Opportunity Cost

I do not remember if I have written this earlier. When we value something, normally we go by the material value attached with it. Also called as the tangible value. But we never associate with it the intangible value. Intangible value can be in the form of time, luxury or emotional. For example, you are doing a job and have an opportunity with 20 % rise. We look at 20 % rise only. Rather we should also look at other factors like whether you have to change location, what are the roles & responsibilities, how is the culture in the organization, whether it is a start up or an established giant, etc. When you think about these things, then you might be able to gauge the real rise that you would be getting.

Sometimes there may not be enough rise in money terms, but the responsibility, the role, the exposure and the power that you are getting with that role might supercede the money value associated. You might get better role or opportunities a few years down the line. You have to think of all these before you make a decision. There was a friend of mine who used to be very adventurous and had a philosophy of taking more roles and responsibilities for better pay package. He often used to get good raises. His philosophy was that even if I am not able to do justice to the new role, and have to leave this job after 5-6 months, I will get another job at present package within 1-2 months. Even then, the rise I am getting now will compensate for the period of 1-2 months. If not anything, I will gain the experience and the precious 1-2 months in which I can do anything.

This is called the Opportunity cost. If you are not making a deal on rent for the want of 500/1000 bucks and keeping the place of 9-10000 bucks idle for 2-3 months, you are anyway loosing 2-3 months rent. Time value is not attached and hence the decision. Time is very significant and you need to value that.