How We Decide
In our web enabled, data driven society, intuition is making a comeback. Paragons of the corporate world such as Jack Welch (who titled his memoir Straight from the Gut) are hailed not just for their success, but their readiness to bet on their instincts. Conversely, politicians are reviled if they are perceived to govern by opinion polls.
The idea that intuition prevails over data is comforting; a triumph of man over machine. However, the reality is more complicated. We certainly don’t admire everybody’s instinct, just those whose decisions pay off. One who makes the leap and fails is not a hero, but a fool.
Do we really want to rely on a gut decision from someone who just had a bad lunch?
While romanticizing about intuition is a formula for disaster, the fact is that rational decision making isn’t pragmatic or effective most of the time. Fortunately, decision making has been an active area of study and, despite some false starts, true insights have been won.
The implications of a vast body of research are that not only is intuition important, but also that “gut” decisions can be improved with training. Moreover, by understanding how consumers make decisions we can market to them more effectively.
A Failed Rational Model
One of the early models for effective decision making comes from a much cited paper by Peer Soelberg of MIT. He described a “generalizable decision process” for finding “ideal solutions” in a 1967 paper which provided an outline of 6 steps.
- Problem Recognition
- Problem Definition
The paper was logical, exhaustively detailed and well received. However, Soelberg’s model and others like it never gained widespread use outside of academia. In reality people rarely use such models because an “ideal solution” is very rarely what you need.
Most of the time, you just need to get something done; a problem solved. You have other things to do and more decisions to make. You find a solution that works and move on.
As an example, think about a pilot who just lost an engine. He has to make a decision about what to do – lives are at stake. He has no need for an optimal solution; one that will keep him from crashing would be more than enough.
Now imagine you are that pilot and review the 6 steps outlined above. How many would you skip?
A 6th Sense?
With funding from the US Military, Gary Klein set out to find out how people actually make decisions under pressure and whether the process can be improved upon. He was initially shocked at what he found: People who make life or death choices often do so with seemingly no process at all.
One fairly typical story was that of a fireman who responded to a routine kitchen fire. While they were spraying water on the fire, the lieutenant gets a bad feeling and orders everybody out. Seconds later the floor collapsed. If not for his order they would have been killed, or at least very seriously injured.
The fireman attributed his life saving “gut” decision to a natural “6th sense” he had about fires. However, during subsequent interviews, some cues became apparent. The fire was too hot for a kitchen fire, it wasn’t responding to the water hose and it wasn’t noisy – all of these things were out of place.
Something felt wrong because the situation violated the fireman’s conception of what was normal based on his experience with previous kitchen fires. His”6th Sense” wasn’t innate, it was learned.
Where a “Gut Feeling” Comes From
The Fireman’s example above is supported by scientific evidence. Renowned neurologist Antonio Damasio believes that we store important experiences as somatic markers in the brain which are regulated by the amygdala, an area of the brain involved in both emotions and memory.
In other words, when something violates our conception of what’s normal we really do have a “gut feeling.” It is through experience and learning that we build our conceptions. In effect, many of our lightning fast impulses are developed over time. That’s why top athletes need to train hard for years.
Damasio also points out that our instincts work faster than our conscious thought – like when we jump out of the way of an oncoming bus and only seconds later realize what happened. When it really matters, we don’t have time to think, only to act.
This explanation also explains the instincts of corporate titans such as Jack Welch. Inside GE, Welch was famous for his ability to digest complicated financial statements, a skill conspicuously absent in his early career. He also pumped billions into GE’s Crotonville Management Center and spearheaded GE’s Six Sigma program, an extremely quantitative process.
For someone who values going “straight from the gut” Welch certainly has worked hard at it, and that’s the point. Intuition isn’t something we’re born with; it’s something that we acquire. Moreover, it’s only effective when we have to make decisions within the realm of our experience.
(For a real life business example, see here).
How to Improve Decision Making
Our instincts are wired for survival, not planning. They help us recognize danger and reward, but don’t actually prescribe solutions. Our emotions help us weigh factors in a decision, but they don’t explain them. They alert us to past lessons learned, but don’t tell us anything about the future.
In order to make decisions effectively we need to both access past experiences and imagine how the future can differ. The evidence points to concrete steps that we can take to improve decision making.
Make Decisions: Like anything else, decision makers get better with practice. The more decisions you make, the better more proficient you’ll be.
Make Mistakes: While failure is difficult, it’s through experience that we build up the somatic markers that enable us to recognize situations quickly and react to them.
Simulate: An important part of Gary Klein’s findings was that while people who have to make life or death decisions routinely didn’t weigh options against each other, they did mentally simulate the consequences of each initiative. If the risk was too great they would move on to another option till they found one likely to result in a successful outcome.
Review Past Decisions: The US Military puts a big emphasis on After Action Reviews, where every facet of an operation is analyzed and rethought.
Our decisions are in large part prisoners to our own experience. By enlarging and clarifying our own personal database of experiences we will have more to draw on when the time comes to act.
The research also reveals a lot about how consumers make decisions and can therefore help us to market more effectively.
Most Purchase Decisions are Highly Intuitive: Consumers have to make too many decisions to utilize Soelberg’s rational process on a regular basis. They rarely seek out an ideal solution, just one that works. Researchers call this satisficing.
Product Cycle Helps Determine Emotional Content: While an emotional component is present in any decision, consumers will gather more information about important decisions they make infrequently.
The more important the purchase decision, the more optimized the process will be. While there will still be an emotional component, rational factors will be more important for purchases of great expense or impact.
Familiarity is Essential for Brand Preference: Somatic Markers are built through continuous experience. Brands that stay in touch with consumers have a distinct advantage. The research also suggests that new brands need to build associations that are already familiar to prospective clients.
Better is not Always Best
For most choices we have to make, an adequate solution will do. One that is simple, available and cost effective will be preferred over one that requires new learning.
We are hard wired to accomplish tasks, not to optimize them.