How entrepreneurship really works

Born entrepreneurs are risk takers? Is there something about their personalities that predispose them to take risks that others can not stomach? Can entrepreneurship be taught?

According entrepreneurship researcher Saras Sarasvathy, entrepreneurs are no different from others, they just take a different approach to solving problems.

Dr. Sarasvathy suggests that entrepreneurs actually create their own chances of success by taking additional measures as closer to their goals. Having been an entrepreneur for over 25 years, and the study of the behavior of many others, I think she's right. She calls this progressive approach "effectuation" because it takes advantage of cumulative effects that the contractor caused by their own actions.

Here are six key points to understand about the theory of effectuation Dr. Sarasvathy:

Entrepreneurs begin with what they have and what they are. What do you know a lot about? That early and very personal experiences have affected? What links do you have? Take advantage of these strengths to do something and then see what comes of it. This first step leads to the additional possibility, and sometimes these opportunities are very large and unpredictable. Action attracts others, and other opportunities and improve the chances of success.


Contractors limit the risk by understanding what they can afford to lose at every stage. True entrepreneurs never take great risk to both. In general, the calculation goes something like this: "I think it would be worth investing $ 50,000 in exploring this opportunity. If I lose, I can survive. What's the worst that can happen "There are two possible outcomes of this reasoning is the experience is successful, in which case the investment is rewarded and leads to other opportunities monitoring, or experience fails, which probably also lead to other opportunities followed. Anyway, new opportunities emerge usually because the action attracts others.


Entrepreneurs create their own market opportunity. When Burt Rutan began building Spaceship One, it was not because he perceived that there was a large market for expensive single spacecraft was going unmet. He started with what he could do and affordable risk. When Pierre Omidyar started Ebay, he did not expect it to become a multibillion dollar company. Founders Sergey Brin and Larry Page of Google tried to sell Google for $ 1 million, but were instead forced to see through and become multi-billionaires. The market for business is often not clear at the time of the foundation. Entrepreneurs to find their way to market creation, iterative lever and know what.


Contractors trust people. The best entrepreneurs internalize the African proverb: "If you want to go quickly, go alone, if you want to go far, go together." To discover the cuisine, it is often necessary to coordinate the interests of many. The best entrepreneurs involve more people in the effectuation process, because more people means more assets, which often has a nonlinear impact on the final result. In fact, Sarasvathy argues that some degree of calculated "over-confidence" and "intelligent altruism" is a rational strategy for discovering great multiplayer options that would otherwise be hidden or impossible.


Effective thinking can be taught. Because entrepreneurship is just an application of the effective logic and not the result of innate personality traits, it can be taught. We do not accept the idea that "scientists are born, not made", and although it might seem that some people are more willing to work with other scientists, we do not accept the idea that people can not be taught to think scientifically. It is even possible to teach people effective thinking. Tellingly, in communities where the effective thinking is common (Silicon Valley, for one), people who don ' had not previously shown effective trends are often motivated to adopt the model once they see that it can be effective to solve problems or generate wealth. effective reflection can not only be teachable, it may be contagious in the right circumstances.


Failure increases the chances of individual success. While the success rate of a typical single company could be quite small, an entrepreneur who experiences a failure is more likely to succeed in later rounds. Failure teaches entrepreneur about affordable risk, suggests limits on behavior-trust, and offers advice on how to maximize the chances. We should never stigmatize failure, but understand that this is part of effective processes.
Pop Business Books

It is fashionable to tell people stories about Purple Cows, tipping points, outliers, whuffie, crush, and practicing a work week of four hours. However, these books all have their roots in effective thinking. Do something. Use what you know to really stand out and be different. Work with others to discover whether you want to find. If books like this can motivate people to act, they are probably a good thing. But I think they can be crazy-making because they do not provide the intellectual underpinnings of why (and how) these approaches could actually work. They are most often shame you into action, and in the end they give you a fish, instead of teaching you.

Realization and Social Networks

The Internet (in general) and social networks (like Twitter and Facebook in particular) are platforms for effectuation. They allow entrepreneurs to find people who, at each successive stage, help contribute to the success of their business. These could be customers, partners or investors. Any platform that allows like-minded people to find each other is an accelerator to the effectuation process. In fact, the common understanding of them is more important than the roles they play. What is the difference between a company and a customer when both are involved in the product? Who pays whom for what and when it is a detail that needs to trend, but without finding the people who will participate in the conversation that maximizes the usefulness of the product, maximizing revenue will never be considered.

The myth of the visionary entrepreneur

We give a lot of credit for successful entrepreneurs. Warren Buffett, Bill Gates, Steve Jobs and Richard Branson are some of the most admired people in the world. In some ways, that credit is deserved (but it could be argued that officials and aid workers are praiseworthy more). However, we give them too much credit, or at least we give them credit for bad ideas.

These people did not anticipate the circumstances of their success, and do not seek to achieve specific achievements for which they are best known. Instead, these people are all effectuators master. They took early action. They participate more. They took many successive steps that are moved closer to their passions. They suffered setbacks. And perhaps more importantly, they are alive to talk about it.

There are many unsung heroes and effectuators teachers who have had great success, but whose stories have ended worse. And we do not hear much about them. The end result should not diminish their achievement.

You do not need to be the next Bill Gates or Steve Jobs, or even have an idea right now, to be a successful entrepreneur. Start now and enjoy the ride. You'll be glad you did.