Missing Costs

Kenneth Fisher has a post about missing important costs:

Growing up my mother used this phrase quite a bit. Penny wise, pound stupid. (In case you didn’t know the pound is the British equivalent of the dollar.) Basically, it means paying attention to the small stuff at the expense of the big stuff. My favorite example of this was a few jobs ago. Without any need to go into details, our coffee area was stocked with both 8oz and 16oz styrofoam cups. One day, one of the accountants decided that there was no point to the extra cups and got rid of the more expensive 16oz cups. Not really a big deal, but our morale was already disastrously low, so it had more impact that it might have otherwise. The most interesting part, though, was a memo that a co-worker sent out. Unfortunately, I don’t have it anymore so I’m going to have to do my best to re-create it.

The lesson is to think through the ramifications of decisions, as there tend to be unintended consequences due to an incomplete understanding of costs.

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