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The Joys of Compounding by Gautam Baid

Opportunity Costs

Life is a Series of Opportunity Costs.


Opportunity costs are based on the most fundamental economic concept: trade-offs. 


When you make a decision, you eliminate all other possibilities (at least for the time being). Sometimes the option you did not select turns out to be the wiser choice, which is why opportunity cost is best measured in retrospect. The best way to understand opportunity costs is to consider what would have been lost if certain trailblazing individuals had chosen to do something else.


The term "opportunity cost" refers to a decision that alters your personal landscape in the future.

Opportunity costs can have a significant impact on many aspects of your life, including money, career, home and family, and other aspects of your lifestyle. In general, it means having to choose one option over another, whether it's a matter of money, time, or lifestyle - and then living with the consequences. 


If you own a business, you will encounter opportunity cost on a regular basis. You will have to spend a significant amount of time determining whether the unavoidable consequences of a given decision are outweighed by the benefits that decision will bring. 

Whether in business or in life, opportunity cost is frequently a measurable figure.

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Units 31/35