This article discusses opportunity cost as a life skill, and how using this approach can help keep us centred on what is important to us. Assessing opportunity cost in our decisions can help unlock more of our personal potential. Our lives are the products of the decisions we’ve made in the past. Opportunity costs that are not well considered… or ignored… can result in regrets as we enter our later years.
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Life decisions are like being a traveller having to choose between a myriad of roads when on a journey. Some roads may get us to a destination quicker… but may not constitute an enjoyable journey. And, the ultimate destination may end up being well short of our potential.
Other roads may result in us becoming hopelessly lost. Some journeys may be full of wonderful experiences and self-fulfillment. The greatest power we have in life, is the power to choose. Choosing well involves considering opportunity costs.
What is opportunity cost?
In very simple terms opportunity cost is the idea that whenever we choose one option, we are giving up the value of another alternative. Using the opportunity cost concept enables us to assess that the ‘true cost’ of something isn’t just the money spent. It can also include other potential benefits that could be unrealized… or put in very blunt terms perhaps squandered… because of the decision we made.
The factors that we can consider as an opportunity cost are certainly financial, but they can also include relationships, career, health, emotions, knowledge, personal development, and time… just to name a few.
Opportunity cost is based on an individual’s decision options.
It is important to consider that opportunity cost is fully dependent on the individual making a specific decision. The decision options that one person would consider may not enter into someone else’s deliberations at all. Using opportunity cost as a life strategy can help us reduce the emotions involved in a decision.
Impact of emotions on logical decision making.
As human beings we make some of the worst decisions in our lives when we are emotionally aroused. Our ability to make sound, logical decisions is inversely proportional to our degree of emotional arousal… either good or bad.
How can we tell when we’ve made poor decisions because we’ve been in emotionally aroused states? One of the easiest signs to recognize is buyer’s remorse that sets in shortly after a purchase was made. As photographers we can harken back to some gear purchases that didn’t go well.
Emotional decision making can lead to more serious consequences. We can find ourselves over our heads in debt from purchasing a home or car because our emotions blinded us to our economic realities. Marriages can be short-lived. And, poor career choices can be made that restrict our potential. Living on the emotional edge can sometimes cast us over a cliff.
Understanding a range of opportunity costs helps broaden our decision options.
Let’s put opportunity cost into an common decision in which many photographers may find themselves. Let’s say a photographer who has been using an APS-C camera system is deciding between two full frame systems.
For argument’s sake let’s assume that this purchase would involve a well spec’d camera body and 4-5 high quality lenses. The total cost of this camera system change could easily be in the $15,000 to $20,000 range.
One way of looking at this particular decision would be to create a camera buying decision matrix. Then, evaluate the equipment being considered on that matrix to help arrive at a logical purchase decision. The problem with this approach is that in all likelihood there would be very little, if any, opportunity cost differences between any two full frame camera systems being considered.
We already know that unless a new camera system has specific technologies that truly expand photographic potential… having more dynamic range, colour depth, and better low light performance will not automatically make a photographer more skillful. A poorly conceived and composed image remains poorly conceived and composed… regardless of the camera gear used to create it.
The real question may not have been asked.
That’s because the photographer has not truly assessed the opportunity cost of their potential $15,000 to $20,000 expenditure. The fundamental question is how else can that $15,000 to $20,000 amount of money be used?
What financial opportunity cost would be lost? Paying off some credit card debt and saving interest? Investing the money in a retirement fund? Topping up the educational fund for children? Fixing a roof? Updating a bathroom or kitchen? Are there relationship opportunity costs… like going with a spouse on a holiday to celebrate a milestone wedding anniversary?
From a photographic standpoint would the photographer value a month long self-drive photography tour of Ireland or of New Zealand more than buying a new camera system? Perhaps a trip to Costa Rica to photograph birds? Or, an African wildlife safari?
Would the emotional experience and memories from a ‘trip of a lifetime’ be an opportunity cost that shouldn’t be missed? Only the photographer considering buying a new camera system would know.
Time, the most important photographic opportunity cost.
Time is a critical photographic opportunity cost. When we spend time online arguing with strangers about opinions that will never change, we waste time… our most precious resource. Some folks find value reading gear reviews or watching a selection of educational YouTube videos. That may be time well spent.
When the time spent on these online activities becomes excessive, we rob ourselves of valuable experiences in the field with our camera gear. Honing our craft, and experimenting with our equipment. The most important things we can do to grow as a photographer is to be out in the field observing subjects, composing images and pressing our shutter releases.
Considering opportunity cost for career management.
Some people go through their work careers with monetary compensation and job position as their only decision criteria. And, there’s nothing wrong with that… this is a personal decision that may work out very well for them.
Other folks consider other career opportunity costs outside of compensation and position on an org chart. Factors like enhancing their education. Broadening and/or deepening their skill sets. Or, gaining experience in a range of functional disciplines. These are examples of considering future opportunity costs vis a vis one’s current financial and career situation.
Putting more arrows in our quiver.
Considering opportunity costs in the future can be of significant benefit when it comes to career planning and management. The more arrows (i.e. skills, education and experience) we can put in our quiver… the more targets (i.e. career opportunities) we can shoot at in the future.
Focusing on opportunity costs linked to the future helped me live a very eclectic work career. At one point in my career I willingly accepted a 22% pay cut in order to get a specific corporate job in a new-to-me industry. The opportunity cost for knowledge acquisition was simply too great to pass up. That decision was a turning point in my life.
Most of my friends thought I had lost my mind. They couldn’t see that I was ‘finding myself’ by focusing on opportunity costs associated with learning and growing.
My journey of self-discovery led me to a number of industries. The pipe and valves industry. Community newspapers. Agricultural equipment. Heavy duty commercial trucks. My own business-to-business consulting and executive coaching practice. Industrial photographer, safety poster and video creator. And… where I am today… here with you.
Every industry change and job change came with opportunity costs. Work as a warehouseman. Customer service representative. Construction materials expeditor. Purchasing and inventory control management. Commissioned sales. Production supervision. Sales management. Sales and promotion management. Marketing management. Strategy formulation. Human effectiveness training.
Through all of my corporate career changes I kept my eye firmly focused on the opportunity costs linked to my future… so I could continue to learn and grow.
Assessing opportunity costs helps to unlock our human potential.
We owe it to ourselves to become all that we can become. To make a positive difference to those we touch directly. And, hopefully in our own small way… help make the world a better place. Recognizing and leveraging our opportunity costs are the keys to our futures. It is imperative to make the most of them.
Technical Note
Photographs were captured handheld using camera gear as noted in the EXIF data. All images were created from RAW files using my standard process in post. This is the 1535 article published on this website since its original inception in 2015.
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