Summary of The Personal MBA

Format: iPad via the Kindle App.

Why I Read it

The Personal MBA by Josh Kaufman was recommended to me by my good friend Dick. Dick is a master reader. What is a master reader? That is someone that reads more books in a year then most people read in a lifetime and continues to read more books every year. Dick knew of my desire to go to business school, he saw the book reviewed it himself and passed it along, for that I say, thanks.

My desire to go to business school was my main reason for reading this book. I figured it would give me a good overview of what they were teaching (which was not really the point of the book). If I found the info interesting I would continue my plans to go to B-school.

This book was a joy to read. It is beautifully organized and written from a top-down approach. I have read a number of books on business, but this was the first one that has ever given me a framework upon which I can analysis businesses and business ideas. This book helped me realize that I don't need to go to B-school to get the knowledge. Business schools don't have a monopoly on knowledge, just degrees. So unless someone wants to give me a free ride, I will stick with my Personal MBA.

Purpose

The goal of the book is to distill the basics of an MBA into a single book. Josh seeks to do this by creating a framework to analysis business through. In the opening chapter, he describes a business as being comprised of Value Creation, Marketing (Attention), Sales (Transaction), Value Delivery and Finance. These five things are accomplished by people and systems.

Format

I love the format of this book. To build his framework Josh decides to teach you all the key words used in business. Each chapter is a collection of mini-essays that are focused on a single topic, such as Value Creation. Josh is very good at helping you to frame your mind with every mini-essay. A mini-essay is comprised of a term, a relevant or illustrative quote, the body and a link to his website with a summary of the mini-essay. After each mini-essay you should have a firm grasp of the topic.

Other Points

Josh is not trying to put everything that you would learn in an MBA in one single book. The key point to understand is that he is giving you a framework for understanding business. The second point to understand is the Josh is promoting self-education. For those interested in continuing your self-educated journey, Josh has assembled the top one-hundred business books to read. It is a goal of mine to tackle most of the list.

Conclusion

The Personal MBA is a great book. It will provide you with a framework in which you can understand any business. If you are a self-learner it is a must read.

Over 2012, I am going to try to read and review at least 6 of the 100 books on his list. Next up on my plate is Thinking, Fast and Slow by Daniel Kahneman.

Chapter Summaries

Chapter 1 - Introduction

Chapter 1 is an overview of the book and an argument for the idea that you could get an MBA level of education from his book. He has the best summary statement of what a business is, rather than try to paraphrase it I will just quote it:

Every successful business (1) creates or provides something of value that (2) other people want or need (3) at a price they’re willing to pay, in a way that (4) satisfies the purchaser’s needs and expectations and (5) provides the business sufficient revenue to make it worthwhile for the owners to continue operation.

— Kaufman, Josh (2010-12-30). The Personal MBA: Master the Art of Business (p. 15). Penguin Group. Kindle Edition.

Chapter 2 - Value Creation

Chapter 2 is about Value creation. Josh defines 12 standard forms of value. I have found this list helpful because I can now evaluate both new business ideas and current business in light of the value they are trying to create for their customers. More than one form of value can be used at the same time, such as a gym which is a subscription and a shared resource.

Chapter 3 - Marketing

Chapter 3 is about Marketing. Marketing is about getting the attention of people that want or need the value you have created. He covers Seth Godin's idea of permission marketing. Good marketing should help educate people about your product. It is important to know who your target audience is. For example, if you don't have a baby you will not be interested in a car seat no matter how educated you are on the topic.

Chapter 4 - Sales

Chapter 4 is about Sales. Sales is about the transaction where money is exchanged for the value you have created. This quote gives a great overview of the sales process:

sales mostly consists of helping the prospect understand what’s important and convincing them you’re capable of actually delivering on what you promise.

— Kaufman, Josh (2010-12-30). The Personal MBA: Master the Art of Business (p. 106). Penguin Group. Kindle Edition.

Chapter 5 - Value Delivery

Chapter 5 is about value delivery. Once the sale has been made, you must deliver the value you have promised to the customer. The key idea for this chapter is: "Customers like to get the benefits of their purchases quickly, reliably, and consistently."

Chapter 6 - Finance

Chapter 6 is about finance. Finance is about understanding how money flows in and out of the company. In understanding this you can decided if the business is doing well or preforming poorly. At the end of the day a business must make enough profit to make it worth the owners time to keep it operating. Finance helps to answer this question.

Chapter 7 - The Human Mind

Chapter 7 is about the human mind. In this part of the book Josh shifts from the business to people. He will first help yo to understand yourself then others. Josh lightly interact with the modern topic of neuroscience.

The part of the chapter that helped me the most was the idea that we operate on perceptual control. Perceptual control is the idea that we work like a thermostat. A thermostat only does something when the temperature moves in or out of the range it is told to operate on. In the same way most people only do something when they perceive it is time to act. Different people have their thermostat at different levels. This is why not everyone responses the same way to the same situation.

Chapter 8 - Working with Yourself

Chapter 8 is about working with yourself. In this chapter Josh covers topics such as mono-idealism, cognitive switching penalty, most important task (MITs) and goals. He explains that the best way to change a habit is to create an environment conducive to change. The reason for this is that will power is quickly used so it is better to save you will power for things beyond your control that would derail your goal.

Chapter 9 - Working with Others

Chapter 9 is about working with others.

In this chapter, we’ll discuss how to work effectively with others. You’ll learn how to communicate more effectively, earn the respect and trust of others, recognize the limitations and pitfalls of group interactions, and lead or manage a team of people effectively.

— Kaufman, Josh (2010-12-30). The Personal MBA: Master the Art of Business (p. 273). Penguin Group. Kindle Edition.

I found his explanation of power helpful. Power can be used to influence others or force them to do something. If you use it for force people will resent you and they may comply, but more power will be required if you want them to do something in the future. Force is not sustainable. Influence can take more time to get people moving in the direction you want them to, but in the end it pays off because it is sustainable.

Chapter 10 - Understanding Systems

Chapter 10 is about understanding systems. Systems are the final topic covered in the book. Josh focuses on Gall’s Law which states:

A complex system that works is invariably found to have evolved from a simple system that worked. The inverse proposition also appears to be true: a complex system designed from scratch never works and cannot be made to work. You have to start over, beginning with a simple system. —JOHN GALL, SYSTEMS THEORIST

This is basically saying that the complex system you see was once much simpler and has over time to be as complex as you see it. Also, if you were to try and build a system as complex as the one you see that you would fail.

Systems describe the flow of resources in and out of the system. Stock is the resources waiting to be inputted into the system. Slack is the amount of resources in stock. All systems have constraints that limit the output of the system. Systems must have means to test the output and are always changing and adapting to new forces in their environments.

Chapter 11 - Analyzing Systems

Chapter 11 is about analyzing systems. Given Gall's Law that complex systems evolved from simpler systems that worked, it is helpful to deconstruct them in order to analyze and understand them. Deconstructing a system is the process of breaking a complex system down into understandable pieces.

Once a system is broken down (deconstructed) into its parts you can start to measure and track their performance. Josh spends some time explaining how to measure and how to decide what to measure. A lot of this was review from my time in A/B testing and web analytics.

Chapter 12 - Improving Systems

Chapter 12 is about improving systems. Now that you have analyzed the system you can hopefully improve it. To improve it you have to decide what you will optimize for, refactor or automate. His thoughts on automation were interesting. He covers some problems with automation such as the amplification of errors. If your automation is wrong it is going to amplify that mistake on every cycle.