Occam’s Razor and How it Applies to Business

Occam’s Razor is a principle first proposed by William of Ockham, a 14^th Century French logician, which states that “Entities should not be multiplied unnecessarily.” In other words, one should not increase, beyond what is necessary, the number of entities required to explain anything. This means that between two equally plausible theories on one subject, the simpler one is always the best.

Interestingly, it is also called Ockham’s Razor because philosopher Ockham used the principle sharply and rigidly in its application, believing that an entity, (let us suppose a business as an example), should not be expanded unless it is absolutely necessary.

Essentially, Occam’s Razor is applicable anywhere, in any situation that requires decision making and strategy planning. Some people find using the philosophy that the simplest explanation is the best makes life easier and stress-free. Over-thinkers though, often find they can’t be satiated with a simple answer and embracing Occam’s Razor may seem impossible. No matter which type you find yourself to be, having a clear business plan that lays out all the potential hazards or obstacles can help mitigate tendencies to make a molehill into a mountain. When you have a decent plan for your decisions, all your challenges become much easier to solve, whether in the business world or in real life. The practice becomes simple to apply as well: when faced with two choices, opt for the one with less friction, or when changing something is not necessary, don’t do it. This concept can best be explained by a quote:

“When it is not necessary to change, it is necessary not to change,”

Lucius Cary, 2^nd Viscount Fackland, 1641

In laymen’s terms: Don’t enforce change or increase your stress about a circumstance unless that stress is absolutely necessary. And similarly, when they are not necessary for your success, then it is best not to enforce changes.

Accepting Occam

But wait, just accept the easiest answer? No questions asked? Isn’t that just being naïve?

No, naivety is not the same thing as Occam’s Razor, because there is a level of education required to know what all the potential consequences could be. So, when an employee says they got a flat tire on the side of the road on the way to work, they are probably telling the truth and not covering for something darker or more manipulative. Occam’s Razor would probably encourage you to give your employee a break in that circumstance, or at least accept the tardiness reason at face value.

When it comes to defining (or redefining) your business rules, there are three reasons why you should keep in mind Occam’s razor. It’s easier:

• for employees to deal with your rules. The more complex your rules, the more trouble your staff has managing them.
• for your customers to understand your mission. And when it’s easier to understand how you can serve them, it’s easier to buy from and work with you.
• to program your systems and develop your branding. The simpler the business premise, the simpler the required programming.

You could even see benefits in your organization, like:

• It is easier if your employees to grow and produce,
• It makes your business more trustworthy and reliable in the market due to the simple and straightforward policies and services,
• It is easier to design your business theme around your rules, like your online business website or your franchise restaurant décor,
• Conflicting business decisions like partnerships and expansion become easier.

Since the whole principle relies on “do not overcomplicate situations”, it sheds light on the importance of how business rules must be kept simple so they could be easily executed and managed. Setting simple business rules aids in business development, and good development is the key to success.

Occam’s Business Relationship

Suppose that as an entrepreneur, you are faced with a decision of starting a strategic partnership with another company. You will need to weigh the pros and cons of such a decision, as well as analyze the compatibility between the two companies and their working processes. By applying Occam’s razor here, you will be able to make the decision more efficient: if the partnership helps your company, go for it, and if it requires more than a few steps to success, or you find during the process you have trouble communicating with the other individual, then do not do it. Every decision in business should have at least some value for you immediately, so unless you get that you should not make unnecessary changes to your practices. 

Similarly, if you are thinking of launching a new product, you should also judge its impact on your business and previous products. In a restaurant, for example, you have your signature dishes and then side dishes. Using Occam’s Razor philosophy, unless the new recipe that you are launching will bring in a new audience or have people buy more food, it shouldn’t be launched. Now, if we always followed this rigid rule, we’d see very little creativity and risk in the market, and when there’s little risk, there’s little innovation. Balancing your threshold for risk and your understanding that simple answers are usually best can be tough, especially for entrepreneurs, whose natural state is risk-taking. Occam’s razor is an efficient way of dealing with most business decisions, but caution must be exercised to use it as a guide, not as an outline. This way, you can lead a stress-free life with easier decisions as well as ensure the best results.