Gut feelings, as it turns out, are more than a feeling. The science is quite clear on it: Your gut knows more than you might realize, and the majority of the time will lead a CEO in the right direction when it comes time to make a big decision.
Steve Jobs, the late Apple founder, believed it. So too does Virgin Group founder Richard Branson. In fact, 62 percent of the executives who participated in a 2014 study undertaken by the Fortune Knowledge Group said it is often necessary to rely on gut feelings and soft factors in the decision-making process.
In a summation of that study, Christopher Becker — CEO and CCO of Gyro, which partnered with Fortune — cut to the heart of the matter when he wrote, “Business decisions are made emotionally and justified rationally.” That tracks with something Lululemon founder Chip Wilson wrote for Forbes: His starting point for any decision is intuition. Then he assembles a panel of experts to cover his blind spots, to give him perspective on things he might not have considered.
It might be expected that it would be the other way around — that an executive like Wilson would first brainstorm things, then painstakingly reach a decision. And while there is no denying that such an approach is prudent with so much information available in this day and age, Wilson argues that intuition is Big Data. His point is that without you knowing it, your body processes millions of data points each day. And that leads to the phenomenon we know as gut feelings.
Wilson’s conclusion is backed up by a 2016 report by Nature.com’s Scientific Reports, which concluded such feelings are in fact not confined to the gut. Rather, they are the result of external stimuli that is felt in several organs. In other words, your body will give you positive or negative feedback about a given situation, based on your previous experiences.
Another perspective comes courtesy of Gerd Gigerenzer of Berlin’s Max-Planck Institute for Human Development, who wrote the book “Gut Feelings: The Intelligence of the Unconscious.” He has found that intuition enables us to focus on the most important factors in a given situation, and weed out trivial information. And that, in turn, allows us to make the best decision.
Gut feelings are not foolproof, of course. One report noted, for instance, that Motorola CEO Gregory Brown cost his company $8 billion when in 1998 he went with his gut and invested heavily in satellite-telephone technology, as opposed to mobile phones.
Then again, data is not infallible, either. Information can be misinterpreted or misunderstood, and often is. An example offered in one report is that of the analysts from a web-design agency who erred in their examination of a client’s buying behaviors, resulting in an outcome that fell short of the agency’s expectations — and a re-tweak of its strategy.
So yes, an argument can be made for seeking a happy medium between the head and the heart, between intuition and information. But it should always be remembered that the gut knows more than you might realize.
This was originally published on Data Driven Investor on November 9th, 2018.