A Few Thoughts on Opportunity Cost

Right now I’m in the middle of a bunch of projects- car upgrades, garage reorganization, office makeover and a store expansion. There’s no question that these projects are taking time, resources and causing me more than my fair share of headaches. So the question floating around in my head lately is “Why?” Why am I doing all this stuff?

Clearly it’s because I must believe that after finishing these undertakings I will, ultimately, be better off than I was before. And then I started thinking about opportunity cost….

Obviously any money I put into my car (or any project) is unavailable for other uses. But what about intangibles? While my car is being overhauled I can’t drive it. What is the opportunity cost of three months of enjoyment? If a mathematical formula could be created, would it show that there is a net benefit with regard to my endeavors? Or is it possible that, when factoring things like utility, pleasure, peace of mind and finances I am actually running a deficit and I don’t even know it.

I do know this: On several occasions I have thought “I shouldn’t have done this- I should have left good enough alone.” But hope generally carried me through. I believe people are very good at creating the reality they want. Perhaps a mathematical analysis would be insufficient; how do you account for the illusion of desired outcome? Cognitive dissonance always wins in situations like these.

What could have been will always remain unknown.

2 thoughts on “A Few Thoughts on Opportunity Cost

  1. It’s hardly a mathematical treatment, but I find that most folks just run on inertia, and the general fear shared is stagnation. So, whether or not the net result is actually a deficit of utility, we 1) can’t know since we aren’t living deterministic existences, and 2) need the stability that instability gives us. If we’re moving in any direction we take that as a forward progression, reorienting the world in such a way that the direction we’re moving in can be considered ‘forward.’ When you think about people who, for example, go into retirement and then find themselves lost — drowned in their own free time — they get extremely uncomfortable, and before they know it they’re back in the workforce. Sure, some people are perfectly content living a more-or-less trivial existence out after they’ve made a mark they’re proud of, but for others there’s an intrinsic need to always be moving, learning, building, or destroying. And they do it because there’s something they’re good at, and it’s something they can do, and not doing it is a painful idea. You’re just one of those people who can’t be satisfied standing still; if we were meant to do just that, we wouldn’t have legs.

  2. Yes, that was the argument I was making- That we can’t know if we unwittingly incur a net deficit.

    The axiom “If you’re not moving forward, you’re moving backward” is definitely applicable where change is involved and lends credence to your suggestion that people fear stagnation. However, I think people can reach a point where something is “done.” In other words, when a pursuit reaches its zenith there is no further need to modify or restructure. I could, for example, conceive of the “perfect car.”

    I don’t move in a perceived forward direction for the sake of preventing stagnation. Rather I move “forward” because I believe it’s possible to achieve a higher level of existence. I am perfectly willing and content, in the presence of satisfactory perfection, to stand still.

    But this is a tangent of my primary train of thought which was: what is the real cost of my projects? Am I better off after doing them? And the answer is fairly simple. In lieu of the fact that I have no actual way to quantify results I will decide that, yes, I am better off (barring some obvious failure). I agree that inertia (or “hope” as I called it) carries us, but I don’t go on the journey for the ride (moving to move). I’m in it for the expected positive result, even if that that result is an illusion.

    Ultimately opportunity cost is a marginal consideration and math cannot provide insights into emotional equations.

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