We go to work to exchange a fixed amount of time out of our lives for a fixed amount of money in return. With increased experience, skills, and education, we can exchange that fixed time for more money. It sounds great to get a promotion or a new job that increases our earnings rate so we can exchange every hour of our life for more money, but it is really false security and there exists a hidden trap in this exchange.
I will consider here the problems with exchanging your limited time in particular and limited resources in general for a fixed amount of money, and also how to address it.
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Limited Time and Value of Money
Quantity vs. Value
We can track how much time we expend and how much money we can get in return. However, the value of both that time and money with respect to our entire life may vary considerably, even if we can quantify very precisely time and money.
Increased Value of Time as We Age
The amount of time we have is limited. Furthermore, time is decreasing steadily as the Grim Reaper comes for us. He is coming for all of us and we can’t hide and can only run for so long. Thus we face a problem.
Even if we can exchange each hour of life for a greater dollar amount of $X, further hours of life become increasingly more valuable because we have fewer of them left. Thus, we need a greater dollar amount of $X just to keep up with the increasing value of our lives.
Decreased Value of Money as We Age
Furthermore, every dollar we make becomes increasingly less valuable.
How much less valuable?
The fixed endpoint of death means that all of our money is worth exactly zero at death. This is whether you have $1 or $100 billion dollars to your name. Right at death, it all decreases to precisely exactly zero.
Why? We cannot use the money after death. It is Game Over.
We can say there’s value to that money for other people or causes, and that may be true, but the value to us is precisely zero since we are no longer alive to use it. There’s a special case where death may be a good outcome if you’re in debt, since that debt will gradually diminish in an accelerating way, and will get canceled right at the time of death.
Speaking in abstractions may be good for generality and theorizing, but let’s consider specifics with real numbers to get a more practical understanding.
Let’s consider two cases
- Writing and Monetization
- Investing and Capital
Case Study: Writing and Monetization
Exchange Your Limited Time in a Scalable Way
The only way to escape from this trap of decreasing time, increasing value of time, and decreasing value of money (even if the amount of money is increasing) is to strategize and execute on how to exchange your limited time for money in a way that can scale.
Scaling Your Time and Effort
Let’s say I desire to communicate my ideas to someone else. Then if I talk with them directly to communicate my ideas, then there is no scaling since every unit of time I spend is equal to the same unit of time they experience. It’s a 1-to-1 scaling in time. But what if I write my thoughts out instead?
The rate I get a fully-finished written article like this one from a blank is about 650–700 words per hour, which includes editing and proofreading. This takes me approximately 3 hours, or 180 minutes, to write a typical 2,000-word article from scratch. Assuming reading 250 words per minute, this takes about 8 minutes of reading.
Since it takes 180 minutes to create divided by 8 minutes to read, then if I get about 23 readers who read such an article, I start to break even. More readers mean that the amount of “time” spent by others reading will exceed the amount of “time” in my own life spent creating it. This means my “time” is starting to scale.
- 230 readers mean 10x time spent reading than writing
- 2,300 readers mean 100x time spent reading than writing
- 23,000 readers mean 1000x time spent reading than writing
- And so on.
This exercise is for idea dissemination, but it can be extended in terms of hourly rate when working and the average monetary amount. If I get 1 cent per view for 23,000 readers, that’s $230.00 for 3 hours here, or about $77/hour.
This is a hypothetical example, of course, but parameters can easily change via such actions as writing multiple posts, having more readers, and a higher average amount of money per view.
Now here’s the great thing, there is nothing further to do in order to scale! In fact, simply waiting and doing nothing can actually increase visibility and scaling effects since your writing may be shared and disseminated more widely. Your reputation, brand, and familiarity as both a person and as a writer enhance significantly thus boosting all of your content. Furthermore, increased age factors positively in enhanced search engine rankings for the content.
For those who aren’t born wealthy, it is necessary that you will have to work in order to exchange a fixed amount of time for a fixed amount of money. There is nothing wrong with this temporarily, but it must be viewed as just a temporary period and a start.
Every extra moment of spare time you have that’s not tied to the necessary fixed time for fixed money exchange that’s required to sustain life should be considered as opportunities to be converted to fixed time for scalable money.
It’s these leverage and scaling effects made possible by technology that really brings in the money and amplifies your influence.
Case Study: Investing and Capital
Money Can Automatically Provide Scale
You expended time for money, but as soon as you invest that money in an interest-bearing bond or an equity-like instrument, it instantly provides the means to get non-scalable returns. The interest from owning debt-like securities like bonds can be reinvested to generate more interest. Equity represents a fraction of a real business that can operate and provide more value and cash even while you sleep.
Time for Money, and Utilizing Money for Even More Money
One way to consider the initial upfront working time you must expend is that it’s a mechanism to exchange that time for money. Once you possess that money, it can then be reinvested and exchanged for even more money. Thus, you have exchanged your original time for money in a scalable way.
This is how to become wealthy, via the effects of compounding and scaling and not by simply getting greater income, unless the income is either very large or very small.
- If income is very large, then the return spent working itself could provide a better return on investment.
- If income is very small, then there is not much capital to invest, assuming there is any leftover at all. This you should concentrate on greater income.
- If income is just right such as in the middle class, then it’s the sweet spot for investing what’s left in discretionary income.
Eventually, Money for Time
The ultimate win is if you cash out that money earned from your investments in order to work less and/or live more. Then you effectively getting more time back that’s of higher quality.
What Really Matters in Life?
Some important principles:
- Do not exchange fixed time for fixed money, unless you must near the beginning.
- Consider activities that allow you to scale your limited and non-renewable amount of time.
- Ultimately, Money is the mechanism that permits the creation of more time in your life from a finite amount of time.
Money should be viewed as a means to increase both quantity and quality in life, and not as an ends itself. It’s easy to get caught up in the game and forget why we started it in the first place. How important is the next billion dollars if we already have a billion? How about the next million? We can’t take any of it with us and all the riches in the world are worth precisely zero at the end of life.