Laura Huang, an associate professor at Harvard Business School studied gut decisions made by hundreds of angel investors and venture capitalists. For several years, she tracked 90 companies that they considered investing in and uncovered the two rules for making gut versus data-driven decisions.
Before trusting your gut, consider the type of problem you’re faced with.
- What is the level of unknowability? Gut feelings work well when the available calculations of risk and probability are unrealistic, and where there is great uncertainty. For example, no amount of pre-launch research can guarantee whether people will buy your product.
- Second, what’s the context in which you are making the decision? If proven models and schemes are available, use them if you’re looking to replicate existing success. But if you’re trying to separate yourself from the pack, your gut feeling can be the way to go.