Mantra #3: Life is all about tradeoffs.
Couple years ago on a high stress, mission-critical project for a huge client, I remember a colleague repeatedly reminding our project team that If everything is a priority, then nothing is a priority. This statement really resonated with me and extends this Mantra that life is all about tradeoffs. Some of you may be familiar with the term opportunity cost – simply put and in layman’s terms, opportunity cost is the cost/value of something foregone in pursuit of something else. Well that first foregone “something” is the opportunity cost and economists believe everything has an opportunity cost. How is this related to this Mantra? Well, tradeoffs create opportunity costs. And before making any decision in business or life, you’ve got to consider what you are trading off and the opportunity costs associated. Once considered and a decision has been made, you’ve got to accept the decision, tradeoffs, and opportunity costs and move on. Hopefully, this will make sense from the following example.
Consider the following recent, true story with a character we’ll call Bob Iluvsports. Well, Bob told me he got tickets to a basketball playoff game for $150 each. Great! So I asked Bob what he planned on doing with those tickets. He said, “Going to the game, duh!” My next question was, “What value do you gain from going to the game?” He replied enthusiastically with, “Well, I get to see my favorite team play, I get to put pictures up on Facebook and I become the envy of all my friends.” Sounds great. He went to the game and we met for drinks. So with false innocence I asked Bob, “So, how’d you enjoy the game? Was your enjoyment and friends’ envy worth $500/ticket?” Dumbfounded, Bob replied with, “What are you talking about?” I educated Bob about people who were willing to pay up to $500/ticket couple of hours before the game and he could have made $700 profit if he was willing to sell his tickets. His response, needless to say, does not need to be repeated. To be clear, Bob’s opportunity costs of going to the game was $700 – the profit foregone in pursuit of enjoying the game live and becoming the attention on Facebook. He could have traded off these pursuits to benefit the $700 and enjoy the game at home with friends.
In this example, prior to making his decision, Bob did not consider his tradeoffs based on his value system and the associated opportunity costs. As a result, he ended up regretting his decision and losing $700. I see decisions like every day in business and in personal life. To avoid regret, take a moment to carefully consider the decision at hand, the potential tradeoffs, and the opportunity costs associated. This thought process not only makes you more educated about your decision but also minimizes the regret associated with the decision.