Every decision you make–big ones like whether to go to med school or law school, to little ones like whether to work on the Smith case this morning or work on marketing instead–require an investment of time, energy, money, and mental focus.
You consciously or unconsciously calculate these costs, along with the possible return on your investment.
But there’s a good chance you are omitting something from your calculation. It’s a cost that most people don’t think about, but should, because it might be your biggest cost. Deciding to make that investment might also result in a much bigger payoff.
It’s called the “opportunity cost”–what you give up by taking on project A, for example, when you could instead use that time, money, and energy, to do project B.
Project A might require less time. But when you factor in the cost of losing the benefits of project B, you might decide project B is the better choice.
Savvy investors understand the need to calculate the opportunity cost of their investment decisions, and so must we.
Of course we must also consider the opportunity cost of turning down one project in favor of another. I’ve turned down invitations to speak because I had other things I could do that offered a better return. But in so doing, I lost the opportunity to get my name in front of new people, which, long term, might have had the bigger payoff.
Every decision to do something includes a decision to not do something else.
Look at your task list and see what you have flagged to do next. Ask yourself what you might be giving up if you do it. But also consider what you might be giving up if you don’t.
You invested a few minutes reading this post, minutes that could have been spent reading something else or doing something else. Did your investment pay off? Was it worth it to be reminded about the importance of considering the opportunity costs of your decisions?
If it was, then I made the right decision to write about it.