Should I Go Naked or Wear a Hat?

Bob Fischer

Some of you have asked me about the relationship between naked thinking and Six Hats thinking; they actually have a lot in common. Both methods are rules-based and process oriented. The key difference is of course that with naked thinking, you create a rule set and procedures and then let the rules determine the decisions. With Six Hats thinking, you apply the rules and procedures and then use your judgment or intuition to come to a decision. So when do you use one and when do you use the other?

Let me be clear - a tremendous amount of empirical data supports the idea that naked thinking, or rules-based decision-making, is more effective (see The Naked Portfolio Manager for details) than human judgment (Six Hats thinking). However, we will not always have the time or data to create a rules set. Certain situations require a quick decision and for these situation, the Six Hats thinking method is ideal.

Important decisions that you make repeatedly for which there is substantial data available should not be left to intuition or judgment. For these, build a decision-making method. Examples are triage decisions in hospitals, food ordering in restaurants, student admission in higher education, credit decisions in lending, and of course portfolio management. Over a long time period, a well constructed decision-making method based on empirical data will trounce the decision-making of experts relying on intuition or judgment.

For those decisions you will not be making on a repeated basis, the Six Hats method is an extremely powerful rules-based process for getting you the best thinking. Furthermore, once you learn it, it is much quicker to use than naked thinking.

So you see, regardless of the situation, we get our best thinking if we use a rule set and clearly defined procedure.

Bob Fischer, Author of The Naked Portfolio Manager
Copyright 2011 Author retains ownership. All Rights Reserved.

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