When Trusting Your Gut Can Get You in Trouble

When Trusting Your Gut Can Get You in Trouble

An Interview with Don Moore, Professor at Berkeley-Haas School of Business


When was the last time you relied on your gut to make an important decision? Turns out, overconfidence can be a big problem in organizations.
As a professor of Management of Organizations at the Haas School of Business, Don Moore knows why.  He studies human confidence—specifically overconfidence—and is an advocate for using evidence to overcome bias. We sat down with Moore to discuss the trouble with overconfidence, how to hire diverse talent, and why evidence-based HR is so important.
Why is Evidence-Based HR gaining momentum? Why should managers pay attention to the need to apply a scientific method to decisions with their employees and team?

People decisions are among the most important decision any company makes.

Perhaps more than other issues in management, we are more inclined to be influenced by subjective opinion and personal anecdote when it comes to People decisions. This is problematic, given that People decisions are among the most important decision any company makes. Most of us have strong opinions of what makes an effective manager that we don’t subject to rigorous testing or examination. Companies cling to traditional methods (like the unstructured face-to-face job interview) that feel like they provide useful information, when in fact they tend to be very poor predictors of performance.  
You’ve spent years studying human overconfidence. Why is overconfidence a bad thing?
When we overestimate our ability or knowledge, or discard information about downsides, we take bad risks. This could be damaging on a number of levels and lead to investing in losing ventures, starting ill-fated companies, or claiming expertise that we lack that could ultimately hurt us and the people we work with. Take for example, how many of us approach driving: in one study, 93% of US drivers claimed they were better than the median, when in fact, only 50% of the population can be above the median. If you think you’re better than the competition, when you’re not, you’re likely to enter contests that you lose.  When making business decisions, it’s far better to have a more accurate view of one’s abilities, based not on intuition and feelings, but on evidence.
Now I’m questioning my skills behind the wheel…is it better to be underconfident?
Underconfidence is quite common, and often contributes to the “impostor syndrome.”  It most often arises when we’re faced with difficult tasks. For example, most people think they’re worse jugglers than average because they’re not good at it. But it turns out, juggling is a difficult task so poor performance is average. This tendency to underestimate ourselves in difficult tasks plays out in the business environment. In situations where the task at hand is difficult or murky, the inclination for many is to think that we’re simply not cut out for the job.
We can be especially aware of our own private failings because others’ shortcomings are often hidden from us. For instance, I know how often I’m distracted by Facebook when I should be doing research. It’s tempting to think I’m particularly bad, without knowing how often my colleagues indulge in such distractions.
Is awareness of over or underconfidence enough to overcome it? Are there other steps you’d recommend?

One of the most persistent forms of overconfidence is the excessive faith that I am right, that my opinions are correct. By knowing your vulnerability to this bias, you can actively consider other perspectives.

Awareness helps us identify the root cause of the problem. It’s especially helpful if it pushes you to gather more information or think in novel ways that broaden your perspective. One of the most persistent forms of overconfidence is the excessive faith that I am right, that my opinions are correct. By knowing your vulnerability to this bias, you can actively consider other perspectives.
Say, for instance, you’re sure your new product will be a great success. Consider why you might be wrong:

  • What contrary evidence is there?
  • What are the best arguments of your most passionate opponents or competitors? How likely is it that they’re correct?
  • What might lead your new product to fail in the market, and is there anything you can do now to reduce the risk of that failure?  

How does ‘going with your gut’ play into the difficulties many companies find with hiring diverse talent?

When we rely on intuition, opinion, and anecdote in place of evidence for people decisions, we are not only being unfair, but missing opportunities to drive business results.

Most of us believe we’re fair-minded and egalitarian, and are reluctant to admit the many ways in which our judgments and behaviors might be biased. It’s important to recognize that “business as usual”, such as seeking new employees through referrals from existing employees, might effectively discriminate because it tends to generate more new hires who look like your current employees.
Similarly, we tend to favor people who are similar to us, so ‘having a good feeling’ about someone may not be a reflection of their competence, but of their similarity to you. This is one reason why I teach that unstructured interviews are a poor indicator of performance, and advocate for tests, work samples, and other more objective means of evaluation.
Good intentions are not enough to avoid discriminatory behavior. Sometimes we are required to actively override accepted ways of acting, normal routines, or our own automatic intuitive impulses.   
When we rely on intuition, opinion, and anecdote in place of evidence for people decisions, we are not only being unfair, but missing opportunities to drive business results. As our economy continues to shift towards knowledge work, companies that effectively use evidence for HR are likely to emerge as winners.