Something that can help people understand business much more readily, is to understand physics and the basic laws of thermodynamics. Some laws have direct correlation, some are more abstract or don’t have any direct application due to businesses involving a more meta influence of physics.

There are many examples of where you can acquire a lot of knowledge through heuristics, just by understanding some crucial and foundational aspects. An example is in hydraulics, where as soon as you realize that liquid is extremely difficult to compress, the entire knowledge base becomes much easier to understand.

One of the laws I think is most interesting is the first law of thermodynamics, which states “Energy can neither be created nor destroyed. It can only change forms. In any process, the total energy of the universe remains the same. For a thermodynamic cycle the net heat supplied to the system equals the net work done by the system.”

Now of course this is an example of where it’s not a direct correlation, but there’s definitely a helpful input of realizing that “there’s no free lunch”. A business that offers a free product or service, will be compensated somehow, or will be forced to stop providing that product or service. We can always create more value than we consume as that’s the basic foundational nature of business and economics. So in some ways, a business is a perpetual motion machine, but that energy is actually provided by the employees.

It became much easier for me to assess businesses when I realized that “there’s no free lunch”, and that a business will need to perform 3 value related activities well to succeed:
1. Create value – its operations and delivery of the service or product
2. Communicate value – its sales, marketing, advertising etc that speaks the language of the customer
3. Captures value – receive earnings, perform financing and accounting

1 + 2 = Non profit
1 + 3 = No sales
2 + 3 = Scam

Another interesting law is the second law of thermodynamics which says “The entropy of an isolated system not in equilibrium will tend to increase over time, approaching a maximum value at equilibrium”. This simply means that a business tends towards failure. Competition, markets, time, etc influence a business to fail. It takes consistent and increasing levels of energy to push a business up. What goes up, must come down. “Flight” and altitude are only attained through energy and work performed to fight the forces that will cause it to drop.