Le Personal MBA : Glossaire (ordre alphabétique)

The 10 Ways to Evaluate a Market is a checklist that's helpful in identifying the overall attractiveness of a new market: urgency, market size, pricing potential, cost of customer acquisition, cost of value delivery, uniqueness of offer, speed to market, up-front investment, up-sell potential, and evergreen potential.

To provide value to another person, it must take on a form that they are willing to pay for. Economic Value usually takes one of the following 12 Standard Forms of Value:

1. Product - Create a single tangible item or entity, then sell and deliver it for more than what it cost to make.
2. Service - Provide help or assistance then charge a fee for the benefits rendered.
3. Shared Resource - Create a durable asset that can be used by many people, then charge for access.
4. Subscription - Offer a benefit on an ongoing basis, and charge a recurring fee.
5. Resale - Acquire an asset from a wholesaler, then sell that asset to a retail buyer at a higher price.
6. Lease - Acquire an asset, then allow another person to use that asset for a pre-defined amount of time in exchange for a fee.
7. Agency - Market and sell an asset or service you don’t own on behalf of a third-party, then collect a percentage of the transaction price as a fee.
8. Audience Aggregation - Get the attention of a group of people with certain characteristics, then sell access in the form of advertising to another business looking to reach that audience.
9. Loan - Lend a certain amount of money, then collect payments over a pre-defined period of time equal to the original loan plus a pre-defined interest rate.
10. Option - Offer the ability to take a pre-defined action for a fixed period of time in exchange for a fee.
11. Insurance - Take on the risk of some specific bad thing happening to the policy holder in exchange for a pre-defined series of payments, then pay out claims only when the bad thing actually happens.
12. Capital - Purchase an ownership stake in a business, then collect a corresponding portion of the profit as a one-time payout or ongoing dividend.

Here’s a curious fact about human beings: we have a really hard time realizing that something isn’t there.

When I worked in P&G’s Home Care division, one of my first projects was testing the viability of a product that essentially prevented things from getting dirty. You still had to clean, but it took more time for things to get dirty again.

Once the product went into testing, it was apparent that the idea wasn’t feasible. The product genuinely saved people time and effort, but the user didn’t realize it - they had a hard time believing anything was actually happening, since they couldn’t see the product working. After the test phase was complete, the project was cancelled.

Accumulation is about small helpful or harmful inputs and behaviors that produce huge results over time. Accumulation isn't always positive.

Incremental Augmentation and the Iteration Cycle are good examples of how much Accumulation can improve the value of your offering.

The more small improvements you make over time, the better the results.

Addressability is a measure of how easy it is to get in touch with people who might want what you're offering. It's far better to focus on marketing to an addressable audience than a non-addressable one, and if you choose to serve an addressable market before committing to an offer, it’ll be significantly easier to market your offer when it's ready to sell.

Akrasia is the experience of knowing an action would be in your best interest... but you don’t do it. Akrasia is one of the most widespread and persistent barriers to getting things done.

Allowable Acquisition Cost (AAC) is the marketing component of the Lifetime Value. The higher the Lifetime Value of your customers, the more you can spend to attract new customers.

To calculate your AAC follow these steps:

1. Start with your average customer's Lifetime Value.
2. Subtract your Value Stream costs.
3. Finally, subtract your Overhead divided by your customer base (which represents your Fixed Costs).

The higher the Lifetime Value, the higher the AAC. The more each new customer is worth, the more you can spend to attract them and keep them happy.

As you develop your offer, you have to choose between the competing Alternatives.

You should appreciate the Alternatives your customers face to decide what to include and what to leave out.

Once you know the options, you can examine the combination that would make the most attractive offer.

Amortization is the process of spreading the cost of a resource investment over its estimated useful life. Amortization can help you determine if a potential investment is worth it.

Amortization is a prediction: it depends on an accurate assessment of useful life. If you're wrong in your assessment, your assesment may be misleading.

Using Amortization is smart, but remember it's a prediction, so act accordingly.

When you make a small change to a scalable system, the results are huge. That's Amplification.

The best way to identify Amplification opportunities is look for things being duplicated or multiplied.

The larger the system, the larger the result of the small change.

Analytical Honesty means measuring and analyzing your data dispassionately.

The best way to maintain Analytical Honesty is to have your measurements evaluated by someone who isn't invested in your system.

Don't lie to yourself when it comes to your data: be honest and focus on improving the system instead.

The human mind stores information contextually. Because the brain looks for patterns, your mind effortlessly forms Associations, even between things that aren't logically connected.

Presenting positive associations in your offer can influence what people think about it.

Cultivate the right associations and your customers will want what you have even more.

Attachment means becoming emotionally invested in a certain result, status, environment, or idea. The more attached you are to something, the more you limit your flexibility and reduce your chances of finding a better way.

Twists in life are bound to happen. It's smart to live to fight another day.

Acceptance means applying the concept of Sunk Costs to yourself.

The way to deal with Attachment is to accept that your idea is no longer feasible. Accept what happened and focus on ways to make it better.

The most important rule of Marketing: Attention is limited. People are expert at filtering, because they can't pay attention to everything.

To be noticed you need to find a way to be more interesting or useful than your competition.

You don't want_ just_ Attention. You want the attention of prospects who will ultimately purchase from you.

Business is about making sales, not winning a popularity contest.

Attribution Error means that when others screw up, we blame it on them, but when we screw up, we blame the situation and circumstances. When something isn't working, find out more about the situation before blaming the person.

People tend to comply with Authority figures. This occurs even if they wouldn't take the same action under different circumstances. Once a figure is perceived as an Authority, they become more persuasive.

If you're in a position with Authority, people will interact with you differently. People may filter what they tell you in order to tell you what you want to hear, which may not be what you need to hear.

Developing a strong Reputation will give you the benefits of Authority. Establish yourself as an Authority and you are more likely to increase your sales.

Autocatalysis is a reaction whose output produces the raw materials necessary for an identical reaction.

An autocatalyzing system will produce the inputs needed for the next cycle as a by-product of the previous cycle. This results in a positive, self-reinforcing Feedback Loop, where the system will grow until the system changes and produces less output.

Example: money spend in direct marketing that brings in more revenue, which the company spends on more more direct marketing, which brings in even more revenue.

If your system has an autocatalyzing element, it'll grow more quickly.

Automation refers to a system or process that can operate without human intervention.

Automation is best for repetitive, well-defined tasks. The less human intervention, the more efficient the Automation.

Automation is the best way to Scale, Duplication and Multiplication.

A Balance Sheet is a snapshot of what a business owns and what it owes at a particular moment in time.

Balance Sheets are valuable because they answer many important questions about the financial health of a business. By examining a company’s Balance Sheet, you can determine whether or not the company is solvent, if it’s having trouble paying its bills, and how the company’s value has changed over time.

Don't focus on competing, focus on delivering more value. Every improvement you make builds a Barrier to Competition making it more difficult for competitors to keep up.

The more time you spend looking at the competition, the less time you have to build your business.

Every improvement you make to your Value Stream, makes it harder for your competition to follow.

Selling anything is largely the process of identifying and eliminating Barriers to Purchase: anything that prevents your prospect from buying what you offer.

These are the five standard objections in every sales process:

1. Loss Aversion: It costs too much. Makes spending feel like a loss.
2. It won't work.
3. It won't work for me.
4. I can wait.
5. It's too difficult.

It's smart to structure your offer with those objections in mind:

Objection #1 is best addressed via Framing and Value-Based Selling. If it's clear that the value of your offer exceeds the asking price, the objection is moot.

Objections #2 and #3 are best addressed via Social Proof. Show the prospects how others like them are benefiting from the offer. That's why Referrals are such a powerful tool.

Objections #4 and #5 are best addressed via Education-Based Selling. If the customer doesn't realize they have a problem, they won't be looking for a solution. Focus your early efforts in making them smarter and then helping them Visualize what would happen if they proceed.

Once you have their Attention and Permission, there are two possible tactics if they still have objections:

• Convince them that the objection isn't true.
• Convince them that the objection is irrelevant.

Always try to negotiate with the decision-maker.

Bootstrapping is the art of building and operating a business without outside funding.

Bootstrapping allows you to grow your business while controlling it 100%.

If you accept Funding, make sure that you use it to do things that you couldn't otherwise.

Bootstrap as far as you can go, then move up the Hierarchy of Funding as needed.

Breakeven is the point where your business' total revenue exceeds its total expenses. The more revenue you bring in and the less you spend, the more quickly you'll reach Breakeven. After Breakeven, your business is truly profitable and self-sustaining.

A Buffer is a third party empowered to negotiate on your behalf. Agents, attorneys, etc. are all examples of Buffers.

Depending on the agreement, your Buffer's priorities may be very different from your own. Be mindful of Incentive-Caused Bias.

If possible, work with a Buffer who is willing to accept a flat fee. Their interests will be more aligned with yours when they are paid no matter what happens.

Don't let your buffer replace your own judgment.

Don't give total control of your decisions or resources to your Buffer.

Bundling means repurposing value that you already created to create even more value by combining multiple small offers into one large offer. The more offers contained in a bundle, the higher the Perceived Value of the bundle will be.

Unbundling is the opposite of bundling, it means splitting an offer into multiple smaller offers.

Bundling and unbundling help create value for different customers without having to create something new.

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.

Bystander Apathy explains why groups like committees never get anything done: everyone assumes someone else will step up.

The best way to eliminate Bystander Apathy in project management is to have clearly defined tasks for each individual.

If you want a prospect to take the next step you need to give them a Call To Action (CTA): tell them exactly what to do. Visit a website, check your e-mail, call a phone number.

The key for an effective CTA is to be as simple, clear and obvious as possible.

The best CTAs call directly for a sale or for Permission to follow up.

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

The Cash Flow Statement is straightforward: it’s an examination of a company’s bank account over a certain period of time. Think of it like a checking account ledger: deposits of cash flow in, and withdrawals of cash flow out. Ideally, more money flows in than flows out, and the total never goes below zero. Every Cash Flow Statement covers a specific period of time: a day, a week, a month, a year. The time period of the report depends on the purpose.

Human biology is optimized for the world that existed 100,000 years ago, not for the world today. Caveman Syndrome is a way of recognizing that your brain and body simply aren't optimized for today's world.

Part of the challenge is facing 16 hours work days, instead of the physical survival of the past.

Don't be too hard on yourself. Nobody was built for the world as it is today.

Cessation refers to the conscious choice to stop doing something that's counterproductive.

Since we suffer from Absence Blindness, we tend to believe that we have to always do something to improve a system.

Doing nothing may be the best path in many cases.

All systems Change. Complex systems are in constant state of flux.

It's hard to know how a system will change, but it's certain that it will.

Reaching a point with your business where everything is perfect and unchanging is impossible.

The more flexible you are, the better prepared you'll be when Change comes.

Checklists are Externalized, predefined Standard Operating Procedures for completing a specific task.

Checklisting can help you define a system for a process that hasn't been formalized yet.

Checklists are helpful to ensure you don't forget important stuff when you get busy.

Checklisting can help not only by improving the quality of your work, but also by making it easier to delegate more effectively.

Creating a Checklist for the Five Parts of your Business can have great overall results.

Clanning is the process through which humans naturally tend to form distinct groups.

Identifying ourselves as part of a group is a human instinct.

Groups naturally form around important issues, positions or events.

Understand the group dynamic, or you'll be caught up in it.

Cognitive Scope Limitation is the way the human mind tends to simplify reality when it becomes too overwhelming for the mind. This is what happens when you walk on Times Square: you can't possibly feel emotionally connected to so many strangers.

It's not possible to expand the scope of information in our minds, we just can't handle so much reality.

Personalizing an issue is the best way to overcome this limitation. It helps to personalize decisions by imagining they affect someone close to us. What if your (present, distant, or metaphorical) grandchild evaluated the results of your decision? What if it appeared on the front page of the newspaper?

Every time you switch your attention from one subject to another, you incur the Cognitive Switching Penalty. Your brain spends time and energy thrashing, loading and reloading contexts.

Neurologically, multitasking is impossible. You are not really doing two things, you're switching your attention from one thing to the other. Productive multitasking is a myth.

To avoid unproductive switching, it's best to group similar tasks together. That way your brain needs to load the context into working memory only once. You'll get more done with less effort.

Commander's Intent means explaining why something must be done when assigning a task to someone. The more your agent understands the purpose behind what must be done, the better he/she will do it. By being clear about the purpose behind a plan, others can act toward that goal without the need of constant communication.

Commitments are a way of binding people together.

Breaking a promise can have a negative impact on someone's Reputation, so people usually try to maintain Consistency with their previous positions and promises.

Obtain a small commitment, and you'll get more compliance from your customers.

Common Ground is a state of overlapping interests between two or more parties.

It's far easier to reach Common Ground if you understand the needs of your Probable Purchaser.

Aligning interests is critical to reach Common Ground, and consequently, a Transaction. Sales isn't about convincing someone to buy what they don't want or need.

Negotiation is the process of exploring different paths to reach Common Ground. The more paths you explore, the more likely you'll find interests that overlap.

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

Communication is absolutely necessary, but as the size of your team increases, so does Communication Overhead.

The solution is simple but not easy: make your team as small as possible. This will save everyone's time and increase productivity.

Comparative Advantage means it's better to capitalize on your strengths than to shore up your weaknesses. Businesses work better if the individuals focus on what they're best, and work with other specialists. Comparative Advantage is the reason why diverse teams outperform homogeneous teams.

The Comparison Fallacy assumes that it's possible to compare your skills, priorities, goals, and results with other people in an accurate and useful manner.

Other people are not you, and you are not other people. You have unique skills, goals, and priorities. In the end, comparing yourself to other people is silly, and there’s little to be gained by it.

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?

Compounding is the Accumulation of gains over time. Compounding is important because it creates the possibility of huge gains in a short period of time. By reinvesting the revenue your business generates over and over,  you can multiply your original investment many times.

Accumulating gains will produce huge results. The trick is to be patient.

Confirmation Bias is the tendency for people to look for information that supports their conclusions, and ignore information that might prove them wrong. The stronger the opinion, the more we ignore sources that challenge it.

The way to counter Confirmation Bias is to actively look for disconfirming evidence: information that challenges your hypothesis.

Conflict occurs when two control systems try to change the same perception. This is what happens in the typical case of procrastination: one system wants to rest, and one wants to work.

Conflict also occurs when people are controlling for different outputs that require the same input.

Conflicts can only be solved by changing Reference Levels: how success is defined by the parties involved.

Change the structure of the situation that creates the reference levels each party is using to define success, and you'll eliminate the conflict.

Conservation of Energy means that we've evolved to avoid expending energy unless it's necessary.

Unless a Reference Level is violated, people will generally Conserve Energy by not acting.

Sources of information that change your Reference Levels are valuable in prompting action. By learning of other choices that you can make, you may acquire different Reference Levels.

All you need to know is that something that you want is possible, and you'll find a way to get it.

A system's performance is limited by the availability of critical input. Eliminate the Constraint and performance will improve.

These are Goldratt's five steps to alleviate a Constraint:

1. Identification: find the limiting factor.
2. Exploitation: make sure that the resources related to the Constraint aren't wasted.
3. Subordination: redesign the system to support the Constraint.
4. Elevation: permanently increase the capacity of the Constraint.
5. Re-evalution: after making a change, reevaluate a system to see where's the Constraint.

The more quickly you move through these steps, the more your system's Throughput will improve.

Context is the use of related measurements to provide additional useful information about the data you're examining.

Aggregate measures are worthless by themselves. How much is $1000 of revenue? It depends on your Context.

Don't focus on "magic numbers" when tracking your results. No measures matter in isolation, look at them in context with other measurements.

Humans are wired to notice Contrast, not to compare what we perceive with things that aren't there (the root of Absence Blindness). We believe something is cheap when we compare it to something more expensive, but not necessarily if it stands on its own.

Contrast is often used to influence buying decisions. In businesses, it's often used as pricing camouflage.

Take advantage of Contrast when presenting your offer and you'll improve the way your customers view your offer.

Controversy means publicly taking a position that not everyone will agree with, approve of, or support. Used constructively, it's very effective to attract Attention.

If you agree with everyone, your position is boring and no one will care.

It's okay to disagree, call out or position against something, because it provokes discussion, and discussion is Attention.

Controversy with an ethical purpose is valuable. Controversy for the sake of controversy is not. Always keep your goal in mind.

Convergence is the tendency of group members to become more alike over time. This is what's known in business terms as "company's culture."

Divergence is the tendency of group members to become less like other group members over time.

Convergence is useful if you consciously choose to spend time with people you'd like to become more like. At the same time, breaking away from groups that aren't serving you is painful but necessary to grow.

There are five Core Human Drives that influence human behavior:

1. Drive to Acquire: the desire to collect material and immaterial things, like a car, or influence.
2. Drive to Bond: the desire to be loved and feel valued in our relationships with others.
3. Drive to Learn: the desire to satisfy our curiosity.
4. Drive to Defend: the desire to protect ourselves, our loved ones and our property.
5. Drive to Feel: the desire for emotional experiences like pleasure or excitement.

Whenever a group of people have an unmet drive, a market will form to satisfy it.

The more drives your offer connects with, and the better you communicate those connections, the more attractive your offer will become.

Causation is a complete chain of cause and effect. Correlation means that the given measurements tend to be associated with each other.

Correlation is not Causation. Just because one measurement is associated with another, doesn't mean it was caused by it.

The more changes in a system, the harder it is to establish Causation.

The more you can isolate the change you make, the more you can tell if it really was the reason behind the results.

Cost-Benefit Analysis is the process of examining potential changes to your business to see if the benefits outweigh the costs. When conducting a Cost-Benefit Analysis, it’s important to include costs and benefits that aren’t purely financial.

Before making a decision, evaluate the total costs and benefits. If the data you’re examining doesn’t lead to make changes that improve your business, you’re wasting your time.

Fixed Costs exist no matter how much value you create. Variable Costs are directly related to how much value you create. Understanding your costs and how they fluctuate is critical in successfully managing your business operations.

Counterfactual Simulation is applied imagination: consciously asking a "what if" question, and letting your mind imagine the rest.

Based on the stored Patterns, Associations and Interpretations, your brain will produce what it believes is the most likely scenario.

Counterfactuals are very useful because of their flexibility: you can simulate anything you want.

When you use Counterfactual Simulation, you assume the event or state you're simulating is already true. The mind then fills the gaps between A (where you are) and B (where you want to be).

Counterparty Risk is the possibility that other people won't deliver what they have promised.

The more your system depends on other people, the higher the risk of failing.

If your system relies on the performance of other people, you need to prepare for the possibility that they won't reach your expectations.

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

Every business has Critical Assumptions that will define if it can survive or not.

The more accurately you can identify and test these assumptions, the less risk you'll be facing.

A Damaging Admission is an acknowledgment of the potential risks or drawbacks an offer may have.

Making a Damaging Admission can actually increase your prospects' Trust in your offering, because it shows integrity.

Be upfront regarding your drawbacks and Trade-offs. They know you're not perfect, so don't pretend to be.

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

If you're not cutting off viable options, you are not making a decision.

No Decision is ever made with complete information. Lack of information shouldn't prevent your from deciding, the world is too complex to make accurate predictions.

Failure to make a Decision is itself a Decision. Life doesn't stop if you refuse to choose.

For best results, be clear and conscious when making a decision.

Deconstruction is the process of separating complex systems into the smallest subsystems possible to help understand it.

Once you've identified the subsystems, you can isolate them to see how they work and what part they play in the big system and build your understanding from the ground up.

Don't lose sight of Interdependence. Remember that each subsystem is a part of a bigger system.

Creating diagrams and flowcharts can help you understand how it all comes together.

It's important to consider the present conditions in a system and how it affects each subsystem.

You need to produce a strong feeling of Desire in your customers for they to want what you have, and to be willing to purchase from you.

Provoking desire usually makes people uncomfortable because they fear that they are "manipulating" people, but in reality no one wants something that they don't already desire.

The key is discovering what people already want, and then presenting an offer that intersects with the preexisting desire.

Your job is not to convince people, but to help them convince themselves that your offering will help them get what they want.

People's wants start at the Core Human Drives. The more drivers you connect with, the more effective your offering will be.

Something suffers Diminishing Returns when, after a certain point, having more of it becomes pointless or detrimental.

Optimizing everything to perfection is almost impossible. After picking the "low hanging fruit", further optimization can cost more than the returns you'll reap.

Optimize until reaching the point of Diminishing Returns, then focus on something else.

A Distribution Channel describes how your offer will be delivered to the end user. There are two primary types of distribution channels: direct-to-user and intermediary distribution.

If you work with multiple channels, you need to make sure that they are representing your business well.

A Doomsday Scenario is a Counterfactual Simulation where you ask the question: "what's the worst that could happen?"

Doomsday Scenarios are intentionally pessimistic to make you realize that in most cases, you'll be okay even if things go wrong. Remember: most threats nowadays are no longer life-or-death situations.

By Externalizing your worst fears, you realize what they really are: irrational overreactions.

Once you've imagined the Doomsday Scenario, you can work to improve upon the worst case.

Duplication is the ability to reliably reproduce something of value.

Duplication allows you to make copies of your offer quickly and inexpensively, making it more widely available in a cost-effective way.

To create something that doesn't require your direct involvement, you need to be able to duplicate effectively.

If you have to be personally involved with every customer, there's an upper limit on how many customers you can serve.

There are nine common Economic Values that people consider when evaluating a potential purchase: efficiency, speed, reliability, ease of use, flexibility, status, aesthetic appeal, emotion, and cost.

Economically Valuable Skills are skills that are directly related to the 5 Parts of Every Business.

To increase your value in the market, focus on improving skills that are economically valuable.

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

By investing time and energy in making your customers smarter, you simultaneously build Trust and make them more interested in your offer.

Remember that to do this properly, you have to know more than your customers. Otherwise, you'll scare them away.

Marketing works better when it focuses on the End Result. People don't buy books, they buy knowledge.

It's more comfortable to focus on features, on what your offer does, but it's more effective to focus on benefits, what your offer_ provides._

The End Result is usually an experience related to a Core Human Drive.

Your body has Energy Cycles: natural rhythms of energy during the day.

Hacking your Energy Cycles (e.g.: not resting) can sound tempting but it's ultimately unproductive.

Here are four ways to work with your body and not against it:

1. Learn your patterns: keep a track of your energy during different parts of the day, and you'll eventually see which are the best moments for you to work and rest.
2. Maximize your peak cycles: plan your day in order to take advantage of the moments where you have the most energy.
3. Take a break: When you're in a down cycle, it's better to rest than power through. Rest is not optional.
4. Get enough sleep: Sleep deprivation results in a prolonged cycle, lowering your productivity.

Paying attention to your Energy Cycles and working accordingly, will help you get the most out of your time available.

An Environment is the structure in which a system operates.

When the Environment changes, the system must do it too to keep continue operating.

Always consider the Environment and adapt your system to it.

Excessive Self-Regard Tendency is the natural tendency to overestimate your own abilities.

Excessive Self-Regard Tendency is more pronounced if you don't know much about the subject at hand. The more incompetent people are, the less they realize they are incompetent. On the contrary, the more you know about a subject, the more accurate your perception of your competence will be.

Once you learn more, you become "consciously incompetent": you know what you don't know. Developing "conscious competence", knowing what you're doing, takes experience, knowledge and practice. A healthy amount of humility can keep you from assuming you know everything, and therefore making you want to keep learning.

Excessive Self-Regard Tendency is common, don't think you're immune to it. It helps to cultivate relationships with people who aren't afraid to tell you when you're wrong.

In most sales situations, it’s in your best interest to maintain Exclusivity: creating a unique offer or quality that other firms can’t match.

If you’re the only person or company that offers what your prospect wants, you’re in a very strong position to negotiate on favorable terms.

Exclusive offers make it much easier to maintain high Perceived Value, since there’s no direct competition.

Exclusive offers are easier to create when you’re creating something new, which means an exclusivity strategy makes the most sense for Products and Services.

A customer's perception of quality relies on expectations and performance. After a purchase is made, the performance of the offering must surpass the expectations for the customer to be satisfied.

If performance is better than expectations, the perception of the offering will be high. Do whatever you can to provide something that unexpectedly delights your customers.

Externalization is the process of transforming our thoughts into some sort of external form, typically by writing or speaking. We respond better to stimuli in our Environment than our own internal thoughts. We can improve our productivity by converting our internal thoughts into an external form.

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

Fail-safes are not efficient if you think you'll never need them. The thing is, if you ever need one, it'll be too late to develop it. Fail-safes must be developed before they are needed.

Separate your Fail-safe from your primary system as much as possible to prevent one tragedy ruining everything.

Never make the backup system part of the system you're trying to protect. Interdependence is not good when it comes to Fail-safes.

Try to eliminate single points of failure. If the system relies on critical inputs to function, you should plan for when those inputs aren't available.

Feedback helps you understand how well is your offering meeting your potential customers' needs before development is complete, which allows you to make changes before you start selling.

Here are a few tips to maximize the value of Feedback:

• Listen to real potential customers instead of friends and family.
• Ask open-ended questions.
• Steady yourself, and keep calm. No one likes hearing that their offer sucks.
• Take what you hear with a grain of salt. The worst response isn't empathetic dislike; it's total apathy.
• Give potential customers the chance to preorder. If they are willing to buy from you, that's a green light!

If no one is willing to preorder you should ask them why, to find out about their Barriers of Purchase.

A Feedback Loop exists in a system when an output becomes the input in the next cycle. Balancing Loops dampen system's outputs with each cycle. Reinforcing Loops amplify the system's output with each cycle. There are Feedback Loops everywhere, and it's critical to notice them to appreciate a system's complexity.

Field Testing means creating, using and iterating your offering before offering it to customers. Field Testing is a critical step in the Iteration Cycle, helping you find flaws in your offering.

The purpose of Field Testing is to minimize risk, by making sure that the offering works before trying to sell it.

Financial Ratios are beneficial because they allow you to make comparisons very quickly. Financial Ratios are useful for sanity-checking profit, debt, cash, and efficiency without spending too much time.

Every business has a small number of important ratios to consider, so it’s worthwhile to do a bit of research to see what they are for your industry.

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

Once that you know what you want, ask yourself: "how would you go after it?" Continue asking "How?" until you've defined your plan in terms of Next Actions.

If you do it right, each action will give you an experience of what you want as you do it. Connect big goals to small actions, and you'll inevitably accomplish what you want.

The Five-Fold Why is a technique to help you find out what you actually want.

Applying it is easy: whenever you want something, ask yourself "Why?" as many times as needed until you get to the root of the want.

Discover the root causes behind the want, and you'll discover new ways to get there.

Every system has Flows: movements of resources in and out of the system.

Inflows are resources moving into the system, like water into a sink. Outflows are resources moving out of the system, like money out of a bank account.

Understand the Flows to understand the system.

Force Multipliers are tools that help you Amplify your effort to produce more output. A hammer is a force multiplier. Investing in Force Multipliers means that you'll get more done with the same amount of effort. Generally, the only good use of debt or outside capital is when it gives you access to Force Multipliers that you wouldn't be able to access any other way.

An Option means taking a predefined action for a fixed period of time in exchange for a fee. (Example: movie tickets!)

Options allow the purchaser the ability to take an action without requiring them to do so.

Insurance focuses on transferring a risk from purchaser to seller in exchange for a series of payments. If something bad happens the insurer is responsible for the bill, and if it doesn't, the insurer keeps the money.

Insurance protects the purchaser from risks they can't mitigate on their own.

Insurers spread risk over a large number of purchasers, and focus on maximizing payments while minimizing claims.

Capital is the purchase of an ownership stake in a business. If you have resources to allocate, you can provide capital to business owners to help them expand their business.

By taking on investors, business owners can gather enough funds to expand quickly.

By acquiring a certain percentage of the business, investors benefit from the business' activities without active involvement. Investors hope to receive a higher rate of return than other methods, like leaving the money in the bank.

Products are self-contained units of economic value. To make money using Products, you must:

1. Create something that people want.
2. Produce it as inexpensively as possible while also having an acceptable quality.
3. Sell as many units as possible, at the highest price possible for the market.
4. Keep an inventory to deal with future orders.

Products can be duplicated and multiplied, and therefore scale better than other forms of value.

A Service is a form of value where you help and provide some type of benefit to someone, in exchange of a fee.

Services can be very lucrative but are hard to duplicate, because your time and energy are finite resources.

A Shared Resource is a durable asset that you create once, and then charge the customers for using it many times.

Classic examples of this form of value are gyms, museums or amusement parks.

It's critical to find a balance in usage levels of the asset: if you have few customers, you won't be able to spread out the costs, but if you have too many the asset will be overcrowded, which will diminish the experience for the user.

Subscription offers provide tangible or intangible benefits on an ongoing basis in exchange for a recurring fee.

The attractiveness of subscription models is its predictability. This form of value ensures a certain revenue in every billing period.

The key is to keep customer attrition as low as possible by keeping your subscribers happy and constantly attracting new customers.

Resale is purchasing an asset from another business to sell it later at a higher price.

Resale relies on helping wholesalers sell their wares without having to identify, market, and sell to individual customers.

A Lease is a form of value where you acquire an asset and then allow another person to use it for a specific period of time in exchange for a fee.

Leasing benefits the purchaser by allowing them to use an asset without paying the higher price to acquire it.

Agency is a business model that focuses on marketing and selling an asset you don't own. By establishing a new relationship between a source and a buyer, you earn a commission.

The benefit for sellers is generating sales that without an agency might not happen.

Buyers benefit by finding assets to buy that the agent, whom they trust, filters for them.

Audience Aggregation focuses on capturing the attention of a group of a people with similar characteristics, and then selling access to that audience to a third party.

This benefits the audience by providing something worthy of their attention.

It benefits the advertiser because it gives him attention, which leads to sales.

A Loan is an agreement to let a borrower use a certain amount of resources for a period of time in exchange for a series of payments over a predefined period of time, equal to the original loan plus an interest rate.

Loans allow people immediate access to products that they couldn't purchase outright.

Loans are beneficial to the lender by benefiting from excess capital.

There are only four ways to "do" something: Completion, Deletion, Delegation and Deferment. These are called the 4 Methods of Completion.

You can use all four options when going through your to-do list and you'll get more done.

• Completion: Doing the task. It's best for tasks that only you can do particularly well.
• Deletion: Eliminating the task. It's effective for anything that's unimportant or unnecessary.
• Delegation: Assigning the task to someone else. It's effective for anything that other person can do 80% as well as you.
• Deferment: Putting the task off until later. It's effective for tasks that aren't critical or time-dependent.

If you want your business to bring in more money, there are only 4 Methods to Increase Revenue: increasing the number of customers, increasing average transaction size, increasing the frequency of transactions per customer, and raising your prices.

There are 4 Pricing Methods that can help you put a price on what you sell: replacement cost,  market comparison, discounted cash flow/net present value, and value comparison.

Framing is the act of emphasizing the critical details of your offering and deemphasizing the others.

You can't include every detail of your message. We rely on framing because we have limited time and limited attention.

By emphasizing certain benefits of your offer, you can maximize persuasive power.

Framing is not the same as lying. Don't leave out information that your customers have the right to know: being less-than-truthful will decrease customer satisfaction and permanently harm your Reputation.

Giving something away for Free attracts attention quickly. People love getting something for nothing. Free gives your potential customers a chance to experience the value you provide. It may net you sales that you wouldn't have had otherwise.

It's critical to remember that attention alone doesn't pay the bills. Focus on giving away real value that attract real, paying customers.

Friction is any process that removes energy from a system over time.

It's necessary to continue to add energy to a system when there's Friction to keep it moving at the same rate.

Introducing Friction can sometimes make people behave in a certain way, like having to present a receipt when making a return, which can lower your return rate. But doing this too much can lower your Reputation.

Remove Friction from your business to increase quality and efficiency.

Gall's Law states that all complex systems that work evolved from simpler systems that worked. If you want to build a complex system that works, build a simpler system first, and then improve it over time.

A Goal is a statement that describes precisely what you want to achieve. Goals are more useful if they are Framed in a Positive, Immediate, Concrete and Specific (PICS) format:

• Positive: your goal should be something you move toward, not away from.
• Immediate: your goals should be something that you decide to make progress on now, not "someday."
• Concrete: it means that you're able to see results in the real world. Achieve "happiness" is not a concrete goal.
• Specific: you have to define what, when and where you are going to achieve your goal. Your goals should be under your control, like "20 minutes of exercise" instead of "lose 20 pounds."

It's ok to change your goals if you no longer feel good about them.

The Golden Trifecta is my way to make others feel important and safe when talking to me: Appreciation, Courtesy and Respect.

Appreciation means expressing your gratitude for what others are doing for you, even if it's not perfect.

Courtesy is, simply put, politeness.

Respect means honoring the other person's status.

It's important to apply The Golden Trifecta to all your interactions with people, not just the ones you're interested in.

Guiding Structure means the structure of your Environment is the largest determinant of your behavior.

If you want to successfully change a behavior, change the structure that influences or supports the behavior first, and the behavior will follow.

Don't try to change your behavior directly, that requires a lot more willpower. It's easier to focus on the Environment.

Habits are regular actions that support us. Due to the power of Accumulation, habits can add up to huge results over time.

Habits require Willpower to create. It's better to use Guiding Structure to help install the habits you want to adopt.

Habits are easier to install if you use triggers. For example, make a note to take your vitamins every time you wash your teeth.

Focus on installing one habit at a time until it feels automatic and you can move to the next one. Remember that your Willpower is limited.

People are almost always willing to pay for things that they believe are too much of a pain to take care of themselves. Where there’s a hassle, there’s a business opportunity: the Hassle Premium.

The more hassle a project or task involves, the more people are generally willing to pay for an easy solution, or pay someone to complete the job on their behalf.

The Hedonic Treadmill explains why people who achieve wealth, status, and fame continue to seek more. We pursue pleasurable things because we think they’ll make us happy. When we finally achieve or acquire what we’re seeking, we adapt to our success in a very short period of time, and our success no longer gives us pleasure. As a result, we begin seeking something new, and the cycle repeats.

If your business needs to buy equipment or to hire employees, chances are you require Funding. The Hierarchy of Funding describes various methods of obtaining funding for a business.

In order to acquire Funding, it's often necessary to give up a certain amount of control over the operations. No one gives money away for nothing. The more money you ask for, the more control they'll want.

The higher you climb, the more funding you get and the more control you give up:

• Personal Cash. The best form of financing is to invest your own money.
• Personal Credit. Easy and quick if your needs don't exceed a few thousand dollars.
• Personal Loan. Typically made by friends/family. Be careful because failure to pay back may harm your personal relationships.
• Unsecured Loan. Typically made by banks or credit unions. It's used for small amounts, usually doesn't require collateral so the interest will be higher.
• Secured Loan. It requires collateral. If you don't make the payments, the lender can seize the property signed as collateral.
• Bond. Debt sold to individual lenders. Instead of asking a bank, a business asks other individuals directly.
• Receivable Financing. Special type of secured lending unique for business. The collateral is the business receivables. The bank can force the business to pay the loan before anything else, even salaries.
• Angel Capital. The "angel" investor gives you Capital in exchange for partial legal ownership of the business. Some angels offer advice, but they usually can't make business decisions.
• Venture Capital. VCs are very wealthy and they offer very large amounts of capital. It happens in "rounds" and there's a lot of negotiation involved. VCs require a lot of control, usually a seat in the company's board of directors.
• Public Stock Offering. It involves selling partial partial ownership of the company to investors on the open market. Whoever owns the most shares of the company controls it, so "going public" is very risky in terms of control. Public Stock Offerings are usually used by angel investors and VCs to exchange ownership for money.

The more control you have to give up, the less attractive the funding. More opinions means slower operations.

It's not uncommon for investors to remove executives that are not performing well, even if they are the founder of the company. (e.g.: Steve Jobs)

Hindsight Bias is the tendency to kick yourself for things "you should have known."

Every decision you'll ever make will be lacking some information. That's why we use Interpretation to fill in the blanks.

It's important to realize that the feeling of "feeling stupid" for not predicting an outcome is irrational, and that there's nothing you can do to go back and change it. Hindsight Bias becomes destructive if you judge yourself or other for not knowing the unknowable.

Reinterpret your past mistakes in a positive way, focus on what's ahead.

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

When creating a Hook, emphasize what's uniquely valuable about your offer and why people should care. Remember: it takes time. Crafting a Hook is a creative exercise.

The better your Hook, the more Attention you'll grab, and the easier it'll be for your message to spread.

Humanization is the process of using data to tell a story (Narrative) about a real person's experience or behavior.

Numbers only tell part of the story, you need to reframe the measures into actual behavior to really understand what happens.

Developing fictional profiles of people developed from data (called "personas") is a great way to Humanize.

Just data doesn't mean a lot. Tell a story to help people understand the issues.

Everyone wants to feel Important. The more important you make people feel, the more they'll value their relationship with you.

The more interest you show in other people, the more important they'll feel.

Making someone feel important is not difficult, yet is rare in today's world: pay attention, listen intently, express interest and ask questions.

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

Incentives influence the way people act. Change the incentive, and you'll change the behavior.

Incentives are tricky because they interact with our Perceptual Control systems.

Incentives can be useful if used properly, but caution is in order. Make sure that your interests match those of the people that receive the incentive.

An Income Statement is a financial report that calculates a business' profitability. If the business manages an inventory or extends credit to customers, a simple cash flow analysis can be misleading.

In order to determine whether or not your sales are profitable, you need to be able to track which sales and expenses are related. By matching each sale with the expenses incurred in the process of making that sale, it’s possible to see if you’re making a profit.

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

Incremental Augmentation helps you minimize the risk by not putting all the pressure in a single iteration.

Incremental Augmentation has its limits. To enter a new market, or change the existing one, you may need to create something new.

Incremental Degradation is the process of making a business offer worse and worse by trying to cut costs. Saving money doesn't help it you need to lower the quality of your offering to do it.

Cost saving measures Accumulate over time, and end up having an impact on quality. Cutting costs can help to increase the Profit Margin, but it usually comes at a steep price.

Cutting costs can only take you so far. Creating value will always cost some amount of money, so there's a limit to this strategy.

Creating and delivering value is a much better way to improve your business. There's no limit to how much value you can provide.

Control your costs, but remember why your customers are buying from you.

Inhibition is the ability to temporarily override our natural inclinations.

Willpower is the fuel of Inhibition. Whenever we inhibit our natural responses to our environment, willpower is at work.

Inhibiting certain decisions or responses can be beneficial, but our ability inhibit has limitations (see Willpower Depletion).

Interdependence means that complex systems depend on other systems to be able to operate.

Highly interdependent systems are called "tightly coupled" systems. The more tightly coupled these systems are, the more they will be affected by failures on the systems they depend on.

"Loosely coupled" systems have low interdependence between each other.

The less dependent a system is, the less rigid and time-dependent it is, and the more Slack it has.

By removing dependencies you can make a system less interdependent, and therefore decrease the chances of a mistake in one system to cascade to the other systems.

Internal Controls are a set of specific Standard Operating Procedures a business uses to collect accurate data, keep the business running smoothly, and to spot trouble. The better a company’s internal controls, the more reliable its financial reports, and the more confidence you can have in the quality of the company’s operations.

When there's not enough information to develop an accurate Pattern, the human brain relies on prior information and patterns to make Interpretations and fill the gaps.

These snap Interpretations can be altered via Reinterpretations. You can change your beliefs and mental simulation consciously by recalling and reinterpreting past events.

Reinterpretation is possible because our memory is impermanent. Every time we recall something, the new memory will include any changes we've made to it. Reinterpret your past and you'll improve your ability to make great things happen.

Before making a change to a system, it’s important to understand that human beings are predisposed to do something rather than nothing. Intervention Bias makes us likely to introduce changes that aren’t necessary in order to feel in control of a situation.

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.

Before making system changes, ask yourself: “do we need to do this at all?”

The Iteration Cycle is a process that you can use to improve anything over time.

It has six major steps:

• Watch: What works? What doesn't?
• Ideate: What could you improve? What are your options?
• Guess: Based on experience, which idea do you think will make the biggest impact?
• Which?: Decide which change to make.
• Act: Make the change.
• Measure: Was it positive or negative? Should you keep it or go back?

Iteration is a cycle. Once you do it, you repeat it.

The more clearly you define what you're after with each iteration, the better the feedback and the value you'll receive from each cycle.

With every new offer, your primary goal should be to work through each Iteration Cycle as quickly as possible. The faster you move through the Iteration Cycle, the higher your Iteration Velocity, and the better your offering will become

The iteration cycle is necessary extra work. The problem with creating the final version outright is risk: you are putting a lot of effort in something that may not sell.

Iteration may take extra work, but after going through a few cycles, you'll have a deeper understanding of the market and your offer.

Not all Measurements are equally important. Measurements of the critical parts of a system are called Key Performance Indicators (KPIs), and paying attention to critical measurements can help you improve your business system.

Anything that’s not directly related to a core business process or a system’s throughput is probably not a KPI.

Leverage is the practice of using borrowed money to magnify potential gains. If you have an investment that promises to double, you can make 10x if you borrow money and make that investment five times.

Leverage is a form of financial Amplification. It magnifies gains and losses.

Using Leverage is dangerous. Never do it unless you are aware of the financial risks for yourself and your business.

Lifetime Value is the total value of a customer's business over the lifetime of their relationship with your company. The more they purchase from you, and the longer they stay with you, the better the value. The higher the Lifetime Value, the more you can do to earn a new customer and keep them happy.

Limiting Beliefs are mistaken assumptions or worldviews that can act as barriers to getting what you want. You have no “fundamental defects” — there’s nothing that you’re fundamentally incapable of learning or doing. Identifying and overcoming your limiting beliefs is an effective way to improve your results.

Trying to control everything that happens to you is a recipe for disaster and frustration, and a waste of time and energy. Understanding your Locus of Control helps you separate what you can control from what you can't.

Focus on your efforts instead of results that you can't control.

Focus your energy on what you can influence, and let everything else go.

Loss Aversion is the tendency for people to respond twice as strongly to potential loss as they do to the opportunity of an equivalent gain.

Loss Aversion explains why uncertainty appears risky, and why perceived threats usually take psychological priority over potential opportunities.

Management is the act of coordinating a group of people to achieve a specific goal while accounting for any Change or Uncertainty.

These are the six simple principles of Management:

1. Recruit the smallest group of people that can do the job quickly and effectively.
2. Communicate clearly the End Result, who is responsible for what, and the current status.
3. Treat people with respect. Use The Golden Trifecta consistently.
4. Create a productive Environment, and then let people do their work.
5. Have an aggressive plan to complete the project, but don't have unrealistic expectations regarding certainty and prediction.
6. Measure what you're doing to see if it's working, and make the necessary adjustments and Experimentations.

Do these well, and your team will be very productive.

Margin of Error is an estimate of how much you can trust your conclusions from a given set of observed Samples.

Small sample sizes can lead to misleading measurements. Always collect the largest samples you can to ensure better results.

Measurement is the process of collecting data as the system operates. Measurement also makes it possible to compare systems with one another.

The best way to avoid Absence Blindness is to measure to identify potential issues that you might not be seeing.

The first step to improving a system is collecting data, and you do that with Measurement.

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

Anticipating the results of our actions improves our ability to solve new problems.

Mental Simulation relies on our memory, learned via perception and experience. Without supplying a goal, a destination, mental simulation can't exist.

Mental Simulation is extremely powerful if you learn how to harness it consciously.

A Minimum Viable Offer is an offer that provides the smallest number of benefits necessary to make a sale. In other words, it's a Prototype that people are willing to purchase.

Creating a Minimum Viable Offer helps you gather Feedback from real customers quickly, and therefore test the idea's Critical Assumptions.

The purpose of the Minimum Viable Offer is to minimize the risk of the project by keeping the investment small and quickly discovering what works and what doesn't.

Modal Bias is the automatic assumption that our idea is always best.

The best way to avoid Model Bias is to use Inhibition to temporarily suspend judgment, at least long enough to consider other perspectives and suggestions.

Model Bias is automatic, so we need to use Willpower and Inhibition to overcome it. Deliberately keeping an open mind will improve your decision making.

Most successful businesses combine multiple Forms of Value to offer value in multiple ways. By making offers Modular, the business can create and improve offers in isolation, and later mix them as necessary.

Usually these offers are handled separately and the customer can choose which ones to purchase, dramatically increasing the number of offers the business can create.

Monoidealism is the state of focusing your energy and attention only on one thing. It's often called a "flow" state: clear, focused attention on one subject for a long period of time.

Here's how to induce a Monoideal state:

• Eliminate potential distractions and interruptions.
• Eliminate inner conflicts.
• Kick-start the attention process by doing a "dash" of productive work to get into the flow quickly. You can stop after that dash, but chances are you'll keep going.

If you eliminate distractions and conflicts before you start your dash, you'll quickly transition into a Monideal state.

A Most Important Task (MIT) is a critical task that will create the most significant results. Every day, create a list of two or three MITs, and focus on getting them done as soon as possible. Keep this list separate from your general to-do list.

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

There are two basic desires that spark Motivation: moving towards something desirable, and moving away from something not desirable.

Motivation is an emotion, not a logical activity. Just because your brain thinks you should be motivated, that doesn't mean you'll become motivated automatically.

Conflicts result when there are "move towards" and "move away" signals at the same time. This defense mechanism was developed to avoid risks in the past, but most present risks are no longer life or death situations like they used to be.

As long as there are also "move away" signals that create a Conflict, it's hard to feel motivated to do something. Eliminate the inner conflicts that make you move away from potential threats, and you'll find your motivation.

Multiplication is duplication for an entire process or system.

There's an upper limit on what a single business can produce. By creating identical business systems based on a proven model, a business can deliver value to more customers.

Multiplication is what separates small businesses from huge businesses.

Mystique is powerful: it makes things with a little mystery appear more attractive than what they really are. It's easy to like the idea of doing something. It's different to like actually doing it.

The best way to counteract Mystique is to talk to someone who does what you are interested in. Ask them and learn the high and low points of their job.

No situation is perfect. Learn from others before you start, it will help greatly to make a better decision.

Narrative – storytelling – is part of human nature. Creating a compelling story is a great way to improve an offer.

Most compelling stories follow a typical format: the story of the Hero. Your customers want to be heroes. They want to be successful, powerful, admired  and determined.

Telling a story of someone who has already walked the path your prospect is considering is a powerful way to make them interested.

The more vivid, clear and compelling your story, the more prospects you'll attract.

A Next Action is the next specific, concrete thing you can do now to move a project forward.

You don't have to know everything to move forward, just the next step.

To keep yourself from feeling overwhelmed, track your projects and tasks separately.

Focus on completing the Next Action, and you'll eventually complete the entire project.

Your Next Best Alternative is what you'll do if you can't find Common Ground with the other parties. Remember: the other party always has a Next Best Alternative as well.

Understanding the other party's Next Best Alternative is extremely helpful: you can structure the agreement to make it more attractive than the other option.

In every negotiation, the power lies with the party that is able and willing to walk away from a bad deal. The more attractive your alternatives, the more you're willing to walk away, and the better your deals.

The theory of Normal Accidents is best expressed as a universal proverb: "shit happens." The more complex a system is, the higher the probability of something eventually going wrong.

Overreacting to Normal Accidents is counterproductive: if you want the system to fail less, making it more complex doesn't help.

The best way to avoid Normal Accidents is to analyze breakdowns when they happen to learn about them and create contingency plans in case they happen again in the future.

Normal Accidents are the reason you should keep your systems as loose as possibly (without affecting its performance). Accidents will happen, it's just a matter of time.

Norms are measures that use historical data to provide Context for current measurements. They are a way of learning from the past to avoid previous mistakes.

When measurement practices change, Norms based on the previous measurements are no longer valid. Change the measurement methods, and you invalidate any Norms based on them.

Past performance is no guarantee of future performance. Examine your Norms to make sure they are valid.

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

Even the most Remarkable object gets boring over time. Human attention needs novelty to sustain itself.

Continue offering something new, and people will keep paying attention.

Opportunity Cost is the value you're giving up when you make a decision. Whenever you invest time, energy or resources in something, you are implicitly choosing not to invest it in something else. Paying attention to what you're giving up helps you evaluate past actions and make better future decisions.

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

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

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

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

When something goes wrong, what matters the most is how you handle the problem. Fixating on the issue doesn't help. It's far more productive to focus on options, not issues – that's Option Orientation.

By focusing your energy on potential options to solve the problem, you're more likely to find a way to make things better.

Overhead is the minimum ongoing resources required for your business to continue operations.

The lower your Overhead, the less revenue you need to keep going.

Overhead is critical if you're building your company on a fixed amount of capital. The faster you spend it, the more quickly you'll need to bring revenue.

A lower Overhead means more flexibility.

Parkinson's Law is usually expressed as "Work expands so as to fill the time available for its completion." If something must be done in a year, it'll be done in a year. If it must be done in six months, then it will.

Parkinson's Law should not be used to set unreasonable deadlines.

Parkinson's Law is best used as a Counterfactual Simulation question. What would it look like to finish a project on a very short period of time?

Our brains are Pattern Matching machines, constantly trying to find patterns and associating them with previous patterns.

This happens unconsciously, your brain does it simply by paying attention to the world.

Humans learn patterns primarily via Experimentation.

Patterns get stored in our memory, waiting to be recalled. This process is optimized for speed to help you remember things quickly, not accurately. The more accurate patterns you've learned, the more options you have when solving a problem.

Perceived Value determines how much your customers will be willing to pay for your offer.

The less attractive the End Result, and the more involvement required to get the benefit, the lower the perceived value will be.

Perceptual Control Theory is a theory of human behavior that says we act to keep our perception of the world within acceptable boundaries. For example, we wear a coat not because of the weather, but because we'll feel cold and we don't want to feel cold.

Once a certain action brings the perception under control, the system stops acting until the system is once again out of control.

The Environment dictates which actions are possible to bring the perception under control. Control is not about planning, it's about adjusting to environmental changes as they happen.

By understanding that people act to control their perceptions, you'll be better equipped to influence them.

Performance Load is what happens when you have too many things to do. Above a certain point, your performance in all tasks decreases. You must set limits to be productive.

Set aside unscheduled time to handle the unexpected. If your agenda is always full, you won't be able to handle surprises that might come your way.

Your body has Performance Requirements. If you don't give your body what it needs to run, you'll stop functioning before you reach your goals.

You need nutrition, rest and exercise to be productive. Here are some tips:

• Eat high-quality food.
• Exercise regularly.
• Get at least seven to eight hours of sleep each night.
• Get enough sun, but not too much.
• Feed your brain the raw materials it needs to run. You may need to get some of these in supplement forms.

It's a good idea to Experiment to see what works for you to improve your energy, productivity and mood.

Hiring is a tricky business, and there’s no foolproof method to find, attract, and retain star employees and contractors. Performance-Based Hiring is a method of ensuring the people you hire are fit for the job before you hire them.

Mistakes in hiring are almost always expensive, and a bad hire can cost you precious time and money, and your team’s limited energy and patience.

The “golden rule” of hiring: the best predictor of future behavior is past performance.

If you look for past performance and evaluate a candidate’s work first-hand, you’ll make much better hires.

Here's a simple, effective hiring process:

1. Publicize you’re looking for help.
2. Use a basic “acid test” for skill.
3. Ask candidates to show you past projects they’re proud of.
4. Check references. “Would you work with the candidate again?”
5. Give promising candidates a short-turnaround project or consulting engagement.

Permission is a real asset: when your prospective customers ask you to follow-up with more information, you're in prime position to make a sale.

Asking for (and obtaining) Permission to follow-up is more valuable than interruption-based advertising like TV commercials.

The best way to get Permission is to ask for it. Whenever you provide value to people (e.g.: Free), ask them if it's okay to continue to give them more value in the future.

The goal is to make the list of prospects that have given you permission to grow. The more it grows, the more sales you'll eventually land.

Don't abuse the privilege. Make it clear for your customers what they'll be getting and how it'll benefit them. Never spam!

A Personal R&D budget can provide you with guilt-free spending on anything that will improve your skills and capabilities.

R&D exists because it works. Investing in your personal skills and capabilities can enrich your life and open possibilities to additional income sources.

What would it look like if you set aside a small percentage of your income as a Personal R&D budget?

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

Reactance occurs when a prospect senses that someone is trying to compel them to do something; they automatically resist and attempt to move away from the conversation.

Desperation is a negative trust signal.

Chasing is a threat signal.

It’s much better to present yourself with confidence.

The Planning Fallacy is the tendency for people to underestimate completion times on complex projects. When planning, we imagine a scenario where everything goes well, and we underestimate the likelihood of things that could impact the plan.

Planning is useful because it helps you understand requirements, dependencies and risks. Plans don't have to be 100% accurate or predictive to be useful.

A Point of Market Entry is the point where a potential customer becomes receptive to your offering. It's highly likely that you won't care about wheel chairs until you need one.

Certain markets have clearly defined entry and exit points, like diapers. Other markets are more imprecise.

It's best to find out when people are interested in hearing from you before you reach out in order to avoid wasting resources.

If you can get a prospective customer's attention as soon as they become interested in what you're offering, you become the standard by which competition will be evaluated.

It's important to discover where your probable purchasers start looking for information after crossing the interest threshold.

Power represents your ability to get things done through other people. The more power you have, the more things you can do. But remember: with great power comes great responsibility. There's nothing morally wrong with wanting more Power.

All human relationships are based on Power and usually take one of two forms:

• Influence, the ability to encourage someone to do what you suggest.
• Compulsion, the ability to force someone to do what you command.

Influence is much more effective than Compulsion.

The most direct way to increase your power is to increase your Influence and Reputation.

Predictability means providing exactly what the customer expects. Unexpected surprises are only good as long as you provide what the customer is looking for. Predictability increases the perceived quality of your offering.

In order to earn the Attention of a prospect, you must divert their attention from what they’re already doing. It's best to assume your prospects begin in a state of Preoccupation: they're doing something else.

The best way to break a potential prospect’s Preoccupation is to provoke a feeling of curiosity, surprise, or concern.

The stronger and more emotionally compelling the stimuli, the easier it is to attract attention.

When you change the price of an offer, the effects aren’t limited to your current target market. Often, you’ll experience a sudden shift in the target market your offer appeals to: a Price Transition Shock.

A change in prices can change your typical prospect overnight.

As you test different pricing strategies, you’ll notice certain thresholds where you stop appealing to certain types of customers and start appealing to customers with very different characteristics.

Pricing Power is your ability to raise your prices over time. The less value you capture, the greater your pricing power. It's related to the economic concept of "price elasticity": how sensitive are your customers to price variations.

The higher the prices you can command, the more reliably you'll be able to collect sufficient profits to remain in operation.

The Pricing Uncertainty Principle states that all prices are arbitrary and malleable. Pricing is an executive decision. You can charge whatever you want!

The key is being able to support the asking price for a customer to accept it. You must be able to provide a Reason Why the price is worth paying.

Keep in mind that, in general, people prefer to pay as little as possible for what they want (with some exceptions, discussed in Social Signals).

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

You can use Priming to influence your Pattern Matching. By deciding what you're looking for, you can program your mind to alert when valuable information pops up.

Goal setting is useful because it's an easy way to Prime your mind to look for things that will help you achieve your goal.

Your Probable Purchaser is the type of person who is perfectly suited to what you are offering.

Don't try to get everyone's Attention. Focus on getting the attention of the right people at the right time.

By spending your limited resources on the people who are already interested in what you are offering, you'll maximize the effectiveness of your efforts.

Profit means bringing in more money than you spend:

For a business to survive, it must eventually make profit. You can’t operate at loss forever.

Profits also provide a “cushion” to the business to deal with unexpected events.

Profits are important, but they don’t have to be only goal for starting a business. Exploring interests and helping others, for example, are also valid reasons to start a business.

Profit Margin (often abbreviated to “margin”) is a measure of how much you keep of the revenue you collect from a sale. Businesses often use Profit Margin as a way of comparing offers.

A Prototype is an early representation of what your offer will look like.

For best results, create your prototype as similar as possible to the finished model. The more realistic your prototype is, the easier it'll be for people to understand it and give you valuable feedback.

The purpose is not to make it perfect. It's to quickly create something that you and others can see, evaluate and improve.

A Proxy measures one quantity by measuring something else. Think of votes: they measure the "will of the people", although measuring it with 100% accuracy is impossible.

The closer the Proxy to the related subject, the more accurate.

Proxies can help measure the immeasurable, but you have to make sure that the Proxy is highly Correlated with the subject of interest.

Purchasing Power is the sum total of all liquid assets a business has at its disposal. The more the better, as long as you use that power wisely.

Keeping a track of your Purchasing Power makes running a business easier and less stressful.

The Pygmalion Effect explains that people tend to perform up to the level that others expect of them.

This effect explains why our relationships are usually self-fulfilling prophecies. Once you set expectations for somebody, that person will tend to live up to that expectation, whether it's good or bad.

The Pygmalion Effect doesn't justify having unrealistic expectations of other people. Expecting miracles is a recipe for frustration on both ends.

The paradox of the Pygmalion Effect is that having high expectations of people will produce better results, but it's also more likely you'll be disappointed. If you're assessing someone, remember to judge as objectively as possible.

Qualification is the process of determining whether or not a prospect is a good customer before they purchase from you. Qualification helps to avoid wasting time and energy on customers that aren't a good fit.

Not every customer is a good customer. Customers that require more than what they are worth, aren't worth attracting in the first place.

Some businesses actively encourage their customers to purchase from the competition if they are not a good fit.

The more clearly you can define your ideal customer, the better you can screen out the customers that are not worth your effort, and the more you'll be able to focus on your best customers.

Calculating a Ratio is a method of comparing two measurements against each other. Divide your results by your input and you can get many useful relationships in your system.

Tracking Ratios is a great way to see how the system is changing and what direction is taking.

After running an analysis, it helps to construct Ratios in a creative way to see the most important parts of your system.

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

Reactivation is a quicker, simpler and more effective way of increasing revenue than attracting new customers, because those who are reactivated already know you and trust you. Your cost of customer acquisition is extremely low.

Reactivation works better if you have Permission from your customers to follow up.

Reactivation is a great strategy to go back to every now and then to increase revenue.

Research shows that giving a Reason Why for your request increases dramatically people's compliance rate.

Humans are predisposed to look for behavioral causes. People will be more receptive if you give them a Reason Why.

Any reason will do.

Receptivity is a measure of how open s person is to your message. People ignore what they don't care about.

The form and customization of your message influences how receptive people are the information it contains.

The two primary components of Receptivity are "what" and "when." People are more receptive to certain things at certain times.

Reciprocation is the desire most people feel to "pay back" for what they received. This is one of the most powerful psychological tendencies underlying human cooperation.

The desire to reciprocate is not necessarily in proportion to the benefit provided.

The more value you can provide upfront, the more likely it is that people will feel the need to reciprocate.

Being generous is one of the best things you can do to build your Reputation and to improve your results as a salesperson.

Refactoring means changing a system to improve its efficiency without changing its output.

Improving output is not the goal of Refactoring. It's making the system faster and more efficient. Refactoring starts by Deconstructing a system, and then looking for Patterns.

Once Patterns emerge, you can rearrange the system by grouping similar processes and inputs together. Refactoring is critical to improve the functionality of any system.

The key element of every Perceptual Control System is its Reference Level: a range of perceptions that indicate the system is "under control."

There are three kinds of Reference Levels:

1. Setpoint. A minimum or maximum level. Business finances are handled this way:  as long as your revenue and expenses are over and below the respective limits, you're ok.
2. Range. A spread of acceptable values. The difference with a set point is that there's an upper and a lower limit, and the perception must be in between those limits to be under control.
3. Error. Set point defined as zero: anything that's not zero is out of control. The pain receptors in your skin, or customer service complaints are good examples of this.

To change behavior, you must either change the Reference Levels or the Environment. By changing the reference level or changing the available options, you can act in a different way and still be under control, even if the perceptions are the same.

Change the Reference Level and your behavior will change completely.

Referrals are trusted recommendations that make it easier for people to choose to work with someone they don't know.

Referrals work because they transfer the qualities of being known and liked.

The more people who know, like, and trust you, the more Referrals you'll get, and the better off you will be.

Relative Importance Testing is a method that helps you determine what people actually want by asking them questions designed to simulate real life tradeoffs.

People never accept Tradeoffs unless they are forced to make a Choice. Since perfection doesn't exist, people happily settle for the Next Best Alternative.

By asking the participant to choose, you collect more accurate information about how the participant would respond when faced with a similar choice in the real world.

The more sets of questions each participant completes, the more clearly you’ll be able to judge the relative importance of each benefit.

Relative Importance Testing helps you define which benefits you should focus on to make your offer as attractive as possible.

Being Remarkable is the best way to attract Attention. It makes your offering worth noticing and talking about.

You should design your offer to be Remarkable in order to pique your prospect's curiosity.

Aim for the edges, that's where remarkability is.

Reorganization is a random action that occurs when a Reference Level is violated, but you don't know how to bring back under control. This is what happens when people feel "unhappy with their jobs", or have the "quarter-life crisis." There's something wrong, but it's hard to know what.

Reorganization is the neurological basis of learning. If your mind doesn't know what to do, the best thing is to do random things to acquire data.

It's best not to fight Reorganization. It usually just slows down your learning without improving your satisfaction. Once you learn how to bring the perception under control, Reorganization stops naturally.

Respect your mind's impulse to try something new.

Reputation is what people think about a company or offer.

Building a strong reputation is very valuable; people are willing to pay more for a good reputation.

It's critical to understand that you don't control your reputation, people will decide what your reputation is. You can't "manage" it. You can only improve it over time by making sure that those who do business with you are glad they did.

Building a good reputation takes time and effort, but it's the most effective kind of marketing there is.

Resilience is having the toughness and flexibility to handle whatever is thrown at you. Resilience is a very underrated quality in business and other important areas of life. Resilience doesn't come with optimal Throughput. Flexibility comes at a price.

Preparing for the unexpected makes you more Resilient. Being able to adjust strategies and tactics may be the difference between survival and the end.

Planning for both Resilience and performance is the mark of a good management.

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

ROI can help you make decisions between competing alternatives by asking yourself the question: what brings a bigger ROI?

The return on every investment is always directly related to how much the investment costs. The more you spend, the lower your return.

Every future ROI calculation is a semi-educated guess. Nothing is a sure bet, you can only know your exact ROI after your investment is made.

Risk Reversal is a strategy that transfers some (or all) of the risk of a transaction from the buyer to the seller. The seller agrees to make things right in advance if the purchaser doesn't end up satisfied. Risk Reversal is a great way to eliminate some Barriers to Purchase.

This strategy may be feel uncomfortable to the seller as well, because no one wants to lose. The difference is that a seller can spread that risk among many customers. The customer can't do the same.

By eliminating the risk of purchase, you'll close more sales and eventually make more money than what you'll lose if some customers take advantage of your generosity.

Effective communication only occurs when both parties feel Safe. As soon as one party feels threatened in some way, they will withdraw mentally and emotionally from the conversation.

People need to feel safe to express what they think and what's important to them.

The STATE model to communicate without anger or defensiveness:

1. Share your facts. Facts are less controversial, so lead with them.
2. Tell your story. Explain your point of view, without judging or insulting.
3. Ask for others' paths. Listen to their side of the story.
4. Talk tentatively. Avoid judgments and ultimatums.
5. Encourage testing. Make suggestions and ask for input until you agree on a course of action.

People have different attitudes. By knowing how to tailor your words and actions to the other party's personality, you'll get closer to an effective communication.

Sampling is the process of taking a small percentage of the total output and using it as a proxy for the entire system. Sampling can help you identify systemic errors quickly. Sampling is good for quick tests of quality without incurring huge costs.

Always make sure to test a random and uniform sample.

Scale is the ability to reliably duplicate or multiply a process as volume increases.

Scalability is limited by the amount of human involvement required in the process. The smaller the level of required human attention in the process, the more the business can produce.

Products are easier to Duplicate, while Shared Resources are easier to Multiply.

People don't scale. On the contrary, the larger and more pressing the demand, and the more demands that need to be addressed, the lower the effectiveness.

The smaller the level of human involvement, the more scalable the business.

Scarcity encourages people to act quickly. If people think they may lose the chance to acquire what you offer, they may take the risk.

Loss Aversion ensures that the possibility of losing feels bad enough to prompt them to act now. Scarcity makes waiting feel like a loss.

Here are a few ways to create Scarcity:

• Limited Quantities
• Price Increases in the near future
• Price Decreases that will end in the near future
• Deadlines

Add an element of Scarcity to your offer, and you'll encourage people to buy now instead of later.

Scenario Planning means constructing hypothetical situations, then Mentally Simulating what you would do if they occur.

By coming up with as many courses of action for that potential circumstance, you'll develop several responses to any imaginable situation.

Scenario Planning is the key to effective strategy. Instead of focusing on one option, your business becomes more flexible and Resilient.

Don't waste time with unknowable futures. Focus on the most likely scenarios and you'll be well prepared if they actually occur.

Every action has a consequence, and each consequence has another consequence. These are called Second-Order Effects. Every change you make to a system will have Second-Order Effects, which may affect the system's functionality. Be careful when making changes, they may have the opposite effect of what you aimed for.

Segmentation means splitting data into well-defined subgroups to add additional Context and find unknown relationships.

There are three ways to segment customer data:

1. Past Performance, which segments customers by past actions.
2. Demographics, which segments customers by external personal characteristics.
3. Psychographics, which segments customers by internal psychological characteristics.

By segmenting your data, and trying different techniques, you'll find hidden relationships worth exploring to improve your systems and business.

A Selection Test is an environmental constraint that determines which systems self-perpetuate and which ones don't. It's like breathing air for a system: if a business doesn't bring enough revenue, it 'dies'.

If the Environment changes, the Selection Tests change as well. If you can identify Selection Tests in a market, you'll be able to compete there more effectively.

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

By recording your answers in a journal, logging when specific behaviors occur and noting the frequency of these behaviors, you'll discover patterns. If you know the pattern, it's easier to change the behavior.

Make it a Habit to consistently ask yourself good questions, and you'll overcome your challenges easier.

Shadow Testing means selling an offer before it actually exists (you have to be upfront with your customers that the offering is still in development). Shadow Testing allows you to get critical feedback: whether or not people are willing to buy your offering.

You can minimize the risk of your project by gathering data from real customers as soon as possible.

Slack is the amount of resources present in a Stock.

For a system to operate efficiently, the Slack should be just right: not too big, not too small.

Slack is tricky: too much and you're wasting money, too little and you face the risk of running out of Stock.

Social Proof is the process through which the actions of other individuals tell us that it's ok to behave in a certain way.

When a situation is ambiguous, we learn by watching the behavior of others. Add Social Proof to your offers to increase your sales.

Testimonials are an effective form of Social Proof to increase sales. The most effective testimonials are the ones that mirror the feelings of your prospects.

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

Social Signals have real Economic Value, so build them into your offer if you can.

To build offers with signaling value, you need to understand what people want to signal to others. Connect your offer to one of the Core Human Drives, and people will want what you have.

A Standard Operating Procedure (SOP) is a predefined process used to complete a task or resolve an issue.

SOPs reduce Friction and minimize Willpower: less time and energy spent solving a problem that has already been solved before.

Review your SOPs regularly because they may become outdated. SOPs should make day-to-day management easier, not increase Friction or bureaucracy.

A State of Being is a quality of your present experience.

States of Being are qualities, not Goals. "Being happy" is not an achievement, it's a state.

Breaking down States of Being into smaller parts helps decide what some imprecise states actually mean to you.

Decide what States of Being you want to experience, and you'll have a powerful decision criteria that you can use to evaluate your actions.

Humans are social creatures, and we care intensely about our relative status. Status Seeking is a universal phenomenon: when opportunities to increase social status appear, most people will seize them. Status considerations influence the vast majority of decisions and actions.

A Stock, in the systems sense, is a pool of resources.

By following the Flow, you'll find where resources pool together.

To increase the stock, increase the Inflows and decrease the Outflows. If you want to decrease the stock, do the opposite.

Find the Stock, and you'll find resources waiting to be used.

It's helpful to learn your breaking point: know how much you're capable of doing before burning out. Paying attention to Stress and Recovery is the how you make sure that you don't have more on your plate than you can handle.

You are not a machine: you can't always operate at 100%.

Dedicating time to relax and recovery will make your life more enjoyable and productive.

Stress Testing means identifying the boundaries of a system by simulating certain environmental conditions.

To try Stress Testing, you should ask this question about your system: What would it take to break it? Stress Testing is a great way to understand how your system works.

Be creative and let chaos take over, then fix any problems you may find before you take your system to the real world.

Financial Sufficiency is the point where a business is bringing enough profit that people find it worthwhile to keep going for the foreseeable future. If you reach the point of financial sufficiency, you are successful, regardless of how much money you make.

Sunk Costs are investments of time, energy and resources that can't be recovered once they're made. Continuing to invest in a project to recoup lost resources doesn’t make sense - throwing “good money after bad” is not a winning strategy.

Making mistakes is inevitable, and often quitting or changing directions is the best option.

Systems tend to have a natural size, and exceeding this size can cause many problems. Systems that grow typically have a Sustainable Growth Cycle that ensures the system doesn't get out of control.

Businesses move through three distinct phases:

1. In an Expansion cycle: the company is focused on growing.
2. In a Maintenance cycle, the company is focused on executing the current plan.
3. In a Consolidation cycle, the company is focused on analysis and pruning waste and inefficiency.

A system is a process made explicit and repeatable. Systemization is the act of creating a new system.

The primary benefit of creating a System is that you can examine the process and make improvements. Developing Systems helps everyone do what they have to do with minimum misunderstanding.

Creating systems may feel like extra work, but they ultimately make your work easier. The better your systems, the better your business.

Testing is the act of trying something new, a way of applying the Iteration Cycle to your own life. You can't make positive changes unless you try something new.

Here's a simple structure to help you experiment:

1. Observations: what do you see that you want to improve?
2. Knowns: what do you know that is related to your observations?
3. Hypotheses: what might cause to contribute to your observations?
4. Tests: which hypotheses will you try?
5. Results: what happened after each test? Did it improve your observation?

Testing is the best way to ensure that your life gets better over time.

Over the time you discover Patterns, and you become better at knowing what makes your life better or worse.

There are 5 Parts of Every Business, 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.

Take away any one of these five parts, and it's not a business.

When planning a new business or analyzing an existing venture, always begin with the five parts - they will help you discover any major issues or gaps quickly.

The Critical Few, also known as Pareto's Law or the "80/20" rule, which explains that in many areas of life 20% of the input produces 80% of the output, and vice versa.

You can achieve great results by focusing on the critical inputs that produce most of the outputs that you want.

The same can be applied for the results that you don't want. Sometimes eliminating certain sources of input is the smart choice, because they are significant Opportunity Costs.

Find the inputs that produce the desired outputs and focus on them. Weed out the rest.

The Crusader Rule is a reminder to evaluate new business ideas before you proceed. There's huge difference between an interesting idea and a solid business. Remember: you have to be able to pay the bills!

It's crucial to be objective and analyze the idea before committing to it. This is where the 10 Ways to Evaluate the Market can help you.

The Experimental Mindset is the healthy approach to business. There's no way to tell what will work and what won't. You need to constantly experiment.

Every experiment will teach you something new and prepare you better for the next challenge.

Experimentation is learning through play. It's the center of living a productive and fulfilling life.

When two markets are equally attractive, you should enter the one WITH competition. The Hidden Benefit of Competition is knowing from the start that there's market of paying customers. That means the Iron Law of the Market is on your side!

Become a customer of the competition to learn from them.

Here's the Iron Law of The Market: even the most ingenious idea will fail if no one wants it - creating something no one wants is a waste.

Find ways to serve existing markets vs. building something, then finding a market to sell it to.

This "iron law" is cold, hard, and unforgiving - ignore it, and you will fail.

The Irony of Automation is that the more reliable the system, the less human operators have to do, so the less Attention they pay to the system while it's operating.

Reliable systems tend to make it hard for operators to notice when something's wrong. If an error is not noticed, it can eventually become the "new normal." The best way to avoid Automation errors is rigorous Sampling and Testing.

Focus on keeping your operators engaged, and they will be better suited to notice when something's wrong.

Here's the Mercenary Rule: don't start a business for the money alone because it always takes more effort than you first expect.

Building or finishing anything is mostly a matter of starting over and over again, so you should find a market that interests you enough to work on it every day.

Don't ignore "boring" businesses - if you can find something that interests you, those markets can be very attractive.

The Middle Path is the balance between too little and too much: just enough.

No one can tell you what the Middle Path is, you have to find out for yourself. It's a constant learning process.

Uncertainty is part of the game, you can't eliminate it. There's no point in being too afraid of it because it's not going away. Embracing the Uncertainty is what differentiates the good from the great.

To understand human behavior, it's important to understand the brain. The Onion Brain is an easy way to remember how the brain is constructed: it has layers, like an onion.

One of the best things you can do to get more done is to dissociate yourself from the voice in your head. The voice isn't always right, it just likes to highlight things around you.

Meditation is a simple practice that can help you separate "you" from the voice in your head. Nothing mystical, just breathe and watch what your mind does. It will eventually get quieter.

The Paradox of Automation says that the more efficient the automated system, the more crucial the human contribution of the operators. Humans are less involved, but their involvement becomes more critical.

If an automated system has an error, it will multiply that error until it's fixed or shut down. This is where human operators come in.

Efficient Automation makes humans more important, not less.

Threat Lockdown is a protective mode your mind and body enter to defend against an external threat.

When your mind perceives a potential threat your body immediately prepares to respond. Your body will come out of protective mode only once you're sure there's no longer a threat.

The key to dealing with it is to convince your mind that the threat no longer exists, either by convincing your mind that there never was a threat, or by convincing it that the threat has passed.

The 3 Dimensions of Negotiation are setup, structure, and discussion.

Setup involves setting a stage for a positive outcome of the negotiation. The environmental factors play a huge role in the negotiation, so it pays to do appropriate research to gain as much knowledge as possible about your negotiating partner.

Structure is the terms of the proposal. By thinking on the Structure of your proposal in advance, you can have valuable options for your partner to consider, and eventually reach Common Ground.

Discussion is actually presenting the offer to the other party. This is where you work on the details, remove Barriers to Purchase, and more. Discussion continues until the parties reach an agreement or quit negotiating.

Prepare the Three Dimensions of Negotiation to increase greatly the chances of reaching an agreement that benefits both parties.

In every negotiation, there are 3 Universal Currencies on the table:

• Resources. Tangible items like money, oil, etc.
• Time. The universal limit of capacity.
• Flexibility. The cost of not doing something else, which is a very real Opportunity Cost

Focus on the appropriate trade-offs between the parties to find Common Ground in these Currencies.

By mixing these currencies in different ways, it's easier to reach an agreement that the parties can agree with.

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

A dollar today is worth more than a dollar tomorrow. Calculating the Time Value of Money is a way of making choices when dealing with Opportunity Costs. The more profitable options you have to invest that dollar, the more valuable it is.

Time Value of Money can help you determine which options to choose and how much you should spend, given the alternatives.

A Tolerance is an acceptable level of “normal” error in a system.

Within a given range of measurements, the system is performing as intended. As long as the errors don’t exceed a certain threshold, urgent intervention is not required.

Tight tolerances are very useful, and are a positive indicator of quality: after all, you don’t want mistakes or variations.

A Tradeoff is a decision that places  higher value on one of several competing options. You can't do everything, resources are limited.

When deciding what to include in your offer, you should look for Patterns that will help you realize what your best customers value, and focus on improving your offering for most of your best potential customers most of the time.

You can't make everyone happy: improve everywhere you can, but universal praise is not a useful goal.

A Transaction is an exchange of value between two or more parties. Sales are the only point where resources flow into the business, so Transactions are critical.

You can only transact with things that are Economically Valuable.

The goal is to make the first profitable Transaction as quickly as possible, because that's when you transition from a project to a business.

Without Trust, no Transaction will take place.

Building a trustworthy Reputation over time through honesty and fair dealing is the best way to build Trust.

The easier both parties can verify that the other party is trustworthy, the easier it is to make a Transaction.

It's often useful to calculate or estimate a "Typical" value for a certain measurement:

• A Mean (or "average") is calculated by adding the quantities of all data points, then dividing by the total number of data points available. They are simple to calculate, but are prone to having outliers that that skew the average too high or low to be representative.
• A Median is calculated by sorting the values from high to low, then finding the quantity of the data point in the middle of the range. By definition, 50% of the values will be below the Median. Comparing the Median to the Mean can tell you if the average is influenced by outliers.
• A Mode is the value that occurs most frequently in the set. They are useful for finding clusters of data.
• A Midrange is the value halfway between the highest and lowest data points.

These are all tools that can help your system analysis if you use them right, but they can be misleading if you use the wrong tool for the situation.

The difference between Uncertainty and Risk is that Risks are known unknowns: you know what might happen. Uncertainties are unknown unknowns, there's no way to expect that that could happen.

You can't know if a something unexpected will occur, all you can do is remain flexible, prepared and Resilient to react properly.

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

The higher a business’ revenues, the stronger the company’s Profit Margins, the higher its bank balance, and the more promising its future, the higher its Valuation. The higher the Valuation, the easier it is to borrow money, the higher the per-share price, and the higher the price in the case of an acquisition.

Valuation is also important if you intend to take on investors. Higher Valuations = more money per share sold to investors.

Many companies base their financial decisions on what will increase the business’ Valuation.

Value Capture is the process of retaining some percentage of the value provided in every Transaction. The more value you capture, the less attractive your offer becomes.

There are two major approaches to Value Capture:

1. Maximization. An organization should try to capture as much value as possible.
2. Minimization. An organization should capture as little value as possible, as long as it remains Sufficient.

As long as you bring enough to cover your needs, there's no need to capture every cent. Create as much value as you can, so your captured value is worth it.

A Value Stream is the set of all steps from the start of your value creation until the delivery of the end result to your customer.

The Value Stream is basically the combination of your Value Creation and Value Delivery processes.

It's best to try to make your Value Stream as small and efficient as possible.

Value-Based Selling is the process of understanding and reinforcing the reasons why your offer is valuable to the purchaser.

Though Value-Based Selling, you increase the likelihood of a transaction as well as the price the purchaser is willing to pay.

Always sell based on the value your offer provides, not the cost.

The most effective way to get people to want what you offer, is to encourage them to Visualize how their lives would be if they accept it.

The best way to help your customers visualize is to expose them to as much sensory information as possible.

The goal of Visualization is to guide the customer to stop comparing and start wanting.

Willpower is a way to interrupt our automatic processing in order to do something else.

It's best to assume your reserves of willpower are very limited, and to use your limited willpower to change your Environment instead of your behavior.