What questions would I ask myself after reading this book? This book teaches me to observe and interpret the business world from different math perspectives.
Choose the Right Business or the Right Skill – Power Law Distribution
Matthew Effect is the keyword. You will want your business in the Power Law Distribution rather than the Normal Distribution. A business in the power law distribution means it is more scalable. Even if it looks slow or like the others in the beginning, its growth is like a vertical trend after it reaches the turning point.
Observe the Resource Allocation Using the Lorenz Curve
If the salary allocation is too fair, the company loses its competitive advantage because no one is willing to work harder to get the same pay. If the salary gap between the executive and the bottom employees is too extreme, it raises a confrontational relationship between the top and the bottom. By observing the Lorenz Curve, you can observe if a company’s salary allocation is healthy.
Manage Your Product Quality and Innovation with the Idea of Variance
A team with diversified backgrounds (high variance) tends to trigger a positive atmosphere to breed innovation in product development. On the other hand, when manufacturing a product, low variance in product quality is no doubt a better result.
Explore the Potential Company in BCG Matrix
Which company is worth investing? The BCG matrix based on the dimensions of business growth potential and market share gives the clue. High market share and high growth potential? Low market share and high growth potential? Which one?
Five-Dimensional Thinking – Business Model and Probability
Get insight from a higher dimension of the coordinate system.
- Tactics Thinking: You focus on one thing but the motivation is not clear.
- Strategy Thinking: You know the value of what you focus on to complete.
- Trading Thinking: You know how you interact with others to complete what you believe.
- Innovation Thinking: Based on the trading relationship, you explore the way to restructure it to gain benefits.
- Time Mode Thinking: You know what your current stage is and can take action accordingly.
- Probability Mode: You know how to observe a successful from the perspective of probability. A successful outcome is not always equal to what it has done.
Make Decision in Consideration of Expected Value and Game Theory
A well-structured business considers risk management. Always consider both the probability and the value, or in other words, the expected value. Something that looks good does not mean something easy to get. The question would be how to get the probability. Well, I would say, data. Collecting data and information is the way to estimate the probability when making a decision on a business.
Read the Financial Statement in + – * /
Three fundamental financial statements include the balance sheet, income statement, and cash flow. Use plus, minus, multiplication, and division to decompose or combine the values you see on the financial statements. Extract the hidden information from simple math and define the index to evaluate the business from financial statements.
