Quick Insight
intuitive judgments ("gut instincts") can be trusted more in “High validity” environments where people have had adequate opportunities for learning the environment. Business strategy decisions rarely meet these criteria.
Two giants in the field of decision-making are Daniel Kahneman and Gary Klein. They disagree on many things. However, they worked together in 2009 to answer the question, “Under what conditions are the intuitions of professionals worthy of trust?” In other words, when can pros trust their guts? Surprisingly, they came to the same conclusion. Their paper was subtitled “A Failure to Disagree.”
Their conclusion has many points to it (there’s a link to the paper below), of which I'll mention a few. They found that intuitive judgments can be trusted more in:
- “High validity” environments where there is a strong relationship between cues and the outcome of the cue.
- People who have had adequate opportunities to learn about the environment.
They point out that poker and medical care are environments where these exist, allowing professionals to develop good intuition.
Unfortunately, many business decisions don’t fit the above criteria. Business strategy decisions come infrequently, and it’s tough to draw lines between cause and effect.
Business leaders may believe in their gut, but strategic business decisions are a terrible place to do this.
What works for business strategy? A good decision-making process. Two (or more) heads are better than one gut, especially when those heads are free to butt against each other in debate.
I wish you a good head and gut instinct... and the wisdom to know when to use each. I wish you well.
- Rob Stephens
Founder of CFO Perspective and the Finance and Strategy Toolkit (FAST)
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