Archives

Categories

When data fails: The importance of gut decisions

Suranga Chandratillake, founder of video search engine Blinkx, has a guest post up on Venturebeat advising CEOs on making gut decisions. In today’s world much more data is available and many decisions can be made based on fact, but Chandratillake’s point is that we are in danger of fetishising data driven decision making to the detriment of business performance. When big decisions need to be made and the data isn’t great we should be prepared to rely on our gut calls. His final paragraph summarises his article well, but I recommend clicking through to read the whole thing:

The ability and confidence to make gut calls is one of the great tests of being a leader.  I meet would-be CEOs all the time who think they will apply data and process to every decision they need to make.  Beware: the real world doesn’t work this way.  Sure, start with rigor and data, but be ready to leave it behind when you need to.  Collect data, even if it doesn’t always fit perfectly. Take big calls seriously, and realize that not making a decision can be as bad as making the wrong one. And once you make a move, be ready to weather both the negativity from others and your own emotional reaction in the inevitable cases when it all goes wrong.

In the world of early stage investment we often find ourselves having to make important decisions in a data poor environment. That’s exciting when it comes to new investments, but horrible when we have to decide whether to continue to support a company that will otherwise have a hard time or close down. We work hard to get as much data as we can, both hard and soft, but there’s rarely enough to make the decision straight forward.

  • Richard Kelly

    It sounds like Suranga’s gut decision wasn’t out of the blue, although it appears this way. I personally think every idea in human history has been inspired via the person’s surrounding environment.

    The data evidence for this?

    Newton’s apple story. If Newton didn’t sit under that tree (interact with his surrounding environment, even if it were an accident) would the word ‘gravity’ mean anything or even exist today?

    I think our environment has a lot of impact on our cognitive thinking. I think Suranga’s gut feeling was caused by his surrounding environment –

    1. His team: knowledge of his team’s potential to make a switch, not only possible, but successful.

    2. The industry: The market which was “then a hot market” but was soon to change due to technology advancements. Evidence: “…became irrelevant once both the Mac and PC OSes added built-in search functionality.”

    I believe Suranga configured an opportunity via subconscious cognitive thinking. Your mind collects data which you don’t always use. In this case, Suranga’s gut feeling was in fact data-driven from his own mind.

    He even states this in his first listed hint: “Start by creating an environment that facilitates confident gut calls.”

    Your Mother’s advice of keeping in the right crowd of people seems to pay off as you grow.
    Your Mother will always be right though, of course :)

  • http://www.theequitykicker.com brisbourne

    Hi Richard – by gut calls I meant decisions that are based on incomplete data rather than on no data. Suranga had lots of tidbits of data, but he didn’t have enough to make an irrefutable argument. That’s what made his decision a gut call rather than fact based.

  • Richard Kelly

    I absolutely agree with you Nic. If Suranga had solid data to work from then it wouldn’t be a gut decision. Gut decisions are based on the use of incomplete data.

    I believe the incomplete data which Surunga acquired/stored was influenced via his surrounding environment: His team and the industry.

    His decision seemed out of the blue and drastic, but in his mind it did make sense.

    So although on paper it looks like he was giving up a huge opportunity and appeared to have lost his marbles, his gut feeling (which has scientifically been proven to be subconsciously connected to your brain**) means his incomplete data was in fact fulfilled via cognitive processing. His own mind filled in the gaps in other words.

    So of course down on paper, the data which his mind used would look very bad. It was in fact bad quality data. But his intuition managed to fill in the required gaps of the data to formulate an alternative. That alternative was his gut decision.

    So after repeating what you’ve basically just said in one sentence, my argument is this:

    How the hell did Suranga subconsciously know about the change in OSes? He must have heard or witnessed a moment related to this subject to generate that gut feeling.

    **Dr Michael Gershon, Chairman of Anatomy and Cell Biology Department at Columbia University, New York – states that

    “Gut feelings may indicate a previous lesson learned, hidden from our conscious mind, but available in the memory bank of our gut then transmitted to the intuitive brain.”

    And as always, it’s a pleasure debating with you Nic :)

  • http://davidmcdougall.org/ Dave McDougall

    The entrepreneur’s job is to ‘skate to where the puck is going to be.’ Data is a useful tool for that, but data is much better at explaining the past than predicting the future.

    If you expect data to be both necessary and sufficient for your decisionmaking process, the odds are that you’re not innovating radically enough.

  • http://www.theequitykicker.com brisbourne

    Hi Dave – “If you expect data to be both necessary and sufficient for your decisionmaking process, the odds are that you’re not innovating radically enough” – that’s spot on.