Opportunity Cost

I’m the one who does most of the writing here on my blog (not surprising, huh?!)  Brett does some of the proof reading and editing. But Jim is the one who adds all the pictures and hyperlinks.

About a month ago, he told me that while I mention “opportunity cost” in a lot of my blog posts, I’ve never had a post dedicated to it.

So I’ve been waiting for just the right example in my life to use for an opportunity cost post.  And I’ve found it.  But first, let’s define opportunity cost.

According to Investopedia:

Opportunity cost refers to a benefit that a person could have received, but gave up, to take another course of action. Stated differently, an opportunity cost represents an alternative given up when a decision is made.

But the way they said it that I liked best is this:

Opportunity cost is what a person sacrifices when they choose one option over another.

That to me is the clearest description.  Because opportunity cost does mean a sacrifice.  And most people miss that concept completely.

Choices

So let’s talk about why I’m posting this now.  As you probably know, my children get asked questions all the time by customers.  Most of them are totally fine, some of them are on the personal side, and some of them go way too far.  Here is an example of somebody who had a very strong opinion on a subject, and didn’t hesitate to share it.

In the Sweet Shop, Brett was talking with a customer and the customer was asking about our homeschooling.  This person asked Brett about what she had studied for high school.  When she found out that Brett has not taken any courses in Chemistry, Physics, Trigonometry, or Pre Calculus, she made a comment that was something like, “Well, your homeschool education was wasted.”

Now, I was in my office which is right next to the Sweet Shop listening to the entire conversation.  Brett was doing a great job handling it, but at that comment, I jumped up because I needed to clarify some points.

In my most upbeat, positive, smiley voice, I introduced myself, said that I had overheard the conversation and that I wanted to point out some things.

I shared with this woman that I was an engineer and had the ability to teach any of my children Chemistry, Physics, Trigonometry and actual Calculus, but that I chose not to.  And the reason that I chose not to was because of Opportunity Cost.

I asked the woman if she know what opportunity cost was, and she replied that she didn’t.  So I told her that, “Opportunity cost is what you give up because you choose to do something.”

I continued with the response that if I chose to take the time to teach those subjects to Brett (or any of the other children), they would be sacrificing their time to other skills or knowledge they could acquire.  I explained that by the age of 16 it was very obvious that Brett would not be making her career in the maths, sciences, engineering, or anything to which detailed knowledge in those courses would be needed.  So if I taught them to her, she would be missing out on learning more skills in English, Writing, and Business, in which she clearly excels.

I could tell that I wasn’t going to change this woman’s mind that every child need to learn Chemistry, Physics, Trigonometry, and Pre Calculus, so I didn’t push it any further.

But afterwards, Brett said to me, “Thanks, Mom, for allowing me to explore what is more important to me and not forcing me to learn what I didn’t want.”

Thanks, Mom!

Now let me be clear, there are a lot of things I believe every child needs to learn, whether they like it or want to learn it or not.  I’m not talking about reading, writing, and arithmetic.

But I believe that there are a lot of children graduating from high school having taken a Pre Calculus class who don’t know how to distinguish between wants and needs, don’t know how to balance a budget, don’t know how to live below their means, don’t know how important it is to save for retirement while they’re young, and a lot of other really important life skills.

When you’re making a decision about what to do with your time (or your children’s time) please, please recognize that you are sacrificing something else.  I see so many young children enrolled in all sorts of classes.  Those may be great, but is it worth the opportunity cost of being able to do nothing and or be creative, or play outside?  I don’t know.

But every time I think about what we are going to do or money we are going to spend, before I make the final decision, I always ask the question, “If I don’t do this, what else could I do with that money or time?”  And on the flip side, “If I do this, what can’t I do because I don’t have the money or time?”

If you start to notice the opportunity cost, it’s amazing how it impacts your decisions.

What about you?  What opportunity costs are you dealing with?

PJ

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Please note: I reserve the right to delete comments that are offensive or off-topic.

  • Laura Davidson

    So very, very true! I took biology, chemistry, physics, trigonometry, and calculus in high school. And I was actually pretty good at them – and except for biology I’d likely have taken them anyway because I enjoyed them (or in one case thought I would enjoy – but I had no illusions about biology beforehand!).

    …I still remember some of it, but I don’t use very much of it at all in my daily life. Yes, I’m a software engineer, but not on anything that actually uses any of that. (Although the math may yet come in handy…maybe…at which point I will need to grab a book and do a quick refresher course!)

    Less than a month ago, I had sinus surgery. It was hard for me to make that choice. In the long term, I will be breathing easier (I already am!), and will hopefully have fewer sinus infections. The interior of my nose is in much better shape in the most literal sense.

    Even though I knew all of this, it was a very hard choice to make to schedule it. I have been functional for *years* without this surgery. Three years ago, I didn’t get it, because during the two weeks after I would not be allowed to lift more than 10 pounds. My youngest son was 2 years old then. It is entirely possible I couldn’t have followed that rule and kept him safe; I definitely couldn’t have followed it and kept him happy.

    However, it’s been getting worse since then. Most of my problems have been recurring sinus congestion and infections – annoying, inconvenient, uncomfortable, and they impact my life and cost me time, but in small amounts any given week – that is, I can still mostly function (but not as well).

    I knew I was going to lose at least one week from work (possibly two, but because my job is sedentary and doesn’t require lifting things, that would only be if I recovered slower than expected). For most of that week, I would be in pain (or taking medicine so as not to be), and the rest of it would be at least severe discomfort. Instead of contributing to the household, I would be doing nothing while they took care of me. (Which is what we do for each other, but it’s still harder on everyone else.)

    And dates for surgery were limited…and I was going to be on day four of recovery when my sons did the fundraising run for their school. It was *possible* I’d be well enough to go, but I had to be realistic, that it was unlikely. (And I wasn’t.) My youngest just entered kindergarten, so this was his first time doing it.

    That’s…a lot of opportunity cost in a short time.

    But I measured it against all the little costs, the grumpier me, the earlier bedtime (for me, not the kids!), the not-thinking-as-well with those recurring issues, and also against the actual *cost*. Because I have good insurance right now, and this year we were for a variety of reasons going to hit the maximum out of pocket or come very, very close – without the surgery. So doing it now costs me less money than doing it next year would, even if our insurance is as good next year. Money-cost is less important to me than opportunity cost, but still relevant.

    I think I made the right choice.

    But I think I’m going to feel better about it (in some ways literally) some time late this month or early next. 🙂

  • wendi

    LOVE! I talk to my kids all the time about opportunity costs! Well said.

  • Janna Hammond Whitlock

    PJ you did a wonderful job raising your kids and home schooling them. You handled the situation very well! probably better than I would have. Keep up the good work with your blog and Goat Milk Soap!
    Jan