The Economy of Time: is time a currency?
Why I've been thinking about time all wrong, and you probably have too...
Reading time: 8 minutes
Consider these time-related facts:
You spend about 40 hours working every week.
You run to the subway for the sake of saving a couple of minutes.
You scroll for two hours on your favourite social media.
You complain about not having enough time.
If you resonate with any of the above, you've most likely fully integrated that time is money.
For the longest time, I've been brainwashed to believe so. Here I am, taking a step back to wrap my head around the root causes of it!
Using not boring economic theories, I'll demonstrate why our society perpetuates this belief (hint: it's not entirely your/my fault!) and how our concept of time has been all wrong (teaser: stay tuned for the 'time versus money battle').
Finally, I'll argue there is another way to perceive time so that, like me, you can claim your time back to live your life without regrets.
Time is money: four economies to know
Historically, the rich had both time and money to do whatever they wanted while exploiting the poor who had neither.
As opposed to today's century, most of us:
either have time but no money (I made my best backpacking trips when I was a student or unemployed),
or have money but no time (I need to schedule calls with friends and family since I started working).
We live in a world where one can be only increased by sacrificing the other.
This was also when the American polymath Benjamin Franklin popularised the expression "time is money."
In this chapter, I'll detail three current economic trends that explain how this concept has shaped our lives.
1. Labour Economy
Our current economy is derived from centuries of specialisation and trading. Yes, this is why money was created in the first place. As a medium of exchange, you can trade it with other people's work, who spent time to provide a product or a service.
As seen in the introduction, we spend 25-30% of our time in a workplace, which is 40+ hours weekly (mine is probably close to 47-50 hours). So instead of a result-orientated approach, your income is based on your working hours (and eventually your skills too!).
Current pay structures encourage individuals to work longer hours because of our pernicious work culture, imposter syndrome, overtime pressure, ambitious young talents, hustle culture… Some industries blatantly charge an hourly-based rate. No bargain. Think of consultants, shrinks, waiters…
Simple as that: if you want to earn more, you will spend time working more.
TIME = MONEY
2. Ultra-productive Economy
Now that you earn enough money, you want some of your time back.
In our ultra-productive era, you aim at optimising each activity:
why take the subway or walk when you can order an Uber?
why do the groceries and cook when you can get Deliveroo?
why shop in a mall when you can click on Amazon?
why read a book when you can listen to Audible?
why spend your Sunday cleaning your house when you can hire Hello Alfred?
Companies know how to address better time-efficient services and products to make your life easier. They know their consumers well: your time is valuable.
TIME = MONEY
Yet, we've never been as productive and busy in our lives! There are plenty of resources out there to teach you how to be more productive and do more with less.
“Productivity is never an accident. It’s always the result of a commitment to excellence, intelligent planning and focused effort.” Paul Meyer
3. Addiction Economy
OK, now that you've earned enough and saved plenty of time, you want to reap the rewards of your efforts by spending your time (and money?) for your own pleasure.
Since Antiquity, we've paid for leisure (c.f. Roman people paid to see Ludi, the Public Games).
Since digitalisation, Big Tech has constantly delivered more and better quality entertainment for its consumers. They know better than you, what you like and are attracted to.
Companies no longer compete exclusively with each other but with their number one enemy: your sleeping hours. As a result, everyday content becomes more appealing and more targeted, so you are hooked to the detriment of your sleep.
"You get a show or a movie you're really dying to watch, and you end up staying up late at night, so we actually compete with sleep [...] And so, it's a very large pool of time.", said Reed Hastings, Netflix CEO.
The most successful businesses have specialised in the addiction economy. Those companies either make you pay to get hooked on their platform (e.g. Netflix) or get paid by the time spent on them via ads data (e.g. social media).
TIME = MONEY
Today, you can easily track the time spent on each app. As horrified as you can be by the numbers, you are unlikely to change your habits, because companies have designed their products with addiction features:
Addiction mindset = certainty of a reward x uncertainty about the amount
This formula ensures you will keep scrolling even though you are unsure what you will find, but you know you will find something that catches your eye, which fulfils your dopamine hit.
Unlike smoking, social media doesn't kill you when you're old and grey.
It kills your time while you're young.
4. Hustle Economy
Finally, you have earned money, saved time, and spent money; what's left? Do you have some extra time?
For the hustlers (like me) who have nailed productivity, let's admit it: we've never been this efficient ever.
What do we do with our leftover free time? We sell it!
TIME = MONEY
“Hustling traditionally refers to income-generating activities that occur in the informal economy. It has also become synonymous with a type of job-adjacent work that looks like it is embedded in the formal economy but is governed by different state protections, which makes the work risky and those doing it vulnerable.” Dissent Magazine
From independent entrepreneurs to wannabe influencers, individuals are encouraged to complete (micro-)tasks and produce more during their free time, in exchange for a small fee or the hope of a high reward (e.g. picking up a long ride for a Uber driver, or closing a partnership contract for product placement on your Instagram account).
Earning money has become a hobby.
Do you see the whole picture now? The current economies have shifted our notion of time and money. Both are a medium of exchange, which become tradable with each other. So we have lived in this vicious circle, where we generate more time and money for ourselves in order to reinvest our time to make more money.
But is this what life is? Is time really a currency? Are money and time equal? Can they be so easily interchangeable?
Time isn’t money: the battle
In this chapter, I'll argue that no, time isn't money, and why you should shift your belief. I’ll compare the two concepts using three other economic theories.
1. The Scarcity Battle
The first lesson you're taught in Econ 101 is the notion of scarcity, i.e. any resources with a short supply.
As we all know, money and time are both scarce resources:
Money exists in a large amount, yet it's still limited in the market (even though banks can technically print unlimited notes, but let's not stretch the demonstration for now).
Likewise, time is limited as we all die. In developed countries, life expectancy is 76 years for men and 82 years for women.
However, you can work more to earn more, but you can't pay more to live more.
Total score: Time 1 vs Money 0
2. The Marginal Utility Battle
Now that we agree that both time and money are two scarce resources. I'll introduce another economic theory: the marginal utility.
Marginal Utility = satisfaction gain x having one more unit of goods/services
Let's take a simple example with crisps. If you eat one crisp, it will bring you pleasure. If you have another one, your pleasure will increase until you finish your bag of crisps, then your pleasure will plateau. Any additional crisps beyond the bag doesn't bring you any fulfilment; in fact, you might even start feeling sick. This is called "the law of diminishing marginal utility".
Why is it related to money? A 2010 study led by two economists, Daniel Kahneman and Angus Deaton, has shown that any additional money doesn't add greater happiness beyond an income threshold, i.e. 75,000 USD yearly.
I can conclude that, similar to the crisps example, money has a diminishing marginal utility up to a certain amount: more money doesn't equal better.
Note that time also has a diminishing marginal utility. The fictional movie "The Age of Adaline" depicts an immortal 29-year-old woman who doesn't age and who lived across centuries, but she's sadly unfulfilled. Immortality doesn't equal happiness.
Based on both the theory and the scarcity, I can conclude that: value of time > value of money.
Total score: Time 2 vs Money 0
3. The Opportunity Cost Utility Battle
Last but not least, the final economy lesson of the day is the opportunity cost concept. In other words, it's the invisible cost of renouncing something for another one:
Opportunity Cost = Return of Next Best Alternative - Return of Chosen Option
Let's take an example here. The opportunity cost of renting a flat is the potential gain you will get from buying a house MINUS all the rent you paid for X years.
You get the picture right? Now, let's go back to our money versus time comparison.
The opportunity cost of working more is the happiness of having more free time MINUS the money earned by working more.
This translates the invisible cost of working more in detriment of losing your time.
Based on the diminishing marginal utility of money and the opportunity cost theories, I can conclude that the cost is a lost.
Total score: Time 3 vs Money 0
Conclusion: what’s now?
To be good with money, you need to be good with time.
We live in a society where productivity is rewarded, and you end up constantly chasing something. Yet, do we even question the why?
We go for our daily lives to strive for better without questioning what we really want. Time? Money? Happiness?
Here are two easy steps to take ownership of your time.
STEP 1: Invest your money to get more time in the future
Money is consecrated in today's world where capital reigns. I'm not saying you should stop working, but instead, aim at the freedom to choose what you want.
OK now that you understand that time is not money, because time is more precious than money. So how do you break the vicious circle of "time is money"?
This is where personal finance comes along.
Don't stop working, but instead make the money work for you!
The beauty of long-term investing is that you no longer have to trade time with money. Instead, you invest to earn money (thanks to compound interest), which in turn unlocks your future time to do what you like.
Bingo! You take back the ownership of your time.
Next, reflect on what would you do with all your time if money was out of the picture.
STEP 2: Reassess your values and your relationship with time
The main question is, what do you want to do with your free time? What do you want to remember in your old age? Do you want to recall the time spent at work, on social media, playing sports, socialising? There is no judgment here. You choose whatever resonates with you. Just don't regret it.
There are so many ways to express the idea of elapsed time in English: spend, save, waste, take, invest... So next time you talk to someone, you might want to choose your words wisely.
It's OK to take / waste your time.
In fact, I'll take it further and argue it's essential to "waste" time. Agatha Christie said “There’s nothing like boredom to make you write”. For centuries, creators have claimed how boredom is vital to spark creativity, and more recently science has proven that daydreaming and creativity are correlated.
A kind reminder that you can earn back the money you lose, but you can't earn back time.
“Money is a good servant but a bad master” Horace
So, let me ask you now, how would you label your time reading this newsletter: have you spent, wasted, or invested a couple of minutes reading this?
The article was originally published on the Money Blueprint newsletter.
