The Variable Money Value of Time

David Kadavy
Jun 18 · 6 min read

Common wisdom in entrepreneurship circles is that you should give your time a money value. But should all of your time be given an equal money value?

Naval Ravikant says that, when he was starting out, he set himself an aspirational hourly rate of $5,000. The idea being that nobody was going to value him as much as he valued himself. If he wanted to be worth $5,000 an hour, he had to treat his time as such, and eventually he would be worth $5,000 an hour.

So, if it cost Naval $5,000 or less to save himself from doing a task that would take him an hour, he would pay for it. If it took an hour of his time to deal with a $5,000 item, and he could save that time by giving it away, he would theoretically do so.

Naval now claims to be unhireable. Even if that’s not literally true, you couldn’t hire him for $5,000 an hour. As a billionaire, he achieved his aspirational hourly rate, and then some.

The aspirational hourly rate can be a powerful and simple heuristic for keeping yourself from getting sucked into inconsequential minutiae.

I know from experience that it takes discipline and practice to be faithful to your aspirational hourly rate. But lately I’ve been thinking about how this concept can be pushed even further.

Not all of your time is worth the same. There is a variable money value to your time.

“Time management” is an outdated paradigm. It assumes that your output depends entirely on the time you put in. But creative thinking doesn’t work that way.

Creativity calls for you to be in a relaxed state of mind. Additionally, the moment of insight is instantaneous. You can have a million-dollar idea in a single moment. If you are wasting your mental energy on minutiae, you will have less energy to have such insights.

This is why I advocate not for a time management paradigm, but for a “mind management” paradigm. The mind management paradigm recognizes that not all time is the same. Your work and your mental state are variable. So, the value of your time is variable, too.

Imagine there was a jackhammer running outside of your window in the middle of the night. How much would you pay to make it stop? If you value your mind, you would pay more to make the jackhammer stop in the middle of the night than you would in the middle of the day.

If a jackhammer is running outside of your window in the middle of the night, you can’t sleep. That lost sleep will have compounding effects. You’ll be less productive tomorrow, and it may take you a few days to catch up on sleep and be your fully-functioning self.

If a jackhammer is running outside your window in the middle of the day, you have options. For example, you could simply go somewhere else.

As behavioral scientist Dan Ariely and I observed while working on productivity features that would eventually end up on Google Cal, some time is far more valuable than other time.

If there is a two-hour window from 8 a.m.—10 a.m. each morning in which you are more productive than any other time, that time is more valuable than the dip in energy you might feel between 2 p.m.— 3 p.m.

Each moment you waste of that productive window isn’t taken from a vast ocean of time, all of which is of the same value. It comes from a smaller bucket of more valuable time. Once that time is gone, you can’t get it back.

Let’s see how that might play out in an everyday decision, such as choosing a seat on a flight. You can pay $50 extra for a seat in the front row of the plane, or you can take a seat toward the back of the plane, without paying extra.

Assuming everything else about the two seats are equal, the seat in the front of the plane will allow you to get off the plane fifteen minutes earlier than the seat in the back of the plane.

Is this $50 seat worth the fifteen minutes of your time it will save you?

If your aspirational hourly rate is $100, and you will get off the plane fifteen minutes earlier by being on the front of the plane, that seat is worth $25. Not enough to justify the price of $50.

But if you think about the variable money value of your time, it may very well be worth the asking price.

Let’s say it’s a late flight. That fifteen minutes is the difference between going to bed at your regular bedtime, and going to bed fifteen minutes later. In your experience, you find that going to bed fifteen minutes later means you aren’t as effective the next day.

Now the seat is worth at least $50.

Making decisions based upon the variable money value of time is obviously much more complex than making decisions based upon a simple aspirational hourly rate.

In a perfect world, you could divide up the value of your time into buckets, such as my seven mental states of creativity. For example:

  • Prioritize: $1,000/hr (Planning and thinking of big-picture stuff.)
  • Generate: $2,000/hr (Generating what will become finished products.)
  • Exploration: $800/hr (Exploring for raw materials that you can turn into ideas.)
  • Research: $500/hr (Asking specific questions to help you verify whether a product works.)
  • Polish: $100/hr (Putting the finishing touches on products.)
  • Administrate: $50/hr (Attending to the pesky details of keeping life and work running smoothly.)
  • Recharge: $1,000/hr (Resting to replenish your energy and incubate ideas.)

In this hypothetical scenario, freeing up time to be in the Generate mental state would be worth $2,000 per hour, as that’s where finished products come from. Freeing up time to be in the Administrate mental state would be worth $50 an hour.

This could be used to help make decisions on what is worth outsourcing. If you can outsource some Research for less than $500 an hour, then, according to this model, it’s worth it.

That’s in the perfect world. In the real world, there are far more factors to consider. For example:

  1. How do you trade one mental state for another? If outsourcing an Administrative task costs $500 an hour, that exceeds your value of the $50-an-hour Administrate mental state. But if outsourcing that task makes it possible to spend an extra hour in the $2,000-an-hour Generate mental state, maybe it’s worth it.
  2. Are there diminishing returns of certain mental states? You can’t fill your whole day with one activity. Each mental state has a limit to the number of hours you can be effective in a given day. If you become less effective in the Generate mental state after three hours per day, additional hours freed up become less valuable than the hypothetical $2,000-per-hour rate.
  3. What’s the value of mind wandering? If you’re trying to optimize for creative ideas, time freed up for mind wandering (Recharge or Explore time) is exceedingly valuable. However, it’s only valuable if you’re able to execute on those ideas. So you need to find the optimal balance of mind wandering mental states and execution mental states.
  4. Are mindless tasks deceptively valuable? Some mindless tasks, such as cooking or cleaning, won’t always be worth outsourcing. If you enjoy cleaning, and cleaning helps you incubate ideas, without preventing you from executing on those ideas, mindless tasks may be deceptively valuable.
  5. What’s your time horizon? Setting an aspirational hourly rate may require a financial cushion or runway. If you’re paying $100 an hour to outsource something, and you have no way of replacing that expense in the short term, you’ll run out of money. You may need a longer runway if you’re valuing something such as mind wandering at a high rate. It may take years for you to come across a black swan that realizes your investment. So you have to change the value of certain categories of time according to your time horizon.

If you set an aspirational hourly rate for yourself, you’ll have an easy shortcut to make decisions about how you use your time. But if creative ideas, and the ability to make those ideas a reality, are priorities for you, you may want to take it further. Think about the variable money value of your time.

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