“Time is money.”
Our profession has grown up on this concept: time is money. You hear it even today. And there’s a tempting ring of truth to it. After all, if I put in time, I can make money. It doesn’t get much more simple than that, right?
But is it really the time that’s making me money? Or is it what I do in that time? And if it’s the latter, why am I tracking and selling time? What should I be tracking and selling instead? What should I conclude when I spend a lot of time, but don’t make a lot of money?
I have a theory: time is merely a tracker of value. And as the definition of value shifts, time can become a less and less accurate tracker of that value.
What do I mean? Take for instance index funds. As we’re familiar with, index funds are those mutual funds which invest in the contents of an index, and thereby perform however well (or poorly) the related index performs. So intead of having to buy all the stocks in the S&P 500 index, you can just buy an index fund instead, and now you’re riding the U.S. large cap market.
But there’s something out there called “tracking error.” That’s when an index fund fails to actually mirror the results of its index. How can tracking error happen you ask? Well, the fund typically doesn’t buy exactly the amount and proportions of an index’s components. Instead it buys a representative sampling, getting “close enough” to follow the index without all the rigamarole. What can happen though, is that the components of the index act too far out of line from that representative sample, and the fund ends up with a noticeably different result. Typically it’s not too far off, though some funds have been caught with meaningful deviations. (Side note: there are additional contributing reasons for tracking error that I haven’t included here to keep things simple, and the irony isn’t lost on me.)
I think the same holds true with time. Time can be a tracker of value, but it’s just that: a tracker, not the actual value itself. We sorta know this instinctively. “That wasn’t worth my time.” They just got quite a deal.” “We’re gonna hafta write down this invoice.” All these are examples of where the tracker and the tracked got out of sync, just like the index fund and the index.
As I’ve argued in a previous post, time is merely the space within which change can take place. And in a separate post, change is what’s truly valuable. But the reality is, that value is not static in space, it’s dynamic over time — it’s a moving target. The changes that are even possible evolve, the changes people have an awareness of and seek out evolve, the relative worth of those changes to other changes evolve, and each person’s perception of the three all evolve at different rates. Add to that the fact that modern advances¹ enable us to deconstruct and construct things much more easily and quickly, and we can start to see how time is less and less an accurate approximator of value.
Following this train of thought, then, we see how billing by the hour can drive a firm under long-term. The strength of the hourly billing model is that through a series of calculations, it insists that every 10 minutes be “profitable.” It works very well in an environment in which the value exchange definition is static, or at least slowly evolving. Time can track value well under this scenario. But insisting that every 10 minutes be “profitable” is also its greatest weakness. Why? Because the first phases of shifts in a value exchange evolution are inherently unprofitable. If I always insist on profitability, I will never permit myself to go down that road. And then what happens is that the value exchange I’ve built my time upon, will become less and less valuable relative to what’s now possible in the marketplace. I’ve literally lost track of value, by tracking my time.
Whew! Okay, one last thought: Value is created at the compound level. Huh? Okay: all matter is made up of atoms. And atoms combine together to make elements. Elements make up molecules. And molecules make compounds. (High school science class kicking in here yet?) And it’s compounds that make the world go round — that’s where the magic happens. Measuring value at the atomic level (i.e., minutes) is too narrow a field of view. We need to be measuring value at the compound level (i.e., customer relationship and even firm level) — that’s where we can get a true picture of whether we’re really helping create the change, that changes people’s lives for the better.
Okay, enough talk. It’s time to innovate.
“In the end, it’s not the years in your life that count. It’s the life in your years.” Abraham Lincoln
¹I’ll leave the definition of advance towards what aside for the moment.
(As originally posted on the Thriveal blog.)