Team Up
to Take Better Risks
We all have to make critical choices involving risks, at work and in our personal lives. To make better decisions, team up with someone who learns about the risks differently than you do.
Here’s the research-backed reason why.
So, how do you learn about risk?
A. READ ABOUT IT
Studies have shown that human beings tend to overestimate small risks when they read about them descriptively.
For example, reading “This surgery has a 10% chance of an unfavorable outcome” causes us to fixate on that 10% risk, giving it too much importance.
B. RELY ON DIRECT EXPERIENCES
Previous studies have shown that human beings tend to underestimate small risks when they experience them.
For example, trying out a simple computer simulation that recreates the same 1-in-10 surgery risk tends to emphasize the 90% chance of success and downplay the 10% chance of failure.
SOLUTION
Team up with someone who
learned about the risk differently
to decide together.
When one person has learned about the risk descriptively and the other experientially, they have a gap in their perceptions of how big or small the risk actually is.
If they can decide together, they tend to narrow that gap to get closer to the truth, thus making a better decision.
For more information, see: "When Experience Meets Description: How Dyads Integrate Experiential and Descriptive Information in Risky Decisions", by Tomás Lejarraga and Johannes Müller-Trede, published in Management Science, June 2017.