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Fretting about Modest Risks Is a Mistake
Rabin, Matthew , and Max Bazerman
61/3  (Spring 2019): 34-48

Managers often engage in risk-averse behavior, and economists, decision analysts, and managers treat risk aversion as a preference. In many cases, acting in a risk-averse manner is a mistake, but managers can correct this mistake with greater reflection. This article provides guidance on how individuals and organizations can move toward greater reflection and a more profitable aggregate portfolio of decisions. Inconsistency in risk preferences across decisions is a costly mistake for both individuals and for organizations.

 

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