We examine the present in light of the past
so as to better understand the future.
John Maynard Keynes

* With apologies to Karl von Clausewitz

Reason or instinct: you donít have to choose

Last week I read a very timely article in The Guardian by Oliver Burkeman on the debate between supporters of logical thinking and intuitive thinking or ‘gut instinct’ (http://www.theguardian.com/books/2014/may/04/advice-stock-market-crashes-plane-disasters-bad-weather-risk-not-reading) I’ve been puzzling over this issue for some time as part of my own research for a forthcoming book on management failures and the lessons to be learned from them. My view is that bad decision-making and failure to interpret information correctly play a big role, perhaps even the predominant role, in most business failures, so I was interested to hear more about this.

Burkeman’s article was a profile of the German psychologist Gerd Gigerenzer, who argues that we should stop trying so hard to be rational and instead concentrate on hearing more clearly what the intuitive side of our brain is trying to tell us. Of course, this is not just a matter of ‘pure’ intuition. Past experience and wisdom also come into play. But somewhere in our brain we make synpatic links that have nothing do with reason, and this kind of thinking, says Gigerenzer, is actually more powerful and can help us make better decisions. He believes that if bankers had made more attention to their instincts and less to what the numbers were telling them, we might not have had the crisis of 2008.

Hmm. I have always understood 2008 a different way. My view is that bankers didn’t pay enough attention to what the numbers were telling them, and probably also looked at the wrong numbers. There is powerful evidence of a herd instinct, particularly where the infamous mortgage-backed securities were concerned; people jumped on the bandwagon and invested in these because everyone else was doing so. But, I agree that we need also to pay more attention to the intuitive sides our brains and listen to what they are telling us. We need to be both rational and intuitive, logical and instinctive at the same time, and only when we are can we be reasonably sure of making the right decision.

Think about it. In the past, how often have you made decisions, in or out of business, where something seemed right logically but still made you feel uneasy? Or the opposite, where you were comfortable with the decision and believed it to be right even while the facts were telling you it was wrong? Now, how often did the decisions you subsequently make turn out to be the wrong ones?

Now think of instances where you made a decision where the analysis and intuitive feeling confirmed each other, where the decision both looked right and felt right? How often did those decisions go wrong? I’ll bet the answer is, nowhere near as often.

I’m starting to wonder if the best business decisions are made using both kinds of thinking at once. We must embrace the paradox. Privileging one way of thinking and ignoring others is a very good way of making bad decisions.

Comment made by
Adi Gaskell
12/5/2014 at 12:39
Good post Morgen. It's this ambidextrous side of things that is the challenge.

If you look at how we struggle to innovate, it seems it's the intuitive side of our brain that is protecting the status quo, even whilst the rational side knows that innovation is key.

Knowing when to use each side, and having the awareness to do so, is thus very important, yet very difficult.

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Management Consultancy

Pradee commented on
Oh, no, not another book on management!

Laurie commented on
Another one bites the dust - reflecting on my new book on management failures