articles_bw_10_04_18-1 (1).jpg


In the last blog, I explained how and why Balance is one of the four key factors to excellent decision making. Balance, Part 1: The Classic Case of Risk vs. Reward outlined how to determine the actual risks and rewards that are most associated with Balance in decisions. But there is another side to Balance that plays a key role as well:

Gut Reaction Vs. Data Analysis

People generally fall into one of two types of decision makers:

1) Decides quickly from gut instinct and feels it is a waste of time to reflect on decisions that he has already initially decided upon.

2) Makes decisions more deliberately (and probably slowly), collects and pours over information, and bases her final decision on data.

Be honest with yourself. Which of these groups do you belong to?

When interviewing CEOs for my book, my findings were nearly identical to other published research I found. About half of the CEOs admitted that their biggest mistakes happened when they didn’t follow their gut instincts. The other half said the exact opposite—that they made mistakes when they relied too much on their gut reactions and did not employ a more thoughtful approach.

So which is better? Going on gut instinct or relying strictly on data?

Neither. Both are wrong.

One of the most important aspects of Balance is to recognize that an excellent decision comes about when we balance our gut reaction against a more thoughtful, data-involved process.

Being Smart ≠ Being an Expert

Many smart people swear by their gut instinct and some argue that they have become very successful relying on it. Making decisions by the way things feel to you is fine when the stakes are low or you are in your area of expertise. But your area of expertise is probably much smaller than you realize or would like to admit.

If what you are deciding is unrelated to your profession or you have not spent at least 10,000 hours mastering the subject, you are outside your area of expertise.

This bears repeating: Being smart is not an area of expertise.

Being smart is an advantage. It is an attribute, like size, strength, and speed are attributes of an athlete. While being bigger, stronger, and faster can be advantages, those characteristics alone don’t make you a skillful tennis player, footballer, or golfer. The same can be said for being smart. It may help, but it doesn’t make you great at every decision.

When you have a lot riding on a decision or you are in an area where you are not an expert, gut instinct should not be the only thing driving your decision.

Likewise, data should not be the sole driver of an important decision because, as we discussed in the last blog, numbers can be misleading. As covered in my book, if a key assumption underlying the data is off (even by a little bit), the results can change dramatically.

How do you balance gut and data? Try To Prove Yourself Wrong.

One of the most common problems for decision makers is “confirmation bias.” Numerous studies show that we tend to make an initial decision mentally and then seek out only information that confirms our original thinking. When this happens, you never really allow yourself to second-guess your initial gut reaction.

With confirmation bias in the driver’s seat, you believe you are objectively “thinking” about the decision, but you really aren’t.

If “confirmation bias” is hard-wired into most of us, how do we correct that tendency?

Employing both your gut reaction and numerical data, think of reasons that your initial decision could be wrong. This does not happen naturally.

The best way to do this is to engage in a “premortem.” Imagine the outcome not turning out as you wanted, and look for the most likely reasons that led to the unfavorable result. After thinking of the problem from this point of view, if you still feel that your original conclusion is the correct one, go for it.

When facing an important decision, don’t ignore your gut reaction, but don’t blindly follow it because it’s quick and easy. Examine as much data you can and keep an open mind. Both should lead you in the same direction. If they conflict, one of them is wrong. Either your gut instinct is leading you astray or the data you are relying on is flawed. Look deeper.