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Because opportunity cost means you don’t get to “and also”. In the cases that I’ve been involved with personally, spinning off another company hasn’t been feasi
by AmericanChopper 7y ago
Because opportunity cost means you don’t get to “and also”. In the cases that I’ve been involved with personally, spinning off another company hasn’t been feasible. To put it a bit more explicitly, say you have a product that generates $25mil/year, and runs about $10mil/year expenses. But, you also have a different product that for every $10mil that you invest into it generates $50mil/year in revenue. The opportunity cost isn’t that you’re spending $10mil to generate $15mil in profit, it’s that you’re spending $10mil to lose $25mil in profit.
In reality everything will be a lot more complex than this. But having the discipline to focus on your core competency, especially in situations like this, is a common trait I’ve seen in many successful start-ups.