Costs vs. Investments

What separates an investment from a cost?

Both costs and investments are similar. Both take away something from our present with the promise to alleviate some problem we face. And yet, we view them in entirely different light. Everybody wants to avoid or minimize costs. Nobody wishes to avoid investments. We hear quite often about cost-cutting. Have you ever heard about investment-cutting?

One of the most successful negotiation strategies is to move from the cost framing to an investment framing. Consider a salary negotiation. If the company viewed your salary as a cost, they would try to pay you the lowest possible price in the market. If you could have them view it as an investment, their focus would shift to the long-term returns that you would bring to the company.

Is there a rule of the thumb here? Most solutions to urgent, short-term problems are costs, whereas things that yield compounded returns in the long-term are investments. That chocolate-chip cookie that lifts your mood is a cost, while running 5 kilometers is an investment.