Tag: decision making

I recently told a colleague I was morally opposed to intuition and it more than raised an eyebrow, it largely shocked the person I was speaking with. As someone who has been in the game industry for too many years, I am often asked to use my intuition to review game or business ideas, prioritize product features and evaluate potential employees, so it would be easy to move my agenda forward by relying on intuition. Unfortunately, it would also be a mistake.

Intuition is often used as an excuse for not having facts to prove your case. During my first year of university, I learned that I should not rely on intuition. As I developed an appreciation for analytics and statistics, I began to understand the best way to approach making optimal decisions. Bayes Theorem further strengthened the fallacy that decisions should be taken on intuition. Then, as I have I read more about heuristics and biases in decision-making, my opposition to intuition has solidified.

Common Sense and Intuition

In my first year at University, one lesson had a very long-term impact. An English professor, discussing that common sense and intuition should not be used to argue for one side in a debate, pointed out that in the 1800s one of the primary justifications of slavery was that it was “common sense” that blacks were inferior to whites. He further attacked using common sense as an argument, showing that many of the great tragedies and mistakes were justified by common sense and intuition: The Inquisition, Holocaust, Smoot Hawley, etc.

Intuition and common sense are often an excuse for not having facts

If you are trying to get a desired decision but do not have strong data to support your decision, intuition and common sense are ways people try to still get their proposed course of action approved. Many times you are pursuing a fast decision and feel there is insufficient time to collect data. Other times data is not easily available to analyze a situation. Intuition and common sense provide an argument for moving forward quickly on a decision even when there is not data to support it.

This problem is magnified if you are in a senior position. A direct or indirect insubordinate is unlikely to argue their bosses’ or the CEO’s intuition is flawed. It is particularly dangerous for those in the senior position, who will see their “intuition” supported by subordinates, further confirming to them that it is an appropriate course of action. This confirmation replaces data in driving decisions forward, and then the leader has to deal with the consequences.

Decision making biases

Reinforcing the issues with relying on intuition and common sense is the many decision making biases people exhibit. I have written frequently about consumer behavior, particularly Daniel Kahneman’s work, that shows how people often make faulty decisions. These biases include:

• Confirmation bias.Confirmation bias is when you ignore information that conflicts with what you believe and only select the information that confirms your beliefs.
• The Linda Problem.When given a story about a fictional person and then potential careers for that person, virtually everyone (from students to very successful professionals) chose a persona that was a subset of a broader persona, thus impossible that the former was more likely.
• Status quo bias. People to prefer for things to stay the same by doing nothing or by sticking to a previous decision, even if the previous decision will lead to a worse outcome.
• The narrative fallacy. People try to comprehend information in stories, rather than looking at just the facts they create a story that links them together even if there is not really a link.
• Dunning-Kruger effect. The Dunning-Kruger Effect is when incompetent or somewhat unskilled people think they are more skilled than they are. As the article quotes, “incompetent people do not recognize—scratch that, cannot recognize—just how incompetent they are.”
• Backfire effect. The backfire effect is after analyzing something that you or your company are doing, if the results are negative and the action was bad, you or your colleagues refuse to accept the results.
• Bandwagon effect. The bandwagon effect is what you would assume, the tendency to do things because many other people are doing it. People will rally around a cause, an idea, a candidate, a variation, or a strategy simply because it is popular.
• Endowment effect.The endowment effect is how people value items they own more than they would if they objectively viewed the item. Somebody might not accept $10,000 for their used car, but if a car dealer offered the same car to them they would not pay $8,000 for it.

Rather than focus on our biases when making decisions, the key takeaway is that people often do not make optimal or rational decisions. When relying on intuition or common sense, data that can offset these biases is neglected.

Common sense usually forgets Bayes Theorem

Related to the biases people experience when relying on intuition is the inability to process statistics well. I have written frequently about Bayes Theorem and how people often infer incorrect probability of a certain result. Bayes’ Theorem is a rigorous method for interpreting evidence in the context of previous experience or knowledge. Bayes’ Theorem transforms the probabilities that look useful (but are often not), into probabilities that are useful. It is important to note that it is not a matter of conjecture; by definition a theorem is a mathematical statement has been proven true. Denying Bayes’ Theorem is like denying the theory of relativity.

By way of an example, I will repeat one I used in 2014. Say you wake up with spots all over your face. You rush to the doctor and he says that 90 percent of the people who have smallpox have the symptoms you have. Since smallpox is often fatal, your first inclination may be to panic. Rather than freak out, you then ask your doctor what is the probability you have smallpox. He would then respond 1.1 percent (or 0.011). Although still not great news, it is much better than 90 percent—but more importantly it is useful information.

The key here is that people do not understand the actual likelihood that something will occur. In this case, your intuition might say you have smallpox. If this then prompts you to fly to a smallpox clinic, you probably made a bad decision. The same happens professionally, where people make decisions by inferring the wrong probability of a possible outcome.

When to use your intuition?

NEVER. Intuition is an excuse to make decisions without data or without putting the work into looking at the data. If your intuition is actually based on past experience, then this experience is data and you should looked at it as a data point (but only one data point and one that is not more valid because you experienced it personally). To make good decisions, you should review the data and make decisions that increase the probability of the optimal outcome. You also need to just say no when somebody asks you to make an intuition based decision, you can help provide data but never should make the decision on what your gut says.

Key takeaways

• Intuition is a very flawed way of making decisions but is often the default, particularly for leaders with extensive experience. It is actually a way to ignore data (or avoid the work collecting it) and leads to poor decisions and priorities.
• Intuition and common sense were often the justification for some of the worst decisions in history, from slavery to the protectionist Smoot Hawley Tariffs.
• Intuition should never be used to make decisions. Instead, spend time collecting and analyzing data and deriving decisions with the highest probably for a positive outcome.