The Personal MBA

Master the Art of Business

A world-class business education in a single volume. Learn the universal principles behind every successful business, then use these ideas to make more money, get more done, and have more fun in your life and work.

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What Is 'Optimization'?

Optimization is the process of maximizing the output or minimizing the input of a system.

Maximization focuses on the system's Throughput. Changing the system so it increases its Throughput means it's performing better.

Minimization focuses on the system's inputs. For example, by minimizing your costs, you will increase your Profit Margin.

You can't Optimize multiple variables of a system at once. Focus your efforts on one until you understand how the changes you make will affect the system.

Josh Kaufman Explains 'Optimization'

Optimization is the process of maximizing the output of a system or minimizing a specific input the system requires to operate.

Optimization typically revolves around the systems and processes behind your Key Performance Indicators, which measure the critical elements of the system as a whole. Improve your KPIs, and your system will perform better.

Maximization typically focuses on the system's Throughput. If you want to earn more money, create more units to sell, or serve more customers, you're optimizing for throughput. Making changes to the system that increase throughput means your system is performing better in a specific, measurable way.

Minimization typically focuses on in-process inputs required for the system to operate. If you're trying to increase your Profit Margin, costs are one of the key inputs. Minimize your costs, and your margins will increase.

Be definition, if you're trying to maximize or minimize more than one thing, you're not optimizing-you're making Tradeoffs.

Many people use the term Optimization to mean "making everything better," but that definition doesn't help you actually do anything.

In practical terms, trying to optimize for many variables at once doesn't work-you need to be able to concentrate on a single variable for a while, so you can understand how the changes you make affect the system as a whole.

You're trying to find Causation (not Correlation) in your changes, and hidden Interdependencies can make it difficult to understand what changes produced what results.

Remember: you can't reliably Optimize a system's performance across multiple variables at once. Pick the most important one and focus your efforts accordingly.

Questions About 'Optimization'


"Premature optimization is the root of all evil."

Donald Knuth, computer scientist and former professor at Stanford University


From Chapter 11:

Understanding Systems


https://personalmba.com/optimization/



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The Personal MBA

Master the Art of Business

A world-class business education in a single volume. Learn the universal principles behind every successful business, then use these ideas to make more money, get more done, and have more fun in your life and work.

Buy the book:


About Josh Kaufman

Josh Kaufman is an acclaimed business, learning, and skill acquisition expert. He is the author of two international bestsellers: The Personal MBA and The First 20 Hours. Josh's research and writing have helped millions of people worldwide learn the fundamentals of modern business.

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