Brainwaves and other things that can harm you

Visit the business section of your bookstore, and you are left with the distinct impression that improbable entrepreneurial success is achieved by people whose intuition overcame conventional wisdom. However, Cornell's Prof Gilovich reminds us that what's missing is the likely corollary that many, if not most, fail quickly and quietly.

David Stauffer in his article "How Good Data Leads to Bad decisions", states that the memory that bubbles up first is more likely than any other to steer you toward a bad decision. We unconsciously recall a past event that confirms the decision we're already leaning towards. We match some characteristic of the current situation with similar aspects of a past situation, with no conscious awareness of the basis of the match.


Never precisely repeats itself

That tends to explain why President John F Kennedy had his aides read a history of World War I when planning strategy. He wanted to get them thinking of precedents other than those arising from World War II – they had all experienced that one personally. He understood that history, contrary to the popular maxim, never precisely repeats itself.

Andy Grove describes the uncertainty we face in business (and life) with refreshing honesty: "The numbers aren't in and the evidence isn't in. None of us have a real understanding of where we are heading. I don't. I have senses about it". So he saw his responsibility as CEO to: "Try not to get too depressed in the journey. If you are depressed you can't motivate your staff to extraordinary measures."

If the box is all our past experience, then thinking out the box means not subjecting ourselves to the unconscious bias of automatically 'knowing' what to do. General Motors have a process built around what's called a 'decision record', that asks a few simple questions:

* What was the context of the decision?
* What alternatives were considered but not selected? Why?
* What assumptions were made?


"It's quite an eye-opening experience," says Nick Pudar of GM Strategic Initiatives. "People are forced to be clear. It can be painful."


Intuition works

Intuition probably works well when you are an expert in your field (i.e. have an idea of the outcome of scenarios), and the motives of your client base are fairly constant. I'm not sure if this story is true, but I was told that when Sol Kerzner was asked to present a more formal business plan for another of his hotel/casino developments, his answer was simply: "My plan is to make bucketloads of money." I believe he never had to write the plan – and many buckets were indeed filled.

Reference: Making Smart Decisions. The Results-Driven Manager Series. Harvard Business School Press, 2006.

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