Hello and welcome to another issue of my newsletter. To the new subscribers, thank you for subscribing.
Last week, a newsletter was recommended to me by a friend. It is only fair I do the same as I find the newsletter beneficial and interesting + fun.
Coincidentally, Samyak-the author also reached out to me, and I was happy we connected.
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Today we discuss two types of “costs”. So instead of listing them out, we’d illustrate them in a story and see if you’d be able to identify them before the end of the story.
A young boy has little money left after spending most on eating out, parties and picnics with his friends. His holiday has been eventful. He has attended all the concerts in his town with his friends. However, he isn’t as excited as he would have been if he had the latest iPhone.
Why? He isn’t able to use all the new filters and capture the moments the way his friends are doing.
With the amount left he has a choice, he can either buy a new phone or attend the next three concerts. He can only choose one.
What would he do? I dunno.
The second story is about me.
I was eating, and I needed to add spice to my food. So, I took out the spice and added it to my food.
It turns out that wasn’t the spice I loved—the spice I wanted to have an undertaste of garlic flavour. I wanted to satisfy my taste buds.
But here I was, halfway through the food. So what do I do? Continue eating or stand up and get the spice I actually want?
I am almost sure you’d suggest I stand up to get the spice with the garlic flavour. It looks that easy, right? I didn’t. I continued eating that way.
In both stories, the character has a choice.
Choices we make, make up or break us.
In the first story, if the character chooses one, he ultimately forgoes the other. He has to choose one of his options.
When you make choices, you are giving up or abandoning other choices.
In the second story, I can choose to act (stand up and get my spice) or not, irrespective of my previous action. I could have the spice I wanted whether I was halfway through the food or not.
Don’t let your past ruin your future.
Now, my dear reader, do you recognise the costs illustrated?
For those who haven’t gotten the full picture1. The first is a tale of Opportunity cost. The second is a tale of sunk cost.
Those with some knowledge of economics are familiar with the term opportunity cost.
Opportunity cost is the cost of choosing an option over another. It is the potential benefit missed because you choose one option over the choices.
If the boy chooses to buy a new phone in the first tale, he misses out on the remaining concerts. If he chooses to go to the concerts, he misses out on the new phone.
I do not miss out on anything if I chose to get the spice. There is only one option. To do or not to do.
The second tale illustrates sunk cost. Sunk cost is a sum paid2 in the past that is no longer relevant to decisions about the future.
When you exert effort to achieve a goal, and then you change to change the goal, the effort you’ve exerted becomes “useless”.This thought of having wasted energy or time prevents us from pivoting and course-correcting. Because we don’t want the time or effort to be wasted, we stick to our ways even when it isn’t helpful.
If you find yourself in a hole, stop digging.
It doesn’t matter what you've already done. Stop and start a course-correcting. The earlier you start, the earlier you get to where you want to be.
And that wraps it up for this week. See you next Sunday
which I suspect might be because of my lack of expertise in storytelling - I am still learning
it doesn’t have to be monetary
I like the analogies 👍👍