Sign In Forgot Password

VOLUME 2, ISSUE 13

05/18/2020 12:20:57 AM

May18

Alex Libkind

Hey, Graduate:
What is Your Opportunity Cost?

Even though they are taking place under less than auspicious circumstances, this is the season for graduations. 

So, graduate, what type of world are you graduating into? 

The economy has been shut down for two months and counting.  New job openings are few and far between. Even those jobs that were always the fallback - waiter, barista, retail clerk - GONE.  I can see how someone graduating now can lose hope.  

Or - is this the time of new opportunities?  Note that Uber and Airbnb were born out of the 2008 recession.

Many of you know that I have been building companies, apps and software for a long time.  In fact I opened my first company in early 2000, right in the middle of the "tech wreck."  Remember Pets.com and the sock puppet Super Bowl ad? That puppet is probably the only remaining valuable asset of hundreds of million dollars invested. Granted it is for a very different reason, but today we are again living through economic uncertainty.  So what are young people and recent grads to do?  Can we learn anything from 2000 and 2008?

When I launched my company Foundation Source, which serves private charitable foundations, someone gave me a great piece of advice. At the time, I was dithering on whether to quit my job and launch the start-up.  He said, "Alex if you don't do it now, when will you do it?"  (And, no, I don’t think he meant to be quoting Pirkei Avot). At that time, I had my first kid on the way and a wife in medical school. Yet, I took that sage advice (no pun intended) and never looked back.

Today, graduates are encountering….interesting times.  Lots of people are out of work or furloughed.  Many unicorn tech companies like WeWork and Uber are having to scale back from their crazy spending.  Revenues and profits really do matter as it turned out. We seem to need to learn this lesson every 10 years or so.

Yet unlike 2000 or even 2008, PCs, mobile phones and broadband are ubiquitous.  Communication and computing power is so cheap that it is almost a footnote in your expenses.  Technology is driving everything from the way we meet to the way we get our groceries. Development of technology is inexpensive and can be outsourced all over the world.

I often ask young people from high school to college one simple question.  "What are your opportunities costs?"  Many don't know what I mean, so I tell them, "You aren't paying rent or a mortgage. You aren't married and you don't have to worry about day school tuition. You have basically negative opportunity cost.  Your only cost is your time and that is probably hovering somewhere around $12 to $15 per hour if you can get a job."  

So like that wisdom I got so many years ago I tell them, "If you have an idea, you have a passion, you think you can solve a problem or make something better, then if you don't do it now, when will you do it?"

Many great entrepreneurs gave up huge opportunity costs to pursue their dreams.  Mark Zuckerberg and Bill Gates are two that gave up a Harvard diploma to dominate the world of PCs and social media.  There are thousands of incredible business and founders out there who are sharing their stories on the "How I Built It" podcast.  Even after 20 years of building companies, I find their stories inspirational and their lessons insightful.

To quote guidance to graduates from Andy Kessler in the Wall Street Journal, "All of the sudden, everything is up for grabs. Education. Health care. Travel. Energy. Commercial real estate. Government. Transportation...Most of these are crony industries being destroyed before our eyes. It's time to trust progress, price signals and perpetual change. Are you ready?"

It has never been a better time to start something new, especially if it is online or a technology idea.  There are thousands of people with experience who are out of work and looking for something to do.  All it takes is dedication, energy and a bit of luck.  

So here are a few tips as you consider your opportunity costs:

  1. Commit to your idea. Don't treat it as a side hustle, even if it is.  Treat it as a real business, even if it is not yet giving you an income, but instead sucking all your cash.
  2. Don't hop from idea to idea, unless the market shows you that a shift is in order (Slack was a game company before it was a collaboration tool).  
  3. Don’t do it alone. Find a partner or partners to fill in those things you don't do so well. 


There will be many ups and even more downs during your journey.  You just have to grind through it.  Why? Because what may come out on the other end is something you can look back on and say "I built that.  These people built a career and raised their families on something I created."  That feeling makes the pain and the process so worth it.

So grads, college students, even high schoolers: Think about this.  What is your opportunity cost?  If you don't do it now, will you look back in 20 years and say, I had that idea? Will you regret not giving it a shot?  Honestly, I have plenty of those as well.

By: Alex Libkind

Wed, August 12 2020 22 Av 5780