Imagine two investments, investment A and investment B. You have €100,000 in capital you are willing to invest. You estimate that investment A will provide an annual yield of 10% over a ten year period and you estimate that investment B will provide you with an annual yield you with an annual yield of 15% over a ten year period. Which investment do you choose? Choosing solely based on which investment will yield you the greatest return, any rational investor would choose investment B. This is simple and straightforward, correct? Capital is a valuable commodity and needs to be applied to where it has the least opportunity cost. When I say opportunity cost, I mean if you put your capital into something, the opportunity cost is the next greatest thing you are giving up. In this example the opportunity cost of putting your capital into investment B and earning 15% per annum is the 10% per annum investment A could have earned you.

But there is another valuable commodity we have which is not given as much attention as capital. Unlike capital, this is a commodity we all have and is arguably more important than capital. This commodity is time. There are endless examples in financial literature and real-world applications where you can see opportunities and projects being analysed in the above way with respect to capital. But I have never seen this done with time. There are endless pulls on our time in the present day with family, friends, work, education, social media, personal projects all vying for our most valuable resource. But let’s take a simple scenario. You and your friends have a start-up idea that greatly interests you. You are a full-time worker so you estimate that you can provide about 15 hours during weekdays and 6 hours over the weekend to contribute to this project, a total of 21 hours per week. So you begin to work on this project with your friends and as with most start-ups, it goes through ups and downs. Sometimes everything seems great and sometimes it seems like the ground is falling out beneath you. One year in, things are looking shaky. New competitors have entered the market with similar substitutes. You have stuck to your plan of putting in 21 hours per week but your friends are starting to lose interest and slack. But at this one year point, a friend of a friend approaches you. He likes what you have done with your start-up but he has a different idea and he wants you to be involved. A lot of the groundwork is already completed and you can’t find any flaws. The return prospects seem great whereas the return prospects of the project you are currently working on seem shaky. The friend of a friend wants you on board as a co-founder but would require a minimum of 20 hours per week from you. What do you choose to do? Although the return prospects seem much greater than the project you are currently working on, you choose the current project because you have already invested so much time into this first project, a total of almost 1100 hours over the year, and also you feel an obligation to your friends even though they are slacking. This seems like the wrong decision to make but it is the decision that a lot of people would make. This example is very clear-cut but as relationships are complicated and time already invested is obscure, decisions can be difficult to make.

The development of a return on time model can assist in making decisions which have the greatest probability of succeeding and providing the greatest return for time. The following rudimentary framework can be applied in making decisions:

· Apply your time where it will yield the greatest return

· All else being equal

· Reasonable and realistic assumptions

· Don’t take into account time already invested

· Adhere to commitments but separate personal relationships from the decision

1. Apply your time where it will yield the greatest return

Students go to college for three or four years because they believe the time they invest in college/university along with whatever part-time work they do will be more worthwhile than spending the years in full-time work or elsewhere. Time should be applied to where you estimate you will get the greatest return.

2. All else being equal

Sometimes what is going to give you the greatest return on time is going to conflict with what other models and factors will suggest you do. So firstly, analyse what return on time would suggest you do with all else being equal and then start to take other models and factors into account to make an informed decision.

3. Reasonable and realistic assumptions

A model is only as good as it’s assumptions. Garbage in, garbage out. If you make unrealistic assumptions about the time you can commit then projects are bound to underperform. Overconfidence is prevalent in modern society and knowing your limitations is a valuable trait.

4. Don’t take into account time already invested

A good professional poker player does not take into account what he has already put into the pot when making a decision. Neither should you take into account the time you have already invested in previous projects.

5. Adhere to commitments but separate personal relationships from the decision

Don’t tarnish your reputation by abandoning things you have committed to but also don’t feel obligated to something which you can walk away from.

This is a rudimentary framework based on my own experience which has helped me make decisions. It is meant to be a mere tool to add to the toolbox and not the toolbox itself. Time is a valuable resource and we have a limited amount of it. Apply it where it will yield the greatest return but also take into account the broad array of other factors affecting return and utility to make better informed decisions.