Skip to main content

Trust-your-gut Based On Expertise May Yield Better Decisions

An experienced entrepreneur or small business owner understands having to make quick decisions based on incomplete information.  In fact, it's a way of business in small operations where there is rarely time, staff, or resources to research decisions before they must be made.

"It turns out there are conditions where using intuition is a good way to make the right decision," said Michael Pratt, of Boston College's Carroll School of Management. "What we found demystifies a lot of the information out there that says intuition isn't as effective as using an analytical approach."

Testing intuition against analysis, Pratt and co-authors Erik Dane, of Rice University and Kevin W. Rockmann, of George Mason, found that people can trust their gut and rely on intuition when making a broad evaluation in an area where they have in-depth knowledge of the subject.

Intuition has long been viewed as a less effective approach to critical reasoning when compared to the merits of analytical thinking. Yet intuition is about looking at patterns and wholes, which is needed when making quick decisions about whether something is real or fake, ugly or pretty, right or wrong.

A Warning
"The primary takeaway is: intuition is like nitroglycerin -- it is best used only in certain circumstances. Be careful when you use your 'gut'," said Pratt. "If you gained your expertise in a different field, you may not have the background to rely as strongly on your intuition."
*  *  *  *  *

The trick is to know when to rely on your intuition, and when to punt.  If, as most successful entrepreneurs do, have five or more years experience in an industry, you should be able to make intuitive decisions.  However, if you are not a true expert, it's smart to know that and not risk making a poor decision than can cripple your business.

This research backs up your need to have an outside staff of specialists you can call on an as-needed basis, and why it is important that you start these relationships before you get too far into starting your business. 

For example, if a problem of accounting or taxation pops up, you want to be able to call an accountant for advice and not have to spend time explaining your business and what it does.  The same applies to an attorney, an HR consultant and so on. 

Use your industry expertise to make those decisions you are truly qualified to make, and know ask for knowledgeable advice in areas where you are not expert.



Story Source:  Erik Dane, Kevin W. Rockmann, Michael G. Pratt. When should I trust my gut? Linking domain expertise to intuitive decision-making effectiveness. Organizational Behavior and Human Decision Processes, 2012

Comments

Popular posts from this blog

Earn a Living Shining Shoes. . . Really

Earning a Living as a Bootblack
Can someone make a living shining shoes in today's economy?  At on time there shoe shine boys as they were called were found on street corners across the country, thousands of them.  Many were from poor families and worked to help support themselves and their families.  Today, I found three established shoe shine stands in downtown Seattle, plus two bootblacks, the traditional name of those who shine shoes, working on the streets of Seattle.

Meet George Johnson, age 74 on October 20th, a self-employed operator of a shoe shine stand in downtown Seattle's Rainier Place.  George has been shining shoes for the last sixty years, starting in Arkansas and ending up some thirty years ago at the Washington Athletic club a few blocks from his current location.
"Sixty years," I asked him the day we met.  "You ever think of retiring?"

"Gonna work until I can't do it no more," he replied.  "I don't even think about i…

The Facts of the Small Business Survival Rate

Back thirty years ago when I first wrote about small business, a hoary and horrible statistic was bandied about, even by some of the most experienced entrepreneurial pros: "80% of new businesses fail in their first five years." 

This "statistic" has appeared in more places than you can imagine, from the leading small business magazines, books, presentations by employees of SBDCs, the SBA, SCORE, Chambers of Commerce, even professors on the college level - who should know better than to quote un-sourced numbers.  It still shows up in small-business blogs today.

For some years, I searched for a source of that statisitic.  Never found where that number came from, leading me to believe that some self-appointed expert made it up.  To quote a character from the popular television show, M*A*S*H, "Horsepucky." 

Here is the truth about the survival rate of new start up businesses in the U.S. economy from two unimpeachable sources, The Marion Ewing Kauffman Foundati…

The Seven Characteristics of the Creative Employee.

How to Find Good Employees:

On my post of February 18th of this year, we talked about the role of managing stupidity in the success of any organization.  "Stupidity Management" refers to the real need of a business to know the difference between routine tasks that must be completed by rote and those tasks that require innovation and fresh thinking.  

Every business has a need for discipline in tasks that must be performed the same way, each and every time.

Every business has a need to creative thinking and fresh ideas on certain other tasks or problems, just not every task of problem.  

The Hunt for the Creative Individual
There are certain jobs in every organization where you, the owner, need original thinking.  Or perhaps you're running a business that lives off original thinkers.  An advertising agency is a business where the company's assets walk out the door every day at five (ish).

Professor Øyvind L. Martinsen at BI Norwegian Business School has conducted a study to…