If A equals B and B equals C, then A equals C. This is a typical precept of formal logic, upon which all reasoning is based. If somebody tried to explain something using statements that contradicted such a precept, we would take exception immediately: such an argument would be illogical.

Competitive Advantage

Understanding How Companies Have A Structural Competitive Advantage: Without logic there can be no science, for we cannot establish the correctness of a given argument. Logic is so important that we have it instilled into us from childhood, and we can say that a large part of our education consists precisely of this. Some psychologists go even further, stating, with solid reasons, that basic logic principles are innate: we come into this world with them, much as we come with the ability to hear or see.

The simplicity of these logical principles is a bit deceptive: they are simple, but without them we could not build more complex constructions. We could not answer the great questions that science and technology have been able to deal with. Physics, for instance, could not advance until Galileo had it enter the path of logic. Before him, each ‘scientist’ had his own ideas, used his own terminology, and put forward ad hoc arguments, that could never be generalized. Once the basic norms of logic were applied however, progress was rapid and Newton, a few years later, answered most of the problems that physics had been trying to solve for millennia. In 300 years we managed to go from magic and alchemy to quantum mechanics.

In the business world, we are not very far from the Middle Ages. If we ask a physicist what determines the speed of an object’s fall, we will get an answer that is both precise and identical to that given by any other physicist. If we ask an expert why a given company is profitable, or whether a given business looks promising, we will receive an answer that is in all likelihood essentially unique. It will not only be different from other answers in its results, but in its starting points, its parameters, its internal logic, even its terminology. Exactly like physicists in the Middle Ages; Aristotle said that things fell to the ground because ‘the centre of the earth

H/T: CSinvesting.org

Understanding How Companies Have A Structural Competitive Advantage

Strategic Logic by ValueWalk.com