Seth Godin’s entrepreneurial opportunity cost

Seth Godin recently wrote a short but sweet blog post entitled “The Jobs Only You Can Do“. The piece describes a milestone in the career of an entrepreneur.

One of the milestones every entrepreneur passes is when she stops thinking of people she hires as expensive (“I could do that job for free”) and starts thinking of them as cheap (“This frees me up to do something more profitable.”)

When you get rid of every job you do that could be done by someone else, something needs to fill your time. And what you discover is that you’re imagining growth, building partnerships, rethinking the enterprise (working on your business instead of in it, as the emyth guys would say). Right now, you don’t even see those jobs, because you’re busy doing things that feel efficient instead.

Seth is essentially describing a classic opportunity cost scenario. Dictionary.com define opportunity cost as,

“The money or other benefits lost when pursuing a particular course of action instead of a mutually-exclusive alternative.”

In Seth’s example, the entrepreneur has two options: do the job himself or employ someone to do the job. Each has a clear benefit.

  • By doing the job him/herself, the entrepreneur saves his money.
  • By hiring someone else to do the job, the entrepreneur saves his time.

The opportunity cost describes what the cost of missing an opportunity when pursuing another.

  • By doing the job him/herself, the entrepreneur incurs a time cost.
  • By hiring someone else to do the job, the entrepreneur incurs a financial cost.

The milestone that Seth describes occurs when the financial cost of hiring someone is deemed to be less valuable than time it frees up.

Before the milestone, the entrepreneur values his time less than the price of a hire.

After the milestone, the entrepreneur values his time more than the price of a hire.

 

Hey. I’m Alex Murrell. I'm a Planner at Epoch Design in Bristol where I help deliver highly creative, innovative and effective pack, instore and online communications for some of the world’s biggest FMCG brands. Want to know more? You can find me on Twitter or LinkedIn.

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