The Personal MBA
Josh Kaufman
Description
Master the fundamentals, hone your business instincts, and save a fortune in tuition. The consensus is clear: MBA (Master of Business Administration) programmes are a waste of time and money. Even the elite schools offer outdated assembly-line educations about profit-and-loss statements and PowerPoint presentations. After two years poring over sanitised case studies, students are shuffled off into middle management to find out how business really works.
Josh Kaufman has made a business out of distilling the core principles of business and delivering them quickly and concisely to people at all stages of their careers. His blog has introduced hundreds of thousands of readers to the best business books and most powerful business concepts of all time. In The Personal MBA, he shares the essentials of sales, marketing, negotiation, strategy, and much more.
True leaders aren't made by business schools - they make themselves, seeking out the knowledge, skills, and experiences they need to succeed. Read this book and in one week you will learn the principles it takes most people a lifetime to master.
Key words: Business
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My Notes
Introduction
Whoever best describes the problem is the most likely to solve it.
Filter all information through a latticework of ‘mental models’ (Charlie Munger)
Business schools don’t create successful people. They simply accept them, then take the credit for their success.
Beware of geeks bearing formulas.
Here is how I describe a business – every successful business:
Creates or provides something of value, that
Other people want or need
At a price they’re willing to pay in a way that
Satisfies the purchaser’s need and expectations and
Provides the business sufficient revenue to make it worthwhile for the owners to continue operation
Every business is created by people and survives by benefiting other people. At the core of every business is a collection of systems and processes that can be ‘readily’ repeated to produce a particular result. Every business fundamentally relies on people and systems.
Business is about the profitable creation and delivery of valuable offers to paying customers.
Value Creation
Make something people want. Every successful business creates something of value – to make someone else’s life a little better. You can’t transact with others unless you have something valuable to trade.
The Five Parts of Every Business:
Value Creation – Discovering what people need or want and then creating it
Marketing – ‘Attracting attention’ and building demand for what you created (getting noticed)
Sales – Turning ‘prospects’ into paying customers (doing the deal)
Value Delivery – Giving your customers what you’ve promised and ensuring that they’re satisfied
Finance – Bringing in enough money to keep going and make your effort worthwhile
If these things sound simple, it’s because they are. Business is not (and has never been) rocket science – it’s simply a process of identifying a problem and finding a way to solve it that benefits both parties.
If you can’t describe your business in terms of these core processes, you don’t understand it well enough to make it work.
Markets matter most; neither a stellar team nor fantastic product will redeem a bad market. Markets that don’t exist don’t care how smart you are.
Your revenue is completely dependent on people actually wanting what you have to offer.
In practice, I prefer Clayton Alderfer’s version of Maslow’s hierarchy, which he called ‘ERG Theory’: people seek Existence, Relatedness, and Growth, in that order.
When people have what they need to survive, they move on to making friends and finding mates. When they’re satisfied with their relationships, they focus on doing things they enjoy and improving their skills in things that interest them. First Existence, then Relatedness, then Growth.
There are five Core Human Drives that influence human behaviour:
Drive to Acquire: the desire to collect material and immaterial things, like a car, or influence
Drive to Bond: the desire to be loved and feel valued in our relationships with others
Drive to Learn: the desire to satisfy our curiosity
Drive to Defend: the desire to protect ourselves, our loved ones and our property
Drive to Feel: the desire for emotional experiences like pleasure or excitement
In general, we like to be associated with people and organisations that we think are powerful, important, exclusive, or exhibit other high-status qualities or behaviours. We also like to ensure other people are aware of our status: for proof, examine what people post on their Facebook profiles.
Status Seeking is a fact of human life: it’s not necessarily bad or something to be avoided. On the contrary: Status Seeking can motivate people to accomplish amazing things.
In the words of Alain de Botton, a philosopher and social critic: “If one felt successful, there’d be so little incentive to be successful.”
So often people are working so hard, at the wrong thing. Working on the right thing is probable more important than working hard.
The competitor to be feared is the one who never bothers about you at all but goes on making his own business better all the time.
The trick is to find an attractive market that interests you enough to keep you improving your offering every single day.
‘Dirty’ businesses like plumbing and garbage collection certainly aren’t sexy, but they can be quite lucrative because there’s a significant ongoing need combined with relatively few people willing to step up and meet the demand.
Business is not financial science…it’s about creating a product or service so good that people will pay for it.
A Service involves helping or assisting someone, in exchange for a fee. To create value via services, you must be able to provide some type of benefit to the user. In order to create a successful service, your business must:
Have employees capable of a skill or ability other people require but can’t, won’t, or don’t want to do themselves.
Ensure that the service is provided with consistently high quality.
Attract and retain paying customers.
A good example of a service business is a barbershop. A haircut is not a product: you can’t purchase one from a shelf. The service is the series of actions the stylist uses to transform your current hairstyle into the one you want.
In this sense, doctors, freelance designers, massage therapists, lawn care providers, and consultants are all service providers.
Find a way to give people more flexibility, and you may discover a viable business model.
People are always willing to pay for things that they believe are too much of a pain to take care of themselves.
The more hassle a project or task involves, the more people are generally willing to pay for an easy solution or pay someone to complete the job on their behalf.
Ideas are cheap, what counts is the ability to translate an idea into reality, which is much more difficult than recognising a good idea.
How to improve a product or service in 6 steps:
Watch - what’s happening? What’s working, and what’s not?
Ideate - what could you improve? What are your options?
Guess - which of your ideas do you think will make the biggest impact?
Which? - decide which change to make.
Act - make the change.
Measure - what actually happened? Was the change positive or negative? Should you keep the change, or go back to how things were before this iteration?
Once you measure the results of the change and decide whether or not to keep it, you go back to beginning to observe what’s happening and the cycle repeats.
Real paying customers are always different than hypothetical customers. Shadow Testing allows you to get a critical piece of customer feedback you can’t get in any other way: whether or not people will actually pay for what you’re developing. In order to minimise the risk you’re taking on in committing to the project, your objective should be to start gathering data from real paying customers as soon as possible.
Marketing
Without Marketing, no business can survive – people who don’t know you exist can’t purchase what you have to offer, and people who aren’t interested in what you have to offer won’t become paying customers.
Marketing is the art and science of finding prospects – people who are actively interested in what you have to offer.
Marketing is about getting noticed; Sales is about closing the deal.
Attention - To get someone’s attention, you have to find a way around their filters. In order to be noticed, you need to find a way to earn that attention by being more interesting or useful than the competing alternatives. Earn the attention of the people who are likely to buy from you, and you’ll inevitably build your business. The mental models in this chapter will show you how.
Receptivity - Make your messages in a form that suggests it was created just for them.
Remarkability - If no one knows you exist, no one will buy what you have to sell. The idea is to get the attention of the people who actually care about what you’re doing.
Preoccupation - Provoke a feeling of curiosity, surprise or concern. Our ancient brains pay close attention to opportunities and threats, scanning the environment for new stimuli that could help or harm us
End Result - Marketing is most effective when it focuses on the desired End Result, which is usually a distinctive experience or emotion related to a Core Human Drive. The actual function of the purchase is important, but the end result is what the prospect is most interested in hearing about. It’s often far more comfortable to focus on the features: you know what your offer actually does. Even so, it’s far more effective to focus on the benefits: what your offer will provide to customers.
Desire - The human mind simply doesn’t work that way - we only purchase what we already desire on some level. The essence of effective marketing is discovering what people already want, then presenting your offer in a way that intersects with that pre-existing desire. The best marketing is similar to Education-Based Selling: it shows the prospect how the offer will help them achieve what they desire most. Your job as a marketer isn’t to convince people to want what you’re offering: it’s to help your prospects convince themselves that what you’re offering will help them get what they really want.
Visualisation - The most effective way to get people to want something is to encourage them to Visualise what their life would be like once they’ve accepted your offer. Our minds are designed to automatically imagine the consequences of our actions, via Mental Simulation.
Free - If you want to attract attention quickly, give something valuable away for Free. For best results, focus on giving away real free value that is likely to attract real, paying customers.
Call-To-Action - Your prospects can’t read your mind. If you want your prospects to take the next step you’re encouraging, you need to tell them exactly what to do. The most effective marketing messages give the recipient or prospect a single, very clear, very short action to take next.
Narrative - Your customers want to be Heroes. They want to be respected and admired by all, to be powerful, successful, and determined in the face of adversity. They want to be inspired by the trials and tribulations of other people who have come before and vanquished the foe. Telling a story about people who have already walked the path your prospects are considering is a powerful way to make them interested in proceeding.
Testimonials, case studies, and other stories are extremely effective in encouraging your prospects to accept your ‘call to adventure’. By telling stories about the customers that have come before, you grab your prospect’s attention and show them a path to achieve what they want. The more vivid, clear, and emotionally compelling the story, the more prospects you’ll attract. Tell your prospective customers the stories they’re interested in hearing, and you’ll inevitably grab their attention.
Controversy - Controversy won’t help you if you lose sight of the purpose behind your actions. As long as you’re able to maintain a sense of the bigger picture of how you’re trying to help, creating a bit of controversy can be a very effective tool in encouraging people to seek out more information about what you’re doing.
Reputation - Building a strong reputation is hugely valuable: people are often willing to pay a premium for a good reputation. It’s important to note that your reputation is not directly under your control - it’s the sum total of what others think about everything you do: the products you release, the advertising you promote, the customer service you provide. Building your reputation takes time and effort, but it’s the most effective kind of marketing there is.
Sales
The best businesses in the world earn the trust of their prospects and help them understand why the offer is worth paying for. No one wants to make a bad decision or be taken advantage of, so Sales mostly consists of helping the prospect understand what’s important and convincing them you’re capable of actually delivering on what you promise.
Building a trustworthy Reputation over time by dealing fairly and honestly is the best way to build Trust.
The more your interests are aligned with your prospect’s, the more they’ll trust your ability to give them what they want.
There are always many paths to a successful transaction, which is the essence of negotiation. Negotiation is the process of exploring different options to find common ground.
Most people who are new to business assume that the best way to increase sales is to reduce prices. That’s not necessarily true. Often, raising your prices is an effective way to attract more customers. There are two major considerations when setting your prices with Price Transition Shock in mind: (1) potential profitability, and (2) ideal customer characteristics.
Price is what you pay. Value is what you get.
Value-based selling
Imagine that you provide an ongoing service to a Fortune 500 corporation that increases their annual revenues by $100 million. Is your service worth $10 million a year? Sure - after all, what company would give up $90 million in ongoing revenue?
Does it matter if providing this valuable service doesn’t cost you much money? Absolutely not -even if it only costs you a hundred dollars a year to provide the service, you’re providing a huge amount of value, which supports the comparatively high price.
Does it matter if most business-to-business services cost $10,000 or less? Absolutely not - you’re providing much more value than other services in the market, which completely justifies a higher price.
Value-Based Selling is the process of understanding and reinforcing the reasons why your offer is valuable to the purchaser. Value-Based Selling is not about talking - it’s about listening. In reality, the best salespeople are the ones who can listen intently for the things the customer really wants.
Instead of barging in with a premature, boilerplate hard-sell, successful salespeople focus on asking specific questions to get to the root of what the prospect actually wants.
By encouraging your prospects to tell you more about what they need, you reap two major benefits.
First, it increases the prospect’s confidence in your understanding of the situation, increasing their trust in your ability to deliver a solution.
Second, you’ll discover information that will help you emphasise just how valuable your offer is in relation to what they’re doing, which helps in framing the price of your offer versus the value it will provide.
If you discover why, how, and how much your offer will benefit the customer, you’ll be able to explain that value in terms they’ll understand and appreciate. Understanding the value you can provide your customers is the golden path to a profitable sale.
Education-Based Selling - Is the process of making your prospects better, more informed customers. As a sales consultant, Kelsey worked to do two things: (1) make the bride feel comfortable and relaxed, then (2) help the bride become more knowledgeable about gowns in terms of how they are made, and what to look for when buying one.
Next Best Alternative - Understanding the other party’s next best alternative gives you a major sales advantage.
Exclusivity - If you’re the only person or company that offers what your prospect wants, you’re in a very strong position to negotiate on favourable terms.
Negotiation - In every negotiation, there are three Universal Currencies on the table:
Resources. Tangible items like money, oil, etc.
Time. The universal limit of capacity.
Flexibility. The cost of not doing something else, which is a very real Opportunity Cost
Focus on the appropriate trade-offs between the parties to find Common Ground in these Currencies. The first thing to decide before you walk into a negotiation is what to do if the other fellow says no. Three dimensions of negotiation – set-up, structure and discussion. Make sure your negotiation is with who has the power – the shot caller. The decision-maker.
The more effective strategy, in the words of the renowned sales expert Zig Ziglar, is to present yourself to the prospect as an ‘assistant buyer’. Your job is not to sell the prospect a bill of goods: it’s to help them make an informed decision about what’s best for them. You’re not pressuring them to give you their money: you’re helping to ensure they invest their resources wisely.
It’s much better to present yourself with confidence, in a way that signals your offer is valuable, is a good fit for the prospect, and will be a wise investment of the prospect’s money. If you don’t genuinely believe that, you need to find something else to sell.
Providing free value builds your social capital, making it more likely the people you benefit will reciprocate when you make an offer down the road.
Being generous is one of the best things you can do to improve your results as a salesperson. By giving away value and helping others as much as you can, they’ll respect you, it will build your reputation, but it will also increase the probability that they will be interested enough when you DO present your Call-To-Action.
Standard Objections to Sales
There are five standard objections that appear in sales of all kinds:
It costs too much. Loss Aversion makes spending money feel like a loss - by purchasing, the prospect is giving something up, and that naturally makes people hesitate. (Some people even experience this sense of loss after they make a purchase decision, a condition called ‘buyer’s remorse’).
It won’t work. If the prospect thinks that there’s a chance the offer won’t (or can’t) provide the promised benefits, they won’t purchase.
It won’t work for ME. The prospect may believe that the offer is capable of providing benefits to other people, but they’re different - a special case.
I can wait. The prospect may believe they don’t have a problem worth addressing right now, even if it’s very clear to you that they do.
It’s too difficult. If the offer takes any effort whatsoever on their part, the prospect may believe that their contribution will be too hard to manage.
To overcome these objections as quickly as possible, it makes sense to build them into the structure of your initial offer. Since these objections are very common, anything that you can do to alleviate them before the prospect considers the offer will be make the sales process much easier.
Objection #1 (‘it costs too much’) is best addressed via Framing and Value-Based Selling. If you’re selling a piece of software to a business that can save them $10 million a year, and you’re asking $1 million a year for a licence, your software isn’t expensive - it’s effectively Free. If it’s clear that the value of your offer far exceeds the asking price, this objection is moot.
Objections #2 and #3 (‘it won’t work’ / ‘won’t work for me’) are best addressed via Social Proof - showing the prospect how customers just like them are already benefitting from your offer. The more like your prospect your stories and testimonials are, the better. That’s why Referrals are such a powerful sales tool - customers tend to refer people who have similar situations and needs, and the Referral itself helps break down these objections.
Objections #4 and #5 (‘I can wait’ / ‘it’s too difficult’) are best addressed via Education-Based Selling. It’s not uncommon for prospects not to realise they have a problem, particularly in the case of Absence Blindness. If the business doesn’t realise it’s losing $10 million in the first place, it’s difficult to convince them that you can help. The best way to get around this is to focus your early sales efforts on making your customers smarter by teaching them what you know about their business, then helping them Visualise what their involvement would look like if they decide to proceed.
Once you have the prospect’s Attention and Permission, there are two possible tactics if they still have these objections: (1) convince the prospect that the objection isn’t true, or (2) convince the prospect that the objection is irrelevant.
The approach you’ll use depends on the objection raised, but some combination of Framing, Value-Based Selling, Education-Based Selling, Social Proof and Visualisation will usually do the trick.
If the prospect still doesn’t buy, that typically means there’s a Guiding Structure issue - your negotiating partner may not have the budget or the authority to agree to your proposal.
Always try to negotiate directly with the decision-maker that way, if they refuse your offer, you know that it’s because it wasn’t a good fit for them, and you can move on to more promising prospects as quickly as possible.
If you want to maximise your sales, it almost always makes sense to offer a very strong, risk-reversing guarantee, and to extend the risk-free period as much as possible. If you don’t already have a risk-reversal policy, implement one and you’ll see your sales increase.
Make it a priority every three to six months to re-contact your lapsed customers with another offer to see if you can encourage them to start buying again, and you’ll be amazed by the results.
Value Delivery
The best businesses in the world deliver the value they’ve promised to their customers in a way that surpasses the customer’s expectations. Customers like to get the benefits of their purchases quickly, reliably, and consistently.
Expectations - A customer’s perception of quality relies on two criteria: expectations and performance. You can characterise this relationship in the form of a quasi-equation, which I call the Expectation Effect: Quality = Performance – Expectations. Customer expectations have to be high enough for a customer to purchase from you in the first place. After the purchase is made, however, the performance of the offering must surpass the customer’s expectations in order for them to be satisfied. Do whatever you can do to provide something that unexpectedly delights your customers.
Predictability - Simple: when you hire them, you can be absolutely certain the job will be done right and on time. When purchasing something of value, customers want to know exactly what they can expect — they want their experience to be predictable. There are three primary factors that influence the predictability of an offer: uniformity, consistency, and reliability. Improving predictability has major reputation and value-perception benefits. The more predictable your standard offering is, the more you’ll be able to increase the perceived quality of the products and the services that you offer.
Scale - Scale is the ability to reliably duplicate or multiply a process as volume increases.
Accumulation - Small helpful or harmful behaviours and inputs tend to Accumulate over time, producing huge results. Toyota’s approach is based on the Japanese concept of Kaizen, which emphasises on the continually improvement of a system by eliminating muda (waste) via a lot of very small changes. Many small improvements, consistently implemented, inevitably produce huge results. The smaller improvements you make over time, the better your results.
Amplification - making a small change to a system that scales produces a huge result.
Barrier to competition - Think of a company like Apple - there’s no other company in the technology world that focuses less on keeping up with what other companies are providing. Instead, they focus on building something completely new and remarkable, then perfecting it as much as possible. By choosing to innovate instead of compete, Apple successfully captured a leadership share of a very competitive market. Don’t focus on competing, focus on delivering even more value. Your competition will take care of itself.
Systemisation - ‘If you can’t describe what you are doing as a process, you don’t know what you’re doing.’ The primary benefit of creating a system is that you can examine the process and make improvements. If Google hadn’t spent most of their early time and energy defining and systematising the search process, the company simply wouldn’t exist. The better your systems, the better your business.
Finance
Finance is the art and science of watching the money flowing into and out of a business, then deciding whether or not it’s enough to keep going. Accounting is the process of ensuring the data you use to make financial decisions is as complete and accurate as possible.
The very best businesses create a virtuous cycle: they create huge amounts of value while keeping their expenses consistently low, so they make more than enough money to keep going without capturing too much value.
Profit - Profit is a very simple concept: it’s bringing in more money than you spend.
Value capture - ‘You can get anything you want in this life if you help enough other people get what they want.’
Sufficiency - Sufficiency is the point where a business is bringing in enough profit that the people who are running the business find it worthwhile to keep going. You can track financial sufficiency using a number called Target Monthly Revenue (TMR).
Cashflow - Ideally, more money flows in than flows out, and the total never goes below zero. Cash tends to come from three primary sources: operations (selling offers and buying inputs), investing (collecting dividends and paying for capital expenses) and financing (borrowing money and paying it back).
Income statement - For other businesses, relying on a Cash Flow Statement isn’t enough. If the business manages an inventory or extends credit to customers, a simple cash flow analysis can be misleading. In order to determine whether or not your sales are profitable, you need to be able to track which sales and expenses are related. By matching each sale with the expenses incurred in the process of making that sale, it’s possible to see if you’re making a profit immediately, without unpleasant surprises (job tracking). Revenue - Cost of Goods Sold - Expenses - Taxes = Net Profit.
Balance sheet - A Balance Sheet is a snapshot of what a business owns and what it owes at a particular moment in time. Assets - Liabilities = Owner’s Equity
Cost Benefit Analysis - The purpose of financial analysis isn’t to produce impressive-looking spreadsheets: it’s to make better decisions. If the data you’re examining doesn’t lead to make changes that improve your business, you’re wasting your time.
Revenue - Believe it or not, there are only four ways to increase your revenue:
Increase the number of customers.
Increase the average transaction size.
Increase the frequency of transactions per customer.
Raise your prices.
Always focus the majority of your efforts on serving your ideal customers. Your ideal customers buy early, buy often, spend the most, spread the word and are willing to pay a premium for the value you provide. The more ideal customers you can attract, the better your business.
Lifetime value - is the total value of a customer’s business over the lifetime of their relationship with your company. The more a customer purchases from you and the longer they stay with you, the more valuable that customer is to your business.
Pricing Power - is your ability to raise the prices you are charging over time.
Purchasing power - When operating a business, always track how much Purchasing Power you have left. How much cash do you have in the bank? How much available credit do you have access to? The more purchasing power you have, the better off you are.
Cashflow cycle - Maximising your cash tackles the issue directly: bring in more revenue and cut costs. Increasing your product margins, making more sales, and spending less of what you bring in will always improve your cash flow. The more Purchasing Power you have, the more Resilient your business is and the better your ability to handle the unexpected.
Internal controls - One of the major benefits of tracking your financial and operations data over time is the ability to notice patterns in your revenue, costs, and Value Chain. Over time, these patterns become useful for budgeting, supervising operations, complying with laws and regulations, and preventing theft and fraud. Internal Controls are a set of specific Standard Operating Procedures a business uses to collect accurate data, keep the business running smoothly, and to spot trouble as quickly as possible.
The Human Mind
Perceptual control - Perceptual Control represents a fundamental shift in understanding why people do the things they do. Once you understand that people act to control their perceptions, you’ll be better equipped to influence how they act.
Reference level - Action comes about if and only if we find a discrepancy between what we are experiencing and what we want to experience.
Conflict - One of the things that make interpersonal conflict challenging is that we can never truly control the actions of another human being. We can influence, persuade, inspire, or negotiate, but we can never directly act upon another person’s perceptions or directly change their reference levels.
Motivation - You can break down the experience of motivation into two basic desires: moving toward things that are desirable and moving away from things that aren’t.
Willpower Depletion - Mischel found a correlation between willpower and success: kids with a greater ability to ‘defer gratification’ were more successful in school, as well as later on in life.
Loss Aversion - Loss Aversion is the idea that people hate to lose things more than they like to gain them. There are very few relationships that psychology is able to quantify, but this is one of them: people respond twice as strongly to potential loss as they do to the opportunity of an equivalent gain. Eliminate this perception of risk by offering a money-back guarantee or similar risk-reversal offer, and people will feel the decision is less risky, resulting in more sales.
Association - Cultivate the right associations, and potential customers will want what you have even more.
Contrast - Take advantage of Contrast when presenting your offer and you’ll increase the odds that your potential customers will view your offer favourably.
Scarcity - encourages people to make decisions quickly. The scarcer the value, the more intense the desire. As a result, adding a scarcity element to your offer is a great way to encourage people to take action. Here are a few ways you can add an element of scarcity to your offer:
Limited Quantities - inform prospects that you’re offering a limited number of units for sale.
Price Increases - inform prospects that the price will go up in the near future.
Price Decreases - inform prospects that a current discount will end in the near future.
Deadlines - inform prospects that the offer is only good for a limited period of time.
Novelty - In Brain Rules, John Medina shares how he’s able to keep the attention of his students effectively in classes that last more than an hour: he plans his class in modules that last no more than 10 minutes. Each module starts with a Hook-an interesting story or anecdote, followed by a brief explanation of the key concept. Following this format ensures that his audience retains more information and doesn’t zone out. Human attention requires novelty to sustain itself. Continue to offer something new, and people will pay attention to what you have to offer.
Working with yourself
Cognitive Switching Penalty - Every time you switch your attention from one subject to another, you incur the Cognitive Switching Penalty. Your brain spends time and energy thrashing, loading and reloading contexts. If you’re trying to create something, the worst thing you can possibly do is to try to fit creative tasks in between administrative tasks-context switching will kill your productivity. A simple rule of thumb I use to plan my day is the 3/10/20 method: in one day, I have the capacity to finish three major tasks and 10 minor tasks. A major task is any activity that requires more than 20 minutes of focused concentration; all other tasks are minor. If a major task is interrupted, re-starting it counts as a new task. Eliminate unproductive context switching, and you’ll get more done with less effort.
Four methods of completion - There are only four ways to ‘do’ something: Completion, Deletion, Delegation and Deferment. These are called the 4 Methods of Completion. You can use all four options when going through your to-do list and you’ll get more done.
Completion: Doing the task. It’s best for tasks that only you can do particularly well.
Deletion: Eliminating the task. It’s effective for anything that’s unimportant or unnecessary.
Delegation: Assigning the task to someone else. It’s effective for anything that another person can do 80 per cent as well as you.
Deferment: Putting the task off until later. It’s effective for tasks that aren’t critical or time dependent.
Most important tasks - At the beginning of every day, create a list of two to three MITs, then focus on getting them done as quickly as possible. Keep this list separate from your general to-do list or task tracking system.
States of being - A State of Being is a quality of your present experience. For example, I define ‘being successful’ as ‘working on things I enjoy with people I like,’ ‘feeling free to choose what I work on,’ and ‘having enough money to live without financial stress’.
Priming - Priming is a method of consciously programming your brain to alert you when particular information is present in your environment. Here’s an example of how I use priming: in the book 10 Days to Faster Reading, Abby Marks-Beale recommends a technique I refer to as purpose-setting: taking a few minutes before you start reading to figure out (1) why you want to read this material and (2) what kind of information you’re looking for. Jotting down a few notes before picking up the book is helpful in reinforcing exactly what you’re looking to find. After defining your purpose, you then pick up the book and flip through it quickly, paying particular attention to the table of contents, section headings, and index-condensed sources of information about what the book contains and how the material is structured. Jotting down terms and concepts that appear to be particularly important helps prime your brain to notice them when they appear later. This process only takes a few minutes, but the impact it has on your reading speed is profound. Once you’ve primed your mind to notice important concepts, you can work your way through the entire book at lightning speed.
Decision - Don’t wait until you have enough facts to be 100 per cent sure, because by then it is almost always too late... Once you’ve acquired 40 to 70 per cent of the available information, go with your gut. Collect just enough information to make an informed decision, then make your choice and move forward.
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 to move the project forward. If you define what ‘done’ looks like, you can focus your attention and energy on ‘doing’ the things that will get you to ‘done’.
Parkinson’s Law - Parkinson’s Law is usually expressed as ‘Work expands so as to fill the time available for its completion’. If something must be done in a year, it’ll be done in a year. If it must be done in six months, then it will. Ingvar’s Rule is a Counterfactual - what would you do if you only had 10 minutes to get something done? Act accordingly.
Self-Regard - Cultivate relationships with people who aren’t afraid to tell you when you’re making questionable assumptions or going down the wrong path. These are valuable friends indeed.
Mystique - Mystique is powerful: it makes things with a little mystery appear more attractive than what they really are. It’s easy to like the idea of doing something. It’s different to like actually doing it. Have a real human conversation with someone who’s actually done what you’re attracted to. Here’s what to ask: ‘I really respect what you’re doing, but I imagine it has high points and low points. Could you share them with me? Knowing what you know now, is it worth the effort?’ If it’s really what you want to do before you start. That kind of knowledge is priceless.
Hedonic Treadmill – Focus on the below for a sustained level of satisfaction.
Only work to make ‘enough’ money
Focus on improving your health and energy
Spend time with people you enjoy ‘the only thing that really matters in life, are your relationships with other people’.
Remove chronic annoyances
Pursue a new challenge
Comparison Fallacy - The only metric of success that matters is this: are you spending your time doing work you like, with people you enjoy, in a way that keeps you financially sufficient? If so, don’t worry about what other people are doing.
Locus of control - Worrying about things you can’t influence, or control is a waste of time and energy. One of the best things I’ve ever done was choose to stop paying attention to the news -99.9 per cent of the information you’ll find in a newspaper or television newscast is completely outside of your Locus of Control. Keep your attention on what you’re doing to build the life you want to live, and it’s only a matter of time before you get there.
Attachment - The more you focus and accept the things that have happened and choose to work on things that you can do to make things better, the happier you’ll be.
Personal Research and Development - “If a man empties his purse into his head, no one can take it from him. An investment in knowledge always pays the highest return.” Benjamin Franklin
Limiting Belief – Viewing your mind as a muscle is the best way to help it grow.
Working with others
Power - All we can really do is act in ways that encourage people to do what we suggest. Influence is the ability to encourage someone else to want what you suggest. Compulsion is the ability to force someone else to do what you command. The best way to increase your Power is to do things that increase your influence and Reputation. The more people know your capabilities and respect the reputation you’ve built, the more power you will have.
Comparative advantage - Comparative Advantage means it’s better to capitalise on your strengths than shore up your weaknesses. Focus on what you can do well, and work with others to accomplish the rest.
Communication overhead - Studies of effective teamwork usually recommend working in groups of three to eight people. In Peopleware, project managers Tom DeMarco and Timothy Lister recommend keeping teams ‘elite and surgical’. If you want your team to perform at its best, make your teams as small and autonomous as possible.
Importance - The deepest principle in human nature is the craving to be appreciated. The more important you make them feel, the more they’ll value their relationship with you. It mostly has to do with undivided focus: paying attention, listening intently, expressing interest, and asking questions. Being the complete focus of someone’s attention is so rare in today’s world that it makes a memorable impact almost immediately. Cultivating a genuine interest in other people goes a very long way. The more important you make people feel when they’re around you, the more they’ll like you and want to be around you.
Safety – Focus on making the other party feel important.
Golden Trifecta – Treat all people you meet with attention, courtesy and respect.
Reason Why - Research shows that giving a Reason Why for your request increases dramatically people’s compliance rate.
Bystander Apathy - Bystander Apathy is an inverse relationship between the number of people who could take action and the number of people who actually choose to act. Direct commands or requests very clearly to one specific individual at a time. If someone appears to be experiencing a heart attack in a crowded store and you yell ‘someone call 911’, it’s likely that no one will actually call - the more people around, the more likely everyone assumes that someone else is taking action. It’s far more effective to single someone out, make eye contact, point, and say very clearly, ‘YOU-CALL 911.’ They will. All tasks must have single clear owners and deadlines.
Planning Fallacy - The Planning Fallacy means that people have a persistent tendency to underestimate completion times. The more complex the project, the more interdependencies the project contains. The more interdependencies there are, the more likely it is that something at some time will not go according to plan.
Convergence and divergence - Breaking away from groups that aren’t serving you is painful but necessary to grow. If your social circle isn’t supporting your goals, change your social circle.
Social signals - If you think about it, the best way to build wealth is to earn a lot of money without spending it.
Authority - Work to establish yourself as an authority on what you’re offering, and people will be more likely to accept your offer.
Modal Bias - Modal Bias is the automatic assumption that our idea is always best. In the absence of data, you’ll ultimately be forced to do things the boss’s way: Modal Bias ensures that the bosses think that their way is best, unless you can prove otherwise. If you’re a leader or manager, it pays to suspend your judgment long enough to thoroughly consider the perspectives and suggestions of the people you work with. Otherwise, you’re very likely to miss important information. Remind yourself to keep an open mind, and you’ll enhance your ability to make wise decisions.
Pygmalion effect - The Pygmalion Effect explains that people tend to perform up to the level that others expect of them. Let them know you expect great things from them, and more often than not, you’ll find that they perform well.
Attribution Error - The Attribution Error means when others screw up, we blame their character; when we screw up, we attribute the situation to circumstances. By assuming the contractor’s actions were due to a character flaw, you made an error in judgment — the contractor actually went above and beyond the call of duty, given the circumstances. Because you weren’t aware of the circumstances, however, you blamed his character. It’s beneficial to give people the benefit of the doubt unless a particular behaviour clearly becomes a pattern.
Option Orientation - Focus on options, not issues, and you’ll be able to handle any situation life throws at you.
Management – Management is doing things right; leadership is doing the right things. Six principles of management. Management is the act of coordinating a group of people to achieve a specific goal while accounting for any change or uncertainty. These are the six simple principles of management:
Recruit the smallest group of people that can do the job quickly and effectively.
Communicate clearly the End Result, who is responsible for what, and the current status.
Treat people with respect. Use The Golden Trifecta consistently.
Create a productive Environment and then let people do their work.
Have an aggressive plan to complete the project, but don’t have unrealistic expectations regarding certainty and prediction.
Measure what you’re doing to see if it’s working and make the necessary adjustments and Experimentations.
Performance Based Hiring - Ideally, you’re looking for an individual who will contribute valuable work, who’s excited about the opportunity, and who you’ll enjoy working with every day.
Understanding systems
Gall’s Law - states that all complex systems that work evolved from simpler systems that worked. If you want to build a system that works, the best approach is to build a simple system that meets the environment’s current selection tests first, then improve it over time. Over time, you’ll build a complex system that works.
Uncertainty
There are known knowns. These are things we know that we know.
There are known unknowns. That is to say, there are things that we know we don’t know.
But there are also unknown unknowns. These are things we don’t know we don’t know.
Risks are known unknowns - if you’re planning on picking up a friend from the airport, the probability that the flight will arrive several hours late is a risk - you know in advance that the arrival time can vary, and plan accordingly.
Uncertainties are unknown unknowns - You may be late picking up your friend from the airport because a meteorite hits your car the night before you’re scheduled to leave for the airport. Who could predict that?
Second order effects - Elements in a complex system can be interrelated or dependent upon each other in millions of different ways, and uncertainty guarantees you probably don’t know exactly how.
Analysing systems
Deconstruction - is the process of separating complex systems into the smallest subsystems possible to help understand it. Creating diagrams and flowcharts can help you understand how each inflow, process, trigger, conditional, endpoint and outflow comes together.
Measurement - Once you’ve understood the parts of the system and how they interact with each other, it pays to ask another question: how well is the system operating? To do that, we rely on measuring the system as it’s operating. What gets measured gets managed. Without data, you’re blind. If you want to improve anything, you must measure it first.
Key Performance Indicator – Focus on the few key measurements, that really matter.
Analytical Honesty - means measuring and analysing the data you have dispassionately. Since humans are social creatures, we tend to care deeply about how others perceive us, which gives us an incentive to make things look better than they actually are.
Context - You brought in $200,000 of revenue this month. Is that good or bad? It depends. If you brought in $100,000 last month, it’s good. If your expenses are $400,000 this month, it’s bad. Context is the use of related measurements to provide additional information about the data you’re examining.
Ratio - is a method of comparing two measurements against each other. Think of a measurement like Return on Investment (ROI): you’re simply dividing the amount of money you collect by the amount of money you spent. Profit per Employee: for every person you employ, how much profit does your business generate? Be creative: study your business, then construct ratios that highlight the most important parts of your system.
Humanisation - Don’t just present data - tell a story that helps people understand what’s happening, and you’ll find your analysis efforts more useful.
Improving systems
The Critical Few - Find the inputs that produce the outputs you want, then make them the focus of most of your time and energy. Ruthlessly weed out the rest.
Diminishing Returns - Focus on doing a few simple things that will produce most of the results you’re looking for, then call it a day.
Friction - is any process that removes energy from a system over time. Remove the friction, and you’ll increase the systems efficiency.
SOPs - Standard Operating Procedures are also effective ways to bring new employees or partners up to speed quickly. Having a central source of SOPs can help new employees or partners learn how you work far more effectively than informal training. Storing your SOPs in some sort of electronic database is best - it ensures everyone can instantly reference the most up-to-date procedure available.
Cessation - refers to the conscious choice to stop doing something that’s counterproductive. Instead of trying to do too much, only do what is absolutely necessary.
Resilience - is a massively under-rated quality in business. Having the toughness and flexibility to handle anything life throws at you is a major asset that can save your skin – literally - and metaphorically. Your ability to adjust your strategy and tactics as conditions change can be the difference between survival and disaster. Preparing for the unexpected makes you more Resilient. Here’s what makes a business resilient:
Low (preferably zero) outstanding debt.
Low overhead / fixed costs / operating expenses.
Substantial cash reserve for unexpected contingencies.
Multiple independent products / industries / lines of business.
Flexible workers / employees that can handle many responsibilities well.
No single points of failure.
Fail-Safes / backup systems for all core processes.
Think less like a tiger and more like a turtle, and your business will be able to withstand pretty much anything.
Failsafe - “‘Always’ and ‘never’ are two words that you should always remember never to use.”
Scenario Planning - is the process of constructing a series of hypothetical situations, then Mentally Simulating what you would do if they occur. Regularly setting non-negotiable time to step back and plan what you’ll do is always time well spent. Don’t try to predict an unknowable future - construct the most likely scenarios and plan what you’ll do if they occur, and you’ll be prepared for whatever actually happens.
The middle path - is the balance between too little and too much: just enough. Getting the balance right in the midst of changing conditions is the difference between a competent business professional and a great one. The people who experience the most success in this world are the people who accept the uncertainty and fear as best they possibly can, learn from the experience, and keep trying new things.
The experimental mindset - Experimentation is at the centre of living a satisfying, productive, fulfilling life. The more you experiment, the more you learn, and the more you’ll achieve.
