Contact: +27 84 810 2274

How Our Intuitions Cloud Our Judgement

Learn to solve any problem or learn a new skill, and you will find that it becomes easier over time as you become accustomed to the processes and requirements involved ; that you can (albeit unconsciously) disregard some information while placing more prominence on others. Eventually you can even skip some steps as you intuitively ‘know’ what to do and still arrive at the right answer.  Because the brain does not have infinite computing capacity at a given time, it has learned to make quick decisions when confronted with lots of information by using mental ‘shortcuts’ – or as psychologists sometimes like to call them- heuristics. However, no shortcut is ever without its costs. Our common intuitions can blind us and give rise to irrational conclusions and hence behaviour. For example:  assumes that 95% of countries in the world are democracies and 5% are dictatorships.  Let’s assume that each decade that 5% of democracies become dictatorships and 20% of dictatorships become democracies. What would happen over time? Well, our intuitions tell us that we would probably end up with more or less even number of democracies and dictatorships. Alas! (from McBeth. Again.) According to Markov Processes, this movement between democracies and dictatorships, given certain assumptions, will converge to a point where only 82% of countries end up as democracies.

Or try the following: A bat and a ball together cost $1.10. The bat costs $1 more than the ball. How much does the ball cost? Many subjects incorrectly answer $0.10. This is due to a phenomenon known as Attribute Substitution. It happens when a person has to make a judgement about an attribute that is computationally complex, and instead substitutes it with an easier heuristic attribute. That is, you make use of (intuitive) shortcuts to answer a related, but easier, problem. In other words, we use subconscious, automatic processes in certain situations and explicit, conscious processes in another context. This is the essence of Thinking, Fast and Slow a new book by Nobel Laureate and psychologist Daniel Kahneman.

This quick cognitive ‘system’ is the reason why we are often unaware of our biases, find it hard to acknowledge their existence and correct them.

This quick cognitive ‘system’ is the reason why we are often unaware of our biases, find it hard to acknowledge their existence and correct them. It is also the reason why business plans can be so valuable. It take the intuition out of setting objectives, goals and strategies. When faced with an important business decision that demands quick thinking, simplicity takes priority over complexity. Although it ensures a quick decision, it oversimplifies the problem and (often) leads to the wrongs decisions being taken. For example:

In the last five years, 440 000 small and medium businesses (less than 50 employees) have closed their doors for the better in South Africa – that’s just over 240 per day (to the worst of pessimists: this figure includes weekends and public holidays). The closures might be due to any number of contributing factors not least because of a lack of leadership or overconfidence, but I am of the opinion that the decision to start a new venture is oftentimes an emotional/irrational one.

Awareness of these different thinking systems should insure proper planning and objective strategies that managers can use to determine if decisions are viable. Challenging this behaviour is more likely to correct ‘wrong’ behaviour in order to intuitively know what behaviour is unconsciously irrational.

 

Marketing Implications

Examples of attribute substitution abound. Take a non-profit organisation such as the World Food Program. They might depict poverty through images of a single child starving instead of many children, because it evokes a more emotional response. Attribute substitution also then explain why, when we buy something, we are not always sure why we bought it. New research suggests we utilise different cognitive ‘systems’ for paying attention* to our internal and external landscape. Because we prioritise our external attention, we are frequently not aware of our inner feelings and paves the way for ignorance regarding the reasons for buying products or services. So it is advisable that people first pause and think about the real reason why we are buying (or selling) goods and services. Gerald Zaltman states in his book How Customers Think that 95% of our thinking happens subconsciously. Hence many customers think they are acting on a conscious, albeit intuitive decision, while they might have been convinced through fast decision-making.

 

*Attention plays a key role in magic tricks and illusions. (No, you cannot multitask. Its overconfidence if you think you can!) For an excellent account of attention’s role in magic, read Sleights of Mind by Stephen Macknik and Susans Martinez-Conde.

Leave a Reply

* Copy This Password *

* Type Or Paste Password Here *

Contact

Werner van Zyl
Phone: +27 84 810 22 74
Fax: 086 604 8175
E-mail: werner@neuromind.co.za