Sheryl Sutherland says intuition isn’t good enough when we invest, instead we need to plan and strategise

By Sheryl Sutherland*

One of my favourite guys wrote a best seller; "Thinking Fast and Slow" (Daniel Kahneman a psychologist and economist).  His book puts forward the premise that we have two ways of thinking – rapid “gut” responses, and slower more reflective thinking. He suggests that the first usually trumps the second (my little book on this is Money, Money Money, Ain’t it Funny). 

He points out that our thinking rational brain loses out more often than not to our intuition or gut feeling. The gut feeling is the one that responds to social media, science being ignored, and political polarisation. 

You don't believe me?  Consider the following problem; A bat and a ball cost $110 in total. The bat costs $100 more than the ball. What does the ball cost?  Did you say $10? Most do, as this is the response that pops into our minds intuitively. But the correct answer is $5. (If the ball costs $10, then the bat would need to cost $110, since it is $100 more than the ball. In total, that is $120.)

What this problem illustrates is the strength of our ability to reason if you got it right and the potential pitfalls of our intuition. To get the correct answer when first encountering this problem, you generally have to spend some time and effort thinking about it. Intuition isn’t good enough.

People who deliberate are also better able to distinguish between “fake news” and real news, and are less prone to seeing and accepting pseudo-profound bullshit, to holding beliefs that are counter to the scientific consensus on several issues, to believing falsehoods about COVID for example, and to believing in false conspiracies.

Intuition isn’t good enough when we invest, we need to take the time to consider, to be a deliberative thinker, to plan, to strategise.  Being a more deliberative thinker is associated with better financial literacy.  Deliberative people are those of you who are smart enough to have a financial planner – preferably a woman (and yes women are great at this; if you want the studies I have them of course!).

*Sheryl Sutherland is director of The Financial Strategies Group, and author of Girls Just Want to Have Fund$ – Every Women’s Guide to Financial Independence, Money, Money, Money Ain’t it Funny – How to Wire your Brain for Wealth, and co-author of Smart Money – How to structure your New Zealand business or investments and pay less tax. You can contact her here.