I’ve been working on a proposal recently.  Today, I used the term “opportunity cost.”  My point was that given some of the decisions made in the past using an accounting cost analysis, the long-term total, economic costs ended up being higher.

Opportunity cost is what you miss by making a choice between several options.  If, after high school, you chose to go to college rather than go straight into the work force, your opportunity cost was the money you could have earned during the time you were in college.  That is fairly easy to figure out.  In reverse, if you went straight into the workforce rather than to college, your opportunity cost would be the education that could have led to a non-linear growth in your pay over time.  That non-linear aspect of what an education can provide makes the accounting cost very hard to figure out.

In the business world, capital expenditures are always difficult decisions.  Where do you put limited resources?  Given my previous post about geometric growth and change and my belief that technology has a propensity for this geometric growth and change, I strongly feel:

“NOT investing in technology will yield “surprise” opportunity costs over time. “

Faced with the choice of capital expenditures between something with a history of linear “returns” and technology with the possibility of geometric “returns,”  I’ll vote for the technology.  If you choose against the technology, there is the risk the total, economic cost of the decision will be a huge opportunity cost over time.