When it comes to predicting the future, Nobel prize-winning professor Daniel Kahneman prefers algorithms to people.

One of the problems with intuition and the concept of trusting one's gut, according to Kahneman, is that humans are very inconsistent. During a conversation with Inc. president and editor-in-chief Eric Schurenberg, Kahneman explained why using data and formulas is generally a more reliable method for predicting outcomes than relying on human experts.

"Experts tend to be overconfident, so they make predictions they have no business making, which a formula would not do," Kahneman says. "If a formula lacks information, it will sort of report on the lack of information.

As an example, Kahneman says, if you show a radiologist the same x-ray twice, but not in immediate succession, there is a surprisingly high probability they will not come up with the same diagnosis both times.

Fortunately, faith in algorithms and formulas is on the rise, according to Kahneman.

"We are seeing more and more evidence-based medicine, as [opposed to] the intuitive model," he says. "In businesses, a lot of at least secondary decisions are increasingly passed on to algorithms. It's the truly important decisions that tend to be driven by intuition."

To hear more about why entrepreneurs shouldn't trust their intuition, watch the video below.

Published on: Aug 18, 2014