The Entrepreneur's Brain

How do great entrepreneurs think? That’s the question that Saras Sarasvathy set out to answer in a recent study. Based on interviews and case studies with successful U.S. entrepreneurs and executives at large corporations, Sarasvathy found that “master entrepreneurs rely on what she calls effectual reasoning. Brilliant improvisers, the entrepreneurs don’t start out with concrete goals. Instead, they constantly assess how to use their personal strengths and whatever resources they have at hand to develop goals on the fly, while creatively reacting to contingencies. By contrast, corporate executives-those in the study group were also enormously successful in their chosen field-use causal reasoning. They set a goal and diligently seek the best ways to achieve it.” (HT: Marginal Revolution) [%comments]

Cyril Morong

Candace Allen Smith has written about how entrepreneurs are like heroes. She gave a talk on this at the Dallas Fed in 1997. Here is the link:

I think that got reprinted in the Freeman. She also had a similar, award winning article in the Journal of Private Enterprise in 1996.

Walter Williams also wrote about entrepreneurs as heroes

So did Johan Norberg

I have also written a couple of articles on the subject

In one of his books, Israel Kirzner said something like "entreprneurs discover opportunities for economic proft by leading a life of purposeful action."

Lawrence Summers explained his vision for an entrepreneurial future last year at the White House blog.

"An important aspect of any economic expansion is the role innovation plays as an engine of economic growth. In this regard, the most important economist of the twenty-first century might actually turn out to be not Smith or Keynes, but Joseph Schumpeter."



I guess two things are true then: (a) I'm not a causal reasoner/career climber, and (b) I have a truly legitimate reason to describe myself as "entrepreneurial" which has made its way into the business boilerplate lexicon.


As an Angel investor I deal with entrepreneurs extensively. The "effectual reasoners" are the ones who succeeded. There are many who do not have that quality, most of them haven't succeeded. Having been a corporate executive as well, I take issue with the description of goal-striving as "causal". Entrepreneurs and corporate executives occupy the same world where change is a constant. One could argue that an entrepreneurial start-up has almost perfect uncertainty about what the opportunity set will be in the near future while a successful company has a narrower opportunity set since they have met, rejected and embraced many more opportunities than the start-up and they know what they are about. The narrower the opportunity set, the more "causal" the approach will appear.

Michael Perkins

The primary difference between successful entrepreneurs and the rest of us is that they do not get discouraged by failure. They are willing to try 10 new things and happy if only one of them succeeds.


Wow, how insightful that Corporate Executives are not as flexible or see the 'other viable' opportunities avialable. There are established companies that are able to make leaps ahead of their competitors not because they we're financially astute but saw the potentials of their market in alternate aspects. As the best example I can give is the competition among cable and phone providers, and if it were not for cable pushing the envelop for faster internet speeds, we would all still be on dial-up. The phone company had no reason to expand until competition walked in. Unfortunately their current forsight for the last fifteen years has been somewhat myopic and unchanging as how to financially succeed while technologically advanced.

sanjib bhardwaj

Being founder & entreprenuer of different types of businesses, one thing I can confidently define about entreprenuers is " an individual who allways think, plan & implement newer ideas for the benefit of investors, state exequer, workers & clients or customers/end users. With permutation, combination & additions of different concepts & technologies.


"An important aspect of any economic expansion is the role innovation plays as an engine of economic growth."

Except when it's innovation in ways to commit fraud.


If you had both on the team - entrepreneural and causal goal seeker - even if it were just a team of two - it would be more successful than either alone. (At least until the fight at the end over who was more important to the success or to blame for the failure!)

Eric M. Jones

I am always bemused by discussions of this sort. I have seen them several times in my life, but they all lead nowhere. "It's the nail that stick up that gets hammered down." (Old Chinese Wisdom.)

Entrepreneurs and innovators are the kids who take the really hard classes and can't get a date. The best advice I can give a technically talented young person is to become a lawyer or businessman. Read Lee Iococca's autobiography if you want to see why being in a "career" (hah!) where you can be whipped to produce while never being given the reins or rewards, is a really bad idea.

In the 1980's "Entrepreneurship" turned into "Let's do a startup and then be bought out..." Now that's a great idea. may think this is just crying in my diet root-beer, but read Hofstadter's, "Anti-Intellectualism in American Life" and look around you: This current push for brains is just a distraction for Wall Street to steal the rest of your money. See:

As Lily Tomlin says, "It's getting hard to stay cynical enough to keep up with reality."


Steve L. Johnson

Stibel (CEO of D&B Credibility -- wrote an article in the Harvard Business Review where he linked entrepreneurship to a pathology. Very interesting insight and take, not that different than what is being reported here:

Interestingly he also wrote another piece a few years back distinguishing between entrepreneuers and inventors, something the authors of this study my have missed:


I used to work in economic development, and a lot of the entrepreneurs were simply selfish people who were born wealthy enough that they had spare capital?

Where is that among the list of qualities? Sure 20% of them were great individuals with big ideas and a genuine desire to change the world, but you find that same ratio among garbage men and office monkeys.

Give any random middle class American $200,000 cash and look they will be an entrepreneur! 95% of them will still fall on their face and random market forces beyond their control will still be the PREDOMINANT determiner of who makes it.

Sure 1% of them have some truly great idea and succeed on its merits, but once again, ditto with any other line of work.

Liam Hill

Isn't there a problem with a survey like this that they're only interviewing successful people. Instead of looking at all the successes and looking for similarities (when luck can play a huge and unseen role) shouldn't the surveys look at the difference between the few successes and the thousands of unsuccessful entrepreneurs and executives.

Terry Clague

If you want to know more about this topic - check out their excellent book ( which is hot off the press and earning rave reviews.

Kevin Park

I wonder if someone without all these qualities would still be successful in running a business?