Trusting your Gut: Informed Intuition and Risk-Based Decision-Making

risk-based decision-making depends on your instincts more than you think

I was thinking a while back about the idea of informed intuition: cases when you seem to be trusting your intuition but, in fact, you’re recalling deeper experiences and patterns that help with your risk-based decision-making. As I was building upon this idea, it became clear that I wasn’t onto any thing new but, instead, this has been explained in the work of, among others, Gary Klein and the RPD model.

I was a little bummed out that I wasn’t breaking new ground but the plus side, this is a real phenomenon that’s worth exploring because it helps you understand when you might be experiencing informed intuition versus simply having a gut feeling. There’s also a nifty model to help you sense-check your intuition.

How we think (a recap)

As a quick recap, we have two main systems of thinking.

System I operates automatically and quickly, with little or no effort and no sense of voluntary control.

System II – allocates attention to the effortful mental activities that demand it, including complex computations. The operatives of system 2 are often associated with the subjective experience of agency, choice, and concentration.”

(Thinking Fast and Slow, Kahneman)

So, as a gross simplification, System I is closer to what we would describe as reacting or doing and is more subconscious. Meanwhile, System II is the more conscious activity we usually call thinking.

A great deal of what falls under System I thinking is intuitive and is hard-wired into us starting with fight or flight instincts, but it doesn’t end there. Sophisticated pattern recognition (‘that’s a tree, not a stop sign’), reading, and simple calculations all become part of our System I thinking. These are things we do with little conscious mental effort.

However, even though reading is something that we have to learn, after sufficient practice and repetition, it becomes intuitive System I behavior.

And that’s the key to this idea of informed intuition.

It’s when you’ve experienced very similar situations over and over again until you recognize them and identify the appropriate response without conscious effort.

But this only applies to situations of great familiarity.

If you’ve never watched a game of baseball before, your gut feeling of which is the better team is nothing more than a guess (or the reaction to the hotdog you just ate). You have no experience to draw upon.

However, there can be situations where your experience is hidden and not immediately apparent.

An athletics coach may have no knowledge of the game itself but can quickly sense which team is more physically able. Her years spent training athletes have embedded markers of performance and athletic ability into her System I thought patterns.

Therefore, despite a lack of sport-specific knowledge, she will still ‘sense’ which team is more physically able.

Luckily, we don’t have to leave everything to our subconscious, and we can sense-check our gut using a technique called RPD – the recognition-primed decision model.

Risk-based decision-making (A.K.A. RPD)

RPD arose from investigations in the 1980s into how people make decisions “under difficult conditions such as limited time, uncertainty, high stakes, vague goals, and unstable conditions.” (Gary Klein Naturalistic Decision Making, 2008)

A key finding was that on the whole, people weren’t applying systemic risk-based decision-making processes in these conditions but, instead, subconscious factors were much more dominant.

Paul Slovic, Daniel Kahneman, and Amos Tversky were pioneers in this field, names you might remember from previous pieces on risk perception, biases, and heuristics.

However, there were still times where these subconscious elements produced the ‘right’ decision, an idea that Gary Klein and others developed into the RPD concept:

“how people use their experience in the form of a repertoire of patterns” to make decisions under pressure. (Klein, Calder- wood, & Clinton-Cirocco, 1986)

Gary Klein and David Klinger wrote a neat summary of RPD here.

However, instead of just relying on our subconscious to identify patterns and tell us what to do, RPD is a “blend of intuition and analysis.” (Klein et al.) So we back up what our gut is telling us with a quick sense-check against a set of parameters.

The RPD mental framework based on the work of Klein et al.

In their field-studies of on-site firefighting commanders and chess players, they observed that initial decisions driven by intuition were “usually satisfactory.”

That might seem like a pretty bland statement of support, but think about the benefit of being able to trust your intuition whenever speed is critical: a factor in both firefighting and playing chess.

Instead of having to coax your subconscious into revealing the patterns it’s filed away before you can start planning – the more laborious System II approach – RPD gets you a workable solution much faster. When time is of the essence, and the stakes are high, “satisfactory” is probably all you need.

In the situations where I’ve seen RPD applied – whether in the military, an emergency, or making a business decision – there was almost always a better, more refined option that came to mind afterwards. However, these other options were usually variations on the approach that we’d already taken. Plus, we would have run out of time and never have reached those conclusions if we had started with a clean whiteboard and a System II approach.

However, before you outsource all your decision-making to your midsection, remember that informed intuition and RPD only work in situations where you have significant experience, and things are familiar. It’s not going to work when the whole situation is new to you.

So how much experience is required?

Unfortunately, that’s a bit of a ‘how long is a piece of string’ question. You might want to treat the 10,000-hour rule cited by Malcolm Gladwell in Outliers as a very rough guide (although Gladwell himself points out that this is simply an average). In work terms, that’s five years of full-time work, but, realistically, you’re not going to be developing patterns that whole time. Instead, perhaps 8 – 10 years in a field might be the point where your pattern library is sufficiently stocked.

But remember, you need to have experienced the same situation to spot patterns.

Simply working as an accountant for a decade won’t necessarily help you sense that you’re looking at the next big accounting scandal. Similarly, just reading about events will give you some idea of what to look for, but it will take much more effort to embed these lessons into your subconscious.

However, an accountant who has reviewed several sets of ‘cooked’ books over the same period will have developed a much more in-depth knowledge of what shady accounting looks like, and the patterns should jump out more quickly.

Beware biases

One final warning is to be wary of your own biases.

You can override your pattern recognition if other biases are at work. This is where the RPD review process is most valuable as it makes you revisit your first response to see if it really fits the situation. If you’re being honest with yourself during the review, the biases should stand out and can be offset, helping you reach a better outcome.

So trust your gut (but within limits)

Risk-based decision-making can be hard and there will always be times when a pure gut decision works: putting everything on black breaks the bank, the rebels win against overwhelming odds, or a blind leap into the dark pays off.

Luck is always a factor and even odds of 100-to-one will come up occasionally. However, this is a reckless way to make decisions on the whole.

So when there’s time, an analytical, cool, calm, and measured System II approach will let you look at all of the nuance and subtlety that a big decision requires.

But when time is tight and the pressure is on, you can trust your instincts to lead you to the right outcome if you’re familiar with the situation and those patterns are filed away.

Add the analysis elements of the RPD to sense-check your initial reaction and you will have cut through a great deal of uncertainty and be on your way before you know it.

Please note that all of this leans very heavily on the work of Paul Slovic, Daniel Kahneman, Amos Tversky, and of course Gary Klein and I would recommend you seek out their work if you really want to dig into risk perception and decision-making. ‘Thinking Fast and Slow’ is a great place to start.

Photo by Jeremy Lwanga on Unsplash

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