When you hear hoof beats, think horses, not zebras.

That is one illustration of Occam's Razor, also called the law of parsimony. It holds that things should not be made more complex than they

really are. In lay terms, this translates into such maxims as "the simplest explanation is usually the correct one." In slang, it is sometimes expressed as Keep It Simple, Stupid, or K.I.S.S.

Attributed to the 14th century English Franciscan friar, William of Ockham, its applications reach into many human endeavors.

Sir Isaac Newton, the father of modern physics, framed a scientific version, to wit: "We are to admit no more causes of natural things than such as are both true and sufficient to explain their appearances. Therefore, to the same natural effects we must, so far as possible, assign the same causes."

Although Ockham's name is associated with the idea, others, from Aristotle to Francis Bacon, had expressed the same premise earlier. Ockham's name prevailed because of the frequency with which he repeated it. To be precise (and for readers who do e-mail this column about their love of Latin), Ockham's exact postulation was "Pluralitas non est ponenda sine necessitate," or "plurality should not be posited without necessity."

Whether they know the term or not, business people and managers in all kinds of organizations know that in analyzing success or failure, one must find the approximate causes, going to the wheat and getting rid of the chaff.

In one way or another, we all figuratively use a razor to separate problems into component parts and by priority.

In commercial real estate, for example, practitioners say there are three essential elements of value: location, location, location. Although there is undeniable humor and exaggeration in that maxim, it does summarize why many businesses do fail: They are in the wrong place.

On the success side, McDonald's founder Ray Kroc was a genius in knowing where to build his hamburger units; Wal-Mart founder Sam Walton engaged in aerial surveillance from helicopters to pinpoint the best places to locate future stores.

Other applications of Occam's Razor include test-marketing consumer products in some areas and not in others, to analyze whether they will do well before national roll-outs are implemented. Pharmaceutical companies test new drugs using control groups, one of which may be given the proposed drug, the other of which may be given placebos.

Simple theories are generally preferable to complicated ones because they are more testable. They are easier to observe. Economists are famous for using the heuristic (that is, rule of thumb), "All other things being equal …" to project economic conditions. Of course, the underlying assumptions must be correct to begin with.

Occam's rule has been criticized for being over-utilized. Some problems are, in fact, very complex, not simple. While Occam's Razor tosses out the most extreme and crazy ideas, and concentrates on the most probable, some situations seem extremely improbable, but happen with disconcerting frequency. They are the "Black Swans" discussed in the column of May 1. Albert Einstein aptly observed, "Make everything as simple as possible, but not simpler."

This nation is in a horrible

economic situation for which there are no simple short-term remedies. However, that we are seeking to recover from the miasma by borrowing and spending trillions of dollars that we do not have is totally counter-intuitive to prudent financial management.

By what twisted logic do elitists think that the solution for too much borrowing and too much spending is even more borrowing and more spending?

A certain high-living Moscow correspondent exemplified a practical illustration of Occam's Razor. Receiving a telegram from his New York editor, enraged at the correspondent's expense account excesses, notably substantial quantities of Russian caviar, the correspondent's return telegram read simply: "Eggs is eggs."

John Quinn, a professional investor for 41 years, including 28 years on Wall Street and in Asia, is the executive director of the Rapid City campus of National American University. He may be contacted at JQDrBoom@aol.com