It’s estimated that the average adult makes more than 35,000 decisions per day. Says who? Says psychologytoday.com. 35000 seems like a stretch, especially for a generation that typically responds to everything with — “IDC”, “anything is fine”, “whatever”, “I trust your choices bro” and “IDGAF”.
If you invest a lot of effort into every single choice/decision that comes your way, you will almost certainly experience what is called Decision Fatigue — the idea that after making many decisions, the quality of additional decisions becomes worse. Cool, so we now know that some decisions are important, some don’t matter and it is probably in your best interest to not overthink everything. It is important that you reserve your mental energy for decisions that matter.
Now again, decisions that matter may differ from person to person. “What do we order at the restaurant?” might not matter to you at all but that is probably the most important decision of the day for a food blogger and “What do I wear tomorrow?” is an incredibly essential every day decision for a fashion influencer. So, I’m leaving this to the readers to decide what matters to them. 35001 decisions today, sorry.
Now that you know what decisions really matter to you, let’s directly dive into the main purpose of this article which is to enable you to make those decisions in an informed manner. We’re going to discuss two considerations in Decision Making — Opportunity Cost and Sunk Cost.
Opportunity cost is the forgone benefit that would have been derived from an option not chosen (Source: Investopedia)
It is the value of the next-best alternative when a decision is made, it is what you do not choose. It is about asking yourself — What am I giving up in the future to have something right now? While the thrill of having something right away will always be more appealing, the decisions that could be life altering demand more than just thrill.
Allow me to elaborate on this with an example. As a commuter, you drive to work everyday instead of taking a cab/bus and it takes 30 minutes one way to reach your workplace. The opportunity cost is an hour spent elsewhere each day and perhaps another hour that you could’ve spent finishing tasks as a passenger. It’s a trade-off. You saved money but spent time.
Remember that every time you choose something, you’re letting go of something else. You’re giving up on the other item, other path, other life.
Now coming to the second consideration,
A sunk cost is a cost that has already been incurred and cannot be recovered. (Source: Wikipedia)
CANNOT BE RECOVERED is key here. Its gone, its done. There is nothing you can do anymore to extract value from it. But how does it affect your decision making today? Because people suck at letting go. We stick to some decisions that we know aren’t working for us anymore just because we’ve invested a significant amount of time and money in it.
Time for an example: Let’s say a market research says the new variant of a popular soft drink won’t be adopted by most of their existing client base, the company might spend additional money into advertising in an attempt to raise awareness of it and avoid losses. This will create even more losses. In your personal life, this could be a goal you’ve had for several years and somehow you’ve grown out of it now. Or a relationship that has ceased to be a meaningful addition to your life.
So my message to those who scrolled down directly to the last paragraph looking for a summary, I’m glad you’re here. I like that you’re at least trying to read what I write. Thank you.
The summary is:
1. Most decisions don’t matter. Focus on the ones that do.
2. Think about what you’re giving up- the opportunity cost- and not just what you’re getting.
3. Let the past be past. Don’t let sunk costs affect your decisions today.
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See you next week folks! Happy Weekend! :)
