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To my mother WinifredSadler-Smith; easily the most intuitiveperson Ihave ever known.
Preface
Intuition in Business is my third book on the subject of intuition. When I first approached this subject in the early 2000s, intuition was to me, along with many other management researchers, an interesting and unusual new topic. I have always believed that the best way to understand something new and challenging is to write about it and/or try to teach it. In order to come to a better understanding of intuition I wrote InsideIntuition(Routledge, 2008). At around the same time I also dipped my toe in the water of teaching intuition to the challenging audience of executive MBA students. My second book, The Intuitive Mind: Profiting from the Power of your Sixth Sense (John Wiley and Sons, 2010) was my attempt to communicate the topic of intuition, which managers seem to find perennially fascinating, to a practitioner audience. Intuitionin Business presents my perspective on the topic of intuition with the benefit of the best part of two decades of researching and writing about intuition in business and management. It seeks to be retrospective (asking ‘where have we come from?’), current (‘where are we now?’), and prospective (‘where are we headed?’) and to communicate a body of knowledge to specialists and non-specialists alike in the various sub-fields of management and leadership. The book’s core idea is that intuition is a uniquely human sensing capability which supports decision-making under uncertainty and complements the solvingcapabilities of rational analysis in problemsolving and decision-making, moral and social judgements, and creativity.
In the years that have elapsed since the publication of Inside Intuition, much has changed in the intuition landscape in business and beyond. The number of books and articles on the subject has flourished and intuition has entered the mainstream of business management research and practice. Conferences on the subject have been held, intuition symposia at leading management conferences regularly take place, whole handbooks devoted exclusively to the topic of intuition have been published, and I for one teach intuition in my leadership and decision-making courses to both undergraduate and postgraduate business school students in the UK and abroad. Business school students whoever and wherever they are certainly seem to enjoy the topic and as a result of studying it they will hopefully enter the world of work better-prepared to cope with the ambiguities, complexities, and uncertainties of organizational life which they will surely face. In the behavioural sciences more broadly, the study of intuition has come on in leaps and bounds, not least as a result of remarkable progress in fields such as social cognitive neuroscience, supported by astonishing developments in techniques for studying the inner workings of the intuitive mind using functional brain imaging. Intuition is no longer confined Cinderella-like to the margins of the behavioural sciences; it has accumulated its own body of knowledge. IntuitioninBusinessis a comprehensive introduction to the science of intuition which will be of benefit to students, researchers, and practitioners.
Looking to the future, we are compelled to ask ourselves questions about what the future holds for human intuition in the age of artificial intelligence. Could an ‘artificial intuition’ be the next or perhaps even the ultimate AI? Could an artificial intuition ever replace human intuition’s phenomenal sensing capabilities? Perhaps artificial intuition is an impossibility precisely because intuitions are embedded in our physical bodies and as such are central to the experience of being human and part of who we are as individuals and therefore cannot be replicated in a machine. These are
important questions for the not-too-distant future. The pressing issue for the present is how the extensive knowledge of intuition, not available twenty years ago but which we are now in the fortunate position of being privy to, can be used to create positive change that will have a beneficial impact on individuals, organizations, the economy, and wider society. The aim of this book is to provide readers with knowledge to support them in making a positive impact through intuition both in their professional and personal lives.
Acknowledgements
I first published on the subject of intuition in 2004 in an article in the Academy of Management Executive. Since then, it has been my pleasure and privilege to work with many remarkable people in researching and publishing on this important and interesting topic. Intuition in Business is the culmination of the best part of twenty years work on intuition in business, none of which would have been possible without the following outstanding scholars who took the risk of working with me and I am privileged to be able to call my colleagues; to them I extend my utmost respect and gratitude (they are listed in alphabetical order and with requisite apologies for any omissions): Cinla Akinci (for research into intuition in police work, collective intuitions, and much else besides); Vita Akstinaite (linguistic markers of intuition and insight and much else besides); Chris Allinson (cognitive styles); Steve Armstrong (cognitive styles); Lisa Burke-Smalley (intuition in management learning and education); Guy Claxton (intuition and creativity and hubris as unbridled intuition); Eva Cools (cognitive styles); Julie Gore (different types of intuition); John Hayes (cognitive styles); Ann Hensman (intuition in banking and finance); Gerard Hodgkinson (cognitive styles, dual-processing and much else besides); Josh Keller (intuition and paradoxes); Janice Langan-Fox (intuition); Steve Leybourne (intuition in project management); Andrew Miles (intuition in human resources); Lord David Owen (hubris as unbridled intuition); Ceyda Paydas Turan (intuition and hybrid intelligence); Richard Riding (cognitive styles); Erella Shefy (who helped to demystify intuition); Marta Sinclair (cognitive styles and for editing an outstanding series
of intuition handbooks); Paul Sparrow (intuition in business strategy and decision-making). Thank you Sarah Sadler-Smith for drawing the pictures. I thank the team at Oxford University Press, Vicki Sunter and Nandhini Saravanan, who saw Intuition in Business through to final completion. Last and most certainly by no means least, my sincere thanks go to Adam Swallow, Commissioning Editor at Oxford University Press, without whose encouragement and support IntuitioninBusinesswould never have seen the light of day.
1. Making Sense of Intuition
2. How Intuition Sometimes Gets It Wrong: Heuristics and Biases
3. How Gut Feeling Sometimes Gets It Right: Fast and Frugal Heuristics
4. Why Intuition Often Gets It Right: Recognition-Primed Decision-Making
5. The ‘Two-Minds’ Model 6. Core Processes of Intuition 7. The Expert Sense 8. The Moral Sense
List of Figures
4.1. Recognition-based intuition
4.2. Intuition-based inquiry
4.3. Traffic light model for intuition and analysis
6.1. Kanizsa triangle illusion
6.2. Gestalt closure task: meaningful (left) and non-meaningful (right) arrangements of the same visual elements
6.3. Approximate location of orbitofrontal cortex; associated with perceptions of coherence
6.4. Approximate locations of precuneus associated with pattern recognition and caudate nucleus associated with generation of best next-move
6.5. Approximate location of ventro-medial prefrontal cortex and amygdala; associated with somatic markers
6.6. Approximate location of anterior insula; associated with interoceptive awareness
6.7. Approximate locations of mirror neurons; associated with mirror mechanism
9.1. Neural correlates of the C-system (reflective cognition) and X-system (reflexive cognition)
10.1. The right hemisphere aSTG associated with solving laboratory insight problems
10.2. Five stages of the creative process in terms of different levels of consciousness
11.1. Four cognitive styles
List of Tables
3.1. Predictors of future job performance
11.1. Questions for diagnosing your analysis/intuition cognitive style
1 Making Sense of Intuition
Overview
The main idea of this chapter is that intuition ‘senses’ whilst its counterpart, analysis, ‘solves’. The power of intuition’s sensing function is illustrated with the example of the 2008 credit crunch which brought the world financial system to its knees. The example of business venturing illustrates how experienced investors, so-called ‘business angels’, blend intuitive sensing and analytical solving to take high-risk decisions in the volatile world of entrepreneurship. The concepts of risk and uncertainty demonstrate the limits of rationality (that it is ‘bounded’) and illustrate how informed intuition expands experienced decision-makers’ capabilities especially when rationality reaches its limits. The history of these ideas is traced back to one of the book’s central figures, the Nobel Laureate Herbert Simon, and beyond to his intellectual forerunner, the intellectually curious business executive Chester Barnard. Intuition is defined. The differences between intuition and instinct are explained. A caveat is offered for those who are tempted to trust their intuition unreservedly. As well as helping us to take decisive and incisive action, intuition helps us to make sense of situations that initially do not make sense. Opening evidence is offered for how and why managers use intuition to take decisions; the conditions under which it is likely to be successful are discussed, and this idea is developed throughout the book. The chapter concludes with a discussion of intuition in the age of artificial intelligence (AI) and speculates on the prospects for an ‘artificial intuition’ as a new, and perhaps ultimate, form of AI.
Shadow Banking
Few executives or experts in the finance industry sensed the calamitous events that unfolded in the 2008 financial crash. This shortcoming prompted Her Majesty Queen Elizabeth II in a visit to the London School of Economics in November 2008 to inquire, with regal understatedness, why no one had noticed that the credit crunch was on its way. In the letter of reply to Buckingham Palace which followed—signed by over thirty eminent scholars, civil servants, and business leaders — the humble response to Her Majesty was that the crisis was hard for them to foresee because, engrossed and preoccupied as they were with mathematical detail, they, the experts, simply lost sight of the bigger picture.1 In any crisis, prevention is always better than cure but did anyone in the industry have a feel for the bigger picture and a sense for the calamitous events that lay ahead? Were there any faint, which is not to say weak, signals that an impending global financial meltdown was about to take place; could the experts have used these to make sense of and avoid this catastrophic financial black swan?2
In the SiloEffect:Why PuttingEverythinginitsPlaceIsn’tSucha Bright Idea (2015) leading financial journalist and Cambridgeeducated anthropologist Gillian Tett recounted how in 2007 leading macroeconomic and monetary policy experts, including some of the best financial brains in the world, sensed that something in the ‘shadows’ was causing the world economy to be tilted out of true. But they were unable to say what it was and why it gave them such cause for concern. The then Deputy Governor of the Bank of England, Paul Tucker, gave a speech in April 2007 to a conference for hedge fund managers organized by Merrill Lynch in London.3 Tucker presented a seemingly upbeat account of robust growth, containment of inflation, and, most importantly for the audience, healthy returns for their sector.
However, against this optimistic assessment Tucker also felt a pointed unease: ‘the dials on the economic instrument board did not seem to be moving in the normal way.’ In the bigger picture, money was swirling around the economy at pace that did not make sense either to the policymakers or the economists.4 Tucker suspected that the source of these incongruities and inconsistencies lay somewhere outside of the banks. But ‘it was one thing to have a hunch … it was much harder to actually prove that something was wrong when there was so little data.’5 Part of the problem was that the algorithms that were the engines of modern mathematical finance had become so complex that many of the brightest brains in banks, equities, and hedge funds even had trouble understanding their creations; as a result, they were quite simply getting their ‘sums wrong’.6 To make the point, Tett likened the multiple use of a single asset, such as a mortgage loan, to create new trading and hedging opportunities to a spinning out a single strand of sugar to make an enormous but insubstantial cone of candy floss.7
To make matters worse, the experts themselves lacked a language with which to even name the exotic financial innovations that Tucker intuited to be a root cause of his unease. When meltdown eventually came it was accompanied by the invention of the new, but now widely used, term ‘shadow banking’.8 Shadow banking was outside the known banking world. The shadow metaphor captured perfectly the intuitive ‘felt-sense’9 of disquiet and foreboding felt by a small group of financial experts. Tucker sensed that something about the system itself did not add up. He had an intuition, albeit only partially formed, that the problem was lurking in the shadows in the highstakes world of high finance. The problem was intuitively sensed, but unfortunately it could not be analytically solved by the intervention of the central banks before it was too late. Tucker did not have extrasensory perception, but he did have an expert’s intuition, which led him to sense that the road ahead was likely to
give the global financial system a very bumpy ride. It did, and the effects are still being felt to this day, for example, in lower economic growth, increased income inequalities and government debt.
Intuitive Angels
The ‘sixth sense’ and self-help intuition literatures are full of exotic interpretations of intuition’s magical powers. These range from intuition-as-ESP10 through to intuitive ‘angels’ with supernatural powers of intercession in human affairs.11 The intuitions, and intercessions, of a different kind of angel are vital for aspiring entrepreneurs in the fast-moving, risky, and uncertain world of business venturing. The decision to try and found a successful startup business means accepting the risk of failure. In the UK, around 20 per cent of start-ups fail within their first year, and at the end of three years around 60 per cent will have gone bust.12 Starting up a business, especially in high-growth, fast-moving areas such as hightechnology, requires a significant financial investment. Some of the largest sources of venture capital for tech entrepreneurs are lowprofile, wealthy individuals, first referred to in the 1980s by William Wetzel as ‘business angels’. Business angels provide capital directly to small, private, often start-up firms operating in conditions of high risk and extreme uncertainty. The have been made famous by TV shows such as ‘Dragon’s Den’ in the UK and ‘Shark Tank’ in the USA. But how do business angels decide which business ventures are worth risking their hard-earned cash on?
Entrepreneurship researchers Laura Huang and Jone Pearce compared how much angel investors relied on hard analytics (such as financials and an entrepreneur’s business plan) versus soft intuitions (such as their intuitive assessment of the opportunities and risks). They discovered that experienced business angels—who stood to make substantial losses if the venture failed—did rely on their
intuition, but they used it in a complex and highly nuanced way far removed from the ‘go-with-your-gut-instinct’ exhortations so beloved of business biographies.13 For successful angel investors, intuition is a skill that is absorbed, cultivated, and sharpened by constantly paying attention to experienced-based prototypes of what constitutes a potentially successful business venture, including market information, financials, product prototypes, etc. But the angels did not shy away from entering into high-risk investments by also relying on their gut feelings. They used their intuition as a way of managing uncertainties that were so extreme as to qualify as unknowable. One angel commented that investing is not about avoiding uncertainly but rather of embracing it: ‘[it is OK to] be uncertain. Bear the uncertainty. Embrace it. Go with it. Let that lead you to the interesting stuff. That’s how I make my huge profits.’
The angels used their heads and their hearts by combining hard ‘business viability data’ (BVD) such as market size and business growth projections with softer ‘person perceptions’ of the founding entrepreneur. This intuitive assessment of the person was described by one investor as ‘noticing right away, sometimes within five seconds of meeting the entrepreneur, how you feel about them and what your overall sense is for them as a person’.14 But the angel investors did not allow their subjective person perception to overwhelm the objective BVD, or vice versa. They had clear goals in pursuit of which they were prepared to take a risk, acknowledging the possibility that they could lose their entire investment. They relied on a combination of intuitive expertise and formal analysis to pick winners and predict extraordinarily profitable investments.
The stories of shadow banking in the credit crunch and business angels in business venturing illustrate two fundamental points about intuition. First, human beings possess a dual system of thinking: an ‘analytical system’ which is designed (by evolution) and adapted (by experience) for the general purpose of ‘solving’; an ‘intuitive system’ which is designed and adapted (by evolution and experience) for the
general purpose of ‘sensing’. In the shadow banking case, the intuitive system was able to sense that something in the financial system was out of kilter without being able to say why precisely. Second, the intuitive system and the analytical system work best when their complementary sensing and solving capacities are used jointly and cooperatively. In the business angels’ case, objective business viability data was used to solve and subjective person perception was used to sense; in combination, analytical solving and intuitive sensing provided an answer to the conundrum of whether or not to invest. The synergy of sensing and solving can result in extraordinary achievements not only in business but, as we shall see, in many other professional fields as well as in the arts, technology, and the sciences.
Decision-Making under Risk and Uncertainty
Shadow banking in high finance and the activities of angel investors in small firm start-ups occupy opposite ends of the business spectrum. However they both illustrate the challenges that decisionmakers are confronted by with the uncertainty that characterizes the twenty-first century business environment. They also show how an informed and intelligent use of intuition is one way and sometimes the only way—in which decision-makers can make sense of and take decisive actions in the face of risks that are hard to quantify and uncertainties so extreme as a to be unknowable.
In the 1920s the University of Chicago economist Frank Knight elucidated the distinction between risk and uncertainty; the term ‘risk’ refers to those situations where we do not know the outcome but can measure the odds (for example an airline can calculate the chances of a plane crash). Uncertainty, or ‘Knightian uncertainty’, on the other hand, refers to those situations where we cannot know all the information we need in order to set accurate odds in the first
place (for example, the prospects for the airline business in fifty years’ time on the other hand is incalculable).15
A little later, another of the most influential economists of the twentieth century, John Maynard Keynes, writing in 1937, illustrated the distinction between risk and uncertainty by reference to games of chance. In situations of risk the possible alternatives, their consequences and their probabilities are known. In such situations mathematical probability can be a helpful decision aid. For instance, the odds of a winning ticket in the UK’s National Lottery can be expressed in probabilistic terms; the chances of a particular set of numbers coming up can be computed and expressed as a risk (for example, one in 45 million for the jackpot). However, arriving at a similar assessment of probability is not possible in the complex, ambiguous, and dynamic environment in which many of our consequential personal and professional decisions are taken. To illustrate the difference between risk and uncertainty, Keynes, who was writing shortly before the outbreak of the Second World War, observed that ‘the prospect of a European war is uncertain’ and about this matter ‘there is no scientific basis on which to form any calculable probability whatsoever. We simply do not know.’ Decisionmaking under uncertainty is not the same as decision-making under risk. In risk, the probabilities of outcomes are knowable and optimum choices can be computed (for example, one in 45 million); under uncertainty, probabilities are not knowable (for example, the probability of a war between the USA and China) hence it is not possible to compute an optimum choice. Such choices can, however, be sensed.
In a speech to the Economic Club of Washington in 2018 Jeff Bezos described how Amazon made sense of the conundrum of if and how to design and implement a loyalty scheme for its customers. This consequential decision was taken under uncertainty. For some time, Amazon had been searching for an answer to the question of ‘what would a loyalty program for Amazon look like?’ A
junior software engineer came up with the idea of fast, free shipping. But a big problem was that shipping is expensive. Also, customers like free shipping so much that the big eaters at Amazon’s ‘buffet’ would take advantage by free-shipping low-cost items, which would not be good for Amazon’s bottom line. When the Amazon finance team modelled the idea of fast, free shipping the results ‘didn’t look pretty’. In fact, they were nothing short of ‘horrifying’. But Bezos is experienced enough to know that some of his best decisions have been made with ‘guts … not analysis’. In his speech he reminded his audience that ‘if you can make a decision with analysis, you should do so. But it turns out in life that your most important decisions are always made with instinct and intuition, taste, heart.’16
In deciding whether to go with Amazon Prime, the analysts’ data could only take the problem so far towards being solved. As a seasoned executive and experienced entrepreneur, Bezos sensed that the Prime idea would work. Prime was launched in 2005. It has become one of the world’s most popular subscription services, with over 100 million members who spend on average $1400 per year compared to $600 for non-prime members.17 The launch of Amazon Prime is a prime example of a CEO’s informed and intelligent use of intuition paying off in decision-making under uncertainty. The customer loyalty problem for Amazon was uncertain because probabilities and consequences could not be known at the time. No amount of analysis could reduce the fast, free-shipping solution to the odds of success or failure. Under these circumstances Bezos had to go with his gut. This is not an uncommon CEO predicament. In business, decision-makers often have to act instinctively, even though they have no way of knowing what the outcome is likely to be. Bezos did not know whether Prime would work or not, nonetheless he used his intuition to sense what the likely outcome might be and make his judgement call. In the case of Amazon Prime, going with his gut worked out well.
Decision-Making under Radical Uncertainty
Oxford economist John Kay and former Bank of England Governor Mervyn King in their book Radical Uncertainty: Decision-making for an Unknowable Future (2019), distinguished further between two types of uncertainty: ‘resolvable uncertainty’ and ‘radical uncertainty’. Resolvable uncertainty can be looked up; for example, to resolve any uncertainty regarding ‘what is the capital of Mongolia?’ the answer, Ulaanbaatar, is discoverable and resolvable quickly and easily at the click of a mouse. However, radical uncertainty cannot be resolved in any similar way because radically uncertain situations tend to be volatile, uncertain, complex, and ambiguous. The problems that abound in a radically uncertain world, unlike the problem-solving puzzles that are studied in many psychology laboratories, tend to be ill-defined and loosely structured. As a consequence, under conditions of radical uncertainty a decision-maker will often have to admit that they simply ‘do not know’ but have nonetheless to take decisions, even though they do not know what the outcomes of their actions are likely to be.
Kay and King described the decision-making dilemma faced by President Barack Obama on whether or not to storm the compound in Abbottabad where the al Qaeda leader Osama Bin Laden might have been hiding as a classic case of radical uncertainty. The CIA’s team leader put the probability of Bin Laden being in the compound at 95 per cent. Other advisers put it as low as 30 per cent. Averaged out, the decision was 50:50. Obama’s challenge was that probabilities were being used by his aides to disguise uncertainty. The president was the one who had to sense what the outcome might be. He had to take the decision of whether or not to storm the compound. This was in spite of the fact that at 50:50, the probabilistic risk assessment that Bin Laden was in there was not much better than flipping a coin. Obama ‘made his peace with
50:50’. He approved the raid.18 It took place on 2 May 2011. As we know, Bin Laden was killed by a team of US Navy Seals. His body was buried at sea from the USS Carl Vinson later that same day.
In his autobiography, A Promised Land (2020), Obama related how he often relied on his intuition when taking consequential decisions. For example, when deciding whether to run for president or to go back to being a law school professor he remarked that he had to ‘decipher what I was feeling in my gut’.19 When deciding whether to go with Joe Biden as his running mate his ‘gut’ told him that ‘Joe was decent honest and loyal’.20 In choosing Timothy Geithner for treasure secretary his instinct was that ‘Tim had a basic integrity, a steadfastness of temperament, and an ability to problemsolve unsullied by ego or political considerations.’ Obama quickly realized that formal processes and mathematical probabilities can only take a president so far. The same is true of a CEO. The problems that make it to the president’s, or CEO’s, desk are by their nature complex and messy. If this was not so, then someone lower down the chain of command would have solved them already or could be delegated to do so. But Obama also recognized a conundrum: the pursuit of the perfect could can lead to paralysis-byanalysis, whilst ‘going with your gut too often meant letting preconceived notions or the path of least political resistance guide a decision—with cherry picked facts used to justify it.’21 The president’s dilemma illustrates perfectly the challenge that sooner or later confronts many decision-makers who have to take consequential decisions under uncertainty: decisions often have to be taken under significant constraints which sometimes severely limit how rational they can actually be even when they aspire, or claim, to be fully rational.
Managers, as well as presidents, often find themselves in situations that are highly uncertain. This might be where no further data are available, not enough time or resources are available to
gather more data, first-mover advantage has to be secured, there is little previous precedent to go on, the territory is uncharted and there are no maps, or there are a number of equally compelling solutions that cannot be discriminated between using analytics. In such situations, making a gut call may be the only way to move the situation forward. In describing how his company responded to the challenges of doing business in the radically uncertain and uncharted territory of the aftermath of the 2008 financial crisis, the CEO of one of the world’s largest engineering professional services firms remarked that: ‘In a recession, you don’t necessarily know what you’re up against, but you still have to be decisive, which means you’ll find yourself making decisions based on gut feel rather than just the facts and accepting that sometimes you’ll get it wrong.’22
Rationality Is Bounded
The psychological processes that are at work in decision-making under uncertainty were the focus of attention for one of management’s most original and influential thinkers: the 1978 Nobel Laureate Herbert Simon (1916 to 2001) of Carnegie-Mellon University. Simon’s work is pre-eminent in intuition research in business and management; it is on his shoulders that subsequent generations of decision-making researchers have stood, so much so that someone once commented, not disparagingly, that much of intuition research in business is a footnote to Simon.23 Three of the theories of intuition discussed in this book (‘heuristics-and-biases’ in Chapter 2, ‘fast-and-frugal’ heuristics in Chapter 3 and ‘recognitionprimed decision-making’ in Chapter 4) are so strongly influenced by Simon’s work that they can be thought of as extensions and elaborations of his original theory of ‘bounded rationality’.
Simon described management as the ‘art of getting things done’ by ‘insuring incisive [penetrating and insightful] action’. He also
reminded us that incisive action must be preceded by making sense of a situation in order to decide what needs to be done before doing it. However, incisive and decisive action in business as well as in any other walk of life often has to be taken under constraints of information and time, a lack of knowledge of the consequences of one’s actions, and using an information processing system (the human brain) that has limited processing capacity. For these reasons Simon described rationality as ‘bounded’. This is also why Simon considered the idealized ‘classical’ rational model of decision-making favoured by many economists a somewhat ‘dubious way of describing human choice’.24
The classical/rational model of decision-making typically involves the identification of various options and attributes—for example their ‘pros’ and ‘cons’—and assigning values to them in order to compute a utility analysis. However, as Simon realized, managers’ rational and analytical decision-making capabilities are bounded not only by their knowledge of the available alternatives and the consequences of their actions—which are intrinsically uncertain—but also by the human mind’s inherent computational limitations.25 The challenge is compounded when decisions have to be taken under time pressure. The classical/rational model assumes that managers have a knowledge of the future that is quite different from that which they, as human beings, are actually able to possess. These are some of the reasons why Simon considered managers to be boundedly rational actors and management to be an ‘art’ that is inherently intuitive and judgemental.26 We will return to a more detailed analysis and appreciation of Simon’s theory of bounded rationality in Chapter 2.
The models of decision-making that managers are taught typically in business schools are based on the economic principles of logic and rationality. It is these principles that managers are expected to follow. We also tend to live our lives more generally as though the world is rational. When this turns out not to be the case, we find it
unsettling. In these circumstances intuition is one way of making sense of and taking action in an uncertain world that is not as rational as we may have been led or might like to believe that it is. This endows intuition with an element of strangeness that many people find both alluring and mystifying, and which some even mistake for magic. Unpacking intuition’s strangeness, allure, and mystique begins by stripping intuition down to its essentials, and that means defining it.
Unpacking Intuition
History matters. One of the earliest and to this day most insightful analyses of the role of intuition in management decision-making is The Functions of the Executive by Chester Barnard published in 1938. Barnard (1886 to 1961) was not only an intellectually curious business executive of a major US corporation (president of New Jersey Bell Telephone Company, now part of Verizon) he was also a pioneering and perceptive writer on the subject of management.27 TheFunctions, which is still in print, is Barnard’s magnum opus. It is one of the most thought-provoking books on organization and management ever written by a practising executive.28 Barnard’s work has made an enormous, if not always explicitly acknowledged, ‘impact on both the academic and business community’.29
The roots of modern intuition research are to be found not in the main body of TheFunctionsbut in its appendix entitled ‘The Mind in Everyday Affairs’.30 Barnard’s cogent and concise exposition, which runs to just over twenty pages, is foundational not least because of the influence it had on intuition researchers who followed in his footsteps, most notably Herbert Simon. In ‘The Mind in Everyday Affairs’, Barnard drew a straightforward distinction between ‘logical mental processes’ and ‘non-logical mental processes’. Logical processes are those thoughts ‘that can be ‘expressed in words or
other symbols’.31 On the other hand, non-logical processes are those mental processes ‘not capable of being expressed in words or as reasoning, which are only made known by a judgement, decision or action’. Non-logical processes are ‘unconscious’ and so ‘complex’ and ‘rapid, often approaching instantaneous’, that they ‘could not be analysed by the person within whose brain they take place’. Barnard attributed them to factors in the physical and social environment ‘mostly impressed upon us unconsciously or without conscious effort on our part’ in addition to the ‘mass of facts, patterns, concepts, techniques and abstractions’ which are ‘impressed on our minds … by ‘conscious effort and study’.32 Based on this clear and commonsense way of thinking, Barnard defined intuition as:
A complex and rapid mentalprocess not capable of being expressed in words or as reasoning or analysed by the person within whose brain it takes place andmanifesting injudgement, decision andaction.33 (Definition 1)
Barnard’s is the first of three definitions of intuition which are cornerstones of intuition research in business. Barnard pointed out that the logical and non-logical mental processes are characteristic of different types of work, for example, logical characterizes the work of accountants and non-logical characterizes that of ‘“high pressure” trading’, ‘salesmanship’, and ‘in much of the work of business men [sic] or executives’.34 He also argued that logical reasoning—that source of the ‘incessant din of reasons’35 that can sometimes obscure intuitions—does not necessarily denote a higher order of intellect than the non-logical processes that underlie quick judgements (i.e. ‘handling of a mass of experience or complex of abstractions in a flash’). His unequivocal position is that without this capacity, which is so ‘unexplainable that we call it “intuition”’, managers ‘could not do anywork’.36
Barnard’s use of accountancy as an example may be somewhat surprising and contradictory given what he said about the suitability of logical and non-logical processes for different business functions.
But he argued that experienced accountants can take a complex balance sheet and within minutes or even seconds ‘get a significant set of facts from it’ which do not ‘leap from the paper and strike the eye [of the novice]’ but which ‘lie between the figures in the part filled by the mind out of years of experience and technical knowledge’. The intuitable aspects of a complex balance sheet provide ‘something to which then reason can usefully be applied’.37 With impressive foresight (given later discoveries about human cognition, see Chapters 5 and 6) Barnard hints at the complementarity of the two processes: the function of the nonlogical processes is ‘sensing’ those things which do not leap out at the eye, whilst the logical processes ‘solve’ through the application of reason.
Ultimately, Barnard’s choice of accountancy as an example need not be problematic since it highlights the important idea that logical (analytical) and the non-logical (intuitive) processes are complementary and both are required by most if not all management functions, no matter how quantitative (or qualitative) the demands of a specific task might be. It has taken some time for management educators and researchers to accept that intuition has a vital role to play in managerial work, even though most managers would accept this as self-evident.38 Intuition has tended to be denigrated in the social sciences more generally, which is in contrast to its status in the arts and physical sciences where it is lauded. For example, Einstein is reputed to have said: ‘The intuitive mind is a sacred gift and the rational mind is a faithful servant. We have created a society that honours the servant and has forgotten the gift.’ Intuition and analysis are qualitatively different ways of thinking, deciding, and problem-solving. Each is more or less appropriate depending on the task, person, and context. The most successful managers and business people have perfected the art of amalgamating, balancing, and reconciling Barnard’s logical and non-
