Opportunity costs...
Category: Self-Improvement
Published: 11/17/2008 10:17 a.m.
Back in high school economics, we learned about an opportunity cost. Opportunity cost is essentially the value of something you didn't choose when making a decision. For instance, lets say I could go to lunch with a friend, or go see a movie and I choose the movie. My opportunity cost is a value of entertainment associated with lunch with a friend. If it is a bad movie, then I may regret my decision, because hind sight shows that the opportunity cost actually had a higher value.
Recently I have been using this concept with stocks. I was investing in a loser (JMBA) and should have just taken my loss and put my leftovers into an index (or a shorting index). Even if JMBA didn't lose money, if something else I had considered gained, then I am losing that potential value of the other investment (or opportunity). This is easy to explain with stocks because of their similar monetary value. It is harder to compare things that aren't so similar.
There are times in life when I consider whatever it is I am currently doing to be a waste of time. This thought implies that my time might be better spent, and that there is some other opportunity out there. The problem is on many of those occasions I am not sure what the better opportunity is. I know what I am doing is not great, but I do not know what I should be doing. Many times when I feel I am wasting time it is out of convenience. An afternoon of lounging in front of the TV on a beautiful day when I could be outside. Usually my only motivation to go outside is to avoid feeling like I am doing nothing. I suppose if I didn't have a TV or a couch that I would spend even more time outside. If I didn't have a laptop or the internet then I might spend more time reading or walking around the city.
From the sounds of that I should get rid of a lot of my stuff, since it seems to be causing me to lose out on these great opportunities. However, I don't plan on doing that. I think if I did that then I would be walking around outside wishing I could be watching TV. It's a bit of the grass-is-greener type situation, but from my perspective I haven't found any great-looking green grass. Eventually I would like to be doing something and feel as if that is the thing I should be doing right then.
This was part of the beauty of CARPOOL. I was doing something productive, with great people, and I was at the top of the game. I was the go-to person, the expert, and to some extents the most knowledgeable person in the world when it came to operations and the web site. I tend to ignore the fact that it took me thousands of hours of work to get to that place. But, a good majority of those were good times, and there was very little waste.
While I hesitate to extend this change to some areas of my life (the ones that provide currency consistency, stability, and security), perhaps that is the area that is killing all of the grass. However it feels much harder to measure those types of things. What is the real value of knowing you will be taken care of for the next six months/years? And is this something you really can know? Scale also matters in that situation, as a lost afternoon is quite a small price compared to losing a entire month or even year. But then again, if the returns scale as well, then I would love to have a year-long walk in the park...