The Personal MBA by Josh Kaufman

Rating:

/10

Big Ideas

An encyclopedic overview of the major business concepts, mental models and terms which any serious business person should be aware of. Because of the book's breadth of scope Kaufman can't go too deep on any one topic but it's a valuable reference and starting point for further research. I found it mostly useful for identifying business concepts which I didn't know existed. For that reason it's the perfect starting point for anyone serious about educating themselves on business. Start here, and then dive deep with other material.

The other big idea which should be mentioned is this question of whether or not someone should pursue a traditional MBA. Kaufman makes the case that for most people and most MBA programs, the investment does not yield a net positive return. This is not to say that no MBA program is worth it, however if you are seriously considering buying an MBA (and I use that word very deliberately) then you should read this book first and then make a decision.

Notes

This book is very large and best used as a reference. In many ways it's a glossary of business concepts, mental models and terms which are relevant to the different elements of business. Because of this I've found that it tends not to go too deep into any one particular discipline but instead offers a general overview of all of them. This was really useful for me if only to high light the things I didn't know I didn't know so that I could dig deeper.

Therefore I've provided the full outline but only notes for those sections which I found particularly interesting or which sparked my curiosity.

Value Creation

The Five Parts of Every Business
Economically Valuable Skills
The Iron Law of the Market
~"Every business is fundamentally limited by the size and quality of the market it attempts to serve. The Iron Law of the Market is cold, hard and unforgiving: if you don't have a large group of people who want what you have to offer, your chances of building a viable business are very slim."
Core Human Drives
~"All successful business sell the promise of some combination of money, status, power, love, knowledge, protection, pleasure, and excitement. The better you articulate how your offer satisfies one or more of these drives, the more attractive your offer will become."
Social Status
Ten Ways to Evaluate a Market
~Urgency
~Market Size
~Pricing Potential
~Cost of Customer Acquisition
~Cost of Value Delivery
~Uniqueness of Offer
~Speed to Market
~Up-front Investment
~Upsell Potential
~Evergreen Potential
The Hidden Benefits of Competition
The Mercenary Rule
The Crusader Rule
Twelve Standard Forms of Value
Form of Value #1: Product
Form of Value #2: Service
Form of Value #3: Shared Resource
Form of Value #4: Subscription
Form of Value #5: Resale
Form of Value #6: Lease
Form of Value #7: Agency
Form of Value #8: Audience Aggregation
Form of Value #9: Loan
Form of Value #10: Option
Form of Value #11: Insurance
Form of Value #12: Capital
Hassle Premium
Perceived Value
Modularity
Bundling and Unbundling
Intermediation and Disintermediation
Prototype
The Iteration Cycle
Iteration Velocity
Feedback
Alternatives
Trade-offs
Economic Values
Relative Importance Testing
Critical Assumptions
Shadow Testing
Minimum Viable Offer
Incremental Augmentation
Field Testing

Marketing

Attention
Receptivity
Remarkability
Probable Purchaser
Preoccupation
Levels of Awareness
~Unaware - the prospect is not aware of any need or desire for what you have to offer
~Problem Awareness - the prospect knows they have a need or desire, but they aren't aware of any suitable solutions
~Solution Awareness - the prospect knows that potential solutions exist, but they aren't aware of your specific offer
~Offer Awareness - the prospect is aware of your offer, but they're not sure it's right for them.
~Full Awareness - the prospect is convinced your offer is a good solution to their need or desire, they just need to know the price and terms so they can decide whether or not to purchase
End Result
Demonstration
Qualification
Point of Market Entry
Addressability
~"Addressability is a measure of how easy it is to get in touch with people who might want what you're offering."
Desire
Visualization
Framing
Free
Permission
Hook
Call to Action
Narrative
Controversy
Reputation

Sales

Transaction
Trust
Common Ground
The Pricing Uncertainty Principle
~"all prices are arbitrary and malleable"
Four Pricing Methods
Price Transition Shock
~"The trouble with the traditional pricing curve is that it can misleading when the offer isn't a commodity. In practice, raising your prices can increase demand by appealing to a more attractive type of customer."
Value-Based Selling
Education-Based Selling
Next Best Alternative
Exclusivity
Three Universal Currencies
Three Dimensions of Negotiation
Buffer
Persuasion Resistance
Reciprocation
Damaging Admission
Option Fatigue
Barriers to Purchase
~Commons objections
~~It costs too much
~~It won't work
~~It won't work for me
~~I can wait
~~It's too difficult
~"To overcome these objections, it makes sense to build them into the structure of your initial offer."
Risk Reversal
Reactivation

Value Delivery

Value Stream
Distribution Channel
The Expectation Effect
Predictability
Quality
Quality Signals
Throughput
Duplication
Multiplication
Scale
Accumulation
Amplification
Barrier to Competition
Force Multiplier
Systemization
Triage

Finance

Profit
Profit Margin
Value Capture
Sufficiency
Valuation
Cash Flow Statement
~"it's an examination of a company's bank account over a certain period of time."
Income Statement
~"Revenue - Cost of Goods Sold - Expenses - Taxes = Net Profit"
Balance Sheet
~"Assets - Liabilities = Owner's Equity"
Financial Ratios
Cost-Benefit Analysis
Four Methods to Increase Revenue
Pricing Power
Lifetime Value
Allowable Acquisition Cost
Overhead
Costs: Fixed and Variable
Incremental Degradation
Breakeven
Amortization
~"is the process of spreading the cost of a resource investment over the estimated useful life of that investment."
Purchasing Power
Cash Flow Cycle
Segregation of Duties
Limited Authorization
Opportunity Cost
Time Value of Money
Compounding
Leverage
~"is the practice of using borrowed money to magnify potential gains"
Hierarchy of Funding
Bootstrapping
Return on Investment
Sunk Cost
Internal Controls

The Human Mind

Caveman Syndrome
Performance Requirements
The Onion Brain
Perceptual Control
Reference Level
Conservation of Energy
Guiding Structure
Reorganization
Conflict
Pattern Matching
Mental Simulation
Interpretation and Reinterpretation
Motivation
Inhibition
Status Signals
Status Malfunction
Loss Aversion
Threat Lockdown
Cognitive Scope Limitation
Association
Absence Blindness
~"is a cognitive bias that prevents us from identifying what we can't observe."
~e.g. "no one sees all of the bad things that the great manager prevents."
Contrast
Scarcity
Novelty

Working with Yourself

Akrasia
~"All of us have had the experience of knowing or feeling that we should do something or that an action would be in our best interest .. but we don't do it. The term for that experience is Akrasia"
Monoidealism
~"is the state of focusing your energy and attention on a single subject at a time."
Cognitive Switching Penalty
Four Methods of Completion
Most Important Tasks
Goals
States of Being
Habits
Priming
Decision
Five-Fold Why
~"is a technique to help you discover what you actually want. Instead of taking your desires at face value, examining the root cause of what you want can help you define your core desires."
Five-Fold How
Next Action
~"The Next Action is the next specific, concrete thing you can do right away to move a project forward. You don't have to know everything that must be done to make progress on a project - all you need to know is the very next thing you can do."
Externalization
Self-Elicitation
Thought Experiment
Parkinson's Law
~"Work expands so as to fill the time available for its completion."
Doomsday Scenario
Excessive Self-Regard Tendency
Confirmation Bias
Hindsight Bias
Performance Load
Energy Cycles
Stress and Recovery
Testing
Mystique
Hedonic Treadmill
Comparison Fallacy
Locus of Control
Attachment
Personal Research and Development
Limiting Belief
Malinvestment
The Necessity of Choice
The Arrival Fallacy

Working with Others

Power
Comparative Advantage
Communication Overhead
Importance
Saftey
The Golden Trifecta
~Appreciation
~Courtesy
~Respect
Reason Why
Commander's Intent
~"Whenever you assign a task to someone, tell them why it must be done. The more your agent understand the purpose behind your actions, the better they'll be able to respond appropriately when the situation changes."
Earned Regard
Bystander Sympathy
Planning Fallacy
Forcing Function
Referrals
Clanning
Convergence and Divergence
Social Proof
Authority
Commitment and Consistency
Incentive-Caused Bias
Modal Bias
~"is the automatic assumption that our idea or approach is best."
Attribution Error
The Mind-Reading Fallacy
Boundary Setting
The Principle of Charity
Option Orientation
~"Instead of dwelling on the problem, cultivate an Option Orientation. Ruminating on the issue doesn't solve anything; what are you going to do about it? By focusing your energy on evaluating potential responses, you're far more likely to find a way to make things better."
Managament
Performance-Based Hiring

Understanding Systems

Gall's Law
~"all complex systems that work evolved from simpler systems that worked."
Flow
Stock
Slack
Constraint
Feedback Loop
Autocatalysis
Environment
Selection Test
Entropy
Uncertainty
Change
Interdependence
Counterparty Risk
Second-Order Effects
Externality
Normal Accidents
~"The theory of Normal Accidents is a more formal way of expressing a universal proverb: shit happens. In a tightly coupled system, small risks accumulate to the point where errors and accidents are inevitable."
~"Overreacting to Normal Accidents is counter productive. When something goes wrong, our instinctive response is to become hypersensitive, locking things down and adding more controls to prevent the unfortunate event from happening again. This response makes things worse: locking things down and adding more system sonly makes the system more tightly coupled, increasing the risk of future accidents."
~"Normal accidents are compelling reason to keep the systems you rely on as loosely coupled as you can. Loosely coupled systems may not be as efficient, but they last longer and fail less catastrophically."

Analyzing Systems

Deconstruction
Measurement
Key Performance Indicators
Garbage In, Garbage Out
Tolerance
Variance
Analytical Honesty
Context
Sampling
Margin of Error
Ratio
Typicality
Correlation and Causation
Norms
Proxy
Segmentation
Humanization

Improving Systems

Intervention Bias
Optimization
Refactoring
The Critical Few
~80-20 principle
Diminishing Returns
Progressive Load
Friction
Automation
The Paradox of Automation
~"The more efficient the Automated system, the more crucial the contribution of the human operators of that system. When an error happens, the operators need to identify and fix the situation or shut the system down - otherwise, the Automated System will continue to multiply the error."
The Irony of Automation
~"The best approach to avoid major Automation errors is rigorous, ongoing Sampling and Testing."
Standard Operating Procedure
Checklist
Process Overhead
~"Processes aren't free: every procedure, or Checklist in a system has a cost that is paid in time, energy and Attention."
Cessation
Resilience
Fail-safes
Stress Testing
Scenario Planning
Exploration / Exploitation
Sustainable Growth Cycle
The Middle Path
The Experimental Mind-set