The AlphaMind Podcast Episode 45: Dr Gary Klein: Decision Making under Uncertainty and the Role of Intuition.

The very essence of the challenge of trading and investing is making great decisions, under time pressured situations, when faced with extreme uncertainty. 

Traders are making decisions in the moment, under-pressure, in the face of volatile and uncertain news flow, whilst battling their own fickle emotions and internal doubts. Success lies in the trader’s ability to make the right decision in these situations, that's no easy task.

Intuition lies at the root of great decision-making, and there is no person in the world more qualified to talk about Intuition and Decision-Making under pressure in uncertain and time limited situations than Dr Gary Klein. 

Dr Klein has studied and practiced in this field for almost 5 decades. He is credited with creating a whole new field of study, Naturalist Decision Making. And his work has been applied to help improve how people make choices in life and death studies.

Prior to Dr Klein’s Naturalistic Decision Making approach, psychologists used laboratory settings to study how people make decisions, with a heavy focus on human bias and errors in judgment. Dr Klein flipped the focus to conducting decision research in real world settings, studying how experts including firefighters, military battle commanders, and doctors use intuition and experience to engage in effective decision-making. 

Dr Klein has received praise from psychologists and researchers whose perspectives have differed dramatically from his own. Nobel Prize winner Daniel Kahneman wrote, "Gary Klein is a living example of how useful applied psychology can be when it is done well...Klein and I disagree on many things...But I am convinced that there should be more psychologists like him."

Amongst some of the innovations which have emerged from Dr Klein’s work is the Pre-Mortem tool. Dr Klein presented the ‘Pre-Mortem’ as a tool for improving thinking, planning and risk management of projects in a 2007 edition of the Harvard Business Review, which can be viewed here. He also founded a method of teaching expert decision-making used an approach ca'lled 'The Shadowbox' method. 

We were delighted to have Dr Klein as a our guest on the AlphaMind podcast this week. Among subjects discussed were:  

- How the Pre-Mortem tool improves decision-making. 
- Developing expert decision-making using the ‘Shadowbox’ method. 
- How the Recognition Primed Decision-Making model captures how experts make decisions.
- The role of intuition and pattern recognition in decision making. 
- Learning how to use AI tools to aid decision-making. 
- The Naturalistic Decision Making approach to Behavioural Finance compared to the Biases and Heuristics approach. 
- How experienced traders develop the ability to recognise patterns intuitively which enable them to anticipate price moves in ways which even machines have not yet been able to match. 

Dr Klein also shared some fascinating stories from his years in this field, told in his own inimitable style.

You can learn more about Dr Klein at the Shadowbox website: 

You can also follow Dr Klein on twitter @KleInsight and if you are interested in joining a live webcast event Dr Klein is running next week jointly with Bryce Hoffman of Red Team Training. Details of this can be found here:

Episode Links:
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The AlphaMind Podcast

The AlphaMind podcast is co-hosted by Steven Goldstein and Mark Randall, market veterans with over seven decades between them in the financial markets.

The podcast delves into the lives and stories of extraordinary guests whose experiences provide a fresh and powerful lens through which to understand the mental, emotional, psychological and behavioural challenges people face when encountering risk and uncertainty in financial markets.

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