Some people make decisions based on their intuition or “gut” feeling.
Others make decisions based purely on data and logic.
Neither is wholly right or wrong, as both have problems with bias.
Intuitive decisions are usually based on two things: 1) a mental model of the situation at hand; and 2) our emotional feelings about the situation.
Sometimes our mental model is wrong. Sometimes our emotions aren’t well informed or don't consider all relevant factors.
Let's say you’re thinking of making a certain expensive purchase.
You have a mental impression of how much money you have in your bank and investment accounts. This impression informs your judgment about how much you can afford to spend.
However, if your impression of your account balances is wrong (perhaps due to a major change in stock market prices), you could make a flawed decision because you did not verify your mental model with the facts of the situation.
Perhaps you see a new sports car that you’d love to own. It would be... amazing. The feelings you have related to the purchase are all overwhelmingly positive. Making such a decision without considering your financial situation and goals would be emotionally impulsive.
It’s fine to spend $1 impulsively. It’s a bit different to do the same for a $150,000 purchase.
Logical and data-driven decision making can also be problematic, albeit in a different way.
Data-driven decisions are heavily biased toward only considering information that’s easily quantifiable.
For example, if you’re using online dating apps to date and find a spouse, your search and filtering process will be heavily skewed toward factors that can be captured in a database.
This is why people can have dates with people that seem perfect on the database search, but in person, are a terrible fit. The factors that made that person a poor fit likely weren’t easily captured in a database field.
In addition, excessively logic-driven decisions tend to under-consider one’s personal values and feelings.
If you’re offered a promotion to a more prestigious job with a 25% raise, should you take it?
What if, in your personal value system, you don’t value more money, but you value working with people you like, and the new job involves working with people you do not like?
But what if you find yourself emotionally feeling grief about the promotion? (Perhaps taking the promotion would mean not seeing your kids grow up, and you feel sad about that.)
In these cases, your values and feelings don’t fit neatly in a return-on-investment Excel model designed to help you make the decision.
When I make an important decision, I do not rely solely on gut feeling, nor solely on logic. I consider every major decision in both dimensions.
Does my “gut” say a resounding “yes” to this opportunity? Or, do I feel hesitation and resistance? If the latter, I try to figure out WHY.
I don’t ignore my feelings about the situation.
I also try to understand and consider the non-quantitative, more subjective factors relevant to the decision. I won’t make a decision purely on those factors, nor will I dismiss them either.
I also do a rigorous fact-gathering exercise around the decision to get all relevant objective data on the situation.
If it’s a complex financial decision, I will either build a financial model or do a quick back-of-the-envelope calculation to get a sense of the range of potential outcomes I may be facing.
If both my intuition and logical analysis say “yes,” I decide “yes.”
If both say “no,” I decide “no.”
If one says “yes" and the other says “no,” I take a timeout and try to figure out WHY there’s a conflict and understand it.
If I can’t make sense of the discrepancy, I slow down my decision making until I can figure out the conflict.
If I can distill the conflict down to a specific trade-off that is the essence of the hesitation, then I will make a fully (factually and emotionally) informed trade-off decision.
In the end, I use my emotions and values to inform my logical decision making.
Or stated differently, I use my fact-gathering and logical analysis to inform my intuitive decision making.
While it’s not a perfect process, I find this integrated approach to decision making has resulted in greater long-term satisfaction and far fewer regrets with my decisions.