Indecisively weighing both blue and red.

Orange gulmohar flowers add a touch of flair and drama.

Giving in to the thirsty spirit of the summer evening.

By three methods we may learn wisdom: First, by reflection, which is noblest; Second, by imitation, which is easiest; and third by experience, which is the bitterest.

~ Confucius (wikipedia).

We’re brought up in a world that values big goals over little ones, performance over uniqueness, scale over nurture, efficiency over engaged. Essentially we’re creating tradeoffs, but for women tradeoffs are absolutely useless. Imagine believing that you’re giving up on time with your child for time at work, or that you’re giving up your home for someone else’s? How would life work if these were indeed rational choices? In fact, how would things work at all without the simple belief that everything changes and the necessary encouragement this belief gives in making the choice presently? It is not that men discriminate more than is necessary. But it is that women are presented with truly difficult choices and they seem to be getting better at making them work. There is that inescapable argument that we’re missing out on developing this certain quality.

I face difficult choices as I go along and I do need to get better at them. Just the other day someone I respect stated with a razor-like clarity that if one were to build and take a product to market, the founders better be 100% committed. This is how the product startup eco-system works and it’s fair if we think about the expectations of those invested. Anyhow what’s right isn’t the point. Let’s look at it another way. The act of choosing could’ve easily dissuaded Zuckerberg, Gates – should I leave Harvard to build Facebook, Microsoft? and the Google founders – finish PhD. or start a Search company? If these choices appear to be straightforward through their eyes, think of the many Gates’, Zuckerbergs, Brins and Pages who did not build a Google, Microsoft, or Facebook in favor of a Harvard, or a Stanford. Reality is that we won’t know a good thing until and unless we see it through.

Women make such choices work out all the time. They’re figuring out how to be themselves and yet be a part of a workforce dominated by men. They’re figuring out how to be good homemakers and yet play a meaningful role in the world outside their homes. They’re figuring out how to be a good Mother and yet grow their career. They’re figuring out how to be a good Daughter and yet found a new family. They’re applying what is universally acknowledged to be a key Business leadership trait*. They’re doing this at the level of an entire gender that accounts for half of everything on this planet. Indeed, what if they were running things?

Dedicated to the Women who’ve helped breath life into this post. Wish you a Happy Woman’s day.

*Opposable Mind: Winning Through Integrative Thinking.

Here’s a tea story of plantations from all over Munnar Kerala.

When driving in to Munnar, the humble tea bush dominates the landscape together.

In conversation with the sky.

Munnar is also a national park.

Eric Francis and his colleagues were the first to introduce tea plantations, railway, boilers, motorcycles, other technologies to the hills of Munnar in 1911. Growing tea in Munnar was not a profitable venture for most of the twentieth century. It survived on the passion and entrepreneurial spirit of a few individuals before making it to mainstream.

Green Tea.

The Kanan Devan Hills Plantation Company is employee-owned and sponsors a tea museum in Munnar.

Thank you for watching! Photos were taken by Santosh Dawara with a Nikon DX7440, January 2013.

… a Blogger, don’t lose the freedom to keep it to yourself;

a Visionary, don’t lose the freedom to spot the obvious;

in Love, don’t lose the freedom to be hurt;

a Leader, work hardest to hang on to the freedom to follow;

a Competitor, don’t lose the freedom to be inspired;

a Pragmatist, don’t lose the freedom to imagine;

Well-spoken, don’t lose the freedom to speak with silence;

a Father, always nurture the freedom to play;

a Founder, never lose the freedom to fail;

… Enlightened?

Feel for you. You will indeed miss the freedom that comes with ignorance and change.

Canoes.

Awaiting passengers.

Already home, nowhere to go.

A house boat chugs through the morning haze on Lake Vembanad. The day after rains in the area.

Do have a look and look forward to your thoughts - Why we start up.

A few hours ago, I drove around town looking for an open store to buy diapers. Amidst the smoke of bursting crackers, illuminating sky rockets and the lights from the numerous structures I thought to myself, I’d like to wish you a different kind of Diwali. Perhaps a quiet, smokeless Diwali. A Diwali that will allow you to gaze upon the true, awe-inspiring, all pervasive night sky, its medley of infinite stars and the Milky Way. The same night sky we always have above our heads, obscured and ignored.

So with that wish in mind, Wish you a Happy Diwali!

This letter is greatly inspired by Dalton Caldwell’s open letter to Mark Zuckerberg and is aimed at making a corrective impression with those who drive the M&A in technology companies across India. This is an opinion letter written by me based on my experiences of over 6 years as an entrepreneur in the Technology and Internet space in India. I have only the entrepreneurs perspective to offer. But I do believe my experience and views will matter to you, especially if you are in any way connected to or affected by MnA’s of startups. This was not my first conversation around acquisition, I’ve had several in my journey. The funny thing is this story repeats itself every time. In fact, several entrepreneurs who read this post relate to it with their own stories which follow this pattern. Enough that we might even call it a broad trend.

The backdrop.

A couple of months ago I was invited to meet with different executives of a potential acquirer with the purpose of acquisition of a technology that I’ve created. What we were selling was strategically ‘aligned’, could potentially expand the acquirers business, get  them to-market significantly ahead of time, and in turn solve a valuable business problem for both.

Before meeting with you (the acquirer), I made not-so-subtle inquiries about the seriousness of the proposal throughout the chain of command. I did this as I was mindful of past proposals which ranged from the truly laughable to the seriously nuts. I’ve learned the hard way that execs in India tend to grossly underestimate the cost that goes into creating technologies such as the one I was selling.

At the time, I was assured that you were reviewing this carefully and wanted to work this out. Right after, I moved forward to arrange a demonstration for your team and shared insights into what the technology could potentially achieve. To help, I ferreted out ex-colleagues who knew what we’d built, got them on-board to consult with and build substance into my proposal.

More time passed by. Your team came back to ask me if I could provide a related technology extension. Yes, we did have that extension as well. I once again setup the demo and this time I walked your team through the details of how it worked. As I write this I realize that I took the last step with faith in due process. Initially, I did wisely ask for a meeting with your key decision maker to discuss commercials in an attempt to push to understand if this was a serious proposal. As he wasn’t in the country, I missed out on that and decided to go ahead with the demo anyway.

After three months of conversations, I had a concluding conversation with your executives from the technology-side that went something like this – I paraphrase.

Me: I wanted to check in as I had not heard from you on what was holding things up.

Them: We’re leaning towards building this ourselves as it will be difficult to adapt your technology. We’re using a framework called foo and you are using bar. They’re not the same. We’ll need to understand and rewrite code, which I think will take longer so we’d rather build it ourselves.

At this point, I was on the defensive and I chose not to follow through. In hindsight, this was a strangely obvious conclusion on your part. So you’ve decided that it is easier to build everything from scratch. We’ve shown you this stuff, your team even took screenshots with the demo in action. Even if the practical value of the code to you is near zero, the best part is that the know-how is independent of the technology you’ve chosen.

This no longer sounds serious to me. I have a feeling that even if I came back to you with a rolled up printout of every line of code we wrote to beat your doors down with – I wouldn’t see success.

My motivations for writing this.

Obviously I have vested interests in what I build. I wanted to see this through. I respect that priorities change, therefore people, business and decisions change. But this post isn’t about eyeballs, getting acquired, or about sour grapes. It is about something I feel is much bigger than that.

I believe our attitude to M&A is what’s holding innovation at ransom.
As a first-time entrepreneur about to start out, I received these cautionary words from someone I look up to as a mentor. He was writing to explain why he’s holding back on Angel Investing in India.

“I do not know the M&A market in India. A robust M&A market is essential for fair valuation of start-ups. I read somewhere that M&A activity is picking up in India. But, I do not have adequate knowledge and/or contacts.”

This was one of the key reasons he cited, the others being that he did not know the market and the players as well as he would like. This coming from someone who has achieved significant success for himself with the company that commercialized the first web browser and who hasn’t forgotten his roots in India. In fact, I’d like to add that I don’t know *of* a robust M&A market in India where technologies, products were acquired rather than simply men or materials.

Over the past 6 years, I’ve heard these same words from at least another dozen angel investors from the west coast. This includes some of the smartest, most accomplished people I’ve met, NRI’s from Intel’s, Google’s, Salesforce’s, Valley-based entrepreneurs and more. To reflect on this advice, I’ve interviewed several entrepreneurs who have had similar acquisition conversations with folks across India’s medium and smaller technology players, including MNC’s. They’ve all been seriously interested in acquiring some of the more comprehensive and complete technologies built. Always, entrepreneurs come back baffled. We can understand when something isn’t a strategic priority for you. We don’t understand when you reject acquiring a technology that is strategically aligned, but hasn’t been invented in-house.

Are you even serious about participating in Startup and Innovation eco-system?

The word on the street is all about how the Infosys’s and Wipro’s of India are all about getting into Products these days. They’re finding it difficult to nurture in-house product visionaries and risk-takers. I understand that. This also why I believe that the independent startup eco-system is precious and needs your attention. The reality is, startups fail for a myriad of reasons, only some of which we understand well. However, the teams, technologies they create need not end there. Acquisitions, repositioning and redeployment of products are necessary lubricants that keep the system churning and ultimately drive long-term growth. I’ve experienced this first-hand working with west coast startups that die and are brought back to life in a more strategically valuable form. If you can’t justify upfront costs, there are simpler ways to work a deal around them.

The key is to empathize, to find a way to extend the knowledge encoded in the people, technology and not just replicate it. Call me an idealist, but I believe that economies of scale start with investments in people’s ability to produce. By validating a startup through acquisition, you’re also subtly encouraging more startups to sprout and explore the sharp edge of innovation.

If you are sponsoring hackathons, that is also where we’ll see more ideas being explored and built. But with these past experiences, I’d hesitate to refer another entrepreneur to you for a conversation about acquisition which might be the last link for her in the chain of completion. I don’t know what else I can do to change this other than to write an honest post asking you to internally review your collective attitudes towards acquisition of teams, startups and technologies. The way I see it, we can either do something about it or we could also choose to ignore the evolution of the west and simply wait for the China’s, Chile’s and Singapore’s of the world to close the gap and start running circles around us.

Here’s to changing our collective destinies together.

Sincerely,
Santosh Dawara.

Professionals who work closely with them and researchers who study them have often speculated as to what makes entrepreneurs “entrepreneurial”? Of course, entrepreneurs also love to hold forth on this topic. But while there are as many war stories and pet theories as there are entrepreneurs, and researchers, gathering together a coherent theory of entrepreneurial expertise has thus far eluded academics and practitioners alike.

What are the characteristics, habits, and behaviors of the species entrepreneur? Is there a learnable and teachable “core” to entrepreneurship? In other words, what can today’s entrepreneurs such as Rob Glaser and Jeff Bezos learn from old stalwarts, such as Josiah Wedgwood and Leonard Shoen? Or even within the same period in history, what are the common elements that entrepreneurs across a wide variety of industries share with each other? In sum, is there such a thing as “entrepreneurial thinking” that can be applied across space, time and technology?

In 1997 I set out on a rather perilous but exhilarating journey to investigate this question. Traveling across 17 states in the US over several months, I met with 30 founders of companies ranging from $200M to $6.5Bn and spanning a wide variety of industries from steel and railroad, to teddy bears and semiconductors and bio-tech. The idea behind the study was not merely to interview these founders , but to get behind their stories and understand how they reason about specific problems in transforming an idea into an enduring firm. The entrepreneurs worked their way through a 17-page problem set over two hours, talking aloud continuously as they each solved exactly the same ten decision problems to build a company starting with exactly the same product idea. Rigorous analyses of the transcribed tapes led to rather surprising but eminently teachable principles. This set of principles, when put together, rested on a coherent logic that clearly established the existence of a distinct form of rationality that we have all long recognized intuitively as “entrepreneurial”. For reasons that will become clear in the next section, I have termed this type of rationality “effectual reasoning”.

Effectual Reasoning: The problem. The word “effectual” is the inverse of “causal”. In general, in MBA programs across the world, students are taught causal or predictive reasoning – in every functional area of business. Causal rationality begins with a pre-determined goal and a given set of means and seeks to identify the most optimal – fastest, cheapest, most efficient, etc. – alternative to achieve the given goal. The make-vs-buy decision in production, or choosing the target market with the highest potential return in marketing, or picking a portfolio with the lowest risk in finance, or even hiring the best person for the job in human resources management, are all examples of problems of causal reasoning. A more interesting variation of causal reasoning involves the creation of additional alternatives to achieve the given goal. This form of creative reasoning is often used in strategic thinking.

Effectual reasoning, however, does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge from contingently over time from the varied imagination and diverse aspirations of the founders and the people they interact with. While causal thinkers are like great generals seeking to conquer fertile lands (Genghis Khan conquering two-thirds of the known world), effectual thinkers are like explorers setting out on voyages into uncharted waters (Columbus discovering the new world). It is important to point out though that the same person can use both causal and effectual reasoning at different times depending on what the circumstances call for. In fact, the best entrepreneurs are capable of both and do use both modes well. But they prefer effectual reasoning over causal reasoning in the early stages of a new venture, and arguably, most entrepreneurs do not transition well into the latter stages requiring more causal reasoning. Figure 1 graphically depicts the different forms of reasoning discussed above.

While Causal reasoning may or may not involve creative thinking, effectual reasoning is inherently creative. The simple task of cooking dinner  may be used to contrast the two types of reasoning. A chef who is given a specific menu and has only to pick out his or her favorite recipes for the items on the menu, shop for ingredients and cook the meal in their own well-equipped kitchens is an example of causal reasoning. An example of effectual reasoning would involve a chef who is not given a menu in advance, and is escorted to a strange kitchen where he or she has to explore the cupboards for unspecified ingredients and cook a meal with them. While both causal and effectual reasoning call for domain-specific skills and training, effectual reasoning demands something more – imagination, spontaneity, risk-taking and salesmanship.

Effectual Reasoning: The Process. All entrepreneurs begin with three categories of means: (1) Who they are – their traits, tastes and abilities; (2) What they know – their education, training, expertise, and experience; and, (3) Whom they know – their social and professional networks. Using these means, the entrepreneurs begin to imagine and implement possible effects that can be created with them. Most often, they start very small with the means that are closest at hand, and move almost directly into action without elaborate planning. Unlike Causal reasoning that comes to life through careful planning and subsequent execution, effectual reasoning lives and breathes execution. Plans are made and unmade and revised and recast through action and interaction with others on a daily basis. Yet at any given moment, there is always a meaningful picture that keeps the team together, a compelling story that brings in more stakeholders and a continuing journey that maps out uncharted territories. Through their actions, the effectual entrepreneurs’ set of means and consequently the set of possible effects change and get reconfigured. Eventually, certain of the emerging effects coalesce into clearly achievable and desirable goals — landmarks that point to a discernible path beginning to emerge in the wilderness.

Yet, in our classrooms, we teach potential entrepreneurs an extremely Causal process – the sequential progression from idea to market research, to financial projections, to team to business plan, to financing, to prototype, to market, to exit with the caveat of course, that surprises will happen along the way. Seasoned entrepreneurs, however, know that surprises are not deviations from the path. Instead, they are the norm, the flora and fauna of the landscape, from which one learns to forge a path through the jungle. The unexpected is the stuff of entrepreneurial experience and transforming the unpredictable into the utterly mundane is the special domain of the experienced entrepreneur.

Let us consider how the two processes operate in the case of building a restaurant. Imagine an entrepreneur who wants to start an Indian restaurant. In the Causal process that we teach, she would start with some market research into the restaurant industry in the city of her choice; select a location very carefully based upon the market research; segment the market in a meaningful way; select target segments based on estimates of potential return; design a restaurant to appeal to her target segments; raise the required funding; bring her team together; and finally, implement specific market strategies and manage daily operations to make her restaurant a success.

In the effectual process, it would all depend on who our entrepreneur is, what she knows, and whom she knows. For the sake of understanding the process here, let us say that she is a good Indian chef who is considering starting an independent business. Assuming she has very little money of her own, what are some of the ways she can bring her idea to market? When used as a class exercise, students usually suggest courses of action such as partnering with an existing restaurant, participating in ethnic food fairs, setting up catering services and so on. Let us say that the actual course of action she decides to pursue is to persuade friends who work downtown to allow her to bring lunch for their office colleagues to sample. Let us further say that some customers then sign up for a lunch service and she begins preparing the food at home and delivering lunches personally. Eventually, she could save up enough money to rent a location and start a restaurant.

But it could equally be plausible that the lunch business does not take off beyond the first few customers, but instead our entrepreneur discovers that the customers are actually interested her ethnic philosophy and life experiences or Indian culture, or other aspects of her personality or expertise, or contacts, or interest. She could then decide to go into any one of those several different businesses contingent upon the ensuing feedback. To cite but a few possibilities, her eventual successful enterprise could turn out to be in any one or all of the following industries – education, entertainment, travel, manufacturing, and packaging, retail, interior decoration, or even self-help and motivation!

Figure 2 graphically depicts and contrasts the causal marketing process with the effectual one. Real-life examples of effectual processes in entrepreneurship abound. In fact, the stories of effectuation permeate and saturate the history of entrepreneurship since at least as far back as the eighteenth century: In the eighteenth century a potter named Josiah Wedgwood, realized that pots can carry people’s aspirations for social mobility; in the twentieth, King Gillette began toying with the idea of creating something that customers would want to repeatedly re-purchase and while shaving one morning, hit upon disposable razors as a possibility; Tom Fatjo, a respectable professional in Houston, practically got dared into founding the garbage giant BFI during a suburban subdivision meeting to solve the community’s garbage disposal problems; and closer to the twenty-first century, while trying to build an interactive cable channel with progressive content, an ex-Microsoft executive named Rob Glaser fell in love with Mosaic, and set out to give voice to the mute Web in the form of RealNetworks; and so it goes.

Effectual Reasoning: The principles. Does all this mean though that we are once again resorting to tales by the campfire? It turns out that all these stories have some common principles of reasoning that invert their counterparts in Causal reasoning. Moreover, these principles tie together in a coherent logic that demonstrates that this is indeed a convincing alternative to causal rationality: While Causal reasoning focuses on expected return, effectual reasoning emphasizes affordable loss. While Causal reasoning depends on competitive analyses, effectual reasoning is built upon strategic  partnerships; and, While Causal reasoning urgest the exploitation of pre-existing knowledge and prediction, effectual reasoning stresses the leveraging of contingencies.

The Affordable Loss Principle. While managers are taught to analyze the market and choose target segments with the highest potential return, entrepreneurs tend to find ways to reach the market with minimum expenditure of resources such as time, effort and money. In the extreme case, the affordable loss principle translates into the zero resources to market principle. Several of the expert entrepreneurs I studied insisted they would not do any traditional market research, but would take any product to the nearest possible potential customer  even before it was even built. To quote but one of them, “I think I’d start by just going … instead of asking all the questions I’d go and say … try and make some sale. I’d make some … just judgements about where I was going — get me and my buddies — or I would go to out and start selling. I’d learn a lot you know which people … what were to the obstacles … what were the questions … which prices would work better and just DO it. Just try to take it out and sell it. Even before I have the machine. I’d just go try to sell it. Even before I started production. So my market research would actually be hands on actual selling. Hard work, but I think much better than doing actual market research.” In finding the first customer within their immediate vicinity, whether within their geographic vicinity, within their social network, or within their area of professional expertise, entrepreneurs do not tie themselves to any theorized or pre-conceived “market”  or strategic universe for their idea. Instead, they open themselves to surprises as to which market or markets they will eventually end up building their business in or even which new markets they will end up creating. Starting with exactly the same product, the entrepreneurs in the study ended up creating companies in 18 complete disparate industries.

The Strategic Partnerships Principle. Another key principle of effectual reasoning is the focus on building partnerships rather than on doing a systematic competitive analyses. Since entrepreneurs tend to start the process without assuming the existence a pre-determined market for their idea, detailed competitive analysis do not seem to make any sense to them at the startup phase. As one of their subject explained, “At one time in our company, I ordered people not to think about competitors. Just do your job. Think only of your work.” Instead entrepreneurs focus on building partnerships right from the start. In fact, the idea beginning for a successful startup seems to be the induction of customers into strategic partnerships. Again, to hear it from the horse’s mouth, “Traditional market research says, you do very broad based information gathering, possibly using mailings. I wouldn’t do that. I would literally target as I said, initially key companies who I would call them flagship and do a frontal lobotomy on them. The challenge then is really  to pick your partners and package yourself early on before you have put a lot of capital out.”

The Leveraging Contingencies Principle. The third principle of effectual reasoning is heart of entrepreneurial expertise – the ability to turn the unexpected into the profitable. As one of the subjects in the study put it, “I always live by the motto Ready – fire – aim. I think if you spend too much time doing ready – aim – aim – aim, you’re never gonna see all the good things that would happen if you actually start doing it and then aim. And find out where your target is.” Great entrepreneurial firms are products of contingencies. Their structure, culture, core competence, and endurance are all residuals of particular human being striving to forge and fulfill particular aspirations through interactions with the space, time, and technologies they live in. For example, we could speculate whether Wedgwood pottery would have been possible if the potter Josiah Wedgwood had not met the gentleman philosopher Thomas Bentley and wooed him into a partnership that created a brand and a great company that lasted over two centuries. The key to the Wedgwood fortune was the realization that people put their money where their aspirations are and that pots and vases could become vehicles of social mobility. Similary, in our time researchers speculate what Microsoft would have been if IBM had written type of a contract or if Gary Kildahl the day IBM came calling. Yet, it is not the contingencies themselves that shaped the companies in the foregoing examples. It is how the entrepreneurs leveraged the contingencies that came upon them that have to form the core of models of effectual reasoning. The realization that not all surprises are bad, and that surprises whether good or bad, can be used as inputs into the new venture creation process differentiates effectual reasoning from causal reasoning which tends to focus on the avoidance of surprises as far as possible.

Effectual Reasoning: The logic. Underlying all the principles of effectual reasoning is a coherent logic that rests on a fundamentally different assumption about the future than causal reasoning. Causal reasoning is based on the logic, To the extent that we predict the future, we can control it. That is why both academics and practitioners in business today spend enormous amounts of brainpower and resources on developing predictive models. Effectual reasoning however, is based on the logic, To the extent that we can control the future, we do not need to predict it. How does one control an unpredictable future? The answer to this question depends on our beliefs about where the future comes from. Is the future largely a continuation of the past? To what extent can human action eventually change its course? While the future is always uncertain, not all uncertainties are the same. In fact, the simplest way we can model the different types of uncertainties is through the classical statistical model of the future as an urn containing different colored balls wherein the drawing of (say) a red ball, results in a reward (of say, $50). Assume the first urn contains 10 red balls and 10 green balls. In this case, the player can calculate the odds as an expected return of $25 on every draw since there is a 50-50 chance of winning $50. This is the model of a risky, but predictable future. Entrepreneurs as well as most human beings in the real world, however, usually have to operate without such a predictability. The urn they have to deal with does not have a given number of balls of known colors. Instead, it contains an unknown number of balls of unknown colors, but the game remains the same. In this case, the best strategy for the player is to draw balls randomly several times and carefully note the result of each draw so that the distribution of balls in the urn can be discovered over time. Using the causal logic – to the extent we can predict the future, we can control it – makes sense in both these cases.

But entrepreneurs choose to view the future through effectual logic. Consciously, or unconsciously, they act as if they believe that the future is not “out there” to be discovered, but that it gets created through the very strategies of the players. In other words, the entrepreneur using effectual logic says: “Whatever the initial distribution of the balls in the urn, I will continue to acquire red balls and put them in the urn. I will look for people who own red balls and induce them to become partners and add to the red balls in the urn. As time goes by, there will be so many red balls in the urn that almost every draw will obtain one. On the other hand, if I and my acquaintances have only green balls, we will put them in the urn, and when there are enough, will create a new game where green balls win.” Of course, such a view may express hopes rather than realities, and many entrepreneurs in the real world do fail. But the fact remains that entrepreneurs use this logic to try and build new urns and devise new games all the times. In fact, several of the expert entrepreneurs explicitly stated that being in a market that could be predicted was not such a good idea, since there would always be someone smarter and with deeper pockets who could predict it better than they could. But being in an unpredictable market meant that the market could be shaped through their own decisions and actions working in conjunction with pre-committed stakeholders and customers-partners. Together they could use contingencies along the way as part of the raw materials that constitute the very urn they are constructing.

Expert entrepreneurs are not usually in the ball counting business or the gaming business. Instead they are actually in the business of creating the future., which entails having to work together with a wide variety of people over long periods of time. Sturdy urns of the future are filled with enduring human relationships that outlive failures and create successes over time.

Embodied in a network of such enduring human relationships, effectual logic is particularly useful and effective in domains such as the introduction of new products in new markets, an area often referred to as the suicide quadrant (See Figure 3), exactly the area where traditional marketing techniques are ineffective.

That is because effectual logic is people dependent, unlike causal logic, which is effect dependent. In other words, when a particular effect has already been chosen such as a target segment within an existing market, the people we hire and partner with will depend on the effect we want to create or the market we want to penetrate. Effectual logic, however, does not assume pre-existent markets and builds on the idea that the markets we create will be predicated  on the people we are able to bring together. In fact, in effectual reasoning, markets are in essence stable configurations of critical masses of stakeholders who come together to transform the outputs of human imagination into the forging and fulfillment of human aspirations through economic means.

Experienced professionals in the entrepreneurial arena, whether they are bankers lawyers, VCs or other investors have always agreed with successful entrepreneurs that finding and leading the right people is the key to creating an enduring venture. These entrepreneurs know that such “right” people are not on the job market waiting for the jobs and incentives the entrepreneurs can offer them. Instead the “right” people need emotional ownership in the goals and objectives of the endeavor and can only be incentivized by the belief the the effects that they create will embody their deepest passions and aspirations while enabling them to achieve their best potential.

But great entrepreneurs realize something more about the central role of people in shaping the urn. Using effectual logic, they understand that they too cannot wait around to find the “right” people all the time. Besides continually striving to attract the “right” people, they learn also to nurture and grow them in their own backyards. As Josiah Wedgwood wrote, “We have to make artists of mere men.” And more recently, the founders of AES Corp., a multi-billion dollar electric power company with operations in dozens of countries around the world say, “[AES] is fun because the people who work here are fully engaged. They have total responsibility for decisions. They are accountable for results. What they do everyday matters to the company, and it matters to the communities we operate in.”

There is, however, a dark corollary to the use of effectual logic in entrepreneurial activity. Since they do not assume specific pre-existent goals or effects and let these effects emerge through the process, in using effectual logic to create products and markets, entrepreneurs and their partners may also end up creating harmful and problematic effects for the society they live in. The effects they create may reflect the ignorance and cupidity as well as the will and aspirations of the people who participate in the creation of new urns and games of the future. But our awareness of the existence of effectual reasoning should alert us more sharply to the role of entrepreneurs to and the market system in shaping our future as a species, not merely as contributors to GDP.

The creation of U-Haul: An exemplar of effectual logic. In 1945, newly married and with barely $5,000, Leonard Shoen set out on his effectual journey that led to the creation of U-Haul. By the end of 1949, it was possible to rent a trailer one-way from city to city throughout the most of United States. When we examine his journey, we find that this feat could not have been accomplished except through the use of effectual reasoning. When students today set out to write a business plan for this venture (using causal processes), they conclude that the plan is financially infeasible, or even psychologically infeasible, since it requires a large and risky capital outlay, most of which gets locked up in relatively worthless assets such as trucks and location rental. Moreover, the logistics of starting the business at a much smaller scale and growing it as fast as Shoen did overwhelm the analytical prowess of the best of causal thinkers. The final nail in the coffin is the complete lack of any entry barriers to imitators with deep pockets after the concept is proved on a smaller scale.

Shoen, however, did not do elaborate market research or detailed forecasting and fund-raising in the sense in which we use the terms today. Instead, using effectual means, (who he was, what he knew, and whom he knew), he plunged into action, creating the market as he grew the business. In his own words, “Since my fortune was just about enough to make the down payment on a home and furnish it, and knowing that if I did this we would be sunk, we started the life of nomads by putting our belongings in a trailers and living between in-laws and parents for the next six months. I barbered part time and bought trailers of the kind I thought we needed to rent from anybody who happened to have one at the price I thought was right. By the fall of 1945, I was in so deep into the trailer rental deal economically that it was either make it or lose the entire thing.”

At the time he moved with his wife Anna Mary Carty Shoen and their young child to the Carty ranch in Ridgefield, Washington. There with the help of the Carty family, the Shoens built the first trailers in the fall of 1945, painted in striking orange with the evocative name U-Haul on the sides, using the Ranch’s automobile garage (and milk house) as the first manufacturing plant. Shoen then practically gave away the initial trailers to renters so that they could establish dealerships in cities they moved to. He would also purchase trailers, and trucks and sell them to employees, family members, friends and investors who would then lease them back to AMERCO, the parent company of U-Haul. He contracted with national gas station chains to utilize their unused space for parking and to manage the paperwork. Together this vast network of stakeholders formed a substantial entry barrier to any imitator who would have to risk a large capital outlay to compete. Advertising was entirely limited to Yellow Pages and to the sudden and startling sight of growing numbers of distinctly painted vans being driven along the freeways of the country.

At any given moment, U-Haul could have failed, but the resulting financial fall-out would not have been a disaster since the investments were spread across so many stakeholders. This brings us to the key implication of effectual reasoning for the success or failure of entrepreneurial ventures. Effectual reasoning may or may not necessarily increase the probability of success of new enterprises, but it reduces the costs of failure by enabling the failure to occur earlier and at lower levels of investment.

So, what makes entrepreneurs entrepreneurial? Entrepreneurs are entrepreneurial, as differentiated from managerial or strategic, because they think effectually; they believe in a yet-to-be-made future that can substantially be shaped by human action; and they realize that to the extent that this human action can control the future, they need not expend their energies trying to predict it. In fact, to the extent that the future is shaped by human action, it is not much use trying to predict it — it is much more useful to understand and work with the people who are engaged in the decisions and actions that bring it into existence.

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Some background on what this paper is doing here. First and foremost, I didn’t write this paper. I’ve read it and found it incredibly valuable. In fact, it has been over 10 years since this paper was written and entrepreneurs will spot some improvements that can be made to it. The real gold mine though is for Startup Founders, for whom a model of action, learning can be based on the framework presented in this paper. If anyone were to ask you – how do you create the future, this would be a paper I’d relate my answer to in more ways than one. I’ve also seen entrepreneurs at work who’ve used effectual reasoning to turn situations into their favor, when any causal thinker would think otherwise. To make the paper digitally shareable, editable and critiquable I thought to seek permission to create a copy.

Download the original version (pdf postscript).

Over the last few months leading up to this conversation, I’ve researched books including the Startup of You, and articles on the web including my favorite Do What You Love. The writing merely helped by giving me a language to explain what it was that I expected from my future. Having someone to face and trade idea fits was unique in it’s own way. I came away with clearer options, and a bonus refreshed perspective on the same challenges that I earlier felt might be dead-ends.

There is still a whole lot of doing that remains before I can claim that the challenge has been won. This post is really to thank and to underline all that went into making this conversation possible. Common friends, common events, one-on-one discussions, email and phone exchanges that stretch out for well over a year. The threads of our journeys intermingle with so many different people we engage with at work and home. I can’t help but believe that this rich fabric might know some things about you that will surprise you as well.

Finally, both of us did not come into the discussion expecting this. It wouldn’t have been possible to have this conversation and its outcome if he did not firmly believe in the creative practice which teaches respect for intuition and encourages you to recognize that what we expect, and the practice itself are independent and yet interdependent. Without that freedom we make it difficult to welcome new objectives, or new goals that emerge out of any discussion on what is and what can be.

I hope that my own experience will convince you to see all those around you with a refreshed perspective.

On my best days I sit for a little above 25 minutes in half-lotus. I sit once on all days, busy or relaxed, easy or stressful, productive and not so productive. I sit in the day and in the night. I’ve come to a point where I am beginning to feel the hunger for a teacher to help me refine. A quick Internet search revealed a Zen retreat in Kodaikanal. Interestingly, there are renown Zen centers in Seattle as well as in Rochester. Both cities I’ve resided in but never looked past my nose for answers.

You can also join a virtual Zendo treeleaf.org, an online practice place that seeks to provide Zazen sittings, retreats, discussion, interaction with a teacher, and all other activities of a Soto Zen Buddhist Sangha. I found them on this reddit.com/r/zen thread.

For the uninitiated who is interested in learning more, I recommend poking around a bit on the Web. There is a wealth of information available on meditation online. See for your self!

Meditation is Universal!

An introduction to Meditation, Kavita Maharaj.

An introduction to Zen Meditation practice – Taigen Shodo Harada Roshi.

I would say that it’s not possible to love you more than I do right now, but I know that it’s not true, becaue I love you more every day. I want to remember every minute of this, every joke you make, every smile. Time is moving too fast and I want to bottle this and have you be two forever. I know that that’s not possible, so allow me to write about you, the things I love, and the things I’ll miss.

A friend of a friend wrote these words on his blog and I can tell you that this rings out true every time I read it. Time flies by too quickly and babies grow up to be kids too soon.

It’s painful to have Megh take his shots. This weekend after he had his chickenpox vaccine, I noticed my hands shaking as I paid the clinic on my way out. I didn’t realize that keeping him still and watching the needle go in would have such a deep impression on me.

A personal favorite are those rare moments when he falls asleep in my shoulders. As he slowly drifts into sleep, his little body steadily eases out, his arms wrapped around me. In that brief moment I know then what being Daddy is, really, really. I renew my promise to always be a source of strength and inspiration for him to go further.

Wikipedia has this to say – “Serendipity means a ‘happy accident’ or ‘pleasant surprise’; specifically, the accident of finding something good or useful while not specifically searching for it.” Interesting that they would use the words while not specifically searching for it.

Going by gut, I’ve found Serendipity to be one part belief and one part effort. They’re both dependent on each other and work together to,
* give you the freedom to persistently continue your effort, to improve it,
* hold off despair through self-encouragement and,
* when the opportunity finally opens up – ensure that you are ready for it.

For instance, Roby John walked the Pune Open Coffee Club through how his startup June managed to unlock the serendipity of the Silicon Valley. Roby has made it a constant effort to focus on building his product and maintaining some presence in San Francisco through the better part of 2011 and 2012. In the middle of 2011, his startup were selected to attend office hours with Paul Graham. Later June applied to YCombinator and were accepted, thus becoming the first truly native Pune Startup to have earned that distinction. This is by no measure a trivial achievement. YCombinator are the institution of repute of Startup Incubation. In hindsight, would you still be surprised? And yet, I don’t think Roby knew all along that this was a certainty. That might be a question I want to ask him, but for now I’ll accept that mystery. In order for serendipity to work for you, you will need to keep rising up again, ‘n again, ‘n again.

There are important areas in our lives where we look forward to serendipity of this kind. I guess it is important to remember both belief and effort are necessary ingredients. Take time to list them out and strengthen both.

A day later.

… because it’s not everyday that you get to see @shekharkapur in the flesh! #Bangalore.

— Santosh Dawara (@santoshdawara) August 13, 2012

Bangalore’s Seniors Head to Work as ‘Traditional Indian Family’ Dissolves – India Ink.

This excellent piece of journalism by India Ink (NY Times in India) points out that the problem is indeed both deep and wide. I don’t know how many seniors out there face this problem, but I don’t have to look too far to understand how this can upset the elderly.

“The three most harmful addictions are heroin, carbohydrates, and a monthly salary.” – Nassim Taleb

— Santosh Dawara (@santoshdawara) October 25, 2010

I tweeted that and endorsed an extreme position some time ago. Since then, I’ve had plenty of time and experience to think through both sides of having a steady income. I’ve looked at it from the perspective of growing up, having a steady job and later as an entrepreneur by self-choice. I’ve lived both avatars, the locomotive kid* and the 25-yr old who’s plugging away on his venture from his parent’s basement (they’re my Angel Investors!). A steady income has significant upsides. It will help you save regularly, smoothen out sudden spikes in expenses, qualify you for borrowing from institutions and get you ready for your retirement.

On the other hand, the total absence of the ups and downs that is life encourages complacency, over-reliance and self-indulgence. Who can tell? Perhaps the nest-egg we’ve put away today still won’t make the cut tomorrow. In the words of Nassim Taleb who author of the Black Swan, the total absence, or insulation from even the minor shocks leaves your earning potential vulnerable to the bigger and more infrequent shocks.

In any case those who are unfortunately disenfranchised from mainstream jobs include recent Mothers who chose to stay longer hours at home, and as in this case Senior citizens. They all need better awareness of opportunities for work and encouragement. While retirement planning helps – it helps better to nurture the ability to locate opportunities, deliver and get paid at any age or stage. Not having a steady income begs a more evolved survival mindset. The confidence that comes from going out there and learning to make a dollar is worth so much more. As you can imagine, I never want to have to think that I’ve retired. I’d prefer to be working away and creating happiness throughout my journey. In a nutshell, I want the notion of ikigai – “the reason for which we wake up in the morning” or, “the reason for being” to pervade my entire life.

Tony Hsieh’s childhood mail order business comes to mind. He describes it vividly in his book Delivering Happiness. In fact, Tony handed it down to his younger siblings before he left home for college so that they might continue to run it and reap the benefits. A wonderful gift! The opportunity to drive a business that transforms effort into a cheque can spark confidence in the inner-knowedge that the future is yours to create. Now armed with this confidence, will you need great effort in securing your future?

Of late, I’m working on making it a habit to ask myself – how do I want all of my efforts to take shape? This thinking comes with commitments to absorbing effectual reasoning and an attitude of ‘always produce‘. For instance, this blog has always been a work of passion for as far back as I can remember. If I could keep the essence of it, and yet to be able to realize the value it creates. I think that’d be a step in the right direction. Now when I write, I consciously link via an Amazon affiliate link which pays if someone were to buy. I wish to think up more ideas like this. Simple actions and commitments, even if they don’t yield significant or immediate results can directly address any financial pressure and encourage clear thinking that something can be done.

Don’t get me wrong, I’m not railing against a steady income – that’d be truly hypocritical at this point. The comfort that you’ll know from pro-actively creating a better financial future with your single income is a blessing. If you think too seriously about supplementing that income, you risk stress and losing the happiness and freedom that comes with it. On the other hand, if you want to think entrepreneurially – then ask yourself why stop there? The whole point of realization of wealth should be the same as say committing to life-long learning, or instinctively listening to an audio book while you wait in traffic for the light to turn green. Find meaningful investments.

I’d look to learn as much as I can from blogs such as getrichslowly.org and by observing other entrepreneurs with the midas touch about both aspects of wealth – how it is realized, as well as making it work for you. If you want to stop having to think about money, ignoring it is the worst policy. Work at it diligently and it’ll take it’s place at the back of your mind on it’s own.

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*Locomotive Kids – First read of it in the New Yorker, “They are the locomotive kids, pulling their whole family behind them” when referring to some of those with Stanford fellowships.

I’ve observed my son to be pretty hands-on with my laptop’s touchpad when watching his favorite youtube videos. I’d love to learn more about your own experience – do you have a toddler who’s warmed up to your touch device?

Applications include – story books, learning counting, singing along,

Read more.

Here’s a video of a 2 year old using an iPad to draw.

An update 9th September 2012. A study found that enhanced ebooks were distracting and children lost the narrative thread. Read more about it on the Guardian.

By constantly and unconditionally nurturing this spirit, by motivating yourself to get up and do anything that is possible, only then is it possible to continue even in confusion, or when you catch yourself thinking that you let yourself and others down, that you failed to keep to your promises or vision, or that you could have done so much better.

“Always produce” is also a heuristic for finding the work you love. If you subject yourself to that constraint, it will automatically push you away from things you think you’re supposed to work on, toward things you actually like. “Always produce” will discover your life’s work the way water, with the aid of gravity, finds the hole in your roof.

~ Paul Graham, How to do what you love.

Always produce will also ensure that Serendipity works with you.

Always produce will give you the freedom necessary to scale up, or scale down no matter what stage you are at.

The way out could be sensible, or even as inane as writing out a journal entry, or reaching out to a confidante and verbalizing all thoughts. Stay focused on your target and make your move.

The way out is to always produce. No matter what the outcome. We’re geared to intuitively grasp the invisible impact, or meaning of what we do and push forward. Lose yourself in the act of production to create that magical fuel that will keep you engaged in the game.

Related,
Secret Traits of Every Successful Entrepreneur.
How to Make Failure Impossible.
Train and when you cannot, Endure – the story of Duk-koo Kim, NY Times.
How to do what you love – Paul Graham.
Go your own Way - Pinterest Founder, Ben Silbermann’s Lesson for Startups.

“What do you think makes our thoughts?”

There are a huge number of different answers out there. The answer that matters to you is the only one that matters.

~ William Morris, from Signs of Change (1888). The Aims of Art (1877).

• Tackling water wastage in Indian cities. My apartment block continues to face a severe water crisis, so does some parts of the city and we could use some help.
• Organic molecules that respond to visible light – think fuel that regenerates itself in sunlight.
• Low cost, multi-level farms to increase farm land.

Read the entire article on the Hindu.

Read the entire article on Times of India.

Time to refocus and get on with work!

I recommend trying these queries out for your self to understand how they work, click here to open your inbox in a new window.

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#1. Your coworker sent you a presentation in the recent work-week and since then it has been buried beneath fresh email. Simply search for emails from john@doe.net with an attachment as follows:

from:john@doe.net has:attachment

This will pull up only those emails from John with an attachment to help you narrow down your view.

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#2. You’ve been getting daily website reports and you’ve put off reviewing some of them for until later. You recall that the subject line had your website sukshma.net in it. We create this search query with the qualifier for the subject line ‘subject:’ and a label for unread email as follows,

subject:sukshma.net label:unread

This will pull up all unread emails with sukshma.net in the subject line allowing you to finish your review and save the day.

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#3. You’d like to mark all conversations from any one of several associates you are working with as important, or perhaps file them under a custom gmail label.

from:{partner1@void.net partner2@void.net}

The curly braces here help group the addresses together and tells gmail that either address is a good match. Learn more about how this technique works here. You could also use the more explicit way of writing the same query if you find this easier -

from:partner1@void.net OR partner2@void.net.

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#4. You want to see all emails addressed directly to you that also mentions your customer mycustomer. Do it as follows,

to:jane@void.net mycustomer

You can use the same idea with the qualifiers ‘cc’, or ‘bcc’.

This version will also work and is easier,

to:me mycustomer

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#5. If you’ve not used labels extensively, your email folders – such as inbox, sent mail, unread, favorites, important are all essentially a label. To view all your drafts, type the query out as follows:

label:drafts

While this one might save you just a click, it’s valuable if you’ve been auto-filtering or categorizing your incoming emails under custom labels such as “discounts” or “event invitations”.

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#6. No list would be complete without learning how to negate conditions. Let’s say I’d like to see all unread email and not include automated mailing list clutter. If I’ve setup a gmail filter to auto-tag mailing list notifications to the label “mailing list”, then by adding the ‘-’ sign I can exclude all emails that have been tagged ‘mailing-list’ as follows,

label:unread -label:mailing-list

What you’ll get is all your unread email without the clutter.

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This is it for now, do leave me a comment if you are looking for help with gmail queries and I’ll get back as soon as I can. Try your hand at more queries here. For an exhaustive list of search filters, try this link on about.com.

Thanks to the shakeup from to the reduced water supply I learned a couple of things. We’re getting less water than we ought to get for a building of our size. As the flats above the 2nd floor in Kundan park are still ‘illegal’ – the PMC has not granted additional water to our building. That additional water could have obviated the need for residents to rely on digging an additional borewell and installing a submerged pump.

The groundwater drawn was clean initially. After a couple of days it turned yellow and stank to high heaven. Lab test results confirmed that the water had higher than normal levels of e-coli.

Of course, we’ve been extremely careful with the water we’re using for our toddler. The residents here are also considering a central UV filtration unit. All this can be frustrating at times and I’m wondering what will fix this.

Monsoons are predicted to arrive in Maharashtra around June 7th while investigative reporters are wondering if the whole idea of water cuts was botched in the first place.

How is your water supply working out?