If compound interest is often referred to as the eighth wonder of the world, then understanding opportunity cost is equally transformative. It reveals the true power behind saying no.
While I’ve written a lot about trade-offs and the importance of saying no, I’ve never directly addressed opportunity cost.
This concept provides a great way to compare options — not just by evaluating whether a decision aligns with your strategy or increases your chances of success, but by considering what you’re giving up.
The OPPORTUNITY COST PRINCIPLE: Every decision involves a trade-off. Always ask yourself: What opportunities am I giving up by choosing this option?
The three-lens principle: See what you are really giving up
To uncover the hidden costs of your decisions, use the three-lens principle (expanded from Clear Thinking by Shane Parrish):
- Compared to what? - Every decision excludes alternatives. What is the best opportunity you are sacrificing by saying yes?
- And then what? - Play it forward. What are the consequences in a month? A year from now? Five years from now?
- At the expense of what? - What resources — time, money, focus — are you using up?
Applying this framework will help you identify and quantify lost opportunities - a critical capability for strategic decision-making.
By consistently asking these three questions, you develop the discipline to turn down tempting but misaligned opportunities. While your competitors chase every new opportunity, your commitment to what really matters becomes your advantage.
The strategic power of saying no
Every careless “yes” undermines your greatest ambitions.
- Feature creep is a real threat - companies collapse under the weight of unnecessary enhancements. Every yes to a new feature is a no to refining what really matters.
- Distraction undermines excellence - Every new task breaks your focus. Let your competitors chase distractions while you focus on what matters.
- Burnout comes from too many yes-men - Over-commitment leads to exhaustion, which in turn leads to mediocrity. Your energy is finite — protect it.
The hardest “no” is the one that matters most
Think you’re good at saying no? Steve Jobs would have put you to the test, just like he did with Jony Ive:
“One of the things Steve would say to me because he was worried I wasn’t focused—he would say how many things have you said no to?
I would tell him I said no to this. And I said no to that.
But he knew I wasn’t interested in doing those things.
There was no sacrifice in saying no.
What focus means is saying no to something that with every bone in your body you think is a phenomenal idea, you wake up thinking about it, but you say no to it because you are focusing on something else.” — Jony Ive
That’s the kind of discipline that leads to lasting success.