Quick overview

Amazing starting point for anyone interested in business. It’s a high level explanation of key business concepts that keeps it interesting without stuffing it with information that you might never need, but it’s a great starting point when you do need to utilize a key concept.

My notes

“The man who tries methods, ignoring principles, is sure to have trouble.” Ralph Waldo Emerson, Essayist and Poet

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.

Value Creation

At the core, every business is fundamentally a collection of five Interdependent processes, each of which flows into the next:

1. Value Creation. Discovering what people need or want, then creating it.
2. Marketing. Attracting attention and building demand for what you’ve created.
3. Sales. Turning prospective customers into paying customers.
4. Value Delivery. Giving your customers what you’ve promised and ensuring that they’re satisfied.
5. Finance. Bringing in enough money to keep going and make your effort worthwhile.

At the core, all successful businesses sell some combination of money, status, power, love, knowledge, protection, pleasure, and excitement. The more clearly you articulate how your product satisfies one or more of these drives, the more attractive your offer will become.

As a business professional, it’s important to understand that status considerations are present in every level of the Core Human Drives. When you make an offer to a new prospect, they will automatically and unconsciously examine how your offer will influence their social status. Consciously building Social Signals into your offer is almost always an effective way to increase its appeal to your target market.

The best way to observe what your potential competitors are doing is to become a customer.

Learn everything you can from your competition, and then create something even more valuable.

Where there’s a hassle, there’s a business opportunity.

On their own, ideas are largely worthless—discovering whether or not you can actually make them work in reality is the most important job of any entrepreneur.

Nobody—no matter how smart or talented they are—gets it right the first time.

“Iteration Velocity Our goal is to have more at bats per unit of time and money than anyone else.” Eric Schmidt, Chairman and CEO of Google

Things that are quick, reliable, easy, and flexible are convenient. Things that offer quality, status, aesthetic appeal, or emotional impact are high-fidelity. Almost every improvement you make to an offer can be thought of in terms of improving either convenience or fidelity. 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.

The best way to discover what people actually value is to ask them to make explicit Trade-offs during the research process. The problem with the hypothetical focus group was that it didn’t ask the participants to make any real Decisions—the participants could have everything, so they wanted everything.

Critical Assumptions are facts or characteristics that must be true in the real world for your business or offering to be successful. Every new business or offering has a set of Critical Assumptions, and if any Critical Assumptions turns out to be false, the business idea will be vastly less promising than it appears.

The best way to validate the truth of your Critical Assumptions is to test them directly, but going through the entire process of starting the business is needlessly risky and expensive. It’s much smarter to minimize your risk by testing your offering with real paying customers before you fully commit to making it real. Shadow Testing is the process of selling an offering before it actually exists. As long as you’re completely up front with your potential customers that the offering is still in development, Shadow Testing is a very useful strategy you can use to actually test your Critical Assumptions with real customers quickly and inexpensively.

Marketing

Using what you make every day is the best way to improve the quality of what you’re offering. Nothing will help you find ways to make your offer better than being its most avid and demanding customer.

Marketing is not the same thing as selling. While “direct marketing” strategies often try to minimize the time between attracting attention and asking for the sale, Marketing and selling are two different things. Marketing is about getting noticed; Sales is about closing the deal.

Marketing is most effective when it focuses on the desired End Result, which is usually a distinctive experience or emotion related to a Core Human Drive.

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.

Here’s the reality: it’s almost impossible to make someone want something they don’t already desire.

The essence of effective marketing is discovering what people already want, then presenting your offer in a way that intersects with that preexisting Desire.

For best results, focus on giving away real Free value that is likely to attract real paying customers.

A Hook is a single phrase or sentence that describes an offer’s primary benefit.

When creating a Hook, focus on the primary benefit or value your offer provides.

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.

Call-To-Action (CTA) Don’t make me think.

Your prospects can’t read your mind. If you want your prospects to take the next step you’re encouraging, you need to tell them exactly what to do. The most effective marketing messages give the recipient or prospect a single, very clear, very short action to take next.

The best Calls-To-Action ask directly either for the sale or for Permission to follow up.

Controversy If you want an audience, start a fight.

Controversy with a purpose is valuable; Controversy for the sake of Controversy, or Controversy that belittles and demeans, is not. Controversy won’t help you if you lose sight of the purpose behind your actions.

“Branding” is one of the most overused and overhyped ideas in the modern business world. There’s nothing magical or complex about building a brand: when business professionals say they want to “enhance their brand” or “build brand equity,” they almost always mean “improve their reputation.”

Sales

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

• replacement cost,
• market comparison,
• discounted cash flow/net present value, and
• value comparison.

These Four Pricing Methods will help you estimate just how much something is potentially worth to your customers.

Value-Based Selling is not about talking—it’s about listening.

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

1. make the customer feel comfortable and relaxed, then
2. help the bride become more knowledgeable about the product/service in terms of how it’s created and what to look for when buying the product/service.

In every negotiation, there are Three Universal Currencies:

• resources,
• time, and
• flexibility.

Any one of these currencies can be traded for more or less of the others.

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.

The more effective strategy, in the words of the renowned sales expert Zig Ziglar, is to present yourself to the prospect as an “assistant buyer.”

• Your job is not to sell the prospect a bill of goods: it’s to help them make an informed decision about what’s best for them.
• You’re not pressuring them to give you their money: you’re helping to ensure they invest their resources wisely.
• This basic Reinterpretation of your role in the sales process works: it eliminates the prospect’s feeling of pressure by convincing them you’re looking out for their best interests.

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. In the same way that people don’t want to date a person who desperately wants to be in a relationship, prospects don’t want to do business with a person who desperately wants or needs their money.

Reciprocation is the strong desire most people feel to “pay back” favors, gifts, benefits, and resources provided. If you’ve ever had the experience of receiving a holiday gift from someone you didn’t send anything to, you know how uncomfortable this feels. If someone benefits us, we like to benefit them in return.

Your prospects know you’re not perfect, so don’t pretend to be. People actually get suspicious when something appears to be “too good to be true.” If an offer appears abnormally good, your prospects will start asking themselves, “What’s the catch?” 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.

Barriers to Purchase Selling begins when the prospect says no.

Selling anything is largely the process of identifying and eliminating Barriers to Purchase: risks, unknowns, and concerns that prevent your prospects from buying what you offer.

To overcome these objections as quickly as possible, it makes sense to build them into the structure of your initial offer. Since these objections are very common, anything that you can do to alleviate them before the prospect considers the offer will make the sales process much easier.

Risk Reversal is a strategy that transfers some (or all) of the risk of a Transaction from the buyer to the seller. Instead of making the purchaser shoulder the risk of a bad Transaction, the seller agrees in advance to make things right if—for whatever reason—things don’t turn out as the purchaser expected.

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, and it’s a big deal. Since you’re serving many customers, you can spread the risk of a return among many customers. Yes, you’ll lose money on customers who are obviously taking advantage of your generosity, and that never feels good. In compensation, by eliminating the risk that every purchaser feels, you’ll close many more sales and come out way ahead in terms of total revenue and profit.

Most point-of-sale (POS) systems keep track of customer data: who purchased and when the sale was made. It’s relatively simple to extract a list of customers who haven’t purchased from you in a while, then present them with a Reactivation offer directly via e-mail, phone call, or postal mail. Reactivation campaigns are consistently the easiest and most profitable marketing activities you’ll ever try.

Value Delivery

Value Delivery involves everything necessary to ensure that every paying customer is a happy customer: order processing, inventory management, delivery/fulfillment, troubleshooting, customer support, etc. Without Value Delivery, you don’t have a business.

“Great design is eliminating all unnecessary details.” Minh D. Tran, Technologist and Designer

In general, try to make your Value Stream as small and efficient as possible. As we’ll examine later in the book when we discuss systems, the longer your process, the greater the risk of things going wrong. The shorter and more streamlined your Value Stream, the easier it is to manage and the more effectively you’ll be able to deliver value.

A customer’s perception of quality relies on two criteria: expectations and performance. You can characterize this relationship in the form of a quasi-equation, which I call the Expectation Effect: Quality=Performance – Expectations.

Do whatever you can do to provide something that unexpectedly delights your customers. Zappos’s free upgraded shipping is more valuable as a surprise—if it were part of the deal, it would lose its emotional punch.

When purchasing something of value, customers want to know exactly what they can expect—they want their experience to be Predictable. Unexpected surprises can provide a customer with a great experience, but if you’re not able to deliver what the customer expects in a Predictable manner, it doesn’t matter how many bonuses you offer. People love pleasant surprises, but they hate to be caught off guard.

Throughput is a measure of the effectiveness of your Value Stream. Throughput is measured in the formula [units/time]. The more results you create per unit of time, the higher the Throughput.

The best way to begin increasing Throughput is to start measuring it. How long does it take for your business system to produce a dollar of profit? How long does it take to produce another unit to sell, or a new happy customer?

Humans don’t Scale. Individual people only have so much time and energy each day, which is a Constraint that doesn’t change with the volume of work to be done.

As a result, Services are typically difficult to Scale, since they tend to rely heavily on the direct involvement of people to deliver value. As a general rule, the less human involvement required to create and deliver value, the more Scalable the business.

The more time and energy you spend following your competition, the less time and energy you have to actually build your business.

Systemization and Automation have a few major drawbacks. For now, recognize that effective systems are the lifeblood of a business—they allow you to create, market, sell, and ultimately deliver what you have to offer. The better your systems, the better your business.

Finance

When examining a business, pay close attention to Profit Margin. The higher the margin, the stronger the business.

Create as much value as you possibly can, then capture enough of that value to make it worthwhile to keep operating.

Cost-Benefit Analysis is the process of examining potential changes to your business to see if the benefits outweigh the costs. Instead of acting on a change the moment you think of it, you take a step back to evaluate the true cost of the action and whether or not you believe it’s the best thing you can do with your limited time, energy, and resources.

Before making a decision, evaluate the total costs and benefits. A little evaluation will ensure you spend your money in the most effective ways.

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

• Increase the number of customers you serve.
• Increase the average size of each Transaction by selling more.
• Increase the frequency of transactions per customer.
• Raise your prices.

Imagine doubling your current prices. If you’d lose less than half of your customers, it’s probably a good move. Pricing Power is your ability to raise the prices you’re charging over time. The less value you’re capturing, the greater your pricing power. Serving customers takes time, energy, and resources—the more you earn per customer served, the better your business. Changing your prices can help you maximize your results while minimizing your effort and investment.

As a result, it takes more currency to purchase the same products and services necessary to stay in business, increasing your business’s Sufficiency needs. Without adequate Pricing Power, your business may not be able to remain Sufficient in the face of higher expenses.

Lifetime Value is the total value of a customer’s business over the lifetime of their relationship with your company. The more a customer purchases from you and the longer they stay with you, the more valuable that customer is to your business.

The higher your average customer’s Lifetime Value, the better your business.

Once you understand the Lifetime Value of a prospect, you can calculate the maximum amount of time and resources you’re willing to spend to acquire a new prospect. Allowable Acquisition Cost (AAC) is the marketing component of Lifetime Value.

The first sale is sometimes called a “loss leader”—an enticing offer intended to establish a relationship with a new customer.

Creating and delivering more value is a much better way to enhance your bottom line. You can never spend less than nothing, but there’s no upper limit on the amount of value you can provide or revenue you can collect.

Control your costs, but don’t undermine the reason customers buy from you in the first place.

Opportunity Cost is the value you’re giving up by making a Decision. We can’t do everything at once—we can’t be in more than one place at a time or spend the same dollar on two different things simultaneously. Whenever you invest time, energy, or resources, you’re implicitly choosing not to invest that time, energy, or resources in any other way. The value that would have been created by your next best alternative is the Opportunity Cost of that decision.

Obsessing over Opportunity Cost too much can make you needlessly crazy, however. If you’re a natural maximizer (like I am), 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. Don’t get bogged down with all of the options available—consider only what appear to be the best alternatives at the time of your decision.

Calculating the Time Value of Money is a way of making Decisions in the face of Opportunity Costs.

Accumulating gains inevitably produces huge results over time. The trick is to be patient enough to wait for the reward.

Using Leverage is playing with fire—it can be a useful tool if used properly, but it can also burn you severely. Never use Leverage unless you’re fully aware of the consequences and are prepared to accept them. Otherwise, you’re putting your business and personal financial situation at risk.

A word to the wise: before you take on large amounts of Capital, be aware of how much Power the business’s board of directors will have over the operation of the company. Funding can be useful, but be wary of giving up control over your business’s operations—don’t do it lightly or blindly.

Bootstrapping is the art of building and operating a business without Funding. Don’t assume that the only way to create a successful business is by raising millions of dollars of Venture Capital—it’s simply not true.

The return on every investment is always directly related to how much the investment costs. The more you spend (in terms of both money and time), the lower your return. Even “sure bets” like buying a house or getting a college degree aren’t wise if you pay too much for them.

Every future ROI estimate is a semieducated guess. You can only know your ROI for certain after the investment is made and the returns collected. Nothing in this world is a sure bet—always take into account the risk of something going wrong before making an investment, no matter how high the potential ROI appears to be.

Sunk Costs are investments of time, energy, and money that can’t be recovered once they’ve been made. No matter what you do, you can’t get those resources back. Continuing to invest in a project to recoup lost resources doesn’t make sense—all that matters is how much more investment is required versus the reward you expect to obtain.

“Throwing good money after bad” is not a winning strategy.

The Human Mind

Your mind is first and foremost a physical system. Oftentimes, what we experience as mental fatigue or emotional distress is simply a signal from our body that we’re not getting enough of something we physically need: nutrients, exercise, or rest.

A few moments of quiet meditation every day can be the difference between feeling scared and overwhelmed and feeling in control of your destiny.

If you’re interested in learning to meditate, I recommend Mindfulness in Plain English by Bhante Henepola Gunaratana and Wherever You Go, There You Are by Jon Kabat-Zinn.

If you’re consistently working twelve-hour days and you decide that no more than eight is acceptable, your work habits will change. Change the Reference Level, and your behavior will change automatically.

“Your environment will eat your goals and plans for breakfast.” Steve Pavlina

Guiding Structure means the structure of your Environment is the largest determinant of your behavior. 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. If you don’t want to eat ice cream, don’t buy it in the first place.

Conflicts occur when two control systems try to change the same perception. When you’re procrastinating, one of your brain’s subsystems is trying to control “getting things done,” while another is trying to control “getting enough rest.” Since both systems are trying to control the same perception—physical action—the systems fight to move the perception in the way they want it to go.

Mental Simulation only works if you supply a “point B,” even if the action or goal is completely arbitrary—you can simulate the path to even the most unrealistic and absurd destination you can imagine.

Reinterpret your past, and you’ll enhance your ability to make great things happen in the present.

Motivation is an emotional state that links the parts of our brain that feel with the parts that are responsible for action.

Eliminate the inner conflicts that compel you to move away from potential threats, and you’ll find yourself experiencing a feeling of Motivation to move toward what you really want.

Loss Aversion is the idea that people hate to lose things more than they like to gain them. There are very few relationships that psychology is able to quantify, but this is one of them: people respond twice as strongly to potential loss as they do to the opportunity of an equivalent gain.

Loss Aversion is why Risk Reversal is so important if you’re presenting an offer to a potential customer. People hate to lose, which makes them feel stupid and taken advantage of. As a result, they’ll go to great lengths to ensure that they don’t lose, and the best way to ensure that they don’t make a stupid decision is to not buy your offer in the first place. If you’re in the business of making sales, that’s a big problem. Eliminate this perception of risk by offering a money-back guarantee or similar Risk Reversal offer, and people will feel the decision is less risky, resulting in more sales.

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, or
• you can convince your mind the threat has passed.

Notice the threat signal, then do what you can to prove to your mind the threat no longer exists, and you’ll break yourself out of Threat Lockdown.

Make a note to remind yourself to handsomely reward the low-drama manager who quietly and effectively gets things done. It may not seem like their job is particularly difficult, but you’ll miss them when they’re gone.

If you’re trying to sell the absence or prevention of something, you’re fighting an uphill battle, even if your Product is great. Always state benefits in positive, immediate, concrete, and specific terms by focusing on things the user can directly experience.

Absence Blindness also makes it uncomfortable for people to “do nothing” when something bad happens, even if doing nothing is the best course of action. Often, the best course of action is to choose not to act, but that’s often difficult for humans to accept emotionally.

Scarcity encourages people to make decisions quickly. Scarcity is one of the things that naturally overcomes our tendency to conserve—if you want something that’s scarce, you can’t afford to wait without the risk of losing what you want. Loss Aversion ensures that this possibility feels bad enough to prompt us to take action now.

Hook—an interesting story or anecdote, followed by a brief explanation of the key concept.

Working With Yourself

Akrasia is a deeper issue: it’s a general feeling that you “should” do something, without necessarily deciding to do it. The “should” feeling doesn’t lead to decision or action, even if the action seems to be in your best interest.

The term comes from the Greek α´κρασi´α, which means “lacking command (over oneself).”

Akrasia is one of the most widespread and persistent barriers to getting things done. In order to spend your time making progress, instead of fighting both sides in a battle of wills, it’s useful to have a strategy for recognizing and combating Akrasia when you recognize it. In my experience, Akrasia has four general parts: a task, a desire/want, a “should,” and an emotional experience of resistance.

Eliminate inner Conflicts. Sometimes it’s difficult to get started because you’re experiencing a Conflict between two control systems in your mind. Eliminating these Conflicts before you start working helps you achieve a Monoideal state much more quickly. If you feel resistance to getting started, it’s useful to spend some time and energy exploring that Conflict more deeply before you keep working.

Kick-start the Attention process by doing a “dash.” Since it can take ten to thirty minutes to get into the zone, setting aside ten to thirty minutes for a quick burst of focused work can make it much easier to get into the zone quickly. If you’re not productive by the time the dash is over, you have permission to stop and do something else. That’s rarely the case: once you get started, it’s easy to keep going.

Productive multitasking is a myth. According to several recent neurological studies, the more things you try to pay Attention to at any given time, the more your performance at all of them suffers.

Every time you switch the focus of your Attention from one subject to another, you incur the Cognitive Switching Penalty. In order to take action, your brain has to “load” the context of what you’re doing into working memory. If you constantly switch the focus of your Attention, you’re forcing your brain to spend time and effort thrashing, loading and reloading contexts over and over again. That’s why it’s possible to spend an entire day multitasking, get nothing done, and feel exhausted at the end—you’ve burned all of your energy context-switching instead of making progress.

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

To avoid unproductive context switching, a batching strategy is best. Eliminating distractions can help prevent unnecessary interruptions, but it’s entirely possible to waste energy mentally thrashing even if you have the entire day free. The best approach to avoid unnecessary cognitive switching is to group similar tasks together.

Paul Graham, a venture capitalist, programmer, and essayist, calls this batching strategy “Maker’s Schedule/Manager’s Schedule.” If you’re trying to create something, the worst thing you can possibly do is to try to fit creative tasks in between administrative tasks—context switching will kill your productivity. The “Maker’s Schedule” consists of large blocks of uninterrupted time; the “Manager’s Schedule” is broken up into many small chunks for meetings. Both schedules serve different purposes—just don’t try to combine them if your goal is to get useful work done.

There are really only four ways to “do” something: completion, deletion, delegation, and deferment.

• Completion—doing the task—is the option most people think about.
• Deletion—eliminating the task—is effective for anything that’s unimportant or unnecessary.
• Delegation—assigning the task to someone else—is effective for anything another person can do 80 percent as well as you can.
• Deferment—putting the task off until later—is effective for tasks that aren’t critical or time dependent.

You only have so much time and energy to get things done each day. Of all of the things that are on your to-do list right now, some of them are really important, and some of them really aren’t important. If you want to make the most of your limited time and energy, it pays to focus on completing the tasks that will make the biggest difference first, before spending your time and energy on anything else.

A Most Important Task (MIT) is a critical task that will create the most important results you’re looking to achieve. Everything on your plate is not critically important, so don’t treat everything on your task list equally. By taking a few minutes to identify a few tasks as particularly important, you’ll make it easier to focus on achieving them first.

A Goal is a statement that clarifies precisely what you want to achieve, which makes it easy for your brain to use Mental Simulation to Visualize what achieving that Goal looks like. If the End Result you’re looking for is vague or fuzzy, you’re making it difficult for your mind’s automatic planning systems to find ways to get what you want. Well-formed Goals also play a key role in Motivation—the more clearly defined your Goal, the easier it is to get excited about doing the things required to get what you want.

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.

It’s perfectly okay to change your Goals. Sometimes we think we want something, only to find out later that we don’t want it so much anymore.

States of Being are decision criteria, not Goals. It’s okay to want to “be happy” or “be successful,” but treating these desires as Goals is a recipe for frustration. Instead of treating these states as achievements, it’s far better to think of them as decision criteria—ways of understanding whether or not your actions are leading to your desired results.

Decide what States of Being you want to experience, and you’ll have a powerful set of decision criteria you can use to evaluate the results of your actions in an entirely new and useful way.

Priming is a way to consciously influence your brain’s Pattern Matching capabilities. By taking a few moments to consciously decide what you’re interested in and what you’re looking for, you can program your mind to alert you when it notices something relevant. Some people call this intuition—Priming is how you consciously put your intuition to productive use.

One of the ways people “get lucky” when they’re working toward a particular Goal is via Priming.

Take some time to consciously Prime your brain to notice what’s important to you, and you’ll inevitably find it.

No Decision, large or small, is ever made with complete information. Since we can’t predict the future, we often attribute the feeling of indecisiveness to a lack of information.

Failure to make a Decision is itself a decision. Life doesn’t stop if you refuse to choose—the world will keep moving forward, and you may be forced to take action by default.

The Five-Fold Why is a technique to help you discover what you actually want. Instead of taking your desires at face value, examining the root cause of what you want can help you define your core desires more accurately.

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

There are two primary ways to Externalize your thoughts: writing and speaking.

Speaking—to yourself or to another person—is another effective method of Externalization.

Externalization is most useful if you use it as a tool to examine your plans, goals, and actions.

Self-Elicitation is the practice of asking yourself questions, then answering them. By asking yourself good questions (or working with someone who asks good questions), you can grasp important insights or generate new ideas very quickly. The Five-Fold How and Five-Fold Why are specific examples of Self-Elicitation. Simply by asking yourself questions, you’re exploring options you previously didn’t consider and Priming your brain to notice related information.

You can think of Counterfactual Simulation as applied imagination—you’re consciously posing a “what if” or “what would happen if” question to your mind, then sitting back and letting your brain do what it does best. Based on the Patterns, Associations, and Interpretations you have stored in memory, your brain will produce what it believes to be the most likely result. All you have to do is suspend judgment, pose the question, and wait for the answer.

Parkinson proposed what became his eponymous law: “Work expands so as to fill the time available for its completion.”

Parkinson’s Law is best used as a Counterfactual Simulation question. What would it look like if you finished the project on a very aggressive time scale? If you had to build a skyscraper in a day, how would you go about doing it? Answer the question the way you would a counterfactual, and you’ll discover techniques or approaches you can use to get the work done in less time.

Excessive Self-Regard Tendency is the natural tendency to overestimate your own abilities, particularly if you have little experience with the matter at hand. Being optimistic about our capabilities has benefits—it increases the probability we’ll try something new. That’s how novices sometimes accomplish great things—they do them before realizing how risky or difficult their objective was.

Cultivate relationships with people who aren’t afraid to tell you when you’re making questionable assumptions or going down the wrong path—they’re valuable friends indeed.

Don’t feel bad about things that you “should have seen” or “should have done.” Changing the past is outside of your Locus of Control, so there’s no sense in wasting energy on self-doubt, wondering what might have been. Hindsight Bias becomes destructive if you negatively judge yourself or others for not knowing the unknowable.

Like all biological organisms, humans need to rest and recover for peak performance. Taking a break isn’t a sign of laziness or weakness—it’s a recognition of a fundamental human need. Paying attention to your natural Energy Cycle will help you consistently perform at your best over long periods of time.

Testing is the act of trying something new—a way of applying the scientific method and the Iteration Cycle to your own life. The most happy and productive people I know all have something in common: they’re always trying new things to see what works. You can’t make positive discoveries that make your life better if you never try anything new.

Mystique is a powerful force—a little mystery makes most things appear to be a lot more attractive than they actually are. Fortunately, there’s an easy way to counteract the rose-colored glasses of Mystique: have a real, human conversation with someone who’s actually done what you’re interested in doing. 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?”

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. Remember the Comparison Fallacy, and keep moving closer to what you want.

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.

Focusing on your efforts helps you stay sane—turning results you don’t directly control into Goals is a recipe for frustration. One of the reasons that diets drive people crazy is that they involve trying to control a result—weight—that is not directly under their control.

The way you choose to respond to challenges determines how successful you ultimately will become. It’s important to realize that you have no “fundamental defects”—there’s nothing that you’re fundamentally incapable of learning or doing. It may take time and effort, but you’ll improve eventually if you make the effort.

Working With Others

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

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

The Golden Trifecta is my personal three-word summary of How to Win Friends and Influence People. If you want to make others feel Important and safe around you, always remember to treat people with appreciation, courtesy, and respect.

Here’s a fascinating quirk about asking people to do something: they’ll be far more likely to comply with your request if you give them a reason to do what you ask.

Commander’s Intent alleviates 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. If everyone understands the purpose of the plan, everyone can act in ways that support the intent without requiring constant attention. When you communicate the intent behind your plans, you allow the people you work with to intelligently respond to changes as they happen.

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. The more people available, the less responsibility each member of the crowd feels to do anything about the situation.

The value of planning is in Mental Simulation: the thought process required to create the plan itself.

Groups naturally form around important issues, positions, or events. Understand the group dynamic, or you’re likely to be caught up in it.

According to the late Jim Rohn, author of The Art of Exceptional Living, “You are the average of the five people you spend the most time with.” The values and behaviors of the people you interact with on a daily basis exert constant pressures on you to adopt the same values and behaviors.

Social Signals are tangible indicators of some intangible quality that increases a person’s social status or group affiliation. People don’t wear sports jerseys because they’re stylish—they’re ugly by any aesthetic measure. People wear them because they want to clearly affiliate themselves with their favorite team—it’s a statement of identity.

Add a bit of Social Proof to your offers, and your sales will soar.

“It is difficult to get a man to understand something when his salary depends upon his not understanding it.” Upton Sinclair, Pulitzer Prize–winning Author of The Jungle

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

They did what they did because they wanted to, so the reward was internal. Paying them makes the action part of their job, which reduces their inner drive to complete it for its own sake. In the case of Conflict, Perceptual Controls win over incentives every time.

In How to Win Friends and Influence People, Dale Carnegie recommends “Giving others a great reputation to live up to.” He was a wise man—raise your expectations of others, and they’ll naturally do their best to satisfy those expectations.

Otherwise, it’s beneficial to give people the benefit of the doubt unless a particular behavior clearly becomes a Pattern. When you understand the reason behind a person’s actions, it usually makes you see their behavior in a different light.

Instead of dwelling on the problem, focus on your Options. Ruminating on the issue doesn’t solve anything; what are you going to do about it? By focusing your energy on evaluating potential responses, you’re far more likely to find a way to make things better.

Finally, give promising candidates a short-turnaround project or scenario to see how they think, work, and communicate firsthand. Small projects tend to work best for skilled technical employees, while scenarios work best for candidates who will be responsible for product creation, marketing, sales, business development, finance, and management roles. The outcome of the assignment should be a deliverable of some kind: a report, a pitch, an asset, or a process.

Understanding Systems

In order to find and eliminate a Constraint, 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: ensuring that the resources related to the Constraint aren’t wasted.
3. Subordination: redesigning the entire system to support the Constraint.
4. Elevation: permanently increasing the capacity of the Constraint.
5. Reevaluation: after making a change, reevaluating the system to see where the Constraint is located.

A Selection Test is an Environmental constraint that determines which Systems continue to self-perpetuate and which ones “die.”

Selection Tests are ruthless: satisfy them, and you’ll thrive. Fail to adapt to changing conditions, and you’ll die.

Here’s the answer to all of these questions: nobody knows. This world of ours is a tremendously uncertain place, which is both a blessing and a curse. Anything can happen, for good or ill—we simply can’t know what’s around the bend.

Eliminate unnecessary dependencies, and you’ll reduce the risk of a cascading failure.

Analyzing Systems

“What gets measured gets managed.” – Peter Drucker

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.

Improving Systems

Many corporate policies have their roots in Intervention Bias. When something bad happens, it’s tempting to “fix” the situation by installing additional layers of limitations, reporting, and auditing. The result isn’t an improvement in Throughput or efficiency: it’s an increase in Communication Overhead, waste, and unproductive bureaucracy. 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.

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

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.

Diminishing Returns The last 10 percent of performance generates one-third of the cost and two-thirds of the problems.

In a similar vein, eating one cookie is great. Eating two cookies is even better. Eating a hundred is actually worse. More is not always better. (The same relationship applies to drinking beer and taking vitamins.) All good things are subject to Diminishing Returns—after a certain point, having more of something can actually be detrimental.

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.

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.

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.

Well-defined Standard Operating Procedures are useful because they reduce Friction and minimize Willpower Depletion.

Checklisting can produce major improvements in your ability to do quality work, as well as your ability to delegate work effectively. By taking the time to explicitly describe and track your progress, you reduce the likelihood of major errors and oversights, as well as prevent Willpower Depletion associated with figuring out how to complete the same task over and over again. In addition, once your Checklist is complete you can use it as the basis for full or partial Automation of the system, which will allow you to spend time doing more important things.

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

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.

Getting the balance right in the midst of Uncertainty is the difference between a competent business professional and a great one.

No one has it “all figured out.” No one is absolutely certain that something will work, or has a complete lack of fear that things won’t work out as planned. The people who experience the most success in this world are the people who accept the Uncertainty and fear as best they can, learn from their experiences, and keep trying new things.

Constant Experimentation is the only way you can identify what will actually produce the result you desire. Often, the best (or only) way to learn things is to jump in and try. At the beginning, you may be in over your head, but there’s no faster way to learn what works. Once you’re committed to exploring something, you’ll learn far more quickly than if you’d cowered on the sidelines.

All failures are temporary—what you learn in the process always helps you move forward.