Mind · Strategy
OpportunityCost
Comparative valuation against the best alternative
Definition
Mechanism
Alternative Valuation: Cost of any choice includes value of best forgone alternative. Don't just ask "Is this good?" Ask "Is this better than what else I could do with same resources?" Time/money/attention spent here can't be spent elsewhere. It explicitly deducts the value of the foregone alternative from the Budget calculation.
Preconditions
- Choice set > 1
- Resource constraint
Postconditions
- Implicit cost made explicit
Invariants
- Cost includes the Value of the best forgone alternative, not only the resources consumed.
Risks
Failure modes
Analysis Paralysis
Infinite search for the perfect alternative prevents any action.
Relationships
Builds on
Used by
References
Safety-first decision making based on loss avoidance
Rationality over historical investment
Reference