Going With Your Gut

Andrew Sullivan —  Jul 2 2014 @ 8:58am

Psychologist Gerd Gigerenzer defends the practice, arguing that we “need statistical thinking for a world where we can calculate the risk, but in a world of uncertainty, we need more.” How ignoring the importance of instincts and gut feelings hurts business practices:

Gut feelings are tools for an uncertain world. They’re not caprice. They are not a sixth sense or God’s voice. They are based on lots of experience, an unconscious form of intelligence.

I’ve worked with large companies and asked decision makers how often they base an important professional decision on that gut feeling. In the companies I’ve worked with, which are large international companies, about 50% of all decisions are at the end a gut decision. But the same managers would never admit this in public. There’s fear of being made responsible if something goes wrong, so they have developed a few strategies to deal with this fear. One is to find reasons after the fact. A top manager may have a gut feeling, but then he asks an employee to find facts the next two weeks, and thereafter the decision is presented as a fact-based, big-data-based decision. That’s a waste of time, intelligence, and money.

The more expensive version is to hire a consulting company, which will provide a 200-page document to justify the gut feeling. And then there is the most expensive version, namely defensive decision making. Here, a manager feels he should go with option A, but if something goes wrong, he can’t explain it, so that’s not good. So he recommends option B, something of a secondary or third-class choice. Defensive decision-making hurts the company and protects the decision maker. In the studies I’ve done with large companies, it happens in about a third to half of all important decisions. You can imagine how much these companies lose.