 euros… per year.
Being technically good in a field does not automatically make us good entrepreneurs.
Being a business owner is a job in its own right.
Training yourself in order to go beyond our “mere” technical expertise is essential.
When Olivier Roland discovered “The Personal MBA”, he took on the insane challenge of reading one book a week for 52 weeks, of publishing a summary of each book on his blog, “Des livres pour changer de vie” (Life-changing books), and of applying what he was learning.
If you follow Olivier Roland, you will definitely know that it has changed his life decisively.
About the author
Josh Kaufman helps his clients to earn a better living, to carry out more projects and to take more joy in managing their business.
Note to readers
Each of the 254 concepts defined by Josh Kaufman in “The Personal MBA” begins with a capital letter and is noted in bold and italic when it first occurs.
In “The Personal MBA”, Josh Kaufman describes each of these concepts in about one and a half pages. In this review, I extracted the definitions of these concepts in the most concise way possible.
If you want to go further, I recommend that you to read “The Personal MBA” because Josh Kaufman illustrates each of the concepts with examples and quotes to fully understand the ins and outs.
Introduction. Why this book The Personal MBA?
Life’s hard. Even harder if you’re stupid. – John Wayne
If starting your business, getting a promotion, creating something new is a goal that is important to you.
You definitely feel:
- The fear of getting started
- The lack of self-confidence
- The impostor syndrome
Rest assured: everyone shares these unfounded fears that can be eliminated quickly.
You don’t need to know everything to succeed. All you have to do is learn a few key critical concepts.
Josh Kaufman’s “Personal MBA” is a lexicon/dictionary that defines a set of key concepts that you can use to achieve your goals.
After reading “The Personal MBA”, you will be part of the 1% of the population who knows:
- How businesses truly operate.
- How to create a new business.
- The way to improve an existing business.
- How to use your professional skills to accomplish your personal goals.
For starters, it’s important that you have in mind the following principle.
Any successful business
- creates or distribute something of value
- that other people want or need to get
- at a price that they agree to pay, in a way that
- satisfies the needs and expectations of the buyer and
- that earns enough so that the owners of the company have an interest in keeping it in business.
Remove any of these elements – value creation, consumer demand, transactions, benefits and distribution or profitability – and you end up with something that is not a business.
Each of these factors is both essential and universal
- You cannot create value without understanding the needs and desires of individuals (market research).
- To attract customers, you need to get their attention and then to spark their interest (advertising).
- To close a sale, individuals must have confidence in your ability to keep your promise and meet their expectations (value delivery).
- And to make a profit, you need to record more revenue than expenses (finance).
- To satisfy the customer, you must always go beyond their expectations (customer service).
These concepts are important because they work.
After reading “The Personal MBA”, not only will you be able to create more value for others and improve your own financial situation, but you will also achieve your goals much more easily – and with greater pleasure.
Chapter 1. Value Creation
The Five Parts of Every Business are:
- Value creation
- Value delivery
They are the basis of any valid idea and quality business plan.
If you are able to clearly define each of these five processes for any business, you will fully understand how it works.
Before starting your business, start by defining the general aspect of these five processes.
If you are unable to describe or sketch your project based on these five basic processes, you will not have sufficient understanding for it to work. Why?
Because the Iron Law of the Market is ruthless, cold and unforgiving.
Remember that any business is limited by the size and characteristics of the market it is trying to serve.
If there are not enough people that truly want your offer, your chances of developing a viable business is very slim.
In addition, to succeed you must bring value to improve, however small, the lives of others.
To do this, you must answer at least one of the four Core Human Drives that deeply influence their decisions and actions:
The drive to
Don’t forget also: Humans care a great deal about what others think of them. And, they spend a lot of energy comparing their status to that of other members of the group.
This Status Seeking is a universal phenomenon and essential to keep in mind.
Let’s move on to identifying the attractiveness of a potential market.
To do this, evaluate the following Ten Ways to Evaluate a Market:
- Market size
- Pricing potential
- Cost of customer acquisition
- Cost of value delivery
- Uniqueness of offer
- Speed to market
- Up-front investment
- Up-sell potential
- Evergreen potential
If you conclude from this evaluation that two markets are as attractive as each other, go into one that is already occupied by the competition. Why? Because it means there is a market for this idea, which reduces the risk. It’s the Hidden Benefits of Competition.
Do not forget also:
- Don’t become a Mercenary: don’t start a business just for the money. Why? Because starting and running a business always requires more effort than you initially imagine.
- Don’t become a Crusader because if you find an idea that is too fascinating, you will find it difficult to consider it objectively. It’s as if, suddenly, you had the deep certainty of having found your calling.
To distribute the value that you successfully create to your customers, use one of the following twelve standard Forms of Value:
- Shared resource
- Audience aggregation
Here is the brief definition of these Forms of Value.
A Product is a form of tangible value. To run a product-oriented business, you must:
- Create a tangible item, whatever it is, able to attract people.
- Produce this item with as little cost as possible while maintaining an acceptable level of quality.
- Sell a maximum number of units at a high price that the market accepts.
- Have enough stock to meet orders as you go along.
A Service is to help or assist someone in exchange for compensation. If you want to create value through a Service, you must be able to bring some benefit to your customer.
A Shared Resource is a durable asset that is accessible to many users. Shared resources allow you to create an asset once and for all and to charge customers for access.
A Subscription provides a predefined benefit that is valid over time in exchange for a periodic contribution.
Resale is buying a good from a wholesaler and then selling it to a retailer at a higher price.
In the case of a Lease, a person acquires property and allows another person to use it for a certain period of time for a certain price.
Agency involves marketing and selling a good that you do not own.
Audience Aggregation is to attract the attention of a group of like-minded individuals and then sell their access to a third party.
A Loan is an agreement that allows a borrower to use a certain amount of resources during a given period.
An Option gives you the right, not the obligation, to achieve something defined in advance in a given period for the payment of an amount.
Insurance involves a transfer of risk from the buyer to the seller.
Capital is buying a stake in a company.
Think also of the easiest solution.
The private pool cleaning service takes advantage of The Hassle Premium. It pockets, for example, 1,200 euros per year, which represents for the owner 1,150 euros more than a cleaning kit – but less of a hassle.
It’s the Perceived Value that is decisive for the price your customers are willing to pay for what you offer them.
If your prospect finds that your offer has no – or not enough – value, they will not be Receptive to what you offer them.
Alongside this, there are some other essential concepts for determining how to create value.
By making your Modular offers, you can create and improve them separately. Then combine them and match them to fit the needs of your customers in order to serve them better.
By providing small Modular offers, you benefit from a strategy called Bundling. Bundling allows you to reuse already created value to create even more.
Unbundling is the opposite of Bundling: it involves taking a global offer and dividing it into multiple offers (e.g., MP3 download sales).
When creating value, go through the following steps:
Submit a Prototype, a first representation of what your offer will look like.
Evolve your Prototype through Iteration Cycles, a process you can use to enhance any offer over time.
The higher the Iteration Velocity, the better your offer.
Also ask your customers for Feedback to identify problems and ways to improve.
When developing your offer, deciding between different Alternatives is inevitable.
And, make Tradeoffs, decisions that place a higher value to one of several possibilities.
To make your offer attractive, think imperatively about the nine Economic Values that the individual considers when evaluating a potential purchase:
- Ease of use
- Social status
- Aesthetic appeal
In this evaluation, Relative Importance Testing lets you know what consumers really want. For example, by asking them a series of simple questions designed to simulate the Tradeoffs from which they can’t escape in reality.
For this, you need Critical Assumptions, facts or features that need to be verified in the real world if you want your offer and your business to work.
You can also think of doing a Shadow Testing, which consists in selling an offer before it actually exists.
However, keep in mind to get started quickly with a Minimum Viable Offer, an offer that allows and/or brings the minimum benefit necessary to close a sale.
Then, Incremental Augmentation will allow you to use the Iteration Cycle to add new benefits to an existing offering.
Indeed, only Field Testing can use and improve each product for years to enhance the customer experience.
Chapter 2. Marketing
Without Marketing, no business can survive.
Modern life is constantly asking for your Attention.
To attract Attention, Probable Purchasers must be Receptive to your message.
Having a Remarkable Character is the best way to attract Attention.
Your Probable Purchaser is the type of person that is a perfect fit for your offer.
Preoccupation is a reality that today’s marketers must face. At the beginning of the marketing process, your prospects will pay Attention to something else.
Effective marketing focuses on the desired End Result – in general, a particular experience or emotion related to a basic human need – for example feeling free.
Qualification is the process of determining if a prospect is a good customer before they buy something from you.
Some markets have clearly defined entry and exit points. For a woman, learning that she is expecting a child is an example of a Point of Market Entry.
Addressability measures the ease with which you come into contact with people who may be interested in your offer.
If your marketing activities do not create visceral Desire in your prospects, you’re wasting your time and money.
The most effective way to drive people to want something is to encourage them to Visualize what their life would be like if they accepted the offer.
Framing consists in highlighting the most important elements and in minimizing voluntarily or leaving aside the least significant.
Also, if you want to attract Attention quickly, play the Free card: give something of value for free.
Here are some other useful Marketing concepts:
Asking Permission to trade with a prospect after they have taken advantage of a free offer is more effective than commercial breaks.
A Hook is a formula or phrase that describes the main benefit of an offer.
Give your prospects a Call to Action by telling them, for example: “Take the next exit to taste the best burgers in town”.
Humans have always told Narratives. Narratives have always been used in business. A good narrative makes the best offers even better.
Controversy means taking a public position that everyone does not support or approve of.
Reputation is what individuals think globally about a particular offer or company.
Chapter 3. Sales
A Transaction is an exchange of value between two or more parties.
Without a minimum of Trust between the parties, a Transaction cannot take place.
Common Ground refers to the area where the interests of the parties coincide, even if only partially.
One of the most fascinating aspects of selling is the Pricing Uncertainty Principle. All prices are arbitrary and malleable.
There are Four Pricing Methods to help you estimate the potential value of your offer to customers.
The Replacement Cost method establishes a price by answering a question. “How much would this cost to replace?”
The Market Comparison Method establishes a price by answering a question. “How much are things like this selling for?”
The Discounted Cash Flow Method determines a price by answering a question. “How much money will it bring in over time?”
The Value Comparison Method establishes a price by answering a question. “To whom is this valuable?”
Beware of the Price Transition Shock. It can radically transform your business; therefore, don’t take it lightly. Indeed, adjusting your prices can cause a drastic change in your customer base.
There are two types of sales:
- Value-Based Selling is about understanding and reinforcing why your offer is valuable to the buyer.
- Education-Based Selling, which educates your prospects and makes them knowledgeable customers.
Your Next Best Alternative is what you will do if you cannot find common ground with your contact.
In most situations, you need to keep Exclusivity to create a unique offer or quality with which your competitors cannot compete.
In any negotiation, there are Three Universal Currencies: resources, time and flexibility. All these currencies can be traded for one another.
The Three Dimensions of Negotiation are setup, structure, and discussion.
A Buffer is a third party authorized to negotiate on your behalf.
One of the reasons customers are uncomfortable with salespeople is that they feel they are going to be subjected to a “forced sale” or be fooled, that is, involuntarily led to accept something that is not in their interest. Hence their Persuasion Resistance.
Reciprocation is a very strong desire felt by most individuals to “repay” favors, gifts, benefits or resources they have obtained.
Contrary to what we think, Damaging Admission can increase the prospect’s confidence in your ability to keep your promise.
Selling is identifying and eliminating Barriers to Purchase: the risks, unknowns and worries that prevent your prospect from buying what you offer.
Risk Reversal is a strategy that transfers all or part of the risk of a transaction from the buyer to the seller.
Reactivation is a process of convincing old customers to make a new purchase with you.
Chapter 4. Value Delivery
Value Delivery includes everything necessary to ensure customer satisfaction: order processing, inventory management, delivery, troubleshooting, after-sales service, etc.
The Value Stream is the set of steps and processes, from the creation of the initial value to the delivery of the final result to the consumer.
The Distribution Channel describes how the created value is delivered to the end user.
The way the customer perceives the quality of the product is based on two criteria: their expectations and the performance. You can put this principle in the form of an equation:
Quality = Performance – Expectations
Construction workers are considered unpredictable. They often arrive late, don’t respect deadlines, botch their work and display inappropriate behavior. This undermines them because they are not Predictable.
The secret of success is Predictability.
Throughput is the speed at which a system achieves its goal.
Duplication is the ability to reliably reproduce something of value.
Multiplication is the Duplication of an entire process or system.
Scale is the ability to Duplicate or Multiply a process reliably as volume increases.
Small ideas or small behaviors, whether beneficial or harmful, tend to Accumulate over time and produce dramatic results.
Amplification is a minor change to a Scalable System to produce a significant result.
Every improvement to your Value Stream makes it difficult for your competitors – this is called a Barrier to Competition.
Investing in Force Multipliers allows you to do more for the same amount of effort.
A System is a process that is made explicit and repeatable – a series of steps that have been more or less formalized. Systems can be represented textually or graphically.
Chapter 5. Finance
Finance is the art and science of understanding the money flowing into and out of a business, deciding how to allocate it, and whether you are getting the results you want.
To understand Finance, you need to know a few key concepts.
Profit is a very simple concept: it’s about making more money than you spend. For a business to continue to exist, the revenue it receives must exceed the expenses it accumulates in the short or medium term.
The Profit Margin (or commonly Margin) is the difference between the money you earn and the money you spend to earn. It is expressed as a percentage.
Value Capture is the process of retaining a certain percentage of the value for each transaction.
The Sufficiency Point is the moment when a company has enough Profit that the executives find it worthwhile to continue going.
Valuation is an estimate of the total value of a business.
Cash Flow is a straightforward concept: it is a question of examining the bank account of a company over a given period.
The Income Statement, sometimes referred to as the “Profit and Loss Statement” (P & L) or “Operating Statement”, shows the profit earned by the company over a period of time once revenue is matched with the corresponding expenses.
A Balance Sheet is a snapshot of what a business owns and owes at some point.
One of the most effective strategies for understanding the finances of a business is to calculate a Financial Ratio. A comparison of two important elements of your activity (e.g., profitability ratio, debt ratio, liquidity ratio, management ratio, etc.)
Cost/Benefit Analysis is the process of looking at potential changes in your business and seeing if the benefits outweigh the costs.
Believe it or not, there are only Four Methods to Increase your Revenue:
- Increase the number of customers.
- rise the average transaction size by selling more each time.
- Increase the frequency of transactions per customer.
- rise your prices.
Pricing Power is your ability to increase your prices over time.
Lifetime Value is the total value a customer represents for a business for the duration of their relationship.
The Customer Acquisition Cost is the marketing component of the Lifetime Value.
Overhead Costs are the minimum resources required to run a business.
- Fixed Costs exist, regardless of the value you create.
- Variable Costs depend directly on the value you create.
Beware of Incremental Degradation: Saving money is not a good calculation if you degrade the quality of your offer.
Breakeven is the point where the sum of your earnings to date is equal to your total expenses to date, that is, when your business starts to create wealth, instead of consuming money.
Amortization is the process of spreading the initial expense of an investment over the likely life of that investment.
Purchasing Power is all cash available to a business – cash, credits and any external financing available.
The Cash Flow Cycle describes Cash Flow circulating within a business. Imagine your bank account as a bathtub.
Opportunity Cost is the value you give up in making a decision.
Calculating the Time Value of Money is a way to make Decisions by considering opportunity costs.
Compound Interest is the Accumulation of earnings over time. Every time you can reinvest your earnings, your investment grows by itself exponentially – a positive Feedback Loop.
Leverage is the practice of borrowing money to increase one’s potential earnings.
The Hierarchy of Funding is like a ladder of possible options. Every entrepreneur starts at the bottom of the ladder and climbs as high as necessary.
Bootstrapping is the art of creating and managing a business without external financing.
The Return on Investment (often referred to as ROI) is the value created by an investment.
Sunk Costs are investments in time, energy and money that cannot be recovered subsequently.
Internal Controls are set of Standard Procedures used by the business to collect accurate information, ensure its proper functioning and identify problems as quickly as possible.
Chapter 6. The Human Mind
If you have a clearer vision of how the Human Mind works, you will have no trouble improving your way of doing things and working more effectively with others.
To be operational, the human body has Performance Requirements.
Living organisms, including human beings, are fundamentally very complex Perceptual Control systems: we act in such a way as to keep our perceptions of the world within acceptable limits.
At the heart of any Perceptual Control system is a Reference Level – a range of perceptions that indicates that the system is “under control”.
Over time, humans have learned how to avoid spending their energy needlessly – in other words, spending it only when absolutely necessary – it’s the Conversation of Energy.
The Guiding Structure means that the structure of your Environment largely determines your behavior.
Reorganization is a random action that takes place when a Reference Level is no longer kept but you don’t know what action to take to bring that perception under control.
Conflict occurs when two control systems attempt to change the same perception.
Our brain is a machine naturally designed to Recognize Patterns. It constantly tries to identify patterns, structures or trends in what it perceives, and then to associate these configurations with other configurations stored in its memory.
Mental Simulation is the ability of our brain to imagine performing a given action and then simulating the likely outcome before deciding whether to act or not.
The human brain constantly relies on earlier patterns and information to make Interpretations in the absence of information.
These quick interpretations can also be modified – a process called Reinterpretation.
Motivation is an emotional state that connects the parts of our brain that are responsible for feeling and those responsible for action.
Inhibition is the ability to temporarily overcome our natural tendencies.
Willpower can be thought of as the neutralization of our instincts, as a way of interrupting our automatic processes to do something else.
Attention, because the reserves of our Willpower are very limited and Depleted with use.
Loss Aversion reflects the idea that individuals hate losing more than they like to gain.
If your brain tells you that you can’t gain by fleeing, you will freeze up hoping that the threat will stop. Freezing up brings your brain into a mode of protection called Threat Lockdown.
Threat Lockdown is a constructive response designed to help protect yourself, but like many archaic instincts, it often malfunctions in our modern world.
The number of social contacts from which Cognitive Scope Limitation apply remains controversial (according to the average established by Bernard and Killworth, it would be 231), but there is no doubt that there are indeed limits.
The human brain stores information contextually, including clues such as the environment. And because the brain is a pattern recognition machine, it naturally establishes Mental Associations, even between things that have no logical connection.
Absence Blindness is a cognitive bias that prevents us from identifying what we cannot observe.
Contrast is often used to influence the purchase decision. In the business world, Contrast becomes a pricing camouflage.
Scarcity prompts individuals to make decisions quickly.
Novelty – the presence of new sensory data – is very important if you want to attract and maintain attention over an extended period.
Chapter 7. Working with Yourself
Akrasia is a serious problem: a feeling of duty that is omnipresent, but which never leads to action, resulting in deep frustration.
Monoidealism is a state in which the enlightened mind is perfectly focused on the task at hand. Attention and energy are focused on one, and only one, thing for a prolonged period.
Whenever you move from one topic to another, you incur the Cognitive Switching Penalty. For your brain to act, it has to “load” the context into its working memory. If you force your brain to constantly load and reload contexts, it takes a lot of time and energy.
A Most Important Task is a critical action — an action that will help you achieve the results that matter most to you.
Clear Goals help you visualize what you want and motivate you to get it. A Goal is a formula that clarifies and specifies what you want, facilitating the work of your brain that will use Mental Simulation to Visualize the desired result. If the end result you want to achieve is vague, fuzzy and confusing, automatic brain planning systems will struggle to give you the means to get what you want.
State of Being is the current state of your feelings, of your experience.
Habits are regular actions that promote our health, well-being and balance.
Priming is a method of consciously programming your brain to alert you as soon as a given piece of information is present in your environment.
A Decision is the act of committing to follow a plan of action.
The Five-Fold Why is a technique that helps you discover what you really want.
The Five-Fold How is a way to connect your core desires to physical actions. Take the following example: feeling free. How are you going to feel free?
- Paying off your debts.
- Reducing your work hours.
- Finding another position in which you’re self-employed.
- Moving to another city or to the countryside.
- Putting an end to a burdensome or frustrating personal relationship.
The Next Action is the next specific and concrete measure to be quickly implemented to move forward. You don’t need to know all the actions you have to take to move your project forward, but only the next one.
Externalization takes advantage of our perception capabilities in a very intelligent way.
Self-Elicitation is a practice of asking and answering questions as follows:
- What were you doing?
- What were you saying to yourself?
- When did it happen?
- What were your thoughts?
- What were your feelings and/or emotions?
- Whom were you with?
- What were you saying to yourself?
- How about your thoughts?
- What were your feelings and/or emotions?
- What were you doing?
- Was it pleasant or unpleasant?
- What ultimately happened?
You can consider Counterfactual Simulation as applied Imagination — you consciously ask a ” what if” question, or a “What would happen if” question to your brain, then let it do what it does best.
Parkinson’s Law is not used to set unrealistic deadlines. All projects take time and you cannot build a skyscraper in a day or a plant in a week. The more complex the project, the longer it takes.
A Doomsday Scenario is a Counterfactual Simulation where you imagine that everything that can go wrong does go wrong.
The Excessive Self-Regard Tendency is the natural tendency to overestimate your own abilities, especially if you have only limited experience in the field at hand.
Confirmation Bias is the general tendency of individuals to pay attention to information that supports their conclusions and to ignore information that may invalidate them.
Hindsight Bias is the natural tendency to blame oneself of things one should have known.
Performance Load is a concept that explains what happens when you have too much to do.
Your energy level fluctuates throughout the day. Your body is subject to natural rhythms, Energy Cycles.
Paying attention to stress and Recovery will help you avoid taking on too much work. You know when you can step on the gas and when you have to hit the brakes.
Testing is about testing something new — a way to apply the scientific method and the Iteration Cycle to your own life.
If your new car is soon to be part of the landscape, then your mind will set your sights on another desire to satisfy in a quest for endless happiness. This sensation corresponds to the Hedonic Treadmill. We seek pleasant experiences thinking that they will make us happier.
The Comparison Treadmill is to be avoided at all costs. Other people are not you, and you are not others. You have unique skills, goals and priorities.
Understanding your Locus of Control means being able to separate what you can control (or strongly influence) from what you can’t control.
The more you are attached to an idea or project, the less flexibility you have, and the more you reduce your chances of finding a better solution.
How about spending a budget of a few hundred dollars a month on Personal Research & Development? Using the techniques advocated in I Will Teach You To Be Rich! by Ramit Sethi, you will have no trouble paying a portion of your income each month into an account that will be used for your Research and Personal Development.
The fixed state of mind is an example of Limiting Belief. Namely a “truth” that you have about the world and that prevents you from achieving an important Goal for yourself.
Chapter 8. Working with Others
All human relationships are based on Power – the ability to influence the actions of others.
Comparative Advantage, a concept derived from business, has been attributed to David Ricardo and in his book, Principles of Political Economy and Taxation, from 1817. The law of comparative advantage provides an answer to a question of international politics. Is it better for a country’s economy to be self-sufficient and produce everything itself? Or, on the contrary, to specialize in the production of certain goods and to develop trade?
Communication Overhead are the amount of time you spend communicating with members of your team instead of providing productive work.
Everyone has the basic need to feel important. Customer, employees, acquaintances or friends – the more you give them Importance, the more they will appreciate the relationship they have with you.
Effective communication requires a feeling of Safety on both sides.
The Golden Trifecta is the summary of How to Win Friends and Influence People and it comes down to three words.
If you want to give others a sense of Importance and Safety, treat them with:
- Appreciation, express your gratitude to others and what they do for you, even if it’s not perfect.
- Courtesy, pure and simple politeness.
- Respect, honoring the status of the other person.
It’s better to Give a Reason Why, instead of simply and rudely saying “just because”, to get individuals to comply with your requests.
Commander’s Intent is an effective method of delegating tasks: every time you assign a task to someone, tell them why they should do it.
Bystander Apathy is an inverse relationship between the number of people who could take action and the number of people actually taking action.
The Planning Fallacy means that individuals tend to underestimate the execution time of a project. The more complex a project, the more Interdependent it is. And the more Interdependencies there are, the more chances are that at some point things will not go according to plan.
Referrals make it easier for someone to work with someone they don’t know.
Human beings naturally tend to form distinct groups, Clans.
Convergence is the tendency of members of a group to become more and more similar to each other over time.
Divergence is a tendency for groups to look less and less like other groups over time.
A Rolex doesn’t keep the time better than a Swatch. That’s not the point. However…people are willing to spend a lot of money and energy to send Social Signals.
Social Proof can create its own dynamic. Fads are often born when a person does something, others see it as a Social Signal, and then act identically to create a Social Feedback Loop.
Individuals naturally tend to obey Authority figures. When an Authority figure asks us to do something, we are likely to obey them.
Commitments have always been used throughout history as a way to bind people together. Failure to keep a promise or breaking a Commitment may taint our Social Status and our Reputation.
If you succeed in getting small commitments from some people, they will very likely want to keep them as to act in a Consistent manner.
The Incentive-Caused Bias explains why people having an interest in something will tend to try to make you agree with them.
The Model Bias is the automatic assumption that our approach is the best.
The Pygmalion Effect owes its name to a figure of Greek mythology of the same name. It explains why all our relationships are self-fulfilling prophecies.
The Attribution Error means that when others fail, we attribute it to the person, and when we fail, we attribute it to external factors, that is, to unfavorable circumstances.
Management is simple, but not simplistic. Fundamentally, it involves coordinating the actions of individuals within a group to achieve a Goal while taking into account Change and Uncertainty, two factors that cannot be avoided.
Chapter 9. Understanding Systems
Gall’s Law: all the complex systems that work come from simpler systems that worked. Complex Systems are full of variables and Interdependencies that need to be organized properly in order to function.
Whatever the System does, it is subject to Flows, that is to say, movements of resources that come in and out.
A Stock is a resource tank.
Slack is the amount of resources in a Stock. The more resources you have, the more Slack you have.
The performance of a System is always limited by the availability of an essential resource. Lighten the Constraint and the system’s performance will improve.
Feedback Loops happen whenever the output of a System becomes one of the inputs to the next cycle. Feedback is the Systems learning mode – if the System is able to understand its Environment, this feedback helps it to determine if it is under control and satisfies the Selection Tests.
Balancing Loops mitigate the outputs of each cycle, allowing the system to be balanced and resist change.
Reinforcing Loops Amplify the system outputs at each cycle. They tend to lead to uncontrollable growth or decline over time.
Autocatalysis is a positive feedback loop that is self-sustaining and empowered by its own dynamics – the system continues to grow until it changes and starts producing less.
The Environment is the structure within which a System operates.
A Selection Test is an environmental constraint that determines the survival of some systems and the “death” of others.
There is a huge difference between Risk and Uncertainty. A risk is something that we know we don’t know. Uncertainty is something that we don’t know we don’t know.
All Systems Change. An immutable System does not exist.
Projects that don’t take into account Change are of limited use.
In the world, nothing exists in isolation. This is the principle of Interdependence.
The Counterparty Risk is the possibility that other people will not keep their promises.
All actions have consequences, and these consequences themselves have consequences called Second-Order Effects.
The theory of Normal Accidents is a formal way of expressing a universal proverb: “Things happen”. In a tightly integrated system, minimal risks accumulate to the point of causing inevitable errors and accidents.
Chapter 10. Analyzing Systems
Deconstruction is a process of breaking down complex systems into subsystems of the smallest possible size in order to understand how things work. Instead of trying to understand the system as a whole, you divide it into small parts and then try to understand the different subsystems and their mutual interactions.
Measurement is collecting data while the system is operating. Collecting information related to its key functions helps to better evaluate how it’s operating.
Some Measurements are more important than others. Key Performance Indicators (KPIs) are measurements of the essential elements of a system.
Garbage In, Garbage Out is a simple principle. Use unnecessary system data input and you will get useless results.
Tolerance is an acceptable level of “normal” error in a system.
Analytical Honesty means measuring and analyzing the data you have objectively. We are social creatures and, therefore, attach great importance to the perception of others, which makes us naturally inclined to embellish reality.
The Context is the use of relevant measurements to gather additional information about the data you are studying.
Sampling involves taking a fraction of the total output at random and then using it as a representative example of the entire system.
Margin of Error is an estimate of the degree of confidence you can have in the conclusions you find from a set of observed samples.
A Ratio is a method of comparing two measurements. By dividing your results by your input data, you can measure all kinds of useful relationships between different parts of your System.
Many forms of analysis are based on Typicality, which consists of identifying a normal or typical value by a Measurement considered important.
It’s Causation, that is to say, cause and effect.
Correlation and Causation are two different things. Even if you observe that one measurement is closely related to another, it is not proof that one is the cause of the other.
Norms use the historical data to provide a Context for the current Measurements.
A Proxy allows to have a significant value by measuring something else. It can be said that it’s an indirect evaluation.
Segmentation is a technique of breaking down a series of data into well-defined subgroups to gain the benefit of Context. Splitting up a set of data into several predefined groups can reveal previously unknown relationships.
Humanization is the process of using data to tell a story about the experience or behavior of a real person.
Chapter 11. Improving Systems
Intervention Bias, also called action preference, leads us to introduce unnecessary changes that give us the impression that we are controlling the situation.
Optimization is the process of maximizing the output of a System or minimizing an input that the system needs to function.
Refactoring is the process of changing a System to improve its efficiency without changing the result it produces.
In any complex System, a minority of the input produces the majority of the output. This pattern of persistent non-linearity is today called the Pareto’s Law, or the 80/20 Rule, or The Critical Few.
All good things are subject to the Law of Diminishing Returns – past a certain threshold, having more than one thing can even become detrimental.
Friction is a force or process that draws energy from a System over time. Regularly eliminating Friction zones over time, even in small doses, ends up producing great improvements in both quality and efficiency.
Automation refers to a system or process that can function without human intervention.
However, beware of The Paradox of Automation: the more efficient the Automated System, the greater the contribution of human operators.
And, The Irony of Automation: the more reliable the system, the less human operators have work to do and therefore the less they pay attention to the system in operation.
A Standard Operating Procedure is a predefined process used to perform a repetitive task and solve a common problem.
A Checklist is a standard, predefined procedure that applies to performing a specific action.
Sometimes the best way to improve a System is to stop it.
Cessation is an intentional choice to interrupt, stop doing something counterproductive.
Resilience is a massively underrated quality in the corporate world. Possessing the strength and flexibility to deal with the vicissitudes of life is a major asset that can save your skin, both literally and figuratively. Your ability to adapt your strategy and tactics to evolving circumstances and Changes may allow you to survive instead of disappearing.
A Fail-Safe is a back-up system designed to prevent or repair a breakdown.
Stress Testing consists of identifying the limits of a system by simulating specific environmental conditions.
Scenario Planning is a process of systematically developing a series of hypothetical situations. Then mentally Simulating what you would do if these situations really happened.
The Sustainable Growth Cycle is a pattern observed in businesses that can develop from year to year without major difficulties.
Running a business is never easy, and it’s as much an art as a science.
The Middle Path is the balance between too much and too little – just enough. No one can tell you what the Middle Path is. You must follow it to know what it is, and it changes constantly.
When you want to improve yourself or improve your business, you don’t really know what approach to take to get the desired result. This is where the Experimental Mindset plays a role.
And finally, an essential concept
Training oneself in any field is an endless process. Each new concept you come across opens the door to thousands of other concepts to explore.
Conclusions about the book “The Personal MBA” by Josh Kaufman:
Starting a business is scary.
Maybe you think it’s for people who have an MBA and have a business school background.
I discovered Josh Kaufman’s “The Personal MBA” through Olivier Roland’s “Life-changing books” blog.
Although I did not have the chance to take an MBA, Josh Kaufman’s concept, “The Personal MBA,” revolutionized my view on entrepreneurship.
What if there were only a few simple concepts to integrate?
And what if, in fact, the 99 business books that Josh Kaufman has put together contained what you need to know in order to create and succeed in entrepreneurship?
Thanks to “The Personal MBA”, Josh Kaufman has inspired me, and I feel like this possible pathway is definitely feasible.
As a matter of fact, Olivier Roland did it.
So why not you or me?
Come on, are you with me, let’s take this advice and start our inexpensive MBA training?
In any case, I, for one, am taking the leap.
- 254 essential concepts to undertake.
- A different take on the MBA.
- A book that allows you to acquire key concepts and a self-taught approach to MBA training.
- A rather thick book in the form of an alphabet primer. This isn’t the novel that can be read during downtime. Nonetheless, a must if you want to get started off on the right foot.
A short practical guide to the book The Personal MBA by Josh Kaufman
The 5 vectors of a successful business disclosed in The Personal MBA
- Create value: Find out what people need or want, then create it.
- Marketing: Getting attention and creating a demand for what you have created.
- Sales: Turn potential customers into paying customers.
- Delivering Value: Give your customers what you promised and make sure they are happy with their purchase.
- Finances: Make sure there is enough revenue to continue and make your efforts worthwhile.
Josh Kaufman’s 10 criteria for evaluating a market
- Urgency: How badly do people want or need this product or service right now?
- Market size: How many people buy this kind of service or product?
- Price Potential: What is the highest price a buyer will spend on a solution?
- Customer acquisition cost: How easy is it to acquire new customers? How much will it cost?
- Cost to deliver value: How much would it cost to create and deliver the value offered?
- Uniqueness of the offering: How unique is your product or service compared to the competition?
- Speed to market: How quickly can you create the product or service and make it available to customers?
- Initial investment: How much money will it take before you are ready to sell?
- Upselling potential: Are there secondary products or services you can offer to customers?
- Longevity potential: Will there be a lot of extra work after the first version is created?
FAQ About The Personal MBA
What is an MBA?
The acronym MBA stands for Master of Business Administration. The MBA is a graduate degree that focuses on business administration and investment management. This means that students enrolled in this program will develop a holistic view of business in disciplines such as marketing, finance and accounting, while developing essential soft skills and leadership skills. In France, HEC Paris, INSEAD, ESSEC Business School, EDHEC and ESCP Business School offer the MBA, while in Canada, HEC and McGill University, both located in Montreal, are highly rated schools for their Master of Business Administration programs.
Why was The Personal MBA book so successful when it was launched?
Because this book saves time and money. An MBA can be very expensive, and the two years of study that schools require to complete the program are not always worth it, according to many, who argue that it is better to develop one’s skills while working. Josh Kaufman published The Personal MBA so that people interested in business and finance can gain the knowledge of an MBA without spending time and money needed to get into business school.
What are the five elements of any well-run business according to Josh Kaufman?
The five basic elements of any business named by Josh Kaufman in his book are:
- Value creation
- Delivering value
Who is the book The Personal MBA: Master the Art of Business for?
This book is aimed at virtually all entrepreneurs and those interested in entrepreneurship or to hold a position in senior corporate management and finance.
What is the iron law of a market?
A company needs a sufficiently large market for its business model to work successfully.
The principles of business success versus the principles of business failure according to Jeff Kaufman
|PRINCIPLES OF BUSINESS SUCCESS
|PRINCIPLES OF BUSINESS FAILURE
|Creating and delivering value
|Market too small for the business model or product
|Listening to consumer demands
|Not taking care of customers and their feedback
|Fixing the right price for the product/market
|Price not adapted to the market
|Services and distribution
|Poor organization and distribution of tasks
Who is Josh Kaufman?
Josh Kaufman was born in 1976 in Sarasota, USA. He is a consultant and author of books on personal development. He also developed the digital marketing strategy of the Procter & Gamble group.
In addition to The Personal MBA, Josh Kaufman is the author of several other books:
- The First 20 Hours
- How to Fight a Hydra
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