The Rule of Intuition and Decisions

Intuition plays a crucial role in decision-making, particularly in the investment industry, but its effectiveness is highly context-dependent. Intuition is characterized as domain-specific, exceling in stable linear environments where experience can be transformed into instinctual knowledge. In situations such as chess, for instance, experienced players develop intuitive skills through extensive practice. However, in unstable and nonlinear environments, relying on intuition can lead to poor decision-making. It is important to differentiate between experience and expertise, as having extensive experience does not guarantee the presence of a reliable predictive model. Therefore, intuition should be approached with caution, as it can be both beneficial and harmful depending on the context. To maximize decision-making effectiveness, a disciplined approach is recommended, starting with statistical analysis or base rates before incorporating intuitive insights. This helps prevent confirmation bias and supports more balanced decision-making processes. Overall, while intuition has its place, it should not be the sole guide in most decision-making scenarios.