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The ‘Opportunity’ Cost of Being Human

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The ‘Opportunity’ Cost of Being Human

Just being a human being and going through life entails a series, never-ending, of trade-offs and decisions.

Life is not short, but it is easy to think and act as if we are going to be around forever. We won’t, sadly. So we need to make the most of what we have, and when we make choices try to ensure that they are the best possible ones we can at the moment of choosing.

Day to day living presents us with a plethora of choices. If we work for someone else then our choices are curtailed whilst we are at work, but if we run a business then we no longer have the comfort of it being out of our control. In fact the number of decisions and choices we are faced with multiplies to where sometimes we no longer think before we decide; we simply go with the flow. Especially if we are under long-term stress, caught in situations where we feel powerless or are simply overwhelmed.

Mindless choices and decision making especially in the realm of business is not a good thing. In order to maximise the benefits, to reduce the potential harm and to develop that glorious feeling of being in control we need to have a framework to use that helps us to decide better and more consciously. And no this is not yet another article on the value of mindfulness; the answer is more pragmatic than that.

The field of Behavioural Economics applies economic theory to human behaviour in an attempt to explain the often irrational (in an economic sense) and bizarre choices humans make. It is an odd field of study in itself, and one thing stands out to me, and that is the idea of ‘opportunity cost.’

Simply, this holds that resources are finite and if we choose to do one thing we no longer have the resources for another. For example, if we buy a brand new Audi we will have less funds available to spend on a new lounge suite. If we decide to go on a cruise to the South Pacific, we can no longer fly to France.

If we begin to apply this thinking to our business (and potentially, even more beneficially, to our non-work life), we will begin to make better, more considered decisions. This does not mean we will make right decisions every time, but on the whole, we will make better decisions.

Here is a suggested framework:

  • If I do X what will it cost me in time/money/resources?
  • Can I afford the resource cost?
  • What will it benefit me/my business/my customers/my family?
  • What will I have to forego if I X?
  • Is this a trade-off that I am willing to make?

If the answer is “Yes”, then at the worst you have made a conscious decision based on your conscious thinking.

We have all the time we need to do anything we want to. But we don’t have enough to do everything. So we have to choose. Choosing can be either via your ‘gut feel’, by laziness or through a frame or lens. I am a big fan of ‘gut feel’ (ignore the voice in the back of your head at your peril), but often, ‘gut feel’ works better if we pause for a minute and run through the framework above. At the very least, we should at least ask, “If I do this what won’t I be able to do in its place? And am I happy to pay the ‘opportunity cost’ involved?”

Life is long enough to do whatever we want but too short to do everything. It is also too short to waste the choices that are presented to us by not at least pondering the cost involved.

Happy choosing …

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