Calculating The 'Opportunity Cost' Of Opportunities

Fredrick Nietzsche said that “The value of a thing lies not in what one attains with it but in what one pays for it (i.e. what it costs us to obtain it)”. In simple terms, this just means that the value of a thing is found in the process or what it took to get it and not in the event or what one gets with it.

For example, (per Nietzsche’s description) the value of being a millionaire is not in what you do with your millions or ‘millionaire status’ but rather in what it took you to get into that position. Fredrick Nietzsche’s statement gives us an insight about opportunity cost. Resources are limited, many opportunities will present themselves but you can only focus on one or a few and leave the rest.

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Which opportunities should one focus on and allocate resources to? And which opportunities should one let pass by?

Figuring Out The Cost

Before a decision is made on whether we should pursue an opportunity or not, we must first figure out its cost. What is it going to take from us? What do we have to put in to capitalize on or make best use of the opportunity? In most cases, it’s either time or money or even both. Time and/or money that could be spent elsewhere are fueled into the opportunity.

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Two good examples are in travelling abroad for the opportunity of a better life and building a business for the opportunity of financial freedom. Building a business will require a lot of time and some money. So in this case, putting in a lot of time and some money will be the ‘opportunity cost’ for financial freedom.

Now that we’ve figured out the cost, the next step is determining whether one should pay the cost or not.

Is It Worth It Or Not?

It took me a while to understand this but not all opportunities are worth it. It’s not like one is not unable to pay for the cost, it’s just that it comes with a heavy price. Like a pyrrhic victory in warfare. A pyrrhic victory is a victory that inflicts such a devastating toll to the victor that it is almost identical to defeat. Some opportunities are like that but you only realize it in retrospection.

Making the decision of whether an opportunity is worth it will depend on some factors and varies from individual to individual. A family person might not put much worth on the opportunity of financial freedom because he/she may put more value on spending time with loved ones than late hours of work. That will probably not be the case for a teenager.

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The general principle is understanding whether the opportunity aligns with one’s ideals and goals. If it does and one can pay the cost, then it’ll be worth it. If it doesn’t, then don’t go for it.

Conclusion

Calculating opportunity cost is a good way to determine what to do when an opportunity presents itself. Just like with everything in life, opportunities too come with a price. Some are cheap while others are expensive. So we always have to first figure out the cost and see if we’re willing to pay for it.

Opportunities that align with one’s goals and ideals are good opportunities that should be explored because the chance of success will be higher and the process will be less boring. After all, what’s the point of living if one is not alive?

Thanks For Reading!

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