Businesses make decisions based on predictions, so it is important to make good predictions. The model of a predictive science is provided by Newton’s three laws of motion. Can we devise an analogous set of laws that apply to business predictions? And can we encapsulate those laws in concise and memorable formulations, as Newton did? That may sound like a tall order, but perhaps it is not as daunting as it sounds, especially when we analyze the conceptual structure of Newton’s own laws.
Let’s start with some truths about the marketplace in relation to business innovation. I think we can agree that innovations tend to encounter resistance at first because people are apt to be skeptical, stuck in their ways, and respectful of tradition. Then there come early adopters who set the tone, later followed by a larger group, until the product gains widespread acceptance (e.g., the motorcar, the computer, the cell phone, etc.). Thus there is a time lag between introduction and market penetration owing to social inertia—things keep on going the same way unless influenced to change course by some forceful change. But once the change has been set in motion it gathers a momentum of its own. Let’s call this the Law of Socio-Economic Inertia: innovations encounter forces of resistance, which once overcome lead to continuing growth. Business decisions need to recognize this fact and plan for it, not regard it as an indication of product deficiency. In fact, we would predict that any innovation will go through three characteristic stages: first, inertial resistance; second, acceptance and enthusiasm; third, absorption and routine commodification (even accompanied by boredom and openness to further innovation). This is a pattern discernible across a wide range of cases.
Newton’s second law states that force is the product of mass and acceleration. What is the analogous law in the socio-economic world? Well, a product’s success (its market effect) is a function of two independent variables: the intrinsic quality of the product, and the prevailing conditions of the market. For example, the motorcar may be a fine invention but it will not succeed if there are no roads to drive on. Similarly, the personal computer will not take off unless people (a) have the skills necessary to use it and (b) see the need for it. Just as you can’t predict the effect of a projectile’s impact simply by knowing its acceleration without knowing its mass (and vice versa), so you can’t predict a product’s market effect unless you know the quality of the product and the prevailing conditions of the market (especially the level of demand). Newton’s law says that physical effects are two-factor affairs, while the business analogue says that product effects are the result of a pair of independent factors—product quality and market receptiveness. Both factors have to be taken into account in making business decisions. Force results from the two factors of mass and acceleration; market penetration results from the two factors of product quality and market readiness. We can even say that some markets possess greater economic acceleration than others, if some are more receptive to socio-economic change than others—less hidebound, more flexible (by law, tradition, politics, etc.). Markets with less inertia will enable more rapid product success and absorption, so that a high-quality product will achieve quicker market penetration. In other words, culture is vital to product success, not merely the intrinsic quality of the product.
Newton’s third law asserts that for every action there is an equal and opposite reaction. The analogous law in business is that a business intervention is apt to generate a response proportional to that intervention: the bigger the intervention, the greater the response. Thus the personal computer had deep market penetration and it generated equally extensive social and economic effects. The atomic bomb is another example. A new type of drumstick or squash racquet would lie at the opposite extreme. The point is that products don’t enter the marketplace without changing it, sometimes dramatically. We need to predict these changes and plan for them. They can be hard to predict and can ramify alarmingly. Newton’s third law might be rephrased, “If you hit something, it will hit back”; the corresponding socio-economic law might be stated, “If you introduce a product into the market-place, the marketplace will react accordingly”. This is an instance of a more general law: historical change leads to historical reaction (reformation leading to counter-reformation, etc.). Colloquially put, no improvement goes unpunished. There will always be disturbances, recalibrations, and counterrevolutions. With luck and good judgment, these reactions can be further exploited as business opportunities. So the predictions afforded by this law can affect business decisions positively.
I would add a further law not explicitly cited by Newton: the Law of Unintended Side Effects. If you hit a ball with a tennis racquet it makes a noise as well as propelling the ball: this is not what the player intends but it results inevitably from the nature of the causal interaction. Likewise, a new technology can perform as intended but also lead to unintended side effects—that’s just how causation works. Examples are legion (cars and traffic accidents, nuclear power and Chernobyl, cell phones and cell phone addiction). Any decision maker has to foresee these side effects and plan to mitigate any possible negative consequences. The law of unintended side effects is universal, applying to physics and biology as well as to human interventions and artifacts; we need to be aware of it constantly.
If we put these three laws together as a package, we obtain a predictive conceptual framework that can be used in practical contexts—just as Newton’s three laws together form a conceptual framework enabling predictions about the physical world. In fact, I would say there is an abstract schema lying behind both sets of laws that is highly commonsensical and even self-evident (one might even say a priori) once it is spelled out. Let me state it very simply: (i) Change encounters resistance; (ii) Change is a result of both the changing agent and the prevailing background conditions; (iii) Change produces reactive change. This schema applies as much to social persuasion as it does to brute physical impact. In business contexts the three principles translate into the laws spelled out above, which I will restate for clarity’s sake: (i) Innovation meets with (initial) resistance; (ii) Innovation succeeds only when quality and receptivity are aligned and combined; (iii) Innovation produces reactions that can ramify (for good or ill) and which may be hard to predict. I hope these principles seem like formulations of commonsense ideas (as indeed Newton’s three laws should strike us that way); the benefit in stating them in this way is that concise codification and conceptual explicitness can pay dividends when making practical decisions. It helps to keep these laws in mind when faced with the world’s complexities.
An internationally acclaimed philosopher and teacher, McGinn was educated at Manchester University (Psychology, BA and MA, 1972) and Oxford University (Philosophy, B Phil, 1974), and went on to teach philosophy at University College London, Oxford University, UCLA, Princeton, and Rutgers. He was a philosophical advisor to Geoge Soros from 2008-2013.