Your Company Is Too Risk-Averse

Dan Lovallo, Tim Koller, Robert Uhlaner and Daniel Kahneman

In theory, companies are supposed to create value for stakeholders by making risky investments. And as long as no single failure will sink the enterprise, those investments may be quite large. It won’t matter if even a significant percentage of them fail so long as the success of other bets compensates, which usually happens.

It’s an approach to investment that’s supported by economic theory going back to the 1950s work of Nobel laureate Harry Markowitz on portfolio optimization. Read more