Reason #335: Opportunity Cost

Posted at June 30, 2010

InvestorWords.com defines “opportunity cost” as follows…

The cost of passing up the next best choice when making a decision. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used for.

But the phrase has viability outside of the cold, hard world of big finance as well. In fact, I would say that every decision we make has an opportunity cost. I will go a step further and say that our entire life has an opportunity cost. Of course that larger sense of the term can be broken down to all the little decisions we make over the course of our lives. I believe the biggest single factor in evaluating the opportunity cost of our daily decisions is this…did I pass up the opportunity to make a difference and impart real value to my existence, or did I just play it safe? I believe we often look at this in a distorted way, thinking that the cost of doing something “benevolent” is too high…that I just can’t afford it right now. After all, I have to take care of me first. But this “me first” attitude is why we fail time and time again in the course of our daily, mundane and unconscious efforts at opportunity cost analysis. Stack all these “play it safe” decisions into a life span and you have the largest opportunity cost breakdown imaginable…a wasted life. The opportunity cost of stepping out of the safety net you have built to ensure less riskiness to your life is too great to ignore. It is the cost of a meaningful life. People may scoff at your decisions and say that they are “imprudent” or “impulsive” or just down right stupid. But that is because they are stuck in the world of living only for one’s self and blind to the tremendous value of their real human potential. Yes opportunity does cost and in the sense that I am speaking, it costs big. Your opportunity to do something today to make a difference, to make this world a better place, or simply to make someone’s day a little brighter, has a value far greater than your efforts at eaking out a living and being impatient and intolerant with anyone or anything that you feel is interfering with that effort. Are you (am I) really willing to pay that price?