A Better Understanding of Opportunity Cost

You might remember when I previously discussed opportunity cost in this space. If you missed it the first time around, I encourage you to swing back around to read it. It’ll help to put more of what I’m about to say into context. Put simply, opportunity cost represents what you may have potentially enjoyed had you not chosen the thing that you did.

The Cost of Alternatives

This introduces a much more complex and nuanced understanding of decision making and the costs associated with making a decision. In choosing one thing, by definition and circumstance, you are not choosing every other thing. The cost of the hamburger you order at the restaurant isn’t just the $10 check you’ve got to pay at the end of your meal; it’s also the “lost opportunity” to eat a hot dog or pizza or any of the other items on the menu.

By choosing to live in New York, you are necessarily also choosing not to live in Los Angeles or Austin or Seattle. You may be able to explore some of these opportunities later, just as you can order something else from the menu the next time you visit, but the time you spend going anywhere or doing anything cannot be returned to you. That’s why you’ve got to ask what your time is worth to you. By choosing NOT to start your vlog or podcast today, you’re missing out on the potential opportunity for reach, for growth, for profit that may have gained by pursuing those opportunities.

READ ALSO  5 Powerful Paid Advertising Channels To Use In 2019

The Day Job Decision

A big part of the impetus behind today’s blog post comes from a reader comment on a site where I write and edit. I’m paraphrasing, but the reader basically asked what would be the opportunity cost of choosing a $18/hour job with three weeks of annual vacation compared to choosing a $15/hour job with four weeks of annual vacation. In his decidedly simplified perspective on the matter, he said the opportunity cost would be that extra week of vacation each year.

But that’s just one aspect. True, the first job has one fewer week of vacation compared to the second job. So, by taking the first job, you are missing out on the opportunity for one more week of vacation. But the opportunity cost extends far beyond that. By choosing the first job, you also incur the opportunity cost of missing out on the potential connections or experience you may have gained from the second job.

Let’s say, for instance, that the first job may pay more initially, but there is practically zero opportunity for career advancement. The job is the job, and there is no upward mobility. If you stay with that company for 20 years, you’ll still be doing the same work for the same pay.

By contrast, let’s say that the second job offers huge opportunities for growth. You might not get paid as much initially, but maybe this little Internet startup grows exponentially and you’re on a constant path of promotion. In those same 20 years, maybe you advance from a humble $15/hour job to a chief executive role that pays millions of dollars a year.

READ ALSO  7 Signs It's Time For You to Create an Online Course of Your Own

The Much Bigger Picture

What’s the opportunity cost then? Is it just the one week of vacation? Or is it the untold millions you might be giving up? Or the connections you forge so your children get into better schools, or the friendships you form that elevate your leisure time and bring remarkable joy into your life? It’s all of that and more. It’s everything. Because opportunity cost represents EVERYTHING ELSE that could have been.

So, for all of you out there who are on the fence about whether or not you should start your own online business — whether that’s Internet marketing, blogging, freelancing or anything else — take a moment to consider the tremendous opportunity cost you are incurring each and every day you DON’T get started with building a business of your own.

What are you missing out on?

Source link

WP Twitter Auto Publish Powered By : XYZScripts.com