Recent research on counterfactual thinking is discussed in terms of its implications for decision making. Against a backdrop of the functional benefits of counterfactual thinking, two distinct types of bias, one liberal and one conservative, are discussed. Counterfactuals may cause decision makers to become liberally biased (i.e., capricious) in terms of tactics, but conservatively biased (i.e., rigid) in terms of long-term strategy. That is, counterfactuals may lead to short-term corrective changes that are needless and costly, but they may also lead to long-term overconfidence, blinding the decision maker to possible beneficial strategic adjustments. Recent research on counterfactual thinking, which is inherently multidisciplinary, is reviewed in light of a theoretical structure that posits two mechanisms by which counterfactual effects occur: contrast effects and causal inferences.