Thoughtbox

export const OPPORTUNITY_COST_CONTENT = `# Opportunity Cost Analysis Consider what you give up by choosing one option over others. ## When to Use - Allocating limited resources (time, money, people) - Choosing between projects or features - Evaluating "should we build this?" - Feeling resource-constrained ## Process ### Step 1: Identify the Choice What are you deciding to do? - "We're going to spend Q3 on building feature X" ### Step 2: List Alternatives What else could you do with these resources? - Feature Y (revenue potential) - Technical debt reduction (velocity) - Scaling infrastructure (reliability) - Team training (capability) - Nothing (preserve optionality) ### Step 3: Estimate Value of Each For the chosen option AND each alternative, estimate: - Expected benefit - Probability of success - Time to realize value ### Step 4: Calculate Opportunity Cost Opportunity cost = Value of best alternative you're NOT choosing If Feature X = $500K value, but Feature Y = $800K value Then opportunity cost of X = $800K ### Step 5: Make Explicit Trade-off "We're choosing X ($500K) over Y ($800K) because..." - X has strategic importance beyond revenue - Y has dependencies that aren't ready - X has higher certainty of success ## Key Principle Every choice has a cost beyond its direct cost: the value of what you didn't choose. Ignoring this leads to poor resource allocation. ## Common Opportunity Costs **Time spent on:** - Meetings → not coding - New features → not fixing bugs - Perfect solution → not shipping good-enough - Optimization → not building new capability **Technical choices:** - Building custom → not using existing - Monolith → not getting microservice benefits - New technology → not leveraging team expertise **Organizational:** - Hiring senior → not hiring two juniors - One big bet → not several small experiments - Process overhead → not shipping speed ## Example Application **Decision:** "Should we build our own analytics or use a service?" **Build custom:** - Cost: 3 engineer-months - Value: Perfect fit, no per-event fees - Risk: Maintenance burden forever **Use service:** - Cost: $5K/month - Value: Immediate availability, maintained by vendor - Risk: Vendor lock-in, may not fit all needs **Opportunity cost analysis:** 3 engineer-months could alternatively: - Build Feature A (est. $200K revenue impact) - Reduce tech debt (est. 20% velocity improvement) - Build integrations (est. 3 enterprise deals) **Calculation:** - Analytics service: $60K/year ongoing - Custom build: $0 ongoing BUT 3 months × best alternative If best alternative is Feature A ($200K), opportunity cost = $200K Custom actually costs $200K in opportunity + maintenance burden vs Service costs $60K/year **Decision:** Use service unless custom has strategic value beyond cost. ## Hidden Opportunity Costs **Complexity:** - Every feature has ongoing cost - What won't you build because this needs maintenance? **Cognitive load:** - Team bandwidth is finite - What decisions won't get attention? **Optionality:** - Committing closes doors - What options are you giving up? ## Anti-patterns - Only counting direct costs ($ and time) - Comparing to "doing nothing" instead of best alternative - Ignoring ongoing/maintenance opportunity costs - Sunk cost fallacy (past investment shouldn't factor in) `;