How can we make sure that our definitions actually link up properly with the context they purport to describe? How can we test our definitions for validity and meaningfulness in the respective context?
Perhaps rather too often, amidst those endless LinkedIn discussions, we get stuck on definitions. Different people define things in different ways: no real surprise about that. Yet every now and then we have a real problem when someone comes up with a definition that is truly daft, and has no idea of just how dangerous such a ‘definition’ can be.
Yesterday was one of those times. The discussion was supposed to be about the differences between ‘business’, ‘organisation’ and ‘enterprise’, but had somehow got sidetracked onto a broader discussion about economics. At that point, one of our regular would-be ‘academics’ came up with the following assertion, that he claimed was an absolute indisputable ‘lemma’ (core-definition) of all economics:
“The purpose of any business is to identify where scarcity is or can be created and use that to create goods that generate profit”
Okay, the (mis)definitions that this particular guy comes out with are often beyond bizarre: from both a theoretical and a practical perspective I’m often astounded by their arbitrariness, their odd mix of spurious-precision and lack of precision, and their lack of connection with the real world. But even by his standards, this one’s an absolute doozy – literally a killer, if we’re not careful. And yet a lot of people won’t at first be able see what’s wrong with it – particularly if they just glanced at it without thinking of any of the implications – or be able to recognise just how dangerous a ‘definition’ this really is. In reality, it’s an empty, self-serving, self-referential bad-joke – and potentially-lethal if we use it as a basis on which to design a business.
“Identify a scarcity” has some limited validity to it, yes. (More on that in a moment.) But over-exploiting a scarcity, and, even more, “creating a scarcity”, is called ‘profiteering’, and in most business-contexts is considered either immoral or illegal – not by the business itself, perhaps, but by the communities within which the business operates. Such ‘profiteering’ and suchlike destroys the mutual-trust that is probably the key shared-asset in any viable economics, and engenders a strong desire in others to override the artificial-scarcity by any means available. In other words, it’s a very fragile basis for a business-model, especially over the longer-term.
The key problem with the definition is that it conflates or confuses ‘scarcity’ (a real and/or artificial constraint on availability of resources or services) with ‘desire’ (the emotion-based drivers that form the actual basis for transaction, trade or change) – and although, yes, they are sort-of related, they’re not the same. Likewise the various subtle-yet-crucial distinctions within the overall theme of ‘desire’: want versus need, for example, and perceived-need versus actual-need.
Okay, yes, many business-models depend on people not understanding those distinctions – and, yes, advertising plays a key role in creating and maintaining such confusions, such as to create spurious perceived-need (“Do you suffer from night-starvation?”). But if, as enterprise-architects and the like, we aren’t aware of and precise about those definitions, we will be placing our organisations and enterprises at risk.
So let’s reframe the definition quoted above into something that actually does get close to matching up with the real-world:
“The purpose of any [for-profit] business is to identify where desire (want and/or need) exists or can be created, and use that as a guide to create goods and services that intend to satisfy the desire [and thereby generate profit].”
(If we remove the words in [..] brackets, the definition can also fit the business of any non-profit, NGO, government-agency or whatever. Alternatively, with a broader concept of ‘profit’, we can reframe every organisation and its business-model as as ‘for-profit’ – see the post ‘Every organisation is ‘for-profit’‘ )
The key point is that definitions are, in effect, a form of belief, which in turn underpins Gooch’s Paradox: “things not only have to be seen to be believed, but also have to be believed to be seen”. Hence, in turn, our definitions colour and guide what we can see and do in the context bounded by the scope of that definition. If we’re careless about our definitions, we inherently skew our perception and action, and thereby also create significant and unneeded risks for ourselves and others.
A simple example? That reframed definition above in essence changes only one word from the original (from ‘scarcity’ to ‘desire’), but is usable, valid and legally-defensible pretty much everywhere, for every form of business. But (mis)using the original definition (“creating scarcity”) as a basis for business is literally ‘risky-business’: in some jurisdictions (such as in China, for example) it can and will get you placed in front of a firing-squad, or worse. Not a good idea?
Definitions matter, folks…