Fast-and-frugal heuristics: analytical models of intuition

Abstract

Trust your gut. Do not rely on urges—analyze! Decisions are either logical or psychological… Such popular maxims reveal a complicated, even confused approach to how one should make decisions. The sciences of decision theory and practice suggest that managers should leverage the power of mathematics, whilst also reserving a role for personal insights. But how exactly can that be achieved? Combining analysis and intuition sounds like trying to have one’s cake and eat it too; enticing but impossible. We believe that it is indeed possible to combine analysis and intuition to make decisions. And that doing so in a systematic way is now within reach. A slow yet powerful series of discoveries has culminated in a vision of decision making that brings ever closer together mathematics, psychology and management in the form of analytical models of intuition. The concept that enables these advances is fast-and-frugal heuristics. The present piece (i) provides a background for fast-and-frugal heuristics; (ii) introduces their basics, outlining conditions under which fast-and-frugal heuristics perform well or not; (iii) challenges established beliefs and clears common misconceptions related to fast-and-frugal heuristics; (iv) outlines principles of smart (heuristics-based) management; and (v) surveys open questions to explore how the potential of fast-and-frugal heuristics for management mathematics can be fully realized.

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ORCID for Konstantinos V. Katsikopoulos: orcid.org/0000-0002-9572-1980

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