0 saved
11.1K views
Ever feel like you're missing out on something? Well, you are. As American novelist F. Scott Fitzgerald put it: "Our lives a ... Lorem ipsum dolor sit amet, consectetur adipiscing elit. Claudii libidini, qui tum erat summo ne imperio, dederetur. Ego vero isti, inquam, permitto. Equidem e Cn. Heri, inquam, ludis commissis ex urbe profectus veni ad vesperum. Callipho ad virtutem nihil adiunxit nisi voluptatem, Diodorus vacuitatem doloris. Duo Reges: constructio interrete. Omnia contraria, quos etiam insanos esse vultis. Minime vero, inquit ille, consentit. At enim hic etiam dolore. Stoicos roga. Deinde disputat, quod cuiusque generis animantium statui deceat extremum. In quibus doctissimi illi veteres inesse quiddam caeleste et divinum putaverunt. Ergo in gubernando nihil, in officio plurimum interest, quo in genere peccetur. Qui autem esse poteris, nisi te amor ipse ceperit? Animum autem reliquis rebus ita perfecit, ut corpus; Positum est a nostris in iis esse rebus, quae secundum naturam essent, non dolere; Itaque contra est, ac dicitis; Quodsi ipsam honestatem undique pertectam atque absolutam. Inscite autem medicinae et gubernationis ultimum cum ultimo sapientiae comparatur. Bork Sed ad bona praeterita redeamus. Atque haec coniunctio confusioque virtutum tamen a philosophis ratione quadam distinguitur. Sin kakan malitiam dixisses, ad aliud nos unum certum vitium consuetudo Latina traduceret. Piso, familiaris noster, et alia multa et hoc loco Stoicos irridebat: Quid enim?
- Ask: ‘what else could I be doing with this time/money and what would that give me?’
As ...
Lorem ipsum dolor sit amet, consectetur adipiscing elit. Virtutis, magnitudinis animi, patientiae, fortitudinis fomentis dolor mitigari solet. Quorum sine causa fieri nihil putandum est. Negare non possum. Vides igitur te aut ea sumere, quae non concedantur, aut ea, quae etiam concessa te nihil iuvent. Bonum negas esse divitias, praeposìtum esse dicis? Apparet statim, quae sint officia, quae actiones.
Duo Reges: constructio interrete. Illa videamus, quae a te de amicitia dicta sunt. Sit hoc ultimum bonorum, quod nunc a me defenditur; Bork Aliena dixit in physicis nec ea ipsa, quae tibi probarentur; Etenim si delectamur, cum scribimus, quis est tam invidus, qui ab eo nos abducat? Cur ipse Pythagoras et Aegyptum lustravit et Persarum magos adiit? Quid igitur dubitamus in tota eius natura quaerere quid sit effectum? Non igitur potestis voluptate omnia dirigentes aut tueri aut retinere virtutem. Quodsi ipsam honestatem undique pertectam atque absolutam. Prave, nequiter, turpiter cenabat; A primo, ut opinor, animantium ortu petitur origo summi boni.
An tu me de L. Nam adhuc, meo fortasse vitio, quid ego quaeram non perspicis. Nondum autem explanatum satis, erat, quid maxime natura vellet. Quid ergo attinet gloriose loqui, nisi constanter loquare?
Opportunity Costs are difficult to calculate, especially when they relate to non-financial considerations. Focusing on Opportunity Costs might also a risk of ‘analysis paralysis’ arising from fear of making the incorrect choice. Finally, assessing Opportunity Costsaccurately is not always practical for every decision, all the time.
Even ‘saving’ has a cost.
Saving money in a bank account with a defined interest rate has an opportunity cost of the lost returns from an alternative venture that you might have invested in.
Benjamin Franklin: ‘Time is money’.
Franklin coined the term ‘time is money’ which can be viewed as another example of opportunity cost. In 1974 he wrote “Remember that Time is Money. He that can earn Ten Shillings a Day by his Labour, and goes abroad, or sits idle one half of that Day, tho’ he spends but Sixpence during his Diversion or Idleness, ought not to reckon That the only Expense; he has really spent or rather thrown away Five Shillings besides.”
What about dinner?
If you are considering buying pizza or asian food for dinner tonight, then finally decide on pizza. The opportunity cost is the asian food that you did not choose.
Opportunity cost is a key mental model in decision making, economics and creating efficiencies.
Use the following examples of connected and complementary models to weave opportunity cost into your broader latticework of mental models. Alternatively, discover your own connections by exploring the category list above.
Connected models:
- Sunk cost fallacy: when considering past decisions and ‘cutting losses’ moving forward.
- Cost-benefit analysis: in deciding on a course of action.
- BATNA: in considering the best alternative.
- Second order thinking: considering the implications beyond the immediate.
- A/B testing: to weigh up potential opportunity costs.
- Regret minimisation framework: a decision process that imagines the long term opportunity cost of inaction.
- TANSTAAFL: linked to ‘There ain't no such thing as a free lunch’ mental model
Complementary models:
- Compounding: considering the opportunity cost of small consistent investments over extended periods of time.
- Inversion: considering the cost of doing nothing.
- Blue ocean strategy: considering new areas of exploration rather than highly competitive areas.
Opportunity Costs was first introduced as an economics concept by David L. Green in 1984, in his article: Pain cost and opportunity cost. It appeared in the Quarterly Journal of Economics. Its origin is also linked to TANSTAAFL (There ain’t no such thing as a free lunch) in 19th century America in saloons.
My Notes
Oops, That’s Members’ Only!
Fortunately, it only costs US$5/month to Join ModelThinkers and access everything so that you can rapidly discover, learn, and apply the world’s most powerful ideas.
ModelThinkers membership at a glance:
“Yeah, we hate pop ups too. But we wanted to let you know that, with ModelThinkers, we’re making it easier for you to adapt, innovate and create value. We hope you’ll join us and the growing community of ModelThinkers today.”
You Might Also Like:
- Actionable summaries of the world's most powerful ideas.
Subscribe now and download this practical guide to transform your thinking, plus recieve one short, powerful and actionable idea in your inbox each month.