The Personal MBA summary
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The Personal MBA Summary and Review | Josh Kauffman

Book Summary and Review of The Personal MBA: Master the Art of Business

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The Personal MBA summary

Life gets busy. Has The Personal MBA been gathering dust on your bookshelf? Instead, pick up the key ideas now.

We’re scratching the surface in The Personal MBA summary. If you don’t already have the book, order the book or get the audiobook for free on Amazon to learn the juicy details.

DISCLAIMER: This is an unofficial summary and analysis.


Have you always wondered how you could be successful in business without paying for a college education? Or have you tried and failed in business and feel you could never be financially successful?

The Personal MBA aims to provide you with a degree-level understanding of business without getting into huge debt. Josh Kaufman gives an outline of the business basics required to be economically successful. He also dispels the myth that you need a college education to do well in the business world.Business leaders are not made in business schools; they become who they are through their willingness to seek knowledge. The Personal MBA is your opportunity to seek business knowledge on your terms.

About Josh Kaufman

Josh Kaufman is an independent business teacher, education activist, and author. Kaufman’s TEDx talk, “The First 20 Hours,” is one of the top 25 most-viewed TED talks published to date, with over 22 million views on YouTube. His website,, was named one of the “Top 100 Websites for Entrepreneurs” by Forbes in 2013.

Kaufman’s books cover topics such as business, entrepreneurship, productivity, creativity, and applied psychology. Collectively, they have sold over a million copies. Kaufman says his aim is “to help you make more money, get more done, and have more fun in your day-to-day life.” His research has been featured by The New York Times, The BBC, The Wall Street Journal, The Atlantic, Fortune, Forbes, TIME, WIRED, Fast Company, Financial Times,, and the World Economic Forum.

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StoryShot #1: There Are Five Interdependent Processes of Business

Every business is a collection of five interdependent processes, each of which flows into the next:

  1. Value Creation: Businesses innovate to address market needs, crafting products or services that offer solutions. This forms the foundation for all business activities.
  2. Marketing: After creating value, businesses must attract and engage the target audience through branding, advertising, and market research, laying the groundwork for sales and growth.
  3. Sales: Converting interested prospects into paying customers is crucial. Sales teams guide customers through the purchasing process, highlighting value and fostering relationships.
  4. Value Delivery: Businesses must deliver on promises made during marketing and sales, ensuring customer satisfaction and fostering repeat business.
  5. Finance: Managing resources, budgeting, and ensuring profitability ties everything together, providing the means to invest in value creation and support overall business operations.

StoryShot #2: ERG Theory and the Five Human Drives Impact Human Decisions and Output

The ERG Theory

Kaufman introduces ERG theory by Clayton Alderfer as a foundation for all value creation. ERG stands for Existence, Relatedness, and Growth. Let’s delve into its key components:

Existence Needs: These are the basic survival needs—things like air, water, clothing, safety, intimacy, and affection. They form the foundation for all other drives.

Relatedness Needs: Once existence needs are met, we seek social connections. These include relationships with family, friends, and colleagues. When you have satisfying relationships, you can move on to the next level.

Growth Needs: These needs involve personal development and self-improvement. Once you’re content with relationships, you can focus on things you enjoy and enhance your skills within those areas.

In summary, ERG theory suggests that our motivations progress from survival (existence) to social connections (relatedness) and finally to personal growth (growth). It’s a fascinating lens through which to understand human decisions and output

Group of women bonding and being productive
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The Five Core Human Drives

Additionally, we all have five core human drives that significantly influence behavior.

  • The drive to acquire – The desire to own or collect physical objects, as well as immaterial qualities like status, power, and influence
  • The drive to bond – The desire to feel loved and valued by forming relationships with others, either platonic or romantic
  • The drive to learn – The desire to satisfy our curiosity
  • The drive to defend – The desire to protect ourselves, our loved ones, and our property
  • The drive to feel – The desire for new sensory stimuli, intense emotional experiences, pleasure, excitement, entertainment, and anticipation

The more clearly you can show that your company provides a combination of these drives, the more attractive your services will become.

StoryShot #3: There Are 10 Ways to Evaluate a Market

Kaufman introduces 10 ways to evaluate a market:

  • Urgency – How badly do people want or need your services right now? 
  • Market size – How many people actively purchase your services or similar ones?
  • Pricing potential – What is the highest price a consumer would pay for your services?
  • Cost of customer acquisition – How easy is it to acquire a new customer? Specifically, how much time and money do you have to spend to get a new customer?
  • Cost of value delivery – How much would it cost you to provide the quality of service required?
  • Uniqueness of your service – How unique will your service be compared to others on the market?
  • Speed to market – How quickly can you create a viable service that can be sold to customers?
  • Upfront investment – How much would you have to invest in creating this viable service?
  • Upsell potential – Are there other services you could offer on top of your primary service?
  • Evergreen potential – Once you have created your initial offer, how much extra work and money will you have to invest to continue selling?

Choose Markets with Competition

It is better to start a business within a market that has competition. Starting in a competitive market means you already know there are paying customers interested in your idea. Adopting this approach will cut your biggest business risk: not having enough potential paying customers.

If you already know such a market exists, you can work on improving your product rather than wasting time proving that a market exists.

Market stallholder selling apples to a customer. He knows the market already exists so hasn’t wasted time proving this
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StoryShot #4: There Are Four Ways to Improve the Value of Your Offers

There are four ways you can improve the value of your offers:

  • Satisfy the core human drives of one or more prospects
  • Offer an attractive, easy-to-visualize end result
  • Command the highest hassle premium by reducing end-user involvement as much as possible
  • Satisfy the prospect’s status-seeking tenancy by providing desirable social signals so they look good to others

StoryShot #5: Obtain Customer Feedback Through Prototyping

When prototyping, don’t worry about other people stealing your idea. Ideas are one of the cheapest entities. A more critical ability is to translate an idea into a reality that creates value.

Prototypes are an effective way to obtain customer feedback on something close to your chosen offer. Once potential customers have viewed a version of your product, you can evaluate and improve it through iteration.

There are six major steps to iteration:

  1. Watch – What’s working? What’s not working?
  2. Ideate – What could be improved?
  3. Guess – Which of your ideas would have the greatest impact?
  4. Which? – Decide what changes to make
  5. Act – Make the changes
  6. Measure – What was the result?

Make every iteration small, clear, and quick. Make sure each one is based on what you have learned from previous iterations.

Here are some tips on how to get the most out of the feedback you receive on your prototype:

  • Get feedback from genuine potential customers, instead of friends and family
  • Ask open-ended questions
  • Steady yourself and keep calm
  • Take what you hear with a grain of salt
  • Allow potential customers to preorder

StoryShot #6: Marketing is About Prospects

Marketing is the art and science of finding prospects. Prospects are people actively interested in what you offer. Essential prospects are qualified prospects. The best companies are exceptional at attracting these prospects quickly and inexpensively.

Your prospects’ attention is limited. You need to filter their attention toward your work. You must also identify the prospects most likely to buy from you. Leading marketers capture the attention of the right people at the right time.

Marketer looking at her computer screen, planning how to capture the attention of prospects
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The best way to capture potential prospects’ attention is to promote their curiosity, surprise, or concern. Always assume your prospect’s attention is preoccupied with something else. This approach forces you to capture their attention rather than merely offer your service. Focus on your desired result and make this a distinctive experience or emotion related to a core human drive.

An effective marketing tool is to make your product a point of market entry. Suppose you can get a prospective customer’s attention as soon as they become interested in what you offer. In that case, you become the standard by which competing offers are evaluated. 

During this initial marketing, highlight the key details and play down aspects that aren’t important. You can align with this approach by minimizing certain facts or leaving them out entirely.

Controversy can sometimes be used as a marketing strategy. For example, your best approach could be to take a position that not everyone will agree with. If you are constructively using this controversy, you can attract positive attention.

StoryShot #7: Earn the Trust of Your Prospects Through Sales

Every successful business relies on sales. Having millions of interested customers is no use if none of them purchase your product. The sales process begins with these prospects but must end with a paying customer.

The best businesses in the world earn the trust of their prospects and help them understand why the product offered is worth paying for. The start of this process is pricing your product in the right way.

The Personal MBA provides four pricing methods, all of which support the value of the product by asking a question:

  • Replacement cost – “How much would it cost to replace?” This type of pricing is a cost-plus calculation. You calculate how much it costs to create, add your desired markup, and price appropriately.
  • Market comparison – “How much are other things like this selling for?” This is a common way of pricing.
  • Discounted cash flow – “How much is it worth if it can bring in money over time?” This type of pricing can only be used for products that provide ongoing cash flow, such as when marking up the worth of an entire business.
  • Value comparison – “Who is this particularly valuable to?” Your product will likely offer benefits to a specific customer. If your product makes things much easier for a high-income group, you can provide a slightly higher markup without impacting sales.

You can use other methods to identify your price baseline. That said, you should always focus on discovering how much your offer is worth to your customers. You can then set your price accordingly.

StoryShot #8: There Are Three Universal Currencies in Negotation

In every negotiation, there are three universal currencies:

  • Resources – Tangible items like money, oil, etc.
  • Time – The universal limit of capacity
  • Flexibility – The cost of not doing something else. This is an opportunity cost.

Kaufman also provides three dimensions of negotiation that can help you gain more of certain currencies:

  • Setup – This sets the stage for a satisfying outcome of the negotiation. You can stack the odds in your favor by doing effective research on the people you will negotiate with.
  • Structure – This includes the terms of your proposal. Create content in a structure that your negotiators will appreciate and accept.
  • Discussion – This is where you present your offer. You should discuss or clarify any issues and answer any objections. Once you have removed these barriers to purchase, you can ask for the sale.

StoryShot #9: Delivering Value Requires Control and Surpassing Expectations

Make your value stream as small and efficient as possible. Your value stream is a combination of your value creation and value delivery processes. The primary reason for shortening the value delivery process is that it minimizes the risk of something going wrong.

Intermediary distribution can increase sales. However, this form of distribution can require giving up certain control over your value delivery process. Relinquishing this control also frees up your time and energy, but increases counterparty risk.

The expectations of your work can significantly impact your company’s perceived quality. Kaufman calls this the “expectation effect.” Your performance determines your company’s quality, minus your customers’ expectations. That said, your expectations have to be high for the customer to buy your services in the first place. Your job is to make sure you produce enough expectations to draw in work, coupled with a performance that exceeds these expectations.

One way to improve the ratio of your customers’ expectations and your performance is ensuring your outcomes are as predictable as possible. Customers love predictability.

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

  • Uniformity
  • Consistency
  • Reliability

StoryShot #10: Business Is What You Keep (The Role of Finance)

Finance is the art and science of watching money flow in and out of a business, then deciding how to allocate it. It is also the art and science of determining whether what you’re doing is producing the results you want.

Accounting is ensuring the data used to make financial decisions is complete and accurate.

Business is not about what you make. It is about what you keep. Work out the profit margin percentage by taking away cost from revenue, dividing by revenue, and multiplying by 100.

Calculator, pen and balance sheet
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Profits are important, but they are a means to an end. Instead of getting too hung up on profit, aim to:

  • Create value
  • Pay expenses
  • Compensate the people who run the business
  • Support yourself and your loved ones

These are the most critical aspects of running a business. If you meet each of these requirements, you can confidently claim you are running a successful business.

There are four methods of increasing your revenue:

  • Increase your number of customers
  • Increase the average size of each transaction your customers make
  • Increase the frequency of transactions per customer
  • Raise your prices

Important Terms

Kaufman describes a few important terms that you need to learn. They are:

  • Compounding – The accumulation of gains over time.
  • Leveraging – The practice of using borrowed money to magnify potential gains.
  • Funding – Provides the fuel to your business. If your business needs additional capacity, then proper funding can help scale your company up substantially.
  • Bootstrapping – Building and operating a business without funding.

StoryShot #13: We Aren’t Built to Multitask

Productive multitasking is a myth. Our minds are not built to multitask. The more things you try to pay attention to at a given time, the more your performance across all domains will suffer. Focus on one task at a time, and never mix creative work with administrative work. Your productivity across both domains will be heavily influenced if you switch between them.

Focus on producing maker schedules, which incorporate large blocks of uninterrupted time. Most people currently produce or have to live by manager schedules with time broken into many small chunks by meetings.

The 3-10-20 method is a way to avoid too much multitasking. Using this method, you can finish three major tasks and 10 minor tasks in one day. A major task is one that requires over 20 minutes of focused concentration.

StoryShot #14: There Are Four Habit Categories and Four Ways to Work With Your Body

Habits are built over time and become regular actions that support us. Some of the most common positive habits are exercise, hygiene, and nutrition. That said, habits can also be divided into four categories:

  • Things you want to start doing
  • Things you want to stop doing
  • Things you want to do more
  • Things you want to do less

You can develop habits if you identify triggers within your environment that impact how you act. Encourage triggers that prime positive habits and remove triggers that prime unhealthy behaviors. Habits can be difficult to install or uninstall. Put all your effort into changing one habit at a time.

Your body will always act based on its natural state. Instead of fighting against this, use these four ways to work with your body:

  • Learn your patterns by using a notebook or calendar to track how much energy you have during different parts of the day.
  • Maximize your peak cycles.
  • Take a break. If you are on a down-cycle, it is best to rest than attempt to power through it. Rest and recovery are not optional.
  • Get enough sleep. Sleep deprivation will lead to a longer down-cycle.

StoryShot #15: Work With Yourself to Get Things Done

Your body and mind are the tools you use to get things done. You take these tools wherever you go. So, you must learn how to work with yourself. If you master this skill, you will accomplish your goals more easily. In the modern world, this can be the difference between a fulfilling career and a draining one.

To help you work better with yourself, consider these four ways to “do” something. Using these methods for guidance while creating a to-do list will help you be more productive. Kaufman calls these the 4 Methods of Completion:

  • Completion – Doing the task. This approach is best for tasks that only you can do particularly well.
  • Deletion – Eliminating the task. This is effective for anything unimportant or unnecessary.
  • Delegation – Assigning the task to someone else. This approach works for anything that other people can do at least 80% as well as you.
  • Deferment – Putting the task off until later. This is effective for tasks that aren’t critical or time-dependent.

Kaufman also describes the Five-Fold Why, a technique to help you discover what you actually want. Rather than taking your desires at face value, examine the root cause. He applies these five Whys to wanting to be a millionaire:

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

StoryShot #16: Use Power and Influence

Relationships are about power and influence. Your influence is your ability to encourage someone to think or act in the way you intend. Compulsion is the ability to force someone else to do what you command.

Aim to increase your influence and reputation rather than your compulsion. Power is tied to your influence and reputation. The more people who know your capabilities and respect your work, the more power you will have.

Working with others is an effective way to get work done quickly and to a higher standard. But effective collaboration relies heavily on strong communication. Communication overhead is how long you spend communicating with your team instead of doing productive work. You always want to minimize this time while not skimping on communication quality.

To sustainably reduce your communication overhead, keep your team small. Specifically, keep your team between three and eight people. You also need to ensure each team member feels safe and valued within the team.

Use the STATE model to communicate with your team members without challenging their value or provoking anger:

  • Share your facts
  • Tell your story
  • Ask for others’ opinions
  • Talk tentatively
  • Encourage testing

The three characteristics you should use to help your coworkers improve the working environment are:

  • Appreciation
  • Courtesy
  • Respect

StoryShot #17: Build a Team and Manage It Effectively

Kaufman outlines how to build a team:

  • Communicate commander’s intent. Always tell your team why a particular task must be done, rather than simply allocating work without meaning.
  • Planning should never be depended upon and should be used to mentally stimulate your team.
  • People will always choose to work with people they know and like. Use referrals to help your coworkers connect with new team members.
  • Convergence is the tendency of group members to become more alike over time. This is your company culture. Although you want a degree of this, you still want some divergence.
Three work colleagues sitting at a table covered in papers and a laptop
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The six steps for developing effective management are:

  1. Recruit the smallest group of people who can accomplish a task.
  2. Clearly communicate the desired results, including who is responsible for what and the task’s current status.
  3. Treat people with respect.
  4. Create an environment where everyone can be as productive as possible. Trust your team members to get the work done.
  5. Refrain from unrealistic expectations regarding certainty and prediction. Create an aggressive plan to complete the project. However, be aware that uncertainty and planning fallacy mean your initial plan is likely to be incomplete or inaccurate.
  6. Measure to see if what you’re doing is working. If not, try another approach.

StoryShot #18: There Are Five Steps to Alleviating a Constraint

There will always be constraints within a system. Here are five steps to ease these constraints:

  1. Identification – Examine the system to find the limiting factor
  2. Exploitation – Ensure the resources related to the constraint aren’t wasted
  3. Subordination – Redesign the entire system to support the constraint
  4. Elevation – Permanently increase the capacity of the constraint
  5. Reevaluation – After making a change, reevaluate the system to discover where the constraint is

StoryShot #19: Succeed by Understanding, Analyzing, and Improving Systems

There are three ways to approach systems: understanding, analyzing, and improving them.

Understanding Systems

A complex system is a “self-perpetuating arrangement of interconnected parts that form a unified whole.” Businesses are complex systems within more complex systems of markets, industries, and societies. It is crucial to first understand each of these systems and how they interact.

Balancing a system is all about understanding risks and uncertainties. Risks are known unknowns. Uncertainties are unknown unknowns. For example, if you are planning to collect a friend from the airport, you will understand there is a risk the flight could be several hours late. So, you would plan accordingly by bringing things to do during this wait time. As this is something you can plan for, it is a known unknown. An example of an unknown unknown is being late to pick up your friend because a meteorite hits your car. You could never have predicted this would happen based on past events.

The only way to prepare for uncertainty is to be flexible, prepared, and resilient. These traits will help you respond appropriately when these events occur within your system.

Contemplating uncertainty is challenging because of the threat of not knowing what’s going to happen. Instead of worrying about predicting things you can’t see or know, use your energy to get better at dealing with the unexpected. Don’t rely on accurate predictions, as things can change at any time.

Analyzing Systems

Systems form the heartbeat of a company. If you feed your company’s system with useless information and ideas, you will receive useless outputs.

One way to feed your systems with the best information is to break your company’s complex systems into smaller subsystems. This is called deconstruction and will allow you to understand better how things work at the company.

When you think about how each part works on its own, you will better understand your key performance indicators (KPIs). KPIs are measurements of the critical parts of a system.

Improving Systems

To decide how you can improve a system, you first have to consider the null hypothesis. The null hypothesis outlines what would happen if you did nothing to the system or assumed any adverse situations were by chance.

You’ve considered your null hypothesis. You’ve seen the value in improving your systems. Now, think about optimizing. Optimization is maximizing the output of a system or minimizing a specific input the system requires to operate. 

The best optimizing approach is to take the most critical variable in your system and focus all your efforts on this variable. Follow this same rule until you have focused on all variables. This prevents you from trying to optimize many variables at the same time, which is highly ineffective.

If you’re less worried about your system’s output and more worried about your team’s efficiency in reaching the ideal output, you need to refactor. Refactoring is changing a system to improve efficiency without changing the output.

One way to improve efficiency is to think about the 80/20 rule. 20% of your inputs will produce 80% of your outputs. Consider how to emphasize the 20% and improve your 80% efficiency.

Friction is any process that removes energy from a system over time. It is a factor that can hugely impact your team’s efficiency. Removing friction will allow your team to work better and feel less exhausted despite achieving the same or better results.

Final Summary

The Personal MBA aims to offer exactly that to its readers. Kaufman covers every area of business that someone needs to understand to succeed. Essentially, to become a successful businessperson, master:

  • Creating, marketing, and delivering value
  • Understanding financial terms
  • The intricacies of the human mind
  • Working with yourself and others
  • Understanding, analyzing, and improving systems


While the book tries to be comprehensive, claiming that it can replace an MBA program from a reputable university may be an exaggeration. Nevertheless, we rate this book 4.3/5.

How would you rate Josh Kaufman’s book based on this summary?

Our Score

The Personal MBA PDF, Free Audiobook, Infographic, and Animated Summary

This was the tip of the iceberg of The Personal MBA. To dive into the details and support Josh Kaufman, order the book or get the audiobook for free.

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Editor’s Note

This article was first published in 2019. It was deeply revised in March 2024.

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