Observation of happy and successful people leads me to think they have a knack of making the right intuitive decisions. But when should you trust your intuition to the extent of making a big bet on it? And when should you not?
The Story of Mary from Maine
Max Gunther, author of that great little book The Zurich Axioms, tells the story of a woman from Maine – I’ll call her Mary. She made a nice living buying and selling real estate in New England. She bought an old, large, run-down property by the shore in Maine. Her builders made a terrific job of renovating it to a high standard. Mary then put it on the market, and as usual fixed her minimum acceptable price in her mind. One offer came close, but she felt confident holding to her target price.
Mary usually slept well, but one day just before a windy dawn she suddenly woke up with the compelling conviction that she should break her usual practice and take the offer. She felt an insistent hunch that the market for old Maine seaside homes would suddenly fall sharply.
In the cold light of day, she wasn’t sure. She looked up recent price trends and couldn’t find any evidence that the market was softening. She didn’t want to sell below her target price and her natural optimism queried the hunch.
She was a friend of Max Gunther and asked his advice. Max wanted to know how well Mary really knew the market. Had she been involved with New England real estate a long time? Did she have frequent contact with buyers, sellers, and agents? Did she follow the state of the economies in each New England state and area and read local newspapers? Did she belong to an owners’ association and go to its meetings? In short, did she really have a good grasp of the market?
To all these questions, Mary answered: Yes. But she couldn’t pinpoint any specific piece of information supporting her hunch. Maybe she just had a bad dream or a mood that had made her uncharacteristically pessimistic.
For reasons I’ll come on to, Max felt she should trust her hunch, and nudged her to accept the offer. She did so the same day. Just a few weeks later, the market started falling and kept going. By luck or judgment, Mary had made a great decision.
The Origins of Intuition
Intuition comes from the subconscious mind. When you have a decision to make that is both important and hard, the subconscious swings into automatic, unseen action. Every relevant scrap of information and insight that you possess – even information you are not aware of knowing – is marshalled by the subconscious to come up with a clear recommendation.
New York Times columnist and author David Brooks says that unconscious thought “restlessly scurries about – many parallel processes at a time – trying to match new situations with old models or to rearrange the pieces of a problem until they create a harmonious whole.”
University of Chicago psychologist Eugene Gendlin says it is a common human experience to know something without knowing how you know it. Every day our subconscious mind takes in colossal amounts of information and retains anything that might really help us in our lives.
Intuition can be trusted, therefore, even if there are no hard supporting data, provided that we are routinely interested in, and collect information relevant to, the decisions we have to make.
Two Rules for Telling Good Hunches from Bad
Rule One – a hunch can be trusted if your mind is likely to have deep knowledge of the relevant domain.
Max Gunther puts it this way – “a hunch can be trusted if it can be explained”.
But I think this is too stringent a test. In many cases where I have made decisions fortunate decisions, I couldn’t explain the hunch. I don’t think Mary could really explain where her hunch came from.
Often in business I have seen managers who lived and breathed their own corner of the market, and had strong hunches. But when they came to recommend action in line with their intuition, these manager could be taken apart by their bosses. The latter knew very little of the specifics, yet insisted on rigorous data and analysis before committing resources. These ‘MBA types’ could argue far better than their experienced subordinates, who couldn’t really explain or rationalize their hunches. Usually the MBA types carried the day, and were eventually proved wrong by the market (although frequently nobody remembered).
So I prefer to say ‘trust the hunch if your subconscious mind is likely to have relevant insight’. Mary clearly did.
Contrast that with a hunch I might have that Apple is undervalued. I could base that on two things – my study of Apple as a great product-simplifying company, and Apple’s low price-earnings ratio relative to its high long-run growth rate.
But do I really understand Apple’s prospects today? Do I have proprietary insight into its short-to-medium term growth? Do I know more about Apple than anyone else? Is it possible that my subconscious mind has an insight denied to other investors?
The answer to all these questions is: No. I’m not like Mary from Maine. My hunch may prove to be right or wrong, but it is certainly not to be trusted for a big bet.
Rule Two – a hunch can be trusted if it is unwelcome.
If your subconscious is trying to tell you something you don’t want to know, trust it.
Mary woke up with a warning, not a warm epiphany.
She didn’t want the hunch. She tried to laugh it off.
There is no better reason to trust a hunch.
By contrast, I want to trust my hunch about Apple. I think Jobs was the Messiah. I love everything about Apple.
Good reasons not to buy the stock.
I don’t mean you should never trust a hunch if only one of the rules applies. Sometimes you really are an expert, but want to follow the hunch. That’s OK, as long as you realize there is some substantial risk. Similarly, you may not be an expert and you may not want the hunch – there is risk again, but it is not foolish to follow the hunch.
What I can say, though, is that if both rules give you a negative answer – if you are not an expert and do want the hunch – you should not follow it.
And if both give you the green light – you are an expert and you don’t want the hunch – then I’d strongly recommend you follow it.
Applying Intuition to Life and Career Decisions
Should you start a serious relationship with Jim or Jane?
Should you accept a job from Megacorp or from a small venture that’s just started?
Should you leave a well-paid job you like to join your brother-in-law’s fledgling outfit?
Should you get married?
Should you leave your lover?
Suppose you have an intuition about any of these – or any other important life decision. Then the two rules can help:
Have you spent a lot of time with Jim or Jane, and seen them in a variety of different situations – especially when they are stressed, emotional, or just being themselves and not putting on a show?
Do you know Megacorp well, or just judge by its shiny exterior? Has a good friend worked there for years, and has she spilt the beans on life inside the firm? How well do you know the people who started the little venture? Do they really understand its market – and do you?
Ask the same questions about your bro-in-law and his firm.
How well do you know your intended? Have you explored his or her dark side? How well do you know his or her family and best friends?
And so on. How well informed is your subconscious mind?