Your relationship to time and money

By Rajesh Setty on Tue 31 Jan 2006, 9:40 AM - 4 Comments

I created this example to drive home a point and use this often in my speaking engagements. Remember, this is fictional

Imagine that one of your friends John asks you for a favor. John has a problem. He is supposed to receive an important packet at the local library on one of the saturdays in February. Unfortunately, he is traveling for the whole month on business and he needs help. He has three other friends who have signed up to wait for the packet on the first three saturdays. In case, the packet does not arrive in the first three days, he needs your help to wait for the same on the fourth saturday. John says there is a 75% chance that the packet will be delivered in the first three Saturdays – meaning there is only a slight chance that you may be required to spend the whole of 4th saturday in february waiting in the library for the packet. John wants to know whether you can help him. Most probably you would sign up to help John.

A couple of days later, John comes back to you and he wants to change the request for help. John apparently has found a company called “Packet Receivers LLC” who take up these kinds of jobs. John signed up for their service instead of causing inconvenience to all his friends. That’s the good news. The bad news is that John has to pay $400 to these folks. John wants to know whether you can pay $100 (your share) as you had offered to help him earlier. You politely decline.

Think about this for a second. You had offered to give him about ten hours of your time. Let’s say you would have productively used about five hours of those ten hours – meaning you would have sort of squandered five hours and instead of that you have to pay $100 – about $20 per hour. since most of us earn more than $20 per hour, it does look reasonable. Or, may be not.

I know your mind is now screaming with logic as to why this story does not make sense. You have your reasons and you may be right. However, the point I want to make is simple – most of us are willing to squander time but safeguard money at the expense of time. Money can be earned back but time once lost can never be earned back. This is our sorry state of our relationship with time and money.

Have a good time (pun intended)

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Anonymous on January 31st, 2006

Brilliant! You are a stimulating thinker and write superbly well.

Anonymous on January 31st, 2006

Thanks David. Coming from you, this is a huge compliment. You made my day!
David needs no introduction. He is a foremost authority on professional services firms and he is one of my heroes. For several years when managing professional services organizations, I have used David’s “Managing the Professional Services Firm” as the bible.
Thanks again David.
Cheers,
Raj

Anonymous on January 31st, 2006

I love the conclusions, Rajesh, about our willingness to invest time to help a friend vs. investing money in their success.
However, my mind has been wrestling with the example. I think there’s a complexity embedded in the narrative example that drifts away from your conclusion.
Asking each of the four friends to contribute $100 1/4 of “Package Receivers’ LLC” fee doesn’t seem right.
Assumptions:
The package may be delivered during any of forty hours spread over four weekends.
Each friend will wait up to ten hours, but will leave as soon as the package is delivered.
There is an equal chance (2.5%) that the package will be delivered during any hour.
If the package arrives, the friend who receives the package will inform the friends that going to the library on subsequent Saturdays will be unnecessary.
Each friend values their time at $20/hr and would have 5 productive hours for a value of $100.
Friend #1 (1st Saturday)
Chance that the friend won’t need to go to the library to wait = 0%
Chance that the friend won’t have to go to the library = 0%
Chance that the friend will spend ten hours at the library = 77.5%
Friend #2 (2nd Saturday)
Chance that the friend won’t need to go to the library to wait =25%
Chance that the friend will spend the entire day at the library = 52.5%
Friend #3 (3rd Saturday)
Chance that the friend won’t need to go to the library to wait = 50%
Chance that the friend will spend ten hours at the library = 27.5%
Friend #4
Chance that the friend won’t need to go to the library = 75%
Chance that the friend will spend ten hours at the library = 2.5% (package delivered during the last hour).
If we’re calculating opportunity costs for each friend, then all four friends have made differently weighted commitments. Friend #1 will likely (but not definitely) spend all ten hours waiting at the library. Friend #4 has made an “if-you-need-me” commitment.
In your example, friend #1 may see $100 a great deal to honor a commitment and regain time for themselves. Friend #4 may see $100 as an unattractive proposition when compared with the small chance that they will be at the library all day.
If you want to eliminate the variable of time, maybe John is waiting for a package that will be delivered on a Saturday at one of four locations–his primary residence, his office, his cross-town studio on the other side of town, and his lake-house. Also, what if the friends in this scenario valued their time at different rates?