Studying business. Rational organizations.

Do you know the difference (in purpose) between managerial accounting and financial accounting? What about the difference between return on equity and rate of increase in stock price (assuming that the company is publicly traded)? Is the U.S. budget deficit more like an expense or a liability? How about the U.S. debt? In other words, learn basic accounting. (On Hacker News most participants have not.) Whole Foods and Apple are both very successful business. One has very high "variable cost" (or as the economists say, "marginal cost" or "cost at the margin") and consequently their marginal income or "profit margin" is much lower. Which one is it? If you own stock in some company, do you care more about its marginal income's being high or its return on equity's being high?

Each of these questions has an unambiguous answer that all accountants and informed businessmen will agree on.

Studying business success is good, but also be sure to study business failure.

Study cautionary tales about how smart and hardworking entrepreneurs succumb to bias and errors of reasoning. Look for how companies are destroyed by personality conflicts, hubris, internal politics, or even sheer shortsighted criminality. Also, study how to survive and bounce back from failure, and how to correct yourself once you've taken a wrong turn.

Rolf Nelson's blog, The Rational Entrepreneur has more rigorous content than Paul Graham in the sense that Rolf pays more attention to studies and evidence and so on and has less of Graham's exploratory musings based on personal insight and nostalgia, with the occasional reader ego-stroke. Rolf's content lacks the "ecological credibility" of having personally made a bunch of money off of two successful companies the way Graham has (once is a accident, twice suggests a pattern, the third time confirms the pattern), because Rolf wrote the blog as a way of doing basically what you are doing right now: reading a ton about businesses and startups before jumping in for his first iteration. If you like the blog, you might try contacting Rolf directly as he's an old time OB/LW reader :-)

These are my own, rather nonstandard thoughts, so I invite feedback and/or correction.

According to my own observations, both via the media and through people I have known personally, it appears that it is rare that an entrepreneur's very first attempt at business becomes a colossal success. It is much more typical that the entrepreneur will take at least one and sometimes several tries to really break out. Some of these tries may end in abject failure.

As we all know, people are generally risk-averse to an irrational degree, and self-identify with failure to an even more irrational degree. So the personalities who "stupidly" keep trying to be entrepreneurs even after all evidence indicates that they are bad at being entrepreneurs are perversely the people who end up being astonishing successes. They are gaining experience, they are making connections, they are learning how to psychologically deal with the stresses of entrepreneurship, so over time they become gradually better. Then, boom, "miraculous" success.

We also know that endless planning in the face of uncertainty is a common human failure mode. I am not saying that reading these books is a waste of time, but I am saying that there will never be a point at which you have read enough books. Or taken enough courses. I think you just have to go out and start failing.

Try to get something done involving real people. Company stuff, volunteer work, leading a project somewhere. It is more difficult than it looks.

Also: work on getting well organized your self. Successful organization are such because they hire successful people (or actually manage to train them.) Much business literature has a focus on motivation, and not that much on how to actually do the work.

Report back in a while, with what you learned.

I strongly recommend Putt's Law and the Successful Technocrat.

"How to Win Friends and Influence People by Dale Carnegie"

I would not recommend this book. I started reading it once many years ago and gave up because I felt it was so obvious as to be useless. Everything mentioned essentially boiled down to "People don't care about you, they care about themselves. Center everything about them and they will like you."

In fairness, I was young when I read it, so perhaps there are subtleties I missed, but I don't have a high opinion of the book. In addition, while I didn't notice it when I read it (I was young, maybe early high school) I've been told it's also quite misogynistic, which would bother me now if I read it.

Isn't it worth getting some experience actually seeing what different organizations work like? (or maybe you've already done this, though that is not the impression I get from the post )

Top management consulting firms are a very efficient way to cover the experience/ credibility/ basic_knowledge/ contacts fields, but require a high tolerance for bullshit (and long hours/ travel)

From here:

"It wasn’t until I decided to launch my own startup that I realized that nothing I’ve read, watched or attended really prepared me for it. And I mean it. Absolutely NOTHING. I had forgotten most of what I’ve learned, and what I remembered didn’t apply much to my situation. I’ve been snacking on other people’s experiences and successes, and like good junk food, it made me feel bloated and satisfied."

This is basically my job so here goes:

Get certified for the best management practices, these have been established by years of trial and error using a simplified version of the scientific method called Plan-Do-Check-Act.

The HPO Center Has done a lot of research on why companies stay in business for a long time, and how they remain market leader. The result is 35 rules that when followed give you a higher chance of being a long lasting market leader.

Another methodology you can get certified for is Six Sigma which revolves around reducing the number of errors in your processes, this is often combined with Lean which focuses on removing those things from your process that do not add any value to the end product. These two combined ensure the customer gets a good product or service at minimal costs to you.
Finally, most of your value will be in the form of knowledge, documents, processes, etc... Companies like Knowledge Values specialize in tools and teaching surrounding the management of this knowledge.

All the idea's here combine to form a strategy and mindset for creating a company (process) that can have a high chance of success an profit with a lower investment and risk of bankruptcy. Note that the whole thing stands or falls with how willing your customers are to get your product, and how good you are at making them want it. In the topics i mentioned this issue does not get a lot of attention.
The concepts i mentioned are often used by companies to become or stay in list like the forbs500.

One final note, whenever you optimize for some metric, that metric becomes less and less reliable, this is called Goodhart's Law. The topic's above do go into this a little bit, but my main advice would be to always find 3 interconnected and if possible contradictory metrics so you see what happens to the other 2 when you optimize for one. An example:
Customers complain >> give them more money they stop complaining.
You can manage the complaint solving a little bit better by adding a cost metric in addition to the customer happiness metric. (in my case i also added a time spent by the employee metric)

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Paul Graham's essays are awesome.

I didnt quite like Kaufman's personal MBA as much as everyone on LW seems to. But I am currently aiming to get admitted into college and was trying to use it to figure out which branch to specialise in, and found that it wasnt as useful (due to lack of detail perhaps?). The book does seem to be generally written honestly though, except that he brags about its simplicity.