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On Occam's Razor

14 May, 2022 - 5 min read


Occam’s razor states that the simplest explanation is preferable over a complex one.

Philosophers select explanations with the fewest assumptions when faced among competing hypotheses.

Definition

Occam’s razor is named after the 14th-century English logician and theologian, William of Ockham. This philosophical razor advocates that when presented with competing hypotheses about the same prediction, one should select the solution with the fewest assumptions, and that this is not meant to be a way of choosing between hypotheses that make different predictions.

All things being equal, the simplest solution tends to be the best. We should discard the things which are unknowable and unimportant. Just because something is complicated, it does not mean it is worth anything. Keep everything simple.

Deep analysis

Albert Einstein had a preference for simplicity which shows in his famous equation E=MC2. He once said:

Everything should be made as simple as possible, but not simpler.

He could’ve settled for a complex and lengthy equation, but instead he settled for simplicity.

Stephen Hawking also advocated for Occam’s razor:

We could still imagine that there is a set of laws that determines events completely for some supernatural being, who could observe the present state of the universe without disturbing it. However, such models of the universe are not of much interest to us mortals. It seems better to employ the principle known as Occam’s razor and cut out all the features of the theory that cannot be observed.

Simplification is a powerful weapon in complex environments. There is a lesson in this beyond scientific theories.

Engineering

In engineering, it’s the KISS principle: keep it simple, stupid. It employs avoiding complexity and over specification.

Writing

Given two written passages which convey almost the same meaning, the shorter passage is usually better. Shortening makes writing clearer and more vivid.

Productivity

Have you ever wondered why billionaires like Mark Zuckerberg or Steve Jobs always wear the same clothes? To avoid decisions. Having to wake up every day with a toll of what to wear is not good use of their time. This technique is employed beyond the billionaires club. Anyone who seeks to be productive simplify their daily cognitive load.

Investing

Simplicity is the way to long term success in investing. Warren Buffett on simplification in investing:

The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective….We haven’t succeeded because we have some great, complicated systems or magic formulas we apply or anything of the sort. What we have is just simplicity itself.

After 25 years of buying and supervising a great variety of businesses, Charlie and I have not learned how to solve difficult business problems. What we have learned is to avoid them. To the extent we have been successful, it is because we concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers. The finding may seem unfair, but in both business and investments it is usually far more profitable to simply stick with the easy and obvious than it is to resolve the difficult.

…we try to stick to businesses we believe we understand. That means they must be relatively simple and stable in character. If a business is complex or subject to constant change, we’re not smart enough to predict future cash flows. Incidentally, that shortcoming doesn’t bother us.

Charlie Munger who is Buffett’s business partner also agrees:

People calculate too much and think too little….we have a passion for keeping things simple. If something is too hard, we move on to something else. What could be more simple than that?

Instead of worrying about where the interest rates or economic headwinds or tails winds are going, focus on what is knowable. Avoiding unknowable is an act of simplification. Buffett explains:

There are two questions you ask yourself as you look at the decision you’ll make. A) is it knowable? B) is it important? If it is not knowable, as you know there are all kinds of things that are important but not knowable, we forget about those. And if it’s unimportant, whether it’s knowable or not it won’t make any difference. We don’t care.

Even the world’s best behavioral economist, Professor Daniel Kahneman suggests that we should simplify our financial plan:

Keep it simple and aim to beat inflation. Don’t try to beat the market. When it comes to investing, less is more. And if you try to do more, you’ll often end up with less.

Make fewer decisions to make better decisions.

Use caution

For every complex problem there is an answer that is clear, simple, and wrong. — H. L. Mencken

While Occam’s razor is a popular mental model, bear in mind that Occam’s Razor doesn’t prove anything. It does not mean the world is simpler. Einstein proves the point:

In my opinion the theory here is the logically simplest relativistic field theory that is at all possible. But this does not mean that Nature might not obey a more complex theory.

Occam’s razor is not an alternative for critical and logical thinking. It only states that simpler solutions are easier to understand and teach over the complex ones. Opting for simpler solutions still requires work. Simplifying is hard work and requires a lot of effort.