The Danger of Oversimplification

Why making things too simple is killing your competitive edge

I watched a master chef reduce a complex sauce the other day, and something fascinating happened. As the liquid evaporated, the flavors initially intensified.

But push it too far, and suddenly all the subtle notes that made the sauce special vanished. What remained was concentrated but flat, a shadow of its original excellence.

We're obsessed with simplification, aren't we? "Break it down," we say. "Make it simpler." Fair enough. Einstein himself said "make things as simple as possible, but no simpler."

Funny thing is, we usually forget that second part.

The Physics Envy Trap

I've seen this play out countless times. Most memorably in Charlie Munger's favorite cautionary tale about McKinsey's advice to the Washington Post.¹ Brilliant consultants with sophisticated models, confidently delivering precise valuations that nearly led the company into financial disaster. They'd reduced reality until it fit their spreadsheets, missing everything that actually mattered.

Why? Because they fell into the oversimplification trap.

Munger calls this "physics envy", our desperate attempt to force messy realities into neat, precise formulas like physics has. But business isn't physics. People aren't electrons. Markets aren't mathematical equations.

The Billion-Dollar Blindfold

What’s fascinates me is this isn't just about making bad decisions. It's about systematically blinding ourselves to opportunity.

Clayton Christensen's research on "value networks" revealed companies develop institutional lenses through which they evaluate opportunities. These lenses, shaped by past experiences and existing frameworks, can make revolutionary innovations appear worthless simply because they don't fit neatly into existing models.

Think about the iPhone's early days. Steve Jobs, master of simplicity, initially resisted third-party apps. He wanted a “simple”, controlled ecosystem. It wasn't until he embraced the complexity of an open marketplace that the iPhone transformed from clever product into a world-changing platform. By 2022, that "complicated" decision accounted for 7% of Apple’s total sales.

Building Complexity Confidence

I'm not suggesting we throw simplicity out the window. Instead, we need to develop what I call "complexity confidence". The ability to navigate and harness complexity rather than fear it.