Random Thoughts

Strategy & Entrepreneurship

Opportunity cost

Tuesday, February 27th, 2018

One bright day you go to the market, you have a bunch of money in your pocket and want to get a dessert. You just ignore the things you don't like and there are still many options available, very good ones. Damn, you do like some sweet taste and you can't have them all.

Facing the loss of potential sampling from other alternatives, the choice becomes harder. You need to pick one, and that means not picking all the others.

On life, business or development, it's all the same. This is called "opportunity cost" and represents the amount of gain you are not getting from the opportunity you have chosen. Think about, if you looking for a date, or searching for a job, or choosing a technology to build your project... All decisions we make, and the ones that are made for us, this cost applies.

The time factor

It's a fact that everyone have a limited amount of time, as in 24h/day, as in 1 lifetime. There are too many variables to measure opportunity costs of the decisions, and these variables varies a lot from different kinds of opportunities. So let's take the time as a universal measure and allow me to elaborate how this can help.

Deciding, no matter what, but when

The time factor can't help much on deciding the dessert, I guess, but it does help to take into account that a decision need to be made at some moment. The time is passing around you and you are still looking at all the options. It will matter if you get the strawberry or lemon flavours? Well, at surface it will not. Decide and pick one.

The most successful business keep the importante on the momentum. They are commited with the timing. Make thing happen before the opportunity goes away. Rushing or delaying the decisions can cause a lot of trouble and can result in failure. On other hand taking decisions in the right timing can be the crux of success.

Planning for the future

We are often afraid of make bad decisions. Too early or too late. Or simply too wrong. That's what happens when someone is inexperienced and don't have enough resources to take decisions. The resources I'm referring here are the material and previous knowledges weighing in decisions.

Future is a abstract time, a time that doesn't really exist. What exist is the present. And on each individual mind, there are memories of the past. A planner mind can take advance from previous experiences and be prepared for the future, when that future becomes present, the mind is ready to take action.

Looking back

Great strategists and decision makers are always looking back. They accumulate a huge amount of experience from it's actions and all that experience are resources to make batter on next opportunities. Great teams usually make restrospective calls and review everything that happened during a certain period. They evaluate how the plans went, how their decisions returned and how they could do better.

Avoid the void

Looking back is great, but one shouldn't stay there. Avoid losing the mind thinking how things could be better if other decisions would be taken. That can cause huge depression and a pessimistic feeling. The past experiences help us to overcome the future experiences, evaluate the successes and mistakes, learn with both and remember, the time doesn't wait, so get back to the present and focus on next challenges.

I have the feeling that everything I wrote above is hight theoretical and my sense of opportunity cost tells me that if I want to make this post better, and make it worth the time invested, both for me as for you, then I should say something that one can really use on practice.

Let me brief for you:

  • Take some time, but not much, to consider the future:
    • Think about your next tasks for the day. A day is a period that you have hight chances of plan well and accomplish result;
    • Think about tomorrow, but tomorrow may depend on today, so be flexible and when tomorrow comes, this will help with your tomorrow's today planning;
    • Think about your week, your fortnight, your month, quarter, semester, year, 2 years, 5 years, 10 years, 20 years, 50 years... Yeah, think about, take some very quiet moment to just imagine how things will be in your life in the future. This is not planning, but somehow gives you some perspective of how to approach the desicions of today because it gives you some general direction for your life;
  • Learn with the past:
    • The past comes fast, all the time you have more past memories accumulating. When you make a decision, try to see the result in a short time, evaluate and try to learn something;
    • Don't regret your decisions, but if regreting something, do it for missing the decision momentuns, learn with that and make better next time;
    • The past teach us both on good and bad experiences, something we forgot to learn the god experiences because we are cheering at it, the same happens when we are regretting for the bad experiences, don't do that, the time comes inexorably;
  • Take notes, be scientific. I know you have great mind, but taking notes have a special effect, something that I would enjoy to write about in another post;
  • Learn to say "no". This is life changer, because learning to say "no" also means that you learn to say "yes". You'll be consciously deciding what's best for you and will avoid a lot of wasted time;
  • The most impostant advice, learn about yourself. You have one life, don't waste it doing stuff that's nonsense for you, the opportunity cost is huge if you make decisions to please others;

That's all for now. I could use my time doing a lot of things, but I decided to write this post because it have a interesting opportunity cost for me, I hope that your reading also worth the time. Please tell me what you think in the comments, of course, if you feel that worth your time and effort. Thanks! :D