I just learned about the idea of “effectual thinking” from Cedric Chin’s recent newsletter issue. He notes, counterintuitively to me, that it’s the opposite of causal thinking, and yet it’s the one thing in common in all the successful case studies he could find in business:
The only answer that fits with the twenty-seven odd cases that we’ve published on the Idea Maze is a thing called effectual thinking.
Effectual thinking is a concept proposed by Professor Saras D Sarasvathy in a 2001 paper — a paper that was also, hilariously, described as “the first good paper I’ve seen” by Vinod Khosla, the renowned venture capitalist and cofounder of Sun Microsystems.
Saravathy didn’t pull this theory out of thin air: she hunted down a list of entrepreneurs who, at the time of her paper, represented a near-complete list of experienced founders (of enduring companies) in the US from the period of 1960 to 1985.
These folk were:
Repeat entrepreneurs (minimum three ventures, though the average number of companies started in her sample was seven new ventures)
Were successful and serious businesspeople (at least one of those ventures had gone public, and they had spent minimum 10 years with that company)
Were filtered from a list of the ‘top 100 most successful’ entrepreneurs compiled by VC David Silver in 1985, and a list of Entrepreneur of the Year awards, compiled by Ernst & Young.
We can be quite sure these entrepreneurs are ‘expert’, by most definitions of the term.
Sarasvathy found that all of them demonstrated a similar style of thinking when given a new venture brainstorming task. She named this style of thinking ‘effectual thinking’.
So what is effectual thinking? In short, effectual thinking is the opposite of causal thinking.
Causal thinking is what you learn in business school. It starts with a fixed goal and works backwards to figure out how to get there — like deciding to cook carbonara for dinner, looking at your pantry, then working backwards to figuring out the ingredients needed, and shopping for those missing ingredients.
Effectual thinking does the opposite: it starts with opening your fridge and asking, “What can I make with what I find here?” You work forwards from available resources, not backwards from a predetermined plan.
Entrepreneurs who practice this effectual thinking follow three principles, and these are the rules that are actually useful for navigating the Idea Maze:
You structure your life to make survivable bets. Successful entrepreneurs don’t go all-in on a single idea. They set themselves up — financially, emotionally, and logistically — to take repeatable, reasonable risks. They aim to stay in the game long enough for something to work.
You take action instead of getting stuck analyzing. In the earliest stages of an idea, competitive analysis is misleading. If a market gap could be spotted through research alone, it’s probably not that valuable (and would likely be quickly exploited by an established competitor). Instead, experienced entrepreneurs take action and attempt to cut deals with relevant people — customers, partners, collaborators. Action generates real information.
You treat entrepreneurship as improvisation. There is no master plan. There’s no strategy that will guarantee success. You take action, learn from what happens, and adapt. This is a game that rewards curiosity, flexibility, and sheer staying power.
(see also search term “forward chaining vs back-chaining.”)
This seems like reasonable life advice for people generally trying to accumulate resources and do something cool. I’m not sure about people who actually have specific goals they want to accomplish. I think in the domain of AI safety, forward chaining is insufficient (seems like the kind of thing that gets you OpenAI and Anthropic)
The principles I sort of try to live by are, each 2-weeks, I should have done:
some actions that forward chain towards more compounding resources
some actions explicitly backchaining from longterm goals
ship something concrete to users
do something wholesome
Which is I think aiming to accomplish similar goals towards the OP, without losing the plot on my more specific goals.
I currently feel confused about how to integrate “the kind of thinking that is good at momentum / action” and “the kind of good that is good at creative strategy”. And it seems like there should be more of a way to unify them into a holistic way-of-being.
The four checksums above are there to make sure I’m not being myopic in some way in a broader sense, but they apply more at the timescale of weeks than hours or days.
You might just say “well, idk, each week or day, just figure out if it’s more like a momentum week or more like a creative strategy week”. I feel dissatisfied with this for some reason.
At least part of it is “I think on average people/me could use to be in creative/broader strategy mode more often, even when in a Momentum mode period.”
Another part is “there are strategy skills I want to be practicing, that are hard to practice if I don’t do them basically every day. They aren’t as relevant in a momentum-period, but they’re not zero relevant.
Hrm. I think maybe what’s most dissatisfying right now is that I just haven’t compressed all the finnicky details of it, and it feels overwhelming to think about the entire “how to think” project, which is usually an indicator I am missing the right abstraction.
I just learned about the idea of “effectual thinking” from Cedric Chin’s recent newsletter issue. He notes, counterintuitively to me, that it’s the opposite of causal thinking, and yet it’s the one thing in common in all the successful case studies he could find in business:
(see also search term “forward chaining vs back-chaining.”)
This seems like reasonable life advice for people generally trying to accumulate resources and do something cool. I’m not sure about people who actually have specific goals they want to accomplish. I think in the domain of AI safety, forward chaining is insufficient (seems like the kind of thing that gets you OpenAI and Anthropic)
The principles I sort of try to live by are, each 2-weeks, I should have done:
some actions that forward chain towards more compounding resources
some actions explicitly backchaining from longterm goals
ship something concrete to users
do something wholesome
Which is I think aiming to accomplish similar goals towards the OP, without losing the plot on my more specific goals.
This maybe reminds me:
I currently feel confused about how to integrate “the kind of thinking that is good at momentum / action” and “the kind of good that is good at creative strategy”. And it seems like there should be more of a way to unify them into a holistic way-of-being.
The four checksums above are there to make sure I’m not being myopic in some way in a broader sense, but they apply more at the timescale of weeks than hours or days.
You might just say “well, idk, each week or day, just figure out if it’s more like a momentum week or more like a creative strategy week”. I feel dissatisfied with this for some reason.
At least part of it is “I think on average people/me could use to be in creative/broader strategy mode more often, even when in a Momentum mode period.”
Another part is “there are strategy skills I want to be practicing, that are hard to practice if I don’t do them basically every day. They aren’t as relevant in a momentum-period, but they’re not zero relevant.
Hrm. I think maybe what’s most dissatisfying right now is that I just haven’t compressed all the finnicky details of it, and it feels overwhelming to think about the entire “how to think” project, which is usually an indicator I am missing the right abstraction.