Magazine

Why Snap Decisions Work


GUT FEELINGS

The Intelligence of the Unconscious

By Gerd Gigerenzer

Viking -- 280pp -- $25.95

(Readers'

Reviews below)

Editor's Review

The Good A useful, scientific look at why gut instincts are so often right.

The Bad It's a tad repetitive--and should have offered more detail about how to use the author's findings.

The Bottom Line A useful and clearly written tutorial on decisions and how to make them.

In 2000, Capital magazine, an investment guide, ran a stock-picking contest. Over six weeks the 10,000-plus entrants could buy, hold, or sell any of 50 pre-selected international stocks using whatever investing strategy they liked. A German team took a particularly unusual tack: Psychologist Gerd Gigerenzer and economist Andreas Ortmann stopped 100 pedestrians in Berlin, 50 men and 50 women, and asked them which of the 50 stocks they recognized. Then, as if acting on gut feelings, the duo bought the 10 stocks whose names were cited most often and held them for the duration of the contest.

You can probably guess what happened. Gigerenzer and Ortmann's portfolio gained 2.5% despite a down market during the period, performing better than 88% of the 10,000 portfolios submitted. Capital's editor, who chose the 50 stocks in the first place, watched his own portfolio lose 18.5% of its value. The researchers further discovered that the less financial knowledge behind choices the better. The women queried by the German team recognized fewer stocks than the men, but a portfolio based on the ones they did know earned more than an equivalent group chosen by the men.

Gigerenzer cites this investment case study in his new book, Gut Feelings: The Intelligence of the Unconscious, to bolster his central point: that intuition often trumps more considered reason. The author is director of the Center for Adaptive Behavior & Cognition at the renowned Max Planck Institute for Human Development in Berlin. If his thesis sounds a lot like that of the 2005 best-seller Blink: The Power of Thinking Without Thinking, by Malcolm Gladwell, it's because Gladwell drew heavily on Gigerenzer's research. But the scientist goes a step further by explaining just why our gut instincts are so often right. Gigerenzer is not nearly as clever a writer as Gladwell, a star at The New Yorker, but the new book does serve as a useful and clearly written tutorial on decisions and how to make them.

Intuition, it seems, is not some sort of mystical chemical reaction but a neurologically based behavior that evolved to ensure that we humans respond quickly when faced with a dilemma (e.g., fight or flight). Too much data, however, throws a monkey wrench into the process. The more variables we consider, the harder it is to make the "right" decision--as anyone who has faced an aisle full of shampoos knows.

Our brains have evolved to take the quickest and most efficient route to a decision, based on experience and a set of innate and unconscious rules developed since birth to negotiate our physical and social environment. Start considering lots of other information and variables, and the brain slows down or falters. Simplicity, writes Gigerenzer, is an evolutionary adaptation to uncertainty: "A complex problem demands a complex solution, so we are told. In fact, in unpredictable environments, the opposite is true."

Gigerenzer gives one example after another to prove that "rules of thumb" beat rational analysis, such as the way a professional baseball player catches a fly ball. Ask the player, and it's likely he couldn't tell you, but researchers have figured it out: He fixes his gaze on the ball in the air, starts running, and adjusts his speed so that the angle of the gaze remains constant. Unconsciously, his brain is making all kinds of tricky mathematical calculations to accomplish his goal, based on its experience with hundreds of prior catches. All the player has to remember consciously is to keep his eye on the ball.

Gigerenzer shows how we apply such an approach to medical diagnoses, social situations, and business questions. He also explains how to manipulate the gut feelings of others. A manager can mold a corporate culture by leaving clues that can be noted by employees. These might include always leaving her office door open or expressing suspicion of absent workers. Pretty soon, everyone is opening doors and dropping in on each other unannounced, or choosing not to attend out-of-the-office conferences.

Gut Feelings gets a little repetitive, and it would have been more interesting if Gigerenzer had gone into more depth about how to use his findings. Others are doing such thinking, however. Take The Political Brain by Drew Westen, which is garnering considerable attention from politicians. Westen, also a psychologist, uses the theory of intuition to bolster his argument that a successful political campaign must appeal to a voter's emotions rather than reason. In elections, he says, when reason and emotions collide, emotion wins, and voters ignore the logic of policy positions. That certainly explains a lot about the state of Washington today.

By Catherine Arnst


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus