Thursday Theory Tips – Is learning about theory worth your investment?


Feb 22, 2024

I usually start presentations with a “Why this matters” slide, so perhaps this whole Thursday Theory Tips series should have started with this particular blog. But, better late than never. Understanding how theory plays into our lives—not just in hypothetical scenarios, but in everyday decisions—will help you decide if the few minutes you spend reading, learning or reviewing theory is worth your investment. So without further ado, before I break down how theory affects us everyday, how you build good theories, and how you identify what theories you actually want apply to your life, this is why theory matters: 

Instincts are usually based on unarticulated theories of cause and effect.

The role of theory in your everyday life 

Instincts are innate and unarticulated rules that have been wired into our way of thinking and acting. I, for example, instinctively brew coffee every morning. Theories tell us what causes what and why. Coffee keeps us alert and awake because – at least the one I drink – has caffeine. Instincts are therefore usually based on unarticulated theories of cause and effect. I brew and drink coffee in the mornings because my implicit theory says coffee will wake me up and get me going.

That is a very simple example of how I innately employ theory every day. Maybe you don’t drink coffee, maybe you drink tea, maybe you don’t drink tea, but you DO make decisions. Whether they are regarding what beverage you consume, which route you take to work, or what investor you try to attract, we all make decisions sometimes knowingly, sometimes innately. But understanding theory can allow us to reprogram even our innate decisions, our instincts. 

Now, why would you want to reprogram your instincts? I don’t always, but maybe I want to change my morning beverage tendencies, maybe you want to learn what kind of innovations you should instinctively pursue for competitive growth, and if we do that is when theory comes into play. If instincts are based on theories, and we want to either intelligently change our instincts, or even just have more agency in our decisions, then we need to understand what causes what and why. We need to understand theory. 

Building theory 

Understanding theory isn’t only about being able to define it. Understanding theory requires us to know how theory is built, so that we can identify and even create good theory.

Building theory usually happens in two stages. The first stage is the descriptive stage and this stage is about correlation. In the descriptive stage theory is inductively distilled by categorizing events that need to happen and correlating those events with outcomes. Descriptive theories are able to signal when on average certain actions are more likely to lead to the desired outcomes than other actions. But this isn’t good theory yet. 

Good theory happens in the second stage, when you get to causation. In the second stage of theory building, you try to understand what causes certain outcomes under certain circumstances. A good theory is able to articulate what it was about a specific situation that made a particular approach successful. 

As you’re building theory or understanding how a theory was built, you may come across an anomaly, and that’s okay. Anomalies are actually welcome because they help us improve theories. When anomalies happen in the first stage, then categorization needs to be redone. If however, anomalies happen in the second stage then that helps us redefine circumstances. Redefining our circumstances will then only improve a theory’s predictive power and explain new situations. 

Applying theory

Now that you know what role theory plays in our lives, and how good theory is built, how do you decide when to apply it? Well, if you can identify good theory, you can identify good advice, and whether or not to take it. 

Good advice will take your circumstances into account, and is grounded on causal theory. In other words, good advice leverages a causal mechanism to make predictions about the future specific to your circumstance and tell you what actions to take to achieve your goals. Advice is the application of theory to action. Good advice understands a person’s specific circumstance, identifies their desired outcome, and finally discerns what action to take based on an established causal mechanism. 

That being said, theory might not always tell us what to do, but it will tell us how to think. How to approach a problem. How to make decisions. How to ask the right questions. That is why theory matters to every single one of us, more than we may have ever realized. 

For more of our Thursday Theory Tips, read:

Thursday Theory Tips – Who are your best customers?

Thursday Theory Tips – Is my business model working for me?

Thursday Theory Tips – Culture, management’s secret weapon

Thursday Theory Tips – How do I plan my new venture?

Thursday Theory Tips – Disruption, a theory of competition

Thursday Theory Tips – On creating new markets

Thursday Theory Tips – Looking for money? Here’s what you need to know

Sandy Sanchez is a research associate at the Clayton Christensen Institute for Disruptive Innovation, where she focuses on understanding and solving global development issues through the lens of Jobs to Be Done and innovation theories. Her current work addresses how individuals can use market-creating innovations to create sustainable prosperity in growth economies.