THE CONCEPT OF OPPORTUNITY COST

Have you ever played The Game of Life? The classic board game has since been adapted to all sorts of different versions, including iterations on video game consoles. The basic premise of the game is simple. You make your way through your fictional life, getting a job, getting married, having kids, and hopefully reaching retirement with the most money possible. That’s how you win.

It’s obviously a gross oversimplification of how real life works, but the board game very clearly illustrates the notion of opportunity cost. The first decision you make in the game, right off the bat, is whether you want to go to college or you want to start working right away.

If you choose to go to college, you skip out on a few turns while you “go to school,” but you are afforded a better chance at a better salary when you graduate. That’s loosely accurate when it comes to real life, because college graduates on average do out-earn their non-college educated counterparts. If you choose to start working, you don’t miss any turns, but the salary you get will likely be less than the player who chooses college.

In real life, I chose college. In the board game, I always pick work because the guy who choose college usually ends up losing. Like I said, the board game is necessarily representative of real life, but it illustrates an important point.

By choosing to go to school (in hopes of getting a better salary), you lose the opportunity of the first few turns of the game. The players who choose work get a “head start,” even if they start out with a lower salary. By choosing one, you lose the other. That’s opportunity cost. Everything that you choose to do has an indirect cost, because it means you are foregoing all other possibilities. By choosing to turn left, you necessarily lose out on everything that turning right could have provided you (and vice versa).

Above all else, the most valuable resource you have is time. How you choose to spend that time has a direct (and indirect) impact at any future shot at success.