History of Opportunity Cost: Be careful what you choose

In the late 19th century the Austrian economist Friedrich von Wieser is credited with conceiving and formalizing the concept of “opportunity cost”. Source

Example:

A good example of opportunity costs is in the synaptic pruning of our brain. From birth to age three the brain rapidly grows, increasing our synapses from approximately 2,500 to 15,000.

However, by the time we reach adulthood, that number is cut in half. The reason for this reduction? As we gain new experiences, some brain connections are strengthened, while those we neglect are reduced or eliminated.

The reality is, for everyone, that you cannot have it all; at least not everything all at once. Each day carries 24 hours to spend and within those hours we are limited to each moment one after the other.

Our investment of focus, funds, time and energy is limited. And, depending on your place in the world, choices available to you will be better or worse in comparison to what others have before them.

We cannot know all the variables beforehand, so risk is present in our choices. For instance, buying one house over another seemingly comparable house is a gamble. You want to acquire as much information as possible, so that you have an educated guess; but it is still a guess all the same.

What is the opportunity cost formula?
Opportunity cost = FO – CO

Your FO in this formula represents the return you would have received from your forgone option; or the next best choice that you declined in favor of your CO. Where CO represents return on your chosen option.