Leading With Your Gut

‘‘NT h e K o r n / F e r r y I n s T I T u T eQ 1 . 2 0 1 110

Lou

Beac

h

L a t e s t t h i n k i n g

o business cliché is more worthy of repudiation, annihilation and eradication than ‘You’ve got to trust your gut.’” So wrote Michael Schrage, a re-search fellow with the MIT Center for Digital Business at the MIT Sloan School of Management, in a recent blog post, reacting to what he believes to be an un-fortunate trend of managers being exhorted to rely more on their intuition.

“Everyone knows [the saying] that ‘Good judgment comes from experience and experience comes from bad judgment,’” Schrage continued. “But where does bad judgment come from? My answer, and the replicable answer from Nobel Prize-winning research, is that it comes from trusting gut instincts.”

The research he refers to is that of Daniel Kahneman, arguably the godfa-

ther of the study of flawed judgment in decision making. Currently professor emeritus of psychology and public affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Kahneman won the Nobel Prize in 2002 for his work.

Much of the research conducted by Kahneman and his late colleague Amos Tversky focused on the study of “expert intuition,” such as might be applied by an emergency room doctor making a diag-nosis. Expert intuition is not a decision per se, nor is it a hunch; it is a reflexive and instantaneous reaction to a familiar situation on the basis of vast specific ex-perience, knowledge and practice.

An expert’s “intuitive impressions come to mind without explicit intention, and without any confrontation,” said Kahneman, in an interview with the As-sociation for Psychological Science Ob-server, an online journal. Sometimes, he said, these intuitive impressions lead to a good outcome, but just as often they can lead to overconfidence and, ultimately, bad judgment. “Accessibility, or the ease with which thoughts come to mind, de-fines intuition,” said Kahneman. “And once people make decisions, they tend to suppress alternative interpretations.”

A recent Wall Street Journal article, “The Yes Man in Your Head,” cited studies with nearly 8,000 participants that showed people are twice as likely to seek information that confirms what they al-ready believe as they are to consider evi-dence that would challenge those beliefs.

“We’re all mentally lazy,” Scott O. Lilien-feld, a psychology professor at Emory University, told The Journal. “It’s simply easier to focus our attention on data that supports our hypothesis, rather than to seek out evidence that might disprove it.”

That phenomenon, known in psy-chology as “confirmation bias,” is just one of a disturbingly long list of well- documented cognitive biases that rou-tinely skew human beings’ judgment,

The pros and cons of intuitive decision making

Leading With Your Gut

Q 1 . 2 0 1 1B r I e F I n g s o n T a l e n T & l e a d e r s h I p 11

Hal

May

fort

h

interesting.. .memory, perception and motivation. For example, “anchoring” is our tendency to rely too heavily on one piece of informa-tion when making decisions; “negativity bias” causes us to give more weight to negative information than positive; “nor-malcy bias” is our disinclination to plan for an outcome that has never happened before; “omission bias” causes us to see action as potentially more harmful than inaction; “consistency bias” is our ten-dency to incorrectly assume that what we currently think is consistent with our past views; “self-serving bias” describes our inclination to give ourselves credit but not blame; and “clustering illusion” de-scribes our tendency to see patterns where none exist.

That small sample, not to mention the full panoply of human cognitive tics, is more than enough to blow a gaping hole in any claim we may make to being objectively rational. But the question is whether intuitive decisions are any more likely to be irrational than analytical ones. The studies cited in The Wall Street Journal suggest perhaps not: They showed that more data and analysis did not necessarily make people’s judgments more accurate, but simply further entrenched their views.

There are those who believe that in-tuition is neither a cause nor a symptom of our irrational biases, but rather a highly evolved way of working around them. Gerd Gigerenzer, director at the Max Planck Institute for Human Devel-opment, is a proponent of the idea of

“bounded rationality,” the notion that any attempt to make a rational decision is limited by the decision maker’s available information, cognitive biases and finite time frame. Within these constraints, op-

timal decisions must necessarily involve heuristics — essentially shortcuts, infer-ences or rules of thumb derived from prior experience and analysis. Gigerenzer argues that the use of heuristics — or in-tuition by another name — represents an adaptive solution to the problem of hav-ing to make choices under constraints.

In his 2005 book, “Blink,” Malcolm Gladwell referred to this process as “rapid cognition.” What we normally call “think-ing” is a conscious strategy, he said. It is analytical, logical and definitive, but it is also slow, information intensive and, evolutionarily speaking, not always an appropriate survival strategy. Rapid cog-nition is a second strategy for making de-cisions that operates a lot faster, but at least initially, entirely below the surface of consciousness. “It’s a system in which our brain reaches conclusions without immediately telling us,” said Gladwell. He does not use the word intuition to de-scribe this phenomenon because he be-lieves that term describes emotional, not rational reactions. “Rapid cognition is thinking,” he said. “It’s just thinking that moves a little faster and operates a little more mysteriously than deliberate, con-scious decision making.”

Dan Ariely, a professor of behavioral economics at Duke, is somewhat more circumspect about the uses of intuition. In his latest book, “The Upside of Irratio-nality,” as in his 2008 book, “Predictably Irrational,” he makes the case that hu-man beings are not and cannot be ratio-nal in any absolute sense. Irrationality is programmed in, but our irrational behav-iors are neither random nor senseless and, if we are aware of them, they can be harnessed to produce good outcomes, he says. Intuition can be an important part of our decision-making tool kit, but it serves us best when we employ it with a healthy skepticism. Note the results of your intuitive choices, and “trust [your in-tuition] only after you have evidence that it’s useful,” he suggested.

Like Ariely, Daniel Kahneman coun-sels self-awareness, and he cautions against using intuition as an easy rationale for any random snap judgment. But even he acknowledges that in real situations where time is limited and there is too much information, “most of the time, we just have to go with our intuition.”

Perhaps that explains the appeal of intuitive decision making. We live in a world in which our ability to digitize, measure, share and track everything of-fers us a welter of information and data on any subject, and yet that somehow makes us feel less in control and less confident in our decisions. It is possible that in such a world, “going with your gut” is the only rational response.

TOO STRANGE TO MAKE UP

According to a recent survey, 25 percent of British men bring stuffed animals with them on business trips. A stuffed animal supposedly “reminds them of home” and “helps them to nod off as they miss a bedtime cuddle from their partner.”Source: Travelodge, 2010

A recent Wall Street Journal article, “The Yes Man in Your Head,”

cited studies with nearly 8,000 participants that showed people

are twice as likely to seek information that confirms what they

already believe as they are to consider evidence that would chal-

lenge those beliefs.