Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking
Kahneman and Lovallo argue that decision makers tend to treat problems as unique, isolating the current choice from future opportunities and neglecting the statistics of the past. Overly cautious attitudes to risk result from failing to appreciate how statistical aggregation reduces relative risk, and overly optimistic forecasts result from an inside view that anchors predictions on plans and scenarios. The conflicting biases are documented in psychological research, and the paper examines implications for decision making in organisations.
Kahneman and Lovallo argue that decision makers tend to treat problems as unique, isolating the current choice from future opportunities and neglecting the statistics of the past. Overly cautious attitudes to risk result from failing to appreciate how statistical aggregation reduces relative risk, and overly optimistic forecasts result from an inside view that anchors predictions on plans and scenarios. The conflicting biases are documented in psychological research, and the paper examines implications for decision making in organisations.
Written from the abstract read 2026-10-25 via OpenAlex.
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Kahneman, D., & Lovallo, D. (1993). Timid choices and bold forecasts: A cognitive perspective on risk taking. Management Science, 39(1), 17-31. doi:10.1287/mnsc.39.1.17 https://doi.org/10.1287/mnsc.39.1.17