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Which of these two options would you choose?
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Daniel Kahneman, the author of Thinking, Fast and Slow, did an experiment. He gave two options: Would you accept a gamble that offers a 10% chance to win $95 and a 90% chance to lose $5? Or. Would you pay $5 to participate in a lottery that offers a 10% chance to win $100 and a 90% chance to win nothing? Well… if you studied engineering, you have convinced yourself that the two problems are identical. In both, you are either richer by $95 or poorer by $5. But that’s engineering mindset… No question why we take so long to find someone that can endure us. The reality is that the second option attracts more people. A bad outcome is much more acceptable if it is framed as the cost of a lottery ticket that did not win than if it is simply described as losing a gamble. We should not be surprised: losses evoke stronger negative feelings than costs. If you have no idea what I’m talking about, you should take a look to the book below. It will teach you to avoid gambles and call some costs, investments.
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Vicente Valencia
Weekly insights on how to perform when it matters | High-stakes decisions. Real situations. No BS. | 👇JOIN +2k readers 👇
Imagine you are building a hospital. Actually, make it two. Both under PFI contracts, aka, another acronym in the PPP world. One morning, your contractor goes into liquidation. That morning arrived on 15 January 2018. The contractor was Carillion. The hospitals were Royal Liverpool and Midland Metropolitan. Construction stopped. Unfortunately, patients could not be admitted to a PowerPoint explaining the risk allocation. Fortunately, only their taxes were claimed. The projects had to be...
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