Philosophy

There are ongoing efforts to apply philosophy to research in entrepreneurship theory, and not only entrepreneurship of course, but all the business sciences – strategy, organizational behavior, management, finance, etc. Some of these efforts have been successful, some unsuccessful, and others nonsensical. In what follows, I want to look at what it means to apply philosophy, some formalisms for how to do it (and not do it), and describe the best path forward for those interested in applying philosophy to questions in entrepreneurship and the social sciences in general.

Let’s start with the obvious question. What is philosophy? At dinner parties, one of my undergraduate philosophy professors would respond to this question tongue-in-cheek by saying, “Would you like the four-hour response or the long answer?” Funny, but I never liked that response very much because, as another one of my mentors, my dissertation advisor John Searle, used to say, “If you can’t say it clearly then you don’t understand it yourself ”, and I think all of us do actually understand what philosophy is and it doesn’t require a four-hour-long explanation. Rather, it’s quite simple. On my take, philosophy is reasoned talk about fundamental questions. That’s it. So, talking about one’s favorite color or what movie one wants to see doesn’t count as philosophy because neither are foundational nor fundamental topics. Neither is haggling over the cost of a car repair. And although haggling over the cost of a car repair is not philosophy, discussing the question of what makes an economic exchange an economic exchange is philosophy, if it is discussed in a “reasoned” manner.

So, philosophy, then, on this view, is: a) first, an activity, the activity of talking or discussing, whether in person or print. Not just any talk, but talk that is performed in a certain manner and directed toward certain topics. b) Specifically, it gravitates around topics involving foundational or fundamental questions. And c) the discussion unfolds in the manner of good reasoning. Some professional philosophers would disagree with this definition, but I think it captures most of what we would want to call philosophy’.¹

Philosophy, then, extends well beyond the traditional categories of logic, ethics, metaphysics, epistemology, and aesthetics because if you’re exploring the fundamentals of any topic in a reasoned manner then that’s philosophy. You can discuss the philosophy of X where X is almost anything – biology, language, sport, economics, physics, entrepreneurship, etc. This coheres nicely with the use of the term in advanced academic studies and with the history of human knowledge. A Ph.D., we often forget, is a “doctorate of philosophy” because one (presumably) spent time exploring fundamentals in one’s field of study. “Natural philosophy” was for centuries the term for the reasoned study of fundamental questions of the natural (physical) world, which is why Newton termed his (1687) work, Philosophiae Naturalis Principia Mathematica, or, Mathematical Principles of Natural Philosophy.

It wasn’t until there was enough agreement about the basics of the physical world, with enough evidence in support of those basic answers, that physics branched off from philosophy and matured into a field of its own. And this is how specialized knowledge arose. The fundamental questions began as pure philosophy and when they gained enough theoretical structure they left the nest and moved out on their own. This happened to biology, chemistry, physics, psychology, anthropology, and the rest of the natural sciences.² Insofar as there are still fundamental questions at the core of these fields, it is still possible to do philosophy of physics, philosophy of biology, philosophy of psychology, etc., and many careers are built around searching for answers to the fundamental questions inside one’s chosen field. Many people work on a philosophy-of-X topic either from the philosophy side or the X side. Scholars working on fundamental questions in the business sciences do this too.

What does ‘fundamental’ mean? An issue that’s fundamental is one that is conceptually prior, more general, or about something’s essential nature. For example, the question of what the actual units of genetic selection are is more fundamental than the question of whether birds descended from reptiles, though both questions are important questions in biology. And the question of what constitutes a social entity is prior to, and a more fundamental question than, the question of what specific incorporated legal entity provides the best tax advantages. Most of us agree about whether a question is fundamental or foundational even without hard metrics for quantifying the precise degree to which it is fundamental.

Reasoning and logic

If philosophy is reasoned talk about such fundamental issues, then it’s important to understand what ‘reasoned’ means. Logic is the study of the methods of good and bad reasoning and in the Western world we take logic to be the compass that guides us toward good reasoning. Logic is the language of philosophy, as math is the language of physics. Indeed, a well-trained philosopher might have limited empirical understanding of any particular topic but typically possesses well-honed powers of logical reasoning and analysis. This is why philosophy majors typically get the top, or near-top, spots in graduate exams like the LSAT, GRE, and MCAT (APA report, 2014)³ and have the highest rates of acceptance into medical school and law school. They’ve had lots of practice doing conceptual analysis and reasoning their way through analytic problems of the kind contained in such entrance exams.

Doing philosophy, on the account presented here, requires a discussion that unfolds in the manner of good reasoning and it is here where the business journals need the most help and where philosophy can pay the biggest dividends. The fundamental principle of good reasoning is that there must be a reason, or reasons, in support of a conclusion, either reasons that purport to support a claim conclusively (a deductive argument) or with some inconclusive degree of probabilistic support (an inductive argument).⁴ A well-reasoned discussion, like the discussion in a paper, should offer a clear thesis as a conclusion supported by a series of relevant reasons that together form the core argument. That is the framework around which the fabric of the discussion is spun.

Somehow, this fundamental tenet of good reasoning sometimes goes missing in contemporary business journals and, when lost, dysfunctional substitutes appear. A thesis “that’s interesting” (Davis, 1971) is no substitute for a claim properly supported by reasons. Here’s an example of an interesting thesis: aliens from planet Zyborg control Earth’s interest rates by means of telekinesis. That’s certainly “interesting” but not worth reading if no plausible reasons are offered in support of it.

Another thing that fails to provide a genuine reason in support of a claim is a citation. Yes, that’s right. Someone believing your claim is not a logical reason in support of that claim. Just the opposite. To justify your claim on the basis of another’s belief in it is a well-known informal logical fallacy called ‘appeal to authority’, or ‘appeal to the masses’. Somewhere during the growth of the business sciences we began to confuse two things – the use of a citation as a way of helping a reader understand where discussants stand (and confirming that your statement is relevant to that discussion), and the use of a citation as logical support for a claim. Having a thousand citations for your claim is no logical reason for it anymore than a thousand people believing the Earth is flat is a reason the Earth is flat.

A third substitute that fails is a merely related idea. If I’m arguing that combustion engines are the best kind of engines and in support of that I say that lawnmowers have combustion engines, I have offered no reason at all for why combustion engines are the best; I have offered a merely related idea. Providing nothing but a collection of merely related ideas that orbit around a thesis is to merely gesticulate around a claim without offering any real, logical reason in support of that claim. This is perhaps the single most commonly occurring failure of logic today.

In sum, the central edict of good reasoning is to provide reasons in support of a thesis. There are at least three ways to fail to provide reasons, and so three ways to fail to provide a logically coherent discussion: 1) to think that you’ve provided a reason for your thesis because your thesis is “interesting”; 2) to think that you’ve provided a reason for your thesis because you’ve provided a citation (or 1,000 citations) in support of it; 3) to think that you’ve provided a reason for your thesis because you’ve provided an idea that is merely related to it.

Crafting a good definition

Before moving on to the topic of philosophical content, I would like to discuss one last formalism used in the application of philosophy to the business sciences, and that is the formal definition. A lack of careful conceptual analysis reveals itself readily in a poor definition. There are many kinds of definitions but at the most general level there are a) intensional (conceptual) definitions that state the essential character of something (usually by stating its necessary and sufficient conditions or through genus-differentia), there are b) extensional definitions that simply list all the members of the defined category, and there are c) operational definitions that specify a technique for determining the members of an extensional category. One can get an intentional (conceptual) definition wrong by mis-specifying the concept. One can get an extensional definition wrong by identifying the wrong members. And one can get an operational definition wrong by specifying a technique that identifies the wrong members.

The real trouble is the rampant proliferation of poorly constructed definitions in theory papers where a genuine understanding of the core constructs is critical and cannot be sidelined or avoided. Getting the concept right in the first place not only corrects a bad conceptual definition but increases the likelihood of getting the operational and extensional definitions right too. In this sense, it can be argued that the conceptual definition is perhaps primary, so we shall focus on the it, though, in reality, each type of definition affects the others in the give-and-take process, like staking down the corners of an tarp. It’s sometimes said that formal conceptual definitions are irrelevant or unimportant, but this is true only if having a concise statement of the essential nature of something is irrelevant or unimportant. If philosophy is the discussion of the essential nature of some phenomenon, then an accurate conceptual definition is a little bit of bedrock of pure philosophy upon which a theory can be successfully built.

Why do we find so many broken definitions in theory papers? There are two reasons. The first is that any definition requires deep reflection. In fact, if Plato knew one thing, he knew that making minced meat out of a poorly constructed definition was easy.⁵ Definitions are important for the same reason that they are hard to get right – they force one to think through the nature of something, be explicit, and clarify exactly what its essential structure is. And it just takes a single counterexample to refute a definition, which is why the prime directive for every practicing philosopher since 300 BC is “never offer an explicit definition”. A favorite Philosophy 101 first-class-of-the-semester pastime is to start by asking the students to define “chair” and then mercilessly dismantle the definitions. “Something with four legs that you sit on”. Counterexample: a log-stump chair or a bean-bag chair. “O.K., something you sit on.” Counterexample: “Well you can sit on a tranquilized tiger and that’s not a chair….” And on it goes until the poor undergraduate is left with the feeling that, first, composing a definition (a definiens) is basically impossible, and second, that philosophy is a waste of time, a feeling echoed by many in the business sciences.

‘Entrepreneurship’ definition examples

Still, theory papers must provide better conceptual definitions. But if it’s not easy to formulate a definition, even for something seemingly as easy and concrete as ‘chair’, how is one supposed to come up with a definition for a deeply contentious phenomenon like ‘entrepreneurship’? Sentiments run deep here: “If we waited for arm-chair speculators to agree on the definition of ‘entrepreneurship’, nothing would’ve gotten done in the last 50 years! Work must go on! Besides we’ve repeatedly tried and never made progress on a definition!” For most researchers in entrepreneurship, working on their field’s definition is about as much fun as reliving the scene of a multi-victim car crash. Still, other fields can quite easily state what they study. Strategy? The study of competitive advantage in firms. History? The study of past events. Physics? The study of matter. Psychology? The study of human behavior and mind. Shouldn’t entrepreneurship scholars be able to at least state what the nature of their field’s study is too?

I shall be forthright and suggest my own definition of entrepreneurship:

The first thing to notice about this formulation is that entrepreneurship is an activity. The second thing to notice is that what counts as entrepreneurial activity is relativized to the knowledge and experience of the agent such that two people can be engaged in the very same activity and it be entrepreneurial for one but not for the other. This ‘agent relativization’ solves a number of puzzles that have plagued the field over the years and coheres nicely with how we think about entrepreneurship in daily life.

Here’s one apparent contradiction it resolves. Imagine a life-long janitor who buys his first McDonalds fast food franchise and compare this to a life-long franchisee who buys his thousandth McDonalds. There is of course a question of whether buying a franchise is a real case of entrepreneurship at all, but more than 98% of us believe that the janitor is acting more entrepreneurially than the professional franchisee (McBride, 2017). But if they are both purchasing the same McDonalds, there is no distinction to be made in the product or the business itself. Nor is there any difference in the degree of innovativeness. Neither is innovative. The discrepancy in the evaluation of the two cases seems like a contradiction. It’s not. The difference is due to a difference in the agents. The janitor is engaged in a novel activity; the professional isn’t. A relativized conception of entrepreneurship handles this deftly. Non-relativized approaches don’t. The approaches that define entrepreneurship as, simply, innovation, or starting a new venture, or economic activity, are absolute definitions that don’t take the agent’s background knowledge or experience into consideration. But that knowledge and experience determines whether the conditions within which the agent is acting are novel and uncertain for the agent or not. Buying one’s thousandth McDonalds is not novel for the experienced professional; it is for the janitor.

An investigation into this conception of entrepreneurship requires a large treatment of its own and the purpose here is to instead explore the application of philosophy to entrepreneurship, within which definitions are merely one prominent methodological tool. But there are a few implications of this definition that are worth noting before moving on to some definitions that don’t work so well. The first is that firms can act entrepreneurially insofar as they are moving into novel and unknown areas – e.g., a completely new product or service offering. The second is that, given that the essential context is one of uncertainty and novelty, the essential activity is one of navigating and reducing uncertainty and deploying creative problem solving because the agent lacks the experience and knowledge for routine problem decomposition. The third is that, insofar as the goal is economic value generation and ‘economic value’ is an inherently social phenomenon, entrepreneurship itself is inherently a social phenomenon. This shouldn’t be surprising since entrepreneurship is, after all, just one of the social sciences, like economics, sociology, management, strategy, political science, etc. But this simple point – that entrepreneurship is social – is a critically important point, confusion about which has caused endless problems over the decades, so we will cycle back to it later and I will repeat it again here: entrepreneurship is a social phenomenon.

So what should one do if one wants better definitions of a theoretical construct? Well, one needs to pay attention to those pesky counterexamples. Plato taught us this a couple of millennia ago. The power of the counterexample is that it points out a “rotten member” in the extension of members that would be there if one were to operationalize the conceptual definition. It therefore serves to detect problems across all three species of definition types in one fell swoop.

Let’s look at some obvious counterexamples to recently offered definitions of ‘entrepreneurship’. On one definition, entrepreneurship is that which causes economic change. It should be clear that this is a pretty broad definition open to endless counterexamples. A tsunami that rolls over Japan causes lots of economic change but none of us want to say that the tsunami is an entrepreneur. Again, it takes only one counterexample to torpedo a definition. You can no longer say “that’s O.K., that’s still a good definition because …”. Rather you’ve got only two options. The first option is to admit the damage and modify your definition to avoid it. “Yes, that counterexample illustrates that not any form of economic change involves entrepreneurship. Let me modify the definition to, e.g., human-caused economic change.” Whether this modified definition works is a separate question, but at least the objection was handled. The second option is to try to show why the counterexample doesn’t really apply. To do this one might say, “No, a tsunami causes only physical damage, but never economic change so this counterexample doesn’t apply.” This would be a hard argument to make, in my opinion, but it at least acknowledges the force of the counterexample and attempts to defuse it. To ignore the force of a legitimate counterexample is to reject the basic principles of reason which form the bedrock of intellectual work.

Another often-cited definition of entrepreneurship is “the formation of a new venture”. There are low-hanging counterexamples here too: a multi-national starts a new venture to sell a red widget instead of the white ones that it’s sold for the last 20 years. Is that entrepreneurship? Most are inclined to say, ‘no’, so that seems like a legitimate counterexample. Or if I walk down to the Department of Corporations, hand over a form and the $100 necessary to get a C-corp, and never do anything with that firm, and never make or sell any product or service, is that entrepreneurship, since there is a newly formed venture? Again, this seems like a counterexample. There are moves available here too. You could suggest that, though there is a new firm, there’s no new venture. This would require some fiddling with the concepts of ‘firm’ and ‘venture’ to find way of distinguishing them. And you might respond to the first counterexample by suggesting that merely offering a new color of the same widget is not truly a new venture so the counterexample carries no weight. These responses may or may not actually work, but again, at least they are attempts to grapple with the counterexamples.

A final example. If you take entrepreneurship to be essentially some kind of social phenomena but suggest that entrepreneurship is essentially “the making of judgments about the allocation of scarce resources” (notice the similarity to the standard definition of ‘economics’) then I’m going to call foul because there exist glaring counterexamples. A lone survivor on an otherwise deserted island trying to decide whether to save or eat one of his last remaining coconuts is, on this definition, a genuine entrepreneur. Faced with this counterexample you have to either bite the bullet and accept the implication that entrepreneurship is not essentially social (since a lone individual making judgments apart from any society can be an entrepreneur), or the definition must be modified. To take neither path is, well, to act in a way that is irrational. Those who like this definition of entrepreneurship usually bite the bullet and accept such counterexamples and the implication that entrepreneurship is not essentially social. This would be a very peculiar result if one of the social sciences itself turned out to not be social, so I don’t think this move works and it’s worth delving into exactly why this is wrong, why it doesn’t work, and why entrepreneurship is, as we in fact already know, inherently social.

We must first, however, work through the second reason why it’s so hard to build a robust formal definition. The first reason, recall, is simply that a good definition requires considered reflection to get right, as Plato showed. The second reason is deeper. In exploring the second reason we move away from our discussion of philosophic formalisms and into a discussion of the philosophical foundation of entrepreneurship, and the social sciences in general.

The social sciences lack a unified theory

A good definition, as we noted, forces one to carefully state something’s essential nature. This is difficult to do, and it is more difficult in the social sciences. By ‘social sciences’, again, I mean: sociology, social psychology, anthropology, economics, entrepreneurship, strategy, political science, finance, organizational behavior, management science, etc. Why is it so much more difficult to state something’s essential nature in the social sciences than in the physical sciences? Because, unlike physics, in which one can clearly state the composition of, e.g., a chunk of rock (molecules comprised of atoms and ultimately smaller particles in fields of force), the social sciences have not so far been able to state the composition of a ‘chunk’ of social reality. They have so far been unable to say what a social entity (or a social fact) actually is! We have not, as it were, yet found the atoms of the social world!

We see a rift in the social sciences between theoretical work and empirical work with few bridges between the two. The bulk of the work done is empirical, statistical work. And when there is theoretical work we rarely see ‘deep’ foundational theory but rather localized theories with a narrow range of application to the particular specialized field. We see work on, e.g., transaction cost economics or the resource-based view, rather than work on the connection between transaction costs and the fundamental structure of social entities themselves. And we don’t see this work because there simply hasn’t been work done that clearly identifies what the fundamental structure of a social entity is in the first place.

We have, in other words, evidence across all the social sciences that points to one inescapable and difficult-to-swallow fact, a fact which most who work in the social sciences (me included) would much rather ignore, pretend is not true, or postpone for a future generation of scholars to confront, and that fact is the following: There is no unified theoretical framework that underlies the social sciences. And there is no unified framework because we do not understand what a social entity is, at heart. We do not know what a team, a government, or a firm really is. And if we do not yet know what it is, it’s very hard to state what it is or offer definitions for social phenomena that ultimately depend on ‘the social atoms’ of the world, whatever they are, as all social phenomena ultimately do.

The natural sciences are distinctly different on this point. They have a broad collection of overlapping and unified theories that support one another in a vast web of coherent knowledge. Physics informs chemistry and biology. Neurobiology rests on principles of physics, chemistry, and biology, etc. In contrast, the fundamental truth of the social sciences is that we do not yet know the fundamental truth. We do not have anything resembling a unified theory; we don’t know what the structure of social reality is; we can’t describe the principles by which social reality changes; nor do we have anything resembling agreement about what the fundamental units of social reality might be.

These questions should have been the responsibility of sociology as the broadest study of these fields, but sociology was, rather, founded by Durkheim on what sociology is not. It was founded on the claim by fiat that sociology is not psychology, as a way of declaring its independence from the one field to which it had the most obvious ties. It didn’t develop to a reasonable point of maturity first, like each of the natural sciences, which built a core framework of facts about the basic principles of its domain before moving out onto their own.

One might think that there is a fundamental truth of the social world and it is that social entities are made of people. Indeed, the methodological individualists claim that social entities ultimately ‘reduce’ to individual humans, and most economists agree. But many disagree. Epstein (2015) refers to this false belief as “the ant trap”. Sociologists believe that there are attributes of social entities that cannot be explained by their individual members, hence the age-old debate between the methodological individualists and the structuralists. This debate is now mirrored in a debate in strategy between those who advocate ‘microfoundations’ (methodological individualism) and those who reject it. But even if the structuralists are correct that the social level holds important powers and facts that cannot be explained by the individuals that comprise a social group, it doesn’t explain why, and still doesn’t amount to anything resembling a foundational theory. The hard-to-swallow truth is that we simply have almost no understanding of what social reality consists, how social structures are born and die, and by what ‘laws’ they change. And this collection of core problems is distinct from the recognized problem, already well accepted, that the social sciences, and economics in particular, have failed miserably at predicting critically important events, like the Great Depression or the financial meltdown of 2008.

Four options: social ontology, social evolutionary theory, institutional theory, and critical realism

The core foundation for the social sciences in general is missing. It turns out, however, that recent decades have seen a surge of work on the core problem by theorists studying what is called ‘social ontology’ (or sometimes, ‘collective intentionality’). Social ontology’s raison d’être is the study of the core problem – the question of what a social entity is – and there has been relentless pursuit of an answer in recent decades, for example: Bratman (1987, 2014); Gilbert (1992, 2015); Petit and List (2013); Searle (1995, 2010); Tuomela (2002, 2007, 2013); and Epstein (2015) among others.

There have also been at least a few other camps working on the core problem – social evolutionary theory (sometimes called, “universal Darwinism”), institutional theory, and critical realism. Social evolutionary theory suggests that the very mechanisms of evolution are not unique to biology but applicable universally, including to the social world. The Achilles heel of this view is that, where biological evolution has a clear unit over which an organism’s attributes vary and are inherited – DNA – there is no agreed-upon unit of variance, inheritance, or mechanism of selection in the social world. We don’t have the analogical “DNA” to make the theory work in the social sphere (McBride, 2016).

Neither institutional theorists nor critical realists hold a unified position, respectively. In fact, ‘institutional theory’ at this point is taken to refer to almost any social theoretical work, roughly since Marx (Scott, 2015). And the only consistent position held among critical realists is their rejection of postmodernism. In both schools there is intermittent, but regular, discussion of the physical sciences and frequent discussion of philosophy of science as if the natural sciences are in any way, shape, or form relevant to the social sciences. They are not. The Achilles heel of these positions is the claim that the social world should be studied through philosophy of science, because it is fundamentally similar to the physical sciences. And this is false (McBride, 2018).

In some importance sense perhaps “everything is physical”. But, even if true, this does not imply that every field must use the methods and principles of physics anymore than it makes sense to break out an electron microscope and infrared goggles to see the source of price fluctuations in the NASDAQ. Or to use the Hubble Space Telescope to locate the trend toward more conservative-leaning political parties in Europe. Different phenomena require different explanatory structures, and, though there is only one world, nothing is more different than physical phenomena and the social phenomena. Physical phenomena include molecules and atoms and quarks and muons and gravity; social phenomena include firms and unemployment and football teams and options derivatives. It’s true that social entities, like Microsoft, e.g., own a physical building and physical resources. But what makes Microsoft, Microsoft is not its buildings. If it were, then a firm that left its building would cease to exist before coming back into existence in a new building.

Social ontology offers a more flexible path forward, not hitching its horse to the single post of evolutionary theory (like social evolutionary theory) or Roy Bhaskar’s work (like critical realism), and insofar as it is oriented around attempts to solve the core problem, unlike institutional theory which roams broadly, it is free to deftly navigate obstacles as they arise. And it does not commit the fundamental error of conflating the physical world with the social world. Further, it has the greatest number researchers, and the most diverse and the most active research currently. So my suggestion is that the best path forward is probably some variant of work that has the greatest recent successes behind it – social ontology – without the obvious flaws just mentioned. But it would be far too great a task to delve into a thorough exploration of social ontology, or compare in detail the four theoretical options here, or adjudicate the debate about methodological individualism, or attempt to justify my claim that social ontology affords the best hope for a unified theory of the social sciences. Instead, to conclude, I would like to offer my suggestion for what the first philosophical building block of entrepreneurship and the social sciences must be, regardless of your theoretical allegiance.

The first building block for theoretical work in the social sciences

The most basic building block, I suggest, and you can guess by now, is that the social sciences are, in general, inherently social. This might seem banal, or like an irrelevant generalization, but the failure to get this basic issue right has caused an enormous amount of problems, missteps, and unnecessary hurdles for the progress of the social sciences. And, as suggested, it’s the most common error at the heart of the social evolutionary views, institutional theory, critical realism, and the anti-social stance of the “judgment view”. So getting this first block in the foundation correct eliminates an enormous variety of “shaky structures”.

Why is the seemingly boring, analytic fact that the social sciences are – surprise! – social so important and why should we care? First, as mentioned, it forces an appreciation of the distinction between physical phenomena and social phenomena. It’s no exaggeration to note that the conflation of the physical and the social is the greatest, and longest running, error in the history of social theory (McBride, 2018). The physical world and the social world are very different things and, as such, demand different explanatory frameworks – one ‘all purpose’ theory will do a good job of neither. Physical facts (e.g., that hydrogen atoms have one proton) are radically different from social facts (e.g., that Paris is the capital of France). Non-linear colliders and electron microscopes help discover the first fact. But I cannot point a microscope at the Eiffel Tower to determine France’s capital. Similarly, if I study property rights and I decide to take my pint of beer and send it to the CERN laboratory for analysis, telling the technicians that “I want you to find the type-identifying chemical configuration that determines the beer to be my beer and no one else’s”, they will politely explain to me that I am deeply confused (Searle, 2010). Why? Because there is nothing in the chemical constitution of that pint, or any other possession, that makes it my property. Property, like any other social phenomena – an employment contract, a recession, the government of the Maldives, a chess match, a start-up venture – is not what it is because of any attributes of the physical world. It’s what it is because of its social properties. Exactly what makes something distinctly social remains to be seen, but it is crucial to first, before any more work is done, cull away considerations of physical explanations. Avogadro’s number can shed light on firm performance about as well as double entry bookkeeping can shed light on nuclear fission.

Second, given this very rudimentary distinction between the physical and the social, we can actually begin to make progress on the core problem of understanding what makes a social entity social. Let’s compare the physical fact that ‘hydrogen atoms have one proton’ to the social fact that ‘Paris is the capital of France’. The former is true regardless of whether anyone is alive to acknowledge it. The latter, somewhat shockingly, is true only because of what people believe to be the case. If everyone on the planet awoke tomorrow believing that Lyon was the capital of France then Lyon would, in reality, be the capital of France. By contrast, if everyone awoke believing that the hydrogen atom has ten protons, that would not make it the case that the hydrogen atom has ten protons. This seemingly innocuous distinction is a breakthrough discovery: social facts depend on the minds of people; physical facts do not! The important conclusion from this is that, in some very important sense, social reality is socially constructed in a way that physical reality is not (McBride, 2018).

There are common misconceptions here that must be blocked. Though it’s true that the activity of understanding the physical world is a social activity – it takes teams of experts and analysts to build, run, and analyze the results from a non-linear particle collider, e.g. – the actual structure of the physical world is independent from what we think about it. Indeed, if the human race were wiped out, the laws of nature and the facts of the physical world, like the fact that a hydrogen atom has one proton, would remain as stable and robust as ever. Though the work of knowledge accumulation is typically done in coordination with other people, such knowledge points to facts about the world itself that are independent of such efforts.

To use philosophy jargon, the physical world is ontologically objective. The social world is ontologically subjective (Searle, 2010). This is just shorthand for saying what we already said, that the very nature of the physical world is objective and independent of what we think about it, while the social world is not. In fact, all of entrepreneurship, strategy, management, organizational behavior, institutional theory, and every other social science is fundamentally different from the physical sciences in that the social sciences all study ontologically subjective social phenomena. It’s only the “natural sciences”, like chemistry, physics, and astronomy, on the other hand, that study ontologically objective phenomena. The role of a CEO, your bank account balance, the capital of France, and the current stock price of IBM are all social phenomena.

There is another misconception that must be blocked. The above truth does not mean that social phenomena are somehow “not real” (as critical realists are quick to note). They are quite real. The fact that social phenomena are socially constructed by the beliefs of those who make them real doesn’t mean that “anything goes” or “it’s all relative”. Still, if your bank account balance is real, it must be real in a very different sense from the reality of the fact that a hydrogen atom has one proton – and it is. Where the stability of the laws of the physical world establish the stability of the fact that a hydrogen atom has one proton, the stability and consistency of people’s beliefs establish the stability of the fact that Paris is the capital of France. Another way of saying this is that such social phenomena are objective in the sense that they are epistemologically objective. Put simply, this just means that France’s capital is a relatively stable fact because the beliefs of people on this topic are relatively stable. Of course, human beliefs are much less permanent than the physical laws of the universe and when people’s beliefs change en masse, as they did during a twenty-year period of hyperinflation in Zimbabwe leaving the Zimbabwean dollar, which people formerly believed worth 1.47 U.S. dollars, later believed to be worth about one millionth of a U.S. dollar.

There is always a misconception about how the social world, being subjective in the sense that it is dependent on beliefs in the minds of people, can also be at the same time so … objective. It seems like a paradox. People spend their entire careers fighting against some objective firmament of their society they want changed. Your bank has very rigid rules that prevent you from rewriting your account balance with a collection of zeros to the end of your current balance. How can such a social fact be subjective but so objective and fixed at the same time? It turns out that there is no deep mystery here. We already see that the simple answer is that it can be both ontologically subjective because it depends on people’s beliefs for its existence, but epistemologically objective because such knowledge and beliefs are relatively stable and consistent. It turns out that there is no real paradox. There are just different kinds of objectivity.

Given that the very structure of the physical world is entirely different from the structure of the social world, it should now be clear that taking explanations that work well for the physical world and applying them haphazardly to the social world can lead to disaster. These are distinct phenomena that require radically distinct explanatory frameworks. Facts of the physical world are grounded by the physical world itself. Facts of the social world are grounded in the beliefs, attitudes, and habits of people. Intuitively, we already knew this insofar as we knew that, e.g., the stock market is driven by a “herd mentality”, i.e., that the prices are driven by the beliefs and sentiments of people. This implies that those theories which borrow techniques from the physical sciences and apply them to social phenomena, will not often work. They are taking successful explanatory techniques and applying them to the wrong domain, like taking banana tree farming to the Artic Sea.

But this seemingly obvious distinction between the physical and the social makes it possible to gain traction on the core question – what is a social entity? We can now see how to begin to answer it. A social entity, whatever it is, is constituted by the beliefs and attitudes in the minds of people. The hard work, then, lies in explaining exactly how it is constituted by the beliefs and attitudes in the minds of people. Investigating this question requires a deep, fascinating investigation.

It is important to note now, though, that a single individual’s belief can’t constitute a genuinely social entity. My mistaken belief upon landing in France that Lyon is the capital has absolutely no effect on what the actual capital of France is. Neither does my belief that Apple’s stock price is $1M make it the case. Economic value is a social phenomenon, so it is more like the capital of France or Apple’s stock price than it is like a baseball or a coconut. If it is a social phenomenon, then it requires beliefs in the minds of more than one person. But, if this is true, then neither can it be the case that a lone survivor on a desert island can be engaged in any kind of social phenomenon and so he can’t be engaged in any kind of economic activity or entrepreneurship even if he is engaged in making various judgments about what to do on a daily basis to survive his mishap. A pile of coconuts may be valuable for his efforts to survive, but they don’t have economic value. So, the judgment theory of entrepreneurship can’t be correct in this case.

But there is something critically correct about the importance of an individual’s beliefs, judgments, attitudes, and habits in the formation of social phenomena. What happens when a raft of shipwreck victims wash up on our lone survivor’s shore? They might trade medical supplies or food bars for some of the lone survivor’s coconuts and, at that point, economic value is established based on the group’s beliefs about worth of the coconuts. How is that worth determined? And what aspects of the individual’s cognition are relevant in determining that worth? These are deep questions.

Future investigations will have to answer exactly how such beliefs blend in a social environment such that one belief becomes established and “real” – that, e.g., Paris really is the capital of France. What kinds of beliefs and attitudes work to do this, and what exactly is their structure? These are important questions that will require a lot of work to sort through, but at least we are now on the right path forward and have the most basic piece of the foundation for a well-grounded understanding of the structure of social reality, and with it, a well-grounded understanding of the social sciences and hope, one day, for a unified theory for them, perhaps even one as coherent and integrated as the physical sciences.