The Meeting of 'Gut' and "Head'
Sahand Tanha
Introduction to Management
The Meeting of ‘Gut’ and ‘Head’
‘Decisions involving huge outlays of capital are almost always classic gut decisions: they involve risky, inherently ambiguous judgements between unclear alternatives.’ Do you agree? Justify your answer using decision-making theory and relevant examples from at least two industries.
Some might ask how people such as Bill Gates and Warren Buffett are separated from other people. Disregarding the obvious capital those individuals are in control of, it can be said that their entrepreneurial intuition regarding business decisions is what allowed them to succeed the way they have. With that being said, decisions cannot always and purely be based on intuition – one’s ‘gut feeling’. This essay reputes the notion that all decisions involving huge outlays of capital are solely based on intuition. Although intuition is a highly significant contribution to decision making, rational analysis cannot be overlooked - which touches on Herbert Simon’s notion that intuition and rational decision-making are complimentary. This essay will focus on the fundamentals and psychology behind intuition, while also examining rational decision making. The computer software industry and electronics industry will be incorporated within the essay to support Simon’s claim. Top companies of each industry will be introduced and discussed regarding their decision-making process leading to certain goals – Yahoo! and their decision-making process regarding the acquisition of other companies, and the process leading to Samsung’s flagship creation of the Galaxy S4 Smartphone.
The word ‘intuition’ can be traced to its Latin origin, meaning to contemplate or to look within (Zohar & Marshall 2000). However, it has been difficult to hold a unanimous definition for the term within the academic society. According to Simon (1987), Shapiro and Spence (1997), Myers (2002) and Crossan et al (1999) intuition can be regarded as
Introduction to Management
The Meeting of ‘Gut’ and ‘Head’
‘Decisions involving huge outlays of capital are almost always classic gut decisions: they involve risky, inherently ambiguous judgements between unclear alternatives.’ Do you agree? Justify your answer using decision-making theory and relevant examples from at least two industries.
Some might ask how people such as Bill Gates and Warren Buffett are separated from other people. Disregarding the obvious capital those individuals are in control of, it can be said that their entrepreneurial intuition regarding business decisions is what allowed them to succeed the way they have. With that being said, decisions cannot always and purely be based on intuition – one’s ‘gut feeling’. This essay reputes the notion that all decisions involving huge outlays of capital are solely based on intuition. Although intuition is a highly significant contribution to decision making, rational analysis cannot be overlooked - which touches on Herbert Simon’s notion that intuition and rational decision-making are complimentary. This essay will focus on the fundamentals and psychology behind intuition, while also examining rational decision making. The computer software industry and electronics industry will be incorporated within the essay to support Simon’s claim. Top companies of each industry will be introduced and discussed regarding their decision-making process leading to certain goals – Yahoo! and their decision-making process regarding the acquisition of other companies, and the process leading to Samsung’s flagship creation of the Galaxy S4 Smartphone.
The word ‘intuition’ can be traced to its Latin origin, meaning to contemplate or to look within (Zohar & Marshall 2000). However, it has been difficult to hold a unanimous definition for the term within the academic society. According to Simon (1987), Shapiro and Spence (1997), Myers (2002) and Crossan et al (1999) intuition can be regarded as
References: Agor, W. (1984). “Intuitive Management: Integrating Left and Right Management Skills”. New Jersey: Prentice Hall Publications Alexa (n.d.). “Yahoo.com Site Info” Ashkanasy, N. & Sinclair, M.(2002). “Intuitive Decision-Making Amongst Leaders: More Than Just Shooting From the Hip”, Mt Eliza Business Review. Vol. 5, Issue 2, pp.32-40 Barnard, C Burke, L. & Miller, M. (1999). “Taking the Mystery Out of Intuitive Decision-Making”, The Academy of Management Executive. Vol. 13, Issue 4, pp.91-99. Business Insider (2013) Clegg, S., Hardy, C. & Nord, W. (1999). “Managing Organizations: Current Issues”. London: Sage Publications Crossan, M., Lane, H Harrison, J., Ireland, R., Hitt, M., & Hoskisson, R. (2008). “Competing For Advantage”. 2nd edition. Ohio: Thomson Learning Publications Isenberg, D Lusch, R. & Harvey, M. (1995). “Expanding the Nature and Scope of Due Diligence”, Journal of Business Venturing. Vol. 10, Issue 1, pp.5-21. McCraty, R., Atkinson, M Mintzberg, H. (1989). “Mintzberg on Management: Inside Our Strange World of Organizations”. New York: Free Press Publishing Mitchell, J., Friga, P Myers, D. (2002). “Intuition: Its Powers and Perils”. New Haven: Yale University Press Nielsen (n.d.). “Social Networking Sites Grow 47 Percent, Year Over Year, Reaching 45 Percent Of Web Users” Norback, P., Persson, L. & Tag, J. (2011). “Acquisitions, Entry and Innovation in Network Industries”. Research Institute of Industrial Economic. IFN Working Paper No. 867. Pira, F Radin, D. (1997). “Unconscious Perception of Future Emotions: an experiment in presentiment”, Journal of Scientific Exploration. Vol. 11, Issue 2, pp.163-180 Sadler-Smith, E Sauter, L. (1999). “Intuitive Decision-Making”, Communications of the ACM. Vol. 42, Issue 6, pp.109-115. Shapiro, S Simon, H. (1979). “Rational Decision Making in Business Organizations”, The American Economic Review. Vol. 69, Issue 4, pp.493-513 Simon, H The Verge (2013). “Samsung reports Q4 2012 financials: $8.27 billion in operating profit on $52.45 billion in revenue”. Available at: http://www.theverge.com/2013/1/24/3912972/samsung-reports-q4-2012-financials-8-27-billion-in-operating-profit Time (2013) Yahoo! (2007). “Yahoo! Acquires Ad Network BlueLithium”. Available at: http://techcrunch.com/2007/09/04/yahoo-acquires-ad-network-bluelithium/ Yahoo! (2008). “Company History” Zohar, D. & Marshall, I. (2000). “Spiritual Intelligence – The Ultimate Intelligence”. New York: Bloomsbury Publications