Scott H Young

Just Because It Won’t Cost Money, Doesn’t Make It Free


Free is a special word in the human language. The idea of getting something without money causes people’s brains to fall out. People unwittingly waste hours of their time and thousands of dollars because they’re seduced by “free”. But, as economists will tell you, even if something won’t cost you a dime, that doesn’t mean it is free.

If you want to be productive, you can’t just assess how much time or money an activity costs you. You also need to assess what you could have alternatively done with those resources. These are known as opportunity costs, and too many people ignore them, wasting time, energy and money.

As an example, if you received a 6% return on a $1000 investment, you’d have an extra $60 in “free” money at the end of the year. However, if you had the opportunity for a 10% investment, you’ve actually lost $40 over what you potentially could have earned.

Opportunity Costs and Productivity

The value of time isn’t just what you can reap from a single hour of the day. It’s also what you could have gained from alternative ways to spend your time. Often when placed under this more critical light, our time appears far more wasteful.

In running this website as a business, I know of dozens of projects I can take on that I’m fairly certain will create a boost in revenue or value for readers. But even if a project can earn me a few thousand dollars without my spending a cent, it may have actually cost me money. By taking one project and not another, I’m paying opportunity costs.

Opportunity Costs and Socializing

Spending time with a group of friends isn’t a free activity. You may be giving up the opportunity for more fulfilling social relationships with people who actually share your interests. Investing in one relationship means you can’t explore new ones. On the opposite side, jumping between people makes it harder to develop a deep relationship with any of them.

Opportunity Costs and Guest Posting

The idea that spawned the title of this post was the result of a conversation with David Zinger, another blogger, over guest posting. For those unaware of the lingo, a guest post is when a writer gives an article to be published on a different website.

The source of our conversation was that I stopped having new guest posts on this website several months ago. The reason was that, although a guest post was “free” for me to use, it often confused readers and reduced the consistency of my writing. In addition, for every guest post I hold, that displaces another article I could have written.

Many bloggers have frequent guest contributors to their websites. Although this is a valid strategy, it has hidden opportunity costs. Just because it doesn’t cost them money, doesn’t mean hosting a guest post is free.

Be More Skeptical of “Free”

Last year, I stopped freelance writing. I had previously been writing articles for other websites at around $40-$60 per hour. If you divide my monthly income by the total amount of time I invest in this website, I’m probably still making less than this amount. I suspect many of my friends earning entry-level jobs at $15-$20 would be shocked that I would give up a role that paid well, wasn’t demanding and fit my interests.

However, $40-$60 isn’t the true price of that activity. When looking at costs, I can’t just consider the value of that time, but the value of any alternatives. Although the hourly rate may be lower, working on my own projects have the opportunity to contribute value for years to come, instead of just lasting for one month.

Here are some things that are often viewed as free (or almost free) but have other opportunity costs:

  • Relationships
  • Attending school on a full scholarship
  • Grocery coupons
  • Library books
  • Extracurricular activities
  • Guest posts (both writing and publishing)
  • Using productivity software
  • Email usage
  • Reading newspapers
  • Bank accounts (especially those with a low interest rate)
  • Friends you spend time with regularly
  • Watching television

Watch out for these costs. Often you’re paying dearly without realizing it. Although psychologically people make a distinction between money lost and money never had, they both have the same impact on your bank account. The same applies to your time, energy and attention span. Spend it wisely and watch out for opportunity costs.


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9 Responses to “Just Because It Won’t Cost Money, Doesn’t Make It Free”

  1. Hi Scott,

    The concept of opportunity cost doesn’t sit well with me. I’m not quite sure what it is, perhaps because it seems to clash with the concept of abundance mentality.

    I certainly get the point you’re making in your $1000 investment example – making only $60 means you’ve lost the opportunity to make an extra $40.

    Part of me says you should make changes to get that extra $40 next time, but another part of me says that you’ll never be happy with that kind of thinking. Chasing what “could have been” can leave you unhappy with what you’ve already got.

    That said, I entirely agree with you that “free” isn’t always free. You can measure cost in many different ways such as money, time, happiness, quality and health.

    TV can be free but costs you in time. Food in a dumpster may be free but can cost you in health (sorry, gross example.) Guest posts can cost you in quality, it might even cost you in lost readers.

    A very interesting post. Thanks!

    Cheers,
    Gwynn

  2. Scott Young says:

    Serene,

    The idea of an opportunity cost is to raise your standards for how you use your time and money. The limitation is that it’s impossible to rationally analyze the value of every alternative. However, if you’re sacrificing for a known alternative, you’re wasting time or money.

    -Scott

  3. [...] is, we are more attracted than ever to anything that is free. Scott Young reminds us, though, that just because it won’t cost money doesn’t make it free. You like that free cell phone? You’ve got to sign a contract for it. Think of the [...]

  4. AD_Queen says:

    hey Scott

    thats very true i mean we do have many uni students here who doesnt want to attend their classes and all just beacuse they have full paid scholarship , in fact it made them not to value the importance of being educated those scholarship are there just to make edcuation process easier for those who cant afford it :)

    thanks for opening such topic its really important to let everyone be aware of it

    AD.Queen

  5. David Cain says:

    Great post Scott, I agree. i figure time consumed is a more accurate metric than money for determining the cost of something.

    I canceled my cable a year ago, but on friday, I accepted on a whim an offer for two free months of cable. There is only one channel I want to watch (French CBC because I’m studying French) but already I have wasted time habitually flipping around. It is a money savings, but a time investment, unless I can 100% limit my tv-time to french studying time.

    It’s physical conditioning that makes channel surfing so compulsive, my thumb just flips channels all by itself without being asked. Years and years of practice I guess :)

    Nothing’s free that takes time.

  6. Loren says:

    Hmmm….. interesting points. Yes, time spent wasted on one thing when plan b could have proven more fertile makes sense.
    However, for me, if I want to do everything in my power to succeed, I am motiviated to do as much as possible. For example,
    if I want to make money doing something I like, I can either teach guitar from the schoolhouse at their rate of pay, or teach at home, at a higher rate. My solution: do both. This way, I increase my chances of success and grow my business on two levels. This comes from the mentality of “whatever cards you are dealt (in Life) always play your best hand”. Working hard at something you love, will benefit you in that you will always have the luxury of doing something you love, instead of flipping burgers (unless THAT is your passion : )

  7. Sami says:

    Hey, Scott, I’m wondering where and/or how you managed to find the opportunity to write for online publications at a (very) decent hourly rate? I’ve written for a few websites in my time and produced some good content, but hardly any of them pay, and those that do probably only pay £10 -15 for a 300-500 word article… admittedly my main field is music and it seems that the vast majority of publications seem to be able to get away with paying (next to) nothing unless they’re at the top end of the game and there seems to be a pretty large amount of people willing to do it for love. I’m certainly capable of writing about other topics, but I’m not sure who to start approaching to get paid for my words. Any pointers?

  8. Scott Young says:

    Sami,

    I was being paid 40 USD per 900 word article (900 words usually takes me approx. 1 hour to write).

    Freelancing gigs are hard to get for writing, because there is an abundance of free content. If you want a paying gig you need to be able to prove that you can contribute more value than your fee. If your writing style attracts a lot of attention, you can get paid. I had a more lucrative contract due to my website, which helps give me more credibility as a writer.

    -Scott

  9. Sami says:

    I guess then that this is where weighing up the opportunity cost comes into play again, I have to give away a certain amount of stuff free to attract attention to my work, but then once it’s known that I will do something for nothing, it’s very difficult to persuade people to pay for what they know I have given away in the past. I find I have the same problem with my DJ career, most of the higher-profile gigs seem to think that exposure is payment enough. Ironically I generally make more playing in a 100-capacity bar than I do in a 1000-capacity club.

Debate is fine, flaming is not. Pretend that this comment form is a discussion taking place in my house. That means I enjoy constructive criticism and polite suggestions. Personal attacks, insults and all-purpose nastiness will be removed especially if it is directed at other readers.

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