Zipf’s Law and 7± 2 Principle Lead to a Possible Explanation of Daniel’s Law

In 1961, D. R. Daniel observed that the success of a company is usually determined by three to six major factors. This observation has led to many successful management ideas, but they leave one puzzled: why three to six? why not two or seven? In this paper, we provide a possible explanation to this puzzle; namely, we show that these numbers of factors can be derived from Zipf’s Law and from the 7± 2 principle. 1 A Problem: An Important Empirical Observation Needs to Be Explained An important empirical observation. In 1961, D. Ronald Daniel observed that the success of a company is usually determined by three to six major factors [1]. Since then, the concept of critical success factors has been actively (and efficiently) used; see, e.g., [2]. Remaining problem. The success of this approach naturally leads to a question: why three to six? why not seven or eight? What we do in this paper. We provide a possible explanation of why three to six factors are usually sufficient. 2 Analysis of the Problem and the Resulting Formulas It is often important to find the exact expression for the dependence. In general, we are interested in controlling the value of a certain quantity y – e.g., of the company’s productivity. We cannot control this quantity directly,