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November 28, 2004

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I just finished reading "Blink" by Malcolm Gladwell, and I'd suggest that you read the book (I actually listened to the audio book) and get the full expanded version of his ideas. Like Lyn in the previous comment, Gladwell makes the case that the unconscious mind can be trained to avoid making irrational judgements. An expert in a field with no biases can pick things out in a split-second, and that's called a "gut instinct", but really it's just the unconscious mind working faster than the conscious mind. However, so many biases can exist that it's hard to tell when your gut instinct is right or wrong. In some ways it would help to interview someone blind-folded, but in other ways it would hurt, because you would no longer be able to mind-read, to be able to read the person's facial expressions to see whether or not they are being honest or displaying leadership qualities, etc. The most basic thing you can do is to know what your biases are, and train yourself to not allow them to factor into your decision-making process. If a short, older man interviews for a position of leadership, and you automatically get a gut-instinct that he's not right for the job, you should probably reconsider that feeling, as it's likely to be based on bias rather than expertise.

In addition to biases or subconscious (or conscious) prejudices about the race, gender, physical attributes and accents of other people, we all have cognitive biases (? gut instincts) that affect our decision-making. Biases in decision-making have been extensively studied in economics, games theory, medical decision-making etc. In fact, the work of the psychologists Tversky(was at Stanford before he died) ) and Kahnemann (at Princeton ) in the field was recognized a few years ago with a Nobel prize in economics. A good education and open mind may not be enough to overcome these biases which include: anchoring (see report of study on 500 MBA students on page 107 of reference #3), loss aversion, status quo bias, overconfidence etc. A short intro to the field is at http://en.wikipedia.org/wiki/Decision_making
Gut instinct may be very useful when it is pattern recogniiton by experts e.g. a chess grandmaster transitioning into a favorable end game pawn structure even without being able to calculate the exact winning variation, or an experienced medical specialist making crucial emergency decisions. However, gut instinct may also lead us into using the wrong heuristic.
See the four web sites below for people who've made contributions to the field including one , Robert Shiller from Yale, who works mainly on behavorial finance:

Daniel Kahneman: ebusiness.mit.edu/schrage/ Articles/DanielKahnemanInterview.pdf

Amos Tversky http://www.j-bradford-delong.net/movable_type/archives/001025.html

Thomas Gilovich http://comp9.psych.cornell.edu/people/Faculty/tdg1.html

Robert Shiller http://aida.econ.yale.edu/~shiller/>http://aida.econ.yale.edu/~shiller/

Books (#3 is especially easy to read):
1. D Kahneman. Judgement under uncertainty. Heuristics and Biases
2. T Gilovich. How We Know What Isn't So. The Fallibility of Human Reason in Everyday Life
3. Gary Belsky and Thomas Gilovich. Why Smart People Make Big Money Mistakes and How to Correct Them. Lessons From the New Science of Behavorial Economics.

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