Bobby’s theory of Relativity

Time can be converted to Dime and Dime can be converted to Time. Read on to how what should you do (Time-> $ OR $ -> Time) and how should you go about doing it?

Albert Einstein proposed theory of relativity in the year 1905, whereby he established that matter can be converted to energy and energy can be converted to matter.

Today, I am proposing Bobby’s theory of relativity – it states “Time can be converted to money AND money can be converted to time”.

Time can be converted to money


The most simple example is having a job. You give 8 hours of your day to your employer and receive a salary in return. You are converting hours into dollar.

Other examples include freelancing – say you are a cartoonist and people pay you to make cartoons. It takes you 60 minutes to understand the customer needs, create a cartoon, discuss with customer, revise based on feedback. The customer pays you $25. You converted 60 minutes of your time into $25.

Money can be converted to time

This is even more interesting – you can create time using money. How? Outsource things to others.

Just like the way your employer/ manager is paying you for your time, you can pay others for their time – they will spend their time to do things that you want them to do thereby saving you time, hence you create time (free time that did not exist before).

It does not have to be something elaborate – you can hire someone for as little as $5 (for any task that can be accomplished virtually).

 

My feedback at Fiverr.com

If you need help with a task that cannot be accomplished virtually, I have used TaskRabbit and Thumbtack – and only have nice things to say about them.

I used Task Rabbit on multiple occasions, you can see two sample jobs in the image below:

My two jobs at Task Rabbit

My job posting at Thumbtack

 

I used Thumbtack to find a painter when I bought a foreclosed house in 2014.

I posted the painting job and had 9 responses within a day. I invited three of them to come over and give me quotes the next day.

The painting started the third day – Brian came with his crew of 4 – 5 people and the job was done in two days.

 

Some tips for outsourcing

Based on a few dozen tasks that I have outsourced on websites like Taskrabbit and Thumbtack, here are some tips to keep in mind:

  1. Describe the task as clearly as you canExplain like you are explaining to a 10 year old. You know your task well but the other person does not. They want to do a good job but cannot read your mind.It is always better to over-communicate in such situations. You do not want to land in the following situation:
  2. Read the reviews in detailThis will avoid any surprises later. I have found reviews to be very reliable (And I always leave a review, I owe it to the community of people who use these services).
  3. If you have a big task, then break it into pieces
    1. Firstly, this makes it easier for the person delivering the task because you have already done the planning. (This called Work Breakdown Structure in project management lingo)
    2. Secondly, this makes it fairly easy (almost automatic) to track progress – each task completion is a milestone achieved
    3. Lastly, you have a fair chance of evaluating your service provider and can switch service providers if one is not working up to your expectations

Convert time to money OR money to time?

Now that you know time can be converted to money and money can be converted to time, which one should you do? I would suggest both, here is why:

Adam Smith in 1776 (Yeah, I am talking about 1700s) wrote Wealth of Nations. The book is a masterpiece and has many things to learn, one of the most interesting things it talks about is ‘Absolute Advantage”.

It is Adam Smith’s work in 1776 that lead the foundations for David Ricardo’s work in 1817 to come up with ‘Comparative Advantage’:

Wealth of Nations – Adam Smith

If you look on the right side page of the above image, you will see an example this book quotes about corn and shoes. It is a ‘real’ quantitative example that goes on to show that the combined output of ‘A + B’ is higher when A only does what it does better and B only does what it does better.

Transposing the same logic to our lives, we should do what we are best at doing. For example – if I am the best at making Wall Street deals, then I should only focus on that. I should outsource everything else possible – for example, cooking, cleaning, driving etc.

I would make far more money in making ‘deals’ as I would ‘cooking at home’. For example, I can make $100 per hour working on Wall Street while I save only $10 per hour cooking at home (in stead of getting professional help to cook).

Nuances to keep in mind

There are a few nuances to keep in mind though:

1.Not everything can be outsourced – for example, you cannot make someone else sleep or exercise for you. As you get older, you will realize the importance of these ‘cannot be outsourced activities more and more’

2. There are things that you enjoy doing – for example, I enjoy cooking, it relaxes me, I do not want to outsource it, it is my daily (or biweekly source of meditation). On the other hand, I outsource laundry and I would outsource it even if it costed 3 times of what it currently does.

3. It is not always possible to convert time into money – for example, right now it is 5am on a Sunday morning; even if I was not writing this blog post I would not have been making money on Wall Street.

4. Lastly and most importantly, do not forget the ‘hidden benefits’ of doing something.  A dear friend of mine (CPA) recently tried to tell me how stupid am I because I do my own taxes. The friendly conversation went like this:

CPA friend: Bobby, how come you know so much about taxes?
Bobby: Well, I work on Wall Street so I am supposed to know a lot about MONEY
CPA: Yeah, but specifically about finances, about all these regulations and decutions?
Bobby: I read
CPA: How much?
Bobby: I must have spent average 1 hour a day last year
CPA: Do you see what the problem is?
Bobby: hm mm ahem…. No
CPA: You spent 365 hours in order to do your tax returns. A CPA would have done your tax returns for less than $365. So you are working for less than $1 per hour, is that about what you make on Wall Street in your day job? LoL
Bobby: No, I make slightly more (being sarcastic) in my day job.
CPA: Then why do you do this tax study?
Bobby: For multiple reasons – it is a hobby, I like learning new stuff. More importantly, it is not only the tax returns, it is the tax planning throughout the year. Whenever I make any financial decision throughout the year, I am already thinking in my mind about the tax implications.

An average American makes about 10 financial decisions every day, not all of them need superior tax knowledge, but even if 1% of them do, we are talking about approximately 50 decisions a year. I want to be able to make those decisions without being required to visit a CPA!

There is no right answer

There is no right or wrong answer here. This is one of the situations where you should just be aware of what you are doing, achieving an ‘optimal’ dollar generation is not really necessary.

If you enjoy working 8 hours a day and then doing your other chores yourself, then by all means you should stick to your schedule, but start to think of time as being the most scarce resource.

Earlier I was talking to a friend of mine at the topmost strategy consulting firm. She asked me – ‘Bobby, what is one most important thing to keep in mind when it comes to project management?’. She was referring to the famous Project Management Institute triangle, where the three levers available to a project manager are cost, time, and scope.

The project manager can handle increase in scope by a proportionate increase in cost and time schedule. Similarly, a budget cut (decrease in costs) can be achieved by decreasing the scope or increasing the time schedule (so that part of the costs goes in the next period).

My answer to her was – Time. Time is the most important out of the three. Time does not wait for anybody. Time is the only scarce resource out of three – for example, you can add more money to the project but the time schedule is most critical due to internal as well as external factors.

CONCLUSION

To Conclude,

If you have more time than money, then you need to spend time to gain money. This can be a full time job, a part time job, or just some side gigs (like I mention in the post above). Convert time to money and then money can be converted to many different things (like a new business, new car, vacation, investments, retirement, financial security).

If you have more money than time, then you can spend money to get time. Spend your time wisely, know the value of your time (it is a scarce resource). I have a dollar value in my mind – that is the value of my time – and that is the reason due to which I do not dispute small dollar amounts on my credit card statements, it is not worth my time.

 

4 thoughts on “Bobby’s theory of Relativity

  1. Hi Bobby, I’ve been wanting to know some “life hack” from you ever since I stumbled on your blog. Well, I got some in the form of your recommendation for TaskRabbit and Thumbtack, though I’m still interested in your suggestion for data analysis. I might request a post about that soon.

    That being said, I need to comment on your statement regarding comparative advantage. Adam Smith proposed the principle of “Absolute advantage”, and it is different from “Comparative advantage” which is proposed by David Ricardo. Indeed, Ricardo’s idea of comparative advantage is revolutionary, despite being very simple and somewhat counter-intuitive, and it is also a factor that pushed the world from mercantilism into global trade. In fact, I would go as far as saying that Ricardo is the most under-appreciated economist in history. Granted, your picture did state that Ricardo was responsible for the principle of comparative advantage (yes, I read it), but other readers might not notice it.

    And by the way, it seems you swapped money and time in your last paragraph (“If you have more money than time, then you can spend time to get money.” should be “If you have more money than time, then you can spend money to get time.”). You did propose that money and time can be converted to each other, but I don’t think it’s convertible to THAT degree 🙂

    • Hi Ray,

      You are looking for a ‘life hack’ in data analysis? I am sorry but I do not know what that means? I have tried to explore a lot of things around me but I need a little more clarity around what exactly are you looking for?

      You are absolutely right – many readers might not read the image in so much detail, I have changed the post to include David Ricardo in addition to the talk about Adam Smith.

      And yes – the last para had a typo, I have corrected it, thank you Ray!

      About the ‘degree’ to which time/ dime are interchangeable – not 100% – but I doubt whether most of us so scientifically realize the trade-off and work towards reaching an optimal level.

      For example – I had to think long and hard (for months, if not years) before I started to get a maid cleaning services twice a month. It sounded like too much money but if I put it in my time-dime perspective, I should have done it long back.

      • Hi Bobby,

        I often find difficulty dealing with a huge amount of data. For example, a few weeks ago I had to filter 70+GB of .csv files and it was very time consuming.

        It is for this reason that I often wondered, how do the professionals deal with their data? What tools or methods do they use? Do they have sophisticated software or do they just have their interns edit their data manually?

        I was thinking of requesting a post on this topic. After all, judging from your “Making money by moving money – 1” and “Is it possible to time the market?” articles, you certainly encouraged critical thinking for your readers. In finances, critical thinking mostly means doing a rigorous analysis on numbers, am I correct?

        • Hi Ray,

          You remind me of 1991 – when I was a teen participating in the ‘National Math Olympiad’. I do not know what is the format now but those days it used to be about 4-hour with ONLY about 6-8 questions. (This was at the national level once you have been a topper within your state).

          Needless to say, there were too few questions and too much of time – say 30 – 40 min per question. I could do 1-2 questions within 15-30 minutes and then I had all the time in the world. Some of the questions I did not understand at all, not even where to begin. One question was “What is the last digit of the number that results from power(2,1991)?’ – of course, Excel or any other tool was not allowed. It was just pen and paper.

          I started to actually calculate – 2, 4, 8, 16, 64, 128, … so on and so forth, I remember I could not see a pattern BUT I still continued till the end of the 4 hours… result = no success BUT I was desperate to go to the IMO (International Math Olympiad).

          So when you are looking at 70+ GB file, I understand the desperation to get it right but “brute force” method does not work always; in fact many a times the resources required might far exceed what is considered optimal.

          Talking about software – of course, there are tons of software that can be used to edit huge amounts of data, but those make sense only if you have a budget for installation and licenses, and also when you have a few days (to a few weeks) time to ‘stage’ and ‘load’ the data (talking about ‘ETL’ here).

          In my opinion though, your best bet is – to try and somehow automate the update: I would create a copy of the .csv and then would start by a pivot table – to get an idea about what ‘kind of data’ is in there. Let us take the simple y2k example – you want to convert every year that has YY format into YYYY format. You first want to see what is the proportion of YY as compared to the overall ‘date’ values in there.

          If you see there are only 4 values with YY, then you do not need an intern, you can do it.

          If it is 500 values, then also you can ask an intern to do it and may be it will take a couple of days.

          But if there are 14,894 updates required, then you need to automate: you can do so either by a simple ‘replace’ OR first filtering all those that need update – copy pasting them in a separate sheet (and updating using mass Ctrl-C and Ctrl-P), deleting these rows from the original data set, and copy pasting the updated set.

          This is just one example, I can go on but you get an idea. I can guide further if you have a real life example.

          And yes – you are right on target – I am trying to encourage critical thinking, each situation is different and once a reader has learned how to think better, they can face any situation better (more scientifically).

          You are partly right when you say “In finances, critical thinking mostly means doing a rigorous analysis on numbers” – I am not sure about mostly but the first step is to get the numbers right, second step is to conduct a rigorous analysis, and the third is to interpret the analysis results with prudence.

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