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Book 1 - Life’s
Opportunity Cost
Basic Concepts
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.
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
Planning.
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.
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!
Book 3 – Mr.
Psychologist, Tell Me How to Be Happy!
...
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