Causal vs. Effectual Thinkers in Business
February 10, 2011 10:29 AM Subscribe
What distinguishes great entrepreneurs? "Discussions of entrepreneurial psychology typically focus on creativity, tolerance for risk, and the desire for achievement—enviable traits that, unfortunately, are not very teachable." So Professor Saras D. Sarasvathy (Caution, autoplaying video) of the University of Virginia’s Darden School of Business created a case study to try to determine how they think, "with the goal of transferring that knowledge to aspiring founders."
Sarasvathy concluded that master entrepreneurs rely on what she calls effectual reasoning. Brilliant improvisers, the entrepreneurs don't start out with concrete goals. Instead, they constantly assess how to use their personal strengths and whatever resources they have at hand to develop goals on the fly, while creatively reacting to contingencies. By contrast, corporate executives—those in the study group were also enormously successful in their chosen field—use causal reasoning. They set a goal and diligently seek the best ways to achieve it. Early indications suggest the rookie company founders are spread all across the effectual-to-causal scale. But those who grew up around family businesses will more likely swing effectual, while those with M.B.A.'s display a causal bent. Not surprisingly, angels and seasoned VCs think much more like expert entrepreneurs than do novice investors.Here's a single-page version of the article.
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