Combining Intuition and Analysis

We live in an age of big data.  People have become enamored with the use of analytics to solve complex problems and to make better decisions.  I'm a big believer in analytics, but I hope we don't forget that intuition does play an important role in decision-making processes.   In the video below, I explain briefly what intuition is and how it works.  

How can we combine intuition and analysis to help us make better choices?  Here are four ways that the two modes of thinking can complement one another.  

1. Use analysis to check your intuition, but not simply to justify decisions that have already been made 
2. Use intuition to validate and test the assumptions that underlie your analysis 
3. Use analysis to explore and evaluate intuitive doubts that emerge as your prepare to make a decision 
4. Use the intuition of outside experts to probe the validity of your analysis

Who is More Empathetic: Intuitive or Analytical People?

The British Psychological Society's Research Digest features new work by Christine Ma-Kellams of the University of La Verne and Jennifer Lerner of Harvard. They focus on empathy, something that has gotten a great deal of attention in the management field recently. The human-centered design movement emphasizes empathy with customers as a key tool for driving innovation. Meanwhile, efforts to improve employee engagement have focused on the need for managers to empathize with their subordinates. La Verne and Lerner study how different types of people engage in empathy, and their results prove rather surprising. The Research Digest summarizes their conclusions: 

Reading what other people are feeling is an important skill that helps us navigate conflicts, deepen relationships, and negotiate effectively. So what’s the best way to approach this? New research published in the Journal of Personality and Social Psychology suggests that most of us believe that the best approach is to trust our instincts. But the paper goes on to show that, on the contrary, accurate empathy comes from operating deliberately and analytically.

What explains this surprising finding that contradicts the conventional wisdom?  The authors argue that reading others' emotions often proves very difficult.  The cues are not always obvious or clear.  Therefore, it takes some effort to discern how others are feeling.   That's where a more analytical mindset has value.   Focusing on details, evaluating a situation comprehensively, and deliberately analyzing a variety of cues turns out to be crucial to empathizing with others in many situations.  Instincts alone do not always do the job.  

Individual vs. Group Decision Making in the Venture Capital World

Wharton doctoral candidate Andy Wu has conducted some interesting research about decision making in the venture capital world.    He explains his research to Knowledge@Wharton:

My current work focuses on the role of partners of venture capital firms who make angel investments on the side. What that allows us to do is compare organizational decision-making to individual decision-making. In this work, we find that individuals acting alone are able to process private information that they have that their organization doesn’t have, and allows them to make investments in firms with observably weaker characteristics, such as younger founding teams, less educated founding teams. Nevertheless, these individual investors are able to generate the same financial return as their employing firms.

What does Wu mean by private information?  Well, he's really referring to tacit knowledge... expertise that cannot be easily transmitted to others.  Your intuition may tell you that a certain investment is attractive or not.   The data do not justify your conclusions.  How do you persuade your partners in the firm?  Wu argues that you often do not persuade them.   You can't make a strong, rational, explicit case to them.  However, tacit knowledge leads you to conclude that it's a good investment.  Groups, Wu argues, focus on explicit information and often fail to incorporate crucial tacit knowledge.  

What is Intuition? Excerpt from my Great Courses lecture series

Here is a brief excerpt from my lecture series, The Art of Critical Decision Making, from The Great Courses.

Tim Cook: Intuition's Role in Decision-Making Processes

Are People More Cooperative When They Make Speedy, Intuitive Choices?

David Rand, Joshua Greene, and Martin Nowak have conducted a series of interesting new experiments that show a correlation between decision speed and selfless behavior.   The experiments involved "the sort of games that economists have used for years. They have to decide how to divvy, steal, invest or monopolize a pot of money, sometimes with the option to reward or punish other players."   The scholars found that individuals behaved more cooperatively/selflessly when they made their choices faster.   The individuals who took to deliberate tended to be a bit more self-interested.   This article in Discover magazine explains a bit more about the studies:

From these results, it’s tempting to conclude that cooperation is somehow “innate” or “hardwired” and that selfishness is somehow imposed upon these predispositions. But Rand points out that our intuitions are also shaped by our daily lives. In so many of our choices, cooperation is the sensible call; if we cheat, we may be punished, lose our reputation, or deny ourselves the future goodwill of those we wrong.  So, when volunteers take part in the experiments, “their automatic first response is to be cooperative,” Rand writes. “It then requires reflection to overcome this cooperative impulse and instead adapt to the unusual situation created in these experiments, in which cooperation is not advantageous.” He found two lines of support for this idea when he surveyed his volunteers: The link between fast-thinking and charity only held for people who said that their daily lives were mostly filled with cooperative interactions; and it only held for those who hadn’t taken part in similar experimental games before.   “This shows how it’s difficult to consider experimental play in isolation from things outside the lab or as completely determined by the game’s monetary payoffs, as a lot of economists do,” says Ann Dreber Almenberg from the Stockholm School of Economics, and one of Rand’s former colleagues. 

I wonder how these findings translate to the realm of organizational life.   Do managers in different business units have a natural tendency to be cooperative if they choose quickly, but perhaps behave a bit more selfishly when they ponder the incentives and payoffs embedded in the firm's compensation and promotion system?  How might we encourage people to focus a bit less on detailed deliberations regarding the direct compensation effects of their actions, so as to hopefully elicit higher levels of cooperation across silos?