The Quarterly: Is intuition more reliable under certain conditions?

Klein: We identified two. First, there needs to be a certain structure to a situation, a certain predictability that allows you to have a basis for the intuition. If a situation is very, very turbulent, we say it has low validity, and there’s no basis for intuition. For example, you shouldn’t trust the judgments of stock brokers picking individual stocks. The second factor is whether decision makers have a chance to get feedback on their judgments, so that they can strengthen them and gain expertise. If those criteria aren’t met, then intuitions aren’t going to be trustworthy.

Most corporate decisions aren’t going to meet the test of high validity. But they’re going to be way above the low-validity situations that we worry about. Many business intuitions and expertise are going to be valuable; they are telling you something useful, and you want to take advantage of them.

Kahneman: This is an area of difference between Gary and me. I would be wary of experts’ intuition, except when they deal with something that they have dealt with a lot in the past. Surgeons, for example, do many operations of a given kind, and they learn what problems they’re going to encounter. But when problems are unique, or fairly unique, then I would be less trusting of intuition than Gary is. One of the problems with expertise is that people have it in some domains and not in others. So experts don’t know exactly where the boundaries of their expertise are.

The Quarterly: Many executives would argue that major strategic decisions, such as market entry, M&A, or R&D investments, take place in environments where their experience counts—what you might call high-validity environments. Are they right?

Klein: None of those really involve high-validity environments, but there’s enough structure for executives to listen to their intuitions. I’d like to see a mental simulation that involves looking at ways each of the options could play out or imagining ways that they could go sour, as well as discovering why people are excited about them.

Kahneman: In strategic decisions, I’d be really concerned about overconfidence. There are often entire aspects of the problem that you can’t see—for example, am I ignoring what competitors might do? An executive might have a very strong intuition that a given product has promise, without considering the probability that a rival is already ahead in developing the same product. I’d add that the amount of success it takes for leaders to become overconfident isn’t terribly large. Some achieve a reputation for great successes when in fact all they have done is take chances that reasonable people wouldn’t take.

Klein: Danny and I are in agreement that by the time executives get to high levels, they are good at making others feel confident in their judgment, even if there’s no strong basis for the judgment (see sidebar, “Overconfidence in action?”).

Quarterly: So you would argue that selection processes for leaders tend to favor lucky risk takers rather than the wise?

Kahneman: No question—if there’s a bias, it’s in that direction. Beyond that, lucky risk takers use hindsight to reinforce their feeling that their gut is very wise. Hindsight also reinforces others’ trust in that individual’s gut. That’s one of the real dangers of leader selection in many organizations: leaders are selected for overconfidence. We associate leadership with decisiveness. That perception of leadership pushes people to make decisions fairly quickly, lest they be seen as dithering and indecisive.

Klein: I agree. Society’s epitome of credibility is John Wayne, who sizes up a situation and says, “Here’s what I’m going to do”—and you follow him. We both worry about leaders in complex situations who don’t have enough experience, who are just going with their intuition and not monitoring it, not thinking about it.

Kahneman: There’s a cost to not being John Wayne, since there really is a strong expectation that leaders will be decisive and act quickly. We deeply want to be led by people who know what they’re doing and who don’t have to think about it too much.

The Quarterly: Who would be your poster child for the “non–John Wayne” type of leader?

Klein: I met a lieutenant general in Iraq who told me a marvelous story about his first year there. He kept learning things he didn’t know. He did that by continuously challenging his assumptions when he realized he was wrong. At the end of the year, he had a completely different view of how to do things, and he didn’t lose credibility. Another example I would offer is Lou Gerstner when he went to IBM. He entered an industry that he didn’t understand. He didn’t pretend to understand the nuances, but he was seen as intelligent and open minded, and he gained trust very quickly.

The Quarterly: A moment ago, Gary, you talked about imagining ways a decision could go sour. That sounds reminiscent of your “premortem” technique. Could you please say a little more about that?

Klein: The premortem technique is a sneaky way to get people to do contrarian, devil’s advocate thinking without encountering resistance. If a project goes poorly, there will be a lessons-learned session that looks at what went wrong and why the project failed—like a medical postmortem. Why don’t we do that up front? Before a project starts, we should say, “We’re looking in a crystal ball, and this project has failed; it’s a fiasco. Now, everybody, take two minutes and write down all the reasons why you think the project failed.”

The logic is that instead of showing people that you are smart because you can come up with a good plan, you show you’re smart by thinking of insightful reasons why this project might go south. If you make it part of your corporate culture, then you create an interesting competition: “I want to come up with some possible problem that other people haven’t even thought of.” The whole dynamic changes from trying to avoid anything that might disrupt harmony to trying to surface potential problems.

Kahneman: The premortem is a great idea. I mentioned it at Davos—giving full credit to Gary—and the chairman of a large corporation said it was worth coming to Davos for. The beauty of the premortem is that it is very easy to do. My guess is that, in general, doing a premortem on a plan that is about to be adopted won’t cause it to be abandoned. But it will probably be tweaked in ways that everybody will recognize as beneficial. So the premortem is a low-cost, high-payoff kind of thing.