Years ago, I knew a company president who used a peculiar formula to forecast sales. I no longer remember the formula itself. It went something like “sales from the previous quarter + sales from the quarter before that + several other things…” and ended with a mysterious factor: “× 0.25.”
At the time, I was developing the company’s software system. Unable to get that 0.25 out of my mind, I asked him about it.
“What does that 0.25 at the end mean?”
The president, who had come from consumer finance and looked frightening, replied:
“I don’t know, but when I put it in, it comes out dead on.”
“Oh. That’s impressive.”
That was all I could manage.
His face frightened me.
Yet the following quarter, actual sales came remarkably close to the forecast produced by the formula with that 0.25 in it.
A target that is neither too high nor too low
Ever since that episode, I have placed considerable value on the “feel” developed by presidents of small and midsize companies—not just that particular president. Those who have spent years in management often account for a vast number of variables that even they cannot fully explain.
How is the market moving? How strong is the company’s sales operation? How far can the employees stretch? Is this client risky? Is now the time to invest? Will the tide turn if the company can hold on for another six months? Not all of this fits into a spreadsheet.
Sales targets are where this judgment becomes especially visible.
A target is not good merely because it is high, and a low one serves little purpose. It should sit just beyond business as usual, yet remain reachable if the organization changes how it acts. Choosing that level—neither too high nor too low, but high enough to alter behavior—reveals a great deal about the person running the company.
Market awareness × knowledge of the company × financial sense × risk tolerance × understanding of the organization. Even ambition enters the equation. Asked to write that formula precisely, I probably could not.
That is exactly what makes it interesting. Seen this way, that 0.25 begins to look a little different.
What was that 0.25?
Intuition and instinct are often placed on one side, with logic and reason on the other. I have never found that contrast entirely convincing. Remembering that 0.25 makes me doubt it even more.
At least to me, it did not look as though the president had picked the number at random. After years of running the company—watching its sales, its market, and its employees—he had developed a sense that “this much adjustment makes it fit.” That sense happened to surface as 0.25 at the end of a formula.
In other words, 0.25 itself held no universal truth. It may have been the visible expression of an internal model he had built over many years.
What comes before logic
Before going further, it is worth considering logic itself. I am not arguing that logic is defective. Logic is an exceptionally powerful tool for testing what follows from a given set of premises.
The problem comes one step earlier. Which premises should we begin with? Which variables should we include? Which part of reality should we isolate, and which things should we treat as instances of the same concept? Human limits of cognition and language enter at this stage.
When people think logically, they often use language and symbols to organize reality. We put things into words, separate concepts, arrange relationships and causes, and turn them into a form that other people can understand. Yet language itself cannot already render reality with perfect precision. New words emerge, old words change meaning, and things once grouped together may later be distinguished more finely.
Some things are recognized before they can be articulated. A person may feel a genuine unease without yet having the vocabulary or concept needed to explain it: “Something is off,” “I should not work with this person,” or “This number is not quite right.” The reason may remain unclear until days later—or until after the problem occurs—when the person can finally say, “So that was what I noticed.”
Intuition can recognize something first, while language catches up later.
That is why I am also uncomfortable with the simple claim that intuition is vague while logic is exact. Logic is powerful at deriving conclusions from premises. But it does not decide which premises to choose.
Take the equation “sales = number of customers × average spend per customer.” The equation itself is clear. But it cannot tell us whether the model should also include the manager’s fatigue, the mood of the local area, reactions to competitors, a salesperson’s confidence, or the president’s ambition.
A person must decide what enters the model and what is left out. If we accept only what can already be put into words or numbers, part of reality may disappear from view. This is less a defect in logic than a limit in the way people model reality.
The mind that answers first, and the mind that thinks afterward
Psychology offers a way of understanding judgment as two broad kinds of mental work. One draws quickly on experience and patterns to produce an answer. The other uses words and numbers to reason step by step. They are often called System 1 and System 2.
Suppose I look at a financial statement and immediately feel that a number is wrong. That is close to the first kind of work. Searching for the reason, comparing past figures, and recalculating the numbers are closer to the second. Intuition gives us an answer first but does not show its working. Logic is slower, but lets us check that working one step at a time.
This does not mean that two separate minds live inside us. Sometimes intuition notices first and logic searches for the reason afterward. At other times, what we work out through logic accumulates as experience and shapes the next intuition. Intuition and logic move back and forth within the same judgment.
How to work with what the formula leaves out
I have no wish to dismiss the formulas and frameworks taught in MBA programs. Anything that can be explained logically is better explained. Doing so makes a judgment more reproducible, easier to share, and easier to inspect when it goes wrong.
But in the management of a small or midsize company, not every variable is available. Market data may be sparse. Statistically meaningful sample sizes may not exist. Information about competitors may be limited. Meanwhile, relationships, local conditions, and the dispositions of employees—factors difficult to quantify—can have a large effect on the business.
In such an environment, a more elaborate formula does not necessarily produce a more exact answer. When the inputs are incomplete, the elegance of the equation and the accuracy of its conclusion are separate matters. The intuition of someone who has spent years in that environment may even register more variables than the formula contains.
So we should not ignore what lies outside the formula. But neither should we declare intuition correct simply because it lies beyond the formula. A sensed anomaly can become a hypothesis, which we test wherever testing is possible. What remains unexplained becomes the next thing to observe. Logic and intuition need not eliminate one another; each can reveal the other’s blind spots.
A beginner thinks through one move at a time. An expert looks at the board and immediately senses that something is wrong. Experience does not mean they have stopped thinking through the moves. It means those moves have been compressed.
That is why I place somewhat more trust in the 0.25 of “when I put it in, it comes out dead on” than in an impressive formula lifted from a textbook written for large corporations.
Training intuition with logic
Of course, intuition can be wrong. If experience is skewed, intuition will be skewed too. Old successes can keep pulling judgment toward a world that no longer exists. Intuition should not be trusted unconditionally.
But the same is true of logical thought. If the premises or the choice of variables are wrong, even flawless reasoning can arrive at the wrong conclusion.
The important choice is not intuition or logic. Intuition proposes a hypothesis, and logic tests it. Logic turns experience into learning, and the results accumulate back into intuition. What matters is the cycle between them.
Even so, after thinking something through, I sometimes consciously choose intuition over the conclusion reached by logic. This is not a refusal to think. It is a way of giving a voice to an unease I cannot yet put into words. I am not surrendering to intuition; I am refusing to let logic claim the whole of reality.
The 0.25 at the end of that formula was not necessarily an absence of reason. It may have been a number temporarily carrying a piece of reality for which its owner had not yet found the words or variables.