When we discuss economic decisions and weighing whether or not we should buy something or participate in a service, the first and most obvious cost is the price. The price is only one aspect of the cost of a service or good. Or anything for that matter. What is perhaps the biggest cost is the the most direct but oftentimes the most overlooked: opportunity cost.
Opportunity cost, or the cost of foregoing your next best alternative, can be thought of as the cost of your time. If you do one thing, that means you can’t do another thing at that time, and you have to forego doing all other choices at that time. This is one of the core facts of the study of economics, but one that many college students seem to miss after their Economics 101 class.
Take going to college as an example. Even if a student were to be given the coveted full-ride, and were awarded scholarships to cover room and board (which is oftentimes the most expensive component of the education), and were awarded a work-study job to cover expenses while at school, college still brings with it a massive opportunity cost: nearly 4 years that could be spent doing something else. Think of all the things you’ve learned in the past 4 years, and then imagine if you had spent the vast majority of your time sitting in a classroom rather than learning those things (or learning about them in a classroom instead). That is the cost of attending a 4 year university (in addition to the actual price!).
The most unfortunate thing about a service like a college education is that it not only take 4 years, but it almost totally occupies the consumer during this time. So while you’re sitting in a classroom learning about economics, or sitting in the library finishing your finance exam, there’s another person out there who is your age or younger who is learning these things in the real world.
This is what economists mean when they say that There A’int No Such Thing As A Free Lunch. Even that seemingly free or low-cost college education carries with it a huge cost.
This is yet another reason why entrepreneurship has changed the modern age in such a groundbreaking way. Through the invention and proliferation of goods and services that not only save money, but save time. By introducing things like the washing machine, the automobile, the refrigerator, the microwave oven, the airplane, the telephone, the smartphone, the computer, the radio, and more, we now spend less time doing what were previously time-consuming, and hence costly, things. By buying a microwave, you lower the cost of having dinner, and free up more time to do other things, like furthering your own education or developing the next big entrepreneurial product. By opening a PayPal account, you can now transfer money without having to go to the bank, write a check, or visit a Western Union. By subscribing to news networks on twitter, you can get all your daily news in a quick feed, rather than perusing each site individually. Entrepreneurship and innovation lowers the cost of formerly time-consuming products and services.
Sir Richard Branson has said that “Business opportunities are like buses; there’s always another one coming,” and this is the mindset of the entrepreneur, and certainly of the entrepreneur who understands the cost of everything. The next big product is one that saves time. It lowers our cost and saves us time — the most fleeting resource of them all.