I have a gut feeling about this

Reflections on Instinct Can Beat Analytical Thinking

Key Ideas

  • Gerd Gigerenzer discusses decision-making with Justin Fox of Harvard Business Review.
  • Generally, two broad scenarios for decision-making are discussed: When you can calculate the risks involved, and when you cannot.
    • In other words, the world is more stable and predictable in the former, but more uncertain in the latter.
  • A scenario where risk is more or less calculable could be the odds of winning roulette in a casino. Eventually, you could figure out some probabilistic pattern of losses vs wins. (I would think most of the time you lose, but that’s just my – ahem – gut feeling.)
  • A scenario where risk is not very calculable could be… well, a crisis, much like the COVID-19 situation we’re facing now. Who would’ve thought Singapore would be stuck in this current mode of lock- I mean, circuit breaker?
  • Gigerenzer argues that in scenarios where the outcome is uncertain, more logical approaches to decision-making (e.g. mathematical, statistical models, etc) don’t work. This is because they fail to be accurately predictive in a crisis.
  • So how now? Gigerenzer thinks what would be more useful are smart heuristics, or “rules of thumb”. Another term would be “gut feeling”, which is shunned by bureaucrats far and wide.
  • Gigerenzer cites that “gut feelings are tools for an uncertain world. They’re not caprice. They are not a sixth sense or God’s voice. They are based on lots of experience, an unconscious form of intelligence.” A good proportion of his research has been dedicated to unlocking the science and mechanisms behind what drives gut feelings, and what makes them effective decision-making tools.
  • To drive home the effectiveness of the gut feelings, Gigerenzer cites that in the large companies he’s worked with, 50% of all decisions are driven by gut feelings. Gigerenzer explains that the process looks something like this:

In the companies I’ve worked with, which are large international companies, about 50% of all decisions are at the end a gut decision. But the same managers would never admit this in public. There’s fear of being made responsible if something goes wrong, so they have developed a few strategies to deal with this fear. One is to find reasons after the act. A top manager may have a gut feeling, but then he asks an employee to find facts the next two weeks, and thereafter the decision is presented as a fact-based, big-data-based decision. That’s a waste of time, intelligence, and money. The more expensive version is to hire a consulting company, which will provide a 200-page document to justify the gut feeling. And then there is the most expensive version, namely defensive decision making. Here, a manager feels he should go with option A, but if something goes wrong, he can’t explain it, so that’s not good. So he recommends option B, something of a secondary or third-class choice. Defensive decision-making hurts the company and protects the decision maker. In the studies I’ve done with large companies, it happens in about a third to half of all important decisions. You can imagine how much these companies lose.

Gerd Gigerenzer, interviewed by Justin Fox for Harvard Business Review

The TLDR

In situations with lots of uncertainty and lack of knowledge, it might not be a bad idea to go with your gut feel when making a decision.

At least going with your gut feeling puts you one step ahead of this guy.

A further breakdown

I found a useful review (by Christine Clavien of the University of Geneva) of Gigerenzer’s book titled “Gut Feelings: Short Cuts to Better Decision Making” that contains useful summaries of Gigerenzer’s research on the topic. Some of my key takeaways from this review are as follows:

  • Lifted from the review: Gigerenzer refers to “gut feelings” and “intuitions” interchangeably. Gut feelings are natural, basic instinctive responses to cues from the environment. These intuitive judgments are automatic, effortless and unreasoned. They appear quickly in our consciousness and are sufficiently strong to make us act on them. Ordinary people do not know why they have these feelings or where they come from. They simply feel and act upon them.
  • One distinction that is unclear in Justin Fox’s article is made clear in this review: that gut feelings are not heuristics/rules of thumb. The former is more about the feeling itself, and the latter refers to the underlying mechanisms of the former.
  • Clavien mentions many heuristics that Gigerenzer had theorised to explain gut feelings. I won’t go through them in this reflection, but might explore them in a separate article if I have the time.
  • My personal summary: The effectiveness of gut feelings is really about cutting through the noise in a sea of information, and to zoom in on the most relevant with the least mental load. The more points of information you take in to decide the next course of action, the more room for error there is. Gut feelings take advantage of this “beneficial degree of ignorance”, especially when “quick decisions have to be made under conditions of uncertainty”.

Is the gut feeling really the best approach to work and life then?

  • As apparent from the points above, Gigerenzer has acknowledged that the gut feeling is applicable only in specific situations; namely, when the environment and its outcomes are uncertain.
  • A quote from Clavien beautifully positions Gigerenzer’s thesis in the universe of decision-making theories:

One should note here that [Gigerenzer] does not deny the human capacity for logical thinking and complex reasoning. His aim is rather to challenge its importance in successful decision-making. In a similar vein, his third goal is to better understand which environmental conditions favour the use of simple heuristics over reflection involving complex calculations.

  • Broadly, I think that most decisions made by the Civil Service should still lean more heavily towards the more calculated, rational approach. This is simply because the Civil Service is by nature a body of governance. As a steward of public resources, it probably would be wiser to demonstrate a rational approach, even if it means having to couch gut-driven decisions as data-driven ones.
  • However, it should be said that policy-makers do still need to be savvy. They need to understand the ground deeply, and at least consider how the effects of their policies will be felt in the daily lives of the people. There is nothing more revealing of a disconnected governing body than when policies disagree sharply with lived experiences.
  • This leads nicely to a critique of the gut feeling: there is little to say when a gut feeling could be considered good or bad. As Clavien points out, how are we supposed to know if some intuitions are better than others? In the policy-making example, perhaps Policy-maker A’s gut feeling is data-driven and calculated, whereas Policy-maker B’s gut feeling is based on ground sentiments that sharply disagree with the data. Who is to say whose intuition is better?
  • Funnily enough, Gigerenzer’s example of the bird and the nest also has a loophole. It is well-known that cuckoos have exploited the general bird’s nest heuristic by laying their eggs in the nests of other birds, and having other birds raise their young. In fact, this is where the word “cuckold” originated from. So, who’s to say which bird’s heuristic is better: the cuckoo’s heuristic or the generic bird’s heuristic? Neither have been eliminated by evolution!
  • In conclusion, I think the perspective to take for the layman is this: depending on how much is at stake, go with the quicker heuristic. That is, some level of intuition could be used to guide small-scale decisions, such as those that fall in the realm of everyday life, or those that involve smaller profit margins for businesses. Even if Gigerenzer’s research points to using gut feelings in critical scenarios (such as having emergency departments adopt simple heuristics approaches), one could perhaps develop a deeper understanding of this realm of decision-making before making the jump in bigger scenarios.

On that note, I’m also reminded of other works in Psychology and behavioural economics, such as Malcolm Gladwell’s Blink (which looks at making judgments with little info, and the “adaptive unconscious”), Kahneman’s System One and Two framework, and the myriad of writings on making snap decisions.

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