A good while ago I read an article in the Harvard Business Review titled “When to Trust Your Gut.”

This is a subject I’ve spent some time thinking about. And my feeling has always been that experience-based gut instincts are at least as valuable if not more valuable than MBA-based analysis from the likes of Harvard, Wharton or Yale.

I was surprised to see that this article supported my view.

The author, Alden M. Hayashi (who was senior editor of the Review when the article was published), says quite correctly that, in making good business and wealth-building decisions, it makes sense to rely on both reasoning and gut feelings.

“The higher up the corporate ladder people climb,” Hayashi says, “the more they’ll need well-honed business instincts.”

In lowlier positions, he argues, one should rely more on facts, figures and established protocols. Instinct is still important, but when you’re new to a company you need to be careful. Those who hired you are alert for mistakes. To avoid costly mistakes, he advises, make sure your impulses align with the facts.

Middle managers who are new to an industry should be careful about shooting from the hip. By sharpening your pencils and following the rules, he says, you’ll keep the bottom line black.

After one moves up the ladder of corporate power, however, attention to detail becomes less important. Gut instinct can help you make the game-changing decisions that will accelerate your career.
[mw-adbox]

Use Your Better Judgment

Hayashi looks to the late Ralph S. Larsen, former chairman and CEO of Johnson & Johnson, to explain why.

“Very often, people will do a brilliant job up through the middle management levels, where it’s very heavily quantitative in terms of the decision making,” Larsen says.

“But then they reach senior management,” he continues, “where the problems get more complex and ambiguous, and we discover that their judgment or intuition is not what it should be. And when that happens, it’s a problem. It’s a big problem.”

Richard Abdoo, former chairman and CEO of Wisconsin Energy Corporation, agrees. He says that as business speeds up and decisions must happen faster, instinct is even more important.

Henry Mintzberg, professor of management at McGill University and longtime proponent of the utility of intuition, believes the subconscious mind is always processing things the conscious mind may not be aware of.

A sense of revelation (the “Aha!” moment) occurs when the conscious mind finally learns something that the subconscious mind has already known.

I agree.

Decision making at the higher levels of business cannot rely solely on rational thinking and logic. To make the best decisions, we must also call upon our emotional intelligence.

Follow the Patterns

To explain how gut feelings work, Hayashi refers to the late Herbert A. Simon, who was a professor of psychology and computer science at Carnegie Mellon University.

Simon, who studied decision making for decades, claims that gut feelings result from observing repeated patterns and rules. Emotional intelligence involves noticing, storing and “chunking” such patterns so we can retrieve them instantly and automatically.

It’s been my experience running and consulting with dozens of growing companies over the years that this is true.

It makes sense: The human mind has an amazing capacity to recognize and “remember” patterns – much greater than our ability to remember and recall facts.

In chess, for example, Simon found that grandmasters are able to recognize and recall about 50,000 major patterns of the huge number of ways in which the various pieces can be arranged on a board.

How do they do it? How is it that some executives seem to have the superhuman ability to make good and profitable decisions?

It’s all about this mysterious process of recognizing and storing patterns. According to Hayashi, the experts say they do this while also “cross-indexing” them. That’s when our brains find patterns in one experience that correspond to patterns in other experiences and “tag” them for instant and automatic recall when we need them.

I – and just about every advertising writer I know – do this routinely. While watching commercials about a Rolex, we may notice a pattern in the pitch that is similar to a newspaper ad on vitamins and/or a radio spot on some financial scheme.

We sometimes recognize the patterns consciously. Very often we don’t. But they are recorded somewhere in our gut.

And that’s why, if you want to become a better business leader and wealth builder, you should make your decisions carefully when you are beginning, but, as the years pass, begin to rely more on your gut.