(This post was last modified: 05-31-2016, 04:22 PM by CrowneAndCrane.)
Everyone that does not possess an unlimited amount of money or that isn't destined for poverty, takes all costs, including opportunity costs, into account when making purchases. If you see a $12.00 safety razor on eBay that has a shipping fee of $25.00, how much did it cost? Did it cost $12.00 or did it cost $37.00? Personally, I'm going to determine whether or not I think the razor is worth $37.00 and I'm going to weigh that against what other options I have for spending that $37.00. Assume there is another, nearly identical, razor that costs $25 and has a $5 shipping fee? Which of the razors is cheaper the $12 one or the $25 one? I take total cost of ownership, including opportunity cost, into account when purchasing a tin of soap and I do the same when I purchase a car.
Let's say that someone sees a razor strop that costs $100 that he likes. Let's also say that he makes $500/day as some sort of contract employee. Let's also say that he can get the materials to make the strop for $25. Not wanting to pay $100 for the strop, he decides to take 1/2 day off from work and make one just like the one for $100? Assume he does so and succeeds. So what is the price of the strop? Is it the $25 for the materials? Or is the value proposition: $250 (loss of a half-day's pay) + $25 (cost of materials) - $100 (value of the strop) = $175? Was this person's value proposition a sound one, or a poor one? One can only make proper decisions when all costs are factored into the value equation.
Let's say that someone sees a razor strop that costs $100 that he likes. Let's also say that he makes $500/day as some sort of contract employee. Let's also say that he can get the materials to make the strop for $25. Not wanting to pay $100 for the strop, he decides to take 1/2 day off from work and make one just like the one for $100? Assume he does so and succeeds. So what is the price of the strop? Is it the $25 for the materials? Or is the value proposition: $250 (loss of a half-day's pay) + $25 (cost of materials) - $100 (value of the strop) = $175? Was this person's value proposition a sound one, or a poor one? One can only make proper decisions when all costs are factored into the value equation.