Drucker + Big Data = A Fundamental Theory of Business?

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Generally speaking, theories are developed through an iterative process, where an hypothesis about a phenomena is repeatedly tested and refined by comparing its predictions with the observed outcomes. Nonetheless, as I mentioned earlier, things could get complicated at this level of inquiry. Even the act of observing and describing the world can be debated. I, for one, adhere to

“a view in which the mind does not simply ‘copy’ a world which admits of description by One True Theory. But my view is not a view in which the mind makes up the world, either (or makes it up subject to constraints imposed by ‘methodological canons’ and mind-independent ‘sense-data’). If one must use metaphorical language, then let the metaphor be this: the mind and the world jointly make up the mind and the world” (Putnam, 1981).

So, what is then a good theory?

“For the truths about nature are too many, and most of them are not worth knowing. Even if one focuses on a small region of the universe — a particular room, say, during the period of an hour — there are infinitely many languages for describing that room and, for each such language, infinitely many true statements about the room during that time. Simply accumulating truth about the world is far too easy. Scientific progress would not be made by dispatching armies of investigators to count leaves or grains of sand. If the sciences make progress, it is because they offer an increasing number of significant truths about the world” (Encyclopædia Britannica, 2013).

In other words, a good theory is one that is “driven by changing expressions of natural curiosity and by our practical needs” (Kitcher, 2001).

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In light of these statements, one may wonder if there are any theories that could transcend the society’s priorities of the day or the periods of stability described by the notion of “punctuated equilibrium.” Those who subscribe to Thomas Kuhn’s view that the scientific world progresses through a series of distinct underlying paradigms (Kuhn, 1962) tend to

“reject any idea of convergence in scientific knowledge. Since we are not talking about the same things as previous scientists, we are not getting more and more knowledge about the same microscopic or macroscopic objects” (Putnam, 1981).

However, in order to be able to even talk about future, there must be some sort of commonality of knowledge. The very act of assessing the relative value of theories relies heavily on comparison, which requires some common ground that would transcend distinct paradigms. If so, then, could some of these theories be referred to as fundamental?

While the notion of “a theory of everything” is generally dismissed (Kitcher, 2001; Prigogine & Stengers, 1984; Putnam, 1981), I think that it is useful to view theories through the perspective of more or less fundamental. Some theories have the capacity to explain a larger amount of phenomena, while others are narrower in scope. The “more fundamental” ones will also tend to serve as underlying platforms for the others. And it is those theories, which we could call fundamental, that tend to transcend a larger number of paradigms over time.

To illustrate this point, let us take Peter Drucker’s idea that all businesses are operated on a set of assumptions called the theory of the business, which must be constantly revised as the environmental conditions change (Drucker, 1994).

With that in mind, we can imagine a large set of companies that have been around for a very long period of time. Over those many years, they all had to change their theory of the business numerous times. Furthermore, all the assumptions that were employed by these companies were codified and recorded for future analysis. Now, would we see assumptions that were employed more than others? Common sense suggests so. The bigger question, however, is whether or not we can find assumptions that have survived most changes. But if we think that the only thing that remains constant is human nature or, at least, a set of basic human behavior characteristics, the odds of finding such assumptions become quite high. And those assumptions will include theories that we could refer to as fundamental.

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REFERENCES

Drucker, Peter F. (1994), The Theory of the Business, Harvard Business Review

Encyclopædia Britannica (2013), Philosophy of Science, Encyclopædia Britannica

Kitcher, Philip S. (2001), Science, Truth, and Democracy, Oxford University Press

Kuhn, Thomas S. (1962), The Structure of Scientific Revolutions, The University of Chicago Press

Prigogine, Ilya & Stengers, Isabelle (1984), Order Out of Chaos: Man’s New Dialogue with Nature, Bantam Books

Putnam, Hilary (1981), Reason, Truth and History, Cambridge University Press

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This is an excerpt (page 9) from the first, unedited draft manuscript of a "letter to the reader" that was intended to complement Cristian's 2013 book Spointra and the Secret of Business Success (The Aged Edition) — a picture book for grown-ups aiming to capture the smallest amount of knowledge that explains the largest amount of phenomena in the business world.

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Image 1: Illustration "Drucker + Big Data = A Fundamental Business Theory?" by Cristian Mitreanu.

Image 2: A copy of Philosphiae Naturalis Principia Mathematica by Sir Isaac Newton at the Science Museum Library and Archives in Swindon, England. Daniel Berehulak/Getty Images, via NPR.

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This article was first published here.

Cristian Mitreanu