{"id":153950,"date":"2023-06-12T15:16:07","date_gmt":"2023-06-12T21:16:07","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=153950"},"modified":"2023-09-05T07:54:03","modified_gmt":"2023-09-05T13:54:03","slug":"when-to-make-and-not-make-gut-decisions","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/when-to-make-and-not-make-gut-decisions","title":{"rendered":"Think Twice: Here&#8217;s When to Make (and Not Make) Gut Decisions"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC6509800492\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The question of whether to trust one\u2019s own gut or to painstakingly analyze any given problem has found different answers amongst different people and in different situations for centuries. On one hand, there is certainly such a thing as \u201cparalysis by analysis.\u201d I myself have seen numerous cases of wannabe real estate investors spend an enormous amount of time (and money) learning, only to never actually buy a property. You can even spot some \u201cseminaraholics\u201d at many events who have been to countless bootcamps and the like but have not locked down a single deal.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Furthermore, as the famous saying goes, \u201ctime is money.\u201d So even if a detailed analysis would yield a better result, it\u2019s not necessarily the better course of action because the time spent on such analysis might not be worth the cost.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">But gunslingers who just go with their intuition have been known to make plenty of mistakes, including some very large ones. WeWork\u2019s former CEO and certifiable nutjob Adam Neumann was able to convince SoftBank\u2019s CEO Masayoshi Son to invest $4.4 billion in his wildly over-valued company during a 28-minute car ride to the airport. Needless to say, that gut decision&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.fastcompany.com\/90426446\/wefail-how-the-doomed-masa-son-adam-neumann-relationship-set-wework-on-the-road-to-disaster\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">didn\u2019t play out too well<\/span><\/a><span data-preserver-spaces=\"true\">.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Thus, we\u2019re left with a conundrum, should you trust your gut or do a detailed analysis? There is no perfect answer, but a deeper dive (or detailed analysis, if you will) can offer some helpful guidelines.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">The Power (and Danger) of Human Intuition<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">As should go without saying\u2014the more experience you have in something, the better your intuition is likely to be. But moreover, for any small decision, you should go ahead and use your gut. Should you install a ceiling fan or regular light fixture in this bedroom? Don\u2019t overthink it.&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/en.wikipedia.org\/wiki\/Decision_fatigue\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Decision fatigue<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;is a real thing too. Just decide and do it.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">That being said, you should be under no illusions about how useful your gut can be. A series of four studies from Harvard&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.hks.harvard.edu\/research-insights\/policy-topics\/decision-making-negotiation\/can-you-trust-your-gut\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">had the following results<\/span><\/a><span data-preserver-spaces=\"true\">, \u201cThe first determined that most people believe that intuition is a better guide than systematic thinking to accurately infer other\u2019s thoughts and feelings. The other three studies found that the opposite is actually true.\u201d&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">With hiring, for example, trusting your gut has a very poor track record. Legendary former CEO of General Electric, Jack Welch, figured about 25 percent of his hires were \u201cA players\u201d until he implemented&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/topgrading\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">a topgrading approach<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;developed by&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.linkedin.com\/pulse\/remembering-jack-welch-4-his-methods-can-work-you-too-brad-smart\/\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Brad and Geoff Smart<\/span><\/a><span data-preserver-spaces=\"true\">. This, in turn, raised that number to 50 and then 80 percent.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">As Geoff Smart put it in his great book&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.amazon.com\/Who-Geoff-Smart\/dp\/0345504194\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">Who<\/span><\/em><\/a><span data-preserver-spaces=\"true\">,<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cForgers can pass off fake paintings as real ones to the time-pressed buyer, and people who want a job badly enough can fake an interview if it lasts only a few minutes. Gut instinct is terribly inaccurate when it comes to hiring someone. If you extend an offer based on a good gut feel, you are going to have a stomachache!\u201d<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">At the same time, your gut instinct can reflect a wide variety of experiences and knowledge that your analytical mind cannot always properly articulate. One great illustration was given by Malcolm Gladwell in his book&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.amazon.com\/Blink-Power-Thinking-Without\/dp\/0316010669\" target=\"_blank\" rel=\"noopener\"><em><span data-preserver-spaces=\"true\">Blink<\/span><\/em><\/a><span data-preserver-spaces=\"true\">&nbsp;when describing the decision-making expert Gary Klein\u2019s investigation into how a lieutenant firefighter narrowly averted a catastrophe.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cThe fire was in the back of a one-story house in a residential neighborhood, in the kitchen. The lieutenant and his men broke down the front door, laid down their hose\u2026 dousing the flames in the kitchen with water. Something should have happened at that point: the fire should have abated. But it didn\u2019t. So the men sprayed again. Still, it didn\u2019t seem to make much difference. The firemen retreated back through the archway into the living room, and there, suddenly, the lieutenant thought to himself, there\u2019s something wrong. He turned to his men. \u2018Let\u2019s get out,&nbsp;<\/span><em><span data-preserver-spaces=\"true\">now<\/span><\/em><span data-preserver-spaces=\"true\">!\u2019 he said, and moments after they did, the floor on which they had been standing collapsed. The fire, it turned out, had been in the basement.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201c\u2019He didn\u2019t know why he had ordered everyone out,\u2019 Klein remembers\u2026 for the next two hours, again and again [Klein] led the firefighters back over the events of that day in an attempt to document precisely what the lieutenant did and didn\u2019t know. \u2018The first thing was that the fire didn\u2019t behave the way it was supposed to,\u2019 Klein says. Kitchen fires should respond to water. This one didn\u2019t. \u2018Then they moved back into the living room,\u2019 Klein went on. \u2018He told me that he always keeps his earflaps up because he wants to get a sense of how hot the fire is, and he was surprised how hot this one was. A kitchen fire shouldn\u2019t have been that hot. I asked him, \u2018What else?\u2019 Often a sign of expertise is noticing what doesn\u2019t happen, and the other thing that surprised him was that the fire wasn\u2019t noisy. It was quiet, and that didn\u2019t make sense given how much heat there was.\u2019\u201d<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cIn retrospect all those anomalies make perfect sense. The fire didn\u2019t respond to being sprayed in the kitchen because it wasn\u2019t centered in the kitchen. It was quiet because it was muffled by the floor. The living room was hot because the fire was underneath the living room, and heat rises. At the time, though, the lieutenant made none of those connections consciously. All of his thinking was going on behind the locked door of his unconscious&#8230; The fireman\u2019s internal computer effortlessly and instantly found a pattern in the chaos.\u201d<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Had they sat around analyzing this situation for just a few seconds, they would have all died.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Now I should admit that I find Gladwell to be a rather frustrating intellectual who\u2019s much better at asking questions than answering them.&nbsp;<\/span><em><span data-preserver-spaces=\"true\">Blink<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;goes back and forth between examples of one\u2019s gut intuition working perfectly and then backfiring spectacularly. It\u2019s been said that the book\u2019s thesis might as well be \u201cAlways trust your gut except when you shouldn\u2019t.\u201d<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">In fairness, though, Gladwell tries to resolve this conundrum late in the book,<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">\u201cOne of the questions that I\u2019ve been asked over and over again since&nbsp;<\/span><em><span data-preserver-spaces=\"true\">Blink<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;came out is, when should we trust our instincts, and when should we consciously think things through? Well, here\u2019s a partial answer. On straightforward choices, deliberate analysis is best. When questions or analysis and personal choice start to get complicated\u2014when we have to juggle many different variables\u2014then our unconscious thought processes may be superior.\u201d<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Ironically, as Gladwell himself mentions, this is the opposite of what many other experts say. For example,&nbsp;<\/span><em><span data-preserver-spaces=\"true\">The Harvard Business Review<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/hbr.org\/2003\/05\/dont-trust-your-gut\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">has a piece<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;emphatically stating, \u201cDon\u2019t trust your gut.\u201d It points out that \u201cThe most dangerous of these flaws, when it comes to intuition, is our deep-seated need to see patterns\u201d and thereby, \u201cthe more complex the situation, the more misleading intuition becomes. In a truly chaotic environment\u2014where cause and effect no longer have a linear relationship\u2014the last thing you want to do is try to apply patterns to it.\u201d<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">In other words, Gladwell thinks you should trust your gut when things are complex and not when they are straightforward, and&nbsp;<\/span><em><span data-preserver-spaces=\"true\">The Harvard Business Review<\/span><\/em><span data-preserver-spaces=\"true\">&nbsp;thinks you can (maybe) afford to trust your gut when things are straightforward but not when they are complex.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">So, what should we do?<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">How to Use Your Gut<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">As noted above, the first series of events you should always use your gut for are simple and relatively unimportant decisions. Work on trying to make small decisions quickly and not overthink them. Mexican or Italian food? Which movie to watch? What color backsplash to install? Just decide and go for it. It\u2019s not worth the cost to deeply analyze such things.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">After that, I would tend to see your gut as having two key uses. The first is when something just feels really wrong. If it feels right, but a detailed analysis doesn\u2019t support it, I would still tend to lean away from it (unless, of course, it\u2019s low cost, say, like buying Dogecoin when it was a hundredth a penny).<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">This is what happened with the firefighter example above. Something felt really wrong even though the lieutenant couldn\u2019t put his finger on it. In such cases, you should withdraw. In fact, Gladwell opens his book with a similar example of an art historian\u2019s gut feeling an extremely expensive statue a museum was about to purchase was fake, which it turned out to be.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">If something feels really wrong, I would stay away.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">The second use is when your gut says something\u2014good or bad\u2014you should at least investigate it. See it as a litmus test. It\u2019s not the answer, but it does act as a guide to where to spend your mental energy.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Recently, I had a feeling we were spending too much on HVAC, and despite being told this was the price, I decided to dig into it and found we could save a substantial amount by switching manufacturers even though that manufacturer is considered to be on the higher end. Many years ago, our previous property manager kept telling us our turnovers were really large, and that\u2019s why they were costing us so much. After a while of this, it just didn\u2019t feel right. So, my brother went and investigated some of the units himself and found her explanations to be faulty, to say the least. She didn\u2019t last much longer as our property manager.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Another time we were told by a third-party property manager that internet advertising didn\u2019t work for an apartment we had in a less desirable area. We naively accepted this explanation for some time before figuring out that it was nonsense when we took back the building to manage ourselves after over a year of low occupancy.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Every real estate investor (and business owner, for that matter) has numerous experiences of slapping their forehead in regret when realizing they were overspending or under-utilizing a potential resource. In hindsight, it always seems like it should have been blatantly obvious.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">But things move fast in business, and there are lots of fires and other problems to solve. (<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.indeed.com\/career-advice\/career-development\/covey-time-management-matrix\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">Quadrant 1 activities<\/span><\/a><span data-preserver-spaces=\"true\">, as Stephen Covey would say.) It\u2019s easy to let such issues slide even if your gut says something is off.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">This is especially true with bad employees who, while being bad at their job, are unfortunately often quite good at gaslighting their supervisors. For example, we had one rehab manager almost a decade ago who was taking kickbacks. We only found that out after he left, but it was becoming clear that his projects were coming in too expensive, and he was oddly selective about which contractors he wanted to use, even if it didn\u2019t make sense. Taking his word for it when our guts said otherwise cost us dearly.<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">This applies to the opposite as well. I had a good feeling about Bitcoin back in 2012 when it was worth less than a dollar, even though I didn\u2019t really understand it. Well, I probably should have made the time to figure it out\u2026<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">On the other hand, our decision to move to Kansas City to open a second branch back in 2010 felt right. Once we looked at the market and the opportunity to get back into buy and hold in a more cash flow friendly market instead of Eugene, Oregon, where we were, it made sense, and so we pursued it.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Conclusion<\/span><\/h2>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">In conclusion, your gut is an important but dangerous tool. Acting like a gunslinger and just relying on your intuition is bound to get you into trouble. But discarding it entirely will waste time and often bog you down in paralysis by analysis.&nbsp;<\/span><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><span data-preserver-spaces=\"true\">Work on allowing yourself to quickly rely on your intuition for small decisions and hone it as a warning beacon to further investigate issues if they feel wrong (or right). But make sure to use an analytical approach when investigating whatever intuition you had as that left to itself. Your gut will often lead you astray.&nbsp;<\/span><\/p>\n\n\n\n<div id=\"hero-block_62ee867235a1c\" class=\"first:mt-0 hero-block py-4    has-background has-slate-300-background-color has-text-color has-slate-800-color\">\n    <div\n        class=\"gap-10 lg:gap-20 flex flex-wrap lg:flex-nowrap max-w-screen-xl mx-auto px-4 relative lg:items-center \">\n\n        <div class=\"relative z-30 lg:w-2\/3 \">\n            <main class=\"py-4\">\n                \n\n<p class=\"has-theme-slate-color has-text-color has-large-font-size wp-block-paragraph\" style=\"font-style:normal;font-weight:800\">Feeling stuck? Shift your mindset and make the impossible a reality.<\/p>\n\n\n\n<p class=\"my-3 md:my-5 lg:my-8 has-theme-slate-color has-text-color wp-block-paragraph\" style=\"font-size:16px\">Life is just waiting to give you everything you deserve and desire\u2014you just need to shift your mindset to achieve it. If you&#8217;re feeling stuck, this book will push you towards a future you never imagined possible.<\/p>\n\n\n\n<div id=button-custom-event-block_64138705d4d27 class='button-custom-event'>\n      <a href=\"https:\/\/store.biggerpockets.com\/products\/do-the-impossible?utm_source=blog&#038;utm_medium=marketing_block\" x-on:click=\"window.analytics.track(&#039;Blog Block | Publishing: Do the Impossible Book&#039;, {\n      referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/when-to-make-and-not-make-gut-decisions&#039;,\n    });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\" target=\"_blank\">Get Yours Now<\/a>\n  <\/div>\n\n            <\/main>\n        <\/div>\n\n                <div class=\"lg:w-1\/3 first:mt-0 relative h-full lg:flex lg:items-center\">\n            <img decoding=\"async\" class=\"object-cover w-full relative z-20 my-0  rounded-md hidden lg:block\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2022\/02\/Do-the-Impossible-3D-2-1-1-e1679001883988.png\" alt=\"do the impossible book cover\" title=\"\">\n        <\/div>\n            <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"<p>We all use our gut, but some use it more than they should, and others use it less. This article is about finding a solid middle ground.<\/p>\n","protected":false},"author":1689,"featured_media":153952,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[20,7119],"tags":[],"class_list":["post-153950","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-personal-development","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/153950","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/1689"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=153950"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/153950\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/153952"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=153950"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=153950"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=153950"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}