1. FACULTY OF ECONOMICS AND SOCIOLOGY Your career starts here

8. LODZ WARSAW How to get to Lodz? BY AIRPLANE
+ taking train: less than 1 hour

10. Facts about the Faculty
Founded in 1965.
The biggest of the 12 faculties of the University of Lodz.
400 employees & 6,000 students.
The „A” category according to the Ministry of Science and Higher Education standards.
Exact sciences + humanities.   
Prominent graduates.
Highly internationalised environment.
Great location- right in the city centre. 11

11. Why EkSoc? 11 Because we have all you need 
We offer more than just studies - over twenty science groups and student organisations are active at our Faculty.
We also host Summer School seminars in Lodz and a little further in Brazil, Ecuador and Mexico.
Erasmus + Programme lets our students study in one of 33 European countries.
Our staff consists of highest ranking scientists and outstanding practitioners, almost every fourth of our lecturers bears the rank of associate or titular (full) professor.
We foster good relationship with the world of business. 11

12. Main research areas Micro- and Macroeconomics Labour Market Economics
Growth economics
History of economic thought
Applied economics and econometrics
Statistics and demography
Operational researches
Finance and banking
International economics
Regional and municipal economics
Sociology of culture and art
Sociology of professions and management
Sociology of ethics and politics
Rural and urban sociology
Sociology of social problems
European studies

13. International research cooperation
The Faculty’s staff successfully realizes international grants and research projects, which in turn further the opportunities for the transfer of knowledge and experience. Some of them are financed by the European Union, while others get support from the Polish government.

14. Faculty’s offer for students and visiting scholars
1. BACHELOR STUDIES IN ECONOMICS
2. BACHELOR STUDIES IN ECONOMICS
ECO-BUSINESS
3. MASTER STUDIES IN ECONOMICS AND INTERNATIONAL BUSINESS
4. POST-GRADUATE STUDIES IN FINANCIAL ANALYSIS AND INVESTMENTS: CONCENTRATION ON CFA® – LEVEL I
5. THE EKSOC FELLOWSHIP PROGRAMME

15. Postgraduate Studies in Financial Analysis and Investments:
Concentration on CFA® – Level I
Post diploma studies “Financial Analysis and Investments: Concentration on CFA® – Level I” give the candidates a possibility to prepare for CFA (Chartered Financial Analyst) level I exam, organised by the CFA Institute.
Our programme is based on CFA Institute Curriculum, focusing on the exam, rich in interna­tional content and taught in English. Additionally, after passing internal exams the participant will receive an official diploma of University of Lodz. Our programme includes courses of: Economics, Ethics, Financial Analysis and Reporting, Corporate Finance, Equity Investments, Fixed Income Investments, Derivatives, Alternative Investments, Portfolio Management.
More information: kurscfa.uni.lodz.pl

19. HOW DO ENTREPRENEURS THINK AND MAKE DECISIONS?
„If I may control the future, I do not have to predict it”

20. Entrepreneurship as making
Different approaches to venture creation or
Entrepreneurship as making

21. How to build a new venture?
Make a market analysis
Think about strategy to conquer the market
Write a business plan

22. How to build a new venture?
Make a market analysis
Think about strategy to conquer the market
Write a business plan

23. EFFECTUATION
VERSUS
CAUSATION

24. Saras Sarasvathy Associate Professor of Business Administration
Top class world professor in entrepreneruship
Author of effectuation theory

25. Introduction
In dynamic thus uncertain environment entrepreneurs take actions in different ways.
What is distinctive for successful entrepreneur (especially expert one) is specific logic of thinking and in consequence making decisions.
The logic might be analyses in CONTROL-PREDICTION frame.

26. GO TO SHOP TO BUY INGREDIENTS
READ THE RECIPE
SET THE GOALS
GO TO SHOP TO BUY INGREDIENTS
OBTAIN THE RESOURCES
COOK
ACHIEVE THE GOAL

27. MOBILIZE YOUR RESOURCES
SEE WHAT YOU HAVE
MOBILIZE YOUR RESOURCES
PREPARE THE MEAL
CLARIFY YOUR IDEA

28. Effectuation vs causation
There are different approaches to taking actions, solving problems and decision making of entrepreneurs, especially in uncertain environment.
Effectuation - the future is unpredictable yet controllable, entrepreneurs create opportunities, effectual models begin with given means and seek to create new ends, based on the premise „To the extent we can control the future, we do not need to predict it”
Causation – rooted in prediction, causal models begin with an effect to be created, based on the premise „To the extent we can predict the future, we can control it”
Two logics
Sarasvathy 2008

29. CAUSUAL REASONING predictive very functional area in business
begins with a pre-determined goal and a given set of means and seeks to identify the optimal – fastest, cheapest, most efficient, etc. – alternative to achieve the given goal.
involves the creation of additional alternatives to achieve the given goal.
causal reasoning may or may not involve creative thinking. The form of creative causal reasoning is often used in strategic thinking.

30. CAUSAL REASONING
based on the rational reasoning found in neo-classical micro-economics
based on intensive search process and the alternative with highest rate of return is chosen
Planning and analysis are required

31. EFFECTUAL REASONING
does not begin with a specific goal. Instead, it begins with a given set of means and allows goals to emerge contingently over time from the imagination and aspirations of the founders and the people they interact with.
effectual reasoning is inherently creative

32. EFFECTUAL REASONING
entrepreneur selects alternatives based on the affordability of experimentation and hedges experiments by making alliances with and getting pre-commitments from potential suppliers, competitors, and customers
decision criteria are the affordability of experimentation and the degree to which an uncertain outcome can be controlled through alliances and pre-commitments
Chandler et al. (2007)

33. Effectual logic
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.

37. Goals define the resources MEANS ORIENTATION Resources define goals
PRINCIPLE
CAUSATION
EFFECTUATION
STARTING POINT
GOAL ORIENTATION
Goals define the resources
MEANS ORIENTATION
Resources define goals
RISK PERCEPTION
FOCUS ON EXPECTED RETURNS
FOCUS ON AFFORDABLE SOURCE
ATTITUDE TOWARDS OUTSIDERS
POTENTIAL COMPETITORS
POTENTIAL PARTNERS
ATTITUDES TOWARDS CONTINGENCY
AVOIDANCE
LEVERAGE
VIEW OF THE FUTURE
FORECAST
Future environment is externally given
CREATE
Environment depends on future action

38. How effectual entrepreneurs start?
with three categories of means:
(1) Who they are – their traits, tastes and abilities;
(2) What they know – their education, training, expertise, and experience;
(3) Whom they know – their social and professional networks.
Using these means, the entrepreneurs begin to imagine an implement possible effects that can be created with them.

39. 5 principles of Effectuation
Bird-in-hand principle →   Start with Who you are, What you know and
Whom you know
Affordable loss principle →   Invest what you can afford to lose
Crazy Quilt principle → Build a network of self-selected stakeholders
Lemonade principle → Embrace and leverage surprises (every day)
Pilot-in-the-plane principle → The future comes from what people do

41. Some remarks
It is important to point out that the same person can use both causal and effectual reasoning at different times depending on what the circumstances are.
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.
Most entrepreneurs do not transition well into latter stages requiring more causal reasoning.

42. SOCIETY FOR EFFECTUAL ACTION www.effectuation.org

43. Who is more entrepreneurial?
Shane
Shane 2003

44. Who is more entrepreneurial?
Shane 2003

45. How do entrepreneurs think, reason and make decisions?

46. explaining entrepreneurial behavior through cognitions
Introduction
Difference: How we should think and how we actually think?
Rational behaviour and rational choice? Expected value and expected utility?
explaining entrepreneurial behavior through cognitions

47. Cognition
Thinking
a group of mental processes that includes attention, memory, producing and understanding language, learning, reasoning, problem solving, and decision making

48. How do we think?
All comparisons are made to reference points or aspirational level
So.. behaviour becomes dependent on our experiences and expectations….
Which is… not really rational

49. Behavioural economics
Behavioral economics is at the intersection of economics and psychology.
Traditional economic theory assumes that people are perfectly rational, patient, proficient little economic robots that know objectively what makes them happy and make choices that maximize this happiness.
Behavioral economists aim to develop models which account for the facts that people procrastinate, are impatient, aren’t always good decision-makers, care about things like fairness in addition to economic gain, are subject to psychological biases which make them interpret information in biased ways.

50. Kahneman and Tversky
New tradition in psychology – cognitive mechanisms - biases and heuristics

51. Kahneman
Kahneman was awarded the 2002Nobel Memorial Prize in Economics  (shared with Vernon Smith).
His empirical findings challenge the assumption of human rationality prevailing in modern economic theory.
In 2011, he was named by Foregin Policy  magazine to its list of top global thinkers.

52. Kahneman and Tversky
Tversky and Kahneman demonstrated that de-cision makers may strongly deviate from rationality because of the use of a number of heuristics, that is, rules of thumb, instead of formal techniques.
People therefore rely on mental scripts and heuristics to make sense of the world.

53. Heuristics
Mental techniques allowing to solve problems and make judgments quickly and efficiently
Heuristics are simplifying strategies that individuals use to manage information and reduce uncertainty in decision making (Tversky & Kahneman, 1973).
Shortcuts that the human brain uses to quickly identify and interpret patterns in its environment in order to guide courses of action.

54. Characteristics of Heuristics
Subconscious process
Automatic process
Quick process (speeding up)
Experience based
Do not give optimal solutions, just „good enough”
Efficient process
Everyone uses every day
Both useful and inaccurate

55. Characteristics of Heuristics
Using heuristics gives solution which is not guaranteed to be optimal

56. Entrepreneurs
Entrepreneurs think in different than non-entrepreneurs way not because they are different but they operate in different situations.
Entrepreneurs often have to make decisions with little or no historical trends, no previous levels of performance, and little (if any) specific market information surrounding whether new products or services will be accepted.

57. Why entrepreneurs use heuristics?
For sense-making
For simplyfing reality
To take decision or make judgement
It is adaptive type of behaviour

58. Benefits of using heuristics
• Working with incomplete data • Need to make faster and cheaper decisions – Less time spent = fewer opportunities missed – Less money spent = need to efficiently manage limited financial resources • Need to take decisive action – Capitalized on near-term opportunities – Lessen likelihood of missing opportunities

59. Counterfactual thinking
Counterfactual thinking is a term of psychology that describes the tendency people have to imagine alternatives to reality. Humans are predisposed to think about how things could have turned out differently if only..., and also to imagine what if?.

60. Counterfactual thinking and entrepreneurs
entrepreneurs are less likely to engage in counterfactual thinking, they regret missed opportunities less and bear past mistakes more easily, both their own and those of others (Baron, 1998, 2000).

61. The planning fallacy
The planning fallacy is a cognitive aspect related to errors in planning, that is, the tendency to believe that one can achieve more in a given period of time than one is really is capable of.
Tendency to underestimate the amount of time needed to complete a given project or the amount of work that can be achieved in a given time

62. The planning fallacy and entrepreneurs
Entrepreneurs tend to overestimate how much they can accomplish in a given period of time and may underestimate the amount of resources needed to complete certain projects (Baron & Markman, 1999).

63. Overconfidence
Overconfidence refers to the tendency of thinking one knows more than what one really knows (Baron & Markman, 1999). That is, our failure to know the limits of our own knowledge.
Overconfidence occurs when decision makers’ assessments are overly optimistic.
Entrepreneurs are overconfident.

64. Heuristics and opportunity process
The research of Bryant (2007) indicates that entreprenerus use heuristics mainly in evaluation of opportunities but when they exploit them they show more systematic manner of decision taking.

65. agnieszka.kurczewska@uni.lodz.pl Faculty of Economics and Sociology
CONTACT
Faculty of Economics and Sociology
Lodz, 3/5 POW Street, Poland
eksoc.uni.lodz.pl/en