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Monday, October 29, 2012

Opportunity Costs



In today's world time might be our greatest resource. In fact, I would argue it is our most precious resource. One we can never replenish. Once it's gone, it's gone forever. With that in mind opportunity costs play an enormous role in our day to day.

Opportunity cost is basically the loss of potential gain when one alternative is chosen over another.


Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone (that is not chosen). It is the sacrifice related to the second best choice available to someone, or group, who has picked among several mutually exclusive choices.[1] The opportunity cost is also the "cost" (as a lost benefit) of the forgone products after making a choice.



Basically, if we choose to hangout with friends an opportunity cost for that action could be studying, and the opposite would be just as true. The crazy thing is this: once the opportunity passes, it may never present itself again. That is a real possibility. 

The difference between greatness and mediocrity is not as unachievable as some may think. The truth is  many of the top performers (athletes, CEO's, musicians, doctor's, etc.) have sacrificed the easy road while calculating their opportunity costs to reach their goals.


It is true, nothing of value comes easy. Thomas Paine once said, "That which we attain too easily, we esteem too lightly." 

2 comments:

  1. opportunity cost basically is saying you have a decision to make, right? Watch tv or go to gym. go to gym or read a book. read a book or do facebook.

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  2. That's fundamentally correct.

    We have only so much time allotted to us, and have choices to make, at times critical choices.

    Although some choices seem insignificant, they will affect the "big picture". Example: Not doing homework so you may be able to hang out with friends. What might be a trivial thing could turn into a bad habit. Not to mention what could happen when hanging out with friends (violence, crime, jail, etc.).

    Remembering what our opportunity cost is at any given time will keep us on track to achieving long-term goals.

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