Two Tests of When to Trust Your Intuitions
A general assumption exists, in both academic and business worlds, that being logical and rational is a more powerful way of thinking than being emotional and intuitive. One of the most influential voices in this regard is the American psychologist Daniel Kahnemann, whose splitting of thinking into the two kinds brought him the accolade of the Nobel Prize for Economics.
One example he offers is of a bat and a ball which together cost £1.10. Add to which, the bat costs one pound more than the ball. How much does the ball cost? System One, as Kahnemann calls it — fast and instinctive thinking — jumps out with an answer: Ten pence! Alas, the answer is wrong. It requires slow thinking to come up with the right answer — and the strategy of distrusting your intuition.
Well, okay, if you’re running your business using lousy maths, you are going to go bust. But how about if you are relying on intuitions about human motivations? Another of his examples is supposed to prove that that is equally foolish.
The Linda Problem, as it is known, is one of the most celebrated quizzes in psychological research. The original experiment, which Kahnemann conducted with Amos Tversky, was elegantly simple. At the outset each of the participants was given this information: ‘Linda is thirty-one years old, single, outspoken and very bright. She majored in philosophy. As a student she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations.’
On the basis of this, volunteers were asked to rank the likelihood of two statements: ‘Linda is a bank clerk’ and ‘Linda is a bank clerk and active in the feminist movement’. Nearly all of them considered it highly improbable that Linda would have become a bank clerk. A full 89 percent instead plumped for the longer description. Yet here’s the catch — how can Linda being a bank clerk of one particular kind, be more likely than her being a bank clerk of all possible kinds? Oops!
Psychologists call this the stereotyping rule. People make a lot of decisions based on it. The research has been cited many times since to wag a cautionary finger at the way humans reason, but don’t rush to apologise. On the contrary, there are many possible arguments to be made as to why the second description ‘really’ is more likely than the first one, and why that 89 percent were quite entitled to say so. It all depends on the way words work, which is rather more complex than Tversky and Kahnemann seem to have allowed.
Fast thinking, intuitive insight is that the odds of Linda being a bank clerk are low, but if you hear of a Linda who belongs to the much smaller group of feminist bank clerks, you are surely justified in considering the likelihood of this being Linda higher — precisely because the group is smaller!