Understanding the Hidden Costs of Opportunity

Master your choices and career…

When you say yes to something, you are automatically saying “no” to other possibilities and potential benefits. And this is called “Opportunity Cost”.

Most of us have heard of this or are aware of this concept at some subconscious level. It is obvious that we cannot do everything we want at the same time. But opportunity cost is much more important to your life and career than you might think. In recent years I have become more aware of this concept and as a result my career has developed significantly in this direction.

In this article, I want to explain how you can use the concept of opportunity cost to make better decisions. But first, let's talk about what opportunity cost is, what do you think?

…

1| A Simple Definition of Opportunity Cost

This is an important concept used in economics. Simply put, opportunity cost represents the potential benefits we miss out on by choosing one option over another.

There are two types of opportunity costs: Explicit and Implicit. Explicit costs, also called accounting costs, are often used in conjunction with business and economic terms. Here we will focus on the second one, that is, the implicit one.

Implicit costs are often invisible. For example, time is an intangible cost. For example, I could have created a YouTube video instead of writing this article. I have to decide: Which action will give me better results for my blog?

…

2| Risks of Ignoring Opportunity Cost

It is easy to ignore the cost of hypothetical opportunities because there is often no tangible price involved. However, we face these costs every day, even if we are not aware of them. If neglected, opportunity cost will negatively affect our lives, careers and relationships. There are two main risks at this point.

a) Working on Autopilot

A career on autopilot means you work without achieving any goals. I went through this and at the end of the day it made me feel hopeless. You put yourself out there, plan and execute your hours, then go home and get paid. Like rinse, wash, repeat. But in the end you achieve nothing; In other words, you do not have any important knowledge, experience or assets.

It may be tempting to go on autopilot at this point because at the end of the day, we all need to pay our bills. But at the end of the day, you want to have a career that gives you inner satisfaction, and this doesn't deliver that.

I always refer to Peter Drucker's book “Managing Yourself” to remind myself of what's important. As stated between the pages of the book:

“There is nothing so useless as doing with great efficiency what absolutely should not be done.”

b) Missed Return on Investment (ROI: Return On Investment)

Would you currently spend your time on something more effective and useful, or on something that doesn't benefit you at all? Because there are many things that do not give us a return on investment. Our time and resources: Investments.

Binge reading the news, scrolling social media, checking emails, reviewing your website stats for no particular reason, etc. All such actions are time consuming.

You wake up and say you're just going to “check something” and before you know it, 2 hours have passed and you haven't done anything productive.

Conclusion? Answer: You won't gain anything.

…

3| Prioritize Your Preferences

So what does all this mean? If you want to be more aware of opportunity cost in your career, you need to start prioritizing the things that are important to your business.

Take my own website. I always prioritize content over design. Of course, both content and design are important. A cluttered blog site destroys the reading experience; However, unnecessary content does not arouse interest in any reader. You understand, right? One is more important than the other. But this does not mean that I neglect the design of my website. I'm putting more energy into working on my content, as that's the main priority of my blog.

Prioritizing is as simple as making a list. Here is my priority list when it comes to my blog site:

1. Publish a quality article once a week, because that's my only job. This is the most important thing for my blog. What if there is no article? There is no blog either.

2. Offer quality products. Because my blog generates income by offering courses and books. What if there is no income? There is no blog either.

3. Gain new knowledge. I'm constantly learning new things. Without these, I cannot publish new articles, books and courses.

4. Listen to readers. This helps me stay connected with people who read my blog. Information and feedback from readers inspire me to continue improving.

5. Other things… My list is longer, but in terms of ranking, anything other than these top 4 isn't that important. My prioritization is about knowing what is most important.

You can make a list of your top 5 priorities if that makes more sense for your career. However, I do not recommend creating a long list of 10 or more items. Realistically, we can't focus on too many things at once. And to be clear, the first 4 items on the list I listed in the example above are related only to my career, not my entire life.

If you want to try this strategy, make a list, keep it somewhere visible, and live by those priorities. I would also advise you not to waste your time pursuing opportunities that do not really contribute to your most important priorities.

…

4| A Personal Example: Don't Get Ahead of Yourself

Let me give you an example that will illustrate how difficult it is to master opportunity cost. Even though my priorities are right, I still come up with new ideas and start working on them right away. But along the way, I realized I wasn't following my top priorities. And then I could do something else.

When the Covid pandemic started, I came up with the idea of ​​an online course on remote working. I asked a few people what they thought and everyone was positive, so I immediately started creating the course. But I didn't spend enough time listening to my readers.

Also, there was something else I forgot. I was also working on another course about starting an online business. This was digitalbusiness.school. I've been mulling over this course for about a year. And that's something many of my readers really wanted.

But because I got ahead of myself (i.e. forgot about priority 4), I had to pause my studies at digitalbusiness.school for about three months. The truth is, I could have finished my business course, started it, and made more profit from the remote work course.

That's the opportunity cost here. But instead, I created a small course that didn't produce the same results. In fact, digitalbusiness.school received much more attention than the remote working course.

…

5| Eliminate Preferences

Our first ideas are not always the best. Just like my decision to build one course upon another. I should have weighed my choices more strategically before getting down to business. In this case, my priority should have been “listening to the readers” as the determining factor. I ignored this when creating the course on remote work. My readers actually wanted the business course more.

At any given time, you may have many options when it comes to spending your time. Should you go drinking with friends or stay home and finish your book on investing? Should you check your emails in the morning or write in your diary? Should you spend less money and more time taking the bus to work or buy a car?

We can't do everything we want at the same time, which is a fact. We must make a choice. The paradox of choice shows that more options are not always better. We are bombarded with a variety of possibilities these days. So how do we know which one we should choose?

Clarifying your priorities will help eliminate many possibilities. This is the secret to better decision making.

There will always be different ideas or new opportunities knocking on our doors that will excite us. It is up to us to analyze these ideas and opportunities correctly. When faced with a decision, always ask yourself: “Does this opportunity really fit all of my priorities?” Because if you answer “Yes” with confidence, go for it…

Darius Foroux