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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
I talk about Personal Growth, Management, Infrastructure and More | 👇JOIN +2k readers 👇
Many people challenge my preferred RFP strategy for PPPs: “Pre-qualify strong consortia, set a minimum technical pass/fail, and award to the best NPV bidder? They’ll just bid low and renegotiate later!” I get it. That tactic has been abused in Latin America for years. But we need to ask: Why has +20% (often +50%, +100%, +200%) become almost inevitable there? Let’s look at the real causes: Why PPP prices skyrocket after award 1) Renegotiation is systemic. In transport PPPs, up to 78% of...
Africa. Mid-2010s. You’re in the middle of a multibillion-dollar PPP. Your consortium is assembled. Your lenders are mobilized. Your bid team is burning cash like Tesla compensating executives… The agency launches the RFP. Everyone is excited. A fair, competitive process… in theory. And then it starts: Deadline extended. “More time to refine proposals,” they say. Another extension. Silence. And then another. “These guys don’t seem ready” Drop a new batch of documents in the data room. (Oh,...
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