Time is All We Have: 3 Ways to Increase Return on Investment

 
May 30th, 2007 by Editor, Pick The Brain
Do not squander time for that is the stuff life is made of.
- Benjamin Franklin
Return on investment (ROI) is a term you hear frequently, usually in relation to business and finance. The goal
(obviously) is to maximize return on the money you invest. The implications of this concept go much deeper
when you start to think of time as your primary investment rather than money. Everything you do is an
investment of time. When you watch television, you’re making an investment in entertainment. If you watch a
show that sucks, you’ve made a bad investment and receive a poor return for your time.
In many ways time is more valuable than money. You’ll always have the opportunity to make more money, but
once time has been spent it’s gone forever. When you think of time as a commodity, and all of your actions as
investments, it changes the way you approach every day decisions.
We spend time in many different ways: working, eating, sleep, exercise, entertainment, etc. All of these things
are important. When we start investing too heavily in one area and not enough in another we create problems
for ourselves. The key is investing our time in a manner that perfectly balances each of these areas and forms
a productive and pleasurable life.
Deciding how to invest our time is a formidable task. Unlike business, there are no percentages or
spreadsheets to reference. We have to rely on experience and intuition. I’m far from a master at this, but these
are a few principals I use to guide my decision making.
1. Look for Multiple Positives
A multiple positive is an activity that generates a positive return in more than one area. These are great for ROI
because they multiply returns and incur fewer losses. One of my best multiple positives is working on this
website. It’s something that I find extremely entertaining, it contributes to a small (but steadily growing) stream
of income, and it develops skills that I’ll be able to use the rest of my life like writing, web design, and
networking.
Every individual will have different multiple positives, the important part is finding ones that work for you. A
multiple positive for a software developer might be working on open source or a personal project. It can even
be as simple as playing basketball, a fun game that’s also great exercise. The key to finding multiple
positives is finding areas where different positive actions intersect. If I can find a way to get paid to eat
delicious food I’ll be golden.
2. Avoid Multiple Negatives
Multiple negatives are the same as multiple positives, except the complete opposite. These are activities that
detract from multiple areas of life. One of my favorite weaknesses is going out drinking. This hurts me in three
ways: the time spent isn’t productive, drinks are expensive, and the effect of staying up late and being
hungover usually ruins the following day. If I don’t have a good time, this is basically the worst possible
scenario.
I’m not saying you should never go out and have a good time. To be happy we need socialization and
excitement. My point is that we should always try to minimize the negative impact of our actions. I try to do this
by minimizing the amount I drink and only going out when I know it will be enjoyable. Often we get caught in a
pattern of poor investment. Over time, the benefits fade away and what remains is mostly negative, but
we keep doing it out of habit. This can be avoided by periodically analyzing our behavior. Is it still a good
investment, or is it time to make a change?
3. Utilize the Power of Compounding
I’m sure that everyone reading this understands the power of compound interest. When you invest money you
earn interest. Then you start earning interest on the money you earned from interest. Over many years this
continues to compound and eventually leads to a very large sum of money. The same concept applies to time.
If you invest time by working hard when you’re young, you put yourself in a position to succeed that will
continue compounding for the rest of your life. If you waste time when you’re young, you can’t make up for
it later because you’ve lost the opportunity to utilize the power compounding.
Many people my age fail realize this, in fact I didn’t, or at least I didn’t act on it, until fairly recently. The primary
reason is that we’re trapped in the childish mindset. As a child, your only responsibility is entertaining yourself.
You needn’t worry about investing your time because Mommy and Daddy are there to take care of you and
they’re usually happy as long as you stay out of trouble. These days many young adults ride the childish
mindset straight through college. After graduation we’re expected to adopt the adult mindset (and the
responsibility of investing our time) instantaneously. A lot of people don’t get it, and every year they waste
trying to extend the college days is an opportunity that can never be replaced.
Many people think their time isn’t valuable when they aren’t working, so they throw it away on activities that
have a poor return on investment and don’t build for the future. The truth is, no one else is going to consider
your time valuable until you do. If you want to acquire the wealth that will provide the freedom to live your
ideal lifestyle, start thinking of every decision as an investment. Nothing is insignificant.
One mental model that can help you make better decisions is imagining that your life is a corporation and
you’re the only employee. If you were the CEO of John Doe Incorporated, and were obliged to maximize profit
on behalf of investors, what would you make yourself do? You’ll find that this sort of analysis simplifies many
decisions and increases return on investment.