Saturday, January 27, 2007
All I remember from Economics 101 – Opportunity Cost
I'm sure it's no surprise I majored in computers in college. I got an IT degree – computer information systems – though I usually refer to it as management information systems, or MIS. I maintained a 3.0+ average in my major, and put most of my time into IT courses, and as a result not as much in those other courses that they made me take. As a business student, all was not lost, and some of the pearls of wisdom from those other classes still resonate today.
One is opportunity cost, which I learned in Economics 101. I have the link to Wikipedia so you can get a more formal definition than I am about to give. I remembered it because it loosely related to decision making in the tech world. If you make one decision, what is the cost, or loss, from making that decision over another one? The cost is not just in dollars, but in time or other "opportunities," thus the name.
Do you spend two hours to save one hour of time for a one-time decision? Do you spend money fixing something now that you know you will need to fix again, or just scrap it and buy something else that won't need to be fixed for a long time? A simpler example is using the Peapod grocery delivery service. Without boring you with the details of my life, we have determined that it is worthwhile to pick our food online and have it brought right to our door, rather than taking a large part of an afternoon to get the very same food. This is justified even with the delivery and sometimes higher costs on some items.
And paying a $1 service fee to buy stamps online from the postal service sure beats waiting in the hellish line in the Chicago Loop post office! So the next time you're doing something that you don't think is a good use of your time, maybe you're right.
Posted by Mike Maddaloni on 01/27 at 11:17 AM
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