Friday, December 19, 2014

When Shall you Go with Intuition, when shall you do Analytics?

There are many considerations in leveraging thinking fast and slow.

Business decision is both art and science, especially in the exponential change and business dynamic we face today, it is so difficult to make effective decisions without the right strategy and methodology. How do you decide whether you should go with your gut, or do a careful analysis? What questions do you ask?  What role does problem framing have in the choice balance between intuition and analytics or gut and reason? What factors do you consider? Do you have a rule of thumb?


The firefighter’s quick decisions in times of stress are intuition built on past experience. There are two options for fighting fires (1) gain time or (2) increase consequences. Either of these will result in the use of careful analysis over the use of intuitive judgments. Both time and consequences can be adjusted to avoid fire fighting.  Firefighters do not have time to utilize careful analysis, yet consequences are high. Success then is on making intuitive decisions based on pattern recognition and mental simulation of a single option, not evaluation of multiple concurrent options. Those quick decisions in times of stress are intuition built on past experience. The firefighter is well trained to make intuitive decision based on their previous experience.


In psychology, there are a long list of heuristics that will lead one astray. “Thinking Fast and Slow’ by Kahneman  mentions great stories where gut reactions have been spot on. And great stories about when gut reactions made people insensitive idiots. In some contexts people almost automatically use faulty biases if they depend on the gut feeling and knowing what characterizes these situations can make then be aware when they should rather use slow thinking-analytics more carefully. In psychology, there are a long list of heuristics that will lead one astray. These are some:
Fundamental attribution error (I am smart but you are lucky or I am unlucky but you were just stupid.)
Availability bias (what we remember is much more prevalent to us than it is in reality)
Prejudice (due to the culture, polar or solo thinking, cognitive difference, etc)
Ownership bias (that a thing we already own is worth much more than something we don't own.)
Loss aversion (makes one really bad mathematicians.)


Analysis is necessary when looking for new ways of doing tasks or overcoming the challenges for solving the complex problems. Sometimes, people are wired to recognize patterns. They learn patterns, and are able to tap into these, before they are able to offer a rational explanation. So far so good. But they want to see patterns so much that sometimes they see one when there is none. Analytics can following the logical steps in decision smart:
1). Study the situation.
2). Ask questions.
3). Collect information.
4) Articulate logic
5) Filter out the bias
6) perceive consequences..


Both intuition and analytics have the role to play in making wise decisions, There are many considerations in leveraging thinking fast and slow. Sometimes there is no time for analysis. Sometimes the issue is small, and detailed analysis is not worth the effort. Sometimes key data is not available. Sometimes the intuition plays so well before you are able to explain the logic; and the other times, you just have to breakdown the big problems to solve them piece by piece via carefully reasoning. A good decision maker needs to embrace the well-defined Principles, well-refined Processes and well-adopted Practices in making wise decisions all the way.

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