Should you trust your gut?

Summary

Podcast Summary: Nudge – "Should You Trust Your Gut?" Release Date: March 3, 2025

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Introduction

In this episode of Nudge, host Phill Agnew challenges the conventional wisdom that relying on gut feelings leads to poor decision-making. Drawing on evidence from psychology and real-world examples, Agnew explores how intuition can sometimes outperform data-driven analysis, especially in complex and uncertain environments.

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Guest Introduction

Gertru Kiko Renss, a renowned psychologist and former director of the Max Planck Institute for Human Development, joins Agnew to discuss her expertise in decision-making processes under uncertainty. Renss specializes in heuristics—the mental shortcuts people use to make decisions—and their impact on various aspects of life and business.

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Gut Instinct vs. Data-Driven Decisions

The Conventional View

Agnew opens with the common narrative taught from childhood, illustrated by the fable of "The Monkey and the Fisherman." This story emphasizes the dangers of acting on instinct without proper understanding or knowledge. In the business realm, this translates to warnings against impulsive investments or launching products without market research.

Challenging the Status Quo

Contrary to this traditional viewpoint, Renss argues that gut instincts can be valuable, especially in situations rife with uncertainty where data is incomplete or unreliable. She introduces the concept of heuristics—simple, experience-based rules of thumb—as effective tools for decision-making when probabilities and outcomes are not fully known.

Notable Quote:

“Sometimes a good heuristic provides better results, more accurate forecasts than highly complex algorithms, including machine learning algorithms.”
— Gertru Kiko Renss [04:50]

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Evidence Supporting Intuition

Firefighters and Rapid Decisions

Referencing Gary Klein's 1999 study, Agnew discusses how experienced firefighters made superior decisions under time constraints. When given only five seconds to decide on their next action in a simulated scenario, firefighters performed better than when given one to three minutes, suggesting that swift intuition can be more effective than prolonged analysis.

Notable Quote:

“Gut instincts in this example led to better decisions.”
— Phill Agnew [04:50]

Managerial Decisions

A 2020 study by Douglas West analyzed the strategic decisions of 122 senior managers. The findings revealed that managers relying on heuristics made decisions that were as accurate as those derived from extensive data analysis but did so significantly faster.

Notable Quote:

“Gut instinct, it seems, can be extremely accurate.”
— Phill Agnew [06:00]

Athletes and Performance Under Pressure

Renss shares insights from studies on professional handball and golf players. These studies demonstrate that experts often perform better with limited decision-making time, as overthinking can disrupt their intuitive abilities.

• Handball Players: Initially, players made optimal decisions quickly. However, given more time, their choices deteriorated, often settling for second or third best options.

• Golf Players: A 2004 study found that expert golfers' accuracy dropped by 10% when given more time to deliberate on their putts, highlighting the benefits of trusting intuition.

Notable Quote:

“If you have too much time, on average, they get worse.”
— Gertru Kiko Renss [14:05]

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Heuristics Outperforming Big Data

Investment Strategies

Renss discusses the limitations of Harry Markowitz's mean-variance optimization in real-world investing. Despite its theoretical appeal, practical application often falls short due to insufficient data. Simple heuristics like the equal-weighted portfolio (1/N rule) frequently outperform complex models.

Notable Quote:

“In real world investing, simple equal weighted portfolios like 1N often will perform just as well, if not better than complex data driven models.”
— Gertru Kiko Renss [19:40]

Sports Predictions

An illustrative 2009 study on predicting Wimbledon winners showed that the recognition heuristic—selecting the player whose name is more recognized—outperformed data-driven models based on ATP rankings.

• ATP Entry Ranking: 66% accuracy
• ATP Championship Ranking: 69% accuracy
• Recognition Heuristic: 73% accuracy

This demonstrates that simple, experience-based rules can surpass sophisticated statistical models in certain contexts.

Notable Quote:

“The recognition heuristic predicted the winner 73% of the time.”
— Phill Agnew [21:46]

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Implications for Business and Personal Decision-Making

Agnew and Renss conclude that in environments characterized by uncertainty and insufficient data, relying on well-honed intuition and simple heuristics can lead to more effective and timely decisions. This challenges the prevailing emphasis on data-driven strategies, suggesting that balancing analysis with intuitive judgment can enhance performance across various domains, from business management to sports and investing.

Notable Quote:

“Intuition is a fascinating thing. ... Einstein knew this all too well. I believe in intuition. I sometimes feel right even without knowing the reason why.”
— Phill Agnew [25:50]

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Conclusion

The episode of Nudge effectively argues that while data and analysis are invaluable, there are scenarios where trusting one's gut can lead to superior outcomes. By examining empirical studies and real-world examples, Agnew and Renss highlight the nuanced interplay between intuition and information, encouraging listeners to recognize when each approach is most appropriate.

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Additional Resources

• Gertru Kiko Renss' Book: Smart Management – Explores the value of heuristics in business, including negotiation strategies, optimal team sizes, and why companies often emulate successful models.
• Upcoming Episode Preview: Renss will discuss Elon Musk's interview techniques, emphasizing the effectiveness of asking a single, focused question over lengthy interviews.

Subscribe to Nudge:
Stay updated with future episodes and receive weekly behavioral science tips by subscribing to the Nudge Newsletter.

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This summary provides an overview of the "Should You Trust Your Gut?" episode from the Nudge podcast, capturing the key discussions, insights, and conclusions drawn by Phill Agnew and Gertru Kiko Renss.

Transcript

[Phil Agnew]

From a young age, we are told that following our intuition isn't always the best option. Take the famous fable the Monkey and the Fisherman. It's a fable that's told to millions of young kids worldwide. It goes like One day, a group of fishermen went to the river to cast their nets and patiently waited for fish to be caught. A curious monkey sat on the tree, watching them closely. After a while, the fishermen decided to take a break and left their nets unattended on the riverbank. The monkey, relying on gut instinct rather than understanding the situation, thought fishing looked easy. He ran down, grabbed the net, attempted to cast it into the river just as the fisherman had done. However, the net was heavy and tangled around him. Struggling to free himself, the monkey fell into the river and began to drown. When the fisherman returned, they pulled him out and said, you foolish monkey. You thought you could do what we do without learning how. Now you see the danger of acting without understanding. The moral of this fairly basic story is if we act on instinct, it can lead disaster. Our gut feelings aren't enough. We must rely on wisdom, on data, on learning, and careful thought. This idea isn't just popular with children, it is repeated daily in the business world. We have heard countless examples of foolish investors who buy crypto on gut instinct and see their fortune crash, and of entrepreneurs who trust intuition over market research and launch products no one wants. And yet, today's guest on Nudge disagrees with this idea. He believes the best decisions don't always come from extra time, more analysis and endless data. Instead, he believes gut instincts can be more effective, and he has evidence to prove it. All of that coming up. Marketing in 2025 isn't getting any easier. Customers are more switched on, they're harder to reach, and they're quick to spot anything that isn't authentic. Most marketing teams are stretched thin. They're expected to do more with less, while proving that every pound spent is worth it. That's why HubSpot's 2025 Marketing Trends Report focuses on what actually works for marketing teams. There's no fluff, it's just practical advice from teams that get results. Inside, you'll find a straightforward guide to using AI without any complex jargon. You'll find ready made templates for videos and visuals. You'll learn about a smarter way to work with influencers and finding people you can actually trust. And you'll even learn clear ways to prove to your boss that your marketing is paying off. All of it is based on solid research, but more importantly, it's useful it's something you can apply straight away if you're dealing with tight budgets or tough targets, or just trying to keep up. This report should help to download HubSpot's 2025 Marketing Trends Report. Head to HubSpot.com marketing to download it for free. Today I interview a world renowned psychologist, the former director of the Max Planck Institute for Human Development and a leading expert on heuristics.

[Gertru Kiko Renss]

So my name is Gertru Kiko Renss and I'm studying how people make decisions, in particular under uncertainty.

[Phil Agnew]

It is widely believed that following a gut feeling over data is a bad decision. These heuristics, or shortcuts as they're more commonly known, lead us to errors, whereas more data and analysis can help us optimise for better decisions. That's what I was taught over my four year business degree. But is it true?

[Gertru Kiko Renss]

Lets start with an important distinction, namely situations where we know everything that can happen in the future, all the consequences and the probabilities. That's called a situation of risk. If you spend this evening in a casino and play the roulette, you're exactly in this situation. You know everything that can happen. It's a number between 0 and 36. And you also know what cannot happen, namely 37 and all the consequences. Probabilities. There are few situations in the world of business and also in our private world that are like that. Most of the time there's a considerable amount of uncertainty. In the real world, 37s happen. And in this world probability theory is no longer sufficient to give you the best answer. In that world one needs smart heuristics that are rules of thumb, that are robust, that are not born in the fiction that we can optimize. Meaning find the optimal answer in the real world. And sometimes a good heuristic provides better results, more accurate forecasts than highly complex algorithms, including machine learning algorithms.

[Phil Agnew]

In his 1999 book, Gary Klein shares an interesting study with experienced firefighters. The firefighters were given a step by step example story of a different firefighter attempting to extinguish a building fire. At crucial points of the story, the researchers would pause and ask the experienced firefighters listening what would you do next? Here's what's interesting. When experienced firefighters were given just five seconds to answer the question, they gave the best answer they could when they had time to think. When they had one or two or three minutes to decide, their answers got worse. It seemed to Klein that gut instincts in this example led to better decisions.

[Gertru Kiko Renss]

If you make decision under uncertainty, for instance, hiring a person Firing a person strategy, then you need good heuristics because you cannot compute the optimal fuel. And linking heuristics with biases is an illusion. The questions rather what heuristic you use for what problem.

[Phil Agnew]

There's a 2020 study run by Douglas west which used real world data from 122 senior managers and analyzed how these managers made big strategic decisions, decisions like what innovation project to invest in. The results showed that the managers make accurate decisions when they rely on their heuristics. In fact, these decisions are as accurate as lengthy analytical methods. Excep were significantly faster. Gut instinct, it seems, can be extremely accurate. But this is odd. Why are our gut decisions so accurate? Well, it might be due to the fluency principle. And there's a study on handball players that reveals why this is.

[Gertru Kiko Renss]

We have been studying handball players, professional ones, and here the term intuition comes in. So intuition is a feeling based on years of experience, which is quickly in your mind, but you can't explain it. So experienced handball players, they decide whether to do a loop or pass on a ball very quickly and intuitively. How can they do this? The basis of this is a heuristic that is called the fluency heuristic. It basically says, go with the first option that comes to your mind unless it cannot be done, and then go with the second. This heuristic works only for people who have an experience with a certain subject matter. It doesn't work with beginners. And in the experiment we did the following. The handball players were standing in front of a video with a top game, and they were instructed, you will see this video now for 10 seconds, then it will freeze, and then tell us what's the best option the player with the ball should do. So they watched the video, then it was frozen, and they said, or maybe pass to the left. And then they had another 45 seconds to study the frozen video more carefully and find whether there are other options. And for instance, one of them said, oh, I didn't see the guy on the right side. That would be a good idea. Pass to him. Then they were asked again, what do you now think is the best option? And in many cases, they changed their mind. What we found is the first option that came to mind was on average, the best one, the second option, the second best, the third one. The third best. That means if they had longer time and began to think, they often ended up with a second or third best option.

[Phil Agnew]

The researchers Johnson and Rab found that the third option the handball players came up with was typically two times Worse than the first option that they intuitively suggested. Gut's instinct trumped lengthy analysis. But doesn't this contradict other studies? I've read papers that say the exact opposite, that Gut decisions are more inaccurate. So I asked why that is.

[Gertru Kiko Renss]

That contradicts a typical finding that you find in psychological experiments, namely the speed accuracy effect, meaning if you make a decision fast, you will lose some accuracy. So it's a trade off. It's assumed. And the trade off is true if you study the typical undergraduate in a psychology lab who has no idea about the task that he or she is getting. Yes, it's not true. For people who have an experience.

[Phil Agnew]

The faster is better principle holds true for experts. For instance, a paper that's titled Strategic Decision Speed and Firm Performance found that firms that make faster strategic decisions often show both greater profits and more rapid growth than those that took more time to make decisions. This might be because the extra time we take can lead us to overthink. Overthinking can harm performance. And Gert has got a lovely example to illustrate it.

[Gertru Kiko Renss]

So experts are often well advised to make fast decisions and do not think about the decision. They are just well trained. And one can disturb expertise by getting the person to reflect on what he or she is doing. And a famous example is what happened in the World Cup 2006 where Germany played Argentina in Berlin and there were 75,000 people shouting. It was a knockout situation. So one of the two had to go home. And it was a draw. And there was a prolongation. It was still a draw. And then it's penalties to decide who.

[Neville]

Wins this quarter final in Berlin.

[Gertru Kiko Renss]

There's always one player and one goalie and the player puts the the ball on the right position. This is 11 meters from the goalie. And so then we'll see what happens.

[Neville]

Neville.

[Gertru Kiko Renss]

And this knockout was unusual because the German goal, Jens Lehman had a sheet of paper in his hand and which he took out every time an Argentinian player was preparing himself. So put yourself in the shoes of an Argentinian player and you see that the goalie has a sheet of paper in his hand. And then you start thinking what's on it. And you probably rightly guess over statistics where I usually shoot maybe down, left or right up. And then you ask yourself what do I do now? And that's the point. And Lehmann stopped two of the shoots and Germany went on in the tournament and Argentina went home.

[Neville]

Has to score to try and keep Argentina in the World Cup. He saved it. Germany a throw.

[Gertru Kiko Renss]

I know a Few referees, professional referees who thought, oh, it's the information that helped the Germans, but the experiments in psychology, and I can tell you one in a minute show it's not the information. It is the disturbance of a highly trained, intuitive player by getting him to think. And we have the evidence, because the last Argentinian player who shot, where you can still see on YouTube, Jens Lehmann, studying very carefully the information. We have the sheet of paper, there's no information on it about that person, so it can't be the information.

[Phil Agnew]

There's a wonderful YouTube video linked to in the show notes that shows how Lehman took his time, studied the sheet of paper before every Argentinian player took their penalty. Unknown to the final Argentinian Cambiasse, the piece of paper that Lehmann was looking at actually contained no information about him. But Lehmann still pretended to read the note very carefully. Cambiasso took his kick and Lehmann saved it. It was not the information on the piece of paper that helped Lehmann save the penalty, but more likely the fact that he made the Argentinian player second guess what to do. Perhaps the player thought, well, I should go left, because that's why I'm strongest, saw Lehmann reading the paper and thought, oh no, he knows where I'm going to go. I have to decide something else. He made Cambiasso overthink and because of that he saved the penalty. Now, this is just an anecdote, but Gert has a study that shows how overthinking harms experienced sports players.

[Gertru Kiko Renss]

There are a number of psychological experiments done, for instance, with golf players, where you have two groups, experienced golf players and amateurs. If you ask both groups, pay attention to your movements when doing a putt. What happens? Are the beginners getting better? Yes. Are the experienced players getting better? No. It disturbs their intuitive play. Another experiment gave them only three or so seconds to do their putt. What happens if the beginners have only three seconds? Are they getting better or worse? They're getting worse. If the experts only have three seconds, they're getting better. It's like in the experiment with the handball players. If they have too much time, on average, they get worse.

[Phil Agnew]

This famous 2004 study found that accuracy for expert golf players dropped by 10% when they had more time to think about their putts. The researchers conclude in their paper with a compelling quote. They say for real time execution by experts, there might be truth in Nike's motto. Just do it. Following your gut can work. It helps golfers, goalkeepers, firefighters, investors and senior managers. But that's not all. After the break, we'll cover how less data might help you make better decisions. All of that coming up. This podcast is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. And the podcast I would like to recommend today is Content is Profit. It is hosted by my friends Louise and Fonzie. On the show, they showcase the secrets and strategies about how your business can achieve a frictionless sale. The duo talk about frameworks, strategies, tactics, and even bring special guests on to provide you all the information you need to turn your content into profit. I think it's a fantastic show. There's loads of fantastic episodes they've created, including one episode with me. So go and listen to Content is Profit wherever you get your podcasts. Hello and welcome back. You're listening to Nudge with me, Phil Agnew. Back in the mid-2000s, Google set themselves a very tricky challenge. They tried to predict flu outbreaks with a program called Google Flu Trends. They used search data to track viruses faster than health agency see. Google had 50 million search terms and tested countless different models to track flu related doctor visits. From 2007 to 2015, they could see every time someone searched for flu symptoms and they used this data to make their predictions. The volume of data they had was unparalleled. But when swine flu hit in the off season of 2009, Google Flu Trends completely missed it. Convinced that this was just a data problem, that they just needed more data, Google added more complexity to their model. They jumped the number of variables they were looking at from 45 to 160. But all of this data didn't help. By 2015, the program was shut down. It could not effectively predict flu outbreaks. Is this a one off or is it an example that more data won't always lead to better predictions? I ask Gerd, if you have a.

[Gertru Kiko Renss]

Situation which is stable, where little things are changing, then more data is usually better. If there's uncertainty, no. A classic example is from investment. So Harry Markowitz from the University of Chicago got his Nobel Prize in Economics for solving the following you have n assets. How do I invest my money?

[Phil Agnew]

It's a simple problem. Say you have 10,000 pounds. What is the most profitable way to invest that cash?

[Gertru Kiko Renss]

And the answer is the mean variance portfolio. So that's not a heuristic. This is a classical optimization technique based on probability theory. And what you need to do is you need to forecast for each of your assets the future return, the variance and the covariance. Good luck.

[Phil Agnew]

Specifically to follow Harry Malkovich's means variance portfolio. We would need all of the historical data, we'd need to calculate the expected returns and risks, and then we would need to optimize the asset weights to reduce risk. It sounds good, but in reality it is practically impossible.

[Gertru Kiko Renss]

When Harry Markowitz made his own investment for the time after his retirement, so we might think he used his Nobel prize winning optimization method, he did not. He used a simple heuristic that's known as one over N. It means invest your money equally. So if you have only two options, 50, 53, a third, a third, a third, and so on. There are a number of studies in the actual stock market whether Markowitz optimization gets is more successful than 101 the simply heuristic. And in a study by De Miguel for instance, they did seven tests and in six of the sevens, 1N made more money than the complicated method that.

[Phil Agnew]

2009 study Gert references actually tested 14 different portfolio models against the simple 1N rule where money is split equally across all assets. For a 25 asset portfolio, the study found that 250 years worth of data would be needed for a model to beat 1N. And for a 50 asset portfolio, 500 years of data would be needed to beat 1N. The average age of companies on the S&P 500 is just 18 years. So there will never be enough data to actually make one of these models work. This suggests that in real world investing, simple equal weighted portfolios like 1N often will perform just as well, if not better than complex data driven models. It's not just the case with investments. All types of predictions can improve without relying on large amounts of data.

[Gertru Kiko Renss]

We've done a number of studies where people who believe that more is always better just couldn't believe the results. And in one case, there was a study about tennis players. Think about Wimbledon men's single. There are I think about 128 candidates, so that makes 127 games until one of them remains. So the problem is to predict before Wimbledon starts the outcomes of all these 10720 games.

[Phil Agnew]

This 2009 study titled WHO will win Wimbledon? Made predictions based on data. Some models used the official association of Tennis Professionals, the ATP Championship race rankings. Other models made predictions on the ATP entry rankings. Another predicted winners based on who is ranked higher. But then the researchers compared all of these predictions made using data with predictions made using no data at all. They compared it with the recognition heuristic. The recognition heuristic doesn't use data. It simply asked participants to pick the player whose Name was recognized.

[Gertru Kiko Renss]

So we know from marketing that people go with name recognition. So Benetton has been a classic example of marketing name, name, name, name. And name recognition is often valid if there's a correlation between the fact that people have heard of a name and its quality. And that's often the case. And it's also the case in tennis. We are looking how many people have heard of this name versus the other one and predicted the player in the match who has a higher recognition which win in order to do this, you can't use experts in this example because they've heard of all of these guys. You need semi ignorant people because the recognition theory tells you if you've heard of one and not of the other one, bet that the one who you have heard of will win. We did an experiment with an actual Wimbledon tournament. And the recognition heuristic predicted better than the ATP ranking than the second ATP ranking and also the seedings of the Wimbledon experts.

[Phil Agnew]

The results are pretty incredible. The ATP entry ranking data predicted the correct winner 66% of the time. The ATP championship ranking predicted the winner 69% of the time. But the recognition heuristic predicted the winner 73% of the time. This is an example of simple heuristics beating big data.

[Gertru Kiko Renss]

We had a group of people who said it's impossible. I actually hired these people, my research group, and said, okay, you now do the same experiment two years later and with new but you need semi ignorant people who haven't heard of everything. And they repeated it and found the same result.

[Phil Agnew]

The recognition heuristic works because there is a correlation between quality and recognition. And because the prediction makers were semi ignorant, they had only heard about the best athletes. This links back to an early study that Gert ran.

[Gertru Kiko Renss]

So the initial experiment we have done, which I found stunning, that was asking German students which American city has more inhabitants, Detroit or Milwaukee. So we asked him like 50 of these. Yeah, just an example. And almost everyone got their answer right, namely Detroit. Then we asked American students the same questions and only 60% of them got the answer right. Detroit. Why they had heard of those? Most of the German had never heard of Milburgh. So they got it right. Now if you're British, test yourself. Here are two German cities, which one has more inhabitants, Hannover or Bieleveld? And I guess you get it right.

[Phil Agnew]

You are probably right. It is Hanover. Simple rules can be complex formulas. It helps predict Wimbledon winners and has been proven with other sports. Take this very simple NFL prediction rule rule. It says to pick the winner of an NFL game. Simply pick the team that has the better win record, or if the record is tied, pick the home team. This extremely simple rule for predicting winners beats almost all expert predictions. In the 2007-2008 season, it outperformed all but one of the expert's predictions. And in 2008-2009 it outperformed all but two of the expert predictions. Simple rules can beat complex thought out formulas.

[Gertru Kiko Renss]

The human mind lives under uncertainty and has learned to use cues and heuristics, and in this case even to exploit one's own ignorance. And it works as long as ignorance is systematic and not random.

[Phil Agnew]

Intuition is a fascinating thing. Jack Welch, the famous General Electric CEO, stated that he made decisions straight from the gut. Now that quote today feels quite antiquated. These days, gut instinct decisions are critiqued. We believe that gut instinct decisions are short sighted and we often tell each other that more data is best. But today we've seen that that's not always true. Instincts can be just as powerful. They can make for better investments, better predictions, and even better golf putts. And really, everyone uses them. In a study of 17 Nobel laureates from physics, chemistry, medicine and economics, these Nobel Laureates were asked how made their big discovery. Was it from decades of deliberate analysis and data collection? Well, no. The majority explained that their discoveries resulted from switching back and forth between analysis and then simple intuition. Einstein knew this all too well. He is quoted saying, I believe in intuition. I sometimes feel right even without knowing the reason why. That is all for today folks. A huge thank you for Gert for coming on. His book Smart Management is a wonderful read. He documents why heuristics are more valuable than we'd expect. He explains how to negotiate better, what the perfect team size is, and why most businesses, from Apple to Amazon, imitate others. It's a great book. I've left a link to it in the show notes and you will be happy to hear that Gerd will be coming back on Nudge. In our second episode, he shares Elon Musk's controversial interview technique. Rather than asking a barrage of questions, Musk only wants to ask one thing. GERD believes that this hiring approach can be more effective than much longer interviews. Listen to that episode to hear why. To ensure you don't miss that episode, sign up for the Nudge newsletter every Monday. I will email you to let you know when the episode is out. And on Friday I'll email you sharing my Behavioural Science Tip of the week. There are 8,500 of you who read that email every week. And if you subscribe, you will also be able to email me and get in touch because I respond to every email I receive from my newsletter subscribers. So to subscribe, just go to nudgepodcast.com, click newsletter in the menu and you could subscribe there or just click the link in the Show Notes. You can subscribe there as well. Okay, that is all for me this week. Thank you so much for listening. I'm your host, Phil Agnew, and I'll be back next Monday for another episode of Nudge Cheers.