Which Will Prevail — Human-Based Intuition vs. Pure Data

It’s been said that numbers don’t lie and that is true to a point, but that also depends on where you are getting your information. And when you are making an important financial or business decision, making the wrong decision can bring severe consequences. Many people grasp the concept that relying on pure data versus human-based intuition can be better for making real-time decisions. However, in a meta-analysis studypublished in the Journal of Applied Psychology, researchers found that a simple algorithm could outperform human judgment by over 25 percent.

The Problem with Human-Based Intuition

Sometimes going with your gut can be a good thing. Consider when you walk out your front door in the morning. It looks cloudy, but the forecast says it’s going to be sunny and your intuition tells you to grab an umbrella just in case because you know from experience you’ll get soaked if it rains. In some situations, intuition is good, but at other times, it might not be enough to make an informed real-time decision.

The problem with using human-based intuition alone is the possibility of making biased decisions without realizing it. This can lead to systematic errors, including correspondence bias. For example, you are considering buying a stock because suddenly it’s performing very well. Your inclination might be to grab it because it’s doing well right now. But consider the reasons why it’s suddenly performing well. There could be numerous variables causing the price to soar, but what about tomorrow — will a change in one or more variables send the price plummeting? Unless you’re a day trader looking to make a fast buck, you should want to know why the stock is suddenly performing well and what’s the expectation it will continue.

Using Pure Data

Consider the previous stock purchase scenario. When determining whether a stock is a good buy, trading algorithms would analyze historical data, current stock info, market conditions, current news (including news about upcoming legislation), and even social media to arrive at an informed decision.

While there are some points of human-based intuition that AI cannot replicate, human intuition is no match for AI’s capabilities for analyzing tremendous amounts of data. Knowing accurate facts before making a critical decision is important for the best income when there’s a lot at stake — this is where pure data prevails. However, the ultimate answer to this question is to use the best characteristics of both AI and human intuition for better outcomes in decision-making processes.