Welcome to Shop Talk! While we love providing you with jam-packed, actionable posts, we also wanted to share quick, thought-provoking snippets here and there — from our brains to yours.
We talked last week about the joy we get from applying a principle from another field or industry to our businesses. We've said it once and we'll say it again: We're nerds. (Who really like Planet Money.)
We bet you're out there, busting down the sunk cost fallacy like warrior ninjas. We couldn't be more proud.
Today's mission, should you choose to accept it: Embrace the concept of opportunity cost.
Put simply, opportunity cost is "A benefit, profit, or value of something that must be given up to acquire or achieve something else." Furthermore, "The notion of opportunity cost plays a crucial part in attempts to ensure that scarce resources are used efficiently."
Take the opportunity cost of going to dinner with a friend. You can't use that money on anything else and you can't get the time back. But maybe you had an incredible time bonding, you ate delicious food, and you feel less stressed now. Totally worth it, right?
But now imagine that you accepted a gig with a terrible client. It's boring work, you're not learning anything new, they're paying you diddly squat, and it leaves you feeling drained.
Instead, you could have been going through a course to increase your subject knowledge; working for a higher-paying client; doing an exercise class to get that post-work out high; or having a coffee meeting with a potential collaborator.
We know that sometimes in life and business, you have to do things that are less-than-desirable to make ends meet.
But remember this: The minute you say yes to one opportunity, you ensure that, for the time being, your resources (brain power, money, energy, and time) are unavailable for any other possibility.
The solution? Before taking on any opportunity, think about the monetary and non-monetary costs associated with it. Could your available resources be directed to a better opportunity?
Think about this, too: For every minute or hour you spend cleaning, cooking, or working on certain pieces of your business likely not related to your expertise, you're giving up time and energy that could be spent on more high-value activities. (Yes, we're giving you justification for hiring a cleaner, meal prep service, and/or a VA. You're welcome!)
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