The Money Value of Time


Even if you’re not particularly familiar with the wide world of finance, you’ve probably heard mention of the “time value of money”. This is the foundational idea that a dollar received today is not the same as a dollar received a year/decade/century from now. You may relate to that concept in any number of ways (say, in terms of the familiar notions of inflation or interest or opportunity cost), but I’m guessing you don’t dispute the idea itself: that the constructs of money and time are inextricably linked.

Take, for another example, the hackneyed business adage that time actually is money. Sure it is, to the extent that time as a resource can be converted into proportionate amounts of sweet, sweet profit. Same idea, though: whether we’re talking about the “time value of money” or the direct equivalence of the two things, the expectation is that time – as an input to some economic process – should yield more money.

But what if we inverted our perspective on precisely that idea?

What if instead of examining how we can invest time to earn money, we were to focus on how we can invest money to earn time? I mean, if they are indeed equivalent and therefore interchangeable, then the exchange of one for the other should happen in either direction, right?

It turns out that this theory does hold true in practice…kinda.

In the obvious and conventional direction, consider the basic function of a job as a mechanism for converting time into money. On the flip side, commonly held beliefs about the importance of a ‘work/life balance’ (not to mention the physical necessity of sleep, etc.) demonstrate that there is some boundary for that time/money exchange. We can’t work 24 hours a day, so we naturally forfeit some hours’ worth of earning potential. Backing down from there, though, we might face the choice between, say, a 60-hour-a-week job paying 5 goats per month and a 40-hour-a-week job paying 4 goats. Which do you choose? Well, that depends on your relative taste for goats and leisure time.

But here’s the trick: while this money-for-time exchange (that is, giving up money to keep more time) can be routinely observed in the context of decisions regarding the absolute forfeiture of the latter – as in the choice of whether to take a job requiring more hours – there’s a more subtle time/money choice that’s routinely overlooked by conventional wisdom, concerning the specific nature of the time invested.

To see what I mean, consider what conventional wisdom says about two 40-hour-per-week jobs: one paying 12 oxen per year, the other paying 15. (Editor’s Note: implied goat/ox exchange rate has not been tested for accuracy.) Same hours means you take the higher-paying one, right? No? Okay, so you’ve allowed for the fact that you may hate the higher-paying job and like the lower-paying one, where the pay gap is arguably modest. Fair enough.

But what if it was the same two jobs, now paying 10 oxen and 20 oxen, respectively? Tougher choice, right?

Of course, I didn’t invent this problem nor the type of thinking required to make a choice in view of the constraints. But I do think that, in practice, people tend to overvalue the higher salary. And that’s where that less-obvious tradeoff I mentioned earlier comes into play. If you have to completely write off 40 hours per week to get 20 oxen per year but could really enjoy those same 40 hours per week by settling for 10 oxen instead, would you consider it? After all, time is money, right?… So how much money would you invest to retain the value of your time?

The big caveat, of course, is that this debate only arises from a position of great privilege. Not everyone has the choice between two jobs that pay the bills, period, much less one that pays the bills and one that earns well above that level. Certainly, my comments don’t apply in that context. The choice I’m identifying concerns those who could pick between work that’s ho-hum (or miserable) but pays very well, and work that is genuinely fulfilling but only pays…sufficiently.

I don’t mean this idea to sound radical. In my mind, it’s actually a matter of sheer pragmatism, born of the observation that a lot of people don’t think twice about making huge investments of time (and often quality of life), for the promise of material comfort and a carefree retirement. The choice is, obviously, up to the individual.

My point is simply that there is a choice to be made in the first place.

I heard a great quote recently, on the topic of those who find themselves encumbered by the stresses of a demanding career, debt load, etc. It’s a simple and elegant allusion to the very existence of choice that interests me…

“Everything you’re carrying, you picked up.”


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