value of time

IMHO there are fundamentally two ways to think about the value of ones time. realised value (cashflow here and now) & expected gains (what you aim to achieve) based on ones vocation.

i think about this in the following framework:

  1. realised value (eg: your salary) is a lagging indicator (almost always)
  2. therefore, in the moment, always better to focus on optimising for expected gains
  3. expected gains are a direct function of whats riding on you & your mandate
  4. what does mandate mean? — what are your direct stakeholders expecting from you & what are you expecting for yourself.
  5. the expected gains number keeps growing with achievement & after a point looks exponential looking back in time
    1. doubling the value of a $100M startup requires adding $100M in value; whereas doubling value of a $1B startup requires 10x value accretion
    2. assuming an expected cadence of doubling every 18-24 months basically implies value of yield (to be extracted) per hour grows exponentially
    3. for the sake of another example, the same thing applies for ones wealth portfolio; growing 25% on $1M in assets is easier than growing 25% on $100M in assets
  6. simple formula
    1. assume normal person works 2500 hrs per year
    2. expected gains = doubling equity value in 18-months
    3. value of 1 hour = (expected gains per year) / 2500
  7. at Series-A you need to 4x from 25M to 100M (75M of value accretion), at Series-B from 100M to 500M (400M of value accretion), and there on.
  8. therefore, what should founders/ceos/senior-people do in this context?
    1. recognise that growth continuously resets expected gains; and develop a framework to change what you “work-on” every 2 quarters or so
    2. set systems to first protect value (you can’t grow if the base doesn’t stay firm)
      1. a big part of this is operating with processes & principles. hiring the right people, empowering them, and setting appropriate priorities
    3. spend disproportionate time focusing on where that exponential value accretion will come from
      1. live in the future
      2. articulate that future (write it down, paint the vision, keep iterating on it)
      3. lay infrastructure (team, tech, capital, other resources)
  9. done right, realised value should grow with a lag of 2-3 years to expected gains — after a certain level, realised value accrues at windfall events as opposed to linear cashflows.

    if you are really doing visionary stuff the delta of time between realised value and expected gains can be longer 5-7-10 years even — Elon Musk is a good example of that.

PS: this is a framework for thinking about work, and not so much about non-work value (which maybe even more steep, given we all live in finite time)

are you working on high-leverage stuff that is *worth your time* ?

hat/tip to Kunal Shah for asking me this question earlier this week.

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