Make Sense Of Your Data - AgileSense Blog

Notes on what makes entrepreneurs entrepreneurial

Rafi Dudekula , 07 / 06 / 2011 , lean, startup, success, entrepreneurs

Professor Sara Sarasvathy of Darden school set out to understand the species entrepreneur , how they reason about specific problems in transforming an idea into an enduring firm. According to her, entrepreneurs engage in a distinct form of reasoning and thinking that she terms effectual reasoning as opposed to causal reasoning.

MBA programs teach predictive reasoning in every functional area of business. Causal rationality begins with predetermined goal and a given set of means, and seeks to identify the optimal - fastest, cheapest, most efficient, and so on - alternative to achieve the given goal.

Effectual reasoning, however, does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the varied imagination and diverse aspirations of the founders and people they interact with.

Entrepreneurs begin with the following means:

• Who are they - their traits, tastes and abilities?
• What they know - their education, training, expertise and experience?
• Whom they know - their social and professional networks?

While both causal and effectual reasoning call for domain-specific skills and training, effectual reasoning demands imagination, spontaneity, risk-taking and salesmanship. Most often entrepreneurs start very small with the means that are closest at hand and move directly into action without elaborate planning. Plans are made and unmade and revised and recast through action and interaction with others on a daily basis. Eventually, certain emerging effects coalesce into clearly achievable and desirable goals. Transforming the unpredictable into the utterly mundane is the special domain of the expert entrepreneur.

Effectual Reasoning places emphasis on:

• Affordable loss instead of expected return
• Strategic partnerships instead of competitive analyses
• Leveraging contingencies instead of pre-existing knowledge and prediction

Entrepreneurs typically:

• Take product to the nearest possible potential customer
• Induce customers into strategic partnerships
• Have the ability to turn unexpected into the profitable
• Ready Fire Aim
• Put the money where your aspirations are
• Use surprises as inputs into creation

Entrepreneurs attract "right" people by understanding their needs of emotional ownership of the goals and objectives of the endeavor. Entrepreneurs agree that "right" people can only be motivated by the belief that the effects they create will embody their deepest passions and aspirations while enabling them to achieve their best potential.

To the extent future is shaped by human action, it is not much use trying to predict it-it is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence.