Think with your Gut

Writes Thomas Stewart in Business 2.0 (link via Abhay Bhagat):

Fred Smith brushed aside the C he received on the college economics paper in which he outlined his idea for an overnight delivery service. His gut told him it would work anyway. (Besides, the Federal Express (FDX) CEO later explained, “a C was a very good grade for me.”) Howard Schultz had his eureka moment in Milan, Italy, when he realized that the leisurely caffeine-and-conversation caffe model would work in the United States too. Market research might have warned him that Americans would never pay $3 for a cup of coffee. But Schultz didn’t need research. He just knew he could turn Starbucks (SBUX) into a bigger business, and he began, literally, shaking with excitement.

Businesspeople retell these parables to refresh their faith in sturdy virtues like risk-taking and creativity. But to researchers who study how managers think, the tales carry an obvious moral: The most brilliant decisions tend to come from the gut. While that observation is not new, it is now backed by a growing body of research from economics, neurology, cognitive psychology, and other fields. What the science suggests is that intuition — or instinct, or hunch, or “learning without awareness,” or whatever you want to call it — is a real form of knowledge. It may be nonrational, ineffable, and not always easy to get in touch with, but it can process more information on a more sophisticated level than most of us ever dreamed. Psychologists now say that far from being the opposite of effective decision-making, intuition is inseparable from it. Without it we couldn’t decide anything at all.

The practical implications of all this are profound. People who make decisions for a living are coming to realize that in complex or chaotic situations — a battlefield, a trading floor, or today’s brutally competitive business environment — intuition usually beats rational analysis. And as science looks closer, it is coming to see that intuition is not a gift but a skill. And, like any skill, it’s something you can learn.

I would agree – the “gut feel” or intuition is what a lot of entrepreneurs rely on for decisions. Many times, one does not have all the facts on hand necessary to make a decision on an analytical basis. That is where a call has to be made – a call from the gut.

I have made many such calls – when I started with the development of an image processing product in the early 1990s (didn’t work), with IndiaWorld in 1994 (worked) and now with Emergic (still too early to say). But the gut in at least the last two cases has been complemented with a lot of reading and thinking. (And in the case of Emergic, a lot of blogging!)

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Rajesh Jain

An Entrepreneur based in Mumbai, India.