Causal thinking and effectual thinking are two different, innate styles of thought that are particularly applicable to business owners. Causal thinkers start with a goal, and they take stock of the materials and means available to them, and then develop and carry out a step-by-step plan to achieve that goal. Effectual thinkers work more fluidly, beginning with what they have at present, such as ideas, personal strengths and materials at hand, and then work by combining the elements available to them and adjusting their plans as they progress. Effectual thinkers don’t begin with clearly-defined goal; rather, they allow the goal to emerge organically out of the process. Causal thinking, which is taught in business schools and other disciplines, is familiar to most of us. Effectual thinking, on the other hand, defines the realm of the entrepreneur.


The distinction between causal and effectual thinking originated in 2001 with the work of Dr. Saras D. Sarasvathy, business professor at the University of Virginia. Beginning with her graduate research while at Carnegie Mellon, Dr. Sarasvathy interviewed business executives and entrepreneurs to find out how they would approach solving business problems. She found that the majority of the entrepreneurs employed a style of thinking that was the inverse of the more traditional, causal thinking style taught in business schools. Dr. Sarasvathy used the term “effectual” to describe the approach used by the entrepreneurs in her studies.

How the Thinking Styles Work

To illustrate, consider the way two different artists, one who thinks causally and one who is an effectual thinker, would create a painting. The causal thinker would first select the subject of the painting, such as a landscape or a portrait. He would carefully plan the picture, choosing a color scheme, making preliminary sketches and assembling the paints and brushes needed to achieve the desired effect. Only then would the artist begin to paint. Ideally, the finished painting would resemble the artist’s initial mental picture of the subject.

An artist who thinks effectually would work in different manner. She might look around her studio one day and notice a bottle of blue paint sitting next to a ball of string and a pile of old book pages. Seeing this combination inspires her to create a mixed-media piece, so she begins by spontaneously applying the paint, string and torn book pages all over the canvas. She would mix in additional colors and collage elements, perhaps some dried flowers or old buttons, and keep working on the piece until an image or design emerges that pleases her. She might let it take a completely abstract form, or make additions and corrections so that it pictures something recognizable, such as a bird or a vase of flowers. Since she had no specific goal in mind when she began, the artist continually revises her methods and materials as the painting takes shape.

Where and When They Work

Causal thinking is advantageous for established businesses, and for projects that can be clearly defined. Many construction and engineering projects would fit this description, such as building an office from a defined blueprint that follows established codes and uses approved building materials. By specifying the steps to take, this causal project reduces distractions and eliminates waste of materials and time. However, the causal method would fall short if circumstances change during the project. For example, the client might request using an alternative construction method that is more energy-efficient but has not yet been incorporated into the building code. The casually-developed project would likely come to a halt at this point.

Because effectual thinking is inherently creative, it is uniquely suited to entrepreneurs. In addition, entrepreneurs typically possess personal qualities needed for effectual thinking, including resilience and guts or chutzpah. A builder who thinks effectually would not be thrown off guard by the client who requests the energy-efficient alternative building method. Instead, the builder would be excited to learn about the method, and would find ways to incorporate it into the plans while meeting the intent of the building code. If that isn’t possible, the builder might look for ways to change the building code itself. The downside of effectual thinking is that the entrepreneur may become distracted by new opportunities and projects, never pursuing any one of them to reach a reasonable level of success.

Causal and effectual thinking both have a place in the business world, and it is possible for the same person to employ both modes of thought. For example, the artist who creates mixed-media pieces as her main body of work might also employ causal thinking for a commissioned piece that must satisfy the client’s specifications. Dr. Sarasvathy notes that some entrepreneurs who used effectual thinking to develop their businesses will shift into a causal mode as their companies mature. However, she also notes that most entrepreneurs remain effectual thinkers throughout their careers. This type of entrepreneur is more likely to hand off the established company to a management team and use effectual thinking to move on to develop another, entirely new business venture.