Finance Net Giants

Time is Money, Money is Time, and What That Means for Tech

Ask anyone to define money. Most can’t do it.  Not even the dictionary succeeds. According to the dictionary, it’s a store of value.

OK, so what is value?  Value is defined as the “worth of something.”  OK, so what is “worth”?  What about this: “the level at which someone or something deserves to be valued.” One could go on this way forever.

You’ve heard the phrase “time is money.” On first consideration, it seems to make sense. After all, people must work for money, which takes time.

However, ninth grade algebra says that if a=b, then b=a.  On that basis, money is time, specifically stored time.  How come we never hear that?  It’s because it’s difficult to conceptualize.  But as we chew it over it seems true.  In other words, perhaps the best definition for money is “stored time.”

Since time is finite for all of us, everything we do in life contains a tradeoff.  You will never get that time back if you pay for and do event A, because you’re missing event B.  Everything in life is based on the fear of missing out, or in acronym-speak, FOMO.  Everything. Whatever you’re doing right now, you’re missing out on something else.  That includes reading this.  Think about that.

There are two costs in everything you do — one obvious and explicit, the other hidden and implicit. The first one is easy. It is the actual cost in money of the item, activity, or event.  The second cost is less tangible, but the more critical one – the effective cost of your time. That serves as the primary determinant of whether you actually go through with a transaction.

This concept has been around for a long time. For instance, Benjamin Franklin in Advice to a Young Tradesman, wrote: “Remember that time is money. He that can earn ten shillings a day by his labour, and goes abroad, or sits idle one half of that day, though he spends but sixpence during his diversion or idleness, it ought not to be reckoned the only expense; he hath really spent or thrown away five shillings besides.”

Let me translate that for you.  He’s saying that if you earn 10 shillings per day, spending half the day doing something aside from work is basically throwing away five shillings.  OK, easy enough.  But more important is that he’s quantifying the value of your time outside of work.

People intuitively realize that every decision has both explicit and implicit costs.  It’s easy to understand the explicit costs, which is essentially the price of a good or service.  But behind the scenes, it is much more complicated. Every decision is the result of a mental calculus, of comparing the implicit costs, or “opportunity costs,” and the price tag.  Whatever seems to have the most relative value generally wins.

You do this math every day without realizing it.

What is your time worth, literally?  If one makes $60,000 per year, that equates to approximately $30 per hour, given there are about 2000 available hours to work during the year.

I read a CNN headline recently that said ‘Retailers’ Amazon Antidote: Buy Online, Pick Up In Store’. Does that really work, from the perspective of the value of your time?  Maybe, maybe not.  Assuming you need to have the item ordered and in your possession by tomorrow, you can either A) pay an extra fee for next-day shipping or B) go pick it up at the store.  But what may not be considered is the implicit cost of the second option.

If it’s a 30-minute round trip and you spend 15 minutes in the store, that’s 45 minutes of your time.  Translated to the life of that person making $60,000 a year, it’s literally equivalent to about $23 of their time.  Could that person have done something else more “worthwhile” with the benefit of next-day shipping?

Additionally, any money you spend means that you will have to re-accumulate that money (read: spend the necessary time at work) in order to buy the next thing.  Since time is finite, unless you’re uber-wealthy you face tradeoffs because you simply have less time for whatever else you desire.

I’m hoping to build on these ideas in a series of articles in the coming months.  Here are some of the areas to explore:

  • What does an on-demand tech economy mean in the context of time and tradeoffs? There’s no question we’re seeing a near-insane societal craving for immediacy. Many recent service companies commercialize tasks, allowing you to, for example, order food from Postmates, call an Uber, or even book a last-minute helicopter ride to JFK via Blade. But just because something happens very quickly doesn’t necessarily mean it’s the best option in terms of your time and money.
  • Where is customer service going as platforms go digital and are rewarded with extraordinary financial success by investors and Wall Street? Digital platforms are so flush with cash that they’d often rather just reimburse you without question when there’s a problem, rather than take the time to ask the customer to account for what exactly went wrong.  It’s fine to cater to the customer and their immediacy-driven ways.  But it’s almost certainly not sustainable.
  • Not all time is created equal. Time is the most precious resource in life because it’s the only thing that’s truly finite. However, whether you realize it or not, we all place varying levels of value on different aspects of time. We put greater value (utility) on free time than on time at work, generally. So it’s not just about how we spend that time, but how we feel about the quality of time. For instance, watching cable during downtime places you at the mercy of the programming lineup. But Netflix, by contrast, allows you to ensure that the quality of your experience is improved by placing the programming power in your hands.

Calculating the implicit costs of time comes up one way or another in every purchase decision, whether it’s the time it will take to re-accumulate the money or the time saved for more immediate experiences.  My view, developed over 10 years as a Wall Street financial analyst, is that the tech companies that save us time are destined to become the most valuable, and those that lose sight of this mission will deservedly underperform.

Next time you buy something, think about what you’re really paying the cashier with. It’s not your cash, it’s your time.



Leave a Reply
