Gut feeling, Gerd Gigerenzer and Decision Making

 “I have always done everything by intuition and gut feeling, and almost never used accountants to decide if I should start a new business.”

-Richard Branson

In one organisation employees were reluctant to suggest any improvements, reason was if anyone suggested improvement, then before it change could be incorporated, a detailed statistical analysis had to be done, the findings had to be presented to panel of experts, who in turn would ask for more analysis…in most cases the improvements were withdrawn.

'On the other hand, maybe he always goes from his gut because he doesn't have any brains.'

While rigours statistical analysis is sometimes required for decision making, but at times many key decisions are also taken based on gut feeling or rule of thumb (heuristics)

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Psychologist Gerd Gigerenzer believes gut feelings don’t get as much respect as they should. He describes gut feeling as …

…it’s a judgment that is fast. It comes quickly into a person’s consciousness. The person doesn’t know why they have this feeling. Yet, this is strong enough to make an individual act on it. What a gut instinct is not is a calculation. You do not fully know where it comes from.

Decisions taken based on gut feelings can be correct ex. Howard Schultz started Starbucks based on intuition that Italian model of coffee houses will work in US.

Ray Kroc ignored his lawyer’s advice (lawyer advised him not to buy McDonalds) and brought fast food chain owned by brothers Richard and Maurice McDonald for $ 2.7 million, based on gut feeling that chain had huge potential to grow!

“The problem with making big decisions based on complex calculations is that you can’t know all of the variables in an uncertain world, and not all the information from your past is relevant to your future, so your judgment can get clouded with irrelevant noise.”

-Gerd Gigerenzer

Intuition comes with practice and years of experience and is useful when decisions have to take in situations where past data is of no use. Intuition is useful in cases where decisions have to be taken in ambiguous situations i.e. while taking decisions some of the key parameters are unknown or uncertain. Decision making based on past data is useful in stable situations, but past data is not reliable in VUCA world (volatility, uncertainty, complexity, and ambiguity)

“Good instincts rely on rules of thumb, known as heuristics, wherein you focus on the most important information and ignore the rest. If you want to explain the past, you can do this with very complex rules, but if you want to predict the future, that is not always the case. Then, less is more.”

-Gerd Gigerenzer

Gred has suggestion for people who either have a hard time hearing their gut or maximizers i.e. who want to explore all of their options before making a decision, to strengthen their intuitive muscle.

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They can start it with using gut for decisions that are not critical ex stop weighing the merits of every item on the restaurant menu and invoke a rule of thumb that has saved indecisive souls everywhere…ask the waiter what he would eat there and just get that.

“Now, in private life, I rely on instinct. For instance, when I first met my wife, I didn’t do computations. Nor did she.”

-Gerd Gigerenzer

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