How Intuition Sometimes Gets It Wrong

Abstract The main idea of this chapter is that intuition can lead to inaccurate and biased judgements under particular sets of conditions as a result of the use of certain types of mental short cuts or ‘heuristics’. The theory of ‘heuristics and biases’, which was the product of a seminal programme of research instigated by Daniel Kahneman and Amos Tversky, is centre stage. Two types of heuristics that have particular relevance for business decision-making are discussed: the ‘representativeness’ heuristic and the ‘availability’ heuristic. Heuristics are a reflection of the inherent computational limitations of the human mind. It is for this reason that the chapter begins with a discussion of a concept which is as important to intuition research as gravity is to physics, the concept of ‘bounded rationality’. The theory of heuristics and biases is considered to be a theory of bounded rationality.