Provocative Thoughts From The Next Generation

Do the costs outweigh the benefits?

I’m sure that no matter what your age that by the time you read this you have come across what most people categorize as “Cost/Benefit analysis”. However, chances are that there is no clear parameter for all of the equations in this formula. If we look back upon decisions we or others have made, sometimes we can’t but help ask “What was/were I/they thinking?” President Bill Clinton’s decision to conduct an affair and jeopardize his seat as the most powerful man in the world (along with the pope) all for sex! What was he thinking? What were the Enron executives thinking when, after already making out like bandits, they decided to seek after more and more money until they were finally put in jail? What was Adam thinking when he took a bite of an apple at the cost of being rejected from the greatest place on earth?

There are many more examples of the list of people who have let the greedy side of human nature dictate their decisions. The question, “What were they thinking?” has an answer, they weren’t! If any one person stopped and thought about the costs and benefits of each of these decisions and their consequences, I highly doubt anyone would go through with them, especially with the chances of getting caught so high.

Costs - what is a cost? A cost means different things to each of us but most of the time we can all agree that time is a cost because time is money. The amount of time that equates to how much you make obviously varies greatly between individuals. Besides time and money a cost could be whatever the consequence of our actions may have. For example if you are taking out a loan then part of the cost will be the “risk” of not being able to pay that loan back in time and therefore being penalized.

If the “risk” is very low and the cost not very high then it is almost always a condonable decision. Let’s look at some examples. Take rolling at a stop sign as an example. Say that each time that you roll instead of completely stopping you save about five seconds. Now the chances of you getting caught are very low, maybe around one or two percent. But the fine for rolling a stop sign is five hundred dollars plus a point on your license. If we can work out the math that is about five to ten dollars each time we roll a stop sign “all things equal”. You may think, “I won’t get caught, it’s a one in a hundred chance” but as you already know if you are a parent reading this article, eventually all of your risks will catch up with you. And as they say, the House always wins.

Now let’s look at another example, this time, jaywalking. The chances of you getting a ticket for jay walking are very low, I’m guessing around one in a thousand. And the fine for jaywalking is very cheap, around twenty dollars. Calculating the cost works out to be about two cents every time you jaywalk. Now if you are jaywalking it’s probably because the nearest crosswalk is at least half a block or more away and even when you get there you would have to wait for your turn. Therefore those two cents might be saving you two minutes or more! This is a case where the benefit outweighs the cost!

Now obviously people aren’t going to be going around asking themselves what are the costs and benefits about every decision (besides perhaps when it comes to the simple cost of money) but I can almost promise that if you start using the cost/benefit analysis more in life, you will find it a valuable tool in helping you make decisions.

Before ending the article I should point out that everyone’s “costs” and “benefits” may be different for each individual. All that to say, just be careful when you think you are warning a friend against something when perhaps they are really trying to achieve the very thing you fear (adrenaline, bad reputation, etc.).

And that is all for now, go out and try on for size this version of the cost/benefit analysis. It’s almost a guarantee you are a natural at it and have already put the method into practice a few or many times.