Trusting Your Gut vs. Evidence-based Decisions
Sometimes your intuition guides you down the wrong path
According to the University of Copenhagen’s associate professor of economics Christina Gravert, common sense is not the best predictor of outcomes.
She says that challenging and testing your baseline assumptions is the best way to get what you want; for your life and your business.
In her TED talk this week, she presents some examples of this.
One of them is a worldwide multi-government program (including the US, UK, and Australia) called “scared straight” aimed at keeping “at-risk” teens from future offending by making them spend a night in prison.
However, as opposed to all other government programs and policies (which are not monitored for outcomes), researchers stepped in and ran a test with a control group — half of those teens were sent for a “time-out” at home instead.
Gravert said that the program seemed intuitive, but when the results came in, they were not what everyone expected.
“Instead of producing fewer criminals, it [the program] was producing more,” she said.
The increase in criminal behaviour directly induced by this program will cost these governments (and their taxpayers) billions of dollars.
But this example is not an exception, the movie “Moneyball”, starring Brad Pitt, is based on a true story of the Oakland Athletics baseball team’s general manager Billy Beane.
Beane broke baseball tradition when he took an analytical (sabermetric) approach to scouting, rather than the age-old intuition-based approach. He was ostracised by his peers, that’s until he consistently started winning matches.
Long story short, sabermetrics has changed the game of baseball forever and forms an integral part of scouting in modern baseball.
Another example is the life of Ray Dalio, the founder of the world’s biggest hedge fund: Bridgewater Associates.
Dalio wrote a book, “Principles”, in which he describes the three most important principles he lives (and works) by — one of them being, “Harness the power of full transparency”.