'Trust your gut,' make better decisions: study

In the age of analytics, cold, hard data is in and trusting one's gut is out, right? Not so fast -- a new study states that the more people trust their feelings, the more accurately they can predict the outcomes of things, ranging from the weather to outcomes of elections and future stock market levels.

That's the finding of new research published in the October 2012 edition of the Journal of Consumer Research, conducted by Andrew Stephen of the University of Pittsburgh, along with Michel Tuan Pham and Leonard Lee of the Columbia University Business School.  The researchers found that people who trusted their emotions more accurately predicted future events than individuals who did not place trust in their feelings, a phenomenon they call the “emotional oracle effect.”

Through a series of eight studies, researchers asked participants to predict the outcomes of events like the 2008 U.S. Democratic Party presidential primary, movements of the Dow Jones Industrial Average, the winner of a college football championship game, and the weather. The results across all studies consistently revealed that people with higher trust in their feelings were more likely to correctly predict the final outcome than those with lower trust in their feelings.

The trust-your-gut theory has come up for validation before in recent times. For example, in his highly regarded work Blink: The Power of Thinking Without Thinking, Malcolm Gladwell cites conclusive proof that snap decisions tend to be just as spot-on, or even more so, than decisions based on piles of data. Sometimes having too much information results in “paralysis by analysis.”  Or, as Gladwell puts it: “We take it, as a given, that the more information decision makers have, the better off they are… All that extra information isn’t actually an advantage at all; in fact, you need to know very little to find the underlying signature of a complex phenomenon.”

Jonah Lehrer also validated gut-checks in How We Decide, in which he concludes that having too much information — whether before it is made or via introspection after the fact — clutters our decision-making abilities.

Relying on gut intuition -- but still backed up by hard data -- may be the best combination for informed decisions, University of Pittsburgh's Stephen finds. The key is having confidence in those intuitive feelings, just as police detectives do. "The results show that your feelings are a valid information source, provided you have some prior knowledge of the decision topic," he says. "The normal line of thought when making predictions or forecasts is that people should be more rational, that you probably shouldn't go with your gut feeling. Our research indicates that in some cases relying on your feelings is likely to help you."

In the study where respondents were asked to pick the winning candidate in the 2008 primary contest between Hillary Clinton and Barack Obama, high–trust–in–feelings respondents correctly predicted Obama’s winning about 72% of the time compared with low–trust respondents, who predicted Obama’s winning about 64% of the time—a striking result given that major polls reflected a very tight race between Clinton and Obama at the time the study was conducted.

Other events tracked for the study also showed the power of intuitive decision making. For the winner of television’s “American Idol” competition, the difference was 41% for high–trust–in–feelings respondents compared to 24% for low–trust respondents. In another study, participants were even asked to predict future levels of the Dow Jones Industrial Average. Those who trusted their feelings were 25% more accurate than those with low trust in their feelings.

The researchers surmise that people’s feelings serve as "meta-summaries" of prior experience, where the brain encodes life experiences, and feelings catalogue the information. "We are encoding experiences every second of every day. Actually tapping into that is a challenge, because it's mostly unconscious,” said Stephen. “Trusting your feelings is how you access that catalogued information.”

However, some amount of relevant knowledge appears to be required to more accurately forecast the future. For example, in one study participants were asked to predict the weather. From the 175 online participants across 46 states, those participants who trusted their feelings were better able to predict local weather. While they were able to predict the weather within their own zip code areas, they could not predict the weather in Beijing or Melbourne.

This post was originally published on Smartplanet.com