Opportunity Cost Thinking
The biggest risk is not failure but spending your time on things that succeed but do not matter
Opportunity Cost Thinking replaces the default ROI framework that most organizations use to evaluate projects and decisions. ROI thinking asks what is the return on this investment, which sounds rigorous but is deeply flawed because every project can be made to look like it has positive ROI by adjusting assumptions. ROI calculations are easily gamed, and they encourage doing everything that clears a minimum threshold. Opportunity Cost Thinking is superior because it asks what am I giving up by doing this instead of that. This forces direct comparison between options rather than evaluation against zero. It reveals that doing project A means not doing project B, makes the real cost of decisions visible, and encourages saying no to good ideas in favor of great ones. As Shreyas Doshi puts it, the biggest risk is not that you will do things that fail but that you will spend your time on things that succeed but do not matter.
- Every project can be made to look like it has positive ROI through assumption manipulation
- Opportunity cost thinking compares options against each other, not against zero
- The real cost of doing something is everything else you could have done instead
- Saying no to good ideas is necessary to say yes to great ones
- List your top three to five current projects or commitmentsWrite down the three to five projects currently consuming most of your time and resources. For each, note the expected return and the percentage of available capacity it consumes. Most people have never explicitly mapped their commitment portfolio against total available capacity, which is why they chronically overcommit.Pro tipInclude personal commitments and recurring obligations. Your capacity is a single pool.
- For each commitment, identify what you are not doing because of itFor every project on your list, write down what you would be doing with that time and energy if the project did not exist. This is the true cost of each commitment: not the resources invested but the alternatives forgone. Often, the opportunity cost reveals that a good project is consuming capacity that could produce dramatically better results elsewhere.Pro tipAsk trusted advisors what they would do with your time and resources. They often see opportunities you are blind to.WarningBe honest about sunk cost. Time and money already invested are irrelevant to whether you should continue. Only future returns compared to future alternatives matter.
- Rank projects by opportunity cost, not by ROIReorder your portfolio by asking: if I could only do one, which would it be? Then two? Continue until you have a clear ranking. The bottom projects are candidates for elimination, delegation, or deprioritization. This often reveals that one or two commitments consume enormous capacity while contributing relatively little compared to alternatives.Pro tipRevisit this ranking monthly. Opportunity costs shift as the landscape changes.
At Stripe, Shreyas Doshi observed teams spending months building features with positive ROI projections that were low-impact relative to alternatives. When the team switched from 'Does this feature have positive ROI?' to 'Is this the highest-value use of our next quarter?', prioritization changed dramatically. Several in-progress features were stopped despite positive ROI because the opportunity cost was too high.
Shreyas Doshi developed this distinction through years of product management at companies where teams consistently chose projects with positive ROI that were nonetheless the wrong things to work on. He observed that ROI frameworks gave teams false permission to pursue mediocre opportunities because the math technically worked. The shift to opportunity cost thinking forced the uncomfortable but necessary question of whether a project with positive ROI was actually the best use of the team's limited time and resources.