Tradeoffs and Opportunity Cost
Every choice has a cost: the next-best alternative you didn’t choose. There are no free lunches.
Opportunity Cost
Definition: The value of what you give up when you choose one option over another. Frédéric Bastiat called this “what is not seen”—the invisible cost of every choice (Bastiat, 1850).
Choosing to watch TV for an hour costs you:
- An hour of exercise (health)
- An hour of work (wealth)
- An hour with family (social)
- An hour of learning (meaning)
The “cost” isn’t the TV. It’s the best alternative you sacrificed.
Why Tradeoffs Are Hard
We want everything. Health AND wealth AND relationships AND meaning AND leisure. Something has to give.
Costs are hidden. The alternative you didn’t choose is invisible. The choice you made is visible.
Comparison is painful. Acknowledging tradeoffs means admitting limits.
Common Tradeoffs
| Choice | Costs | Benefits |
|---|---|---|
| Work more | Time, health, relationships | Money, career |
| Exercise daily | Time, energy | Health, mood, longevity |
| Save aggressively | Present enjoyment | Future security |
| Deep relationships | Time, emotional energy | Connection, support |
| Say no | Opportunities, reputation | Focus, energy |
Cross-Domain Tradeoff Matrix
| Domain | Trades Against | Key Decision |
|---|---|---|
| Health | Time, money, convenience | Short-term comfort vs. long-term function |
| Wealth | Time, relationships, health | Present consumption vs. future security |
| Social | Time, solitude, focus | Breadth vs. depth of connection |
| Meaning | Money, status, safety | Convention vs. authenticity |
Decision Framework
1. Make Tradeoffs Explicit
Don’t pretend you can have it all. Write down what you’re giving up.
2. Compare to Your Values
Which outcome aligns better with what matters most?
3. Consider Reversibility
- Reversible: Experiment freely
- Irreversible: Proceed carefully
4. Watch for False Tradeoffs
Some “tradeoffs” are false:
- “Health OR career” — Actually, health enables career
- “Family OR success” — Success is hollow without family
- “Now OR later” — Some investments serve both
5. Accept the Choice
Once decided, stop second-guessing. The cost is paid. Focus on the benefit.
The Meta-Tradeoff
The biggest tradeoff: optimization vs. satisfaction.
You can always optimize more. But optimization has diminishing returns. At some point, “good enough” is the optimal choice. Barry Schwartz calls this “satisficing” vs. “maximizing”—satisficers are often happier (Schwartz, 2004).
Related
- Constraints — Tradeoffs arise from constraints
- Risk and Variance — Risk is a type of tradeoff
- Goals vs Systems — Choosing direction
You can have almost anything. You can’t have everything. Choose deliberately.