Decision making is not all long term but a daily if not hourly or minute by minute activity of every entrepreneur. How successfully you make these decisions is equally important as they accumulate toward achieving long term success. Consider the following mental exercise. If I ask you what is 2×2 you would intuitively answer 4. If I asked you what 27×43 was you would most likely not be able to answer that intuitively, but would rather have to use either a calculator or write out the calculation to give the answer 1,161. Now if I asked how you felt about this exercise, you would probably have a more positive feeling about the first problem, because it was easy; and a less positive one about the second because it was hard. This mental exercise has implications about how as an entrepreneur you make decisions on a daily basis.
The Nobel prize winner Daniel Kahneman spent a lifetime researching how people make decisions, documented in his bestselling book “Thinking Fast And Slow.” He divided thinking into two categories. He labeled them as System 1, which was intuitive thinking and System 2 which was cognitive thinking. You use System 1 thinking to give the answer 2×2 being 4. But you would use System 2 thinking to calculate the answer to 27×43 being 1,161. He would also say that how you felt about both was an indication of “cognitive ease”, the feeling of how easy the task was.
“cognitive ease is both a cause and a consequence of a pleasant feeling.”
Daniel Kahneman
Now here are the two most important revelations about intuition from Kahneman’s book. First, intuition is “nothing more than recognition”. Second, “the confidence that people have in their intuitions is not a reliable guide to their validity.” Kahneman documents the endless biases that arise from intuitive thinking and the hazards associated with them. I won’t elaborate on them as you can learn about them by reading the book yourself.
How does Kahneman’s research apply to entrepreneurship? For an Objectivist entrepreneur, as Ayn Rand states, “reason is man’s only absolute.” Intuitive decision making may be necessary when time does not allow for deeper cognitive thinking. However, reason should dominate an entrepreneur’s decision making. The more reason is employed the more likely your decisions will be correct. Furthermore, the more an entrepreneur applies cognitive thinking throughout their life the more likely their intuitive thinking will be correct as well. As stated above by Kahneman “intuition is nothing more than recognition.” Through rigorous application of reason at all times your mind will become programmed to recognize correct answers when an intuitive response is demanded. We are born into this world “tabula rasa”, a blank slate. Fill that slate with rational conclusions and all your thinking, intuitive and cognitive will be in alignment with reality.
“Man is born with an emotional mechanism, just as he is born with a cognitive mechanism; but, at birth, both are “tabula rasa.”
Ayn Rand
While intuitive decision making is unreliable, decision making based on “gut feelings” is equally problematic. Emotional responses to situations have the same value as intuitions. They are both immediate responses. They both provide information about a situation that may prove to be valid. Intuition and emotions should never be ignored or repressed, just questioned as to their validity. For an Objectivist entrepreneur, “emotions are not tools of cognition.” Yet many entrepreneurs make decision based on intuition and “gut feelings”. They do so because it is cognitively easier. But this practice is nothing more than lazy thinking. It is an attempt to run on auto-pilot. Cognitive thinking requires effort. The more you apply it, the more consistent you will be with your intuitive thinking and emotional responses. For an Objectivist entrepreneur the goal is to have your cognitive thinking harmonious with your intuitive thinking and emotional responses. What you think is what you will feel and what you feel is what you think.
“The act of focusing one’s consciousness is volitional. Man can focus his mind to a full, active, purposefully directed awareness of reality—or he can unfocus it ….. merely reacting to any chance stimulus of the immediate moment,”
Ayn Rand