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Why Understanding Opportunity Cost Might Help Your Blogging

Dear Readers,

On errands this weekend to fill my home office, I ended up at the television store.

As I browsed through LGs, Samsungs, and the rare Toshiba, the concept of opportunity cost crossed my mind.

Was I spending my money wisely? Was there a better option? I had actually been thinking of buying Lead Player to help my blogging videos, maybe that was more worth it?

As I drifted off into day dream narnia I realized this was a bigger concept that I thought…

Opportunity cost related to blogging

Blogging is a time-consuming activity and if you do it the “right way” it costs you some money. Email list software, hosting and domains, themes, it all adds up.

Of course, to many of us these things are a necessity, a topic we’ll talk about in a second.

Here’s a simple example of opportunity cost:

Say you have two choices. Stay in tonight and setup a simple website, or go out to a dinner and play with a hot date. The first costs you $60 – that’s the cheapest route with HostGator. The latter costs you $100, cheap for NYC.

Which option gives you the most satisfaction?

The opportunity cost of going to a play is the alternative activity, setting up a website.

The opportunity cost of going to a play is thus, a lasting website, and more importantly, $40 cash. Folks never realize that opportunity cost actually saves you, or gains you, money. You just have to analyze the situation like I just did.

More examples:

  1. Spend 2 hours writing a post, or 1.5 hours exercising at the gym followed by 30 minutes on a post.
  2. Go to Theme-Junkie for a premium theme or go to J-Crew for a premium polo.
  3. Spend two hours reading blogs or two hours watching television.

The key factor to realize here is personal utility. What I choose for my evening might not be the best for you and it’s all about getting the most satisfaction for yourself.

Economists really don’t stress this enough.

Understanding that other options exist and comparing them side by side can often really clear up a decision. And of course, the options should be of equal cost in terms of money or time.

Necessity

Necessity has everything to do with personal utility. It’s defined as our own view on what we need.

We’ll spend a lot for what we deem necessary and will go to great lengths to NOT spend on what we think we don’t need.

For me, three things are absolutely necessary in blogging:

  1. The domain name and hosting
  2. A premium theme (read which one)
  3. An email list building software (read the review)

These things cost me relatively little each money (the theme was a one-time thing) and it’s the bare minimum for me to blog how I want to.

What are your necessities?

But depending on where you’re at in blogging and website building, this may be totally different.

And, oddly enough, when bloggers or affiliate marketers tell us “you need this tool” the most common reader response is “really? No I don’t, thank you very much.”

I don’t know, I find this stuff really interesting.

TV economics

Image Caption: View from the comp. Plant still needs a name (Lorraine?)

My TV set me back a good amount of money. The time was actually a bit less, I recruited my tennis partner help set it up.

I planned to use it to watch the French Open (immediate necessity) though upon leaving my tennis partner referred me to a bootleg site where streaming the tennis works pretty darn well.

Timing…a third economic issue I suppose.

I can’t return the TV, unless I smash it then claim something crazy.

So, I’ll have to find other, more long-term purposes for it.

Your perspective?

What do you think?

Do you think that opportunity cost affects your decision making?

Let’s talk money, and more importantly blogging economics, in the comments.

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8 Responses to "Why Understanding Opportunity Cost Might Help Your Blogging"

  1. Hey Greg,
    This econ discussion is an awesome way to encourage writers to invest in their blog, whether the investment is time or money (or both). Your explanation of opportunity cost is sure to inspire casual bloggers to take it to the next level! Great post!

    1. Hey Shifa!

      OMG great to see ya here. Exactly, it’s all about investing in what you love doing so you can do more of it!

      Thank you for the comment and encouragement 🙂

      Cheers,
      Greg

  2. I agree with Shola. We often forget to value our time. For example, is it worth my time at $35/hour to mow the lawn, or should I hire the neighborhood kid for $15 to do it for me. If I sit around and watch the grass being cut, then I should do it myself. However, if I use that free time to get some writing done, then I have come out ahead.

    Yet, I find that people are often resistant to this idea. For some reason there is an idea that our time is not valuable. When you understand the value of your time, you are more likely to treat blogging like a business

    1. Hey Rhonda,

      I was commissioned to cut the grass when home and I highly recommend out-sourcing it. Got to write after.

      Good point about time…but don’t you think “do it yourself” still applies to things like designing and marketing the blog?

      Cheers,
      Greg

  3. Hey Greg,

    It’s good to see that someone finally addressed the topic of opportunity cost in relation to time, effectively that’s what biggest investment people make in their blog.

    I would also include the actual cost of your time to make it more quantifiable i.e if you are currently making $x per year then your hourly wage is $y, therefore to spend 2 hours working on your blog cost $z.

    I believe this would make for a better decision.

    1. Hey Shola,

      Definitely. And folks have a hard time trading present wages for future gains.

      A guy who always talks about this stuff is Pat Flynn. Of course, he might be one of the best at minimizing opportunity cost and maximizing returns.

      Thanks for your 2c,

      Greg

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