The Financial I/O Bound

Lately I’ve been reading productivity blogs again, specifically those by James Clear and Tim Ferriss.
A frequent hobby horse of theirs is the concept of knowing the value of your time. The idea is that through an analysis of your current and/or future earnings, you come to a “per hour value of time”. And then you use this value as a decision rule for which activities are a productive use of your time.

As an example: suppose you have determined that you value one hour of your time at €20. Now you look at the flow of your day, and you notice it costs you one hour and €5 to go shopping and make dinner every day; whereas it would cost you just half an hour but €10 to go to a restaurant. In this case cooking for yourself has a combined cost of €25 whereas going out only has €15.
Thus the insight garnered from having a value of our time, is that the choice that would maximize our value vs. time trade-off would be to go the restaurant, and pump the extra half hour into a productive activity.
(Of course productivity gurus would say that it’s still fine to cook if there is some other purposes to it, such as relaxing. But a strategy for living in the most productive and efficient way possible, it is not.)

All of this is an intriguing idea, and valuing your time in this way can certainly lead to useful insights. Just as another example: travel is another case where it often makes sense to go for the more comfortable but expensive option; you can recoup the cost by working productively.
The model is doubly useful if your life is busy and you’re prone to losing track of your time allocation… I suppose that’s all of us.

There is a very important wrinkle to the value vs. time calculation though, and it’s a crucial insight for young adults.
The calculation relies on you actually being able to somehow monetize the time you’re saving. After all the assumption is that you will replace low- or zero-income time with high-income time.
Yet for most people with entry-level jobs, this is not at all a given. You may be able to free up 5 hours of time in your schedule by spending some more money, but that does not mean you can automatically work 5 hours more (or at least it doesn’t mean you’ll get paid for it).
Put simple: if you save 45 minutes by skipping cooking and going out to Thai, and you spend the time sitting on the couch or putting in more for the same pay… then you didn’t realise any value increase at all. You just spent more.

1c1l9q“Just teach ’em about value for time. Easy way to increase their hours”

We could say that gaining money is very input-bound for young people. Even if you magically got 10 hours more productive time in a week, there’s no clear way to invest that in a place with an obvious monetary reward. Finding a way to spend 45 hours at the office is a strange idea if you’ll only get paid for 40.
I see this as the productivity conversion problem that many of us face: we get better at planning our time in intricate ways, but we have no place to invest the benefits.

Therefore I see it as a major development project to find just that: profitable projects to put excess time into. Some of these can be extensions to what you’re already doing (working out a bit more, spending more time with your loved ones), others should be new initiatives that are intended to bring you benefits in the future.
Most of these initiatives will probably be quite creative in nature, so it’s going to be hard to put a specific value gain on them; e.g. if you’re setting up a business on the side, it might take you a year to see the first income from the hours you invested. That’s OK. Just make educated estimates on the expected return, and try to spend your time in a way that makes sense.

Here’s a few ideas for the latter category:

  • Generating content: writing a book, blogging.
    For these activities it takes time to create an interesting enough “base” to attract interested readers (what do you think I’ve been doing?)
  • Networking.
    Use the extra time to join NGOs that can develop new or existing skills, or expand your network by spending more time in new social and business circles.
  • Learning marketable skills.
    Spending 10 hours per week learning data analysis which you will be able to use in your job later, is probably a very useful enterprise.
  • Side businesses, start-ups or working freelance.
    Bet I don’t need to explain how this can benefit you!

If I come across as the Wolf of Wall Street right about now, that’s not intended. Of course there’s plenty of time for un-analysed recreation time and chilling too. Not everything we do has to be coldly analysed for potential monetary gain.
But it is still good to have valuable projects on the backburner, which you can dump extra productive hours into. Otherwise striving for productivity improvements will benefit your quality of life in the present, but not bring you many benefits down the line.

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