Finding symmetries in an unsymmetrical world ..

Opportunity cost : what have you lost anyway ?

Posted on: January 21, 2009

Opportunity cost or economic opportunity loss is the value of the next best alternative foregone as the result of making a decision. Opportunity cost analysis is an important part of a company’s decision-making processes but is not treated as an actual cost in any financial statement. The next best thing that a person can engage in is referred to as the opportunity cost of doing the best thing and ignoring the next best thing to be done .


 The sad part is that there is an opportunity cost attached to everything, so whatever you do  you will always be tormented by that  feeling of “losing out on something”.


In college, the opportunity cost of slogging it out meant losing out the fun, and social networking .In workplace, choosing a particular work profile meant losing out on exploring other avenues.


So, if there is a COST that is involved to everything, you might as well do things right. Bottom line: there is nothing free out here, if it is, find who is paying for it.

Now the tricky part: The decision making


Define what you want :


The more specific you are on what excites you, and what is it that you WANT, the more likely you are to achieve it.



Analyze why you want and evaluate the alternatives:

Analyzing why you want one thing over another, is as important, because this lets you achieve the tradeoffs in the options abundant world. The more the options open to you, the more should analyze why you chose one thing over another.


Some reasons be may inherently justified, like leaving a job to pursue higher education. Here’s a good example that I came across :


Consider the case of a MBA student who pays $30000 in tuition and fees at a private university. For the two year program this would amount to $60000.This is the monetary cost of education. However when making the decision to go back to the school, one should consider the opportunity cost, which includes the amount that the student would have earned had he chose the decision of remaining in his/her job. If the student had been earning $50000 per year and assuming a 10% increase in salary in the second year, $105000 in salary would have foregone as a result of decision to return to the school. Adding this amount to the tuition fees results in $165000 for the degree.



Just do it :


Simple as it may sound, you are anyway paying for every single decision that you make, you are giving it your time, which by far is the most precious resource that you alone have.


If something is worth doing, it is not worth doing it bad .



The question isn’t who is going to let me; it’s who is going to stop me.


1 Response to "Opportunity cost : what have you lost anyway ?"

Very inetersnaya article. I would like to know more details on please. Over the past thanks
Sincerely George

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