OppThink and Opportunity Cost

One economics topic I always found intriguing is "Opportunity Cost" (I'll refer to it as OppCost). Since you cannot do two things at once (although cellphones and other technologies are helping to change that), when you choose to do X you typically lose the opportunity to do Y.

For example, if you take a job at Xerox, you can't simultaneously work at Yahoo. If offered a job by both companies, you would weigh the benefits of one job against the benefits of the other (and the second job's benefits make up the OppCost of taking the first job). In this example, the things you would gain from taking Yahoo's offer is the OppCost of taking Xerox's offer. Similarly, the things you would gain from taking Xerox's offer is the OppCost of taking Yahoo's offer.

Here is another example in the arena of investing: "A person who invests $10,000 in a stock denies herself or himself the interest that could have accrued by leaving the $10,000 in a bank account instead. The opportunity cost of the decision to invest in stock is the value of the interest. A person who sells stock for $10,000 denies himself or herself the opportunity to sell the stock for a higher price in the future, inheriting an opportunity cost equal to future price minus sale price." (source: Wikipedia)

In general, when deciding whether or not to do X, you should weigh the opportunity cost of doing X -- that is, add up all the things you give up if you decide to do X.

OppThink and Opportunity Cost (OppCost) are obviously related concepts. The OppCost of X is the value of "the opposite of X" -- where I define opposite here as all the things you can do if you don't do X. OppCost is another example of how looking at "opposite situations" or "opposite activities" can have great value.

One of the biggest benefits of applying OppThink in the realm of OppCost comes when you discover that the OppCost of doing something is too great. For example, suppose a man's OppCost of taking a 70-hour a week $700,000 per year job is a great loss of time he would have spent with his children (which to many parents is priceless - that is, infinite cost). In this example, the man should not take the job, even with its high salary, since the OppCost is even higher.