The Personal MBA

0. Introduction

You Don’t Need to Know It All

One of the beautiful things about learning any subject is the fact that you don’t need to know everything—you only need to understand a few critically important concepts that provide most of the value.

be in the top 1 percent of the human population when it comes to knowing:

• How businesses actually work.
• How to start a new business.
• How to improve an existing business.
• How to use business-related skills to accomplish your personal goals.

No Experience Necessary

this book does not require any prior business knowledge or experience.

Questions, Not Answers

will help you ask better questions. Knowing what’s critically important in every business is the first step in making good business decisions. The more you know about the essential questions to ask in your current situation, the more quickly you’ll be able to find the answers you need to move forward.

Mental Models, Not Methods

I call these foundational business concepts mental models, and together, they create a solid framework you can rely on to make good decisions.

Mental models are concepts that represent your understanding of “how things work.”。

My Personal MBA

Andy Walter, the first associate director I reported to at P&G, had given me:

“If you put the same amount of time and energy you’d spend completing an MBA into doing good work and improving your skills, you’ll do just as well.”

A Self-Directed Crash Course in Business

Working for P&G was an education in itself. As time went on, however, I realized three very important things:

1. Large companies move slowly. Good ideas often died on the vine simply because they had to be approved by too many people.
2. Climbing the corporate ladder is an obstacle to doing great work. I wanted to focus on getting things done and making things better, not constantly positioning myself for promotion. Politics and turf wars are an inescapable part of the daily experience of working for a large company.
3. Frustration leads to burnout. I wanted to enjoy the daily experience of work, but instead I felt like I was running a gauntlet each day. It began to affect my health, happiness, and relationships. The longer I stayed in the corporate world, the more I realized I wanted out. I desperately wanted to work on my own terms, as an entrepreneur.

The Wheat and the Chaff

I started to wonder: how much of what’s out there—and there’s a lot out there—I really needed to know. How could I separate the valuable information from the rubbish?

I began tracking which resources were valuable and which ones weren’t, then publishing my findings on my Web site, both as an archive and for the benefit of anyone interested.

The Personal MBA Goes Global

The books themselves aren’t as important as the ideas and knowledge they contain, but many of my readers were missing out because it took hours of turning pages to get to the good stuff.

Munger’s Mental Models

I think it’s undeniably true that the human brain works in models. The trick is to have your brain work better than the other person’s brain because it understands the most fundamental models—the ones that do the most work.

—CHARLES T. MUNGER, BILLIONAIRE BUSINESS PARTNER OF WARREN BUFFETT, CEO OF WESCO FINANCIAL, AND VICE-CHAIRMAN OF BERKSHIRE HATHAWAY

According to Buffett…“Charlie can analyze and evaluate any kind of deal faster and more accurately than any man alive. He sees any valid weakness in sixty seconds. He’s the perfect partner.”

I’ve long believed that a certain system—which almost any intelligent person can learn—works way better than the systems most people use [to understand the world]. What you need is a latticework of mental models in your head. And, with that system, things gradually fit together in a way that enhances cognition…biologist Julian Huxley’s idea that, “Life is just one damn relatedness after another.”

Connecting the Dots

Here’s how I define a business: 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.

Take away any of these things—value creation, customer demand, transactions, value delivery, or profit sufficiency—and you have something other than a business. Each factor is both essential and universal.

As I deconstructed each of those factors, I found additional universal requirements. Value can’t be created without understanding what people want (market research). Attracting customers first requires getting their attention, then making them interested (marketing). In order to close a sale, people must first trust your ability to deliver on what’s promised (value delivery and operations). Customer satisfaction depends on reliably exceeding the customer’s expectations (customer service). Profit sufficiency requires bringing in more money than is spent (finance).

Every business fundamentally relies on two additional factors: people and systems. Every business is created by people and survives by benefiting other people in some way.

Systems, on the other hand, are the invisible structures that hold every business together. At the core, every business is a collection of processes that can be reliably repeated to produce a particular result.

For the Skeptics

怀疑论者

Should You Go to Business School?

Here’s the answer: five simple words that will save you years of effort and hundreds of thousands of dollars: Skip business school. Educate yourself.

Three Big Problems with Business School

1. MBA programs have become so expensive you must effectively mortgage your life to pay the price of admission.
2. MBA programs teach many worthless, outdated, even outright damaging concepts and practices
3. MBA programs won’t guarantee you a high-paying job, let alone make you a skilled manager or leader with a shot at the executive suite.

Delusions of Grandeur

Unfortunately, daydreams and reality are often quite different.

Your Money AND Your Life

the average cumulative debt of a student who completed an undergraduate degree in the United States in 2009 is $22,500.

Breaking Out the Benjamins

What an MBA Will Actually Get You

Where Business Schools Game From

In Search of Distribution

Playing with Fire

No Reason to Change

The Single Benefit of Business Schools

I Owe, I Owe – It’s Off to Work I Go

A Better Way

What You’ll Learn in This Book

How to Use This Book

1. Value Creation

1.1 The 5 Parts of Every Business

Roughly defined, a business is a repeatable process that:

1. Creates and delivers something of value…
2. That other people want or need…
3. At a price they’re willing to pay…
4. In a way that satisfies the customer’s needs and expectations…
5. So that the business brings in enough profit to make it worthwhile for the owners to continue operation.

it’s simply a process of identifying a problem and finding a way to solve it that benefits both parties

1.2 Economically Valuable Skills

If you want to improve your value as a businessperson, focus on improving skills directly related to the Five Parts of Every Business.

Any skill or knowledge that helps you create value, market, sell, deliver value, or manage finances is Economically Valuable

1.3 The Iron Law of the Market

Books like The New Business Road Test by John Mullins can help you identify promising markets from the outset.

1.4 Core Human Drives

I prefer Clayton Alderfer’s version of Maslow’s hierarchy, which he called “ERG theory”: people seek existence, relatedness, and growth, in that order.

Paul Lawrence and Nitin Nohria, the authors of Driven: How Human Nature Shapes our Choices]], all human beings have four Core Human Drives that have a profound influence on our decisions and actions:

1. The Drive to Acquire: The desire to obtain or collect physical objects, as well as immaterial qualities like status, power, and influence. Businesses built on the drive to acquire include retailers, investment brokerages, and political consulting companies. Companies that promise to make us wealthy, famous, influential, or powerful connect to this drive.
2. The Drive to Bond: The desire to feel valued and loved by forming relationships with others, either platonic or romantic. Businesses built on the drive to bond include restaurants, conferences, and dating services. Companies that promise to make us attractive, well-liked, or highly regarded connect to this drive.
3. The Drive to Learn: The desire to satisfy our curiosity. Businesses built on the drive to learn include academic programs, book publishers, and training workshops. Companies that promise to make us more knowledgeable or competent connect to this drive.
4. The Drive to Defend: The desire to protect ourselves, our loved ones, and our property. Businesses built on the drive to defend include home alarm systems, insurance products, martial arts training, and legal services. Companies that promise to keep us safe, eliminate a problem, or prevent bad things from happening connect to this drive.

There’s a fifth core drive that Lawrence and Nohria missed:

1. The Drive to Feel: The desire for new sensory stimulus, intense emotional experiences, pleasure, excitement, entertainment, and anticipation. Businesses built on the drive to feel include restaurants, movies, games, concerts, and sporting events. Offers that promise to give us pleasure, thrill us, or give us something to look forward to connect with this drive.

1.5 Status Seeking

We also like to ensure other people are aware of our status

1.6 10 Ways to Evaluate a Market

Rate each of the ten factors below on a scale of 0 to 10, where 0 is extremely unattractive and 10 is extremely attractive.

1. Urgency—How badly do people want or need this right now?
2. Market Size—How many people are actively purchasing things like this?
3. Pricing Potential—What is the highest price a typical purchaser would be willing to spend for a solution?
4. Cost of Customer Acquisition—How easy is it to acquire a new customer? On average, how much will it cost to generate a sale, in both money and effort?
5. Cost of Value Delivery—How much would it cost to create and deliver the value offered, both in money and effort?
6. Uniqueness of Offer—How unique is your offer versus competing offerings in the market, and how easy is it for potential competitors to copy you?
7. Speed to Market—How quickly can you create something to sell?
8. Up-Front Investment—How much will you have to invest before you’re ready to sell?
9. Upsell Potential—Are there related secondary offers that you could also present to purchasing customers?
10. Evergreen Potential—Once the initial offer has been created, how much additional work will you have to put into it in order to continue selling?

If the score is 50 or below, move on to another idea—there are better places to invest your energy and resources. If the score is 75 or above, you have a very promising idea—full speed ahead

1.7 The Hidden Benefit of Competition

it means you know from the start there’s a market of paying customers for this idea, eliminating your biggest risk.

1.8 The Mercenary Rule

Even if you identify a business that will largely run itself, setting up the Systems

1.9 The Crusader Rule

changing the world is difficult if you can’t pay the bills.

1.10 12 Standard Forms of Value

there’s no need to reinvent the wheel—Economic Value usually takes on one of twelve standard forms:

1. [Product]: Create a single tangible item or entity, then sell and deliver it for more than what it cost to make.
2. [Service]: Provide help or assistance, then charge a fee for the benefits rendered.
3. [Shared Resource]: Shared Resource. Create a durable asset that can be used by many people, then charge for access.
4. [Subscription]: Subscription. Offer a benefit on an ongoing basis, and charge a recurring fee.
5. [Resale]: Acquire an asset from a wholesaler, then sell that asset to a retail buyer at a higher price.
6. [Lease]: Acquire an asset, then allow another person to use that asset for a predefined amount of time in exchange for a fee.
7. [Agency]: Get the attention of a group of people with certain characteristics, then sell access in the form of advertising to another business looking to reach that audience.
8. [Loan]: Lend a certain amount of money, then collect payments over a predefined period of time equal to the original loan plus a predefined interest rate.
9. [Option]: Offer the ability to take a predefined action for a fixed period of time in exchange for a fee.
10. [Insurance]: Take on the risk of some specific bad thing happening to the policy holder in exchange for a predefined series of payments, then pay out claims
11. [Capital]: Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend.

1.11 Form of Value #1: Product

Product 产品 To run a Product-oriented business, you must:

1. Create some sort of tangible item that people want.
2. Produce that item as inexpensively as possible while maintaining an acceptable level of quality.
3. Sell as many units as possible for as high a price as the market will bear.
4. Keep enough inventory of finished product available to fulfill orders as they come in.

1.12 Form of Value #2: Service

Service 服务 In order to create a successful Service, your business must:

1. Have employees capable of a skill or ability other people require but can’t, won’t, or don’t want to use themselves.
2. Ensure that the Service is provided with consistently high quality.
3. Attract and retain paying customers.

1.13 Form of Value #3: Shared Resource

（共享资源） In order to create a successful Shared Resource, you must:

1. Create an asset people want to have access to.
2. Serve as many users as you can without affecting the quality of each user’s experience.
3. Charge enough to maintain and improve the Shared Resource over time.

1.14 Form of Value #4: Subscription

Subscription 订阅 In order to create a successful Subscription, you must:

1. Provide significant value to each subscriber on a regular basis.
2. Build a subscriber base and continually attract new subscribers to compensate for attrition.
3. Bill customers on a recurring basis.
4. Retain each subscriber as long as possible.

1.15 Form of Value #5: Resale

Resale 转卖 In order to provide value as a reseller, you must:

1. Purchase a product as inexpensively as possible, usually in bulk.
2. Keep the product in good condition until sale—damaged goods can’t be sold.
3. Find potential purchasers of the product as quickly as possible to keep inventory costs low.
4. Sell the product for as high a markup as possible, preferably a multiple of the purchase price.

1.16 Form of Value #6: Lease

Lease 出租 In order to provide value via a Lease, you must:

1. Acquire an asset people want to use.
2. Lease the asset to a paying customer on favorable terms.
3. Protect yourself from unexpected or adverse events, including the loss or damage of the leased asset.

1.17 Form of Value #7: Agency

Agency 代理 In order to provide value via Agency, you must:

1. Find a seller who has a valuable asset.
2. Establish contact and trust with potential buyers of that asset.
3. Negotiate until an agreement is reached on the terms of sale.
4. Collect the agreed-upon fee or commission from the seller.

1.18 Form of Value #8: Audience Aggregation

（流量） In order to provide value via Audience Aggregation, you must:

1. Identify a group of people with common characteristics or interests.
2. Create and maintain some way of consistently attracting that group’s attention.
3. Find third parties who are interested in buying the attention of that audience.
4. Sell access to that audience without alienating the audience itself.

1.19 Form of Value #9: Loan

（贷款） In order to provide value via Loans, you must:

1. Have some amount of money to lend.
2. Find people who want to borrow that money.
3. Set an interest rate that compensates you adequately for the Loan.
4. Estimate and protect against the possibility that the Loan won’t be repaid.

1.20 Form of Value #10: Option

（选择权）

WHY

Options are valuable because they allow the purcahser the ability to take a specific action without requiring them to take that action. Options are often used to keep specific courses of action open for a certain period of time before another transaction takes place.

HOW

In order to provide value via Options, you must:

1. Identify some action people might want to take in the future.
2. Offer potential buyers the right to take that action before a specified deadline.
3. Convince potential buyers that the Option is worth the asking price.
4. Enforce the specified deadline on taking action.

1.21 Form of Value #11: Insurance

（保险） In order to provide value via Insurance, you must:

1. Create a binding legal agreement that transfers the risk of a specific bad thing (a “loss”) happening from the policy holder to you.
2. Estimate the risk of that bad thing actually happening, using available data.
3. Collect the agreed-upon series of payments (called “premiums”) over time.
4. Pay out legitimate claims upon the policy.

1.22 Form of Value #12: Capital

（资本） In order to provide value via Capital, you must:

1. Have a pool of resources available to invest.
2. Find a promising business in which you’d be willing to invest.
3. Estimate how much that business is currently worth, how much it may be worth in the future, and the probability that the business will go under, which would result in the loss of your Capital.
4. Negotiate the amount of ownership you’d receive in exchange for the amount of Capital you’re investing.

1.23 Hassle Premium

Hassles come in many forms. The project or task in question may:

• Take too much time to complete.
• Require too much effort to ensure a good result.
• Distract from other, more important priorities.
• Involve too much confusion, uncertainty, or complexity.
• Require costly or intimidating prior experience.
• Require specialized resources or equipment that’s difficult to obtain.

To benefit from the Hassle Premium, you need to understand how much of a hassle the task is to the prospect. The greater the hassle, the higher the potential Hassle Premium.

1.24 Perceived Value

价值察觉 The most valuable offers do one or more of the following:

• Satisfy one or more of the prospect’s Core Human Drives.
• Offer an attractive and easy-to-visualize End Result (discussed later).
• Command the highest Hassle Premium by reducing end-user involvement as much as possible.
• Satisfy the prospect’s Status Seeking tendency by providing desirable Social Signals (discussed later) that help them look good in the eyes of other people.

1.25 Modularity

模块化 Most successful businesses offer value in multiple forms

1.26 Bundling and Unbundling

Bundling and Unbundling can help you create value for different types of customers without requiring the creation of something new.

1.27 Prototype

原型 Ideas are cheap—what counts is the ability to translate an idea into reality, which is much more difficult than recognizing a good idea. The more realistic your Prototype is, the easier it’ll be for people to understand what you’re trying to do.

1.28 Iteration Cycle

迭代 Iteration has six major steps, which I call the WIGWAM method:

1. Watch—What’s happening? What’s working and what’s not?
2. Ideate—What could you improve? What are your options?
3. Guess—Based on what you’ve learned so far, which of your ideas do you think will make the biggest impact?
4. Which?—Decide which change to make.
5. Act—Actually make the change.
6. Measure—What happened? Was the change positive or negative? Should you keep the change, or go back to how things were before this iteration?

For best results, clearly define what you’re trying to accomplish with each iteration.

1.29 Iteration Velocity

迭代速度 The key is to keep each iteration small, clear, and quick, basing each iteration on what you learned via previous iterations.

1.30 Feedback

反馈 Getting useful Feedback from your potential customers is the core of the Iteration Cycle. Here are a few tips to maximize the value of the Feedback you receive:

1. Get Feedback from real potential customers instead of friends and family
2. Ask open-ended questions
3. Steady yourself, and keep calm
4. Take what you hear with a grain of salt
5. Give potential customers the opportunity to preorder

Whenever possible, give the people who are giving you Feedback the opportunity to preorder the offering

1.31 Alternatives

替代品 As you develop your offering, you can’t avoid making choices between competing Alternatives. Should

1.32 Trade-offs

妥协 By paying attention to the Patterns behind what your best customers value, you’ll be able to focus on improving your offering for most of your best potential customers most of the time.

1.33 Economic Values

经济价值 there are nine common Economic Values that people typically consider when evaluating a potential purchase. They are:

1. Efficacy—How well does it work?
2. Speed—How quickly does it work?
3. Reliability—Can I depend on it to do what I want?
4. Ease of Use—How much effort does it require?
5. Flexibility—How many things does it do?
6. Status—How does this affect the way others perceive me?
7. Aesthetic Appeal—How attractive or otherwise aesthetically pleasing is it?
8. Emotion—How does it make me feel?
9. Cost—How much do I have to give up to get this?

In the book Trade-Off: Why Some Things Catch On, and Others Don’t, Kevin Maney discusses these common values in terms of two primary characteristics: convenience and fidelity. Things It’s incredibly difficult to optimize for both fidelity and convenience at the same time, so the most successful offerings try to provide the most convenience or fidelity among all competing offerings.

1.34 Relative Importance Testing

相关重要性测试

Things which matter most must never be at the mercy of things which matter least.

— JOHANN WOLFGANG VON GOETHE, NINETEENTH-CENTURY DRAMATIST, POET, AND POLYMATH

As a rule, people never accept Trade-offs unless they’re forced to make a Decision The best way to discover what people actually value is to ask them to make explicit Trade-offs during the research process Relative Importance Testing…gives you a way to determine what people actually want by asking them a series of simple questions designed to simulate real-life Trade-offs. Here’s how it works.

1.35 Critical Assumptions

关键假设 Assumption-Based Planning]]

It is better to be roughly right than precisely wrong.

—JOHN MAYNARD KEYNES, ECONOMIST

Critical Assumptions are facts or characteristics that must be true in the real world for your business or offering to be successful

1.36 Shadow Testing

灰度测试

1.37 Minimum Viable Offer

最小价值提供 Since Feedback from prospective customers and paid-in-full orders are very different things, creating a Minimum Viable Offer allows you to start collecting data from real customers as quickly as possible, directly testing the idea’s Critical Assumptions and reducing the risk of making a business-ending investment decision

1.38 Incremental Augmentation

递增 Incremental Augmentation is the process of using the Iteration Cycle to add new benefits to an existing offer

1.39 Field Testing

田野测试

2. Marketing

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.

2.1 Attention

Rule #1 of Marketing is that your potential customer’s available attention is limited. Keeping up with everything in your world would require way more attention than you actually have to work with.

2.2 Receptivity

接受能力 The fastest way to be ignored by anyone is to start talking about something they don’t care about.

2.3 Remarkability

Being Remarkable is the best way to attract [Attention .

EXAMPLE

marketing book Purple Cow, Seth Godin uses a wonderful metaphor to illustrate this principle. A field full of brown cows is boring. A purple cow violates the viewer’s expectations, which naturally attracts Attention and interest.

2.4 Probable Purchaser

Your Probable Purchaser]] is the type of person who is perfectly suited to what you’re offering. Attempting to appeal to everyone is a waste of time and money: focus your marketing efforts on your Probable Purchaser.

2.5 Preoccupation

专注 Preoccupation is a fact of life for modern marketers: at the beginning of the marketing process, your prospects are paying attention to something else, not you. In order to attract Attention to your offer, what you’re doing must be more interesting than your prospect’s current subject of attention.

2.6 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 Drives.

EXAMPLE

Most women don’t buy a $20 tube of lipstick for its color alone. They buy it because they believe it will make them more beautiful and desirable.

HOW

It’s often far more comfortable to focus on the features: you know what your offer does. Even so, it’s far more effective to focus on the benefits: what your offer will provide to customers.

2.7 Qualification

资格，资质，能力，限定，先决条件

WHAT

Qualification is the process of determining whether or not a prospect is a good customer before they purchase from you.

WHY

Progressive Insurance has turned Qualification into a profitable business strategy.

HOW

When you request a quote, Progressive asks you a set of basic questions:

1. What type of car do you have?
2. Do you own or lease it? If you own it, are you still making payments?
3. What’s your ZIP code?
4. Are you married?
5. Did you go to college?
6. Have you had any at-fault accidents in the past five years?

2.8 Point of Market Entry

市场切入口 If you can get a prospective customer’s attention as soon as they become interested in what you’re offering, you become the standard by which competing offers are evaluated. Discovering where Probable Purchasers start looking for information after crossing the interest threshold is extremely valuable.

2.9 Addressability

抵达能力

WHAT

Addressability is a measure of how easy it is to get in touch with people who might want what you’re offering.

WHY

A highly Addressable audience can be reached quickly and easily. A non-Addressable audience can only be reached with extreme hardship, or isn’t Receptive and doesn’t want to be reached at all.

2.10 Desire

渴望

WHY

It’s almost impossible to make someone want something they don’t already desire…we only purchase what we already desire on some level. 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. Refer to [Core Human Drives.

2.11 Visualization

视觉化 The test drive is used to sell cars all over the world for a very good reason: it works….Once you’re actually behind the wheel of a car, however, the emotional parts of your mind take control…You’ve stopped comparing and started wanting. Once you start wanting, you’ll probably buy—it’s only a matter of time. The most effective way to get people to want something is to encourage them to Visualize what their life would be like once they’ve accepted your offer.

2.12 Framing

构图，意在突出重要的部分，忽略对听者不重要的内容。

Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.

—MARCUS AURELIUS, ROMAN EMPEROR AND PHILOSOPHER

WHAT

Framing is the act of emphasizing（强调） the details that are critically（极其） important while de-emphasizing things that aren’t, by either minimizing certain facts or leaving them out entirely.

WHY

Proper use of Framing can help you present your offer persuasively while honoring your customer’s time and attention.

HOW

It’s simply not practical to include all of the facts and context when communicating with others—we emphasize some details and leave out others to save time.

2.13 Free

WHY

Giving Free value attracts attention, but always remember that attention alone doesn’t pay the bills.

2.14 Permission

权限

WHAT

Asking for Permission to follow up after providing Free value is more effective than interruption.

WHY

Offering genuine value earns your prospect’s Attention, and asking for Permission gives you the opportunity to focus on communicating with people you know are interested in what you have to offer.

HOW

The best way to get Permission is to ask for it. Whenever you provide value to people, ask them if it’s okay to continue to give them more value in the future.

2.15 Hook

钩子，诱惑

WHAT

A Hook is a single phrase or sentence that describes an offer’s primary benefit. Sometimes the Hook is a title, and sometimes it’s a short tagline. Regardless, it conveys the reason someone would want what you’re selling.

WHY

The better your Hook, the more Attention you’ll grab, and the easier it’ll be for your satisfied customers to tell their friends about you.

HOW

When creating a Hook, focus on the primary benefit or value your offer provides. Emphasize what’s uniquely valuable about your offer and why the prospect should care. Brainstorm a list of words and phrases related to your primary benefit, then experiment with different ways to connect them in a short phrase.

2.16 Call-to-Action

WHAT

If you want your prospects to take the next step you’re encouraging, you need to tell them exactly what to do

WHY

A Call-To-Action directs your prospects to take a single, simple, obvious action.

HOW

make it immediately clear WHERE the e-mail address field is, WHY they should fill it out, WHAT to click once they’ve entered their e-mail, and WHAT they can expect to happen when they do.

2.17 Narrative

叙述

WHAT

Narratives around the world follow a common format…”The Hero’s Journey” or the “monomyth.” The Hero’s Journey begins by introducing the Hero: a normal person……The Hero then receives a “call to adventure”: a challenge, quest……When the Hero accepts the call……A series of remarkable experiences initiates them into the new world……After persevering……the Hero receives a mighty gift or power, then returns to the normal world to share this knowledge……In return, the Hero receives the respect and admiration of all.

WHY

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.

HOW

Tell your prospective customers the stories they’re interested in hearing, and you’ll inevitably grab their Attention.

2.18 Controversy

争论

WHAT

Controversy means publicly taking a position that not everyone will agree with, approve of, or support.

WHY

Used constructively, Controversy can be an effective way to attract [2.1 Attention: people start talking, engaging, and paying [Attention to your position, which is a very good thing.

HOW

Controversy with a purpose is valuable; Controversy for the sake of Controversy, or Controversy that belittles and demeans, is not.

2.19 Reputation

名声

WHAT

Reputation is what people generally think about a particular offer or company.

WHY

Reputations naturally arise whenever people talk to one another. Building a strong Reputation is hugely valuable: people are often willing to pay a premium for a good Reputation.

3. Sales

3.1 Transaction

交易

WHAT

Transaction is an exchange of value between two or more parties. The Transaction is the defining moment of every business. Sales are the only point in the business cycle where resources flow into the business, which makes completing Transactions critically important.

HOW

You can only transact with things that are Economically Valuable. That’s why developing and testing a Minimum Viable Offer is so important: it’s the best way to determine whether or not you’ve created something valuable enough to sell before you invest your life savings.

3.2 Trust

WHY

Without a certain amount of Trust between parties, a [Transaction will not take place.

HOW

Building a trustworthy Reputation over time by dealing fairly and honestly is the best way to build Trust.

3.3 Common Ground

（兴趣、信仰或观点上的）共同点，一致之处，共同基础

WHAT

Common Ground is a state of overlapping interests between two or more parties. Common Ground is a precondition of any type of Transaction.

HOW

Negotiation is the process of exploring different options to find Common Ground: the more potential paths you explore, the greater the chance you’ll be able to find one in which your interests overlap.

3.4 Pricing Uncertainty Principle

定价不确定性原理 Uncertainty Principle]]

Everything you want in life has a price connected to it. There’s a price to pay if you want to make things better, a price to pay just for leaving things as they are, a price for everything.

—HARRY BROWNE, AUTHOR OF FAIL-SAFE INVESTING

WHAT

Pricing Uncertainty Principle: all prices are arbitrary and malleable. The Pricing Uncertainty Principle has an important corollary 必然结果: you must be able to support your asking price before a customer will actually accept it.

3.5 Four Pricing Methods

There are four ways to support a price on something of value:

• replacement cost: by answering the question “How much would it cost to replace?”

• market comparison: by answering the question “How much are other things like this selling for?”

• Net Present Value]](DCF/NPV): by answering the question “How much is it worth if it can bring in money over time?”
  • DCF/NPV is only used for pricing things that can produce an ongoing cash flow.
• The Value Comparison method supports a price by answering the question “Who is this particularly valuable to?” In the case of the house, this question becomes “What features of this house would make it valuable to certain types of people?”

3.6 Price Transition Shock

价格过渡冲击，或者理解为折扣，价格的锚定理论有关。

Discounts attract customers when the offer is a commodity. If there’s no difference between the gasoline at one gas station and another

Price Elasticity of Demand

HOW

There are two major considerations when setting your prices with Price Transition Shock in mind:

1. potential profitability 可能的利润率
2. ideal customer characteristics 理想客户类型

3.7 Value-Based Selling

Value-Based Pricing

WHAT

Value-Based Selling is the process of understanding and reinforcing（加深、 加固） the Reasons Why your offer is valuable to the purchaser.

WHY

Value Comparison method is often the best way to support a high price on your offer. Value-Based Selling is how you support that price. By understanding and reinforcing the Reason Why a Transaction will be valuable to the customer, you simultaneously increase the likelihood of a Transaction as well as the price the buyer will be willing to pay.

HOW

Neil Rackham describes the four phases of successful selling:

1. understanding the situation
2. defining the problem
3. clarifying the short-term and long-term implications of that problem
4. quantifying the need-payoff, or the financial and emotional benefits the customer would experience after the resolution of their problem

3.8 Education-Based Selling

WHAT

Education-Based Selling is the process of making your prospects better, more informed customers.

HOW

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. Education-Based Selling requires an up-front investment in your prospects, but it’s worth it. By investing energy in making your prospects smarter, you simultaneously build Trust in your expertise and make them better customers.

3.9 Next Best Alternative

替代品，竟品

WHY

The other party always has a Next Best Alternative as well—that’s what you’re negotiating against.

HOW

you can structure your agreement so it’s more attractive than their next best option. The more you know about the other party’s alternatives, the more attractively you can Frame your total offer by Bundling/Unbundling various options.

3.10 Exclusivity

独占的

WHY

Exclusive offers make it much easier to maintain high Perceived Value, since there’s no direct competition. Exclusivity is easiest to maintain when you’ve created something new, which means an exclusivity strategy makes the most sense for Product and Service.

3.11 Three Universal Currencies

Time will take your money, but money won’t buy time. —JAMES TAYLOR, MUSICIAN

there are Three Universal Currencies:

• Resources: Resources are tangible items like money, gold, oil, etc
• Time
• Flexibility

Trade-offs between one or more of the others.

3.12 Three Dimensions of Negotiation

The Three Dimensions of Negotiation are:

• Setup: setting the stage for a satisfying outcome to the negotiation.
• Structure: the terms of the proposal
• Discussion:

SETUP

Setup is the negotiation equivalent of Guiding Structure. Who is involved in the negotiation, and are they open to dealing with you? Who are you negotiating with, and do they know who you are and how you can help them? What are you proposing, and how does it benefit the other party? What’s the setting—will you present your offer in person, by phone, or by some other means? What are all of the Environmental factors around the deal—do recent events make this deal more or less important to the other party?

STRUCTURE

Remember, your goal in creating the proposal is to find Common Ground What exactly will you propose, and how will you Frame your proposal to the other party? What are the primary benefits of your proposal to the other party? What is the other party’s Next Best Alternative, and how is your proposal better? How will you overcome the other party’s objections and Barriers to Purchase? Are there Trade-offs or concessions you’re willing to make to reach an agreement?

DISCUSSION

The Discussion is where you actually talk through your proposal with the other party.

3.13 Buffer

缓冲人

WHAT

A Buffer is a third party empowered to negotiate on your behalf. Agents, attorneys, mediators, brokers, accountants, and other similar subject-matter experts are all examples of Buffers.

WHY

When a professional athlete is negotiating a contract to join a professional sports team, he or she typically enlists the help of both an agent and an attorney. Buffers can also be useful in order to add some time or space to a high-intensity negotiation.

HOW

Be very mindful of Incentive-Caused Bias when working with a Buffer. Depending on the arrangement, your Buffer’s priorities may be very different from your own. Agents are typically compensated on a commission basis, so it pays to be wary if you’re using them on the buy side of a deal. Don’t let your Buffer replace your own informed judgment.

3.14 Persuasion Resistance

强行推销

WHAT

One of the things that makes prospects uncomfortable around salespeople is the feeling that they’re going to get the “hard sell” or be tricked into agreeing to something that’s not in their best interest. This experience is called Persuasion Resistance.

WHY

If a prospect feels that you’re desperate to make a sale, it diminishes their interest in a matter of seconds. Desperation is a subtle signal that other people don’t find your offer desirable, and Social Proof starts working against you. If a prospect senses you’re chasing them, their first impulse will be to move away from you.

HOW

Salespeople need to be aware of two additional signals that can trigger Persuasion Resistance: desperation and chasing.（绝望和追赶） 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. Chasing a prospect to make a sale is counterproductive, a waste of time and energy. Instead, find ways to Frame the situation in a way that encourages the prospect to feel like they’re chasing you.

3.15 Reciprocation

回报

WHAT

Reciprocation is the strong desire most people feel to “pay back” favors, gifts, benefits, and resources provided. Here’s the tricky part: the desire to Reciprocate is not necessarily in proportion to the original benefit provided.

WHY

As a social force, Reciprocation is one of the primary psychological tendencies that underlie human cooperation……Historically, gift giving was how the powerful remained in Power.

HOW

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. By giving away value and helping others as much as you can……will also increase the probability that they will be interested enough when you do present your Call-to-Action.

3.16 Damaging Admission

入场阻力

WHAT

making a Damaging Admission like this to your prospects can actually increase their Trust in your ability to deliver what you promise.

WHY

Your prospects know you’re not perfect, so don’t pretend to be.

HOW

Instead of making them wonder, tell them yourself. By being up front with your prospects regarding drawbacks and Trade-offs, you’ll enhance your trustworthiness and close more sales.

3.17 Barriers to Purchase

购买障碍

WHAT

Barriers to Purchase: risks, unknowns, and concerns that prevent your prospects from buying what you offer. There are five standard objections that appear in sales of all kinds:

1. It costs too much. Loss Aversionmakes spending money feel like a loss……and that naturally makes people hesitate.
2. It won’t work
3. It won’t work for ME
4. I can wait
5. It’s too difficult

HOW

Objection #1 (“it costs too much”) is best addressed via Framingand Value-Based Selling. Objections #2 and #3 (“it won’t work” / “it won’t work for me”) are best addressed via Social Proof—showing the prospect how customers just like them are already benefiting from your offer. Objections #4 and #5 (“I can wait” / “it’s too difficult”) are best addressed via Education-Based Selling. Often, your prospects haven’t fully realized they have a problem, particularly in the case of Absence Blindness.

3.18 Risk Reversal

风险转移

WHAT

Risk Reversal is a strategy that transfers some (or all) of the risk of a Transaction from the buyer to the seller.

WHY

this strategy completely eliminates the purchaser’s perception of risk, which is a major Barriers to Purchase. The difference is that the purchaser is purchasing from one seller—the seller is selling to many purchasers. Your customers experience this risk with every purchase they make…

3.19 Reactivation

再激活，复购

WHAT

Reactivation is the process of convincing past customers to buy from you again.

WHY

Since Netflix is a Subscription business, every reactivated customer means a new monthly stream of income, which greatly enhances the Lifetime Valueof each customer. Your cost of customer acquisition (a component of Allowable Acquisition Cost) is extremely low. Make it a priority every three to six months to contact your lapsed customers with another offer.

4. Value Delivery

A satisfied customer is the best business strategy of all.

by Michael LeBoeuf, business professor and author of How to Win Customers and Keep Them for Life

WHAT

Value Delivery 价值传递 involves everything necessary to ensure that every paying customer is a happy customer: order processing, inventory management, delivery/fulfillment, troubleshooting, customer support, etc

4.1 Value Stream

Great design is eliminating all unnecessary details. —MINH D. TRAN, TECHNOLOGIST AND DESIGNER

Value Stream 价值流 A Value Stream is the set of all steps and all processes from the start of your Value Creation process all the way through the delivery of the end result to your customer.

You can think of the Value Stream as a combination of your Value Creation and Value Delivery processes.

The Toyota Production System (TPS) was the first large-scale manufacturing operation to systematically examine its entire Value Stream on a regular basis. Analyzing the production system in great detail paved the way for an ongoing series of small, incremental improvements…until The Paradox of Automation destroyed that Reputation.

HOW

The best way to understand your Value Stream is to diagram it. In general, try to make your Value Stream as small and efficient as possible.

4.2 Distribution Channel

Distribution Channel 分销渠道 A Distribution Channel describes how your form of value is actually delivered to the end user.

two basic types of Distribution Channels: direct-to-user- and *intermediary. *Direct-to-user- distribution works across a single channel: from the business directly to the end user. *Intermediary- distribution works across multiple channels Intermediary distribution can increase sales, but it requires giving up a certain amount of control over your Value Delivery process.

4.3 The Expectation Effect

Expectation Effect 期望效应 `Expectation Effect: Quality = Performance - Expectations.`

WHY

A customer’s perception of quality relies on two criteria: expectations and performance.

HOW

Customer expectations have to be high enough for a customer to purchase from you in the first place.

4.4 Predictability

Predictability 可预测的

WHY

When purchasing something of value, customers want to know exactly what they can expect—they want their experience to be Predictable. Improving Predictability has major Reputation and value perception benefits

HOW

There are three primary factors that influence the Predictability of an offer:

• Uniformity（一致性）: means delivering the same characteristics every time.
• Consistency（连贯性）: means delivering the same value over time.
• Reliability（可靠性）: means being able to count on delivery of the value without error or delay.

4.5 Throughput

Throughput 生产力 Throughput is the rate at which a system achieves its desired goal. It’s the measure of effectiveness of your Value Stream. It’s measured in the form of units/time: the higher the number of units and the lower the time, the higher the throughput.

• Dollar Throughput- is a measure of how quickly your overall business system creates a dollar of profit.
• Unit Throughput- is a measure of how much time it takes to create an additional unit for sale.
• Satisfaction Throughput- is a measure of how much time it takes to create a happy, satisfied customer.

HOW

The best way to begin increasing Throughput is to start measuring it.

4.6 Duplication

Duplication 复制 Duplication is the ability to reliably reproduce something of value.

As Kevin Kelly remarked in his essay “Better Than Free,” the Internet is essentially an enormous, inexpensive copy machine.

4.7 Multiplication

Multiplication 增长

WHY

Multiplication is Duplication for an entire process or System. McDonald’s began as a single restaurant in California

HOW

Multiplication is what separates small businesses from huge businesses. There’s an upper limit on what any single business system can produce. By creating more identical business systems based on a proven model, Multiplication can expand a business’s ability to deliver value to more customers.

4.8 Scale

Scale 规模

Humans don’t Scale……in Performance Load, a person’s effectiveness usually goes down as the demands on them increase.

WHAY

Scale is the ability to reliably Duplicate or Multiply a process as volume increases. Scalability is typically limited by the amount of required human involvement in a process. Starbucks is able to enhance their ability to Duplicate lattes via Automation.

HOW

Products are typically the easiest to Duplicate, while Shared Resources (like gyms, etc.) are easiest to Multiply.

4.9 Accumulation

Accumulation 积累，量变到质变 Sometimes when I consider what tremendous consequences come from little things, I am tempted to think: there are no little things.

—BRUCE BARTON, ADVERTISING EXECUTIVE BEST KNOWN FOR CREATING THE BETTY CROCKER BRAND

WHY

Small helpful or harmful behaviors and inputs tend to Accumulate over time, producing huge results.

Incremental Augmentation is an example of the power of Accumulation. If your offer improves with every Iteration Cycle, it won’t be long before your offer is many times more valuable to your customers than it was before. Small changes to your Value Delivery process can save you a ton of time and effort in the long run.

4.10 Amplification

Amplification 放大 making a small change to a scalable System produces a huge result.

HOW

The best way to identify Amplification opportunities is to look for things that are constantly Duplicated or Multiplied. Scalable systems amplify the results of small changes.

4.11 Barrier to Competition

障碍物

WHY

Every improvement you make to your Value Stream make it harder for potential competitors to keep up.

HOW

Every benefit you deliver and every customer you serve make it harder for competitors to replicate you. Don’t focus on competing—focus on delivering even more value.

4.12 Force Multiplier

事半功倍

WHY

Tools are important because they Multiply the effect of physical force, thought, or attention. The more a tool Amplifies or concentrates your effort, the more effective the tool.

HOW

Investing in Force Multipliers……the more effective they are, the more expensive they tend to be.

4.13 Systemization

Systemization 组织化，分类

WHAT

A System is a process made explicit and repeatable—a series of steps that has been formalized in some way. Systems can be written or diagrammed, but they are always Externalized in some way.

WHY

The primary benefit of creating a system is that you can examine the process and make improvements. Systems also help teams of people stay on the same page. If you can’t systematize your process, you can’t Automate it.

5. Finance

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.

5.1 Profit

Profit 利润 Profit is a very simple concept: it’s bringing in more money than you spend.

WHY

Profit is important because it allows businesses to stay in operation. Profit also provides a “cushion” that allows the business to weather unexpected events. but it’s not the be-all and end-all of business. For some people (like me), business is more of a creative endeavor—a way to explore what’s possible, help others, and support yourself at the same time. From this perspective, as long as you’re making enough Profit, your business will continue to be successful.

5.2 Profit Margin

Profit Margin 利润率 Profit Margin (often abbreviated to “margin”) is the difference between how much revenue you capture and how much you spend to capture it, expressed in percentage terms.

Formula for profit margin: ((Revenue – Cost) / Revenue) × 100= % Profit Margin

USAGE

Most businesses try to keep each offer’s Profit Margin as high as possible, which makes sense: the higher the margin, the more money the business gets to keep from each sale. Businesses often use Profit Margin as a way of comparing offers.

WHAT

markup, which represents how the price of an offer compares to its total cost. Formula for markup（加成）: `((Price – Cost) / Cost) × 100= % Markup`

5.3 Value Capture

Value Capture 价值获取 Value Capture is the process of retaining some percentage of the value provided in every Transaction.

There are two dominant philosophies behind Value Capture: maximization and minimization.

Maximization means that a business should attempt to capture as much value as possible…Unfortunately, the maximization approach tends to erode the reason customers purchase from a business in the first place.

The minimization approach means that businesses should capture as little value as possible, as long as the business remains Sufficient…it preserves the value customers see in doing business with the company, which is necessary for the business’s long-term success.

WHY

5.4 Sufficiency

Sufficiency 充足

WHY

business is not necessarily about maximizing Profits. you have enough profit to do the things you need to do to keep the business running and make it worth your time, you’re successful

WHAT

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 for the foreseeable future. You can track financial sufficiency using a number called “target monthly revenue” (TMR).

5.5 Valuation

Valuation 估值 Valuation is an estimate of the total worth of a company.

5.6 Cash Flow Statement

Cash Flow Statement 现金流量表

I recommend starting with the Cash Flow Statement.

The Cash Flow Statement is straightforward: it’s an examination of a company’s bank account over a certain period of time

5.7 Income Statement

Income Statement 损益表

WHAT

the Income Statement contains an estimate of the business’s Profit over a certain period of time, once revenue is matched with the related expenses. Net Profit `Revenue – Cost of Goods Sold – Expenses – Taxes = Net Profit`

5.8 Balance Sheet

Balance Sheet 资产负债表 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` Assets are things the company owns that have value: products, equipment, stock, etc.

Liabilities are obligations the firm hasn’t yet discharged: loans, financing, etc.

Owner’s Equity, the company’s “net worth.”

5.9 Financial Ratios

Financial Ratios 财务比率

WHY

Financial Ratios are beneficial because they allow you to make comparisons very quickly. Profitability ratios indicate a business’s ability to generate Profit]].

WHAT

Return on Assets which is calculated by dividing net profit by total assets, tells you what percentage of every dollar invested in the business was returned as profit.

Leverage ratios indicate how your company uses debt.

Liquidity ratios indicate the ability of a business to pay its bills.

Efficiency ratios indicate how well a business is managing assets and liabilities.

5.10 Cost-Benefit Analysis

Cost-Benefit Analysis 成本效益分析 Cost-Benefit Analysis is the process of examining potential changes to your business to see if the benefits outweigh the costs.

5.11 Four Methods to Increase Revenue

Believe it or not, there are only four ways to increase your business’s revenue:

• Increase the number of customers you serve.
  • Increasing the number of customers means you’re trying to bring more people in the door
• Increase the average size of each Transaction by selling more.
  • Increasing average transaction size means you’re trying to get each customer to purchase more
• Increase the frequency of transactions per customer.
  • Increasing the frequency of transactions per customer means encouraging people to purchase from you more often.
• Raise your prices.
  • Raising your prices means you’ll collect more revenue from every purchase a customer makes.

5.12 Pricing Power

Pricing Power 定价权

WHAT

Pricing Power is your ability to raise the prices you’re charging over time.

WHY

Pricing Power is related to a concept economists call “price elasticity.”Price Elasticity of Demand If customers are very sensitive to the price of your offer, you’ll lose many customers with even a slight increase in price… Pricing Power is important because raising your prices allows you to overcome the adverse effects of inflation and increased costs.

5.13 Lifetime Value

Lifetime Value LTV Lifetime Value is the total value of a customer’s business over the lifetime of their relationship with your company.

WHY

One of the reasons Subscriptions are so profitable is that they naturally maximize Lifetime Value.

HOW

it’s much better to operate in markets where customers have a high Lifetime Value.

5.14 Allowable Acquisition Cost

Allowable Acquisition Cost 获客成本

WHAT

Allowable Acquisition Cost (AAC) is the marketing component of Lifetime Value.

WHY

The higher the average customer’s Lifetime Value, the more you can spend to attract a new customer, making it possible to spread the word about your offer in new ways.

HOW

How…not losing money hand over fist?……The answer is Subscription.

• HOW TO CALCULATE

  To calculate AAC, start with…average Lifetime Value, then subtract（减去） your Value Stream costs—what it takes to create and deliver the value promised to that customer over your entire relationship with them. Then subtract your Overhead divided by your total customer base, which represents the Fixed Costs you’ll need to pay to stay in business over that period of time. Multiply the result by 1 minus your desired Profit Margin (if you’re shooting for a 60 percent margin, you’d use 1.00 − 0.60=0.40), and that’s your AAC.

  The higher the Lifetime Value of your customers, the higher the Allowable Acquisition Cost.

5.15 Overhead

Overhead 日常开支 Overhead represents the minimum ongoing resources required for a business to continue operation.

WHY

The lower your Overhead, the less revenue the business requires to continue operation, and the more quickly you’ll reach your point of financial Sufficiency.

Overhead is critically important if you are building your company on a fixed amount of Capital.

5.16 Costs: Fixed and Variable

Fixed Costs 固定成本 Fixed Costs are incurred no matter how much value you create.

Variable Costs 可变成本 Variable Costs are directly related to how much value you create.

HOW

Reductions in Fixed Costs [Accumulate; reductions in Variable Costs are Amplified by volume.

5.17 Incremental Degradation

逐步降级，是指通过降低成本，但对质量没有太大的影响。

WHY

Cutting costs can help you increase your Profit Margin, but it often comes at a steep price.

HOW

Cutting costs that are wasteful or unnecessary is certainly a good idea, but Diminishing Returns always kick in—be careful not to throw the baby out with the bath water.

5.18 Breakeven

Breakeven 收支平衡点 Breakeven is the point where your business’s total revenue to date is equal to its total expenses to date—it’s the point where your business starts creating wealth instead of consuming it.

5.19 Amortization

Amortization 分期偿还

WHAT

Amortization is the process of spreading the cost of a resource investment over the estimated useful life of that investment.

WHY

Amortization can help you determine whether or not a big expense is a good idea.

HOW TO CALCULATE

Amortization depends on an accurate assessment of useful life, which is a prediction. Amortization doesn’t work well if you don’t sell what you produce or if your equipment wears out more quickly than expected

5.20 Purchasing Power

Purchasing Power 购买力

WHAT

Purchasing Power is the sum total of all liquid assets a business has at its disposal（处理）.

Purchasing Power is what you use to pay your Overhead and your suppliers

HOW

Always keep track of how much Purchasing Power you have available.

5.21 Cash Flow Cycle

Cash Flow Cycle describes how the cash Flows in and out of business. Accounts Receivable are promises of payment you’ve received from others. Debt is a promise you make to pay someone at a later date. To bring in more cash it’s better to speed up collections and reduce the extension of credits.

WHY

The more Purchasing Power you have, the more Resilient your business is and the better your ability to handle the unexpected.

5.22 Opportunity Cost

Opportunity Cost 机会成本

WHAT

Opportunity Cost is the value you’re giving up by making a Decision.

HOW

it’s tempting to overanalyze every Decision to make sure you’ve chosen the very best option available, which can easily go well past the point of Diminishing Returns.

5.23 Time Value of Money

金钱的时间成本 A dollar today is worth more than a dollar tomorrow. Calculating the Time Value of Money is a way of making Decisions in the face of Opportunity Costs.

5.24 Compounding

Compounding 复利

WHAT

Compounding is the Accumulation of gains over time. Whenever you’re able to reinvest gains, your investment will build upon itself exponentially—a positive Feedback Loop.

5.25 Leverage

杠杆原理 Leverage Leverage is the practice of using borrowed money to magnify potential gains. Leverage is a form of financial Amplification—it magnifies the potential for both gains and losses.

5.26 Hierarchy of Funding

融资结构

WHAT

Funding can help you do things that would otherwise be impossible with your current budget. imagine a Hierarchy of Funding: a ladder of available options. starting at the bottom:

• Personal Cash is by far the best form of financing.
• Personal Credit is another low-cost method of financing.
• Personal Loans are typically made by friends and family.
• Unsecured Loan（无抵押贷款）are typically made by banks and credit unions.
• Secured Loan（有抵押贷款）require collateral.
• Bond are debt sold to individual lenders.
• Accounts Receivable Financing is a special type of secured lending unique to businesses.
• Angel Capital is where we shift from Loans to Capital.
• Venture Capital takes over where angels leave off.
• A Initial Public Offering involves selling partial ownership of the company to investors on the open market.

5.27 Bootstrapping

Bootstrapping 自力更生 Bootstrapping is the art of building and operating a business without Funding.

WHY

Bootstrapping allows you to grow your business while maintaining 100 percent control over the business’s operations.

HOW

If you accept Funding, make sure that you use it to do things that you couldn’t do any other way. Force Multipliers are useful but expensive…

5.28 Return on Investment

Return on Investment 投资回报率

WHAT

Return on Investment (ROI) is the value created from an investment of time or resources.

WHY

Return on Investment can help you decide between competing alternatives.

HOW

you can use it for other Universal Currencies as well. “Return on Invested Time” is an extremely useful way to analyze the benefits of your effort.

Every future ROI estimate is a semieducated guess.

5.29 Sunk Cost

Sunk Cost 沉没陈本

WHAT

Sunk Cost are investments of time, energy, and money that can’t be recovered once they’ve been made.

5.30 Internal Controls

Internal Control

WHAT

Internal Control are a set of specific Standard Operating Procedure a business uses to collect accurate data, keep the business running smoothly, and spot trouble as quickly as possible.

WHY

Financial controls also help you to benchmark your company against other companies in your market.

HOW

Internal Control are most useful in four areas:

• Budgeting is the act of estimating future costs and taking steps to ensure that these estimates aren’t exceeded without good reason. Budgets are very important in controlling Profit Margins, the Cash Flow Statement Cycle, and Leverage.
• Supervision is important in businesses that rely on employees or outside firms for important parts of its business process.
• Compliance is necessary when a business operates in an industry affected by government regulations.
• Theft and Fraud Prevention（盗窃和诈骗保护）is important to protect against the risk of financial loss by an unscrupulous party.

6. The Human Mind

Businesses are built by people for people. Understanding how we take in information, how we make decisions, and how we decide what to do or what not to do is critically important if you want to create and sustain a successful business venture.

6.1 Caveman Syndrome

洞穴人综合症 we are all running demanding new software on ancient hardware. 也就是所谓的生物人，虽然现代人通常称自己为社会人，但是人类内在的生物特性多数 时候还是在起作用。

WHAT

Human biology is optimized for conditions that existed 100,000 years ago, not for the world in which we actually live today.

WHY

Part of the challenge of working in the modern world is that our brains and bodies are tuned for physical and social survival, not sixteen-hour workdays.

6.2 Performance Requirements

WHY

If you want to get things done, you can’t run on “empty”—the human body has Performance Requirements.

HOW

Eat high-quality food. [Garbage In, Garbage Out] pay attention to what you put into your body. Exercise regularly. According to Brain Rules 让孩子的大脑自由 by John Medina, even low-intensity physical activity increases energy, improves mental performance, and enhances your ability to focus.

Get at least 7-8 hours of sleep each night. Sleep helps consolidate the results of Pattern Matching and Mental Simulation, as well as reverse the effects of Willpower Depletion.

6.3 The Onion Brain

WHAT

Think of the Brain as an Onion……At the core is a structure called the hindbrain, which is essentially responsible for keeping you alive……sometimes called the “lizard brain” because…generating signals that are passed down through your spinal cord and nerves to every part of your body, resulting in your physical actions.

Above your hindbrain is the midbrain, which is responsible for processing sensory data, emotion, memory, and Pattern Matching.

Sitting just above the midbrain is a thin, folded layer of tissue—the forebrain. This small sheet of neural matter is responsible for the cognitive capabilities that make us distinctly human: self-awareness, logic, deliberation, Inhibition, and Decision.

P. J. Eby…uses a great analogy to explain the relationship between the different parts of your mind: your brain is a horse, and “you” are the rider. Your “horse” is intelligent—it moves on its own, can identify challenges, and will balk at things that appear dangerous or scary. “You,” the rider, are there to set a direction and reassure the “horse” that it’s safe to proceed.

Mindfulness in Plain English by Bhante Henepola Gunaratana and Wherever You Go, There You Are by Jon Kabat-Zinn.

6.4 Perceptual Control

Perceptual Control 感知控制

WHAT

In reality, human behavior is much more like a thermostat（温度调节器）This relationship is called Perceptual Control……and the action we ultimately take depends on the Environment.

The Environment dictates which actions are possible to bring the perception under control. Control is not planning—it’s adjusting to changes in the Environment as they actually happen.

WHY

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.

6.5 Reference Level

Reference Level Reference Level—a range of perceptions（感觉，洞察力）that indicate the system is “under control.” There are three kinds of Reference Levels: set points, ranges, and errors.

• A set point is a minimum or maximum value……Business financial controls are managed as set points
• A range is a spread of acceptable values.
• An error is a set point defined as zero—any perception that’s not zero is out of control.

HOW

If you want to change a behavior, you must either change the system’s [Reference Level](#orgec6b681) or change the Environment in which the system is operating.

Consciously defining and redefining Reference Levels can help you change your behavior.

6.6 Conservation of Energy

The fundamental principle of human action is that men seek to gratify（满足）their desires with the least exertion（努力）.

—HENRY GEORGE, AUTHOR OF THE SCIENCE OF POLITICAL ECONOMY, 1898

people are generally lazy. The critical insight is that being lazy is a feature, not a bug. Unless a Reference Level is violated, people generally will Conserve Energy by not acting.

WHY

Conservation of Energy explains why some people stay in dead-end jobs for decades, even though they know the position isn’t great.

HOW

Sources of information that change your Reference Level are valuable in prompting action.

6.7 Guiding Structure

Guiding Structure 指导框架

WHAT

Guiding Structure means the structure of your Environment is the largest determinant（决定因素）of your behavior.

HOW

If you want to successfully change a behavior, don’t try to change the behavior directly. Change the structure that influences or supports the behavior, and the behavior will change automatically.

Add a bit of Friction or eliminate certain options completely, and you’ll find it much easier to focus on what you’re trying to accomplish.

6.8 Reorganization

Reorganization 重整

BACKGROUND

Sometimes that response is well defined…but…you don’t know exactly what is wrong…Think of a perception as abstract as “job satisfaction”. your brain will kick into action—“I’m not as happy as I should be… Something needs to change.”……you may not know what that “something” is.

WHAT

Reorganization is random action that occurs when a Reference Level is violated but you don’t know what to do to bring the perception back under control.

WHY

Reorganization feels like you’re lost, depressed, or crazy—that’s completely normal. Your brain starts spitting out all kinds of off-the-wall things in an effort to find something to fix the situation.

6.9 Conflict

Conflicts

BACKGROUND

How can you focus on something due in the future when there’s something that needs to be done now?

WHAT

Conflicts occur when two control systems try to change the same perception. Conflicts occur when people are controlling for different outputs that require the same input.

HOW

Conflicts can only be resolved by changing Reference Level—how success is defined by the parties involved.

Each party in the Conflict has a different [Reference Level](#orgec6b681), which is primarily influenced by the situation or Environment.

Conflict can be ended by scheduling firm times for work and rest, ensuring enough of each.

6.10 Pattern Matching

WHAT

Our brains are natural Pattern Matching machines. The brain is constantly busy trying to find patterns in what we perceive, then associating new patterns with other patterns that are stored in memory.

Humans learn patterns primarily via Experimentation.

The more accurate patterns you’ve learned, the more options you have when solving new problems.

6.11 Mental Simulation

WHAT

Mental Simulation is our mind’s ability to imagine taking a specific action, then simulating the probable result before acting.

Mental Simulation relies on our memory—the database of Patterns.

WHY

Mental Simulation…can be used to test even the most arbitrary（武断的）actions without risk

6.12 Interpretation and Reinterpretation

理解and重新解释

We don’t see things as they are. We see things as we are. —ANAÏS NIN, AUTHOR AND DIARIST

WHAT

The human brain constantly relies on prior Patterns and information to make Interpretations in the absence of information.

Reinterpretation is possible because your memory is fundamentally impermanent…every time we recall a memory, it doesn’t simply resave to the same location in the same state.

In Re-Create Your Life, Morty Lefkoe teaches a process that can be used to Reinterpret past events:

1. Identify the undesirable pattern.
2. Name the underlying belief.
3. Identify the source of the belief in memory, including as much sensory（感觉的）detail as possible.
4. Describe possible alternate interpretations of the memory.
5. Realize that your original belief is an interpretation, not reality.
6. Consciously choose to reject the original belief as “false.”
7. Consciously choose to accept your reinterpretation as “true.”

6.13 Motivation

Motivation 动机 Motivation is an emotion—NOT a logical, rational activity. Motivation is an emotional state that links the parts of our brain that feel with the parts that are responsible for action.

Motivation is the link between the [midbrain and the hindbrain.

break down the experience of Motivation into: moving *toward- things that are desirable and moving *away- from things that aren’t.

In general, “moving away*” takes priority over “moving *toward.” The reason comes back to Caveman Syndrome.

WHY

Very often, Mental Simulation, Patterns, Conflicts, and Interpretation hidden in the midbrain can get in the way of making progress toward what we want to accomplish. As long as there are “move away from” signals being sent, you’ll have a hard time feeling motivated to move toward what you want.

6.14 Inhibition

Inhibition 拘谨，拟制

WHAT

Inhibition is the ability to temporarily override our natural inclinations.

Willpower（意志力）is the fuel of inhibition.

6.15 Willpower Depletion

Willpower 意志力耗尽

WHAT

Willpower can be thought of as instinctual override……Willpower are very limited and become Depleted with use.

HOW TO AVOID

[Willpower](#orgc172ee6) for self-control tasks is dependent on a physiological fuel: blood glucose.

The best way to use your limited reserves of Willpower is to use Guiding Structure to change the structure of your Environment instead of your behavior.

6.16 Loss Aversion

Loss Aversion Loss Avuersion Loss Aversion is the idea that people hate to lose things more than they like to gain them.

WHY

Loss Aversion explains why threats typically take precedence over opportunities when it comes to Motivation.

Loss Aversion also explains why uncertainty appears risky.

Loss Aversion is why Risk Reversal is so important if you’re presenting an offer to a potential customer.

HOW TO AVOID

The best way to overcome Loss Aversion is to Reinterpret the risk of loss as “no big deal.”

6.17 Threat Lockdown

Threat Lockdown When your mind perceives a potential threat—real or imaginary—your body immediately prepares to respond.

HOW BRAIN RESPONSE

The subconscious choice to fight, flee, or freeze is largely dependent on your brain’s automatic Mental Simulation of the situation.

WHY

Threat Lockdown is a constructive response designed to help you defend yourself, but like many ancient instincts, it often malfunctions（发生故障）in our modern environment.

Threat Lockdown can easily become a vicious cycle……If you’re experiencing Threat Lockdown, don’t try to repress the threat signal.

HOW TO DEAL

The key to dealing with Threat Lockdown is to convince your mind that the threat no longer exists. You can do that in one of two ways:

• you can convince your mind there was never actually any threat
• you can convince your mind the threat has passed

6.18 Cognitive Scope Limitation

认知范围局限

One death is a tragedy. A million deaths is a statistic. —KURT TUCHOLSKY, GERMAN SATIRIST

WHAT

According to Robin Dunbar, a British anthropologist, humans have the cognitive capacity to keep track of somewhere around 150 close personal connections.

HOW

In Green to Gold, Daniel Esty and Andrew Winston describe…The “newspaper rule” and “grandchild rule” are effective ways of personalizing the results of your decisions.

• The “newspaper rule” is a simulation of the following: assume your decision was publicized on the front page of tomorrow’s New York Times, and your parents and/or significant other read it. What would they think?
• The “grandchild rule” is a way of evaluating decisions with long-term consequences. Imagine that, thirty or forty years from now, your grandchild gives you feedback on the results of your decision. Will they laud you for your wisdom or reprimand you for your stupidity?

6.19 Association

Association 联合，关联，联想 For decades, the Coca-Cola Company has been associating Coke with a single emotion: happiness.

WHY

It’s possible to influence behavior by using associative cues, even Associations that make no logical sense.

Correlation is powerful—your brain will make the [Association](#org49ffcdf) anyway.

Presenting your prospects with positive Associations can influence how they think about what you offer.

6.20 Absence Blindness

Absence Blindness Absence Blindness is a cognitive bias that prevents us from identifying what we can’t observe. Our perceptual faculties evolved to detect objects that are present in the Environment. The problem is, no one sees all of the bad things that the great manager prevents.

WHY

Absence Blindness makes prevention（防止）grossly（极度夸张）underappreciated.

[Absence Blindness](#org6bc1712) also makes it uncomfortable for people to "do nothing" when something bad happens, even if doing nothing is the best course of action.

Because of Loss Aversion, people start freaking out and start clamoring for an immediate solution to the collapsing（倒塌；垮掉）market.

HOW TO AVOID

To fix the issue, the best course of action is to stop artificially manipulating interest rates, which caused the issue in the first place. Experience makes it easier to avoid Absence Blindness. The only reliable way I’ve found to overcome Absence Blindness is Checklisting.

6.21 Contrast

差异，反差

BACKGROUD

Our perceptions are influenced by information gathered from the surrounding environment. Our perceptual（感知的；知觉的）faculties（官能，机能）are optimized to notice Contrast, not to compare what we perceive with things that aren’t there, which is the root of Absence Blindness.

WHY

Contrast is often used to influence buying decisions. Framing is a way to control the perception of Contrast.

6.22 Scarcity

Scarcity 稀缺性

BACKGROUND

Because of Conservation of Energy, people have a natural tendency to decide to “do things later” unless there’s a compelling reason to act immediately.

WHAT

Scarcity encourages people to make decisions quickly. As a result, adding a Scarcity element to your offer is a great way to encourage people to take action.

HOW

add an element of Scarcity to your offer:

1. Limited Quantities—inform prospects that you’re offering a limited number of units for sale.
2. Price Increases—inform prospects that the price will go up in the near future.
3. Price Decreases—inform prospects that a current discount will end in the near future.
4. Deadlines—inform prospects that the offer is only good for a limited period of time.

6.23 Novelty

新颖，新奇

WHAT

Novelty—the presence of new sensory data—is critical if you want to attract and maintain attention over a long period of time.

WHY

Even the most Remarkable object of attention gets boring over time. Human attention requires novelty to sustain itself. Continue to offer something new, and people will pay attention to what you have to offer.

7. Working With Yourself

To think is easy. To act is difficult. To act as one thinks is the most difficult. —JOHANN WOLFGANG VON GOETHE, POET, DRAMATIST, AND POLYMATH

In this chapter, we’ll discuss how to decide what to do, set and achieve goals, track your daily tasks, overcome resistance, and consistently get more productive work done without burning out.

7.1 Akrasia

the state of mind in which someone acts against their better judgement through weakness of will. Whenever you “should” do something, but resist doing it, you’re experiencing Akrasia. Akrasia is one of the most widespread and persistent barriers to getting things done. In my experience, Akrasia has four general parts:

• a task
• a desire/want
• a should
• an emotional experience of resistance.

WHY

there can be many potential sources of resistance:

• You can’t define what you want.
• You believe the task will bring you closer to something you don’t want.
• You can’t figure out how you’re going to get from where you are right now to where you want to be.
• You idealize the desired [End Result to the point that your mind estimates a low probability of achievement, resulting in Loss Aversion.
• The “should” was established by someone else, not you, prompting [Persuasion Resistance.
• A competing action in the current Environment promises immediate gratification（满足，满意）, while the reward of the task in question will come much later. (Psychologists call this Hyperbolic Discounting.)
• The benefits of the action are abstract（抽象的）and distant（远期的）, while other possible actions will provide concrete and immediate benefits. (Psychologists call this Construal Level Theory.)

7.2 Monoidealism

心流

WHAT

Monoidealism is the state of focusing your energy and attention on only one thing, without conflicts.

HOW

1. Eliminate potential distractions and interruptions….Turning off my Internet connection…Using similar Guiding Structure techniques is a good way to prevent your Attention from straying.
2. Eliminate inner Conflicts…Instead of trying to ignore the resistance or push through it (a surefire（万无一失）way to experience Willpower Depletion), exploring that resistance using Mental Simulation and Reinterpretation helped me uncover a hidden Conflicts.
3. Kick-start the Attention process by doing a “dash.” …setting aside ten to thirty minutes for a quick burst of focused work can make it much easier to get into the zone quickly…called the Pomodoro Technique.

7.3 Cognitive Switching Penalty

意识转换处罚

BACKGROUND

How can you accomplish everything you need to do most effectively? Many people rely on multitasking…Monoidealism and multitasking are complete opposites（对立面）…Every time you switch the focus of your Attention from one subject to another, you incur the Cognitive Switching Penalty.

WHAT

The Cognitive Switching Penalty is a Friction cost: the less you switch, the lower the cost.

HOW

The best approach to avoid unnecessary cognitive switching is to group similar tasks together…difficult to make progress on creative tasks between client calls. 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 ten minor tasks. A major task is any activity that requires more than twenty minutes of focused concentration

7.4 Four Methods of Completion

WHAT

Four ways to “do” something: completion, deletion, delegation, and deferment.

• Completion—doing the task
• Deletion—eliminating the task
• Delegation—assigning the task to someone else
• Deferment—putting the task off until later

7.5 Most Important Tasks

WHAT

A Most Important Task (MIT) is a critical task that will create the most important results you’re looking to achieve. Combining this technique with Parkinson’s Law by setting an artificial deadline is extremely effective.

7.6 Goals

WHAT

Goals are most useful if they’re Framed in a Positive, Immediate, Concrete, Specific (PICS) format:

• Positive refers to Motivation—your Goal should be something you move toward, not away from
• Immediate refers to time scale: your Goals should be things that you decide to make progress on now, not “someday” or “eventually.”
• Concrete means you’re able to see the results in the real world.
• Specific means you’re able to define exactly what, when, and where you’re going to achieve your Goal.

Goals should be under your control. Goals like “losing twenty pounds” are soul crushing because they’re not directly under your control—losing weight is a result, not an effort. make your Goals actions that are within your Locus of Control, like doing a minimum of thirty minutes of exercise every day and controlling the number of calories you consume.

7.7 States of Being

WHAT

A State of Being is a quality of your present experience. Emotional experiences aren’t achievements because they fluctuate over time. States of Being are decision criteria, not Goals.

EXAMPLE

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.”

7.8 Habits

WHAT

Habits are regular actions that support us. Due to the power of Accumulation, small Habits can add up to huge results over time. Most Habits take on one of four common forms: things you want to start doing, things you want to stop doing, things you want to do more, and things you want to do less.

HOW

Habits typically require a certain amount of Willpower to create. Therefore it’s best to use the techniques we discussed in the section on Guiding Structure to make it easier to instill the Habits you want to adopt.

7.9 Priming

重要性

WHAT

Priming is a method of consciously programming your brain to alert you when particular information is present in your Environment

WHY

Priming is a way to consciously influence your brain’s Pattern Matching capabilities.

HOW

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.

7.10 Decision

WHAT

A Decision is the act of committing to a specific plan of action.

WHY

Constructing（结构，构思）a system to make decisions for you is a pipe dream—all systems can do is help provide information you can use to make better decisions. No Decision, large or small, is ever made with complete information.

HOW

Once [you’ve acquired 40 to 70 percent of the available information], go with your gut.”

7.11 Five-Fold Why

WHAT

The Five-Fold Why is a technique to help you discover what you actually want. Applying the Five-Fold Why is easy: whenever you set a Goal or objective, ask yourself why you want it.

EXAMPLE

I want to be a millionaire

1. Why do I want a million dollars? Because I don’t want to be stressed about money.
2. Why don’t you want to be stressed about money? So I don’t feel anxious.
3. Why don’t you want to feel anxious? So I feel secure.
4. Why do you want to feel secure? So I feel free.
5. Why do you want to feel free? Because I want to feel free.

7.12 Five-Fold How

WHAT

The Five-Fold How is a way to connect your core desires to physical actions.

EXAMPLE

Example: the core desire is to feel free.

1. Paying off an outstanding debt
2. Reducing your work hours, finding another position, or becoming an entrepreneur
3. Moving to a new city or country
4. Breaking off a restricting personal relationship

HOW

Continue asking “how” until you’ve clearly defined your plan in terms of Next Action .

7.13 Next Action

Simple: focus only on the action you need to take next to move toward your Goal. The Next Action is the next specific, concrete thing you can do right away to move a project forward.

EXAMPLE

David Allen, the author of Getting Things Done, coined the term to describe one of the core steps of his “fundamental process”:

1. Write down a project or situation that is most on your mind at this moment.
2. Now describe in a single written sentence your intended desired outcome for this problem or situation. What needs to happen to mark this “done”?
3. Next, write down the very next physical action step required to move the situation forward.
4. Put those answers in a system you trust.

7.14 Externalization

具体化

WHAT

Externalization takes advantage of our perceptual abilities in a very intelligent way. By converting our internal thought processes into an external form, Externalization essentially gives us the ability to reinput information into our own brains via a different channel, which gives us access to additional cognitive resources we can use to process the same information in a different way.

HOW

There are two primary ways to Externalize your thoughts: writing and speaking. Writing is the best way to capture ideas, plans, and tasks. The key to vocal Externalization is to find an audience who is willing to listen patiently and avoid interrupting you as you talk through an issue. Experiment with different approaches to find which method works best for you.

7.15 Self-Elicitation

自我诱导

WHAT

Self-Elicitation is the practice of asking yourself questions, then answering them.

HOW

The Five-Fold How and Five-Fold Why are specific examples of Self-Elicitation. The ABC Method (Antecedent（前因）, Behavior, Consequences) is a set of questions to ask yourself whenever you notice a behavior you want to change.

EXAMPLE

ANTECEDENT

• When did it happen?
• Whom were you with?
• What were you doing?
• Where were you?
• What were you saying to yourself?
• What thoughts were you having?
• What feelings were you having?

BEHAVIOR

• What were you saying to yourself?
• What thoughts did you have?
• What feelings were you having?
• What actions were you performing?

CONSEQUENCES

• What happened as a result?
• Was it pleasant or unpleasant?

7.16 Counterfactual Simulation

反事实模拟

WHAT

Counterfactual Simulation allows you to “force” your brain to run the simulations you want it to run.

WHY

Counterfactual Simulation can help you discover hidden opportunities you may have previously assumed weren’t possible.

HOW

When you run a Counterfactual Simulation, you assume the event or end state you’re simulating is already true. By supplying your mind with an artificial destination, it will automatically start to fill in the blanks between point A and point B.

7.17 Parkinson’s Law

帕金森定理 Parkinson’s Law

Work expands so as to fill the time available for its completion. —CYRIL NORTHCOTE PARKINSON, NAVAL HISTORIAN AND MANAGEMENT THEORIST

WHAT

Parkinson’s Law should not be considered carte blanche to set unreasonable deadlines.

HOW

Parkinson’s Law is best used as a Counterfactual Simulation question.

7.18 Doomsday Scenario

全球灾难危机 Doomsday Scenario

WHAT

A Doomsday Scenario is a Counterfactual Simulation) where you assume everything that can go wrong does go wrong.

WHY

Doomsday Scenarios are pessimistic for a reason—they help you realize that, in most circumstances, you’re going to be okay.

HOW

When you actually examine your worst fears, you’ll discover that things won’t be as bad as you fear. By intentionally Externalizing and defining your worst fears, you’re exposing them as what they really are: irrational overreactions. Once you’ve imagined your Doomsday Scenario, you can start doing things to improve upon the worst case.

7.19 Excessive Self-Regard Tendency

过于自我的趋势

WHAT

Excessive Self-Regard Tendency is the natural tendency to overestimate your own abilities, particularly if you have little experience with the matter at hand.

WHY

The Excessive Self-Regard Tendency is even more pronounced if you don’t know much about the subject at hand. The more incompetent a person is, the less they realize they’re incompetent.

EXAMPLE

They explain the Dunning-Kruger Effect as follows:

1. Incompetent individuals tend to overestimate their own level of skill.
2. Incompetent individuals fail to recognize genuine skill in others.
3. Incompetent individuals fail to recognize the extremity of their inadequacy.
4. If they can be trained to substantially improve their own skill level, these individuals can recognize and acknowledge their own previous lack of skill.

7.20 Confirmation Bias

Confirmation Bias 确认偏误

WHAT

Confirmation Bias is the general tendency for people to pay Attention to information that supports their conclusions and ignore information that doesn’t.

HOW

The best way to counteract（抵制）Confirmation Bias is to intentionally seek out sources of information that challenge your current hypothesis or belief.

7.21 Hindsight Bias

后视偏差 Hindsight Bias

WHAT

Hindsight Bias is the natural tendency to kick yourself for things you “should have known.”

WHY

It’s important to realize that these feelings are irrational—your decisions were based on the best information you had at the time.

HOW

As the saying goes, “Hindsight is 20-20.” Reinterpret your past mistakes in a constructive light, and focus your energy on what you can do right now to move in a positive direction.

7.22 Performance Load

WHAT

Performance Load is a concept that explains what happens when you have too many things to do.

HOW

Remember Parkinson’s Law: if you don’t set a limit on your available time, your work will expand to fill it all.

7.23 Energy Cycles

WHAT

Your body has natural rhythms during the day, which I call Energy Cycles.

WHY

Paying attention to your natural Energy Cycle will help you consistently perform at your best over long periods of time.

HOW

Here are four simple ways to work with your body instead of against it.

1. Learn Your Patterns—Use a notebook or calendar to track how much energy you have during different parts of the day, as well as what you’re eating and drinking.
2. 2. Maximize Your Peak Cycles—When you’re in an up cycle, you’re capable of getting a lot accomplished, so plan your day to take advantage of that energy.
3. Take a Break—When you’re in a down cycle, it’s better to rest than attempt to power through it.
4. Get Enough Sleep—Sleep deprivation results in a prolonged down cycle, which gets in the way of getting things done.

7.24 Stress and Recovery

WHY

Paying attention to Stress and Recovery ensures that I don’t take on too much to handle. It’s impossible to know how much you’re capable of until you decide to push your limits. As long as you stay safe by limiting your Experimentation to things that won’t kill you or do permanent damage, you can learn a ton about how you work by stretching yourself to the limit.

HOW

The less overlap between your hobby and your work, the better.

7.25 Testing

WHAT

Testing is the act of trying something new—a way of applying the scientific method and the Iteration Cycle to your own life.

HOW

Here’s a simple structure that will help you plan and track your Experiments:

• Observations—What are you observing in your life or business that you want to improve?
• Knowns—What have you learned from past Experiments that might be related to your observations?
• Hypotheses—Based on what you’ve observed, what situations or factors might cause or contribute to your observations?
• Tests—What will you try or change to improve your situation? Which hypotheses will this experiment Test?
• Results—What happened after each Test? Does it support or disconfirm the hypothesis?

Here are a few questions to help you discover things worth Testing:

• How much sleep do you need to feel rested and alert?
• Which foods make you feel energetic after eating? Which foods make you feel ill or lethargic?
• When do you do your most productive work? Are there any patterns in your productivity?
• When do you get your best ideas? What are you doing when they occur to you?
• What is your biggest source of stress or concern? When do you start worrying, and why?

Once you’ve found a Pattern in one of these areas, it’s time to start Experimenting.

7.26 Mystique

神秘色彩

WHAT

Mystique is a powerful force—a little mystery makes most things appear to be a lot more attractive than they actually are.

HOW TO IDENTIFY

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?”

7.27 Hedonic Treadmill

愉悦 乏味

WHAT

This cycle is called the Hedonic Treadmill: we pursue pleasurable things because we think they’ll make us happy. When we finally achieve or acquire what we’re seeking, we adapt to our success in a very short period of time, and our success no longer gives us pleasure. As a result, we begin seeking something new, and the cycle repeats.

WHY

The Hedonic Treadmill is a major problem if you’d like to experience a feeling of success or achievement for an extended period of time.

HOW

here are five priorities that will contribute to your long-term happiness in a way that minimizes hedonic adaptation:

1. Work to make “enough” money…Once you have enough money to cover the necessities and a few luxuries, you reach a point of Diminishing Returns: every additional dollar you earn doesn’t provide the same amount of utility.
2. Focus on improving your health and energy.
3. Spend time with people you enjoy.
4. Remove chronic annoyances（长久的烦恼）…Examining ways to reduce or eliminate chronic stresses or annoyances can generate significant improvements in life satisfaction.
5. Pursue a new challenge.

7.28 Comparison Fallacy

比较谬论

BACKGROUND

We tend to fixate on what other people are accomplishing instead of what we need to do next to achieve our Goals.

WHAT

The Comparison Fallacy is a simple idea: other people are not you, and you are not other people.

HOW

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. If not, focus on making changes that are within your Locus of Control, so you can start moving in the direction you desire.

7.29 Locus of Control

控制点 Locus of Control

WHAT

Understanding your Locus of Control is being able to separate what you can control (or strongly influence) from what you can’t. Trying to control things that aren’t actually under your control is a recipe for eternal frustration.

HOW

Focusing on your efforts helps you stay sane—turning results you don’t directly control into Goals is a recipe for frustration.

7.30 Attachment

爱慕，附加

WHAT

When something outside of our Locus of Control affects our plans or Goals, it’s easy to take it personally. The more Attached you are to a particular idea or plan, the more you limit your flexibility and reduce your chances of finding a better solution.

HOW

Acceptance requires applying the concept of Sunk Cost to yourself. The solution to Attachment is accepting that your idea or plan is no longer feasible or useful. The less Attached you are to your plans, Goals, status, and position, the easier it will be to respond appropriately to inevitable change or unforeseen circumstances.

7.31 Personal Research and Development

WHAT

Research and Development (R&D) is what business leaders around the world count on to determine what the company should work on next.

WHY

R&D exists because it works—companies that make Research and Development a priority often discover new products to offer their customers or process improvements that meaningfully contribute to the bottom line.

HOW

Using the techniques discussed in I Will Teach You to Be Rich by Ramit Sethi, it’s remarkably easy to automatically divert a certain amount of your monthly income into an account earmarked for Personal R&D.

7.32 Limiting Belief

习得性无助 Learned Helplessness

BACKGROUND

In general, there are two primary ways of looking at the world—two mind-sets that influence your response to new experiences.

• The first basic mind-set is that your skills and abilities are fixed. If you try something and it doesn’t work, it’s because you’re “not good at that,” and you never will be.
• The second basic mind-set is that your skills and abilities are malleable. If you try something and it doesn’t work, it’s because you haven’t worked on it very much, but if you keep trying, you’ll inevitably get better.

The fixed mind-set is an example of a Limiting Belief: something you believe is true about the world that holds you back from achieving a Goal you value. The fixed mind-set isn’t true, but it’s capable of holding you back if you choose to believe it.

Some Limiting Beliefs are the result of errors in Pattern Matching. Everyone has Limiting Beliefs in certain areas. Anytime you use the words “I can’t,” “I have to,” or “I’m not good at,” you’ve discovered a potential Limiting Belief. Limiting Beliefs may also appear when you consider doing things that make you uncomfortable, like applying for a new job or selling an offer to a new prospect.

HOW

Here’s a useful rule of thumb for these types of situations: make the other party tell you no. This is a Habit worth installing: you may believe you’re going to be turned down when you make a request or propose an idea, but make the other party say it instead of assuming it’s a given.

8. 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.

8.1 Power

BACKGROUND

human relationships are based on Power—the ability to influence the actions of other people…influence is much more effective than compulsion（强迫）.

WHY

Power represents your ability to get things done through other people—the more power you have, the more things you can do.

HOW

The best way to increase your Power is to do things that increase your influence and Reputation.

8.2 Comparative Advantage

比较优势 Comparative Advantage

BACKGROUND

Why work with other people in the first place? The answer is Comparative Advantage, a concept that originated in the “dismal science” of economics.

WHAT

Comparative Advantage means it’s better to capitalize on your strengths than to shore up your weaknesses.

WHY

businesses work better if the individuals who operate them focus on what they’re best at. The major benefit of self-education when working with others is knowing what skill looks like.

8.3 Communication Overhead

过度沟通

WHAT

Communication Overhead is the proportion of time you spend communicating with members of your team instead of getting productive work done.

HOW TO IDENTIFY

Symptoms of Bureaucratic Breakdown that appear in teams suffering from Communication Overhead:

1. The Invisible Decision—No one knows how or where decisions are made, and there is no transparency in the decision-making process.
2. Unfinished Business—Too many tasks are started but very few are carried through to the end.
3. Coordination Paralysis—Nothing can be done without checking with a host of interconnected units.
4. Nothing New—There are no radical ideas, inventions, or lateral thinking—a general lack of initiative.
5. Pseudo-Problems—Minor issues become magnified out of all proportion.
6. Embattled Center—The center battles for consistency and control against local/regional units.
7. Negative Deadlines—The deadlines for work become more important than the quality of the work being done.
8. Input Domination—Individuals react to inputs—i.e., whatever gets put in their in-tray—as opposed to using their own initiative.

HOW TO RESOLVE

The solution to Communication Overhead is simple but not easy: make your team as small as possible. You’ll be leaving people out, but that’s the point—including them is causing more work than it’s creating in benefits. Studies of effective teamwork usually recommend working in groups of three to eight people.

8.4 Importance

HOW

The more Important you make them feel, the more they’ll value their relationship with you. The more interest you take in other people, the more Important they will feel. The more Important you make people feel when they’re around you

8.5 Safety

Effective communication can only occur when both parties feel safe.

HOW

…using the STATE model to communicate without provoking anger or defensiveness:

1. Share your facts—Facts are less controversial, more persuasive, and less insulting than conclusions, so lead with them first.
2. Tell your story—Explain the situation from your point of view, taking care to avoid insulting or judging, which makes the other person feel less safe.
3. Ask for others’ paths—Ask for the other person’s side of the situation, what they intended, and what they want.
4. Talk tentatively—Avoid conclusions, judgments, and ultimatums.
5. Encourage testing—Make suggestions, ask for input, and discuss until you reach a productive and mutually satisfactory course of action.

8.6 Golden Trifecta

QUESTIONS

If people have a fundamental need to feel Important and Safe, how do you go about making that happen?

WHAT

The Golden Trifecta is my personal three-word summary of How to Win Friends and Influence People…always remember to treat people with appreciation, courtesy, and respect.

• *Appreciation*（感谢，欣赏，评价） means expressing your gratitude for what others are doing for you, even if it’s not quite perfect.
• *Courtesy*（礼貌） is politeness, pure and simple.
• *Respect*（尊重） is a matter of honoring the other person’s status.

8.7 Reason Why

Humans are predisposed to look for behavioral causes. People will be more receptive to any request if you give them a reason why. Any reason will do.

8.8 Commander’s Intent

WHAT

Commander’s Intent is a much better method of delegating tasks: whenever you assign a task to someone, tell them why it must be done.

WHY

Commander’s Intent alleviates（减轻，缓解）Communication Overhead. By communicating the intent behind a certain plan, a leader can make constant communication less critical for the success of the entire team.

8.9 Bystander Apathy

旁观者效应 Bystander Effect

BACKGROUD

two useful principles from this training:

1. always personally step up and take responsibility, unless relieved by a more experienced professional.
2. always direct commands or requests very clearly to one specific individual at a time.

WHAT

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.

WHY

Bystander Apathy explains why anything assigned to a committee（委员会） never gets done.

HOW

The best way to eliminate Bystander Apathy in project management is to ensure that all tasks have single, clear owners and deadlines. When delegating responsibilities, always assign tasks to a single owner with a clear deadline.

8.10 Planning Fallacy

When we create plans, we’re simply guessing and using Interpretation to fill in the blanks.

WHY SHOULD CARE

The Planning Fallacy means that people have a persistent tendency to underestimate completion times. The more complex the project, the more Interdependencies (discussed later) the project contains.

HOW

Use plans, but don’t depend on them—as long as you keep working as quickly and effectively as possible, the project will be done as soon as it’s feasible.

8.11 Referrals

参考，推介

WHAT

Referrals make it far easier for people to Decide to work with someone they don’t know.

WHY

Referrals are effective because they transfer the qualities of being known and liked. The Referral transfers the knowing/liking effect to the recipient—instead of being a risky unknown quantity, they’re suddenly a friend. The more people who know, like, and trust you, the better off you are

8.12 Clanning

WHAT

Humans naturally tend to form distinct groups, a process called Clanning. Distinct group identities formed to help members identify “insiders” and “outsiders.” Clanning is a natural human tendency—we’re automatically and profoundly influenced by the people around us.

8.13 Convergence and Divergence

趋同与分歧

WHAT

Convergence is the tendency of group members to become more alike over time. In business, this is sometimes called a company “culture,” in the sense that people who work there tend to have similar characteristics, behaviors, and philosophies. Convergence also means that groups have a tendency to police themselves. The Norms) of the group work like gravity—if they are violated, others will exert an influence on the rebel to bring them back in line. the Norms is a Social Signal that you don’t belong in the group Divergence is the tendency for groups to become less like other groups over time. Divergence explains why fashions among the socialite class in New York City change so quickly and dramatically. Convergence can be useful if you consciously choose to spend time with people you’d like to become more like over time.

8.14 Social Signals

社交信号 Signalling Theory

WHAT

Social Signals are tangible indicators of some intangible quality that increases a person’s social status or group affiliation.

WHY

Signals sometimes have little or nothing to do with the reality of what the signal is supposed to communicate. Social signals have real Economic Values, so it pays to build them into your offer if you can. Part of building a signaling value into something is understanding what people want to signal to others. Since signals go back to the Core Human Drives.

8.15 Social Proof

Social Proof can take on a life of its own. Fads often form when one person takes an action, others perceive it as a Social Signal Signalling Theory, then act the same way, creating a social Feedback Loop.

8.16 Authority

权威

WHAT

People tend to comply with Authority figures even if they’d refuse to take the same action under normal circumstances. If you’re in a position of Authority, your Authority will change the way others interact with you…more likely to do what you suggest. the combination of Authority and Confirmation Bias shelters them from information that contradicts their opinions…it’s difficult for Authority figures to compensate for the Excessive Self-Regard Tendency.

8.17 Commitment and Consistency

Commitments have been used throughout history as a way of binding groups together. Breaking a promise or Commitment can often have a negative impact on social status and Reputation, so most people will do whatever they can to act in ways that are Consistent with previous positions and promises.

HOW

Obtaining small Commitments makes it more likely people will choose to act Consistently with them later.

8.18 Incentive-Caused Bias

WHAT

Incentive-Caused Bias explains why people with a vested interest in something will tend to guide you in the direction of their interest.

HOW

Incentives automatically influence the way people act, based on how they’re rewarded. Sometimes incentives create unintended Second-Order Effects. Incentives are tricky because they inevitably interact with our Perceptual Control systems.

8.19 Modal Bias

<Modal Bias Modal Bias is the automatic assumption that our idea or approach is best. Most of us like to assume we have everything together—that we know what we’re talking about, we know what we’re doing, and that our way of doing things is best. Very often, we are quite mistaken.

HOW TO AVOID

The best way to avoid Modal Bias is to use Inhibition（拟制）to temporarily suspend judgment. Part of the value of understanding cognitive biases is the knowledge that you’re not immune to them, and simply knowing they exist doesn’t make them any less influential.

8.20 Pygmalion Effect

皮格马利翁效应

WHY

The Pygmalion Effect explains why all of our relationships are, in a very real sense, self-fulfilling prophecies. The Expectation Effect means that our perception of the quality of someone’s work is a function of our original expectations.

8.21 Attribution Error

归因谬误

WHAT

The Attribution Error means that when others screw up, we blame their character; when we screw up, we attribute the situation to circumstances. Avoiding the Attribution Error makes it easier to stay on good terms with the people you work with.

8.22 Option Orientation

定向

BACKGROUD

By the time you’re aware of an issue, preventing it is beyond your Locus of Control. The issue has already occurred—the only question is how you plan to respond to it.

HOW

Instead of dwelling on the problem, focus on your Options. Focus on Options, not issues, and you’ll be able to handle any situation life throws at you.

8.23 Management

WHAT

Management is the act of coordinating a group of people to achieve a specific Goal while accounting for ever-present Change and Uncertainty.

HOW

Based on what we’ve learned thus far, here are six simple principles of effective real-world Management:

1. Recruit the smallest group of people who can accomplish what must be done quickly and with high quality. Comparative Advantage means that some people will be better than others at accomplishing certain tasks, so it pays to invest time and resources in recruiting the best team for the job.
2. Clearly communicate the desired End Result, who is responsible for what, and the current status.
3. Treat people with respect. Consistently using the Golden Trifecta—appreciation, courtesy, and respect—is the best way to make the individuals on your team feel Important and is also the best way to ensure that they respect you as a leader and manager.
4. Create an Environment where everyone can be as productive as possible, then let people do their work.
5. Refrain from having unrealistic expectations regarding certainty and prediction.
6. Measure to see if what you’re doing is working—if not, try another approach.

The best managers don’t act like big-shot executives: they’re more like very skilled assistants, whose primary purpose is to keep the people with Economically Valuable Skills focused on improving The 5 Parts of Every Business): that is, doing things that directly contribute to the company’s results.

The “management team” isn’t the “decision making” team. It’s a support function. You may want to call them administration instead of management, which will keep them from getting too big for their britches.

8.24 Performance-Based Hiring

Here’s the golden rule of hiring: the best predictor of future behavior is past performance. If you want to hire people who will perform well for you in the months and years to come, you need to look for people who have performed well in the past.

HOW

The first step in hiring is to publicize that you’re looking for help. Next, identify a basic “acid test” to screen applicants…ask a few basic questions that require a certain amount of specialized knowledge in the field to answer. Finally, give promising candidates a short-turnaround project or scenario to see how they think, work, and communicate firsthand. Don’t put the candidate in an artificial environment: they should be free to use whatever tools or resources they’re comfortable using. The purpose of the project or scenario is to evaluate the candidate’s actual work in a realistic environment. What does the candidate focus on first? What do they notice, and what do they miss? How do they explain their choices and recommendations? How do they respond when you ask questions or disagree with a conclusion?

9. Understanding Systems

In this chapter, you’ll learn common elements of all systems, how Environmental factors influence the function of systems, and the ever-present nature of Uncertainty and Change.

9.1 Gall’s Law

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

WHAT

Here’s Gall’s Law: all complex systems that work evolved from simpler systems that worked. Complex systems are full of variables and Interdependence that must be arranged just right in order to function. Uncertainty ensures that you will never be able to anticipate all of these Interdependences and variables in advance, so a complex system built from scratch will continually fail in all sorts of unexpected ways.

WHY

Gall’s Law is where environmental Selection Tests meet systems design. Gall’s Law is why [Prototyping and [Iteration work so well as a [Value Creation methodology. Expanding that [Prototype into a [Minimum Viable Offer allows you to validate your [Critically Important Assumptions, resulting in the simplest possible system that can succeed with actual purchasers. Iteration and Incremental Augmentation, over time, will produce extremely complex systems that actually work, even as the Environment changes.

9.2 Flow

WHAT

Flows—movements of resources into and out of the system. Inflows are resources moving into a system. Outflows are resources flowing out of a system.

WHY

Follow the Flows, and you’re on your way to understanding how the system works.

9.3 Stock

库存

WHAT

Stocks are pools of resources, it pays to understand how many resources you have to work with.

HOW TO USE

To increase a Stock, increase Inflows and/or decrease Outflows. To decrease a Stock, decrease Inflows and/or increase Outflows.

9.4 Slack

存活 Slack is the amount of resources present in a Stock.

WHY

For a System to operate efficiently, Stocks should be just the right size—not too big, and not too small. Large Stocks have the most Slack, but that flexibility comes at a cost…which increases your costs and decreases your [Profit Margin.

HOW TO MANAGE

Slack is tricky to manage: too much, and you’re wasting time and money. Too little, and your system faces the risk of running out of the resources necessary to continue operating.

9.5 Constraint

限制，强迫

WHAT

Theory of Constraints: any manageable system is always limited in achieving more of its [Goals by at least one Constraint. If you can identify and alleviate the Constraint, you’ll increase the Throughput of the system.

HOW TO ELIMINATE

Goldratt proposes the “Five Focusing Steps,” a method you can use to improve the Throughput of any System:

1. Identification: examining the system to find the limiting factor.
2. Exploitation（利用）: ensuring that the resources related to the Constraint aren’t wasted.
3. Subordination（从属）: redesigning the entire system to support the Constraint.
4. Elevation（提升）: permanently increasing the capacity of the Constraint
5. Reevaluation: after making a change, reevaluating the system to see where the Constraint is located

9.6 Feedback Loop

WHAT

Feedback Loops exist whenever the output of a System becomes one of the inputs in the next cycle. Feedback is how systems learn—if the system is capable of perceiving（察觉）its Environment, that feedback helps the system understand whether it’s under control and satisfying the required [Selection Tests . Balancing Loops dampen（稳定，对…泼冷水）each system cycle’s output, leading to system equilibrium（均衡）and resistance（抵制）to change. Balancing Loops stabilize the system, dampening oscillations and keeping the system in a certain state. Perceptual Control systems are usually made up of Balancing Loops. Reinforcing Loops Amplify the system’s output with each system cycle. Compounding is an example of a positive Reinforcing Loop

9.7 Autocatalysis

An Autocatalyzing System produces the inputs necessary for the next cycle as a by-product of the previous cycle, Amplifying the cycle. Autocatalysis is a Compounding, positive, self-reinforcing Feedback Loop—the system will continue to grow until the system changes in a way that produces less output.

9.8 Environment

BACKGROUD

Every system is inevitably affected by all of the other systems around it.

WHAT

An Environment is the structure in which a system operates. The Environment primarily influences or impacts the system’s Flows or processes, changing the output of the system.

9.9 Selection Test

选拔考试

BACKGROUND

Self-perpetuating（使持续） Systems (like businesses or organisms（有机体）) can only self-perpetuate as long as they meet the Environmental conditions necessary to exist.

WHAT

A Selection Test is an Environmental constraint that determines which Systems continue to self-perpetuate and which ones “die.” As the [Environment changes, the Selection Tests change as well

9.10 Uncertainty

WHAT

Risks are known unknowns. Uncertainties are unknown unknowns.

WHY SHOULD CARE

You can’t reliably predict the future based on past events in the face of Uncertainty. No matter how stable or predictable things seem, unpredictable “black swan events” can change everything in an instant. A black swan eventBlack Swan Theory, the probability of its occurring is a moot point: the event changes the Environment in which the system operates, sometimes drastically changing Selection Tests without warning. Discounted Cash Flow (NPV), or Capital Asset Pricing Model (CAPM) model is only as good as the quality of your predictions. Absorbing（吸引人的）the ever-present nature of Uncertainty is an exercise in seeing the world as it really is, not as we want it to be. Instinctually, we all want to feel like we know what will happen in the future, particularly given how prone we are to [Loss Aversion and [Threat Lockdown.

9.11 Change

WHAT

All systems Change—there is no such thing as a System in stasis. Because of our natural [Pattern Matching abilities, we tend to see patterns where none exist and tend to attribute random Changes to skill if the Changes are good or misfortune if they’re bad.

9.12 Interdependence

相互依赖

WHAT

Complex Systems almost always rely on other systems in order to operate.

WHY

The more tightly coupled the processes in a system are, the more likely failures or delays will affect other parts of the system. Tightly coupled systems are typically time dependent, rigidly ordered, and have very little [Slack.

HOW

You can make a system less Interdependent by removing dependencies. A dependency is an input that’s required before the next stage of a process can take place. The more dependencies there are in a system, the higher the likelihood of delay or system failure.

9.13 Counterparty Risk

信用风险 Credit Risk

WHAT

Counterparty risk is the possibility that other people won’t deliver what they have promised.

WHY

Too much Counterparty Risk increases the risk of catastrophic system failure. Counterparty Risk is [Amplified by the [Planning Fallacy.

9.14 Second-Order Effects

Every action has a consequence, and those consequences have consequences, which are called Second-Order Effects.

WHY

Changing some aspect of a complex system always introduces Second-Order Effects, some of which may be antithetical to the original intent of the change.

9.15 Normal Accidents

The theory of Normal Accident is a more formal way of expressing a universal proverb: shit happens. Overreacting to Normal Accidents is actually counterproductive.

WHY

Normal Accidents are a compelling reason to keep the systems you rely on as loose as you possibly can.

HOW

The best way to avoid Normal Accidents is to analyze breakdowns or “close calls” when they happen.

10. Analyzing Systems

In this chapter, you’ll learn how to Deconstruct systems into smaller parts you can understand, measure what’s important, and discover how parts of the system interact with and depend on one another to function.

10.1 Deconstruction

解构

WHAT

Deconstruction is the process of separating complex systems into the smallest possible subsystems in order to understand how things work. Deconstruction is the reverse-engineering aspect of Gall’s Law.

HOW

In addition, it’s important to understand the conditionals present in a system—if-then or when-then relationships that influence the operation of the system. Creating diagrams and flowcharts can help you understand how each Inflow, process, trigger, conditional, endpoint, and Outflow comes together.

EXAMPLE

If you know nothing about how cars work…Instead of focusing on how the entire car works, you simply concern yourself with the engine for a while. Where does the subsystem begin? What Flows are involved? What processes take place inside the system? Are there Feedback Loops involved? What happens if Inflows don’t come in? Where does the system end? What are the Outflows?

10.2 Measurement

WHAT

Measurement is the process of collecting data as the system is operating. By collecting information related to the core functions of the system, it’s much easier to understand exactly how well the system itself is performing.

WHY

Measurement helps us avoid [Absence Blindness when analyzing a system. Measuring something is the first step to improving it. Peter Drucker famously opined, “What gets measured gets managed.”

10.3 Key Performance Indicator

WAHT

Some Measurements are more important than others: Key Performance Indicators (KPIs) are Measurements of the critical parts of a System. Typically, business-related KPIs are directly related to either [The 5 Parts of Every Business or [Throughput…identify a business’s KPIs:

• [Value Creation: How quickly is the system creating value? What is the current level of Inflows?
• [Marketing: How many people are paying Attention to your offer? How many prospects are giving you Permission to provide more information?
• [Sales: How many prospects are becoming paying customers? What is the average customer’s Lifetime Value?
• [Value Delivery: How quickly can you serve each customer? What is your current returns or complaints rate?
• [Finance: What is your Profit Margin? How much Purchasing Power do you have? Are you financially Sufficient?

HOW

Try to limit yourself to only three to five KPIs per system.

10.4 Garbage In, Garbage Out

WHAT

Garbage In, Garbage Out is a straightforward principle: put useless input into a System, and you’ll get useless output.

HOW

To improve your results, improve the quality of what you start with.

10.5 Tolerance

容错

WHAT

A Tolerance is an acceptable level of “normal” error in a system. Within a given range of measurements, the system is performing as intended. Tolerances are often referred to as being “tight” or “loose.” A tight Tolerance is one in which there’s little room for error or variability. A loose Tolerance allows significant room for error or variability and is common when small mistakes produce no major repercussions. Often, systems companies use this reliability measurement as a Tolerance, and they write a contract called a Service Level Agreement (SLA) that promises to compensate customers if errors exceed a certain threshold.

10.6 Analytical Honesty

WHAT

Analytical Honesty means measuring and analyzing the data you have dispassionately（客观公正）.

HOW

The best way to maintain Analytical Honesty is to have your measurements evaluated by someone who isn’t personally invested in your system. [Incentive-Caused Bias and [Confirmation Bias are all too easy to succumb to if your social status is on the line.

10.7 Context

WHAT

Context is the use of related [Measurements to provide additional information about the data you’re examining. Aggregate [Measurements almost never tell you anything useful. Aggregate measures are worthless when it comes to making tangible improvements because they lack Context.

HOW

examine no measures in isolation—always look at them in Context with other [Measurements.

10.8 Sampling

样品

WHAT

Sampling is the process of taking at random a small percentage of the total output, then using it as a proxy for the entire system.

WHY

Sampling can help you identify systemic errors quickly without testing all of the output of the system, which can be time-consuming and expensive. Random “spot checks” are also a form of Sampling.

10.9 Margin of Error

WHAT

Margin of Error is an estimate of how much you can trust your conclusions from a given set of observed Samples. When it comes to analytical confidence, more data is always better.

10.10 Ratio

WHAT

A Ratio is a method of comparing two Measurements against each other. By dividing your results by your input, you can measure all sorts of useful relationships between different parts of your System. HERE ARE SOME USEFUL RATIOS TO TRACK:

• Return on Promotion: For every $1 you spend in advertising, how much revenue do you collect?
• Profit per Employee: For every person you employ, how much profit does your business generate?
• Closing Ratio: For every prospect you serve, how many purchase?
• Returns/Complaints Ratio: For every sale you make, how many choose to return or complain?

10.11 Typicality

典型值

WHAT

Many forms of analysis rely on defining Typicality: identifying a normal or typical value for some important measurement. There are four common methods of calculating a typical value: mean, median, mode, and midrange.

• A Mean (or average) is calculated by adding the quantities of all data points, then dividing by the total number of data points available.
• A Median is calculated by sorting the values in order of high to low, then finding the quantity of the data point in the middle of the range.

10.12 Correlation and Causation

相关与因果关系

WHAT

That’s Causation: a complete chain of cause and effect. Correlation is not Causation. Even if you notice that one measurement is highly associated with another, that does not prove that one thing caused the other. Causation is always more difficult to prove than Correlation. When analyzing complex Systems with many variables and Interdependencies, it’s often extremely difficult to find true causality.

HOW

Adjusting for known variables can help you isolate the potential causes of a change in your system.

10.13 Norms

基准

WAHT

Norms are measures that use historical data as a tool to provide [Context for current [Measurement.

WHY

When Measurement practices Change, Norms based on the previous Measurements are no longer valid.

HOW

Remember, we’re dealing with complex Systems—things always Change over time. Just because something was useful in the past does not mean it will continue to perform as well in perpetuity（永久，永恒）. For best results, reexamine your Norms periodically to make sure they’re valid.

10.14 Proxy

WHAT

A Proxy measures one quantity by measuring something else.

HOW

Useful Proxies are closely related to the primary subject—the closer, the better. Take Web site analytics—you may want to know exactly where and how long people pay Attention to different parts of the Web page, but again, you can’t brain scan each visitor to your Web site.

10.15 Segmentation

WHAT

Segmentation is a technique that involves splitting a data set into well-defined subgroups to add additional [Context. There are three common ways to Segment customer data:

• Past Performance
• Demographics
• Psychographics

Past Performance

Segments customers by past known actions. Lifetime Value calculations are a form of Segmentation by Past Performance.

Demographics

Segment customers by external personal characteristics. Personal information like age, gender, income, nationality, and location can help you determine which customers are your Probable Purchasers.

Psychographics

Segment customers by internal psychological characteristics. Typically discovered via surveys, assessments, or focus groups, Psychographics are attitudes or worldviews that influence how people see themselves and the world at large.

10.16 Humanization

人性化

WHAT

Humanization is the process of using data to tell a story (Narrative) about a real person’s experience or behavior. Quantifiable measures are helpful in the aggregate, but it’s often necessary to reframe the measure into actual behavior to really understand what’s actually happening. Many businesses Humanize by developing a series of personas: fictional profiles of people developed from data.

11. Improving Systems

Learn the secrets of Optimization, how to remove unnecessary Friction from critical processes, and how to build Systems that can handle Uncertainty and Change.

11.1 Intervention Bias

Intervention Bias

WHAT

Intervention Bias makes us likely to introduce changes that aren’t necessary in order to feel in control of a situation.

HOW

The best way to correct for Intervention Bias is to examine what scientists call a “null hypothesis”: examining what would happen if you did nothing or assumed the situation was an accident or error.

EXAMPLE

Imagine a company that allows its employees to purchase any book they want or need, no questions asked…until one employee abuses the privilege and orders hundreds of novels for personal enjoyment. What should be done?…waste time for everyone by increasing paperwork and bureaucracy, and reduce employee productivity by increasing the amount of time it takes to find information they can use to improve the business…The correct response in this case is to do nothing.

11.2 Optimization

WHAT

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 Indicator, which measure the critical elements of the system as a whole. Maximization typically focuses on the system’s Throughput. Minimization typically focuses on in-process inputs required for the System to operate. By definition, if you’re trying to Maximize or Minimize more than one thing, you’re not Optimizing—you’re making Trade-offs. 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 which Changes produced which results.

11.3 Refactoring

Refactoring is the process of changing a system to improve efficiency without changing the output of the system.

What’s the point?

The primary benefit of Refactoring isn’t improving the output—it’s making the system itself faster or more efficient.

HOW

Refactoring starts by Deconstructing a process or system, then looking for Patterns. Once Patterns begin to emerge, you can rearrange the system to group similar processes or inputs together.

WHEN

If your Goal is to make the system faster or more efficient, Refactoring is critically important.

11.4 The Critical Few

关键少数

WHAT

In any complex System, a minority of the inputs produce the majority of the output. This Pattern of persistent nonlinearity is now called the Pareto principle, or the 80-20 rule. Personally, I prefer to refer to it as the Critical Few.

EXAMPLES

• In many businesses, less than 20 percent of the customers account for more than 80 percent of annual revenue.
• Less than 20 percent of a business’s employees typically do 80 percent or more of the highly valuable work.
• You wear less than 20 percent of the clothing in your closet over 80 percent of the time.
• You spend over 80 percent of your time communicating with less than 20 percent of your personal contacts.

HOW

For best results, focus on the critical inputs that produce most of the results you want.

11.5 Diminishing Returns

Diminishing Returns 边际产量递减 Diminishing Marginal Product All good things are subject to Diminishing Returns—after a certain point, having more of something can actually be detrimental

HOW

Focus on doing a few simple things that will produce most of the results you’re looking for, then call it a day. Don’t feel like you have to Optimize absolutely everything to perfection. Optimization as well—a few small changes can produce enormous results.

11.6 Friction

摩擦，不合

WHAT

Friction is any force or process that removes energy from a System over time. In the presence of Friction, it’s necessary to continue to add energy to a system to keep it moving at the same rate over time. Unless additional energy is added, Friction will slow the system down until it comes to a stop. Remove the Friction, and you’ll increase the system’s efficiency. Every business process has some amount of Friction.

WHY

Removing even small amounts of Friction from your Marketing, Sales, and [Value Delivery processes can generate major improvements in [Profit.

EXAMPLE

82 percent of Prime members choose to purchase items on Amazon even when the item is less expensive at a competing retailer.

HOW

Introducing Friction intentionally can sometimes encourage people to behave in a certain way or make a particular decision.

11.7 Automation

WHAT

Automation refers to a System or process that can operate without human intervention. Automation is best for well-defined, repetitive tasks.

HOW

Find a way to Automate your system, and you open the doors to Scale via Duplication and Multiplication, improving your ability to create and deliver value to more paying customers.

11.8 The Paradox of Automation

BACKGROUND

Consider this: In late 2009, Toyota identified a major issue with the accelerator pedal in several popular vehicle models, which were top sellers for many years. The error was Multiplied across every vehicle Toyota made, and the recall cost over five billion dollars. Before the recall, Toyota was considered the best automotive manufacturer in the world. They still are in many respects, but their Reputation and financial situation suffered a major blow. Even the best can fall if costly mistakes are allowed to Multiply.

WHAT

Here’s 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, operators need to identify and fix the situation quickly or shut the system down—otherwise, the Automated system will continue to Multiply the error.

11.9 The Irony of Automation

WHAT

Here’s the Irony of Automation: the more reliable the system, the less human operators have to do, so the less they pay Attention to the system while it’s in operation.

WHY

reliable systems tend to dull the operator’s senses, making it very difficult for them to notice when things go wrong—the moment when their attention is most sorely needed.

HOW TO AVOID

The best approach to avoid major Automation errors is rigorous, ongoing [Sampling and Testing.

11.10 Standard Operating Procedure

Standard Operating Procedure

WHAT

A Standard Operating Procedure (SOP) is a predefined process used to complete a task or resolve a common issue. Business Systems often include repetitive tasks, and having a standard process in place can help you spend less time reinventing the wheel and more time doing productive work.

HOW TO USE

Don’t let your Standard Operating Procedures lapse into bureaucracy. For best results, review your SOPs on a periodic basis—once every two to three months is ideal. If you find outdated, wasteful, or unnecessary work in your SOPs, change them. Neither you nor your customers are served by unnecessary red tape.

11.11 Checklist

WHAT

A Checklist is an Externalized, predefined Standard Operating Procedure for completing a specific task.

WHY

for two reasons. First, Checklisting will help you define a System for a process that hasn’t yet been formalized—once the Checklist has been created, it’s easier to see how to improve or Automate the system. Second, using Checklists as a normal part of working can help ensure that you don’t forget to handle important steps that are easily overlooked when things get busy.

HOW

For best results, create explicit Checklists for the Five Parts of Your Business, then make sure they’re followed every single time.

11.12 Cessation

停止

WHAT

Cessation is the choice to intentionally（有意的） stop doing something that’s counterproductive（适得其反）. Due to Absence Blindness, we’re predisposed to attempt to improve a system by doing something—it “feels wrong” to do nothing.

WHAT

Doing something is not always the best course of action. Consider doing nothing instead.

11.13 Resilience

适应能力 The world is a fundamentally [Uncertaint place. Unexpected things happen.

WHAT

Resilience is a massively underrated quality in business. Having the toughness and flexibility to handle anything life throws at you is a major asset that can save your skin.

HOW

Preparing for the unexpected makes you more Resilient…HERE’S WHAT MAKES A BUSINESS RESILIENT:

• Low (preferably zero) outstanding debt
• Low overhead, fixed costs, and operating expenses
• Substantial cash reserves for unexpected contingencies
• Multiple independent products/industries/lines of business
• Flexible workers/employees who can handle many responsibilities well
• No single points of failure
• Fail-safes/backup systems for all core processes

11.14 Fail-safe

“Always” and “never” are two words that you should always remember never to use.

WHAT

A Fail-safe is a backup System designed to prevent or allow recovery from a primary system failure.

WHY

Backup systems and Insurance, from one perspective, can be seen as a waste of money—why spend valuable resources on something you hope you’ll never need?

HOW

In order to be effective, Fail-safes must be developed before you need them. Fail-safes that are highly Interdependent with the primary system can actually introduce additional risks. As much as possible, never have a single critical point of failure.

11.15 Stress Testing

To make no mistakes is not in the power of man; but from their errors and mistakes the wise and good learn wisdom for the future.

—PLUTARCH, ANCIENT GREEK HISTORIAN AND ESSAYIST

WHAT

Stress Testing is the process of identifying the boundaries of a system by simulating specific Environmental conditions.

11.16 Scenario Planning

Scenario Planning

WHAT

Scenario Planning is the process of systematically constructing a series of hypothetical situations, then [Mentally Simulating what you would do if they occured. You may not be a seer, but Counterfactual Simulation gives you a powerful capability: imagining things that might occur, then figuring out what you’d do if they did. Scenario Planning is essentially detailed, thorough, and systematic Counterfactual Simulation applied to major decisions.

HOW

Scenario Planning always starts with a simple question: “What would I do if. . . ?” The “what if” part is the Counterfactual, and it’s what kicks your planning brain into gear, helping you imagine possible responses. Most large businesses use Scenario Planning as the basis of a practice called “hedging”: purchasing various forms of Insurance to reduce the Risk of unfavorable future events.

11.17 Sustainable Growth Cycle

BACKGROUND

Businesses and biological organisms have many things in common: they’re made up of many interrelated parts and systems that change and grow over time.

WHAT

The Sustainable Growth Cycle is a pattern I’ve noticed in businesses that are able to grow year after year without major difficulties. This cycle has three distinct phases: expansion, maintenance, and consolidation.

HOW

In an Expansion phase, the company is focused on growing. In a Maintenance phase, the company is focused on executing the current plan. In a Consolidation phase, the company is focused on analysis.

WHY

A healthy business cycles between expansion, maintenance, and consolidation often. No matter which part of the cycle you’re in, it’s important to recognize that it’s necessary and essential to the health of the business. By giving each cycle the appropriate time and attention, you’ll ensure the long-term success of the business.

11.18 The Middle Path

WHAT

WHAT

The Middle Path is the ever-changing balance point between too little and too much—just enough.

HOW

Try to find the Middle Path, then stay on it as best you can. Find the right balance, and you can accomplish anything.

11.19 The Experimental Mindset

The only way you learn to flip things is just to flip them!

—JULIA CHILD, WORLD-RENOWNED CHEF, AFTER FLOPPING A POTATO PANCAKE ONTO THE FLOOR DURING HER TV SHOW

WHY

Constant Experimentation is the only way you can identify what will actually produce the result you desire.

HOW

You learn the most from what doesn’t go well. As long as your mistakes don’t kill you, paying Attention to what doesn’t work can give you useful information you can use to discover what does.

11.20 NOT THE END

B. C. Forbes, the founder of Forbes magazine, who wrote an essay in 1917 called “Keys to Success.” Your success depends on you. Your happiness depends on you. You have to steer your own course. You have to shape your own fortune. You have to educate yourself. You have to do your own thinking. You have to live with your own conscience. Your mind is yours and can be used only by you. You come into this world alone. You go to the grave alone. You are alone with your inner thoughts during the journey between. You make your own decisions. You must abide by the consequences of your acts… You alone can regulate your habits and make or unmake your health. You alone can assimilate things mental and things material… You have to do your own assimilation all through life. You can be taught by a teacher, but you have to imbibe the knowledge. He cannot transfuse it into your brain. You alone can control your mind cells and your brain cells. You may have spread before you the wisdom of the ages, but unless you assimilate it you derive no benefit from it; no one can force it into your cranium. You alone can move your own legs. You alone can move your own arms. You alone can utilize your own hands. You alone can control your own muscles. You must stand on your feet, physically and metaphorically. You must take your own steps. Your parents cannot enter into your skin, take control of your mental and physical machinery, and make something of you. You cannot fight your son’s battles; that he must do for himself. You have to be captain of your own destiny. You have to see through your own eyes. You have to use your own ears. You have to master your own faculties. You have to solve your own problems. You have to form your own ideals. You have to create your own ideas. You must choose your own speech. You must govern your own tongue. Your real life is your thoughts. Your thoughts are your own making. Your character is your own handiwork. You alone can select the materials that go into it. You alone can reject what is not fit to go into it. You are the creator of your own personality. You can be disgraced by no man’s hand but your own. You can be elevated and sustained by no man but yourself. You have to write your own record. You have to build your own monument—or dig your own pit. Which are you doing?

HOW TO CONTINUE YOUR BUSINESS STUDIES

I highly recommend starting with any of these books:

BUSINESS CREATION

• Go It Alone! by Bruce Judson
• The Lean Startup by Eric Ries
• The Knack by Norm Brodsky and Bo Burlingham
• Ready, Fire, Aim by Michael Masterson
• Escape from Cubicle Nation by Pamela Slim
• Bankable Business Plans by Edward G. Rogoff

VALUE CREATION AND TESTING

• Rework by Jason Fried and David Heinemeier Hansson
• The New Business Road Test by John W. Mullins
• How to Make Millions with Your Ideas by Dan S. Kennedy

MARKETING

• All Marketers Are Liars by Seth Godin
• Permission Marketing by Seth Godin
• The 22 Immutable Laws of Marketing by Al Ries and Jack Trout
• Getting Everything You Can Out of All You’ve Got by Jay Abraham

SALES

• The Psychology of Selling by Brian Tracy
• Pitch Anything by Oren Klaff
• The Ultimate Sales Machine by Chet Holmes
• Value-Based Fees by Alan Weiss
• SPIN Selling by Neil Rackham

VALUE DELIVERY

• Indispensable by Joe Calloway
• The Goal by Eliyahu M. Goldratt
• Lean Thinking by James P. Womack and Daniel T. Jones

FINANCE AND ACCOUNTING

• Financial Intelligence for Entrepreneurs by Karen Berman and Joe Knight with John Case
• Simple Numbers, Straight Talk, Big Profits! by Greg Crabtree
• The 1% Windfall by Rafi Mohammed
• Accounting Made Simple by Mike Piper
• How to Read a Financial Report by John A. Tracy
• Venture Deals by Brad Feld and Jason Mendelson

THE HUMAN MIND

• Thinking, Fast and Slow by Daniel Kahneman
• Brain Rules by John Medina
• Making Sense of Behavior by William T. Powers
• Driven by Paul R. Lawrence and Nitin Nohria
• Deep Survival by Laurence Gonzales

PRODUCTIVITY AND EFFECTIVENESS

• Getting Things Done by David Allen
• The Power of Full Engagement by Jim Loehr and Tony Schwartz
• StrengthsFinder 2.0 by Tom Rath
• Bit Literacy by Mark Hurst
• 10 Days to Faster Reading by Abby Marks-Beale and the Princeton Language Institute

PROBLEM SOLVING

• The ⁸⁰⁄₂₀ Principle by Richard Koch
• Accidental Genius by Mark Levy
• Learning from the Future edited by Liam Fahey and Robert M. Randall

BEHAVIORAL CHANGE

• The Power of Less by Leo Babauta
• The Path of Least Resistance by Robert Fritz
• Re-Create Your Life by Morty Lefkoe
• Self-Directed Behavior by David L. Watson and Roland G. Tharp

DECISION MAKING

• Sources of Power by Gary Klein
• Smart Choices by John S. Hammond, Ralph L. Keeney, and Howard Raiffa
• Ethics for the Real World by Ronald A. Howard and Clinton D. Korver

COMMUNICATION

• On Writing Well by William Zinsser
• Presentation Zen by Garr Reynolds
• Made to Stick by Chip Heath and Dan Heath
• The Copywriter’s Handbook by Robert W. Bly
• Show Me the Numbers by Stephen Few

POWER AND INFLUENCE

• Influence by Robert B. Cialdini
• How to Win Friends and Influence People by Dale Carnegie
• Crucial Conversations by Kerry Patterson, Joseph Grenny, Ron McMillan, and Al Switzler
• The 48 Laws of Power by Robert Greene

NEGOTIATION

• Bargaining for Advantage by G. Richard Shell
• 3-D Negotiation by David A. Lax and James K. Sebenius
• The Partnership Charter by David Gage

MANAGEMENT

• First, Break All the Rules by Marcus Buckingham and Curt Coffman
• 12: The Elements of Great Managing by Rodd Wagner and James K. Harter, PhD
• Growing Great Employees by Erika Andersen
• The Essential Drucker by Peter F. Drucker

LEADERSHIP

• Tribes by Seth Godin
• Total Leadership by Stewart D. Friedman
• What Got You Here Won’t Get You There by Marshall Goldsmith
• The New Leader’s 100-Day Action Plan by George B. Bradt, Jayme A. Check, and Jorge E. Pedraza
• The Halo Effect by Phil Rosenzweig

PROJECT MANAGEMENT

• Making Things Happen by Scott Berkun
• Results Without Authority by Tom Kendrick

SYSTEMS

• Thinking in Systems by Donella H. Meadows
• Work the System by Sam Carpenter

ANALYSIS

• Turning Numbers into Knowledge by Jonathan G. Koomey, PhD
• Marketing Metrics by Paul W. Farris, Neil T. Bendle, Phillip E. Pfeifer, and David J. Reibstein
• The Economist Numbers Guide by Richard Stutely

STATISTICS

• Thinking Statistically by Uri Bram
• How to Lie with Statistics by Darrell Huff

CORPORATE SKILLS

• The Unwritten Laws of Business by W. J. King
• The Effective Executive by Peter F. Drucker
• The Simplicity Survival Handbook by Bill Jensen
• Hire with Your Head by Lou Adler

CORPORATE STRATEGY

• Purpose by Nikos Mourkogiannis
• Competitive Strategy by Michael E. Porter
• Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne
• Seeing What’s Next by Clayton M. Christensen, Scott D. Anthony, and Erik A. Roth

CREATIVITY AND INNOVATION

• The Creative Habit by Twyla Tharp
• Myths of Innovation by Scott Berkun
• Innovation and Entrepreneurship by Peter F. Drucker

DESIGN

• The Design of Everyday Things by Donald A. Norman
• Universal Principles of Design by William Lidwell, Kritina Holden, and Jill Butler

CONSULTING

• Getting Started in Consulting by Alan Weiss
• Secrets of Consulting by Gerald M. Weinberg

PERSONAL FINANCE

• Your Money or Your Life by Vicki Robin and Joe Dominguez with Monique Tilford
• The Millionaire Next Door by Thomas J. Stanley, PhD and William D. Danko, PhD
• I Will Teach You to Be Rich by Ramit Sethi
• Fail-Safe Investing by Harry Browne

PERSONAL GROWTH

• Lead the Field by Earl Nightingale
• The Art of Exceptional Living by Jim Rohn
• A Guide to the Good Life by William B. Irvine

FORTY-NINE QUESTION TO IMPROVED YOUR RESULTS

DO I USE MY BODY OPTIMALLY?

• What is the quality of my current diet?
• Do I get enough sleep?
• Am I managing my energy well each day?
• How well am I managing daily stress?
• Do I have good posture and poise?
• What can I do to improve my ability to observe the world around me?

DO I KNOW WHAT I WANT?

• What achievements would make me really excited?
• What “states of being” do I want to experience each day?
• Are my priorities and values clearly defined?
• Am I capable of making decisions quickly and confidently?
• Do I consistently focus my attention on what I want versus what I don’t want?

WHAT AM I AFRAID OF?

• Have I created an honest and complete list of the fears I’m holding on to?
• Have I confronted each fear to imagine how I would handle it if it came to pass?
• Am I capable of recognizing and correcting self-limitation?
• Am I appropriately pushing my own limits?

IS MY MIND CLEAR AND FOCUSED?

• Do I systematically externalize (write or record) what I’m thinking about?
• Am I making it easy to capture my thoughts quickly, while as I have them?
• What has my attention right now?
• Am I regularly asking myself appropriate guiding questions?
• Do I spend most of my time focusing on a single task, or am I constantly flipping between multiple tasks?
• Do I spend enough time actively reflecting on my goals, projects, and progress?

AM I CONFIDENT, RELAXED, AND PRODUCTIVE?

• Have I found a planning method that works for me?
• Am I “just organized enough”?
• Do I have an up-to-date list of my projects and active tasks?
• Do I review all of my commitments on a regular basis?
• Do I take regular, genuine breaks from my work?
• Am I consciously creating positive habits?
• Am I working to shed nonproductive habits?
• Am I comfortable with telling other people “no”?

HOW DO I PERFORM BEST?

• What do I particularly enjoy?
• What am I particularly good at doing?
• What environment(s) do I find most conducive to doing good work?
• How do I tend to learn most effectively?
• How do I prefer to work with and communicate with others?
• What is currently holding me back?

WHAT DO I REALLY NEED TO BE HAPPY AND FULFILLED?

• How am I currently defining “success”?
• Is there another way of defining “success” that I may find more fulfilling?
• How often do I compare myself with my perceptions of other people?
• Am I currently living below my means?
• If I could only own one hundred things, what would they be?
• Am I capable of separating necessity and luxury?
• What do I feel grateful for in my life and work?

EXTENDS

• Making Sense of Behavior: The Meaning of Control, William T. Powers
• Re-Create Your Life, Morty Lefkoe
• In Green to Gold, Daniel Esty and Andrew Winston
• In Sources of Power: How People Make Decisions, researcher Gary Klein
• Steve Pavlina, Personal Development for Smart People.
• The Vegetarian Myth by Lierre Keith
• Protein Power by Michael R. and Mary Dan Eades
• In Mindset: The New Psychology of Success, Dr. Carol Dweck
• In The 48 Laws of Power, Robert Greene argues that no one is completely exempt from dealing with others, which inevitably involves Power.
• book Beyond Bureaucracy, Derek Sheane
• What Got You Here Won’t Get You There, veteran executive coach Marshall Goldsmith
• Crucial Conversations, authors Kerry Patterson, Joseph Grenny, Ron McMillan, and Al Switzler.
• Influence: The Psychology of Persuasion, Dr. Robert Cialdini
• According to the late Jim Rohn, author of The Art of Exceptional Living
• How to Win Friends and Influence People, Dale Carnegie
• The Goal: A Process of Ongoing Improvement, Eliyahu Goldratt
• The Black Swan, Nassim Nicholas Taleb
• /Fooled by Randomness/—the title of Nassim Nicholas Taleb’s
• The 4-Hour Workweek, Timothy Ferriss
• For a full introduction to common Financial Ratios, I recommend Financial Intelligence for Entrepreneurs by Karen Berman and Joe Knight with John Case.
• The New Business Road Test by John Mullins