Opportunity Cost


Back when I started blogging, I had a go-around with Pierre Igot. I’m not going to rehash it, but I think the best summary of the entire affair can be found here.

During that discussion, I made the mistake of bringing up the concept of “opportunity cost.” The mistake wasn’t so much that the concept didn’t apply to the discussion. Rather, my mistake was in believing that Pierre and some of the other folks in his echo chamber would understand what I was talking about.

So, from time to time, one of them tries to mock me by throwing the phrase into a discussion somewhere. The most recent instance is in a comment made by someone named Warren Beck, on Eric Schwiebert’s recent post explaining his take off on J. Geils’ Love Stinks.

Now, I suppose I could take the time to explain “opportunity cost” to these guys, but I can also spend that time playing a game with my daughter, or reading Dick Davis’ recent translation of Abu’l-Qasim Firdawsi’s Shahnameh: The Persian Book of Kings, or watching the latest episode of CSI. Better yet, rather than explaining to these guys why I might be inclined to fix someone else’s problems before I get around to fixing theirs, I can spend that time actually fixing bugs.

Now, I’ll bet that at least one of these guys will offer a comment complaining about how we place profits over fixing bugs, thereby demonstrating that they really don’t get it. If they do, I will most certainly approve their comments. Do you think any one of them will stop to ask themselves why I might be inclined to approve such a comment?

Do you think I might be allowed to coin the word “egonorant”? (My daughter suggested that I give the latin term for this: ego rectalitis. That’s where the head swells, and it gets stuck.)

By the way, I should point out that none of this has any bearing on whether or not we, at MacBU, pay any attention to Pierre’s bug reports. In fact we do. I’ve even given him credit for his assistance in helping to track down a bug.

Rick

Currently playing in iTunes: Ain’t Wastin’ Time No More by The Allman Brothers Band


Comments (22)

  1. Adam says:

    Simply, opportunity cost is the cost involved in the activity you are NOT doing, while doing another activity…

    i.e. The ‘opportunity cost’ of going to University straight out of school, is the dollar earning of working full time and having your nights free, or, it could be the travel potential and the year’s break you get.

  2. Rick Schaut says:

    Adam,  your example is correct, but your definition isn’t.   Opportunity cost is the _benefit_ that you would have received had you engaged in activity B yet give up because you choose to engage in activity A.

    TANSTAAFL–there ain’t no such thing as a free lunch.

  3. Schwieb says:

    You mis-spelled my name!  🙂

  4. Rick Schaut says:

    I was so focussed on spelling your last name correctly.

    But, you know what?  It’s actually fitting, given the subject at hand.

  5. Chris Hanson says:

    I think part of it is that a lot of people simply don’t believe that opportunity cost applies when a large company with lots of cash in the bank and high quarterly earnings makes its decisions.  They see it as "well, it won’t affect the balance in the bank account appreciably so an argument from opportunity cost is specious."

    The problem is that business accounting – especially the GAAP rules used by publicly-traded corporations – don’t work like balancing your personal checkbook.  Money you spend on operations comes out of your earnings, not your total balance, and is a cost rather than an expense, and needs to be accounted against particular line items in particular ways, and…

    This on top of the "is this going to get us the very best possible return for our dollars so we’re faithfully executing our responsibility to our shareholders?" is something people get confused by.  Does ConHugeCo have the money to pursue Course A and Course B at the same time?  Probably.  But that’s not the only thing that matters in the decision of how to allocate ConHugeCo’s resources, and that’s hard for a lot of people to grasp because it’s largely outside their experience.

  6. Hanz says:

    Opportunity cost is a simple concept in economics that any moron could understand.

    If someone doesn’t get it, I question their intelligence.

    It’s called the BIG PICTURE.

  7. scott lewis says:

    Ahh, it’s nice to see that calm heads and rational minds prevail throughout the MacBU. We of the quiet majority support you. 🙂

    Now, I’m getting all nostalgic and have to find some poor soul to bore to tears with a lengthy reminiscing of when I switched from Netscape to IE/mac back in the dark ages and just how much better IE/mac ran on my LC II…

  8. Rick Schaut says:

    Chris,

    You are correct that people see this in terms of dollars, but there are two problems with that.

    First, money isn’t the only constraint we work under.  In fact, the biggest constraint is human resources.  I don’t know about you, but I’d really prefer not to ship code worthy of showing up on the Daily WTF?  So, we don’t just go out and hire anybody to work on the product.  The consequences is that our most significant resource is very limited.

    Secondly, the calculus of opportunity cost works whether we want to measure the benefit to a company’s bottom line _or_ we want to measure the maximal benefit to the most number of users.  It was precisely in terms of users that I’d brought up the concept oh so long ago.  To this day, I have no idea how it was so horribly misunderstood.

    PS.  Hasn’t anybody gotten the joke yet (well, other than Schwieb)?

  9. Schwieb says:

    I was just thinking the same thing, Rick.

  10. DF says:

    "Now, I suppose I could take the time to explain ‘opportunity cost’ to these guys, but I can also spend that time playing a game with my daughter, or reading Dick Davis’ recent translation of Abu’l-Qasim Firdawsi’s Shahnameh: The Persian Book of Kings, or watching the latest episode of CSI."

    I wonder how many people will get the above para 😉

  11. Reading this entry before coffee can be very odd, as it leads to thoughts like:

    "Holy Crap, Dick Dale translates Ancient Persian too?

    oh…wait…"

  12. Doug says:

    Disclaimer first: not a Windows fan or hater, don’t even own a Mac.  Just like the blog, that’s all.

    I’m probably opening myself up for a good shafting here, but I’m afraid I don’t get why everyone thinks this guys is such an ‘asshat’.

    Now, I didn’t read it all (I got bored), and the language throughout was fairly timid (maybe I stopped too soon?).

    But I think this guy had a legit. gripe.  And if I had never read your blog before, then with reading as far as I did, I would probably conclude that he was being more reasonable in that discussion.  You say he didn’t get what you were trying to tell him – I can see that.  I also think you missed a few things he was trying to tell you.

    Doug

  13. Rick Schaut says:

    Doug,

    I’m glad you like the blog, and you’ll get no shafting from me.  Indeed, my sole motivation in posting this has been to clean up much of the misattribution that’s been directed at me.  If these guys would accurately restate the point I’d made oh so long ago, there wouldn’t be an issue.

    Having said that, the problem with Pierre is that he wastes enormous amounts of time and energy spewing righteous indignation in just about every direction imaginable with no concern about whether that indignation is deserved.

    The issue with French punctuation and non-breaking spaces is a good case in point.  You can find a good summary of the rules and technical issues at http://www.cs.tut.fi/~jkorpela/html/french.html.

    It is, in fact, not possible to do proper French punctuation on any computer, and particularly with any Type 1 font, by using non-breaking spaces.  In a number of instances, the non-breaking space is too wide.  Most French users of Word don’t use non-breaking spaces at all.  They use advance field widths to get the proper spacing.  Fields don’t cause line breaks, because there is no character that can form a line break.  Fields merely change the width of the inter-character spacing.

    And, with Pierre, therein lies the problem.  Rather than discussing the details of his problem and asking for ways to resolve it, he prefers spout reams of bile, in which he outright questions our competence and good faith, over the fact that he can’t solve the problem in the manner he thinks is the most efficient way to solve it.  No human being deserves the kind of vilification Pierre directs at us, and, in a civilized world, there simply is no justification for it.

    None of this means that Pierre doesn’t have even several valid points.  And, I’ll acknowledge the possibility that I may have missed one or two in the exchange he and I had, though I don’t believe so.  I merely chose not to address every point simply because, well, the opportunity cost of addressing all of Pierre’s points is just too high.  I have better things to do.

    If there is something you think I missed and mertis attention, by all means, bring it up either in the comments or by clicking on the "Email" link in the upper left-hand portion of this page.

  14. Doug says:

    Hi Rick,

    When you put it that way, fair play!

    After doing a little more selective reading, I think I see what you mean.  It’s kinda like shouting at the wind, isn’t it?

    As you say, better to just get on and do something useful.

    Doug

    Currently playing on iTunes – Gnaahh, Joe Satriani

  15. Pierre Igot says:

    All I can do is shake my head in disbelief, on behalf of all French users out there:

    http://www.betalogue.com/2006/06/25/french-punctuation-in-microsoft-word-rick-schaut-chimes-in/

  16. Yep, I’d prefer you to fix the clunkiness when dealing with large master documents and the navigation pane than dealing with potential trolls. 🙂

    If you need a large master document (35 sub-documents, 330 pages) to demonstrate the navigation pane issue, just let me know.

    Plus, I’m going Intel soon. Need a Universal binary – I’ve tried Word under Rosetta on a 2.16 GHz MBP and it’s no faster than I have today on my G4 laptop. Looking forward to Office 12!

    Andrew

  17. NathanHerring says:

    The opportunity cost at the level of prioritizing features/fixes based on maximal benefit to the most number of users is still fully embedded in the larger opportunity cost of choosing whether to spend time (which means salary money) on those features at all. If it so happened that we could know that a desired bug fix would be a negative profit (cost of fixing the bug vs. incremental profit on future sales of the product), it is <em>required</em> of us to avoid fixing the bug, and <em>highly suggested</em> that we find the most profitable bug fixing/feature adding on whatever range of products Microsoft has or has yet to create, and work on that instead. Being a public company has its profit-motive constraints.

  18. I don’t care if you do use your app. Unless you’re the only person who uses your app, then you’re probably not your target user.