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🍀 OPPORTUNITY COST MINDSET - Issue #76

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Sunday Retazo

December 12 · Issue #76 · View online

Hi, I am JOE and I write on "Mindful Productivity & Cerebral Happiness". My weekly newsletter is an endeavour to share life lessons, some thoughts, quotes and links to articles/podcasts/books, I discover over the week. Let's gear up to connect the dots and 'Unlock Human Potential'.


Hey Friends,
During the week, I was listening to a Podcast wherein I have heard a term called “ Opportunity Cost” being discussed on it. Although, this term is used more in economical sense but I found this concept quite interesting to think through in non-financial way. I digged deep into it and stumble across few good work. I have particularly liked this research paper on “Opportunity cost neglect in public policy”.
In this 🗞️ Newsletter, I share how you can use the concept of opportunity cost to make better decisions. But first, let’s talk about what opportunity cost is all about.
In non- economist speak Opportunity Cost means “Whenever you say yes to something, you’re automatically saying no to other possibilities and their potential benefits”. It translates into the potential benefits that we miss by choosing one option over another. It is the estimated value of the best alternative or the best option that one misses out as a consequence of picking one particular option.
For Example: Spending a limited resource, like Money could be one of the example. Suppose if I have Rs 50,000/- to spare. With this money, I may choose to buy a smart phone which I have been thinking to buy for sometime OR I can give it to my parents becuse they need it for their gainful requirements OR choose to invest in mutual funds Or put it in fixed deposit. The multiple opportunities available to me in this situation comes with the ‘opportunity cost’ of being unable to spend that amount on other stated alternatives.
Most of us have either heard or experienced such situations on a subconscious level. We do realize that we can’t do everything we want at the same time. But opportunity cost is more important to our life and career than we think. In recent years, I’ve been more aware of this phenomenon, and as a result, i did make an exponential improvements.
Types of Opportunity Costs ;
There are two types of opportunity costs: Explicit and Implicit. Explicit costs are more direct which are commonly accounted for in a typical accounting way. Implicit costs are often invisible. For example, Time is an intangible cost. I could be doing something else right now, instead of writing this newsletter. I have to decide: Which action gives me better results for my Life Skills Lab ? That’s why, Subconsciously we are aware that we can’t do everything we want at the same time. However, when we are more aware of this concept, we can make better decisions and reduce this cost.
Opportunity cost calculation is essential to individuals, corporations and governments, where there are decisions to be made regarding limited resources like time, money and effort. Choosing one of the scarce resources always leads to a trade-off in gains. It is important to account for risks associated with the different available options.
How to Calculate Opportunity Cost ;
The way to calculate the opportunity cost is to subtract the value of the option from the value of the alternative that is foregone. In simple way, it’s :-
Opportunity Cost = Return on the best foregone alternative - Return on the chosen option.
There is no denying that certain external constraints make us overestimate the opportunity cost, as we start to imagine all the foregone options as a missed opportunity and start to see the situation irrationally. This can cause a negative emotional and psychological reaction, like regret & wavering in decision making or probably total collapse in decision making.
The opportunity cost should not be viewed as the sum of all your skipped alternatives, but only the value of the best one which is foregone.
Many of us fail to take into account the various opportunity costs. We need to actively question ourselves about the alternatives that may be missed out by deciding on a particular option.The often neglected cost of waiting too long is also a decision that can incur a significant amount of opportunity cost, as we lose the time window to take action & in-turn losing the better option due to delay and inaction.
Not taking an action is also a decision that needs to be evaluated, just like other options.____ Joe Sehrawat
Opportunity cost in non-financial situations is more difficult to quantify. The loss or gain with choosen option while foregoing another can be subjective and not readily comparable. However while deciding on it and factoring the reality of opportunity cost may lead to the better decision making ( It’s a high probability & not a definate certainty).
Do take a cognisance of it or just think about it while making your permanent choices and long term decisions.
Have a great week! Stay Safe
Joe
PS: Brain Trust :
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❤️ 🧠My Favourite Things of the Week : 🧤🧤
Hey friends, In this section, I share some of the valuable Life Lessons,Thoughts, Quotes and Links to articles/podcasts/books which I discover over the week. Do check them out as well:-
🍀 Productivity Principles :
FOLLOW THESE PRINCIPLES TO ENHANCE YOUR PRODUCTIVITY :
✍️ Quote I'hv been thinking about:
“Talent sets the floor but character sets the ceiling.“— Bill Belichick
🍀Fleeting Tweet for Value Addition :🕊🕊
Joe Sehrawat
We often think of buying something uncommonly expensive for our loved ones.

A better option would be to give the gift of love itself. That is,a gift that helps its recipient to see and understand love better. It's an emotional skill which can foster and sustain 💕 Love.
⌛️End Note :🍀🍀
📍 Thank you for reading my Newsletter till the end, If you have liked it then ‘Do give a thumbs Up👇‘ and let me know your views. You can share it with your friends to see if they too like it as well.
📍PPS: Brain Waves:
  • Enjoyed the read? You can share the love with fellow curious minds on TWITTER or INSTAGRAM.
🏡🧭➡️ My Home Address on the Web - www.joesehrawat.com
I will meet you next Sunday with another edition of ‘Sunday RETAZO’. Till then “Take good care of yourself”.
Joe Sehrawat
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