Group 4_Lecture 8_Rohit Garg_Intuition vs Statistical Decision Making

intuition-vs-statistics“Intuition is sometimes more important than statistics in decision making” – When I heard these words during my Research Methodology session, I wondered whether despite the presence of ample statistical decision making tools would managers still prefer their intuitive thinking to make decisions. But intuitive thinking is very important as statistical tools might not be helpful under certain complex situations and might even fail in many others.

Intuitive thinking can be extremely fast. What would one do when he has to decide on which move to take next in a sports? What would an army chief do when he needs to decide on his next manoeuvre? What would a manager do in a situation in which he has to make quick decisions with insufficient statistics available to him? The answer is intuition. One can get an overall feeling about a situation based upon evolved heuristics and one’s emotions which modified by his experiences will allow him to act fast in a situation. This is the power of intuition which help a handball player decide where to target his shot, a commando decide when to fire a shot and a CEO to decide whether he should go for an IPO or not.

Had Tata Motors relied on statistical decision making, the company would not have acquired JLR which now is one of the biggest revenue grosser of the Tata Group. Interestingly, the world’s best statistical tool with the best algorithms failed in their judgement over whether a crisis of the sort of subprime crisis could ever occur. All these point to the importance of intuition over statistical decision making.

On the other hand in the movie Moneyball, the manager of the baseball team, Oakland Athletics, developed an analytical system of choosing players instead of adopting the traditional approaches based on intuition. This approach of applying statistics turned out to be a huge success changing the methods for evaluating players of professional basketball teams and it correlated with positive outcomes. Also, the game Monty Hall uses a statistical approach to prove that intuitive thinking in decision making could work against you.

So it’s more about finding a balance between intuitive and statistical decision making. It is worthwhile listening to your intuition initially when data is scarce. At the same time it is equally important to consider evidences, statistics and outcomes as the importance of analytical decision making cannot be undermined. In conclusion, perhaps the best technique would be to use your intuition and back it up with some analysis.

SectionB_Group 4_Rohit A Garg_13PGP105

Other members of Section B,Group 4 are Alok Paul, Aniruddh Mukerji, Anusha C, Avik Chatterjee, Chanyo YL, Gurjot Singh, Anwesha Dasgupta.

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