For some, taking on a certified MBA offers decent self-investment – the networks, the skills and the credentials do, on average, provide a boost to earning and career climb.
For others, however, it can be hard, literally, to justify the cost – 12 years to break even, according to info from The Personal MBA author Josh Kaufman.
I finally decided, after leaving Kaufman’s book on the shelf for almost a decade, that it was time to flick it open and get stuck in.
Here are some of the main points I learned on my personal MBA.
As someone who has spent their career largely in public service, but who writes and podcasts in my spare time, I’ve certainly tried to sell products – mainly my book – and attract interest in my content.
This is a fundamental of the personal MBA – the ‘Iron Law of the Market’. “If you don’t have a large group of people who really want what you have to offer,” writes Kaufman, “your chances of building a viable business are very slim.”
Selling books, like I suspect any other selling, is terribly hard. To make a living off writing is perennially difficult and it certainly pays – to paraphrase novelist Louis L’Amour – to be where you need to be if it doesn’t work.
Which brings home another fundamental point taught as part of an MBA.
A start up business, according to entrepreneur Paul Graham, first needs to be ‘Ramen profitable’ – being profitable enough to pay your rent, keep the utilities running, and buy inexpensive food like ramen noodles.
Working all this out is, however, takes measure and balance. Especially amid the buzz and optimism arising from starting something new.
Critically Important Assumptions (CIAs) – facts that need to be true for your business to be successful in the real world – offer a great lesson in calculating just how difficult sustaining a business is.
Kaufman cites the example of opening a yoga studio, and committing to $10k in monthly rent (signing up for twelve months) and $5k upfront costs (mats, equipment etc.).
This in turn means CIAs of:
- People willing to pay $100 per month
- Attracting at least 220 members paying full price within three months
- Total monthly revenue exceeding $22k.
But what happens when a nearby competitor offers $75 per month, and if some of your customers decide to go there instead? This actually then means 300 members are required in your CIA, not 220. Not to mention all the other real-world considerations.
Again, I’m not a business expert.
But you can very quickly see how important your assumptions are when embarking on something new. “If any CIAs turns out to be false,” writes Kaufman, “the business idea will be vastly less promising than it appears”.
This, of course, doesn’t mean being risk averse to the point of paralysis.
What I thought neat at the start of Kaufman’s course is the mention of accurate and inaccurate mental models.
“Starting a business is risky”, for example, is an inaccurate mental model. But noting that uncertainty is part of business, and that “risks can be minimized” offers an accurate mental model.
And ‘who you know’ might be important, but “knowledge is [also] key if you want to use those connections to your best advantage”.
Importantly, if you do manage business success then it doesn’t stop there. World-beating businesses still spend big – in time and money – on finding ways to get better and improve.
“Toyota employees implement over 1 million improvements to the Toyota Production System every year,” writes Kaufman. “Each year,” he adds, “Google engineers make over 550 improvements to the primary search engine algorithm.”
Creating real value for customers
Exposure is important. Companies like Toyota and Google clearly have it.
But their painstaking improvement process orbits back to one thing – the customer.
“Being featured on national television or on a huge web site is a wonderful thing,” notes Kaufman, “but very often this kind of broad publicity fails to deliver actual sales. Spending time and energy acting like a socialist reduces the amount of resources you can devote to creating real value for our customers, which doesn’t help anyone.”
What we keep – the politics of business
Finally, Kaufman notes that “It doesn’t matter if your business brings in $100,000,000 a year in revenue if you spend $100,000,001. Business is not about what you make – it’s about what you keep.”
As a policy person, I found great political application here.
How often, for example, do we hear of record revenues from big companies but without actually working out, or looking at the CIAs, on what they spend to keep operational.
And that is before the complex range of regulations – green and red tape – that now accompany running a modern business.
Easy political solutions should not come at the expense of these things.
Business as business
At the same time, I suspect, people are asking more from business – or at least a version of ‘business’ that we have come to know, however incorrect.
Kaufman, for example, is sceptical of “the leveraged buyout strategy”, which he says is “taught in many business school classrooms – buying a company, financing massive expansion via debt, then selling the business to another company at a premium – turning formerly self-sustaining companies into debt-bloated monstrosities, and the constant flipping of businesses from one temporary owner to the next turned financial markets into a game of musical chairs.”
Paired with the observation that many sectors of our economy are now ‘capital light’, and the political candidates tuning into this trend, a disconnection around ‘business’ has the capacity to change our policy and political landscape in the years to come.
Kaufman notes business is “one of the most complex and multidisciplinary areas of human experience.”
Note Kaufman here cites human experience, not algorithms or high finance.
These are all fine lessons, from the importance of customer base to careful improvement.
So was my personal MBA worth it?
In short, yes.
With experience I’ve learnt how important it is to build skills in the workplace and not just on paper. It’ll help you cut through work more effectively, be a more helpful team member and think more broadly about your work challenges while staying on top of your game.
For these reasons, before taking on a certified MBA, I suggest the personal MBA first.
 Josh Kaufman, The Personal MBA, Penguin Group, Camberwell, 2010, 39
 Ibid, 156
 82-83, italics mine.