HOW TO TAKE DECISIONS?

Tom has to decide whether to go to a college or take up a job.

SCENARIO I
If Tom belongs to a middle-class family, going to a good college and earning a degree will help his family and his career. Going to a job straight away will put him in a low-level job. And he may stick with it for his entire life. Here education yields more than a job.

SCENARIO II
Say, Tom belongs to a rich family. His father is running an industry employing hundreds of persons. His father is also ailing at present. So, for Tom education is not essential. It is only an ornament. If he takes up a job in the family business, he will earn valuable experience and move up the ladder in the company management quickly. He can study through distance education. Or he can go to part-time classes. He is not going to lose anything for want of higher education. Here work-experience yields more than education.

"The cost of what you do is what you miss or lose".

This sentence can be better understood by taking another example.
Say, you are running a shoe factory. You want to buy modern machines which will increase the production rate. But it cost about 500000 rupees. Is it wise to invest in the machines? A lakh rupee fetches the interest of 30000 rupees annually, when it is deposited a bank. (At the rate of 6% per annum). If you strongly believe the machines will give you more gain than 30000 rupees yearly than you can go ahead with machines.
Here 'what you do' is 'buying machines' and what you miss is "interest 30000 rupees". The missing element is called 'opportunity cost' in economics.
In every situation, calculate the opportunity cost and take decisions based on that. But the cost need not be material like money, it may also be abstract like 'happiness'.
The idea 'opportunity cost' can be employed to use your time efficiently. The decisions like 'go to college or cricket match today' can be easily made using this idea. If it is a practical class, you should attend it [oppurtunity cost - missing an important experiment]. If it is a dull lecture, you may go to the stadium.

To take voluntary retirement or not.
To study abroad or not.
To go for a second child or not.
To buy a house or lease a house
You can always use this technique in situations like the ones given above.

"The cost of something is what you give up to get it".
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