Opportunity Cost – A Boon Or A Bane?


My past life seemed wonderful, and ignorance was bliss, until I found the meaning and application of “opportunity cost”. If one is unaware of an unpleasant (!) fact, one cannot be troubled by it, I think. The moment I started digging into my past life with the power-shovel of “opportunity cost”, the happiness and blissful peace bid goodbye to me.

“What would my life be if I hadn’t opted for an education in textiles? My father was very keen in persuading me to further my education in the medical field. Did I miss that opportunity?”

“What would my life be if I hadn’t joined a textile mill in India and had instead worked abroad like my friend who was doing relatively well?”

“What would my life be if I was married to someone else, like another friend of mine, who was married to a girl from a wealthy family?” (Am I the only person in the universe thinking like this?)

There were so many “what-if” questions related to my personal life. I also had such questions related to my textile job. “What would be the performance of the mill if we (management and I as a manager) had selected imported machineries instead of indigenous ones?”

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“What would be the profitability of our mill if we had supplied to ‘that’ customer instead of ‘this’ customer? Because the other manager in our same group had been supplying to that special customer in which there was a huge price realisation and as such his remuneration and name was better than mine!”

“What would be the profitability of my mill if I had increased the proportion of value-added yarns from 20% to 40%?” The list of questions continued boundless. I had been lamenting about the opportunities that I missed not only in terms of money but also in time, effort, and other resources.

This had become a habit that I started analysing other opportunity costs in every choice that I was making. And many times, I would stop taking actions on some projects as I could not take any decision on them, which aggravated my actual growth.

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I finally sought my mentor’s advice. He laughed at first upon hearing my laments.

“See! We all have limited resources and certainly have to decide how we can use them prudently. Good decisions will only be taken if the correct information is available. The fact that there is an opportunity cost to every transaction means that we all certainly face trade-offs in the decisions we make.” He paused for a moment and searched my face for any sign of relief. But my face was still grim.

“Please remember, we cannot have everything we want and so to have more of one thing, we may have to have less of another. So, my advice is not to look for too much opportunity costs in every transaction of your decision-making process.  The important thing is, never ever attempt to see the opportunity costs lost in the past transaction. You consider the past transactions as s sunk cost, which cannot be recovered.”

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Now, I could understand what he was trying to say.

“Also mind that there is no perfect calculation to find opportunity cost. Mostly they are imaginative. We may be lured by the immediacy of promised benefits rather than a pay-off that we forego years down the road. So, do make use of opportunity cost if you have authentic data of all the alternatives and be satisfied with the decision you made after a careful consideration and work on it continuously for further improvement and don’t search for other alternatives. This is helpful in your personal life also.” He winked at me while saying this.

I smiled and nodded my head as a sign of accepting his advice.


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