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How far should you trust your gut instinct?

Apr 05, 2010 Business Daily, Leadership

The McKinsey Quarterly: “In your recent American Psychology article, you asked a question that should be interesting to just about all executives: “Under what conditions are the intuitions of professionals worthy of trust?” What’s your answer? When can executives trust their guts?”

Gary Klein: “It depends on what you mean by “trust.” If you mean, “My gut feeling is telling me this; therefore I can act on it and I don’t have to worry,” we say you should never trust your gut. You need to take your gut feeling as an important data point, but then you have to consciously and deliberately evaluate it, to see if it makes sense in this context. You need strategies that help rule things out. That’s the opposite of saying, “This is what my gut is telling me; let me gather information to confirm it.””

Daniel Kahneman: There are some conditions where you have to trust your intuition. When you are under time pressure for a decision, you need to follow intuition. My general view, though, would be that you should not take your intuitions at face value. Overconfidence is a powerful source of illusions, primarily determined by the quality and coherence of the story that you can construct, not by its validity. If people can construct a simple and coherent story, they will feel confident regardless of how well grounded it is in reality.”

The McKinsey Quarterly (March 2010)

The McKinsey Quarterly recently ran an interesting debate between two renowned authorities on the subject of human decision-making: Nobel laureate Daniel Kahneman and Gary Klein. The question being discussed: when can you trust your gut?

If you spend as much time with business leaders as I do, you will soon discern that many of them don’t use formal, rigorous decision-making processes at all. They may pay lip service to formalised group strategy formulation activities, but actually the real decisions are being made elsewhere – in their heads, and very quickly! These leaders are relying less on complex analysis of trends and numbers, and more on that age-old tool – gut feel.

In fact, many accomplished leaders will tell you with great pride how successful their insights and judgments, delivered quickly and without too much deliberation, have been. They wear this instinctive decision-making ability as a badge of honour. But should they?

The scholars urge caution. They posit two factors which affect whether there is a good basis for trusting gut instinct: predictability and feedback. In short, gut feel has a good chance in situations where events are generally predictable with a narrow set of outcomes, and where regular feedback is possible. It is highly unreliable in extreme turbulence and where feedback does not come quickly enough.

Most strategic decisions faced by executives, say the duo, are not ‘high-validity” situations that lend themselves to quick conclusions. So what should leaders do? Here the two authorities differ on emphasis: Klein thinks intuition is valuable in a business context, and should be protected; Kahneman is sceptical about its value, unless executives are dealing with issues they have handled repeatedly in the past.

So what do you think? A quick weighing-up of the situation followed by a way forward, John Wayne style, or a more reflective process of analysis? I, too, remain sceptical of overconfident leaders: as Kahneman points out, it doesn’t take that much success to make them overconfident. Sometimes all they have done is take unreasonable risks which happen to have paid off, for which they receive disproportionate reward. But equally, business life would be as tedious as hell if all we did was crunch numbers and prepare checklists and flow diagrams.

The real judgment of the good leader, it seems to me, is to know when to go with gut feel and when to hold back and seek more information.

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