Kaufman’s Twelve Standard Forms of Value: A Mnemonic
A beginners guide to memorising useful mental models
Those who know me know I’m a big advocate of Josh Kaufman’s ‘The Personal MBA’ (TPMBA). For those who aren’t familiar, the book distills hundreds of mental models and frameworks spanning business, psychology and systems thinking. As a reader, you come out the other side feeling armed and ready to take on just about any situation - in business or in life.
It’s critical reading for anyone who operates in any remotely commercial environment. Also, as a Product Manager (PM), it pays to have an artillery of mental models up your sleeve.
The only issue I have with the book is that I need to keep picking it back up to refresh key models and concepts. In spite of Kaufman’s own guidance on how to read/use his book (as an ongoing reference guide - like a framework dictionary), I still badly want to be able to commit everything to memory. Would it really be so hard?
Can you commit a whole book to memory?
Last year, I spent countless hours translating TPMBA mental models into AnkiApp cue cards to rote learn them. In the process, I developed a strong distaste for AnkiApp, and I never want to use it again. My guess is that nobody in their entire company has ever tried to create lots of cue cards using their UI before, or spoken to anyone who has.
In spite of the pain, I persisted through and managed to get the first part of the book (Understanding Business) into barely legible flash cards; ignoring the little voice in my head telling me I was wasting my time.
That voice belonged to the esteemed Harry Lorayne — the ‘Godfather of Memory’. His book How to Develop a Super-Power Memory sits alongside The Personal MBA as another of my other all-time favourites.
Back in the day, Harry was known for pulling absolutely bonkers memory stunts. In the video below, he memorises and recalls the names and faces of approximately 500 members of a studio audience - using the methods he describes in the book I mentioned earlier. Cut to 7:00 onwards to watch his recall in action. He was an absolute madman. RIP.
The Importance of Novelty and Narratives
One of my key takeaways from Lorayne’s book, as described in his chapter on the Link Method of Memory, is that it is much easier to recall something that has a ‘ridiculous’ mental image attached to it - and the more ridiculous the better.
To elaborate, let’s pretend you are using Lorayne’s Link Method to memorise a 50-item-long shopping list, and the first two items are eggs and shampoo. The first thing you would do is imagine the craziest possible scenario involving both eggs and shampoo.
So, in this instance, you might picture a person in the shower cracking eggs on their head and rubbing the yolks into their hair like shampoo. Or, a person cracking an egg on a frying pan, and a miniature bottle of 'Head and Shoulders’ falls out onto the pan. Neither is a mental image you could quickly forget.
Another popular memorisation trick that many of my friends use is the Ioci Method. This entails visualising the items you’re trying to remember being placed throughout a familiar spatial environment — such as your house or workplace.
The Importance of Visualisations
For myself, and for many others, narratives and visualisations are key for committing something to memory. AnkiApp doesn’t work for me, because I don’t like the experience of repetitively reviewing raw, plain, unformatted text.
While TPMBA has narratives on lock, visualisations are something the book is arguably lacking. If each concept was accompanied by some kind of graphic, I daresay I might not be reaching to pick the book up anywhere near as much.
While creating visuals and illustrations for the TPMBA is something I’ve wanted to do for myself for a while now, the catalyst to actually doing so came earlier today, when I saw that kids are now reading the book as well.
So there it is. I’m going to create a mnemonic story with visualisations to help you commit Kaufman’s twelve standard forms of economic value to memory. It’s only one mental model, but it’s a start.
What are the twelve standard forms of economic value?
Of all the mental models I’ve learned from The Personal MBA, I’ve personally found the ‘12 Standard Forms of Value’ to be the most useful. This is an especially important framework for PMs, whose primary directive is to create and deliver value for their customers and businesses.
According to Kaufman, there are 12 primary ways to deliver value to another person/business, and they are:
Product
Develop and produce a distinct item or solution, then market and distribute it at a price exceeding its production costs.Service
Offer expertise or support and levy a charge for the value provided.Shared Resource
Construct a lasting asset accessible to many people, and impose a fee for its use.Subscription
Provide continuous access to some form of benefit and collect a periodic subscription/membership fee.Resale
Purchase goods from someone else, then sell them to end consumers at a markup.Lease
Obtain an asset and permit someone else to use it for a specified period in return for payment.Agency
Promote and sell a product or service owned by another entity, earning a commission on the sale.Audience Aggregation
Gather an audience, then monetise it by selling advertising opportunities to businesses who would like to reach and engage with them.Loan
Provide a specified sum of money, with the expectation of receiving repayment over an agreed period along with an agreed-upon interest.Option
Grant the chance to execute a specific action within a set timeframe for a fee.Insurance
Assume responsibility for a particular risk faced by the insured, charging periodic payments and providing compensation when the insured event occurs.Capital
Invest in a portion of ownership in a company, receiving a share of the profits through either a one-time payment or regular dividends.
Crafting and Remembering the Story
In the section below, you will find a very simple story accompanied with images to take you on a journey through the twelve standard forms of value. After you’ve read the story, I’ll summarise each node with mnemonic pegs to help you recall all of them at your leisure.
Full dislosure: I have reordered the list slightly to make the narrative flow in a more streamlined way, which should make it more intuitive to recall.
Side note: I’d like to extend an open invite to the broader TPMBA community to create your own visualisations for the book as well, because this took a while, and I don’t think there’s enough time in this lifetime to do the whole book.
Enjoy!
The Farmer’s Dozen: Lessons in Delivering Value
This is the story of Jeff, a small-town farmer and entrepreneur. He is the owner of Mellow Farm somewhere in rural England. He loves gardening and has a knack for delivering sustainable projects which bring his local community together.
1. Product
Jeff opens a small shop front on his property, where he sells things which he has made or grown and packaged up on his farm — think clay gardening pots, packets of flower seeds, sacks of grain, potted flowers and plants.
Inspired by his green thumb, his neighbours start frequenting his shop asking questions about how to grow their own gardens.
2. Service
In response to all the interest and demand, Jeff starts organising gardening workshops to share his knowledge and skills. Attendees pay him a small fee each time.
He notices that some of the attendees like to linger around his farm, even after the workshop has finished. Probing into why, the answer people generally give is: ‘This is just such a beautiful space, I never want to leave!”
Jeff also notices that these people who linger are generally his best customers and biggest advocates in the community, which gives Jeff an idea…
3. Shared Resource
Jeff sections off part of his land, and opens it to the public as a community space — with communal areas for picnics and gatherings. He also opens up a small workshop with tools for people to carry out arts and crafts projects as they please.
All people have to do is pay a small fee for entry, and they can use all of the facilities for the day.
4. Subscription
With Mellow Farm becoming a very popular community hub, Jeff launches a membership program. People who pay the annual membership pay no entry fees to the farm all year, and they also receive a 10% discount on all products and workshops.
When a famous botanist comes to town to give a talk, Mellow Farm members also get priority access to tickets and snap up all the best seats.
5. Audience Aggregation
As Mellow Farm flourishes into a beloved gathering spot hosting increasingly frequent and larger events, it naturally starts to attract the attention of other local businesses.
Local enterprises recognise the value of this captive audience and start to collaborate with Jeff, paying him to place advertisements and host their own events on the farm.
Mellow Farm effectively starts to become a living bulletin board for the community's diverse offerings.
6. Resale
More and more, Jeff finds himself fielding questions from the flocks of visitors about where they can buy common gardening tools, like spades, trowels, pruning shears and watering cans.
The problem solves itself, as local artisans and manufacturers start approaching Jeff, asking if he’d like to sell their goods in his store.
7. Lease
One of the most popular items in Jeff’s store are the wooden baby cots made by local artisan, Ellen, who lives in a small shack in the centre of town.
Overwhelmed by the growing demand for her cots at Mellow Farm, Ellen realises she needs a bigger space to build everything in.
She notices Jeff has a shed on the back of his property which doesn’t get a great deal of use, so she taps him on the shoulder and asks if she can use it for a small fee.
They draft up a lease agreement, and Ellen moves her workshop onto Mellow Farm.
8. Agency
Other farmers in the local community take note of all the diverse people surrounding Jeff all the time, from artisens like Ellen, to restaurant owners, bankers and distributors.
They each start approach Jeff requesting introductions. As they are effectively Jeff’s competitors, it’s a slight risk to Jeff in some cases.
However, Jeff agrees to make the introductions, on the provsion that he gets 10% of the revenue resulting from the first year of any partnership agreements.
9. Loan
Jeff is now quite successful. He realises though, that a great deal of his most recent satisfaction came from helping other farmers like himself.
Driven by a growing urge to help and give back, he starts loaning money (and charging interest) to younger farmers in his community to kick off their own projects and businesses.
As an added bonus, Jeff offers his loan beneficiaries direct mentorship, as well as access to Mellow Farm’s tools and resources. This ensures that they have a strong foundation for success.
10. Insurance
Jeff realises that many of his fellow farmers are at the mercy of unpredictable weather and pests, which can lead to crop failures and significant financial losses. To support his community, especially the farmers he has lent money to, Jeff decides to explore a new form of value: Crop Failure Insurance.
Jeff collaborates with a local insurance expert to create a simple, affordable insurance plan tailored to small-scale farmers and gardeners. For a small annual fee, they can insure their crops against common risks such as severe weather, disease, and pest infestations. If disaster strikes, policyholders receive compensation to cover their losses, ensuring they can plant again next season without financial ruin.
11. Option
Now that he is an expert in agricultural market forecasts and industry risk, and he feels protected with his new insurance scheme, Jeff begins exploring more sophisticated financial strategies to boost his earnings and capitalise on volatility and uncertainty.
After a heck of a lot of research and analysis, he decides to offer call options on his grain. He approaches large grain-buying corporations and sells them the right, but not the obligation, to purchase his grain at $500 per bag in two years. Each option is sold for a $5 premium, providing Jeff with immediate income.
As the big companies think the price of his grain bags will be more than $500 + $5* each in two years time, a lot of them buy his options. This arrangement allows Jeff to generate additional revenue through the option premiums, which he can reinvest into expanding and improving Mellow Farm.
If the future market price drops to $300 a bag, the option holders won't exercise their options, preferring to buy at the lower market price, leaving Jeff with the $5 premium as profit. Conversely, if prices soar to $700, option holders will exercise their right to buy at $500, obligating Jeff to sell at this lower price, and resulting in Jeff missing out on higher market profits.
*ignoring interest & inflation for example’s sake
12. Capital
At this point, Jeff is getting on in years. With years of hard work behind him and a growing desire to embrace a more leisurely pace of life, he crafts a plan to reduce his day-to-day responsibilities and ensure financial security for his retirement.
He sells a portion of the farm's ownership to his community in the form of shares. This not only secures Jeff a retirement fund, but also protects his legacy by cementing Mellow Farm as a communal asset.
Jeff now starts to step back with peace of mind, feeling assured that Mellow Farm can continue thriving under the collective care of those who cherish it.
Story Overview: A ‘Peg’ Mnemonic
Now that you’re familiar with this story, all you need to do is rehearse the below flowchart a couple of times to help you ‘peg’ each value form together via the narrative.
Once you’ve done this a couple of times, you might be surprised to realise, that you can start to recall each of the 12 value forms in reverse order from last to first!
If you’ve made it this far, thank you! I hope you’ve enjoyed it.