Those BusinessHunches
Are More
Than Blind Faith
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Approved For Release 2003/09/10
: CIA-RDP96-00788R001 70021 001 2-9
Executives like David Mahoney and Ray Kroc aren’t
clairvoyants, but often they “see” ways to solve business problems that defy
computer logic. The bottom-line results can be spectacular.
The feasibility study is a beauty. The cost
analysis looks right on
the money, liven
die
sales
projections, sometimes
a
little
.>ie-in-the-sky, seem pretty
solid. All the
ingredients needed
for a sound decision
say: "Go!" Yet this nagging voice from a
mysterious echo chamber deep inside his
brain keeps repeating: "No!"
"Let's hold off on this one/' announces
the
c.e.o.
to his astonished subordinates.
'We've got enough on our plates for now."
Lame excuses like that cannot disguise
the fact that most of the chief executives
who control the destinies of the biggest
corporations
are
often guided by
ill-de-
fined gut
feelings. The intuitive boss, of
course,
is a recurring figure in American
business. J. P. Morgan (who was known to
visit
fortune-tellers) and, Cornelius Van-
de”‘
't (who consulted clairvoyants and
beH^d
in ghosts) took enormous pride
:• d cii enormously profitable hunches. So
nd ii.cu legendary contemporaries, with-
iut seeking the counsel of mediums. Even
today, when the empirical world of busi-
ness is practically paved over with M.B.A.'s
who can figure the risk-reward ratio of any
decision at the drop of a computer key, the
old-fashioned hunch
continues
to
be
a
managerial tool.
When biology feeds back
Society's current
addiction
to
psychic
advice
is
hardly what
executives mean
when they admit
to following hunches.
Biofeedback, for example, has proved help-
ful
in the healing process, but most busi-
nessmen—and
not businessmen only
—would consider it just short of sorcery.
Yet a handful of scientists and academi-
cians have ciime up with measurable proof
that subconscious elements play a role in
the decision-making process. They are con-
vinced that heeding a strong hunch may
be a wise move, and even see a correlation
between the boss's precoenitive a bility and
his rnmpanv'T~profitability.
In any
case,
tie
mint out that
it isn't realistic for ex-
ec^g^es to rely solely on logic to cope with
the complexities of modern business.
Broach these thoughts to _a board chair-
Kcsearch associate: lane Co/iilo/i ApprOVGd For
by ROY ROWAN
man
or
president,
and
you
had
better
watch your language. To begin with, hunch
is an odious word to the professional man-
ager.
It's
a stock-market
plunger's term,
rife with imprecision and unpredictability.
Psychic and
prccognitive are
just
as bad,
since they smack of the occult. Self-pro-
claimed psychics pop up all over the place,
insisting they can bend metal, project pho-
tographic images, or remove diseased or-
gans by using nothing more than intense
mental concentration. The business leader
understandably shrinks from the thought
of being associated with such kooks.
’
But suggest to this same executive that
he might indeed possess certain intuitive
powers, which could be of real assistance
in generating
ideas, choosing alternative
courses of action, and picking people, and
you'll elicit some interested responses:
"The chief executive officer is not sup-
posed to say, T feel.' He's supposed to say,
T know,' " asserts David Mahoney, chair-
man of Norton Simon. "So we deify the
word instinct by calling
it judgment. But
any attempt
to deny
instinct
is
to deny
identity. It's the most current thing. It's me
— in everything from picking
a wife to
picking a company for acquisition."
"Intuition helps you read between the
lines," says John Fetzer, owner of the De-
troit Tigers and chairman of Fetzer Broad-
casting Co. "Or walk through an office, and
intuition tells you if things are going well."
A staunch believer in mind over matter ,
Fetzer explains that he would never sug-
gest to star pitcher Mark Fidrych
that he
stop talking alouci to the baseball and tell-
ing it where to go.
"In a business that depends entirely on
people and not machinery," says Robert
Bernstein, chairman
of Random House,
"only intuition can protect you against the
most dangerous individual of all—the ar-
ticulate incompetent. That's what frightens
me about business schools. They train their
students to sound wonderful. But
it's nec-
essary to find out
if there's judgment be-
hind the language."
"Physics is all hunches and intuition,"
admits Herman Kahn, a trained physicist-
r ^l^sf4
lt2dfif3/t5^/'ll6
>T
Hudson Institute. "My research
is a com-
bination of intuition and judgment.
1 don't
know where it comes from. The mind sim-
ply puts things together."
Precisely how the mind puts things to-
gether has never been adequately charted.
If only we knew how the human brain con-
stantly delves into the subconscious to re-
trieve buried fragments of knowledge and
experience, which
it then instantaneously
fuses with
all
the new
information, we
might better be able to define the hunch
and assess its reliability.
Are you fortune's darling?
Nevertheless, we do know certain char-
acteristics of the hunch.
It concerns rela-
tionships, involves simultaneous percep-
tion of a whole system, and can draw a
conclusion (not necessarily correct) with-
out proceeding through logical intermedi-
ary steps. As Max Gunther points out in
The Luck Factor. "The facts on which the
hunch
is based are stored and processed
on some level of awareness just below the
conscious
level. This
is why
the hunch
comes with that peculiar feeling of almost-
but-not-quile knowing." But Gunther, an
author of books on human relations, also
warns against disregarding those "odd lit-
tle hunches that are trying to tell you what
you don't want to hear. Never assume you
are fortune's darling." Failure to maintain
some degree of pessimism, he claims,
is
to be in a state of peril.
There
are other caveats
that
the wily
manager should heed: never confuse hope
with a hunch, and never regard a hunch as
a substitute for
first acquiring
all known
data
(laziness
usually
produces
lousy
hunches). However, since management it-
self
is an inexact science—frequently de-
fined as the "art of making decisions with
insufficient information"—even the most
deliberate c.e.o. may be forced to act pre-
maturely on an inner impression.
Possibly, then,
it is in matters of timing
that the business hunch is most critical, as
Robert
P. Jensen, chairman of General Ca-
ble Corp.,
will
testify. Last year, sensing
. the need for his company to diversify, he
,
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sions that involved $300 million in sell-offs
and acquisitions. "On each decision," says
Jensen, "the mathematical analysis only
got me to the point where my intuition had
to take over"—as was the case with the
$ 106-million cash purchase of Automation
Industries. General Cable's strategic-plan-
ning department had come up with a pur-
chase price based on Automation's future
sales. "It's not that the numbers weren't ac-
curate," Jensen recalls. "But were the un-
derlying assumptions correct?"
An engineer not given to precipitate de-
cisions, he calls "patience" crucial to the in-
tuitive process. "It's easy to step in and say
I have a feeling we ought to do this or that.
But then you haven't
let your managers
weigh in with their feelings
first." At the
same time, he warns that the perfectionist
who keeps waiting
for new information
never
gets anything
done.
"Intuition
is
picking the right moment for making your
move." adds lensen. who spent three years
as a tight end for the Baltimore Colts.
Reveling in "calculated chaos"
There
is, in fact, considerable evidence
that the wholly analytical creature pictured
at the corporate pinnacle is so much folk-
lore. That, anyway,
is the view of Profes-
sor
Henry
Mintzberg
of
the
McGill
University Faculty of Management, who
has been dissecting and writing about the
executive animal for a dozen years.
According to Mintzberg, the c.e.o. pays
lip service to systematic long-range plan-
ning, elaborate tables of organization, and
reliance on computers and esoteric quan-
titative techniques (more folklore). In re-
ality he's a "holistic, intuitive thinker who
revels
in
a climate of calculated chaos."
Mintzberg portrays the
c.e.o. as working
at an unrelenting pace, jumping from top-
ic to topic, disposing of items in ten min-
utes or
less, and "constantly relying on
hunches
to cope with problems
far too
complex for rational analysis."
No criticism intended. The puckish thir-
ty-nine-year-old
professor has immense
admiration for the c.e.o.'s innate sense of
direction, which he claims
is much more
reliable than that of the analytical consul-
tant who
is forever devising inflexible
guidance systems for unmapped business
terrain. "After all," says Mintzberg, "the
intuitive Eskimo crosses the ice cap with-
out a compass." The intuitive executive, he
explains, solves problems in four interre-
lated stages set forth in Gestalt psychology:
preparation
("creativity
favors
the
pre-
pared mind"), incubation ("letting the sub-
conscious
do
the
work"),
illumination
("waking up in the middle of the night and
shouting, 'Eureka, I've got
it!' "), and veri-
fication ("then working it all out linearly").
In performing all of his tasks, the c.e.o.
—as students of intuitive decision-making
have noted—must know how to read a lot
more than words. He assimilates gestures
and moods, and thrives on head-to-head
encounters with both colleagues and com-
petitors. His own language suggests this
hunger for sensory information. He wants
to get the "big picture," the "feel of a sit-
uation," and "hot gossip" and "cold facts."
This ability to absorb all manner of in-
formation stems from the fact that chief ex-
ecutives seem to be "right-brain domina t-
ed.'A It was
long known
that
the
right
hemisphere of the brain controls the
left
side of the body—and vice versa. Only re-
cently, however, was it discovered that the
two sides of the brain seem to specialize
in different activities. The
left appears
to
handle the logical, linear, verbal fund inns.
The right takoscare ot the emoti onal, in-
tu itive. spatial functions. Therefore: as in
baseball, a savvy board of directors might
pick an
intuitive
right-brained
c.e.o,
to
pitch for the company;
To confirm this application of the right-
brain, left-brain theory to business, Rob-
ert
Doktor,
a
University
of
Hawaii
business-school
professor,
wired
up
a
number of c.e.o.'s to an electroencephalo-
graph to find out which hemisphere they
relied on
most. The
right
hemispheres
won hands (or should
it be heads?) down.
It was only a question of time before
word of the right-brained boss would leak
out and somebody would develop a market
for the "soft information"—gossip, clues,
insights, and other intangibles—on which
the intuitive mind feeds. Infer-mation, as
the Williams
Inference
Service
of New
York calls itself, now sells educated hunch-
es ("disciplined
intuition"
is the term
it
uses) to companies such as Travelers and
IU International.
"Lead time is the most valuable thing a
corporation
can
have,"
claims
Bennett
Goodspeed, marketing chief for Williams.
"Yet by the time the numbers are in on
any new trend, the change is obvious to ev-
eryone."
Williams
combs
hundreds
of
trade and technical journals for early, iso-
lated clues that, when connected, may con-
vey
an
"unintended
message."
But,
as
Goodspeed
laments,
corporations
resist
change. He points out that of six vacuum-
tube manufacturers, only one had the fore-
sight to switch to transistors.
A masquerade of memories
In
today's unpredictable environment,
it's hard
to
tell whether even the "best"
hunches will work. A c.e.o. may come up
with an ingenious concept that he can't sell
—leaving him feeling as if he's suspended
on a limb after the tree has fallen. Aware
that universities were concerned about the
"social
content
of
their
investments,"
Howard Stein, chairman of Dreyfus Corp.,
launched a
special mutual fund
in 1972
composed only of companies that strictly
complied with environmental safeguards
and fair-employment practices. "Ironical-
ly,
this Third Century Fund has outper-
formed most others," reports Stein, "but
the colleges called
it a 'do-good attempt'
and stuck to traditional investments."
In addition, William F. May, chairman
of American Can Co., Warns that "you have
to be alert not to
let bad memories mas-
querade as intuition." He cites his compa-
ny's experience with the two-quart milk
container, which failed miserably when
it
was
first introduced in 1934. The compa-
ny revived the idea in 1955 in the belief
continued
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that
its time had come. “Our executives
turned it down," says May ruefully. Today,
American
Can's
competitors
have
two-
quart containers in every dairy case.
One area where the hunch player has re-
peatedly scored is in figuring out the fickle
American
appetite.
Confronted
in
1960
with what
his lawyer
called
a
bad, deal
—$2.7
million
for
the McDonald name
—Ray Kroc says: "I closed my office door,
cussed up and down, threw things out of
the window, called my lawyer back, and
said: 'Take
it!'
I
felt in my funny bone
it
was a sure thing." Last year, system-wide
sales of Kroc's hamburger chain exceeded
$4.5 billion.
Precognition and profits
This ability to decipher the telltale signs
of the future puts an enormous premium
on what the parapsychologists (ESP spe-
cialists)
call
"precognition." Almost two
decades of testing executives have uncov-
ered a close link between a c.c.o.'s precog-
nitive
and
profit-making
abilities.
In
research conducted at the New Jersey In-
stitute of Technology, engineer John Mi-
halasky and parapsychologist
E. Douglas
Dean found that more than 80 percent of
c.e.o.'s who had doubled their company's
profits within a five-year period proved to
have above-average precognitive powers.
(The executives had to predict a 100-digit
number that would be randomly selected
by a computer anywhere from two hours
to two years later.)
Mihalasky visualizes precognition as a
flow of information particles moving for-
ward and backward
in time. He uses the
stock-market crash of 1929 to illustrate his
point. For "precognitive" investors, there
was strong evidence that
it was coming
and that there would be violent repercus-
sions afterward.
"If something goes beyond the logic that
we understand," cautions Mihalasky, "we
say
forget
it."
In any case, "the biggest
roadblock to intuitive decision-making is
not
having
the
guts
to
follow
a good
hunch." Although Mihalasky admits that
the world is full of "psi-hitters" and "psi-
missers," he offers certain recommenda-
f
tions for inducing intuition:
(1) Concen-
trate on what
is unique,
(2) he aware of
the gaps in your knowledge. (3) Make con-
nections between diverse factors. (4) Avoid
becoming overloaded with information.
"‘'"While executives may hide the impor-
tance of the hunch, nonbusiness leaders are
not so reluctant to acknowledge their in-
debtedness to
it. Helen Gurley Brown con-
fides
that
she
uses
"secret
personal
knowledge"
in
editing
Cosmopolitan.
"When I read a manuscript, even if it's not
well written, only intuition can say this is
truth, readers will like
it. Or intuition may
tell me that a piece by a Pulitzer prizewin-
ner is a phony."
Dr. Jonas Salk, discoverer of the polio
vaccine, says: "Intuition
is something we
don't understand the biology of yet. But
it
is always with excitement that
I wake up
in the morning wondering what my intu-
ition will toss up to me, like gifts from the
sea.
I work with
it, and rely upon
it.
It's
my
partner."
After
tedious experiments
seeking ways to immunize against polio,
Salk made an intuitive leap to the correct
vaccine. R. Buckminster Fuller, creator of
the geodesic dome, says: "I call intuition
cosmic
fishing. You
feel
a
nibble,
then
you've got to hook the fish." Too many peo-
ple, he claims, get a hunch, then light up a
cigarette and forget about it.
Artists, certainly, always assumed that
creativity doesn't spring from a deductive
assault on a problem. Yet there are instanc-
es where a melding of the intuitive and de-
ductive helped them produce magnificent
results. From
Leonardo
da
Vinci's
pen
came detailed drawings of the first flying
machine. Both Robert Fulton, inventor of
the steamboat, and Samuel Morse, inven-
tor of the telegraph, started out life as art-
ists. But intuition led them elsewhere.
Today,
it is an explorer back from outer
space, Edgar Mitchell, who has turned into
intuition's most
fervent
evangelist—and
almost a mystic as well. A doctor of science
from
M.I.T., Navy captain, and the sixth
| man on the -moon, he bel ieves that "man’s
I potential knowledge is more than the prod-
luct of his five senses."
Following that journey, Mitchell found-
ed the Institute of Noetic Sciences (Greek
for
intuitive knowing)
in
California, and
not long ago became
a
director
of two
computer-software companies— Informa-
tion Science in West Palm Beach and Fore-
cast Systems in Provo, Utah. In
all three
endeavors, his aim
is
to help
his fellow
man—especially the businessman—devel-
op intuitive decision-making powers to the
point where, as he says, "they can control
the scientific beast."
Exploring inner space
In preparing for a lunar flight, Mitchell
explains, "we spent 10 percent of our time
studying plans for the mission, and 90 per-
cent of our time learning how to react intu-
itively to
all the 'what
if's.' " At Forecast
Systems, Mitchell and his associates use
this same approach to help clients identify
potential problem
areas. They
interview
managers, foremen, and workers to uncov-
er their fears about all the things that might
go wrong. "With a computer printout of
the resulting 'fault tree' in front of him, a
c.e.o. can almost smell those failures before
they
occur,"
says
Mitchell,
explaining
"failure analysis," a space-age spinoff.
However
methodical,
even
scientific,
Mitchell and other researchers may be, the
explanations of intuition and its powers re-
main elusive. All of the parts, added up,
fall short of making a sum called the hunch.
But the businessman like David Mahoney
or Ray Kroc who has relied on an occa-
sional hunch to solve an important busi-
ness problem cares
less about analyzing
the phenomenon than seeing the results.
Often, these can be spectacular.
In the future
it will probably be sparks
thrown off by minds trained in still newer
disciplines which produce the best hunch-
es:
Not
that
this
amorphous,
intuitive
power will be any more measurable then.
Of course, that is simply a hunch.
Qf]
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