There are many types of thinking but for the purposes of this blog I propose to divide the universe of thinking into two types: Magical and Functional.

Magical thinking occurs when we don't understand the functional nature of something. Functional thinking occurs when we are attempting to understand how something functions or have figured out how something functions and can apply that knowledge to solving problems.

The world is very complex and our understanding of many aspects of it are at a magical level. How does your car work? How does the forest work? How does your home plumbing work? How does your home electrical system work? How does your computer work? You may think you know the answers to these questions but as soon as you are confronted with the problem of fixing or evolving these systems, some magical thinking is often revealed.

On my walk today I wondered how much of our thinking about starting a business is magical version functional. Some entrepreneurs believe that passion, hard work, and faith are key. This seems pretty magical to me but I don't know that I can criticize it too much in terms of results. Many of our ancestors had this ethos.

There is a bit of magical thinking involved in starting most businesses. The most critical piece of magical thinking are the leap of faith assumptions that define what the startup believes to be true, but without much actual supporting evidence in the early stages of the business. A major goal in lean startup theory is to test these leap of faith assumptions so they become a functional theory of the firm. Some magical thinking is at the core of starting a new business but it generally gets converted to functional thinking as the leaps of faith are tested and refined in the marketplace.

The term magical thinking is often used as as a put down in debates. A recent example is The Magical Thinking of Ecomodernism. The solution to alot of the problems of modernity may not be solved simply through a clear functional understanding of how things work, it may also require some magical thinking involving passion, hard work, and faith that local solutions can be found.