Too often, we take the things around us that are purchasable for granted. It’s refreshing to take some time to evaluate the actual value of simple goods as this helps reconcile the relative values of more expensive goods.
It’s the middle of strawberry picking season here in Oregon, so rather than miss out on the tasty bounty down the road, I spent Saturday crouched in a field picking berries. It was hot, exhausting, and I came away with far fewer berries than I expected.
But in all, I paid far less for the berries than I would have buying them in the store.
The experience got me thinking about the total cost of the strawberries now sitting on my counter. Yes, there was the actual monetary cost of the berries (which in a way makes up for the cost of growing the berries). Then there was the cost of transportation (the berry field was several miles from home, driving out was a non-trivial task). Finally, and most importantly, there was the cost of picking the berries.
I didn’t pay to spend time in the field picking berries. But those 2 hours could have been spent doing just about anything. When you take into account how much money I make in my regular job or even how much I bill for the occasional business consult, these were expensive strawberries.
Opportunity cost is a real cost that needs to be factored in to the valuation of everything. On the one hand, freshly-picked, organic Oregon strawberries only cost $1.75 per pound. On the other hand, they also cost the amount of time it takes for you to pick that pound of berries. Depending on what you have to give up to invest that time, these berries could become far more expensive than the $2.50 per pint berries at the supermarket.
As a kid, I used to look at products as the sum of their parts. This made it difficult for me to justify why a hamburger, for example, cost more than two slices of bread, some meat, cheese, and a few vegetables. The fact that I can just order a burger at a restaurant – rather than prepare everything myself – is usually called convenience cost.
But it also speaks to the inherent value of the product. Someone had to make the burger – it might take them 5 minutes at $15/hour to do so. Instead, I could sacrifice a consulting job (perhaps $200/hour) and spend 5 minutes (or longer) preparing that sandwich on my own. For me, the intrinsic value of anything I don’t have to prepare on my own is considerably higher than the price placed on it by someone who prepared it for me.
Well, this is true most of the time. Sometimes I’m able to do things at far less of a real monetary cost than just buying the product at the store. Learning how to tell the difference between situations of high-value, prepared goods and lower-value, I-can-do-this-myself-for-less goods has taken years.
Ask yourself, how often do you pick something up at the store and immediately know (and respect) its intrinsic value? If you prepared/built the product at home on your own time, would it save you money? What is the opportunity cost related to doing it yourself?