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Book 1 - Life’s Opportunity Cost
Our main resources are time, our labor force (or body), our intelligence and the product of all that, which is the money we make or our belongings.
We spend all our life exploring these more or less finite resources, just as we spend all our life exploring earth's resources, we are nothing but explorers of ourselves. So there are certain economic concepts that can be helpful in our life and in our self-management, one of those concepts is Opportunity Cost.
It's a concept with simple premises but which becomes somewhat complex. It’s even possible to express it in numbers. What matters to us here is to understand the concept to apply it in the management of our lives.
The opportunity cost of an action or activity is simply the main alternative to such action or activity. Nothing more than that, the alternative; when we watch a bad movie in the theater we get revolted because of the lost time and we say something like I could have gone to the concert, that is the opportunity cost of having gone to see the movie, it is the possibility of having gone to the concert instead. Everything we do has an alternative, everything we do has an opportunity cost. Therefore all our activity has a value when compared with another activity which we could be doing.
We speak here of value, of cost, but what is the currency. The currency is the time we have to spend in our life. Whenever we choose to watch a television series instead of reading a book, we are taking our valuable time and spending it with the television series and vice versa. That time will not be refunded, but what matters, we have a lot of time! Actually not, one day we're too old, one day we die. Time is a finite resource, time ends and that is why it must be valued, that’s why it is valuable. An afternoon spent in four walls could be an afternoon spent outside. Our time is valuable, our resources are valuable, don’t wait until they say you have a month to live to start valuing your time and to use it well, don’t wait until you are paralyzed to want to make good use of your body, don’t wait until you have Alzheimer's disease or another degenerative disease to value your intelligence and your memory. All this is valuable, your time, your body, your intelligence, use them, spend them wisely. We are all millionaires; we have this world of resources that is life. We've all thought about how we would spend our money if we were millionaires, here it is, spend well your million minutes, a life of 80 years is more than 42 million minutes. Have a fortune of 42 million and on top of all spend on nothing and be miserable! No!
Examples of Opportunity Cost
As we saw, opportunity cost is our best alternative to an activity or action of ours. It’s just that, an alternative. Imagine that we have two options for holidays, Dubai or Paris and we decide to go to Dubai, then the opportunity cost of the choice we made (in this case go to Dubai) is not going to Paris. I.e. we went to Dubai and this is very good but it cost us not having gone to Paris.
If we have two options to spend a Sunday afternoon and they are going to the movies or take a walk on the beach, and we choose to go to the movies then the opportunity cost of going to the movies is not going for a walk on the beach.
We like Mary and Julie and can only marry one, the opportunity cost of marrying Mary is not marrying Julie.
If we have two options where one is to stay home resting after returning from work or getting a second job with a good salary and we choose to stay home resting then the opportunity cost of staying home resting is not getting the second job we could have, in other words our rest is as valuable as a second job with a good salary and vice versa - a second job with a good salary is as valuable as our rest.
Hence it becomes clear that the opportunity cost is totally subjective and varies depending on several factors, but mainly depending on what we want, that’s why we can never talk to a person and say, hoo! you're wasting your life going to art school while it costs you not being able to go to economics school, That will cost you a lot of money! You could make lots of money studying economics.
The truth is that for that person, being in art school is much more valuable than being in economics school. Contrary to what we may think this goes far beyond money, the cost here is measured by the degree of happiness we can achieve, for that person, an artist's life is a life of happiness, a complete life and an economics course even with a guaranteed job at the world's richest bank, with an astronomical salary, never, but never will match an artist’s life for that person.
So this opportunity cost that we speak of is not an exact science, here we are getting away from the concept of economy’s opportunity cost, because we will not hire an economist and tell him please analyze my life and calculate the cost of opportunity of a career in law or economics so I know what to follow. This doesn’t work, it would only work if the only goal in life was to make money, because if so the economist could tell us for example that in the current market salaries of professions related to economic courses are lower than salaries relative to law courses, so it is best to follow law and thus you will be richer.
But the human component is lacking here, of course we all want money but money is not the basis for anyone's life. Money is not an end, it is a means. Because even money has an opportunity cost, i.e. if we stop doing what we like to go after money then all the money we get will be valued in all our passions that were left behind in order to amass this money.
Let’s suppose for example that a talented writer and absolutely passionate about the art of writing decides to quit writing and go take a course in economics. This whole life of an accountant, the people he meets, the wife he has, his family, the world in which he lives, has an opportunity cost, has an alternative that is the life of a writer who struggles to achieve success, an uncertain life, an uncertain world and a literary universe, a different love life, a different I, different ways of dressing, of valuing life and money.
What shall we say, that have an accountant’s life is easier and that this individual should simply stifle the writing! Madness! Art is the most beautiful thing in the universe, and there is no money in the world to buy it.
But what is intended here is not to say that we should all be artists or go after the artist's life, because first to be an artist you need uncommon talent, truly extraordinary talent, and this is extremely rare. The intention here is to show that the currency in question in this opportunity cost thing is not money but our precious life time.
And this is very important because once we understand this our life becomes much simpler. The most valuable currency there is, is time and human passions are the best merchandise that this currency can buy.
Opportunity Cost Applied to Life
As we saw, our main resources are time, our labor force (or body), our intelligence and the product of all this, which is the money we make or our belongings.
Every moment we must live knowing that we have time to spend, that we have human passions to satisfy. In all our activities we must know that there is an opportunity cost involved, an alternative. We must always ask ourselves: “could I be doing something better right now?”
This is very important.
But remember, the opportunity cost is subjective so often we can be doing something that is not valuable to us but valuable to someone we love and rightfully so, it becomes valuable to us.
But there are cases in which we are unhappy, clearly unhappy and we know that we could be happy if we chose the alternative but we do nothing. For example a woman living with a man she doesn’t love and in love with a co-worker who has offered assurances that he would make her happy and be with her the second she left her husband.
“I'm here with this person and I don’t even smile” - she says – “and I'm not happy but if I was with that other person who also wants me crazily, I would be smiling and I would be happy every day, every moment.”
It is in these cases that having a clear notion of opportunity cost helps, because if we are 100% certain that the alternative is better and will leave us a thousand times happier, there is no reason for hesitating.
The purpose of life is to be happy, is to satisfy our human passions, those we know and those we don’t know. If you are unhappy and you could be happy, then you are going against human nature. Our body is a park of pleasurable sensations waiting to be satisfied. It is the ego, the libido, the senses, they are all waiting to be satisfied. Our being is a religion of love waiting to be spread.
Happiness is subjective. Each of us answers the question “what being happy is” differently.
Opportunity cost tells us that everything has a price because we are all sitting on a gold mine, the time that was given to us to live, these 80 years, these 42 million minutes that spend themselves automatically if we don’t use them. We must use this time as best as we can while it passes, and we must know that a third of that time goes to sleep tax.
If the opportunity cost tells us that everything has a price then we can say that the more money we earn because of work the more work we earn because of money. And the more work we earn because of money, less time we have to spend that money. The best person to spend a millionaire’s money is an unemployed person. That’s why it is necessary to love the work we do so that the more we work the more we are happier and make more money.
A satisfactory job for a reasonable amount of time for a sufficient amount of money and live by the simple priceless pleasures of life, have a family with a person who beyond loving us has a spirit similar to ours, that is the basic definition of a happy life.
What is more remarkable of all this, is that money here, the one that makes the world go round, is just a variable because what really makes the world go round is the largest currency in the world, our life time on earth, which make us all millionaires.
How to Benefit from the concept of Opportunity Cost
Be like a company, like a municipality, like a country that plans its activities for an entire year or for the next 5 years.
Plan your weekends, your holidays, plan visits to places you like, outings, meetings, family gatherings.
Learn the value of free time. A weekend is a suitcase full of money, do not waste your weekends doing nothing, do not spend your weekends waiting for the time to pass. Plan your weekends very well, maybe this weekend you will go to the beach, maybe the next you will visit a family member, plan this visit with the person.
Vacations are like winning the lottery. Make full use of vacations, you worked almost a year to have this vacations. Plan ahead every minute-gold of your vacations. Give a feast to your senses.
Value time, value life.
Don’t Waste your Lifetime
(Extracted from my book Advice and Lessons for a Happy Life)
Time is the main raw material for life, not the life we were born with, but that we build. The life we project and design with our plans, ideas and projects. If nature and the world are the medium where our body lives, then time is the place where our mind exists, for our mind breathes time and does everything within it.
Managing time is an art that few know the secret. You don’t manage time just at the level of the hour, of the day, of small plans, of large projects, but also at the level of the life we live, up to the moment of death.
Time is both diverse and unique. It doesn’t come back and always comes back. Our childhood is gone, it will never come back. The first day of school, as exciting as it was, now belongs to the past, our former relationship, our known deceased, will never come back. Time must be used, every second lived without regret. We must always do what we think is right and what is in agreement with our personality. The time to express a certain feeling ends, if we have something to say, we must say before the opportunity passes, there are things that we can only do once or at a certain hour on a certain day, at a certain moment. And there are things we can always do. We should always give priority to scarce things, because we will not have many of these.
Things end, people die, the world will not be here forever, even a statue can cease to exist, even a museum may not be available some time from now. Run to go see the exceptional things, the wonderful musician everyone is talking about, the incredible stand-up comedian, the wonderful jazz improviser, the wonder he'll do today, even he can’t do tomorrow.
Time is everything. One day it will end. Old age arrives, terminal illnesses occur, your doctor may tell you that you only have two months to live, or who knows you may be in a car seconds away from hitting with another car and result from there your death. Time will not be yours forever, only your body will stay here on earth to rot, but your mind has only a few decades to live.
Feed your mind with knowledge, treat people well, be culturally active, value your community, be grateful for the time that has been given to you and reciprocate by making good use of it. Prove you deserve to be alive. Don’t regret, don’t beg God for more days, the time you have is that and it needs to be well used. Don’t waste your time. Make history with it. Enjoy every second that has been given to you, and on bad days, fight and believe in better days
Read more about Opportunity Cost on wikipedia
Book 2 – What does Being Alive Mean?
Book 3 – Mr. Psychologist, Tell Me How to Be Happy!
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