Opportunity Cost — Economics

In Economics, opportunity cost is the the loss of potential gain from other alternatives when one alternative is chosen.

Every decision we make has an opportunity cost.

If I decide to spend $1000 to go on that cross crountry road trip I’ve always wanted to go on, that’s 1000$ that can potentially compound into $50,000 twenty years down the road [1].

Deciding to do a gap semester has an opportunity cost. Figuring out which essay topic to write about has an opportunity cost. Choosing which startup to invest in has an opportunity cost.


[1] Will Robbins talks about this in his piece, The Paradox of Compound Interest—which he argues that experience compounds as well.

March 19, 2020 · Mental Models · Economics

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