Wednesday, 2 January 2013

Intuition - or not?

One of the stories from behavioural economics that I have been quoting over the last six or eight years is from Gary Klein, from his collection of anecdotes from his studies, about the fire chief - a lieutenant. I have thought it had parallels with farm decision making -

“It is a simple house fire in a one-storey house in a residential neighbourhood.  The fire is in the back, in the kitchen area.  The lieutenant leads his hose crew into the building, to the back, to spray water on the fire, but the fire just roars back at them.
“Odd,” he thinks.  The water should have more of an impact.  They try dousing it again and get the same results.  They retreat a few steps to regroup.
Then the lieutenant starts to feel as if something is not right.  He doesn’t have any clues; he just doesn’t feel right about being in that house, so he orders his men out of the building – a perfectly standard building with nothing out of the ordinary. 
As soon as his men leave the building, the floor where they had been standing collapses.  Had they still been inside, they would have plunged into the fire below.”

After disappointment with traditional methods of analytical decision making, Klein surveyed military and emergency service workers to uncover how they made decisions. His conclusion emphasised the importance of experience, to form "intuitions" or rules of thumb to help with decisions.
However I have recently come across a different view put by Daniel Kahneman, who won the 2002 Nobel Prize for his work that combined economics and psychology. Kahneman's view was formed from studying stock brokers, clinical psychologists and economic forecasters, and he concluded that experience more commonly resulted in confusion about what was luck and what was skill. Kahneman suggested that Klein's view was appropriate when decisions could be made in an environment that was predictable, and where skills could be honed by practice. 
Farming probably has characteristics of both approaches. To be safe, we should collect and analyse data as best we can, and be careful about blindly relying on experience - especially when it is the easy option. (Such as putting our trust in some "Guru".)  
Certainly most farmers are aware of the dangers of becoming too confident about what lies ahead.

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