Effectuation theory is a relatively new, somewhat controversial theory of how entrepreneurs think differently than traditional managers of big companies. The name effectuation is derived in contrast to causation. For the better part of the last century we have been using a logic of prediction based on causal influences. A new way to look at the world, as entrepreneurs do, is to use a logic of control. Instead of trying to predict the future world, effect it! Change it in a way that couldn’t be predicted.
One interesting difference of effectuation regards the use of sunk costs, all the things left over from previous failed efforts. This has been explained through an analogy of two chefs. A traditional chef plans the perfect meal and then goes to the market in search of the ingredients. An effectual chef goes to the pantry and figures out what ingredients are available and then plans a meal that best utilizes what’s on hand.
This analogy attempts to depict the entrepreneurial mindset as having an entirely different perspective towards sunk costs. Effectual thinking leads to the reuse of old assets first, something that I think most entrepreneurs can identify with. It would be nice to throw away all of the mistakes they make and start fresh, but the entrepreneur increases their chances at survival by repurposing the remnants of their mistakes in order to learn and move forward.
An entrepreneur can never be defeated as long as they learn and move forward.