Book Summary of The Personal MBA by Josh Kaufman

The Personal MBA by Josh Kaufman provides a detailed guide on business operations, identifying five critical processes that support any business: creating value, marketing, sales, delivering value, and managing finances. Kaufman also recommends strategies to optimize these processes for achieving success.

This guide covers Kaufman’s recommendations for managing the five business processes in four parts, with a focus on finance throughout:

  • Part 1: Create valuable solutions
  • Part 2: Attract attention
  • Part 3: Drive sales
  • Part 4: Deliver satisfaction

Part #1: Create Value That Satisfies Needs

Kaufman emphasizes that successful businesses must prioritize providing value in exchange for something.

In Part 1 of the guide, we’ll cover the five fundamental needs driving people’s desires, how they assess the value of products/services, and ways businesses can provide valuable solutions. Additionally, we’ll highlight the importance of researching the profitability of potential products/services before developing them.

People Want to Fulfill Their Basic Needs

Kaufman asserts that despite appearing to have diverse preferences, people buy products/services to fulfill five basic needs:

  1. To feel good about themselves by improving their well-being, appearance, status, and satisfying their sensory desires.
  2. To connect with others, romantically, platonically, and professionally, both online and offline.
  3. To learn and grow, academically/professionally, and pursue hobbies/interests.
  4. To feel safe by protecting themselves, loved ones, and possessions from potential threats.
  5. To avoid effort by eliminating tasks that consume too much time, energy, or require specialized knowledge/resources.

Schools of Thought on What Motivates Us to Want Things

Understanding the motivations and timing of consumer decisions is essential for psychologists and marketing specialists, although Kaufman’s needs discussion doesn’t cover how we prioritize them.

By combining Kaufman’s list with four theories, we can explain why we desire certain things and how we prioritize them. Alderfer’s ERG theory groups our basic needs into three categories: Existence, Relatedness, and Growth. Maslow’s Hierarchy of Needs categorizes our needs into five levels: Physiological, Safety, Love and Belonging, Esteem, and Self-Actualization.

Murray’s Psychogenic Needs

According to this theory, basic needs are divided into two categories: Primary needs, such as the need for food and water, are essential for our survival and biological demands. Secondary needs, which fall into five categories – ambition, materialism, power, affection, and information – are crucial for our psychological well-being.

Self-Determination Theory

According to this theory, there are three core needs that drive our desires: autonomy (the need for control), competence (the need for achievement), and relatedness (the need for meaningful relationships).

How People Judge the Value of Products and Services

Kaufman states that people’s needs vary based on their circumstances, and they only show interest in offers that address their discomfort. For instance, a recently divorced person may be more receptive to romantic connection services than a happily married person.

When assessing the value of an offer, people consider both objective factors like reliability and cost-effectiveness and subjective factors like how it makes them feel and how it affects their image.

Businesses Align Offers With What People Want

Kaufman suggests eight ways for businesses to meet the five basic needs that drive purchasing decisions: create or buy products, offer services for a fee, create an asset and charge for access, supply products and services through subscriptions, rent out physical property, provide brokerage services for a commission, create and monetize attention, and lend money or offer insurance.

How You Sell Depends on What You’re Selling and Who You’re Selling To

Osterwalder and Pigneur’s (Business Model Generation) provide five different markets that business ideas fit into, each requiring a specific marketing and sales approach. These markets are not fixed, and it depends on the nature of the product or service and the target audience. Once you have determined the best approach for your business, consider which market suits your offer the best. The five markets are as follows:

  1. Mass Market: Selling to a large customer base with similar needs.
  2. Niche Market: Selling to a small customer base with unique requirements.
  3. Subdivided Market: Offering slightly different products and services to meet different customer needs.
  4. Diversified Market: Offering distinctly different products and services to unrelated customer groups.
  5. Multi-Sided Market: Serving interdependent customer groups, with an approach that appeals equally to both parties.

Evaluate Potential Products and Services Before Investing in Them

Kaufman advises businesses to test the viability of products and services before investing in them. To do this, ask yourself five questions:

Question #1: How Much Will It Take to Get It Out There?

Assess the time and financial commitment needed for developing, marketing, and distributing your product or service. Determine required resources and anticipate fixed and variable costs, including research and development, rent, salaries, supplies, and utilities.

Question #2: How Will You Finance It?

Consider the need for funding and the associated risks. If you plan to borrow money or seek investors, weigh the advantages and disadvantages carefully.

Loans are easy to apply for, have tax-deductible interest payments, and improve your credit score with repayments. However, they require personal assets as collateral, have to be repaid with interest even if your business fails, and can result in higher interest rates with multiple loans.

Question #3: How Much Demand Is There?

To determine market demand for your product or service, try these strategies:

  1. Analyze how many people are searching for similar products using SEO tools.
  2. Refer to public reviews and social listening tools to understand how people value existing products.
  3. Research competitors’ pricing for similar offers.
  4. Also, keep in mind that demand can fluctuate based on availability, seasonal trends, and economic/natural events.

Question #4: How Much Competition Is There?

Assess your product’s competition and strive to differentiate your offer to stand out from others and win customer loyalty in a crowded market.

How to Analyze the Competition

Experts advise entrepreneurs to identify their competitors’ strengths and weaknesses in four ways:

  1. Attend professional conferences and trade shows to observe competitors’ offerings and customer interactions.
  2. Analyze competitors’ website and SEO strategies using online tools to examine keywords, site traffic, and ranking.
  3. Examine competitors’ social media presence to learn about their platforms, content, followers, and customer responsiveness.
  4. Sign up for competitors’ newsletters to gain insights into their email marketing strategies.

Use this information to improve your product or service until it matches or exceeds what’s currently available. For instance, if you discover that your competitors are slow to respond to customer concerns on social media, develop a plan to enhance your social media strategy and provide better customer service.

Question #5: How Much Potential Is There to Expand Your Offer?

Think about how you can expand your offer to increase future sales and profits. Can you modify your offer or offer complementary products to meet additional needs?

Overestimate the Risks of Proceeding With Your Idea

Kaufman advises that when you’re passionate about your product or service, it’s easy to overlook potential obstacles and underestimate risks. To avoid this, intentionally seek out reasons why your idea may not work to make more accurate plans and increase your chances of success.

Part #2: Entice Attention

The second step in a business’s journey is to attract potential customers by tailoring its marketing approach. It’s crucial to appeal to people who’ve already shown interest in the offer. This section of the guide will cover how to make your offer more appealing.

Identify People Who Might Be Interested in Your Offer

Kaufman suggests that people are busy and make quick decisions about what’s worth their time. To get noticed, successful businesses target those who’ve expressed an interest in similar offers and focus on converting them into paying customers. It’s a waste of resources to advertise to those who have no interest in what they offer. For instance, promoting a vegan recipe book to someone who bought a book on offal won’t work, but promoting it to someone who bought a raw food recipe book would.

Persuade Them to Want What You’re Offering

To make your offer attractive to potential customers, Kaufman suggests four tips.

  1. Keep your message concise and to the point.
  2. Identify when your target audience is most receptive to your content.
  3. Demonstrate the benefits of your offer to evoke positive emotions and a fear of missing out.
  4. Use endorsements from respected individuals to establish trust.

Part #3: Encourage Transactions

The third important process for businesses is to secure sales and make a profit. In this section, we’ll cover tactics used to encourage sales and strategies for determining prices.

Customers Feel No Sense of Urgency to Hand Over Their Money

To ensure successful transactions, businesses need to act fast once they have potential customers’ attention.

However, customers tend to take their time in making a purchase decision, which is why businesses should use limitations and money-back guarantees to encourage them. Limitations, such as limited availability or an expiration date for discounts, create a sense of urgency, while money-back guarantees build trust and alleviate doubts.

How to Price Your Offer

To balance fair pricing with profit, Kaufman recommends four strategies:

  1. Manufacturing cost + profit: Calculate the cost of production and add desired profit per sale.
  2. Comparative pricing: Set prices based on the average of similar offers. Lower prices attract more customers, but higher prices signal superiority.
  3. Long-term value: If selling an asset that generates ongoing income, set the price based on its projected earnings over time.
  4. Subjective value: Determine how much your offer is worth to specific customers based on their needs and set prices accordingly.

How to Increase Profits Without Raising Your Prices

To boost sales revenue, businesses often resort to raising prices. However, there are three other ways to achieve this, as suggested by Kaufman:

  1. Increase the number of customers making a single purchase.
  2. Encourage customers to spend more by purchasing additional products or services.
  3. Encourage existing customers to make more frequent purchases.

Part #4: Fulfill Expectations

Businesses need to prioritize customer satisfaction to ensure success. This involves optimizing resources and procedures to meet customer needs.

Satisfied Customers Are the Key to Long-Term Success

Kaufman believes that satisfying customer expectations after a sale is as important as attracting new customers for business success. Satisfied customers provide long-term revenue and positive reviews, while disappointed customers lead to lost revenue, negative reviews, and damage to reputation. This repels potential customers and requires additional expenses to repair the damage, hindering business success.

Optimize Systems and Procedures to Ensure Satisfaction

Kaufman advises businesses to prioritize efficient and reliable operations for customer satisfaction and success. To achieve this, businesses must understand all tasks involved in their product or service and make incremental improvements through streamlining, cost-cutting, and resource improvement.

Prioritize Improvements That Will Make the Most Impact

Kaufman advises prioritizing impactful improvements for efficient and profitable business operations. Consider the impact and possible consequences of changes on your operations before proceeding. Separating your list of improvements into priority and non-priority items can help you allocate resources effectively.

Book Summary of Business Made Simple by Donald Miller

Donald Miller believes that the reason you may not be making enough progress in your business career is that you’re not adding enough value to your company. Miller suggests 11 methods to become a good investment for your company, from acquiring value-adding personal attributes to successfully carrying out a strategy.

By following his advice, you can learn how to add value to your company no matter what your role. Creating a StoryBrand is a book by Miller, the owner of StoryBrand, a firm that assists businesses with story-based marketing message.

In this manual, we’ll add psychological knowledge and advise from other business experts to Miller’s suggestions.

Your Goal in Business: To Be a Good Investment for Your Company

Adding value to a company by generating profits is key to succeeding in business, according to Miller. This ability can lead to career advancement or entrepreneurial success, as leaders and investors prioritize it. For example, creating a successful marketing campaign that brings in new prospects and revenue is more likely to get you noticed and promoted compared to simply fulfilling job requirements.

11 Ways to Investing Well for Your Business

Miller provides 11 sequential steps to become a valuable investment for your company.

Trait 1:

Successful professionals recognize themselves as valuable economic assets to their companies, quantifying and explaining their value in terms of revenue generated or sales made. They aim to earn back at least five times their salary, resulting in a modest profit for the company.

Trait 2:

To succeed and be a valuable asset to your company, you must see yourself as an active agent in your life. Making excuses and playing the victim will hinder your growth and success. By pursuing new goals actively, you can learn and develop.

Trait 3:

Reacting calmly to problems is a valuable trait that can earn you respect and help you accomplish more. By handling problems gracefully, you can conserve mental energy for yourself and others.

Trait 4:

Being open to feedback is a key trait for success. Seeking regular feedback from mentors and friends can help you improve and excel, even if it’s initially challenging to hear.

Trait 5:

Successfully managing conflict is crucial for progress. To navigate conflict productively, Miller recommends accepting it as a part of moving forward, avoiding intense negative emotions, showing respect for the person involved, and prioritizing resolution over being right.

Trait 6:

As a manager, prioritizing respect over being liked is crucial for the success of your team and company. You can earn trust by setting clear goals, clarifying individual responsibilities, and rewarding achievements.

Trait 7:

Being action-oriented is key to completing projects. Merely intending or planning to do something isn’t enough; you must follow through with action.

Trait 8:

Trusting in your knowledge and taking action leads to faster progress than procrastinating or avoiding difficult decisions.

Trait 9:

Maintaining a positive outlook on the outcome of your actions leads to taking more risks, resulting in greater long-term rewards.

Trait 10:

Believing in your ability to improve means failures are viewed as growth opportunities. You can take on greater challenges and rise to meet them, leading to growth, improved skills, more responsibility, and higher pay.

Step 2: Become an Effective Leader by Creating a Company Story

Miller’s second step for becoming a valuable asset involves creating a company story to become a successful leader. A company story explains the reason for the company’s existence and why people should engage with it.

Without a clear story or mission that includes every employee, the company will lack direction and fail. To create a company story, start by writing a mission statement that inspires action, using a template such as “We will accomplish [goal] by [date/year] because of [why achieving the goal is important].”

Then, define the traits employees must possess to fulfill the mission and determine three repeatable actions they should take daily to achieve it.

Step 3: Enhance Productivity by Focusing Only on Critical Tasks

Miller’s third step towards becoming a valuable company investment is to manage time effectively by prioritizing tasks that offer the highest return on energy investment. Miller recommends creating two task lists: one with three crucial tasks to complete each day and another with less important tasks to delegate or eliminate. It’s important to complete the top three tasks first, even if only partially done, to increase productivity.

Step 4: Visualize Your Business as an Aircraft to Become an Experienced Marketer

Step four in Miller’s guide to becoming a valuable employee involves learning to strategize effectively. He suggests visualizing the company as an airplane with five parts – body (overhead), wings (products/services), right engine (marketing), left engine (sales), and fuel (capital and cash flow). Balancing these divisions is essential for maximizing success.

For instance, if the body of the plane becomes heavier, the marketing and sales engines must be powerful enough to keep it aloft. Miller advises keeping overhead low, ensuring profitable and popular products, testing marketing with a website, building a sales funnel, and monitoring cash flow to stay airborne.

Step 5: Base Your Messaging on a Story the Customer Can Star In

Step 5 in adding value to your organization is crafting effective marketing messaging. Miller recommends creating a story where the customer is the hero with a goal that your product helps them achieve. The hero faces an obstacle, which is the problem your product solves. You position yourself as the guide who can help the hero overcome the obstacle with a plan and challenge the hero to take action. Lastly, you explain the benefits the hero gains by taking action and the consequences of not taking action.

Step 6: Create A Three-Step Sales Funnel That Fosters Customer Trust in The Sixth Step.

To become a valuable team member, it’s important to learn marketing mechanics. Miller emphasizes the significance of a robust sales funnel in marketing strategy.

A sales funnel helps to improve sales by leading buyers through the three stages of inquiry, comprehension, and purchase. To spark curiosity in potential customers, create a concise sentence that outlines a problem, your product as the solution, and the result of using your product to solve the problem.

Step 7: Communicate in a Story Format so Others Listen

To add value to your company, you must excel in basic communication, particularly presentations, according to Miller. In sales presentations, follow the story structure and focus on the problem you’ll solve, your solution, and how it will change the customer’s life.

Connect every subpoint to your main point, and limit the number of subpoints to three or four. For a unique and memorable presentation, consider weaving in other stories and keeping it short. Gallo suggests a maximum of 18 minutes, as anything longer will cause the audience to tune out, regardless of the presentation’s quality.

Step 8: Making the Sale Involving Qualifying Leads, Sharing A Narrative, And Sending Proposals

To add value through sales, Miller recommends qualifying leads to avoid wasting time and money. Ask if they have a problem your product solves, if it’s within their budget, and if they have the authority to buy.

Miller also suggests pitching in a story format, highlighting the customer’s problem and proposing a solution with references to past success. Lastly, provide a document or video summarizing your pitch for prospects to reference.

Step 9: Negotiate Effectively by Determining the Other Party’s Negotiating Style

Step 9 is about developing negotiation skills to add value to your company. According to Miller, there are two types of negotiation: cooperative and adversarial. In a cooperative negotiation, both parties aim for a win-win outcome, while in an adversarial negotiation, one or both parties want to win at the other’s expense.

To negotiate successfully, identify the type of negotiation and adjust your approach accordingly. Find out what factors influence the other party’s decision-making process and appeal to their emotional needs. For instance, when selling a used car, highlight its sleek leather interior to appeal to the buyer’s desire for a stylish ride. Finally, to end a negotiation, pretend to be dissatisfied with the outcome, which signals to the other party that they’ve won.

Step 10: Successfully Manage Groups With Metrics

To effectively manage people, Miller advises relying on input and output metrics. Input metrics measure the work put in to produce an output, while output metrics measure the actual output produced. For example, posting three times a week on social media (input) could lead to 300 new followers (output).

Step 11: Execute Well Using a Plan

To execute a project successfully, Miller recommends three steps: hold a launch meeting to determine the project’s success criteria, participants, resources, and timeline; check in with the team weekly to ensure everyone knows their next step; and publicly track input metrics to encourage the team’s progress.

In “A World Without Email,” Cal Newport suggests using task boards to manage communication and check-ins effectively. Task boards are physical or digital boards with columns representing project stages and cards representing tasks. Newport also advises delegating the scheduling of large meetings to an administrator or scheduling service.

Book Summary of Principles Life and Work by Ray Dalio

Ray Dalio is the founder of Bridgewater Associates, the world’s largest hedge fund. Although coming from a middle-class Long Island area, he started trading stocks at the age of 12 and launched Bridgewater out of his New York apartment in 1975.

He was initially successful, but in 1982 he lost everything due to incorrect market projections, which taught him important lessons about risk leadership and financial history. Dalio developed a set of principles for living and achieving success, which he shares in his book, Principles.

What Are Principles?

According to Dalio, facing new situations every day can be exhausting if you have to decide what to do at each point in time. To make decision-making more efficient, he suggests systematizing it by creating principles – fundamental truths that determine how you behave.

Through his early blunders, Dalio discovered that he made the finest choices when he set aside his ego and persistently pursued the truth. His principles revolve around understanding the importance of finding the truth and how to achieve it over common obstacles. This article will explore his eight main principles and how to put them into practice, as well as his process for achieving goals.

Principle #1: Relentless Truth-Seeking

When facing challenges, Dalio advises against wishing for a different reality, as this can hinder objectivity. Instead, he suggests embracing the current situation and being open to the possibility of being wrong. Dalio identifies two common obstacles to recognizing reality:

1) Your Ego 

Ego is your desire to be capable, loved, and praised. Threats to your ego can lead to denial or emotionally-driven reactions. To prevent this, Dalio uses a formula: Pain + Reflection = Progress. Take responsibility for mistakes and use them as a chance to improve.

2) Your Blind Spots

Blind spots occur when you view the world with bias, making it difficult to see things objectively. Different perspectives can cause arguments over who’s right. To overcome this, Dalio suggests being “radically open-minded,” which we’ll explore further.

Principle #2: Total Receptivity

To be totally receptive means acknowledging the possibility of being wrong and continuously seeking ways to improve. Dalio recommends three steps:

  1. Search for the best answer by being open to others’ viewpoints and considering all possibilities.
  2. Recognize your blind spots and remain open to different perspectives.
  3. Strike a balance between humility and reasoning, as being overly confident or ignorant can hinder progress.

Principle #3: Extreme Honesty and Transparency

Dalio believes that the best decision-making involves being receptive, honest, and transparent. He created a culture at Bridgewater that prioritizes objective truth over protecting egos and emotions.

Extreme Honesty

Dalio believes in extreme honesty, which involves expressing your thoughts without any filter, questioning them relentlessly, and bringing up issues immediately instead of concealing them. At Bridgewater, this culture is embedded, where everyone has the privilege and duty to speak up publicly, even to call out foolish actions of anyone, including Dalio himself.

Extreme Transparency

Dalio emphasizes that extreme transparency involves giving everyone in an organization access to the full truthful information, without filtering it through others. This approach empowers people to make better decisions and enables the organization to leverage the full potential of its people.

Principle #4: Productive Conflict and Letting the Best Ideas Win, Whatever the Source

Dalio believes in “thoughtful disagreement” and “idea meritocracy” which are essential for productive conflict and creating an environment where the best ideas, regardless of their source, can be implemented to make better decisions.

Productive Conflict

Productive conflict entails considering other perspectives and steering a discussion towards a constructive outcome. The objective is not to assert your correctness, but to uncover the right view and determine the necessary course of action. This necessitates a blend of openness and assertiveness: strive to understand the other person’s viewpoint while clearly articulating your own.

Letting the Best Ideas Win, Whatever the Source

Dalio proposes credibility-centered decision making, where the opinions of people who are more credible in a certain area are given more weight, unlike democracy where everyone’s votes are weighed equally. This, coupled with productive conflict, leads to an environment where the best ideas win, resulting in better solutions and decisions than relying on just one person’s ideas or orders.

Principle #5: Visualizing Complex Systems as Machines

Dalio recommends a machine-like approach to decision-making, where complex systems are analyzed as cause-and-effect relationships, and predictable patterns are identified. This helps determine repeatable courses of action. He applies this thinking on three levels:

Personal

View yourself as a machine that can be optimized to achieve your goals. Identify weaknesses or problems and address them, similar to fixing a machine.

Economical

Dalio’s approach to the market involves viewing it as a network of cause-and-effect relationships, allowing him to identify repeatable trading rules and find solutions quickly.

Organizational

To optimize your organization, Dalio suggests viewing it as a machine and establishing an efficient structure with clear roles and responsibilities. People are an integral part of this machine, and managers should act as engineers to build and maintain the best team with complementary strengths.

Principle #6: People Management

Dalio regards people as vital to the organizational machine but managing them can be challenging due to individual differences. He recommends adopting a curious attitude to understand people’s perspectives and strengths, including one’s own.

This insight can help build a team with complementary skills. Bridgewater employs personality assessments to create a comprehensive profile of each team member.

Dalio provides principles for hiring, training, and evaluating people to ensure a good fit:

Hiring

Dalio’s principles for hiring, training, and evaluating people involve determining your needs, systematizing the interview process, paying north of fair, and hiring people who have great character and capabilities.

He recommends creating a mental image of the values, abilities, and skills required for the job, systematizing the interview process with a set list of questions and saving candidates’ answers for later evaluation, paying enough to meet needs but not too much to encourage complacency, and hiring individuals with both great character and capabilities.

Training and Evaluating

According to Dalio, the training process is key to determining if a new hire is a good fit. To appropriately assess their strengths and limitations, he suggests the following rules:

  1. Set clear expectations..
  2. Give regular feedback and practice extreme honesty.
  3. Hold all employees to the same standards and be fair.
  4. Check behavior, audit or investigate people, and deter bad behavior.
  5. If a person fails, understand why, and make sure it won’t happen again.
  6. If a new hire fails due to a lack of values or abilities, it’s best to let them go. Keeping them is toxic to the organization and holds them back from personal growth.

Principle #7: Creating Effective Teams

To ensure team members work well together, Dalio recommends the following: prioritize resolving important disagreements, standardize meeting agendas, and cultivate meaningful relationships with team members. While disagreements are natural, addressing the most important ones first saves time.

Clear agendas and limited participation help make meetings more efficient. Finally, building relationships based on partnership and excellence is crucial, and team members who don’t perform should be let go.

Principle #8: Effective Decision-Making

By following the principles mentioned earlier, you can make better decisions consistently. Despite the unique aspects of each situation, Dalio suggests that decision-making involves only two main steps:

1) Learn Well

To make informed decisions, it’s crucial to gather information from credible sources and understand the context of the situation. By comparing the information against your desired trajectory, you can evaluate your progress. It’s also important to consider how the information is interconnected by a greater logic.

2) Decide Well

Dalio suggests systematizing decision-making to avoid being influenced by emotions. This involves using timeless and universal principles to make decisions in similar situations. Ideally, these principles can be turned into algorithms, allowing for computer assistance in the decision-making process.

  1. Consider second- and third-order consequences. Don’t let short-term consequences derail your real goals.
  2. Dalio advises making expected value calculations when considering options. This involves assessing all options and selecting the one with the highest expected value, despite any drawbacks. It’s crucial to understand the probability of being right and ensure that the risks won’t lead to failure.
  3. Resolve conflicts effectively and avoid getting stuck in endless debates.

Dalio’s Methodology for Success

Five phases make up Dalio’s method for success in any situation:

1) Clarify Your Goals

Having a clear goal helps you stay focused and avoid aimless wandering. According to Dalio, money should not be your ultimate goal as it only provides basic necessities and doesn’t significantly enhance your life. Instead, identify your non-monetary goals and work backwards to set specific monetary goals that will help you achieve them. It’s best to focus on a few goals at a time to avoid spreading your attention too thin and hindering your progress.

2) Recognize Problems and Don’t Condone Them

Problems can hinder your goal attainment. According to Dalio, recognizing problems requires overcoming ego, self-examination, and objective assessment of weaknesses. To fix identified problems, it’s essential to be receptive, accountable, and precise in describing issues to design relevant solutions.

3) Find the Primary Source of a Problem

Problems may be interrelated, and what appears to be the problem is often a symptom of a deeper “root cause,” as Dalio explains. Analogous to medicine, the symptoms are the problems, and the disease is the root cause. To solve problems effectively, one must identify the root cause. To do this, repeatedly ask “why” until reaching the primary source, rather than stopping at the initial answer.

4) Come Up With Solutions

Diagnosing problems should lead to improvements and positive outcomes; otherwise, it’s a waste of time. After identifying a problem, Dalio recommends developing a detailed plan that includes specific tasks, timelines, and the second- and third-order consequences of the plan.

5) Do the Tasks Required to Completion

To execute your plan, Dalio suggests three tactics: Develop good work habits, measure progress, and stay motivated. This includes using checklists, persevering through failure, and celebrating achievements to remain on track.

Book Summary of The Great Game of Business by by Jack Stack and Bo Burlingham

The Great Game of Business by Jack Stack and Bo Burlingham proposes that creating a successful business is best achieved by encouraging employees to take ownership and see the company as theirs. The authors argue that when employees feel a sense of ownership, they are more motivated to work hard for the success of the company.

Stack, a CEO and author, promotes open-book management and believes his principles for leadership can increase productivity and success at any level of a company. Burlingham is an editor and author who co-authored a second book on employee ownership with Stack. The guide synthesizes the authors’ principles into two keys to increasing employee ownership: accessibility and engagement. The commentary compares their advice to other business experts and examines how it intersects with psychological principles.

Defining the Two Keys to Employee Ownership

Encouraging ownership is essential for a successful business, and Stack and Burlingham believe accessibility and engagement are the keys to achieving it. Accessibility means providing employees with enough information to fully understand how the company operates, while engagement means having active and interested employees.

The authors argue that engaged employees who understand the company’s operations are more likely to help the company succeed. Technology can help with accessibility, but companies must make an effort to use it effectively. We’ll explore the benefits of these keys and ways to encourage them further in this guide.

Barriers to Encouraging Ownership

Stack and Burlingham identify several reasons why companies may not prioritize encouraging ownership, despite its significance in achieving a thriving business.

Barrier #1: Misplaced Focus

Some companies prioritize fun over ownership, which can detract from creating a successful business, according to Stack and Burlingham. However, Tony Hsieh disagrees with this view and argues that prioritizing employee happiness can lead to more focused, productive, and innovative employees who are committed to the company’s success.

Barrier #2: Lack of Trust

Stack and Burlingham found that many companies discourage ownership among employees due to a lack of trust. Managers often assume that employees are not invested in the company’s success and withhold important information.

This results in a lack of accessibility and prevents employees from feeling a sense of ownership. This lack of ownership leads to decreased motivation and productivity, which reinforces the manager’s low expectations. For example, a manager may lie about production targets to motivate employees, but this ultimately leads to a lack of trust and decreased productivity.

The Dangers of Managing With Misinformation

Stack and Burlingham point out that spreading misinformation is problematic as it decreases motivation and prevents employees from taking ownership. According to Ken Blanchard and Spencer Johnson in The One-Minute Manager, the consequences of manipulation can be even more severe. Employees may become resentful and jaded towards the company, leading to a lack of desire to help it succeed and even sabotaging it.

In contrast, Tony Hsieh believes that honesty is a powerful motivator. Being honest builds trust and relationships, which increases the likelihood of people wanting to help. Zappos’ policy of radical transparency, where employees and outside vendors were trusted with access to inventory and systems, led to the company’s meteoric success.

Barrier #3: The Myth of Omniscience

Some managers don’t encourage ownership because they fear that sharing information and being accessible will damage their reputation. They worry that knowledgeable employees will recognize gaps in their knowledge and lose respect for them. This fear is based on the myth that managers should have all the answers.

However, Stack and Burlingham argue that this attempt to appear omniscient is harmful as managers who refuse to reveal gaps in their knowledge are more likely to make mistakes. Furthermore, employees struggle to take ownership due to a lack of information from their reticent managers. Instead, the authors recommend creating an environment where everyone, including managers, can ask for help and learn from each other without fear.

The Role of Social Comparison Bias in Management

Rolf Dobelli explains in The Art of Thinking Clearly that social comparison bias can cause people to refuse to help others if they feel threatened by their position in a group. This is an evolutionary defense mechanism, but it can be problematic for modern companies.

Hiring managers may avoid hiring more skilled or knowledgeable employees for fear of being replaced. This limits a company’s growth and improvement. To combat social comparison bias, companies can foster a culture of innovation that values risk-taking and learning from mistakes. Innovative companies see mistakes and knowledge gaps as positive attributes that fit the company’s culture, making employees more willing to overcome their shortcomings.

The Benefits of Accessibility

To foster ownership, Stack and Burlingham advocate for accessible and engaging business practices. In this guide, we’ll explore the advantages of accessibility and engagement and the authors’ recommendations for promoting them. Accessibility, defined as sharing sufficient information for employees to comprehend the company’s operations, has three key benefits:

Benefit #1: Enforced Accountability

Employees are more likely to take responsibility for their choices and their impact on the company when they have access to information about how the company operates. This is because it’s easier to trace problems to their root causes when details are openly available, according to Stack and Burlingham.

Openness prevents employees from shifting blame or hiding mistakes, which encourages accountability. To minimize fear of punishment for mistakes, companies should prioritize a culture of respect and empathy over blaming and punishing individuals.

Benefit #2: Increased Productivity

According to Stack and Burlingham, accessibility also boosts productivity. When employees have a clear understanding of how the company operates, they can adjust their processes accordingly and make decisions without constantly seeking guidance from management. For example, if employees are aware of the time it takes for the computer system to process order forms, they can adjust their submission times to ensure timely shipping.

Encouraging Productivity: More Complex Than Just Offering Accessibility?

According to Stack and Burlingham, accessibility boosts productivity because it enables employees to improve processes and make decisions independently. However, Paul Marciano argues that productivity also requires resources and autonomy. For example, Bill needs access to computers to implement his knowledge of how to improve his work processes.

Autonomy is also necessary, as Bill’s manager needs to give him the freedom to submit the forms in the evening. In addition to improving productivity, accessibility also encourages teamwork by demonstrating how each department and individual contributes to the company’s success. This understanding fosters cooperation, as employees realize that they must work together to ensure the entire company thrives.

Signs of Interconnectivity

To encourage employees to focus on the success of the whole company, Stack and Burlingham suggest that understanding how a company is interconnected is key. This shift in focus is crucial for adaptation and success, as noted by The Practice of Adaptive Leadership.

To help employees adapt and thrive together, your company should have traits like shared resources, compensation structures that prioritize company-wide performance, leadership with experience across departments, and shadowing opportunities for employees to learn from each other.

Creating Accessibility

Stack and Burlingham suggest three key actions for making a business accessible: clarifying the business, clarifying financial information, and regularly informing employees.

Step #1: Explain the Business

To make a company accessible, it is important to ensure that employees understand the company’s products or services, goals, and purpose. According to Stack and Burlingham, employees may have a narrow view of the company, which can hinder their support for its larger goals. In contrast, knowledgeable employees are more likely to take ownership and work hard to support the company’s goals.

Sharing the company’s goals, purpose, and operations directly with employees is the most effective method of education, which can be done during onboarding and meetings with established employees. For example, a car saleswoman named Shelly becomes more passionate about selling upgraded cars to customers when she learns that the company’s purpose is to decrease crashes and protect its customers.

The Psychology of Memory in Business

According to Stack and Burlingham, employees often lack a broad understanding of their company, which can discourage ownership. This is because the brain prioritizes remembering relevant information and forgets what it deems irrelevant.

Employees focus on remembering their personal tasks, as forgetting them could result in losing their jobs. The company’s overall goals and operations are seen as less important and thus forgotten. To counter this, Stack and Burlingham suggest discussing the company’s organization, goals, and purpose during onboarding and meetings. This makes these concepts more relevant to employees’ day-to-day tasks, which encourages them to work harder to fulfill them.

Step #2: Explain the Numbers

To effectively take ownership and help the business succeed, employees must understand the numerical details of how the company works towards its goals – especially financial numbers, according to Stack and Burlingham. Financial statements are the language of business, and comprehension of them reduces misunderstandings between employees, which can lead to over-ordering and inventory issues.

Explain Balance Sheets and Income Statements

According to Stack and Burlingham, understanding balance sheets and income statements is crucial for employees to take ownership and help their company succeed. Balance sheets reveal financial problems, while income statements help diagnose their cause.

This knowledge allows employees to diagnose and solve problems as they arise, rather than waiting for upper management to address them. The authors recommend offering classes and tutoring in reading these financial documents to both new and established employees. However, before educating employees, it’s crucial to ensure that financial statements are accurately constructed, clearly organized, and regularly updated to make them easier to understand.

Step #3: Keep Employees Updated

To succeed, employees must have access to constantly updated information about a company’s goals and numbers. Outdated information can lead to harm for the company, causing it to fail to meet its goals or even collapse. The authors recommend frequent staff meetings, posters, scoreboards, and charts to keep everyone informed.

This is important because modern markets are constantly shifting and companies need to be viewed as constantly evolving. Visual management systems are valuable tools because humans process information visually faster and more accurately than with words.

The Benefit of Engagement

To foster employee ownership, engagement is the second key, defined as active and interested employees. Engaged employees use their intelligence, creativity, and dedication, leading to better business decisions, innovative solutions, and harder work.

Unengaged employees focus on tasks and paycheck, leaving potential untapped. Efficient and positive relationships between management and employees are crucial to avoid disengagement. Understanding employees’ weaknesses, talents, and personalities can make them happier and more engaged, leading to autonomy and company success.

Creating Engagement

To foster employee ownership, engagement is crucial. Stack and Burlingham define engagement as employees being active and interested in their work, which leads to better business decisions, innovative problem-solving, and stronger dedication to the company.

Unengaged employees, on the other hand, are at risk of becoming lethargic and using only the minimum required to complete their tasks. To promote engagement, businesses should prioritize accessibility, as learning new information releases dopamine and generates pleasure and motivation. However, setting goals and offering rewards are also essential factors in generating engagement, according to Stack and Burlingham.

Step #1: Set Company-Wide Goals

According to Stack and Burlingham, active and interested employees are key to creating engagement in the workplace. One way to achieve this is by setting specific company-wide goals, as this gives employees something tangible to work towards. Specific goals, like “make 100 sales this week,” are more motivating than vague ones like “increase sales.”

By achieving these goals, employees can see how their actions can impact the company’s success, making their work more meaningful and interesting.

Set Baseline and Ambitious Goals

Stack and Burlingham advise that setting a minimum level of success for the company is the first step in goal-setting, as it ensures survival. However, it’s important to go beyond this baseline and set more ambitious goals for company growth and success.

Using sales and profit projections as starting points for goal-setting can help create a middle-ground or comfort zone, but it’s also important to set stretch goals that encourage employees to get out of their comfort zones and increase their effort. Achieving smaller goals can provide important motivation for employees and help them feel more invested in the company’s success.

Consult Other Departments When Setting Goals

Consulting with other departments is crucial when setting goals, according to Stack and Burlingham. While sales and marketing may provide estimates, other departments provide concrete information to determine if the projections are feasible and accurate.

For instance, the manufacturing department can determine if making 500 cars, as projected by sales and marketing, is possible in terms of cost and labor and if it will actually result in $3 million in profit. This advice aligns with the OKR goal-setting system’s approach of having larger objectives and smaller key results, where employees set most of their own key results for efficiency and better understanding of their goals.

Step #2: Offer Rewards

To promote engagement, Stack and Burlingham suggest offering rewards, which incentivize people to be active and earn them. Rewards create positive feelings, activating the pleasure centers of the brain and releasing dopamine, which leads to increased engagement. The authors recommend two methods for offering rewards:

Method #1: Institute a Bonus Program

Stack and Burlingham recommend using a bonus program to encourage engagement by offering rewards to employees who reach certain goals. The program should operate on a company-wide level, with everyone working together to meet the same goals and receive the same bonus. Individual bonuses can create conflict and a lack of cooperation.

The bonus program should have tiers, with increasing bonuses for more ambitious goals, and payouts every few months to keep employees engaged. This structure concretely shows employees their progress and encourages positive feelings associated with making progress.

Preventing Inter-Employee Competition

Stack and Burlingham warn that competing for bonuses can lead to conflict, as it requires one person to fail for another to succeed. To avoid this problem, the authors suggest offering company-wide goals instead of individual bonuses.

Alternatively, individual bonuses can be offered that make employees compete against themselves rather than their coworkers. In this scenario, employees push themselves out of their comfort zones to reach certain goals and earn bonuses, without relying on their coworkers’ failures. This approach helps to prevent conflict and promotes mutual appreciation and support.

Method #2: Offer Equity

Stack and Burlingham suggest offering equity as a reward to increase employee engagement. By giving employees a stake in the company’s ownership, they become more invested in the company’s success. As the company’s value increases, so does the value of their shares.

However, the authors warn that offering equity is only effective if employees have access to information about what affects share value, as uninformed employees may become upset by temporary dips in share price.

Equity and Participative Management

Equity is a powerful reward that encourages engagement and improves company performance. Studies show that companies with employee stock ownership plans (ESOPs) grow faster, perform better, and retain more employees than those without.

ESOP companies are also more resilient in the face of economic hardship. Offering equity gives employees ownership and the ability to influence the company’s direction, motivating them to work hard to improve its performance.

Pairing equity with participative management further increases motivation, as it extends employees’ sense of influence over day-to-day operations. Participative management can be implemented by including employees in important meetings, seeking their feedback regularly, and educating both managers and employees on effective participation.

Book Summary of Leadership Strategy and Tactics by Jocko Willink

“Jocko Willink’s book “Leadership Strategy and Tactics” places a major emphasis on developing strong connections, putting people first, and accepting responsibility for team failures. Willink, a former US Navy SEAL and founder of leadership consulting program Echelon Front, combines his previous leadership principles into a field manual in this book.

The book offers more than 30 bits of advice on leadership, divided into four themes: modesty, connections, accountability, and balance. To assist readers in putting Willink’s ideas into practice in their everyday lives, the article goes into great depth on these topics and offers parallels to other leadership works as well as perspectives from psychologists and leadership specialists.

The Importance of Leadership

This section of the manual will examine Jocko Willink’s idea of leadership and emphasize its significance. We will distinguish leadership from manipulation and stress the need of it for success.

What Is Leadership?

In conclusion, Jocko Willink asserts that effective leadership entails mobilizing others to work toward a common objective. It involves motivating your team to do what you want them to do, but for the common good rather than for your own benefit, which distinguishes it from manipulation. Willink argues that true leadership involves serving your team and achieving a shared mission, leading to long-term success and a loyal following.

Is Manipulation Ever Ethical?

Willink contends that leadership and manipulation are distinct, although a second expert disputes this claim, claiming that certain ethical leadership philosophies would recognize manipulation as a tactic. Kantian philosophy deems manipulation ethical when it considers the manipulated individual’s interests and treats them as an “end in themselves.” If manipulation results in greater good than greater evil, according to utilitarian philosophy, the larger good should take precedence over individual satisfaction.

Why Leadership Matters

In his book, “Leadership Strategy and Tactics,” Willink emphasizes the importance of leadership and how it can benefit both the team and the individual. Willink believes that by being a good leader and putting others before yourself, you can help your team achieve success and reach collective goals more efficiently.

Willink proposes that service-oriented leadership results in success both as a leader and an individual. Although he doesn’t explain the reason behind this, research indicates that helping others can enhance personal fulfillment and meaning by reinforcing self-worth and fostering stronger connections.

Good Leaders Are Humble

Willink advocates for leaders to exhibit humility by recognizing that every team member is equally essential. The following section examines how leaders who demonstrate humility can earn the respect and loyalty of their team. It also emphasizes the importance of humility in making informed decisions and improving leadership skills.

Practice Humility to Earn Respect From Your Team

Leaders must avoid placing themselves above their team, as this can lead to resentment and reduced motivation. Adopting a humble approach and collaborating with the team can encourage cooperation and help achieve shared goals. Acting humbly also fosters respect, which can enhance followership.

To cultivate humility and gain the team’s respect, three recommended practices are avoiding condescending language, engaging in daily tasks with the team, and offering compliments when addressing conflicts. It is essential to note that authentic intentions behind these actions are critical to establish trust and respect among the team.

  • To obtain the team’s respect and collaboration, leaders should exhibit humility. This involves avoiding condescending actions and language, participating in day-to-day tasks with the team, and responding to conflicts by offering genuine compliments.
  • When addressing the team, use language that acknowledges their value and avoid exhibiting superiority through body language. Avoid considering any task beneath you and work alongside the team when performing necessary chores and duties. 
  • When encountering conflict, respond confidently by offering genuine and specific compliments, as this can enhance the team’s trust and respect towards you.

Practice Humility to Make Better Leadership Decisions

Humble leadership can gain the team’s respect and improve receptiveness to their ideas. Being too prideful may lead to pointless arguments and missed opportunities for valuable input. Adopting humility helps leaders be open to advice and make better decisions.

To humbly accept criticism, prepare general responses and recognize that it is not a personal attack. Objectively assessing ideas and selecting the best one, regardless of its origin, strengthens relationships and builds trust.

This article highlights the significance of adopting humility as a leader to gain respect from the team and improve idea reception. It suggests three ways to accept criticism humbly, such as acknowledging feedback from anyone, not being rigid about one’s ideas, and learning from everyday leadership examples. The article emphasizes the importance of being receptive to feedback and continuously learning as a leader to make informed decisions and enhance team cohesion. Additionally, it provides advice on how to prepare for and respond to criticism constructively.

Good Leaders Build Relationships With Their Team

Earning team respect is critical for leaders to build a robust team. Practicing humility helps leaders listen to team ideas and accept criticism.

Building strong relationships is pivotal for team success, as it is based on trust, which can be achieved through empowering team members, regular communication, and honesty. Strong relationships enhance creativity, collaboration, productivity, job satisfaction, and retention.

Empower Your Team to Lead

To build trust and strong relationships with your team, give them the freedom to decide how to accomplish tasks after clearly communicating what needs to be done and why it matters.

Empowering your team to lead not only increases commitment to the mission, but also develops their leadership skills.

Delegating duties also allows you to focus on bigger-picture issues and support the team. However, in urgent or indecisive situations, executive decisions may be necessary.

If you normally give your team the freedom to shape plans, they will trust and follow you even in these situations, according to Willink.

Empower Your Children to Make Decisions

Willink’s advice on giving responsibilities to your team can also be applied to parenting. Allowing children to make decisions helps them develop critical thinking skills, build trusting relationships, and become more resilient.

Parents can teach children that mistakes can be fixed and it’s okay to have mixed feelings about a decision. Encouraging and trusting children’s decision-making abilities will motivate them to trust their parents in return.

A Note About Empowering Your Team to Cultivate Self-Discipline

Willink advises that promoting self-discipline within your team is crucial for maximum effort and success. External discipline may suffice, but it won’t inspire the same level of commitment and effort as self-discipline.

By explaining why their tasks are essential to their personal success and the team’s goals, your team can cultivate self-discipline, leading to more motivation and control over their behavior. While external discipline may still be necessary, the ultimate goal is for the team to adopt self-discipline voluntarily.

The Relationship Between Motivation, Habits, and Self-Discipline

Psychologists suggest that self-discipline is enhanced by both motivation and good habits, and the two may be connected. Intrinsic motivation, which stems from internal enjoyment or interest, is more effective than external motivation based on rewards or punishments for creating successful habits.

Studies have shown that external motivation is short-lived and ineffective, while intrinsic motivation leads to long-lasting success in achieving goals. In weight loss studies, intrinsic motivation and discipline were found to be necessary for long-term success. Similarly to Willink’s theory, it is believed that self-sustaining behavior is developed once an individual finds enjoyment in it.

Communicate Regularly With Your Team

Good communication is crucial for a strong team. Poor communication leads to confusion about roles and mission, decreasing morale and causing the team to fail. Quality communication includes understanding team members’ perspectives and validating their emotions, as well as occasional workshops and cross-training to build team relationships. However, boundaries should be set if negative thoughts or emotions become overwhelming.

Make Your Instructions Simple and Clear

Effective communication is key to building strong team relationships. Poor communication can lead to confusion and decreased morale, ultimately leading to team breakdown. To avoid this, regular and quality communication is necessary. It’s important to understand team members’ perspectives by learning about their roles and responsibilities and asking for feedback on how to improve operations. Communication should be clear and accessible, using various formats.

Tell Your Team the Truth

To maintain strong relationships with your team, it’s important to always be truthful, even if it’s uncomfortable or challenges their beliefs. Concealing negative information can lead to harmful rumors and self-fulfilling prophecies. However, there are cases where transparency may be harmful, such as when it involves personal issues or jeopardizes long-term interests. Address problems promptly and don’t delay delivering bad news.

Organize Your Problems, Then Address Them

Gino Wickman, in Traction, suggests categorizing problems into three lists based on their severity. The first list is for non-urgent issues that can be addressed during quarterly meetings, while the second and third lists are for more urgent strategic and departmental issues that require weekly attention, respectively. This system can help effectively manage and prioritize problems.

Good Leaders Take Responsibility for Their Team’s Problems

Leaders must take “radical responsibility” for any problems within their team instead of blaming others. This motivates the team to find solutions and prevents future issues. Additionally, Willink offers guidance on making effective decisions that lead to solutions.

Benefits of Radical Responsibility

“Radical responsibility” means taking complete ownership of all problems related to your team and mission, accepting responsibility for any issues that arise, and taking proactive measures to prevent future problems. Adopting this mindset allows leaders to effectively solve problems and avoid mistakes.

Can Radical Responsibility Lead to Burnout?

Scott Peck agrees with Willink that taking responsibility for problems leads to solutions, but an excessive sense of responsibility can lead to neurotic behavior and lower quality of life. The Subtle Art of Not Giving a F*ck suggests distinguishing between fault and responsibility – fault concerns the uncontrollable past, while responsibility concerns the present.

Taking responsibility sets an inspiring example for your team and is contagious. To encourage a culture of radical responsibility, Built to Last suggests aligning your team with your culture’s values. The most important leadership quality that sets long-lasting companies apart is a long-term vision and concern for organizational culture.

Make Effective Decisions

The next step after taking responsibility for a problem is to detach from emotions and prioritize the issues that need to be addressed in order to make a decision that can solve it.

Detach From the Situation

To solve problems effectively, leaders should detach emotionally and prioritize issues based on their impact on the team’s mission. Physical distancing, deep breathing, and focusing on the big picture can aid detachment. Leaders should delegate tasks and intervene only in issues beyond their team’s capabilities. Techniques such as the “five whys” can be used to understand the root cause of a problem by immersing in details.

Carry Out Difficult Decisions Gradually

When unsure about the best decision, taking small steps based on your best guess can prevent overinvestment in the wrong direction and allow for adjustments. This approach helps to adapt over time, maintain focus on individual goals, and increase predictability for shorter time frames. A retail manager suspecting employee theft could start by asking for closer watch on sections and double-counting drawers.

Good Leaders Are Balanced

Willink emphasizes the importance of balance in leadership across various critical areas. Let’s dive into these areas and understand why balance is necessary for effective team management.

Balance Between Optimism and Realism

Effective leaders maintain a balanced attitude during tough times by avoiding extreme negativity or optimism that can harm morale and credibility. They acknowledge the situation’s reality and focus on finding solutions. According to Stoic philosophy, difficult situations can be viewed as opportunities for growth and discovering hidden solutions.

Balance Between Praise and Criticism

Balancing positive and negative feedback is crucial when providing feedback to your team. Solely praising them can lead to complacency, while only criticizing can demotivate them. Instead, balance your feedback by recognizing their strengths while also providing suggestions for improvement.

Be honest and specific when providing negative feedback, back it up with data, and place it within the context of their overall performance. It’s important to tailor your feedback approach to the individual’s personality and sensitivity.