Tag: judgement

You make dozens of decisions every day. And every decision you make has a cost. By deciding to pursue one thing, you’re saying no to something else. At work, if you decide to participate in a meeting, that timeslot is filled and you can’t spend the time focused on a creative task. You can’t do everything. Life requires tradeoffs.

Opportunity cost is the cost of not pursuing alternative opportunities. The higher the value of what you could be doing versus what you actually are doing, the greater the opportunity cost.

It’s easy to recognize opportunity cost when it’s staring you in the face—like moving to a new city, changing jobs, or planning your next vacation. But most of us don’t consider opportunity cost in our decision-making process for the majority of our decisions.

We know money is not infinite, but we often treat time, energy, and attention as if they are. Your time is limited. If you choose to spend an hour on something, you can’t use it for anything else, so making smart decisions about your time is critical.

Do you stop to consider multiple scenarios of how you could spend your time before scheduling a meeting, attending a conference, pursuing a potential customer, or deciding to build a new product feature?

What are the costs of spending too much time on nonessential busy work? Such as cleaning up your email inbox or spending time in non-essential meetings.

What are the costs of signing a contract with a customer? Are there higher-value clients you won’t be able to serve because you’re too busy serving a lower-value customer? You want to choose your customers carefully.

One of the most extreme examples of opportunity cost is the decision to start a company. I love creating and building businesses. But startups require a tremendous commitment of time and energy. The potential rewards are large if you succeed, but the opportunity cost is huge if you fail. If you’re an employee of a company and the business isn’t doing well, it’s much easier to go to work somewhere else. It’s worth it to start your own company. But you should consider the opportunity cost before jumping in blindly.

Here are a few useful ways to consider opportunity cost.

1. Do fewer things better. Tradeoffs imply that in order to become good at a few things, you’ll be mediocre at a bunch of other things. That’s okay. Focus on being excellent at a handful of things and consider dropping or outsourcing some of the other stuff. Doing fewer things also allows for breathing room. If you’re too busy, you could miss out on great opportunities. But it’s also hard to say no to good opportunities. Be ruthless and say no to almost everything. This frees up time and creates space to pursue a great opportunity.
2. Create a minimum of three imagined scenarios. For important decisions, develop at least three different potential solutions or scenarios with a detailed list of benefits and consequences for each scenario. Consider not only what you’ll gain from each scenario, but also what you will lose. Assume each scenario is wrong. Try to disprove them!
3. Choose a high aspirational hourly rate for yourself. No one values your time more than you do. Your aspirational hourly rate doesn’t have to be consistent with what the market is paying you today. Factor it into every decision. I set my hourly rate at $1,000 an hour. This usually forces me to outsource most things so I can focus my time and mental energy on higher-value work. This means delegating tasks whenever possible and minimizing time doing busy work, errands, and household chores. Having a $1,000-per-hour opportunity cost helps motivate me to focus on what’s important.

Maps help guide us where we want to go. They represent the accumulation of knowledge from people who have traveled the route before you. Maps help you avoid getting lost and wasting time.

But a map is not reality—just as an architectural blueprint for a building is not the building. A map is both a representation of reality and an interpretation of reality shaped from the perspective of the map maker. There are no perfect maps. All maps are subjective and distorted, capturing the best understanding of the people who create them. 

One of the earliest surviving world maps was drawn on silk in 1389 and depicts the Chinese Ming Empire. The map spans the entire Eurasian continent from Japan to the Atlantic Ocean. It is particularly notable for the way in which it distorts the size of various landmasses. Mainland China sits like a monolith in the middle of the map, while Japan and Korea are both far larger than modern-day India. The African continent, meanwhile, is depicted as a relatively small peninsula with what appears to be a giant lake in its center. You would have a hard time navigating the world if you were following that map.

Often, we think of maps as tools to help us navigate the physical world, allowing us to get where we want to go. But we also have mental maps. You interpret reality based on the maps in your head. When you learn a new skill, you create a mental map of each step you must take to perform the skill. Your experiences of people, culture, and physical environment shape your mental maps.

Imagine being born into a world that had no maps—of either the geographical or mental varieties. Imagine trying to navigate the world without the benefit of thousands of years of knowledge compiled from our ancestors’ painful failures and hard-earned victories. Just as cartographers provide us with maps of our city, so science provides us a map of human knowledge. Art maps our creative expression, imagination, and experience. Religion gives us maps to a virtuous and meaningful life.

Maps are useful. But It’s important not to confuse a map with the territory. Maps get outdated because the terrain constantly changes and evolves. Even Google maps can lead you in the wrong direction if you don’t pay attention.

Navigating the wilderness

In my early twenties, I led backpacking and climbing expeditions for teenagers in remote parts of Alaska. Backpacking with a group of kids in remote wilderness areas ten days from the nearest road required me to become proficient at reading maps. We did not have GPS, and our only backup in case of an emergency was a radio that only worked when a plane flew over us—which would happen every few days. A route-finding mistake could bring severe consequences.

We could carry only enough food for seven days. A small plane would meet us mid-route, land on the glacier, and drop another seven days of food. If we did not make it to this predetermined food-drop location, we would not have food. Route finding was challenging because some rivers could not be crossed and others could be crossed only before sunrise. After a few hours of sunshine, the ice on the glacier warmed enough to unleash a torrent of water, making a river crossing impossible. 

Learning to navigate with maps and also learning that the “map is the not the territory” was essential to navigating the wilderness. Those principles have also proved valuable in business. It’s important to study your competition and companies who came before you to look for patterns, to see what strategies worked and failed. But every company is unique, and you can’t blindly copy the customer acquisition strategy, design process, or business model of another company. Even if your business is targeting the same customers, it’s highly unlikely your map will look exactly the same as the map from another company. 

Strategies for navigation

Here are a few strategies that have helped me follow the right paths and successfully navigate unexpected changes in terrain.

1. Aim at the right target. Make sure you have a well-defined destination that aligns with your goals.
2. Orient your map. When I taught 16-year-olds to read a map in the wilderness, I first taught them to orient the map correctly. If you don’t align the map to the terrain, it is easy to start walking in the wrong direction.
3. Zoom in and out. Zoom in to deconstruct a problem into its foundational elements. Zoom out to see the big picture and make sure you are solving the right problem.
4. Calibrate against reality often. Test your assumptions often to make sure you are on the right path.