“In a role with a lot of decision-making on time management, it’s important to know what subtle value you might be giving up in terms of opportunity cost.”

How to know when you’re wasting your time

In a highly specialized economy, everyone has employable skills and, as a result, a value placed on their time. For example, a software engineer that specializes in the architecture of some esoteric enterprise product might be worth $200 per hour to a certain company that sells that product. So, when that software engineer spends time doing anything other than working for that company, she is doing so at the opportunity cost of $200 per hour.

Not all time can be valued in terms of money. It’s difficult to place a dollar sign on spending time with your family or doing a hobby you really love. In a strictly business context, however, when the main objective is to optimize for the y-axis of profit using the x-axis of time, it’s worth being wary of situations in your organization where individuals that have a very high opportunity cost, spend time doing things at a lower rate of return for time spent.

For example, if I’m selling an insurance policy to the same software engineer previously mentioned. And I quote her at $900 per year. But she thinks she might be able to get a quote for $700. It’s financially irrational for her to spend any longer than one hour price shopping, because at any time after one hour, she will be working to save only $200 at the opportunity cost of more than $200 per hour from her normal wages.

Another example, if you’re stuck at the airport and a flight home that will get you back to the office one hour earlier is $100 more expensive, it makes sense to book the flight if you make more than $100 per hour, and doesn’t make sense if you make less.

This assumes away a lot of messy variables like additional cost from impatience sitting at the airport for another hour, or additional value from doing anything other than your software engineering job for an hour.

But in a role with a lot of decision-making on time management, it’s important to know what subtle value you might be giving up in terms of opportunity cost, by chasing what’s right in front of you at the moment.

Originally published here: www.rebalancedaily.com/how-to-know-when-youre-wasting-your-time/