Have you considered your opportunity costs? - Therese Gedda – International Keynote Speaker and Award-Winning Entrepreneur
entrepreneurship,Productivity
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19 Sep Have you considered your opportunity costs?

Imagine that you are in the following position…

In order to reach your goal of developing a successful company you believe that you have to expand your current business activities. In order to do this, you have realized that you would need to get in contact with some experts in a certain industry. And in order to do that, you are thinking of organizing an event which will showcase your company and allow you to network. But organizing an event means that you will need to contact a venue, a caterer, and entertainment. And even before that, you should brainstorm with your business advisor and decide everything that your event needs in order to be successful. That’s a long to-do list. Thinking about it, you decide to take a break and browse the internet. You are then invited to go out with a friend of yours, so you decide to really focus on your work later. Later becomes the next day.

What you don’t know is that if you had met with your business advisor that day, he would have remembered that a certain friend of his was in town for the evening and could probably give you some advice on your project. A meeting for later that day would have been organized, and you would have been introduced to a woman with extensive ties to the industry that you are currently interested in. After hearing your pitch for the new business expansion, she would have been impressed and invited you to an after-work the following week. At that after-work you would have been recommended about the type of event you should organize and connected to a caterer who would give you a discount.

Of course, there was no way that you could have known that all this would have happened. Still, the opportunity cost of you deciding to browse the web and go out that one day was that the other chain of events, which led to you being able to plan the perfect event, was never set in motion. It may be impossible to predict exactly what could happen if you do or don’t do something, but it is important to at least try to consider opportunity costs of actions. Is the opportunity cost of you going to a movie that you don’t finish your project on time? If so, was it worth it? On the other hand, maybe you were really in need of a night of relaxation after a tumultuous and stressful month, and so prioritizing some time off at this moment was your best decision.

 

Or this example…

Jeff has known for a long time that he truly wants to become a gourmet chef. However, he is advised that the culinary school that he wants to attend would be extremely expensive and the competition to succeed there is fierce. He also learns that it would take many years after graduation for him to work his way up to being the kind of chef he was hoping to be. In addition, his friends and family are encouraging him to follow one of his other talents and go into computer programming, something he has proven to be great at. Dreading failure in the competitive school, and nervous about the difficulty of supporting himself while studying there and the years of hard work that it would take to reach his goal, he decides to go for the safer option and studies programming for two years at a local college. He gets a job right out of school making a fairly good wage. But 5 years down the road, he finally admits to himself that he simply isn’t happy doing what he is doing.

One of the opportunity costs of becoming a computer programmer in this case was that Jeff ended up being in a career that he wasn’t truly passionate about. Sure, he never took the risk of an unknown future, and he never paid the high culinary school fees. But if he had tried to follow his dream and stayed with it long enough to become a top-class chef, not only would he have been earning wages that proved the money he spent on education to be a wise investment, but he would have been doing something he truly enjoyed. He didn’t truly consider the opportunity cost of not doing what he was passionate about, and instead gave in to his fears and focussed on a goal that belonged to his friends and family, not to him.

What’s your opportunity cost?

When you are doing a task, focus on whether or not you are doing it for the right reasons. If you are working toward a goal that isn’t truly yours, does that mean that you are sacrificing a goal that really motivates you? If you are using your time to do something, what is it that you aren’t able to do with that time? Are you doing things that maximize your ability to meet your true goals? And if you are doing something because you enjoy doing it, is it the most enjoyable thing you could be doing at that moment? Time is a precious commodity, and maybe some people do not focus enough on using it to the best advantage.

 

Before you start with something, ask yourself these 3 questions

1. Why am I doing this task? What goal is it helping me work toward?

2. What is the actual opportunity cost of doing this task right now instead of another one?

3. Is it the best thing that I could be doing to move toward this particular goal? Am I maximizing the effectiveness of my time and energy right now?