Never Go With Your Gut

How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters (Avoid Terrible Advice, Cognitive Biases, and Poor Decisions)

Gleb Tsipursky

• Publisher: Career Press
• Year: 2019
• Print ISBN: 9781632651624
• eBook ISBN: 9781632657701
• Topic: Business
• Subtopic: Decision Making
• Index: Business

“This book is Moneyball for management. It will help you understand your subconscious biases that can lead to bad decisions, and it will teach you the techniques to help you make better decisions.” —Gordon Tredgold, author of Fast

“This well-written, go-against-the-grain book is full of practical ways to tap into your very best mental resources to make better and better decisions.” —Brian Tracy, bestselling author of Eat that Frog!

Want to avoid business disasters, whether minor mishaps, such as excessive team conflict, or major calamities like those that threaten bankruptcy or doom a promising career? Fortunately, behavioral economics studies show that such disasters stem from poor decisions due to our faulty mental patterns—what scholars call “cognitive biases”—and are preventable.

Unfortunately, the typical advice for business leaders to “go with their guts” plays into these cognitive biases and leads to disastrous decisions that devastate the bottom line. By combining practical case studies with cutting-edge research, Never Go With Your Gut will help you make the best decisions and prevent these business disasters.

The leading expert on avoiding business disasters, Dr. Gleb Tsipursky, draws on over 20 years of extensive consulting, coaching, and speaking experience to show how pioneering leaders and organizations—many of them his clients—avoid business disasters. Reading this book will enable you to:

• Discover how pioneering leaders and organizations address cognitive biases to avoid disastrous decisions.
• Adapt best practices on avoiding business disasters from these leaders and organizations to your own context.
• Develop processes that empower everyone in your organization to avoid business disasters.

Chapter 1

The Gut or the Head?

Chapter Key Benefits

Identify the systematic and predictable situations in which we are most likely to make bad business decisions by understanding how our brain is wired.

Learn the principles and broad strategy behind effective tactical techniques to prevent poor decisions.

Discover twelve cutting-edge tactical techniques used by pioneering business leaders to address dangerous judgment errors in their everyday business environment.

Many pundits heap praise on those leaders who make quick gut decisions about the direction of their company, about whether to launch a new product, or about which candidate to hire. Sadly, going with our gut frequently leads to devastating results for our professional lives, as I saw in news headlines that were relevant as I finished up this book.

In May 2017, hackers stole the credit information of more than 148 million people from the consumer credit reporting company Equifax. The data breach exploited a security flaw that the company should have known it needed to fix. It was called “entirely preventable” by a December 2018 Congressional Report by the House Oversight Committee.¹ Even worse, the Equifax C-suite decided to cover up the incident for several months. The disastrous decision to conduct a cover-up—inevitably discovered later—gravely damaged Equifax's reputation, caused a large and lasting drop in the company's stock, and led to the CEO and a number of other top executives being forced out due to incompetence.

John Schnatter, the founder of Papa John's, sued the company after it forced him out for using a racial epithet. When he testified against the company during a court hearing on October 1, 2018, he described a “gut feeling” that the board of directors sought actively to push him out and accused the board of breaching its fiduciary duties.² This was terrible PR for the company, which brings down its stock and sales, and it hurts Schnatter as well because he holds a 30 percent stake in the company.

What about Elon Musk's infamous tweet on August 7, 2018, when he said he was considering taking Tesla private and has funding secured for a buyout per share at $420 (a code for marijuana)? The tweet led to an SEC investigation and settlement. Musk gave up his role as chair of the board while remaining CEO; Musk and Tesla each paid $20 million in fines, and Tesla appointed more independent directors to the board.³ Tesla's stock fell dramatically during this incident.

Make no mistake: each of the example cases exemplify value-destroying decisions that hurt shareholders because top corporate leaders followed their gut. By the time you hold this book in your hands, I'm confident more breaking headlines will illustrate the foolishness of corporate leaders going with their intuitions instead of evaluating reality to make wise decisions.

These examples of top leaders at prominent companies are not isolated incidences: a four-year study by LeadershipIQ.com interviewed 1,087 board members from 286 organizations that forced out their chief executive officers. It found that more than 20 percent of CEOs got fired for denying reality, meaning they refused to recognize negative facts about the organization's performance.⁴ Other research shows that professionals at all levels suffer from the tendency to deny uncomfortable facts in business settings.⁵

The scope of this problem became crystal clear to me in graduate school when I started to study the kind of errors human beings make when we trust our gut. At the time, I was doing some teaching as a graduate student. At the end of my first semester of teaching, my supervisor called me into his office and gave me some constructive criticism about my performance.

He was somewhat rough and forceful in his delivery of the criticism. Perhaps he didn't need to say “lily-livered coward” when he described what he perceived as the excessively high scores I gave my students. Naturally, I felt very grateful for his advice and thanked him immediately and profusely . . . NOT!

What I really wanted to do was deny his criticism: shout back at him, tell him he was wrong, and say that his grading system sucked. That's what my gut was telling me to do. My face turned bright red and I clenched my fists, as my gut was also telling me to pop him one.

It took everything I had to restrain myself, dial down my emotions, and stop from yelling back or doing something worse. I wouldn't have had much of a career in academia—or anywhere—if I couldn't do it. Through a haze of red, I told him I'd do what he wanted with the grading system, and slunk out of his office with a scowl on my face and my fists clenching and unclenching. I ended up changing my grading style to suit his preferences. He was my boss, after all, and I wanted the teaching gig.

What did you do when you received constructive criticism—well delivered or rough—from your boss, your customer, your colleague, or your coach? What did your gut tell you to do in that moment? Did it tell you to be aggressive and shout back? Perhaps it told you to hunker down and disengage. Maybe it pushed you to put your fingers in your ears and sing, “La-la-la, I can't hear you!”

Behavioral scientists call these three types of responses the fight-flight-freeze response. You might have heard about it as the saber-toothed tiger response, which means the system our brain evolved to deal with threats in our ancestral savanna environment. This response stems from the older parts of our brain, such as the amygdala, which developed early in our evolutionary process.

I Feel, Therefore I Am

Fight-flight-freeze forms a central part of one of the two systems of thinking that (roughly speaking) determine our mental processes. It's not the old Freudian model of the id, the ego, and the super-ego, which has been phased out by new research on the topic.⁶ One of the main scholars in this field is Daniel Kahneman, who won the Nobel Prize for his research on behavioral economics. He calls the two systems of thinking System 1 and System 2, but I think autopilot system and intentional system describe these systems more clearly.⁷

The autopilot system corresponds to our emotions and intuitions; that's where we get the fight-flight-freeze response. This system guides our daily habits, helps us make snap decisions, and reacts instantly to dangerous life-and-death situations. Although it helped our survival in the past, the fight-flight-freeze response is not a great fit for many aspects of modern life. We have many small stresses that are not life threatening, but the autopilot system treats them as saber-toothed tigers. Doing so produces an unnecessarily stressful everyday life experience that undermines our mental and physical well-being.

Moreover, the snap judgments that result from intuitions and emotions usually feel “true” because they are fast and powerful, and we feel comfortable when we go with them. The decisions that arise from our gut reactions are often right, especially in situations that resemble the ancient savanna. Unfortunately, our modern business environments don't have much in common with the savanna, and with the increase in technological disruption—ranging from teleconferences to social media—the office of the future will look even less like our ancestral environment. The autopilot system will therefore lead us astray more and more, in systematic and predictable ways.

The intentional system reflects rational thinking and centers around the prefrontal cortex, the part of the brain that evolved more recently. According to research, it developed as humans started to live within larger social groups.⁸ This thinking system helps us handle more complex mental activities, such as managing individual and group relationships, logical reasoning, abstract thinking, evaluating probabilities, and learning new information, skills, and habits.

Whereas the automatic system requires no conscious effort to function, the intentional system is mentally tiring and requires a deliberate effort to turn on. With enough motivation and appropriate training, the intentional system can turn on in situations where the autopilot system makes systematic and predictable errors.

The following is a quick visual comparison of the two systems:

Autopilot System	Intentional System
Fast, intuitive, emotional self Requires no effort Automatic thinking, feeling, and behavior habits Mostly makes good decisions, but is prone to some predictable and systematic errors	Conscious, reasoning, mindful self Takes intentional effort to turn on and drains mental energy Used mainly when we learn new information and use reason and logic Can be trained to turn on when it detects the autopilot system making errors

We tend to think of ourselves as rational thinkers when we use the intentional system. Unfortunately, that's not the case.

Scholars of this topic, such as Chip and Dan Health, compare the autopilot system to an elephant. It's by far the more powerful and predominant of the two systems because our emotions can often overwhelm our rationality. Moreover, our intuition and habits dominate the majority of our life; we're usually in autopilot mode. That's not a bad thing, as it would be mentally exhausting to think through every action and decision.

The intentional system is like the elephant's rider. It can guide the elephant to go in a direction that matches our goals. Certainly, the elephant part of the brain is huge and unwieldy, slow to turn and change, and stampedes at threats. But we can train the elephant. Your rider can become an elephant whisperer. Over time, you can use the intentional system to change your automatic thinking, feeling, and behavior patterns to avoid dangerous judgment errors.

It's crucial to recognize that these two systems of thinking are counterintuitive. They don't align with our conscious self-perception. Our mind feels like a cohesive whole. Unfortunately, this self-perception is simply a comfortable myth that helps us make it through the day. There is no actual “there”; our sense of self is a construct that results from multiple complex mental processes within the autopilot and intentional systems.

It will take a bit of time to incorporate this realization into your mental model of yourself and others—in other words, how you perceive your mind to work. The bottom line is that you're not who you think you are. The conscious, self-reflective part of you is like a little rider on top of that huge elephant of emotions and intuitions.

Do you want to see what the tension between the autopilot system and the intentional system feels like in real life? Think back to the last time your supervisor, client, or investor gave you constructive critical feedback. How easy was it to truly listen and take in the information, instead of defending yourself and your work? That feeling is your willpower trying to get the intentional system to override the cravings of the autopilot system.⁹

Consider the last flame war you got into online, or perhaps an in-person argument with your loved one. Did the flame war or in-person argument solve things? Did you manage to convince the other person? I'd be surprised if it did. Arguments usually don't lead to anything beneficial. Often, even if you win the argument, you end up harming relationships you care about.

Looking back, you probably regret at least some of the flame wars or in-person arguments in which you've engaged. You might wonder why you engaged in the first place. It's the old fight response coming to the fore, without you noticing it. Unlike that situation with my boss, or when you were getting some constructive critical feedback, it's not immediately obvious that a fight response will hurt you down the road. Thus, you let the elephant go rogue, and it s...

Table of contents

• Cover Page
• Title Page
• Copyright
• Dedication
• Contents
• Acknowledgments
• Foreword
• Introduction
• Chapter 1: The Gut or the Head?
• Chapter 2: Who Wants to Be a Loser?
• Chapter 3: Who's the Bad Guy?
• Chapter 4: What Color Are Your Glasses?
• Chapter 5: Should You Be Confident?
• Chapter 6: Are You Paying Attention?
• Chapter 7: What Are the Dangerous Judgment Errors in Your Workplace?
• Conclusion
• Notes
• Index
• About the Author