occams-razor

The Occam’s Razor In A Nutshell

Occam’s Razor states that one should not increase (beyond reason) the number of entities required to explain anything. All things being equal, the simplest solution is often the best one. The principle is attributed to 14th-century English theologian William of Ockham.

Understanding Occam’s Razor

Occam’s Razor is a principle that states that one should not increase (beyond reason) the number of entities required to explain anything.

In other words, with all things being equal, the simplest solution is often the best one.

The principle is attributed to 14th-century English theologian William of Ockham.

It’s important to realize that Occam’s Razor is not 100% reliable. That is, the simplest solution is not always the correct solution.

But when a business is presented with several solutions to a problem, its best course of action is to choose the solution with the fewest assumptions.

In business, companies spend vast amounts of time and money recruiting new customers and retaining them as loyal followers.

Consumers themselves are bombarded with messages daily and are easily distracted by social media and other sources of cognitive overload.

While complex marketing strategies may be somewhat effective in attracting customers, far simpler solutions help businesses retain them. 

Here, the simplest solution for the business is to focus on:

Product quality

Many businesses equate the number of features with the value of a product.

But they do not ask the customer what they value beforehand. Products with too many features distract a consumer and reduce product utility.

Occam’s Razor suggests that product development teams discard as many features as possible and go for the simplest, most effective solution.

Customer service

Simplifying customer services means removing as many barriers as possible.

It might be streamlining the customer purchase journey by removing unnecessary sign-up forms.

It might also mean removing wait times on customer support calls. Ultimately, consumer behavior is guided by simplicity and a pleasurable shopping experience.

Defining their target audience

No product or business can appeal to everyone, so defining a target audience should be made as simple as possible.

Simplicity is achieved by starting small and focusing on the traits of a single, ideal customer to develop a marketing persona.

This is Occam’s Razor at work. Simplifying procedures increases productivity and profitability by focusing on processes most likely to deliver results.

Examples of Occam’s Razor in companies

McDonald’s

mcdonalds-business-model
McDonald’s is a heavy-franchised business model. In 2021, over 56% of the total revenues came from franchised restaurants. The long-term goal of the company is to transition toward 95% of franchised restaurants (in 2020 franchised restaurants were 93% of the total). The company generated over $23 billion in revenues in 2021, of which $9.78 billion from owned restaurants and $13 billion from franchised restaurants. 

In an attempt to boost their profits, McDonald’s created the now-infamous phrase “Would you like fries with that?”

Behind this catchphrase, marketers selected a very simple way to increase profits out of what was likely a large spread of options. Fries are of course made with potatoes, which are cheap and abundant and thus very profitable.

Apple

apple-business-model
Apple has a business model that is divided into products and services. Apple generated over $394 billion in revenues in 2022, of which $205.5 came from iPhone sales, $40 billion came from Mac sales, over $41 billion came from accessories and wearables (AirPods, Apple TV, Apple Watch, Beats products, HomePod, iPod touch, and accessories), $29.3 billion came from iPad sales, and $78.13 billion came from services.

While the removal of the headphone jack may have been a case of over-simplification, the design of the iPhone also reflects Occam’s Razor principles.

With just a single button on smartphones and tablet devices, designers gave consumers a sleek and minimalist product without extraneous features.

Where can Occam’s razor be applied in business?

In this section, we’ll detail the ways Occam’s Razor can be applied in business to reduce complexity in certain situations.

Too many websites

Some business owners create a separate website for each of their brands with the belief that more sites equal more sales.

However, this does not tend to be the case.

Operating a single website is much simpler and more efficient. It is also much more cost-effective since hosting and maintenance costs are reduced.

In the context of marketing, too many websites means finite resources must be spread and diluted in the process.

Aside from poor resource utilization, this also reduces an individual website’s ability to dominate its niche and be ranked on the first page of search results.

Other companies dilute their presence with different websites for their B2B and B2C operations.

Unless there is a valid reason for doing so, these models should not be separated as doing so only leads to cost increases.

Instead, it is better to keep it simple by creating a website that appears for all intents and purposes to be a B2C site.

B2B customers can use the site by accessing a password-protected area where they can see a list of business prices, make volume purchases, or contact a dedicated support team, for example.

Bloated proposals

The most persuasive business proposals are those that focus on a simple minimum viable product (MVP).

leaner-mvp
A leaner MVP is the evolution of the MPV approach. Where the market risk is validated before anything else

Why is this the case? For one, simple MVPs tend to be cheaper and as a result, are associated with less risk.  They can also be developed more rapidly, which shortens the time until the company can enter the market. 

Despite these benefits, some product developers choose to ignore Occam’s Razor and develop complicated, bloated proposals where an excess of bells and whistles is the norm.

The goal here should be to work with the customer and assess each feature on its own merits to determine whether it contributes to functionality.

Superfluous features that do nothing but add complexity to the MVP should be discarded.

International expansion

Business owners can also become preoccupied with complexity when looking to expand into international markets.

An eCommerce site looking to sell tennis rackets in France and Spain, for example, may feel the need to replicate their website on a .fr and .es domain.

However, this situation is similar to building a separate website for each brand. That is, it tends to be more expensive, more inefficient, and less effective in terms of SEO.

For most eCommerce companies, a simpler course of action involves using canonical link elements for each country on their core website.

For example, tennis rackets for sale in France may be found at tennisrackets.com/fr/ and in Spain at tennisrackets.com/es/.

While a .fr site written in French may convert higher, a separate French page on the core tennisrackets.com domain will be effective provided it prices the tennis rackets in euros and details country-specific shipping policies.

In fact, any decrease in conversation rate is normally offset by reduced maintenance costs and the increased authority and visibility of the tennisrackets.com domain.

Occam’s Razor and Law of Parsimony

Parsimony psychology is an idea that advocates finding the simplest, most accurate explanation for any cognitive process or behavior. 

Aspects of parsimony psychology may be referred to as the law of parsimony or Occam’s razor, with the latter named after William of Ockham.

Sometime in the 1300s, the theologian and logician wrote that “plurality must never be posited without necessity.” 

However, the ideas that form the basis of the law have existed at least since the time of Aristotle who said “the more limited, if accurate, is always preferable.

Since then, Ptolemy and Isaac Newton have used the idea to explain natural phenomena, and in the modern area, it has found use in healthcare and psychological contexts in particular.

So how exactly can parsimony psychology be defined?

The first clue lies in the word parsimony, a term based on the Latin word parser which may be defined as excessive thriftiness or, in less complimentary terms, miserliness or a lack of generosity.

Thus, parsimony psychology advocates that when academics want to explain a cognitive process or behavior, they should endeavor to find the simplest, most accurate explanation that fits the available evidence.

Five elements of the law of parsimony

Five of the most salient elements fundamental to parsimony and thus parsimony psychology are briefly explained below.

1 – Find the elegant solution

The elegant solution is the one that operates within the bounds of the law of parsimony.

In psychology, it may be a conceptual framework that can explain a behavior in the most simple terms or with the fewest components.

In business, think of an optimized assembly line that produces satisfactory results and contains no unnecessary steps or processes.

2 – Make assumptions that can be dealt with easily

If assumptions are present in a solution, further research is crucial to discover whether they are valid and can be efficiently dealt with.

If they cannot be validated, stick with the solution with the fewest assumptions.

3 – Refer to things that are observable

Observable things may comprise objects, behaviors, motions, body language, KPIs, or performance review results.

4 – Few entities

The law of parsimony also points out that history is littered with ordinary phenomena that have been explained countless times by countless entities with complex descriptions.

Therefore, it is important to involve as few entities as possible to explain an event.

In that important sales meeting, ensure that only people who are knowledgeable about the product and can sell it to the potential client are in attendance.

Remember, there is no need to overcomplicate an event or strive for perfection when a desirable result has been produced by others many times beforehand.

5 – Simple is best, but not always possible

Simplicity is important in parsimony, but so is accuracy.

While it may be tempting to default to the simplest solution right away, there are occasions when more information is needed to arrive at the solution we want.

Think of the thrifty consumer who wants to purchase a vehicle.

If they don’t research durable and inexpensive models beforehand, they’re more likely to waste their money on a car that either doesn’t run or is constantly off the road for repair.

Parsimony psychology in the workplace

We all can relate to having one of those days where everything seems to go wrong. 

Perhaps we missed our usual bus, tripped on the pavement in our haste to make the office, and arrived at work late anyway where we received a reprimand from the boss.

Then, when it comes time a break, we realize our lunch is sitting in the fridge at home and the café is closed.

How can you explain this using parsimony psychology? Here are some possible explanations for these events:

  • You’re just having a bad day. No need to panic, they happen from time to time.
  • The world is out to get you and restore balance. After all, the bus was early three times last week.
  • Someone is out there whose primary intention is to sabotage your life. This may be the café owner, the bus driver, or your boss.

Remember from earlier that the parsimonious solution is one with the fewest assumptions. In this case, the first explanation is the simplest and therefore most likely to be correct.

Key takeaways on the law of parsimony

  • Parsimony psychology is an idea that advocates finding the simplest, most accurate explanation for any cognitive process or behavior. 
  • Five of the most salient elements of parsimony and thus parsimony psychology include finding the elegant solution, making assumptions that can be dealt with easily, referring to things that are observable, involving as few entities as possible, and ensuring solutions are both simple and accurate.
  • In the workplace, parsimony psychology can also be used to explain a bad day where everything seems against us.

Occam’s Razor vs. Hanlon’s Razor

hanlons-razor
“Never attribute to malice that which is adequately explained by stupidity.”

Similar to Occam’s Razor, Hanlon’s Razor proposes that often an outcome can be explained through stupidity, rather than malice.

In short, in a complex world, where it’s easy to think in terms of conspiracy theories, Hanlon’s razor is a great heuristic, which tells us, often stupidity is the cause of many problems, rather than malice.

Variations of Hanlon’s razor go back as far as German writer Johann Wolfgang von Goethe, who equated malice and stupidity with incompetence.

However, the adage was named after Robert J. Hanlon, who submitted the quote for inclusion in a joke book. 

In the modern context, Hanlon’s razor is a somewhat philosophical concept.

Indeed, the principle of a razor in philosophy is one that allows the individual to eliminate or “shave off” unlikely explanations for a particular phenomenon. 

Instead, Hanlon’s razor advocates that problems and bad experiences are part of life. In the vast majority of instances, there is no malice behind them.

Thus, similar to the Occam’s Razor, Hanlon’s Razor proposes a simpler solution to complex situations.

Occam’s Razor vs. Occam’s broom

occams-broom
Occam’s broom was first proposed by South African microbiologist Sidney Brenner who proposed that inconvenient facts that do not fit into someone’s hypothesis or serve their agenda are swept aside or hidden. Occam’s broom is a principle stating that inconvenient facts are hidden or obscured to draw important conclusions or argue points.

Occam’s broom is a sort of bias, coming from the fact that people in various fields look for confirmation to evidence what they’re looking for.

In short, instead of searching for something with the core belief to change their minds, they tend to search for information that only confirms their beliefs, thus reinforcing their thesis.

This bias can be pervasive in business as well, where business people might actually focus on what they believe is right instead of wanting to be proven wrong.

Differently from it, Occam’s razor focuses on keeping things simple in a complex world. In short, Occam’s broom is the other side of the coin, where people focus on what they believe is true instead of what disconfirms their beliefs.

Occam’s Razor vs. Hickam’s dictum

hickams-dictum
Hickam’s dictum is the counterargument to Occam’s razor. Whereas Occam’s razor is a heuristic that tends to narrow down decision-making to the simplest variables, Hickam’s dictum believes a situation must be tackled by looking at multiple variables.

Hickam’s dictum is the counterargument that helps balance out Occam’s razor.

Indeed, while Occam’s razor is an extremely effective heuristic, this can also lead to over-simplification in a complex environment, where many factors might influence an outcome.

While Occam’s razor helps speed up decision-making when it comes to decisions where. The outcome might have a wider impact, so it’s essential to balance out Occam’s razor with Hickam’s dictum.

Occam’s Razor vs. Pascal’s Wager

pascals-wager
Pascal’s wager is named after Blaise Pascal, a seventeenth-century French mathematician, philosopher, and theologian. Pascal believed that since evidence could not settle the question of whether God existed, individuals should wager on it instead. Pascal’s wager is a philosophical argument positing that individuals should wager their lives on the existence (or non-existence) of God.

Pascal’s wager is primarily a philosophical argument whose aim is to find an optimal answer.

Whereas Occam’s razor is a heuristic, or shortcut to making effective decisions, in a complex environment.

Thus, where Pascal’s wager is more of an optimization formula to achieve infinite rewards, Occam’s razor is a more practical approach to decision-making, which is extremely useful in complex scenarios where adding more valuables to a solution makes it harder to define the problem.

Of the two, Occam’s razor is the most applicable to business, and it’s extremely useful in an ambiguous business context, where it’s very hard to define the problem at hand.

Occam’s razor, in that respect, helps and drives execution.

Key takeaways

  • Occam’s Razor says that the simplest solution is more likely to be the correct solution. The theory does not provide the correct solution 100% of the time, but it does posit that a simpler solution with fewer variables yields more predictable results and is easier for the business to execute.
  • Occam’s Razor helps businesses focus on streamlining product development, simplifying customer service, and defining a target audience. McDonald’s and Apple are two examples of companies that have used simplicity to their advantage.
  • In more general business applications, Occam’s Razor is used to reduce the complexity that arises from too many websites, bloated product proposals, and international expansion efforts.

What is an example of Occam's razor?

A great example is Apple’s iPhone, which with just a single button on smartphones and tablet devices, designers gave consumers a sleek and minimalist product without extraneous features. The simplicity of Apple’s GUI and UX is a trademark of the company, and the fact that anyone, in no time, can learn to use an Apple device, makes it a perfect example of Occam’s Razor.

What is the opposite of Occam's razor?

The opposite of Occam’s Razor is Hickam’s Dictum which works as a counterargument to Occam’s razor. Indeed Hickam’s Dictum poses that to understand complex situations, a person, or group must be looking at multiple variables.

What is Occam's Broom?

Another concept connected to Occam’s Razor is Occam’s Broom, where when inconvenient facts that do not fit into someone’s hypothesis or serve their agenda are swept aside or hidden. This bias can lead to many judgment errors and is pervasive in various domains, especially in cognitive science, where cherry-picking (you select only facts that are in line with your thesis) can become an issue.

Connected Business Heuristics

Convergent vs. Divergent Thinking

convergent-vs-divergent-thinking
Convergent thinking occurs when the solution to a problem can be found by applying established rules and logical reasoning. Whereas divergent thinking is an unstructured problem-solving method where participants are encouraged to develop many innovative ideas or solutions to a given problem. Where convergent thinking might work for larger, mature organizations where divergent thinking is more suited for startups and innovative companies.

Second-Order Thinking

second-order-thinking
Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and any eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Critical Thinking

critical-thinking
Critical thinking involves analyzing observations, facts, evidence, and arguments to form a judgment about what someone reads, hears, says, or writes.

Systems Thinking

systems-thinking
Systems thinking is a holistic means of investigating the factors and interactions that could contribute to a potential outcome. It is about thinking non-linearly, and understanding the second-order consequences of actions and input into the system.

Vertical Thinking

vertical-thinking
Vertical thinking, on the other hand, is a problem-solving approach that favors a selective, analytical, structured, and sequential mindset. The focus of vertical thinking is to arrive at a reasoned, defined solution.

First-Principles Thinking

first-principles-thinking
First-principles thinking – sometimes called reasoning from first principles – is used to reverse-engineer complex problems and encourage creativity. It involves breaking down problems into basic elements and reassembling them from the ground up. Elon Musk is among the strongest proponents of this way of thinking.

Ladder Of Inference

ladder-of-inference
The ladder of inference is a conscious or subconscious thinking process where an individual moves from a fact to a decision or action. The ladder of inference was created by academic Chris Argyris to illustrate how people form and then use mental models to make decisions.

Six Thinking Hats Model

six-thinking-hats-model
The Six Thinking Hats model was created by psychologist Edward de Bono in 1986, who noted that personality type was a key driver of how people approached problem-solving. For example, optimists view situations differently from pessimists. Analytical individuals may generate ideas that a more emotional person would not, and vice versa.

Second-Order Thinking

second-order-thinking
Second-order thinking is a means of assessing the implications of our decisions by considering future consequences. Second-order thinking is a mental model that considers all future possibilities. It encourages individuals to think outside of the box so that they can prepare for every and eventuality. It also discourages the tendency for individuals to default to the most obvious choice.

Lateral Thinking

lateral-thinking
Lateral thinking is a business strategy that involves approaching a problem from a different direction. The strategy attempts to remove traditionally formulaic and routine approaches to problem-solving by advocating creative thinking, therefore finding unconventional ways to solve a known problem. This sort of non-linear approach to problem-solving, can at times, create a big impact.

Moonshot Thinking

moonshot-thinking
Moonshot thinking is an approach to innovation, and it can be applied to business or any other discipline where you target at least 10X goals. That shifts the mindset, and it empowers a team of people to look for unconventional solutions, thus starting from first principles, by leveraging on fast-paced experimentation.

Biases

biases
The concept of cognitive biases was introduced and popularized by the work of Amos Tversky and Daniel Kahneman in 1972. Biases are seen as systematic errors and flaws that make humans deviate from the standards of rationality, thus making us inept at making good decisions under uncertainty.

Bounded Rationality

bounded-rationality
Bounded rationality is a concept attributed to Herbert Simon, an economist and political scientist interested in decision-making and how we make decisions in the real world. In fact, he believed that rather than optimizing (which was the mainstream view in the past decades) humans follow what he called satisficing.

Dunning-Kruger Effect

dunning-kruger-effect
The Dunning-Kruger effect describes a cognitive bias where people with low ability in a task overestimate their ability to perform that task well. Consumers or businesses that do not possess the requisite knowledge make bad decisions. What’s more, knowledge gaps prevent the person or business from seeing their mistakes.

Mandela Effect

mandela-effect
The Mandela effect is a phenomenon where a large group of people remembers an event differently from how it occurred. The Mandela effect was first described in relation to Fiona Broome, who believed that former South African President Nelson Mandela died in prison during the 1980s. While Mandela was released from prison in 1990 and died 23 years later, Broome remembered news coverage of his death in prison and even a speech from his widow. Of course, neither event occurred in reality. But Broome was later to discover that she was not the only one with the same recollection of events.

Crowding-Out Effect

crowding-out-effect
The crowding-out effect occurs when public sector spending reduces spending in the private sector.

Bandwagon Effect

bandwagon-effect
The bandwagon effect tells us that the more a belief or idea has been adopted by more people within a group, the more the individual adoption of that idea might increase within the same group. This is the psychological effect that leads to herd mentality. What in marketing can be associated with social proof.

Read Next: BiasesBounded RationalityMandela EffectDunning-Kruger EffectLindy EffectCrowding Out EffectBandwagon Effect.

Other connected business strategy frameworks

PESTEL Analysis

pestel-analysis
The PESTEL analysis is a framework that can help marketers assess whether macro-economic factors are affecting an organization. This is a critical step that helps organizations identify potential threats and weaknesses that can be used in other frameworks such as SWOT or to gain a broader and better understanding of the overall marketing environment.

STEEP Analysis

steep-analysis
The STEEP analysis is a tool used to map the external factors that impact an organization. STEEP stands for the five key areas on which the analysis focuses: socio-cultural, technological, economic, environmental/ecological, and political. Usually, the STEEP analysis is complementary or alternative to other methods such as SWOT or PESTEL analyses.

STEEPLE Analysis

steeple-analysis
The STEEPLE analysis is a variation of the STEEP analysis. Where the step analysis comprises socio-cultural, technological, economic, environmental/ecological, and political factors as the base of the analysis. The STEEPLE analysis adds other two factors such as Legal and Ethical.

Porter’s Five Forces

porter-five-forces
Porter’s Five Forces is a model that helps organizations to gain a better understanding of their industries and competition. Published for the first time by Professor Michael Porter in his book “Competitive Strategy” in the 1980s. The model breaks down industries and markets by analyzing them through five forces.

SWOT Analysis

swot-analysis
SWOT Analysis is a framework used for evaluating the business’s Strengths, Weaknesses, Opportunities, and Threats. It can aid in identifying the problematic areas of your business so that you can maximize your opportunities. It will also alert you to the challenges your organization might face in the future.

BCG Matrix

bcg-matrix
In the 1970s, Bruce D. Henderson, founder of the Boston Consulting Group, came up with The Product Portfolio (aka BCG Matrix, or Growth-share Matrix), which would look at a successful business product portfolio based on potential growth and market shares. It divided products into four main categories: cash cows, pets (dogs), question marks, and stars.

Balanced Scorecard

balanced-scorecard
First proposed by accounting academic Robert Kaplan, the balanced scorecard is a management system that allows an organization to focus on big-picture strategic goals. The four perspectives of the balanced scorecard include financial, customer, business process, and organizational capacity. From there, according to the balanced scorecard, it’s possible to have a holistic view of the business.

Blue Ocean Strategy

blue-ocean-strategy
A blue ocean is a strategy where the boundaries of existing markets are redefined, and new uncontested markets are created. At its core, there is value innovation, for which uncontested markets are created, where competition is made irrelevant. And the cost-value trade-off is broken. Thus, companies following a blue ocean strategy offer much more value at a lower cost for the end customers.

Scenario Planning

scenario-planning
Businesses use scenario planning to make assumptions on future events and how their respective business environments may change in response to those future events. Therefore, scenario planning identifies specific uncertainties – or different realities and how they might affect future business operations. Scenario planning attempts at better strategic decision-making by avoiding two pitfalls: underprediction, and over-prediction.

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