In the last few posts, I have been developing the idea of effectuation as a self-organization principle against the idea of expertise acquired by entrepreneurs via experience and deliberate practice. Following are two blog posts in which I have elaborated my thoughts.
- Why expertise theory of effectuation is flawed?; Here I argue why expertise framing of effectuation is flawed
- Self-Organization: Paul Cilliers and Saraswathy: Here I assess effectuation using Paul Cilliers’s attributes of self-organization. Arguing that effectuation simulates the action models of self-organizing systems.
I have demonstrated that the ideas proposed by effectuation fit perfectly with self-organization principles. Advancing that point, the following are some of the complexity principles associated with effectuation and its core principles(heuristics).
1. Self-Organization/Effectual dynamics
I argue that “effectual dynamics” is the dynamics of self-organization. Self-Organization refers to the feature of systems that appear to organize themselves without external direction or control. Self-organization has been used to describe swarms, flocks, traffic, and many other systems where the local interactions lead to a global pattern or behavior (Camazine et al, 2003; Gershenson, 2007). Intuitively, self-organization implies that a system increases its own organization. Self-organization of the effectual entrepreneur is initiated with an examination of the means available to an entrepreneur. The questions “Who am I?”, “What do I know?”, and “Whom do I know?” allow for an examination of the means available to an entrepreneur, which allows him or her to consider what he or she can do (Sarasvathy & Dew, 2005). Through interacting with others and engaging with stakeholders, the entrepreneur discovers new means and establishes new goals that allow for revaluation of means and possible courses of action (Fisher, 2012).
2. The attractor/ Intention
Self-organizing systems typically evolve towards a state of equilibrium, or an attractor state. Almost any dynamical system can be seen as self-organizing; if it has an attractor towards which the system dynamics will tend to move, thus increasing by itself its own organization. According to Kauffman(1995), “the trajectory converges onto a state-cycle attractor around which the system will cycle persistently thereafter. A variety of different trajectories may all converge on the same state cycle, like water draining into a lake. The state-cycle attractor is the lake, and the trajectories converging onto it constitute its basin of attraction”. So the question is, Who or what constitutes one of the key initial attractor according to effectuation. Is it the entrepreneur, or intention? Since effectuation has a lot of roots in the work of Herbert Simon, especially “The Sciences of the Artificial” (Simon, 1968), I prefer to take evidence from his work, quoted by Saraswathy herself; “For Simon, human intention and design were central to the social sciences, and the word ‘man-made’ was synonymous with artificial” (Sarasvathy, 2008). From that foundation, it is logical to assume recognition of “intention as the attractor (Juarrero, 2010)”. Intention is also a valid concept in entrepreneurship (Bird, 1989; Shapero and Sokol, 1982; Krueger and Carsrud, 1993). According to Juarrero(2004), “new intention reorganize the earlier state space into a more differentiated and complex set of qualitatively novel options. This means that once an agent formulates a prior intention, every possible behavioral alternative no longer requires consideration; only a partitioned subset does”.
3. Phase space disposition
According to Saraswathy, the process elements of effectuation begin with entrepreneurs asking who they are, what they know, and whom they know. This corresponds to the idea of knowing the disposition of phase space or state space of a complex adaptive system. In complexity science, the ‘phase space'(or state space) is the representation of all possible instantaneous states that can occur in a physical system (Butkovskiy 1990, Sayama 2015). It can be thought of as the space within, around, or adjacent to which a complex adaptive system can self-organize and emerge. While we may not be able to know precisely how a system might change, we do know that it will be most likely within the phase space. A change in emergent phenomena within a phase space may be incremental. A radical change suggests a shift in phase space, a qualitative difference in the system (Byrne & Callaghan, 2014). According to Dave Snowden(2017a), in complex adaptive systems, “at a system level, we have no linear material cause but instead we have a dispositional state, a set of possibilities and plausibilities in which a future state cannot be predicted.” This is particularly important because, in a complex system, phase space disposition, is what decides on the evolutionary potential of the system, not any specific fixed goal. If a system is complex(no causality), “you can’t set outcome targets a priori, but you can define a vector target (direction and speed of change from the present against intensity of effort). You can’t manage to a desired future state but have to manage the evolutionary potential of the situated present. You can’t predict the future, but you can increase resilience in there the here and now which will allow you to manage that uncertainty” (Snowden, 2017b).
This importance of disposition can also be found in the works of scholars who specialize in entrepreneurship complexity. According to Jeffrey Goldstein, Self-transcending Constructions (Goldstein, 2003), which involves the emergence of radically novel outcomes—-operate on already extant order and creatively transform it along the way into radically novel outcomes.
Following are some sources of this pre-existing order that are processed by Self-transcending Constructions (Goldstein, 2005);
1. The already present nascent order in a system, i.e., the way it is functioning right now;
2. The multifarious constraints currently in place, e.g., the geographical layout, the actual buildings, the already extant work groups, the constraints of money, time, goals, and so forth;
3. Operations of recombining and manipulating the above;
4. Supplemental means for introducing novelty such as randomization and negation, i.e., changing the rule.
I argue that an effectual entrepreneur, by asking questions such as; who they are? what do they know? and whom they know? etc. effectively is trying to make sense of the dispositional propensities, so that they can utilize the evolutionary potential of the present to decide what to do.
4. Adjacent Possible.
From the understanding of disposition comes the “The bird-in-hand principle” which refers to a principle of means-driven(as opposed to goal-driven) action. The emphasis here is on creating something new with existing means rather than discovering new ways to achieve given goals. To effectuation, entrepreneurs focus on what they can do and do it, without worrying much about what they ought to do. This idea is similar to acting in the adjacent possible (Kauffman, 1996), i.e. a kind of zone of proximal development (Vygotsky, 1978), towards which change and evolution are more likely because of the current disposition of the system. The concept of “adjacent possible” was introduced by Stuart Kauffman (1996; 2000) in evolutionary biology and complex adaptive systems to explain how biological evolution can be seen as exploration and actualization of what is adjacent possible. It can be defined as “the set of possibilities available to individuals, communities, institutions, organisms, productive processes, etc., at a given point in time during their evolution” (Loreto 2015, p. 9). The concept of the “adjacent possible” is useful for understanding how entrepreneurial adjacent possibilities emerge, and how the new adjacent possible will lead to yet newer adjacent possibilities. In the case of effectual entrepreneurs, they will focus on the adjacent possible than worry about things they don’t possess. They will focus on what they can do and do it.
Any failure inside the zone of adjacent possible will not likely result in system destruction, but likely help the development of system resilience. The affordable-loss principle to me is a heuristics based on this idea. It prescribes committing in advance to what one is willing to lose rather than investing in calculations about expected returns to the project. If an effectual entrepreneur commits 6 months and 10000k, that commitment itself will shape the constraints of the adjacent possible.
4. Co-evolution and Co-adaptation
For a system to self-organize, its elements need to communicate: they need to “understand” what other elements, or mediators, “want” to tell them (Gershenson,2007). Thus, first of all, in a complex system, dynamics of self-organization are initiated and manifested by heterogeneous agents interacting with one another in a non-linear and continuous way. Even if specific agents may only interact with a few others, the impact of these interactions are propagated throughout the system. Accordingly, agents co-evolve with one another (Anderson, 1999). Through this interaction, agents strive to improve their fitness with the environment but the outcome of these attempts depends on the disposition and behaviors of other agents (Mitleton-Kelly, 2003). Thus, co-evolution is one of the key themes when it comes to viewing the system as a whole(the nested and entangled relationships with multiple complex adaptive systems), which refers to the simultaneous evolution of entities and their environments, whether these entities are organisms or organizations (Baum & Singh, 1994). It encompasses the twin notions of inter-dependency and mutual adaptation, with the idea that species or organizations evolve in relation to their environments, while at the same time these environments evolve in relation to them. In effectuation, this is parallel to initiated interaction and the crazy-quilt principle. This principle involves interacting and “negotiating with any and all stakeholders who are willing to make actual commitments to the project, without worrying about opportunity costs, or carrying out elaborate competitive analyses. Furthermore, who comes on board determines the goals of the enterprise. Not vice versa”. This involves the co-evolutionary potential of interacting agents constituted by the principles we have discussed till now but applied to the other side. They are; The Intention(attractor) of other agents, Phase space disposition of interacting agents, Adjacent-possible of interacting agents.
5, Acknowledging and appropriating Emergent property
Complex adaptive systems show emergent properties. Emergent properties refer to a characteristic that is found across the system but which individual parts of the system do not themselves hold. E.g. Human heart is made of heart cells. But heart cells on their own don’t have the property of pumping blood. You will need the whole heart to be able to pump blood. Thus, the pumping property of the heart is emergent. A complex system like entrepreneurship has emergent property. That means the emergent or emerging venture idea might be different from the ideas the entrepreneur has initially conceived. Thus initial idea may be to start HTML5 supported location-based service; The emergent outcome could be Instagram. The initial idea may be to develop an app to compare two people’s pictures and rate which one was more attractive; The emergent outcome could be Facebook. The lemonade principle of effectuation is based on adapting, using, and improvising according to emergent realities, whether it is perceived as negative or positive. It suggests acknowledging and appropriating contingency by leveraging surprises rather than trying to avoid them, overcome them, or adapt to them. This means accepting the emergent realities as it comes, adapting, acknowledging, and appropriating the contingencies as it unfolds.
The pilot-in-the-plane principle urges relying on and working with the human agency as the prime driver of opportunity rather than limiting entrepreneurial efforts to exploiting exogenous factors such as technological trajectories and socioeconomic trends. This is equivalent to elements of Lichtenstein’s(2016) concept of generative emergence that views entrepreneurial emergence as intentional, and agency, even if distributed, as the source of successful organizing. To the framework, intention is the primary attractor around which self-organisation takes place. In order for effective self-organization to take place, the agent must use agency, not to exert control that is driven by his/her own bounded rationality, or the rules of perceived local optima, but a kind of agency that is distributed (Garud and Karnøe, 2005)and embedded as well (Garud and Karnøe, 2003)
6. Effectual Self-organisation cycle
A complex system is always dispositional and I have discussed quoting Snowden that we can only know the system by knowing how it is disposed. “you can’t set outcome targets a priori, but you can define a vector target (direction and speed of change from the present against intensity of effort). You can’t manage to a desired future state but have to manage the evolutionary potential of the situated present”. Since the system is always changing, the bird in hand or disposition is also parallelly evolving. This warrants continuous reappraisal of the situated present. The effectual cycle suggests always looping back and cycling through five core principles in a non-linear manner(bird-in-hand, affordable-loss, crazy-quilt, lemonade, pilot-in-the-plane). More specifically there are two types of converging cycles mentioned; expanding means and converging goals. The expanding-means cycle looks for increases in resources, and the Converging goals cycle adapts the goals. “It accretes constraints on the venture that converge into specific goals that get embodied in an effectual artifact over time” (Sarasvathy et al, 2014; Sarasvathy & Dew, 2005, pp. 543–544). This is also a feedback about emergent realities that will lead to estimation of the new phase space disposition, new adjacent possible, new co-evolutionary potential, new action, etc.
This is part of Esoloop Framework
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