31 Dec 2020
Return on Time
I’ve been using a lot of my creative output outside work to focus on Stock Talking, so this blog has seen less posts recently than previous years. I did want to do a short post on a concept I’ve been thinking about a lot recently, so here goes.
A lot of investing I do is informed by a hurdle rate. Investopedia defines this term as:
…the minimum rate of return on a project or investment required by a manager or investor. It allows companies to make important decisions on whether or not to pursue a specific project.
For public equities investing, this is a 10% annualized return for me. If I don’t think the company can compound at 10% over a five year plus time period, I don’t invest.
Hurdle rates exist because everyone has limited capital. If you pursued every opportunity, you’d quickly run out of funds and be unable to make any more investments.
Similarly, time as of this writing is finite. Not only is time finite, types of time at least for me are limited. One hour right after I wake up and have a coffee is a much more high quality type of time than 2PM in the afternoon. To follow the investing analogy, morning time for me is the chance the deploy capital in a 2008/9 / 15/16 / Dec. 2018 / Mar. 2020 environment. Each dollar goes a lot further.
So, just like investing has a hurdle rate, I think how I spend my time has to have a hurdle rate. The morning has a higher hurdle rate than later in the day since I have more energy.
Measuring returns is harder for time than for money. There’s no clear cut formula to determine entry and exit. The next closest thing I think is just a log of what was done and how much time was spent doing it.
One of the best podcasts I listened to this year was Jerry Seinfeld on Tim Ferriss. Seinfeld says just the habit of writing for some amount of time makes a difference. There has to be a beginning and end. It can’t be forever. Achieving this 25 minutes of whatever each day of writing is a victory.
Doing the work and logging it gives you conviction around data even if it doesn’t give you conviction around outcomes. What I mean by this is that a side project with Heap or Google Analytics or Stripe linked up can tell you if something is gaining traction or not. Do new features, new blog posts, new podcasts, etc. bring in new users? Not doing the work every day means less new data to evaluate.
Consistency around work I think makes it easier to reason about the future and maybe is the biggest return to time well invested. For many stocks I own, the basic bet is that the company will grow earnings by at least 20% each year and therefore more than have doubled earnings in 4-5 years. Even if the multiple the stock trades at halves, the price should remain the same. The simple return on time version of this is if the amount of work I produce doubles, it’s very unlikely all of it was bad.
The only way to produce work is to spend time doing it. That time has to be scheduled and managed. I’ve found Toggl useful for time tracking and Notion good for logging what was done.
Just like automated investing guarantees some dollar amount is dollar cost averaged over time, I think time should be set aside every day / week to do activities that produce work. As Seinfeld says on the podcast, maybe 20 minutes go by and only one paragraph is produced. That’s better than zero.