“The possibility of men living together in peace and to their mutual advantage, without having to agree on common concrete aims, and bound only by abstract rules of conduct , was perhaps the greatest discovery mankind ever made” - Friedrich Hayek
Peace and mutual advantage are essential requiredmentd for civil society and for success
Everyone knows the right thing to do and is motivated to do it without explicit directions or overly detailed rules
Good Profit is creating superior value for our customers while consuming fewer resources and always acting lawfully and with integrity
Good Profit comes from making a contribution in society
The most value for customers is created by maximizing the freedom of the employees bound only by abstract rules of conduct
Earn profit by creating value for customers, society, our partners, and every employee who contributes
Free societies are based on respect for what people value. They enjoy the greatest prosperity
The best societies as well as the best companies have been the ones with a framework of freedom in which individuals can improve their lives by improving the lives of others
When economic signals are allowed to direct actions, people gain the knowledge of what is valuable to others and the magnitude of that value. They are then motivated to replace old systems with new ones that improve people’s lives
“It is, to feel much for others, and little for ourselves, that to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature; and can alone produce among mankind that harmony of sentiments and passions in which consist their whole grace and propriety” - Adam Smith
This ideal could only be achieved through voluntary restraint of one’s selfishness
Newton’s third law is that every action has an equal and opposite reaction
Humans ignore at their own peril the fundamental principles of how to best live and work together
F. A. Harpers Why wages rise
Ludwig von Mises human action
Widespread human well being demands a system that clearly defines and protects private property rights, allows people to speak freely without intimidation or legal repercussions, refrains from interference with private parties agreements and exchanges, and allows human action to guide prices
Allowing people the freedom to pursue their own interests is the best and only sustainable way to achieve societal progress
For individuals to develop and have a chance at happiness, they must be free to make their own choices and mistakes, rather than we forced to accept choices made for them by others
The role of business in society: providing products and services that customers value more than their alternatives while more efficiently using resources
Profit only from benefitting both our customers and society as a whole
Create a cutler that invites challenges
Hire based on values first, then talent
“Adversity is a blessing in disguise and is certainly the greatest character builder” - Fred Koch
Children in a family are far more important than making money
“There is only one boss—the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else” - Sam Walton
The role of business is to respect and satisfy what customers value rather than lobbying the government to mandate what can or cannot be offered
In a society that maximizes people’s well being, business would only profit if it is doing a good job listening and learning responding to changing needs and wants
Employees of businesses that do not evolve will soon be out of a job
The opposite of self interest is extinction
Parties will not voluntarily enter into an exchange unless both believe they will be better off. Therefore, you can only profit over time in a system of voluntary exchange by making others better off
Prosperity can take place only through spontaneous order, an order that results from unscripted human action, not human design
When people and companies are free to innovate using their knowledge of what they and others value, customers benefit, enabling businesses to generate good profit
Replicating the way the scientific community organizes itself, wherein knowledge is shared freely with a commitment to disproving even the most cherished hypotheses, leads to innovation
Buddha warned us not to believe anything just because it is commonly accepted but only when after observation and analysis, when it agrees with reason, and is conductive to the good and gain of one and all
We must constantly remind ourselves that just because we believe or want a thing to be true does not make it so
Given human nature, we all tend to become complacent, self protective, and less innovative as we succeed. It can be far more difficult to overcome success than adversity
If you want to generate good profit in your organization, you have to constantly strive to discover, respect, and satisfy what customers value, and even anticipate what they will value in the future. The ground is always crumbling beneath our feet
Sunk costs should not govern decisions. Instead, decisions need to be driven by forward looking analysis
Opportunity cost: the true cost of any activity is the highest value activity forgone
When employees are rewarded only for short term accounting profits without factoring in what long term profits were missed, they will tend to make suboptimal decisions
We only truly know something when we can apply it to get results
Theoretical grounding is necessary, but by itself it is not sufficient to obtain results. Success in applying new mental models comes only after correct, frequent, and prolonged practice. Practice makes permanent; thus it has to be done correctly
“Action without study is fatal. Study without action is futile” - Mary Beard
Accomplishing a change in one’s thinking involves a focused and prolonged effort to develop new habits of thinking based on valid mental models
To succeed in the long term, a business must innovate and improve at least as fast as its most effective competitor
For any business to sustain success we must have a vision that guides us to do more and more for our customers and society
In a truly free economy, for a business to survive and prosper in the long term it must develop and use its capabilities to create real, sustainable, superior value for its customers, for society, and for itself. Only by doing so can it continue to inspire and attract customers, suppliers, and partners
Having a clear vision is critical to attracting the best talent. Understanding what a business is trying to achieve and how it creates value not only enables employees to focus and prioritize; it helps them develop and find fulfillment
The role of business in society is to help people improve their lives by providing products and services they value more highly than their alternatives, and to do so while consuming fewer resources
Every company, no matter what size or type, should strive to develop and clearly communicate a unique vision of its own
Create a view of how the organization can create superior value for its customers and society and capture a share of it. The vision is a description of exactly how the organization plans to create that value
Any organization interested in good profit should begin with a realistic assessment of what it can do particularly well that enables it to outperform others. Then it should address how to imporve those capabilities and acquire the new ones needed to keep pace in the future
We aren’t creating value in society if the resources we are consuming are worth more in another use than the value of the products we are making from them
If you don’t have a culture of innovation, your days are numbered
Deciding the order in which to do things can be just as important as deciding what things to do
Compare an estimate of the risk-adjusted present value of opportunities to the resources consumed
“Someone who has never made a mistake has never tried anything new” - Einstein
“Winning takes talent; to repeat takes character” - John Wooden
Talented people with bad values can do far more damage to a company than virtuous people with inferior talents
Imagine how productive business would be if everyone acted with complete integrity, with their word as their bond, never doing anything they wouldn’t want exposed to the whole world
If something seems off, stop, think, and ask
“I was not aware” is not an excuse
To generate good profit, it's critical not only to understand but to anticipate what customers value, their expectations, measures, incentives, needs, alternatives, and decision-making processes
It is impossible for customers to truly know what they would prefer to their current alternatives until they know what will become available
Seek and use the best knowledge and proactively share your knowledge while welcoming challenges
Significant competitive advantages accrue to those who are the first to foresee change and act quickly on that foresight and drive creative destruction through pervasive continual experimentation
Experimental discovery is needed because we cannot know the final destination when our journey begins
To create value, we must a;; constantly seek to understand and constructively deal with reality to create value and achieve personal improvement
Having humility means understanding and accepting yourself as you really are. It means admitting your mistakes and what you don't know rather than being defensive and blaming others
Making people feel appreciated leads to better long-term results
For feedback to be constructive , the person delivering it must have previously proven that he respects and cares for, and is trying to help, the other person
Results must be the focus
Because leaders set the standard, they are the guardians of, and must be held accountable for, the culture. Leaders must internalize and consistently apply the principles in a way that produces results. The most effective leaders are those who provide frequent and honest feedback that identifies opportunities for improvement in a way that stimulates dialogue and change. They hold themselves, their employees, peers, and management accountable
Be grateful for everything and entitled to nothing
Good people are a company's most valuable resource
Societies are most prosperous when knowledge is most plentiful, accessible, relevant, and inexpensive. These conditions are best brought about by freedom of speech and association, and trade based on mutual gain
Knowledge is information that is profitably used to improve results. Just gathering and sharing information that doesn't get results is unprofitable
'There is surely nothing quite so useless as doing with great efficiency something that should not be done at all' - Peter Drucker
None of us has all the knowledge to consistently make the best decisions or discoveries
When a workplace culture of respect and trust is promoted, employees share their ideas and seek out the best knowledge to anticipate and solve problems
Foster an open environment that invites challenge and embraces change
Be open to challenges. Solicit them, and then thank any challenger who offers a constructive one
“As simple as possible, but not any simpler” - Einstein
Complicated mental models, pointless arguments, and ideas that do not deliver profitable results have no value
Style should never take precedence over substance
“Men pay most attention to what is their own; they care less for what is common. They are more prone to neglect their duty when they think that another is attending to it” - Aristotle
When no one owns or sufficiently benefits by conserving a resource, no one takes responsibility for it, and the resource tends to be used inefficiently, overused, or even extinguished
Widespread value creation throughout a company requires that decision rights are continually earned, not geared or bestowed; and that lack of authority is never considered an excuse for inaction
All employees need to raise awareness, propose solutions, and gain approval for the resources necessary to address any problem or opportunity
When is doubt, employees at every level of the organization should stop, think, and ask
Perfection is the enemy of progress
People perform best when their role is a challenge, but not so much so that they feel overwhelmed and defeated
“Ever more people today have the means to live, but no meaning to live for” - Viktor Frankl
Do your best to make a difference in the world
Die for something rather than living for nothing
For people to become self actualizing their most basic needs must first be satisfied: physiological (thirst and hunger), safety (security, stability, protection, order), belongingness and love (family, friends, acceptance), and esteem (self respect and regard from others). Only when these are met can people fulfill their potential
“Even if all these basic needs are satisfied, we may still often expect that a new discontent and restlessness will soon develop, unless the individual is doing what he is fitted for” - Abraham Maslow
What a man can be, he must be
The desire for self fulfillment, the tendency to become actuality’s in what he is potentially. This tendency might be phrased as the desire to become more and more what one is, to become everything one is capable of becoming
All incentives should motivate each employee to fully develop her aptitude to create value, to innovate and drive creative destruction
There are 3 requirements for a human to act: dissatisfaction with the present state of affairs, a vision of a better state, and belief that we can reach that better state
An apprentice model: I do, you watch; I do, you help; you do, I help; you do, I watch
No limit should be put on an employees compensation so employees will not put a limit on the value they create
Total compensation should reflect total contribution
If one thinks of the natural world as functioning harmoniously without orchestration or central planning, one can easily visualize spontaneous order—an order that leads to the miracles of nature
Build the capacity to identify and understand unmet consumer needs, and then develop products and services that would satisfy them
Acquire the right talent, ask the right questions, foster a challenge environment, and empower and reward people
Employees should be rewarded according to their contribution to the long-term value of the business
Good profit can only result from creating value for the customer. It is the manifestation of the entrepreneur's respect for what the customer values
The leader should ensure the elimination of all work that isn't important to the decision
Establish and enforce only general rules so employees can innovate by challenging the particulars
What works best is learning by doing. Yes, training is important, but only to get started. It cannot take the place of continual learning by trial, error, and feedback. We don't progress if we are afraid of making mistakes
It is just as important to know the order in which to do things as it is to know what to do
1. Frame and quantify by order of magnitude of value all the opportunities and problems you face. 2. Use this quantification to reduce the list to a manageable number. 3. Prioritize it according to urgency and magnitude
Don't forget that endless learning of concepts without application is not beneficial
The greatest gift we can receive or pass on is the opportunity to find and pursue our passion, and in doing so, to make a difference by helping others improve their lives
To be truly rich is to live a life of meaning