Intuition is an important ingredient in any sustainable venture.
Promethean figures like Mary Barra, chairman, and CEO, of General Motors and Steve Jobs, the legendary founder of Apple, believed that every bit of intuitive knowledge should be counterbalanced with rumination and our sixth sense.
On the importance of meditation, Jobs once wrote, “That’s when your intuition starts to blossom and you start to see things more clearly and be in the present more. Your mind just slows down, and you see a tremendous expanse in the moment. You see so much more than you could see before.”
To the late magnate’s credit, a new study published in the Journal of Behavioral and Experimental Economics found that those who obey their instincts make better decisions than those who second guess themselves; a postulation the authors believe to be applicable to any discipline. From the report:
“Against what theory might expect, we show how revisions tended towards significantly worse forecasting performance, suggesting that individuals should have stuck with their initial judgments or their `gut instincts’. This result is robust to both differences in the average forecasting ability of individuals and the predictability of matches. We find evidence that this is because revisions to the forecast number of goals scored in football matches are generally excessive, especially when these forecasts were increased rather than decreased.”
Gut instincts and the impact of forecast revisions
In order to establish a correlation between intuition and successful outcomes, the economist employed online gambling as a model—more discreetly drawing on data from the Superbru Premier League Predictor Game – which is an online betting program wherein players attempt to accurately guess the scores in top tier football games.
After analyzing a staggering 57,000 individual predictions over the course of 380 football games in the Barclays Premier League during the 2017/18 season it was determined that users who remained faithful to their initial reactions were correct 20% more often compared to those who changed their minds a few minutes after their novel assessment. This revelation held true even when estimates were submitted days and even weeks in advance.
It should be noted that forecast revisions are actually pretty infrequent, occurring about once in 25 times during any given season. When they do occur it’s usually to account for relevant updates, like player injuries. Even in these instances, however, revisers were only accurate in their predictions about 7.7% of the time.
There are a couple of mechanisms at play here. The first and most cogent involves the vagus, alternately known as the wandering nerve, or colloquially as gut feelings. When faced with a high stakes situation wherein an outcome survives on a single decision, a series of signals spike so that we avoid any potentially harmful consequences.
Ostensibly, aiding this process by applying reconsideration would only increase the likelihood of a successful upshot but this new paper and others before it actually intimates the opposite effect. Second-guessing often frustrates the operation, seeing us resort to panic. Ironically we become more impulsive the more we reject our impulses.
The participants in the latest paper that routinely second-guessed themselves yielded to a tailspin, making it hard to distinguish caution from anxiety. The authors are certain of the broad implications of their findings, writing that it
“Could have relevance to other contexts where judgmental forecasting explicitly takes place and which have real economic importance, such as in company management and planning, financial markets and macroeconomic policy.”