Ahh, somehow I forgot to respond to this!
I’m nearly 100% sure that investing is causal thinking, with little-to-no place for effectuation.
And I suspect this is why investors tend to struggle when it comes to operating businesses. As I’ve alluded to in various other threads — I think the worldview difference between operating and investing are just diametrically opposed. So decision making frameworks that are optimised for one don’t apply as cleanly to the other.
This is quite significant. For instance, it’s worth asking how much Annie Duke’s Thinking in Bets applies to operating environments.
To take a step back:
- Investors can and should think in terms of expected return
- Investors can hedge and size bets; capital is inherently leveragable, time is not.
- Investors can create a portfolio of various bets; entrepreneurs often cannot (to be clear: if you sit atop a large org, you can take many bets simultaneously, but if you’re the one executing on the bet, you are doing so sequentially and paying with your time).
- Investors can afford to not do ‘resulting’ — that is, you can make the right decision and get the wrong outcome; entrepreneurs cannot afford to think like this.
Even ‘control investors’ (such as from PE) and late stage VCs think more causally than effectually.
Take, as an example, the Benchmark style of investing. In such a situation, the VC that becomes a board member is so hands-on that portfolio companies often describe taking on a Benchmark investment as ‘taking on a new co-founder’. Sebastian Mallaby has a number of chapters in The Power Law on how various VCs (Sequoia, Accel, Benchmark, etc) can be actively involved in changing company outcomes. This seems pretty ‘action generates information’ type of effectual thinking. But even then, many of these VC actions are after the startup has found product-market fit, so are often more causal than effectual in nature — their actions tend to be focused on around helping with hiring, putting in place best practices, doing good board governance things, and helping with subsequent fund raising rounds. You do get some VCs pushing operators to make certain new bets, and you could say that’s effectual thinking in action, but I think this is the exception not the norm.