First off, this going to be one of those narcissistic blogs. We have several checkpoints and feedback loops established to avoid any sort of digression in that direction. Anything remotely approximating, bordering, or second cousins to Ego are for humor’s sake, not that we are claiming to be funny. We are young, naive, and will not pretend to be a value-add for anyone other than ourselves. The purpose of this blog is to document things that we believe make successful businesses, mistakes that smart and/or powerful people make*, and smart lessons that other intelligent people have taught us, all in the hopes that one day we can compile this into a functioning career.
Let the games begin…
Opportunity cost (for those Art History majors out there who didn’t take an econ course or never made it to class because sleep seemed like a better alternative) is the cost of forgoing your next best alternative. An example: the time and energy we spend writing this blog could be put to use doing any number of productive things. We must narrow the options down to the “next best” forgetting about things like collecting Subway coupons, selling toothbrushes on eBay, buying toothbrushes on eBay, alphabetizing our CDs, or trolling the Craigslist personals as all of these things (except maybe Craigslist personals) clearly hold little value. We should probably also not include creating world peace or training for the World Mixed Couples Badminton Championships, because given our resources (skills and time) this is not plausible.
Obviously the debate can get complicated. But for arguments sake we will say that my opportunity cost is the education I would get from doing the mountains of post graduate work I have assigned to me on a daily basis, and my sister must forgo a few minutes every day of making sweet excel models. Given that she is paid to make sweet excel models and I pay to do homework one might call the cost of this blog a rather hefty one. But, all that it really means is that this blog is super valuable, so valuable, that we sacrifice our invaluable would-be-work time to do it.
You must promise us to memorize and thoroughly understand this entire definition with all of its nuances and rambling asides, including this important subtlety: too often people evaluate the short-term opportunity costs when they make decisions. They don’t consider the third and fourth iterations and consequences of a decision. This is probably because there is a vast amount of uncertainty about the future; however, that does not mean it is worthless.
Anyway, opportunity costs are important. They are particularly crucial in the strategic sense. Evaluation of opportunity costs, including the unknown consequences, is strategy at its most basic and effective level. This blog is going to be dedicated to evaluating businesses and situations that we encounter on a day to day basis with an eye towards strategy and mouth towards, “what we would do differently if we were running the show” or “what we think is working.” In addition, we’ll try to include smart thoughts that other people have had that might be useful and/or entertaining.
*We are still trying to establish the correlation between the smart and powerful
**Disclaimer – neither one of us can spell or edit appropriately. You can expect to see AND where there should be an AN on numerous occasions.
Tags: opportunity costs, Ashleigh Williams, Jonathan Williams
