In the fairly recent past, I worked as a part of the leadership team at a company that was built and run almost entirely on the intuition and instincts of a small group of founders. There was plenty of raw data and a good deal of relevant information around too, but when it came to the critical decisions around strategy, key customer relationships and managing enterprise risk, the information generally took second place to the senior leadership’s gut feelings.
Given that this approach had built a highly profitable, $4 billion-revenue public company from scratch in less than a decade, it was hard to argue with — at least for as long as the founders were around and active. However, as the business grew it was clearly going to be harder, and eventually impossible, for every key decision to be vetted by the core set of “intuitions” that had driven success. It was also going to be increasingly difficult to keep regulators and the market (in the form of financial and industry analysts) happy that the business was being run on a sound footing. Even some of the large customers began to question why we were using incomplete or out-of-date information to manage customer relationships. We never seemed to know as much about them as they expected us to.
Things came to a head when it was time for some of the founders to step aside. New management wanted information-based decisions, not gut feelings — which triggered a cultural upheaval in large part because the founders had generally hired people who operated pretty much the way they did — on intuition and instinct.
As it turns out, I’d seen situations like this before.
Although I trained as a mathematician and computer scientist, the most useful classes I took during college were economics and behavioral psychology. In the latter, we spent a lot of time looking at how good human beings are at applying intuition to the world around them and how they generally go about it. Even back then, behavioral psychologists had collected a lot of observational and experimental data on the workings of human intuition. [If you want a generally accessible source on much of this and subsequent work, I highly recommend a 2011 book from economics Nobel laureate Daniel Kahneman, “Thinking Fast and Slow.”]
We generally have good intuition about things that are similar to what we encounter every day, and are able to make “instinctive” decisions (based on comparisons with our experience) that are generally correct. So we know what a “fair” price is – even for something brand new — or how long a task should take, even though we haven’t done exactly it before. But we have poor intuition about things that are outside of everyday experience (how to identify and react to the risks represented by a tsunami or an earthquake, for example) and very poor intuition about things that are totally alien — things outside of all human experience, like quantum mechanics or nanotechnology.