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).
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:
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:
- 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:
- 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).
- If you have a big task, then break it into pieces
- 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)
- Secondly, this makes it fairly easy (almost automatic) to track progress – each task completion is a milestone achieved
- 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’:
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.
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.