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Using Logic & Reasoning to Make Business Decisions

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  • 0:05 Logic & Reasoning in Business
  • 1:03 Deductive Reasoning
  • 1:41 Conditional Reasoning
  • 2:17 Inductive Reasoning
  • 2:57 Premises Matter
  • 4:48 Lesson Summary
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Lesson Transcript
Instructor: Sean Kennedy

Sean has 8 years experience as a supervisor and has an MBA with a concentration in marketing.

Making business decisions can be scary. Even simple business decisions can have million dollar consequences. In this lesson, we discuss the use of logic as a tool we can use to make sound business decisions.

Logic and Reasoning in Business

Have you ever struggled to make a decisive business decision? The answer is yes. Everyone in the business world struggles to make the best decisions. Logic is a tool we can use to help us make better business decisions.

Logic is the process of using rational reasoning in order to make a valid argument. We use logic to make a point, make a decision, or convince others to agree with us. If you want to convince your co-workers that Friday should be a casual dress day, you need to make a valid argument to convince others that this change is needed. It might look like this:

  • Companies who implement a casual dress day experience an increase in employee morale.
  • Improved employee morale increases productivity.
  • Therefore, making Friday a casual dress day will increase productivity.

With the use of a valid argument, it is much more likely that you will get a casual dress day. There are different types of logic, and there are rules to using logic. Understanding some logic basics will help you make better business decisions.

Deductive Reasoning

Deductive reasoning is a logical process where a conclusion is based on premises that are frequently assumed to be true. A premise is a statement we use in our argument that is believed to be true. According to the rules of logic, if your premises are true, then your conclusion is also true. In the business world, this means if your data is true, then your conclusion is true.

  • Premise: The company needs to increase sales this month by 20% to meet quarterly sales targets.
  • Premise: 2 extra sales per employee this month would increase sales by 20%.
  • Therefore, if every employee sells 2 extra widgets this month, the company will meet its quarterly sales targets.

Conditional Reasoning

Conditional reasoning is another form of deductive reasoning but it uses if/then statements. It is like deductive reasoning as it uses premises as well, but the premise uses if, and the conclusion starts with then. The idea here is that 'IF my premises are true, THEN my conclusion is also true.' Here are a couple of examples:

  • If quarterly sales increase by 20%, then all employees will earn their quarterly bonus.
  • If we bring pizza in for lunch on Friday, then employees will be happy to work an extra hour to complete the inventory audit.

Inductive Reasoning

Inductive reasoning is reasoning that takes specific information and makes a broader generalization that is considered likely. It takes statistics or research and allows you to form a conclusion. Inductive reasoning is usually used in businesses where there are predictions, forecasting, or behaviors involved. Making a prediction is tricky. Trying to forecast inventory is scary! If your forecast is off, your company can't sell its products.

Let's look at a real world example:

  • Research shows a 60% spike in customer complaints after the company moved the position of the handlebars on their bicycles.
  • Therefore, we can determine that customers didn't like the recent changes.

Premises Matter

Deductive, conditional, and inductive reasoning rely on premises being true. Remember, the basic rule of logic is that if the premises are true, then the conclusion must be true. Evaluating whether the premises are true is the key to making valid arguments.

See if you can spot the faulty premises in some of these tricks that advertisers often use:

  • Moms need a way to stay connected; therefore, all moms need a cell phone.
  • People are impatient, and no one likes to wait around; therefore, everyone wants our fastest Internet product.
  • If everyone loves a great steak, then everyone loves to eat at Outback.
  • If good moms want their kids to be happy, and this red toy makes kids happy, then good moms want to buy this red toy for their kids.
  • Moms know that pancakes make kids happy; therefore, your mom doesn't want you to be happy if she doesn't make you pancakes.

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