How to Make Sound Decisions

Why You Shouldn’t Trust Your Gut as a Decision Maker

The most common misconception in corporate leadership and career advice is “trust your intuition.” As a decision-maker, you’ve probably heard this advice and variations on it, such as “trust your instincts,” “be authentic,” “listen to your heart,” or “follow your intuition.”

When I see incredibly profitable firms, top-tier jobs, and fantastic business connections destroyed because someone bought into the toxic advice of following their intuition, I am deeply angry, saddened, and enraged. When someone comes home from a fire-walking session and begins to act like their “genuine self,” they are simply shooting themselves – and their business – in the foot.

Our true selves were designed for the old savanna, not the current commercial world. In today’s professional world, following our instincts can lead to disastrous mistakes. For the sake of our bottom lines, we must resist acting on our primal inclinations and instead be civilized in our approach to the intrinsically defective character of our minds.

Consider the following:

• What percentage of your company’s projects have cost overruns?
• When was the last time a company leader opposed necessary changes?
• How often do members of your team overestimate the quality of their decisions?
• What percentage of your company’s goals prioritize smaller short-term gains over larger long-term ones?
• How frequently do your employees show a desire to avoid unpleasant conversations about potentially critical issues?

Following our gut reactions causes all of these and many other issues.

Any of these errors, if done frequently enough, can and do lead to disasters for successful businesses and drag down high-flying careers, especially when competing against savvy competitors who educate themselves on how to avoid such difficulties. In contrast, if you’re the one who learns about and defends against these blunders, you can take advantage of competitors who follow their instincts and make disastrous mistakes, giving you a significant competitive advantage.

This science-based viewpoint is founded on research on dangerous judgment errors known as cognitive biases. These mental blind spots influence decision making in all aspects of life, from business to relationships. Fortunately, current research has revealed effective and practical techniques for overcoming these perilous judgment errors.

Strategic business assessments are highly flawed

Tragically, contemporary business strategy assessments designed to overcome human nature’s flaws through structures and planning are fundamentally misguided. Take the most well-known, SWOT analysis, in which a group of business leaders attempts to identify the company’s Strengths, Weaknesses, Opportunities, and Threats. SWOT analyses frequently fail to account for the harmful judgment errors we make as a result of the way our brains are wired.

It’s especially problematic because SWOT is virtually often performed in a group context, and mental blind spots are sometimes multiplied tremendously in group situations. One major issue is groupthink, in which groups tend to cluster behind the beliefs of a prominent leader.

SWOT and other similar strategic analyses provide corporate leaders with a false sense of security and comfort. These soothing approaches result in heinous mistakes that destroy valuable businesses.

Sports has surpassed business

Surprisingly, sports like baseball have surpassed the great majority of businesses in grasping the need of avoiding gut reactions, as popularized by the 2011 film Moneyball. The film depicts the 2002 season of the Oakland Athletics baseball team, which had a relatively low player budget that year. Billy Beane, the team’s general manager, took an unconventional approach. He chose players based on quantitative facts and statistics rather than the customary practice of trusting the team’s scouts’ intuitions.

In other words, he followed his logic rather than his instincts. He hired a slew of players who were underestimated by other organizations using outdated evaluation methodologies. As a result, the Oakland Athletics set a new record by winning 20 consecutive games.

Since then, more teams have followed suit. Statistics are increasingly taking precedence over gut instincts in determining who to play and what plays to make. The use of quantitative data is becoming more prevalent in baseball and other sports. For example, in football, punting is increasingly out of favor due to evidence-based methodologies demonstrating that, statistically speaking, punting is a horrible idea, despite gut reactions indicating that punting works well.

How much would you pay to implement a similarly groundbreaking invention in your firm that rewards you with record-breaking growth for 20 consecutive quarters? You’ll hit a home run if you resist believing your gut and instead use your intellect.

What We Really Believe (and Feel)

Researchers have revealed that we have two systems that control our mental functions. It is not the classic Freudian model of the id, ego, and superego, which studies have shown to be obsolete. These two systems are known by numerous names: System 1 and System 2, rapid and slow thinking, the low and high road “Autopilot system” and “intentional system,” in my opinion, best describe them.

Our emotions and intuitions are mirrored by the autopilot system. This system evolved to help humans survive in our ancestral savanna environment and is mostly reliant on the amygdala, the brain’s older section. It directs our daily behaviors, assists us in making quick judgments, and reacts instantaneously in life-or-death circumstances.

Because they are quick and powerful, snap judgments based on intuitions and emotions generally feel “true” and “correct.” We feel completely at ease when we travel with them. In conditions resembling the ancient savanna, decisions based on gut reactions are frequently correct.

Unfortunately, they are frequently incorrect. Our modern world – in business and other spheres of life – contains numerous features that are not seen on the savanna. With increasing technology disruption, from teleconferences to social media, the office of the future will resemble our ancestral surroundings even less. As a result, the autopilot system will progressively lead us to make bad decisions in systematic and predictable ways.

In contrast, the purposeful system exhibits rational and analytical thinking. It revolves around the prefrontal cortex, the more recently evolved section of the brain. This cognitive system assists us in performing more complicated mental tasks such as managing individual and group interactions, logical reasoning, abstract thinking, evaluating probability, and learning new information, skills, and habits.

While the automatic system takes no conscious effort to operate, the intentional system demands conscious effort and is intellectually exhausting. Fortunately, with enough incentive and training, you can learn to activate the deliberate system when the autopilot system is prone to repetitive and predictable failures.

We normally think of ourselves as rational thinkers who use the intentional system. That, unfortunately, is not the case.

The autopilot system is significantly more powerful than the other, controlling 80-90 percent of what we do, think, feel, and decide.

Our emotions frequently overpower our logic. Furthermore, our intuition and habits control the majority of our lives. We normally operate on autopilot.

That’s not a negative thing, because thinking through every action and decision would be psychologically tiring. However, it is problematic when this system repeatedly repeats the same mistakes.

Fortunately, you can stop these problems by using your intended system. To avoid mental blind spots, you can adjust your automatic thinking, feeling, and action patterns.

Make Sound Decisions

Many high-flying professionals, even top corporate leaders, shudder at the idea of not trusting their intuition because it is difficult and unpleasant. It’s counterintuitive and knocks them out of their element. It contradicts the common structures and incentives in teams and organizations that support trusting intuition.

Furthermore, many – but not all – of the world’s most successful leaders and professionals feel they are ideal decision makers. After all, they’ve already succeeded!

Unfortunately, the most devastating disasters strike those who had previously been the most successful. Such catastrophes typically arise when successful people continue to apply what worked for them in the past in new circumstances where previous tactics no longer apply.

Another prevalent issue for them is being cut off from formerly trusted sources of critical information as they advance in their jobs, resulting in more and more distortions and worse and worse judgements. This propensity helps to explain the numerous cases of highly talented and successful business CEOs who destroyed their organizations and careers.

If you only remember one item from this article, keep in mind that the solution that feels most natural to you is often the worst one for your bottom line.

The future will never be like today in our technologically disrupted environment. To secure the success of our businesses and jobs, we must constantly adapt to an ever-changing environment. Because of the increasing speed of change, our gut instincts will become less and less relevant in the future. We shall crash and burn if we rely on our intuition.