Last Updated Nov 10, 2010 12:20 PM EST
The Debunker demanded details:
Q: What's wrong with intuition?
A: There is a role for intuition in decision-making, but I think it's vastly over-glorified. For intuition to work, two conditions must prevail.
The first is that the system itself has to be stable, which is to say it doesn't change over time. A chessboard is a perfect example. It's eight by eight, the rules are always the same, and no one's throwing any curves.
The second thing is that it has to be linear -- A causes B the same way every time. If your system is unstable and non-linear, then your intuition is going to lead you astray. What is business? What are markets? They're not totally stable and linear, but also not totally unstable and non-linear.
So the key is for an executive to think about the problems. To the degree the problems are stable and non-linear, intuition isn't going to serve well. To the degree they are stable and linear, intuition is going to serve well. In "Blink," most of Gladwell's examples involve stable, linear systems.
Q: What are common mental mistakes people make in business?
A: The first I'd mention is something called the inside versus outside view. When we're faced with a problem, we gather information about it, add our own inputs and project into the future. That could be what happens when I am deciding when I am going to launch my new product. This is the inside view and people who use the inside view are consistently too optimistic about forecasts.
The outside view says you should look at your problem as an instance of a larger reference class. In other words, when other people are in the same situation you are now, what happens? Mergers and acquisitions offer a great example. There have been decades of studies about M&A and we know that about 60 percent of the time the value of the acquiring company's stock goes down afterward. Yet of course, every executive doing a deal is optimistic that their deal will succeed, based on the inside view.
Q: How can people unlearn misconceptions and become better business thinkers?
A: Step one is to learn about these situations. Create a mental database of them. Step two is to recognize them when they show up. They'll show up in different guises, in personal and professional life. Practice picking them out. The third thing is that in every case, there are typically methods to mitigate these things. When you find yourself in one of these situations you should try to take those steps.
With most decisions, whether consequential or inconsequential, what you should do is pretty straightforward. But periodically you'll find yourself in one of these danger zones and it will have consequences. That's when you need to slow down. I'm not trying to paralyze you. But those are the situations where this kind of thinking can help.
Q: Are business people becoming better thinkers? Or worse? What's the trend?
A: I would like to be optimistic. But these things are deeply engrained. Very few people take the time to learn about them and improve their decisions. I've gotten great feedback on the book and lots of fans. Whether it's changed people's behaviors is hard to say.
Mark Henricks has reported on business, technology and other topics for The New York Times, The Wall Street Journal, Entrepreneur, and other leading publications. Follow him on Twitter @bizmyths.