From the Introduction to Objectivist Epistemology: "The ability to regard entities as units is man's distinctive method of cognition..." (p.6)
Think of the possibilities! If you know how to group things together in a way that is not personal just to you, but based on real characteristics of those things—and if you then know a way to treat those groups as units, then all limits are off. By making combinations of combinations, your mind becomes capable of handling everything that exists. But that's only the beginning. Since you can hold more than one unit in mind at once, you can compare all of reality as seen from one angle to all of reality as seen from other angles. You can discover new relationships not noticed before. You become a discoverer, an inventor, an innovator.
You took that step when you realized that while a pair of pants is one thing, a pair of shoes is two things regarded as one thing. To think of a unit is to think of things and the relationships between things all at once. Thinking is differentiation and integration—telling the difference and making combinations. The unit makes it possible to do both at once.
Think of the concept "man." You can treat it in your mind as a unit, but it includes everybody who ever has lived, who is living, and who ever will live. These countless people are not combined arbitrarily in your mind, but by objective similarity. They all have a common characteristic which can be measured by comparison. They all have a rational faculty. Some are geniuses, others are slobbering idiots, but they all have some degree of rationality, and nothing else has any degree of rationality.
When you make the combination, not a single difference of any kind is dropped from your consciousness. You know that things are different in many measurable ways. You omit the actual measurement, but you know it is there to be made. What you do is choose a range of differences within which things can be treated as a unit. In the concept "man," that range includes all degrees of rationality. In the concept "child," the common characteristic is age, and the range is on the low side.
To get the idea of making concepts right, think of sorting out the papers on your desk. Many different ways of putting them in order might be useful. But none of those ways could be random, or else the papers would not be sorted out. Concepts enable you to sort out reality in many useful ways, as long as you classify by common characteristics you observe rather than arbitrary characteristics you make up.
For the perfect example of how not to make concepts, think of that all purpose slur word "extremism." A number of positions or doctrines are being grouped together, so they must have some objective similarity—some common characteristic that can be compared and quantified. That characteristic will be measured into ranges, and a specific range will be chosen to make up the group.
But here the designated group is the range itself—not a range of anything, but just the most or the least of anything: the extreme. This is as useful for handling reality as it would be to sort out your personal papers by putting the ones with many words on them in one pile, and the ones with few words on them in another pile. Counting the words would not substitute for understanding what they had to say.
"Extremism" gets concept formation wrong because it intends to. It is a hoax. It is used to put extreme good into the same group with extreme evil, and obscure the difference. It counts on a superstitious fear of the extremes of any range. But its common usage shows why many people never do learn to make concepts correctly. People say, "Oh, everybody knows what it means!" In fact nobody knows because it has no meaning. When you use it, you are pretending to say something while conveying your meaning with a frown, and others are pretending to hear something while nodding in answer to the frown.
Anyone can shuffle words around and call that thinking. Unless those words refer to actual facts of reality, however, neither thought nor communication is taking place. To have a concept, you must have a word, but having the word does not give you the concept. Only observing and integrating facts will give you the concept. Without the concept, your word conveys only attitude.
To get concept formation wrong, all you have to do is nothing. You use the words everybody uses, and assume you are thinking the thoughts everybody thinks. In fact, you are thinking no thoughts. Consciousness is not passive, but active. If you have not seen for yourself, you are not thinking thoughts, but reciting lines.
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