Understanding cost

Lecture handout: Understanding cost*

Textbook Reading: Chapter 2 (Intro and Section 2.4, pp. 39-34 and 59-63)

The aim of this session is to understand the economic concept of opportunity cost.

Group activity: Malhotra, Deepak, 2005, “Hamilton Real Estate: BUYER”, Harvard Business School Case No. 9-905-052 (£) Malhotra, Deepak, 2005, “Hamilton Real Estate: SELLER”, Harvard Business School Case No. 9-905-053 (£)

I believe that the case discussion demonstrates our inherent reluctance to lie. However:

2 of the bestselling Holocaust memoir authors of the golden age of misery memoirs were both fakes, and they actually met each other at a conference and claimed to remember each other from the time. neither had ever been to Nazi-occupied Europe

— Ed West (@edwest) September 11, 2020

Here is a more recent example of obtaining copyright for the use of a photograph:

William Greenbladt, a photojournalist, who took this photo of the McCloskey’s pointing guns at protestors sent them a $1500 bill because they lifted the photo and used it as a Christmas card. pic.twitter.com/EpdRSp19Hx

— Michael Cali (@cali_photo) November 5, 2020

In the debrief it’s important to realise when someone is being evasive. A good example of this is in the U.S. version of The Office, where Andy has to repeat the same question to Angela 3 times before he gets to the truth. (Season 5, Episode 12, from 9:22 – 10:13).

• Further reading: “The Origins of EVA”, by Jeffrey Steele, Chicago Booth Magazine, Summer 1998

Here’s a good post on the downsides of using EBITDA as a measure of profitability:

EBITDA is a terrible measure of profitability.

Yeah that's right. You heard me.

Here's why 👇

— The Secret CFO (@SecretCFO) August 31, 2022

Finally, The Economist reports that at the start of 2023 the e-commerce firm Shopify deleted 12,000 recurring meetings from their employees shared calendars, and asked managers to think seriously about whether they should be reinstated. The results:

“The company reports a rise in productivity as a result of the cull.”

Learning Objectives: Opportunity cost reasoning, basic principles of negotiation. Focus on diversity: The Hamilton Real Estate case is used as the first session on the Harvard MBA course on negotiation. It was written by Deepak Malhotra who has a recent book called ‘Negotiating the Impossible‘. You can follow him on Twitter @Prof_Malhotra.

• Category: course map