Opportunity Cost

Recently a friend asked me to meet an acquaintance who was in the energy business. “He’s really smart,” she said, “and he’s been selling renewable energy for a company in Ohio. I think you’ll like him.”

We met for lunch. I instantly liked the guy. Often when people with potential business opportunities come in, they ask “What would you like me to do?”

“That’s the wrong question,” I tell them. “You tell me what you would like to do and then ask me if we’ll support you.”

At that point I rarely hear from them again.

This conversation was different. He told me about some environmentally friendly energy products that he sold – florescent light bulbs and solar polar cells, for example. Then he told me about some distributed generation units he wanted to sell, such as co-generators that produce electricity in high priced states like New York and Massachusetts and give off steam as well to heat or cool office buildings. Then my new friend added, “But your business is a no-brainer. Can I help you sell it?”

“What do you mean,” I asked in amazement.

“Well, the way I see it,” he began, “Energy prices are the most volatile in the world. They’ve come down recently because of a warm winter. But that will change because the world has an energy shortage. So therefore commercial customers should be buying your product like hotcakes.”

“Well, they should be,” I answered. “But they’re not.”

“Would you let me approach a friend who has a hundred or so chain restaurants?” he asked. “He’d be crazy not to lock in his prices. After all, if prices go down, that’s opportunity cost but it’s not a real loss. But if he does not lock in his prices and prices go up, he’ll be hurting.”

Point, set, match. I couldn’t have said it better myself!