Personal MBA Book Summary
By Josh Kaufman
My book isn’t easy to summarize: The Personal MBA: Master the Art of Business is a distillation of 226 of the most important ideas in modern business practice. There are, however, a few big ideas and recurring themes that will help you understand why learning business is so important… and how to focus on learning useful business skills instead of useless academic theories.
1. Research indicates business school isn’t worth the investment. As costs continue to rise, the ROI gets worse. You’re better off learning business on your own.
Business school is a poor investment. A 2006 study by Dr. Jeffrey Pfeffer of Stanford and Dr. Christina Fong of the University of Washington found that MBA programs do not deliver meaningful improvements to students across any metric of career success.
Since then, business school tuition has continued to rise, but corporate jobs and wages have stagnated. Career security is at a historical low. Business schools have high direct tuition cost, significant opportunity costs in the form of lost wages, and are financed by most students with the worst forms of debt.
If you want to have a rewarding career and a satisfying life, you’re better off learning the art of business own your own, without incurring massive debts.
2. Debts cost you more than money – they’re a loss of freedom and flexibility.
If you don’t want to become a wage slave, don’t borrow a lot of money to purchase a credential. Business schools have high direct tuition cost, significant opportunity costs in the form of lost wages, and are financed by most students with the worst forms of debt.
Business schools may open certain doors, but they close doors as well. Massive debts decrease your freedom and flexibility, making it more difficult to experiment with business ideas that have a greater probability of leading to commercial success and career satisfaction.
Mortgaging your life for a credential is not worth it in the long run. Protect your freedom and flexibility, experiment with your own bootstrapped businesses, and you’ll get better results.
3. The 80/20 rule applies to learning business – a few critical ideas carry most of the weight.
Learning the fundamentals of business is essential, regardless of your profession. Fortunately, it’s possible to learn the most important business-related ideas quickly, without spending a lot of time and money.
Pareto’s Law / The 80/20 Principle / the Critical Few state that most of the desired results in an area come from a small set of inputs. This relationship applies to learning business: a few critical concepts carry most of the weight. Learn these ideas, which I call “mental models,” and you’ll reap most of the rewards of studying business with a minimum of time and effort.
The Personal MBA is designed to help you learn the most important ideas in business quickly and inexpensively, so you can focus on doing valuable work that matters.
4. Every business, large and small, has only five simple parts.
- Value-Creation: creating something other people want or need.
- Marketing: attracting attention and making people interested in what you’ve created.
- Sales: encourage people to trust you enough to give you money in exchange for the value you’ve created.
- Value-Delivery: give your customers what they promised, in a way that makes them happy.
- Finance: examine how much money is flowing into the business, how much is flowing out, and ensure enough profit is flowing in to make your efforts worthwhile.
Every business, from the largest multinational corporation to the smallest startup microbusiness, has these five parts. If any of these parts are missing, it’s not really a business.
If you’re trying to understand how a particular business works, use the Five Parts of Every Business to reverse engineer the operation. If you’re creating a new business, the Five Parts should be the outline of your business plan.
5. To improve your value as a businessperson, focus on improving economically valuable skills.
The skills that will help you get paid are directly related to the Five Parts of Every Business. The more skilled you become at creating value, marketing, selling, making your customers happy, and improving profitability, the more you’ll be economically rewarded.
If you’re working for an employer, or if you’re looking for a job, emphasizing your economically valuable skills will ensure you’re paid what you’re worth.
If you want to start your own business, or improve an existing business, focus on these five areas to generate the most significant results quickly.
6. Businesses are created by human beings, for the benefit of human beings. Understanding human psychology is crucial for success.
Psychology isn’t typically considered a business topic, and that’s a shame. You’re a person; your colleagues are people; your customers are people. Understanding the human mind (and how to work with it) is absolutely essential to your productivity and success.
Understanding how the human mind processes information and makes decisions helps you present ideas in a way others are likely to appreciate and value. Understanding how the human mind tends to malfunction can help you avoid common mistakes and pitfalls, saving you effort and money, and frustration.
7. Learning how to use your body and mind effectively is a pre-requisite of accomplishing anything worthwhile.
Your productivity is a function of how well you use your mind and body. If you understand how your brain and body work, you can use that knowledge to produce better results.
Understanding the differences between Goals, Habits, and States of Being will help you invest your efforts wisely. Techniques like Counterfactual Simulation can help you figure out where to start given what you’re trying to accomplish, even if you’ve never done something before.
8. Recruiting and managing a team can help you get more done, provided you understand how to work effectively with other people.
Working with others can be enormously beneficial, provided you understand enough about how people work to be productive. Every person you collaborate with can increase your capacity to get things done, but it also subtracts from your capacity via Communication Overhead.
Managing the team well is an exercise in communication, planning, and setting expectations. Effective management requires striking a balance between exerting too much control and exerting too little.
9. Businesses are complex systems. If you don’t know how to create and improve systems, you’re at a severe disadvantage.
Every business is a complex system: a repeatable process designed to produce an intended result. Learning how complex systems function (and malfunction) can help you create business systems that work, or improve business systems that already exist.
In addition, it pays to know how systems commonly break down. The more complex the system, the more interdependencies and counterparty risks are involved. Making a change to the system can provoke second-order effects. Automated systems multiply errors until the issue is identified and fixed.
10. Flexibility and resilience are the key to long-term success in business.
Uncertainty and change are a part of life: you can’t eliminate them, but you can prepare for them. Building a business that can withstand changes in the environment or market requires foresight, planning, and investing in capabilities that give you options before you need them.
Fail-safes, backup systems, emergency funds, and insurance aren’t strictly optimal in the sense of maximizing returns – you’re spending money on something you hope you’ll never need. They are investments in flexibility and resilience that will protect your business when times get tough.
Purchase The Personal MBA: Master the Art of Business now to master 226 of the most important ideas in modern business practice for less than $25.
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