Lifestyle Investing: “Compound Time” Like Compound Interest? 65 Comments

Written by Tim Ferriss Topics: Investing, Outsourcing Life

berkshire-hathaway-vs-nasdaq.jpg
Berkshire Hathaway vs. Nasdaq (orange), 1984-2004

I met David Kutoff in Omaha at the Berkshire Hathaway annual shareholder meeting, and he asked me an interesting question:

Do you think that the value of time can compound like interest?

Three glasses of wine into a post-event party with Cirque du Soleil performers, I didn’t have a good answer, but David recently sent me a thought-provoking e-mail I thought I’d share.


Compound what?

How might better use of your time compound? David explores:

Bear with me, this is somewhat rough at the moment — my initial quandary was whether time, like currency, could be invested to produce a compounding effect. After a bit of thought, my conclusion is that the value of ones time could experience a significant gain, and perhaps a compounding effect over time, given an investment of [that present-state] time in knowledge, skill or other capacity, and a reinvestment of future gains (just like currency).

Money and currency — accumulated excess money — represent one part of your capacity to transact in the marketplace, and can be exchanged for help from others in the form of products or services, including “things” like consumables, depreciable and appreciable assets. Similarly every action you take, whether it be transaction-related or not, requires the expenditure of some amount of time, which is roughly fixed for all of us (say 10,000 working days between the ages of 22 and 62).

Much like currency can be exchanged for appreciable assets that can grow with a compounding effect over time if the gains are re-invested, my theory is that time can be thought about in a similar way, which may lead to more effective action.

To put this in terms of your thinking from your book, lets say you work 40 hours per week simply performing tasks requested by your employer, none of which produce any additional future potential for generating income for yourself.

This is the equivalent of spending your money on consumables or living expenses. It’s single use, and gives you no real future gain, aside from whatever currency you might earn in the moment. Now, you decide to outsource 50% of your tasks to India, producing the same outcomes with 50% of your time. You just doubled the value of your time compared to before (less the additional expense for the help). Now, with that free time, you get more rigorous about working out, studying, and building your networks. You increase your energy, skill, and capacity working with others and manage to produce yet the same results that were taking 50% of your time with only 30%. If you keep reinvesting some of your time in additional gains in your capacity to act, you can theoretically have a compounding effect with the value of your time (rather than time itself). Just like investing currency, the earlier you start this process, and continue to invest in your capacity, the more time your capacity has to compound, and the greater outcomes you can produce during your lifetime.

Posted on May 7th, 2008

65 Responses to “Lifestyle Investing: “Compound Time” Like Compound Interest?”

  • Ryan May 8th, 2008
    12:45 am

    great post.

  • Joe Frost May 8th, 2008
    12:55 am

    The baseline of the graph could be Old Rich value of time and the escalating graph line could be New Rich Value of Time.

    I like the picture. Tim “in the O” that’s one of Omaha’s tag lines.

  • Manan May 8th, 2008
    1:01 am

    Freakin hell! Amazing post!

    Never thought of evaluating time in such a manner! Very interesting.

  • Jason Davies May 8th, 2008
    2:13 am

    Very interesting perspective. I imagine the idea of investing, returns and compound interest can be applied to many other aspects of life, too (e.g. relationships, exercise, etc.)

  • Chris May 8th, 2008
    2:18 am

    While investing for the future is the right thing for most everyone, this concept is just wrong. The flaw is that the the ‘investing in yourself’ activities here create a world where the grass is always greener on the other side and you’ll never ever be satisfied. So you get 50% more time, less money, then get a little thinner, a little less stressed, a few extra letters on your resume…you still trap yourself into thinking that you’re ‘sacrificing today for something tomorrow’ instead of actually enjoying your time today as if you might be hit by a bus tomorrow. The cycle would never end.

    Say you’re a smart, motivated, energetic janitor making $10/hour. By this logic, you should hire a migrant worker for $8/hour to do your job and spend the profit going to law school or something. If your boss ever figures this out you’re screwed, fired (the $8 an hour guy gets the job), and still need to pay for law school. Your dreams are even farther away and you just wasted a bunch of your finite time in the process.

    Mr/Ms Janitor should make the most of his present time. They should experiment with the most effective ways to get their job done…play with the variables—their cleansing supplies, techniques, ways to communicate with their boss, ways to collaborate with their colleagues, until they do a spectacular job. They should figure out how to turn their cleaning into a workout. The result: They will have built a network of people they like being around because they challenged themselves to work together well with the other (and thus are happy at work!). They learned people/management skills. They learned about being organized. They got fit. They maybe moved forward the state of the art of cleaning. They can then leverage these skills into a higher paying profession (i.e.sell the idea for a consulting bestseller of ‘winning cleaning techniques for upper management’). The point is that the present tasks were oddly satisfying because it involved a challenge, continuous improvement and constant learning.

    Tim Ferriss talks about how hard physical labor is like zen meditation to him…that’s exactly the point, embrace your situation and learn/milk as much out of it.

  • Chris Elliott May 8th, 2008
    2:41 am

    I think the Chris comment before mine is correct in some aspects, but not correct in others. He has just found another map to the territory. I think that both solutions are increasing the value of time.

    In the e-mail, David uses an example from Tim’s book to show how you can structure the same work to give you personally more time to peruse more financially rewarding projects. I would assume that this means outsourcing the things you don’t enjoy or that are not generating revenue at the rate so you can focus on higher revenue generating activities.

    In Chris’ example, the person is investing time getting better at a career in order to move that career forward. I think they are saying the same thing, but David is looking at it from the point of view that the person might be good at being a janitor and has found a way to make it generate more revenue in the same amount of time.

    I think that is the same thing…trying to find ways to generate more revenue in the same amount of time.

  • Mwangi - the Displaced African May 8th, 2008
    3:45 am

    It makes sense. One way to look at it is through the lens of the Pareto Principle. When you dedicate all your time to the 20% tasks (that produce 80% of the result) and outsource the other 80% you have multiplied the value of your time by 4 because if you had focused the same duration of time on the 80% (that produces 20% of the result) you would only have had produced one quarter of the output.

    Perhaps your time can begin to increase in exponential value if you then begin to perform a Pareto analysis of the 20% tasks - for example what Tim did with his email (which is a 20% task). In so doing you yet again increase the effectiveness of your time by a large margin, or factor……………..

  • Tom May 8th, 2008
    3:49 am

    I don’t think that time and money can be measured separately, and indeed aren’t in the above email; I think it makes more sense to discuss them together and speak of wealth.

    For those familiar with Robert Kiyosaki’s definition of wealth (which I think is the correct one), wealth is the measure of time that your automated and/or accumulated money and/or income brings you.

    For instance, if your living expenses are $1000 a month, and you have $12000 in the bank (or have the automated income to create $12,000 in twelve months), you could live on that for a year. You would be “twelve months” wealthy. You could then compound both your time and your money - obviously the idea is to increase both so as to become more wealthy.

    Eventually there comes a point with automation where wealth can essentially be infinite, the ultimate result of compounding! Time and money, especially with regards to the concepts espoused in “The Four Hour Work Week” should always go together.

  • Tim Brownson May 8th, 2008
    3:56 am

    Let me be honest, I have no idea what you’re talking about. I’m just hanging around and commenting hoping a few stray souls will be curious enough to click through and read my own highly amusing and informative blog on self development and life coaching. It could happen and I have a theory that, and a desire to seem intelligent or be fleetingly famous by association are the only reasons anybody ever replies to ‘famous’ people’s blogs. Am I being unfair? Probably.

    I did like 4 hour work week though if that counts for anything.

  • Summy May 8th, 2008
    4:19 am

    You can definitely compound time. There is outsourcing of course. But there are other ways also: delegation (you train someone to do your job inside your organization or family- a few minutes of training ), automation (invest a small amount of time to get a machine/computer to do your job for you), ;earning, teaching, systemize etc.

  • Marsello Oentoro May 8th, 2008
    4:22 am

    Quite a thought provoking post, if people say that time is money and money can be invested with compound interest then time should be able to be invested with the same effect right? The logic is there and in some degree is true. Take work for example, as your experience and skill grows over time, your time certainly worth more.

  • Ken May 8th, 2008
    5:23 am

    Interesting post. I just realized how much time I’ve wasted. I need to run out and start a 401K for my time. I don’t want to run out of time before I’m done living!

  • B Smith @ Wealth and Wisdom May 8th, 2008
    6:12 am

    Tim-great post. And how did you find time to ponder deep thoughts like this? It looks like you were having too much fun!

    For years I’ve been a believer in incremental improvement with the occasional “aha” moments. I think improvements compound but you can only factor in recent ones. After a certain point you have just moved beyond them to the next level. This requires a new set of skills and the old skills are of lesser impact/importance.

  • Maria - Never the Same River Twice May 8th, 2008
    6:17 am

    This is an interesting way of taking advantage of leverage, which in this case is defined as “Positional advantage; power to act effectively.” Essentially, Mr. Kutoff is proposing using global labor arbitrage to multiply your own personal impact.

    While this is incredibly seductive on one level, it do have to agree with Chris above that in the end it seems to play into the “bigger, better, faster, more” mindset that 4HWW seems to oppose.

  • Robert May 8th, 2008
    6:20 am

    This is very thought provoking and gives one a different outlook on time management. Thanks for the excellent post Tim!

  • Allen May 8th, 2008
    6:45 am

    Chris, I think you’ve missed the point. Investing now to get more time in the future only works if you invest your time in that which will lead to more time in the future. Getting a law degree isn’t going to lead to more free time down the road. Quite the opposite. Generally improving yourself to become more valuable as an employee will only make you a better paid employee. Compare this with spending your time starting a self sustaining business.

    Sure we can always make improvements, but we shouldn’t give up trying to improve things because we’re afraid of going to far. When we do spend our time doing unproductive things like sitting on the beach it’s important to recognize what we’re sacrificing to do that. Maybe if we spent that day investing in the future we could have two days on the beach next year. Sometimes it’s worth it sometimes it’s not.

  • akthe47 May 8th, 2008
    6:45 am

    Interesting point and Chris above also brings up some interesting points which I can’t deny. In many ways, time = money, so that leads to several corollaries (if you believe time = money):

    1) If you can invest in money, there’s no reason you can’t invest your time (which equates to money, anyway, since your time can be thought of in terms of money).

    2) If 4HWW professes that you shouldn’t be overly concerned with investing money in hopes of spending it later, it should also hold true that you shouldn’t be overly concerned about investing time in hopes of spending it later.

    Perhaps it would be interesting to hear how you would tie this idea of time investment into the ideas of the 4HWW.

  • Max May 8th, 2008
    7:07 am

    Investments in one’s human capital made at a younger age will pay off higher in the future than investments made later in life. The younger you make these investments, the more years of lifespan you have to reap the benefits of them.

  • Deb Rogers May 8th, 2008
    7:29 am

    Interesting. I think about it more in terms being able to bend time than I do in creating a greater “value” for your time that would translate into a higher salary or even capacity—those are just additional benefits. If you think of time as linear, you’ll be stabbed continually on the point of your own line. When you are in the zone doing what you love—even if that is doing nothing sitting on the edge of a river- time bends to a much happier shape. That’s the real compounding (and compelling) interest.

  • longwalksinparis.blogspot.com May 8th, 2008
    7:38 am

    To hell with outsourcing… get out of the rat race and marry someone rich. The tried and true old-fashioned way to free time and wealth !

  • Anthony Timperman May 8th, 2008
    7:44 am

    Interesting post, makes good sense

  • Anthony Timperman May 8th, 2008
    7:45 am

    Great post, logically sound enough for me

  • Dewey May 8th, 2008
    8:11 am

    I think an easy way to frame this idea is with an analogy to education. Education is the perfect example of time spent that should compound efficiency and effectiveness. X hours spent learning, should produce compounded time. For example, use the time spent learning to speed read twice as fast as you currently read—you have compounded that time in an amount equal to whatever time is saved by reading for half as many hours for the rest of your life.

  • Ronnie Nurss May 8th, 2008
    8:11 am

    Love the idea, and time is essentially money. I wrote a post about how investing 1 hour a day for a year is equivalent to 9 40-hour workweeks. Imagine spending 9 40-hour workweeks to learn another language, mastering the acoustic guitar, or learning to surf. You will no doubt be at least above-average in whatever you practice. And it just starts with a small investment of 1 hour a day.

    Compounding time is a great idea with huge potential, especially the younger you start.

  • Mr Crash May 8th, 2008
    8:17 am

    Don’t waste your time, or time will waste you.

  • EJ May 8th, 2008
    8:22 am

    LOVE the post!!!! I can see there will be a lot of posts about measuring times worth in terms of salary or income.

    After reading Tim’s book, I concluded time was not just about making more money (and working a “4 hour work week”) but so much more. How so?

    1.) Money and Interest Rate are clearly measurable.

    2.) Time and Pay can be measured in terms of annual salary. Or better yet, and as Tim explained, how much do I earn given the number of hours worked.

    This might be a little off the subject but I think it is related. A chapter in Tim’s book questioned the use of time and how one was spending their one-and-only life. To me, this was the essence of the 4 Hour Work Week. How was I spending the time in my one-and-only life? Not how much was I earning.

    Tim suggested that I not ask “am I happy” but “am I excited.” And for me, this was the life-changing chapter in the book.

    Although I have so much (a beautiful, charming wife, great kids, a beautiful house etc.) I didn’t feel happy. I was asking myself, what the hell is wrong with me? I SHOULD be happy. But by starting to asking myself, “am I excited?” I realized I was bored out of my friggin mind. Yes, I was grateful for what I had and I realized so many would love to be in my shoes. But I was bored.

    I have spent the past few months finding ways to inject some “excitement” back into my life. When looking at activities (at home and with my career), I find ones that really interest me. Ones that send a shiver up my spine. Ones that physically gives me goose-bumps. And I asked how I could inject excitement in all areas of my life: career, family, hobbies etc.

    And I became more aware of the activities that bore me. And these are the activities that I either try to eliminate or out-source.

    From Tim’s book, I learned the focus is not just to make an extra buck per hour. But to use time so that I am more fulfilled, more happy…and more excited….per hour.

    Immeasurable. And priceless. EJ

  • Sheamus May 8th, 2008
    8:44 am

    Post content aside, the first thing I noticed was that if you’d invested in Berkshire Hathaway at the beginning of 2003 when it was rallying strongly and looked as solid as ever and, like Buffett advises - held on - within a year you’d have lost 50 per cent of your investment. Meantime, over the exact same period, the NASDAQ rallied significantly.

    Point being: it’s all relative, surely? While time should not, in theory, be wasted, the option to be able to waste time is a luxury. Catch 22.

    That aside - didn’t you already make David’s point in your book, Tim?

    As Chris’ post also suggests, the option is only really there if one already has secured a certain level of status in life that affords the opportunity to outsource the work. Up to that point - i.e., for ‘normal people’ - the only likely outcome is you’re making it clear that your job can be done by somebody else, for less. Instead of getting more for your money, you’re unemployed, and your boss is getting more for his money.

    Ultimately, one suspects that in the long term, if enough people pursued this, the only group who would really win, ironically, is big business.

  • Jake Shellenberger May 8th, 2008
    8:51 am

    This can certainly apply to exercise and basic healthy living. What you eat and how well you exercise at 25 will have a huge effect on your physical and mental living condition at 50. How well you take care of yourself at 50 will play a huge role in your status at 70, etc.

    Life most certainly builds upon itself and the “investments” you make now will “pay dividends” for you in the future.

    Chris - Your janitor example was a poor one as not all jobs are possible to be outsourced. If that janitor were an office gopher at company XYZ the story would be different. This kind of lifestyle isn’t for everyone and those of us that are able to do it should be quite thankful.

  • Nate May 8th, 2008
    12:46 pm

    Tim,

    Isn’t this concept already coined “opportunity cost”?

    I suppose the wild card to it all is whether or not this “time” saved, lost, compounded or whatever is “quality time” or just being busy. Nate

  • Karl May 8th, 2008
    12:49 pm

    Hi Tim -

    Serious question: do you find that the more successful you are at implementing a 4HWW lifestyle, the more it isolates you from people who don’t live that way?

    Trust-fund brats and the marginally-employed have more schedule commonality than ‘regular people’ (ie. 40-hour WW commuting workers) - just take a look at the Sunday-night crowd at any club. I’m sensing a hidden social cost to the 4HWW lifestyle - ‘Hey, want to surf?” “Can’t - I have a big project due”. “Hey, let’s go to Berlin!” “Can’t - I have a job, dude”. Etc.

    How do you manage the social tensions / filtering / isolation from peers that the 4HWW can create? Sure, success of any kind can be isolating, but radically increasing personal freedom is different than just being wealthier than someone…. and I think a lot harder for the less-free to take.

    How do you bridge the culture gap, or have you just given up - and retreated into a clique of the super-free? Note that I’m -not- talking about the stresses of being successful in general (i.e. best-selling author) - I’m asking about the unique problem-set of having more freedom than your peers because of implementing the ideas in your book.

    Maybe an idea for a future post?

    - Karl

    ###

    Hi Karl,

    Great question. I was just discussing this today with a few self-made decamillionaires. It’s not just 4HWW. The more successful you are in any field, the fewer people will identify with you. You might still be down-to-earth enough to identify with them, but the opposite may not hold true. Often doesn’t.

    It may be lonely at the top, but there are still plenty of interesting people there ;) Better than the alternative, methinks.

    Cheers, Tim

  • Malcolm May 8th, 2008
    1:06 pm

    I don’t think you can compound time. I think you could though compound the quality of time to a point. If you have a higher paying job as the result of experience/education investment you may be able to afford an ipod in 1 week vs if you had a lower paying job it may take 1 month. So instead of working those four weeks you can do other things you want to do. Does this add time, no but it allows you to spend your time closer to the way you want to. At a certain point though even if you are spending your time exactly as you want you can’t extend the amount or quality of time. You could though perhaps increase the quality of time of other people giving money away so they can spend it more as they would like, so maybe quality of time isn’t limited via compounding.

  • John Peden May 8th, 2008
    1:09 pm

    The value of my time fluctuates much more in a given day than my (lack of) money and consequently I will complete tasks of lower importance when my time is ‘worth less’ e.g. refill ink cartridges in the hour before a lecture, otherwise spent watching Heroes. Though not necessarily compound-interest in terms of your time, could it all be classed as time-banking?

    I think its a concept many of us have already experienced (as with many things in life) its just interesting to have someone elaborate on the idea in a little more detail and perhaps encourage us to take a more observant role in our time investments.

  • Are you sufficient with your spending…?? May 8th, 2008
    1:25 pm

    […] is a good link from Tim talking about compounding your time…food for thought. Post a comment Permanent Link | Digg This | Stumble It | Save to […]

  • Jennifer Bingham-Heart May 8th, 2008
    1:26 pm

    Hey Tim,
    This post a bit more challenging for me to wrap my head around but I’ll have a go. Having time as a investment is interesting concept only one that can be measured in moments of “now” and possibly by the end of this lifetime. I think the only way to invest in time is with enjoying every moment even if the moment sucks, exciting, or even mediocre. Most of us Americans can barley handle eating without another activity on like TV or internet. Most people don’t enjoy the act of eating itself. This translates to every area. I think certain instances like when we are with friends or lovers, in creative pursuits like writing or drawing, we may be more in the moment. I am sure there are some people that still have their running to-do or worry list in their head. The return on investment is to be “in the zone” but also when engaging with a friend or a lover to be in the zone add value to the time stock. This time investment will show dividends when you and I are 85 on the wrap around porch getting ready to play with the great grandkids and knowing that we didn’t have any regrets. That thought doesn’t even come time mind because we are in the moment with lots of hugs, good food, wine, family and friends.

    To me it’s the only way to measure time as an investment. What do you think?

    Hugs, Jen

  • abaybay May 8th, 2008
    2:42 pm

    everyday i’m hustlin

  • John May 8th, 2008
    4:53 pm

    I think it’s an illusion to think we could somehow compound time. I think the best we can ever do (short of extending our lives) is choose how to use time. Time, like attention, is a finite resource. Now, it is true that we may choose to maximize time for the sake of increasing other resources (money, skill, health), but we never really increase the amount of time in any given day, week, month. Money can be increased; skill can be increased; health can be improved, but time is always finite (though unfortunately we never know exactly how much of it we have). The 80/20 rule, and other ways of thinking about time “management,” help us eliminate those activities that we do not value or find important. But they don’t make more time. They simply direct our attention in any given moment.

    Now, for my money, love is an infinite resource (in a manner of speaking). We can love many people and not run out of love. We might run out of energy, money, time, attention, but do we ever run out of love? Mother Teresa didn’t think so. (If you doubt that love is a resource, ask yourself about it’s power to change your life.)

  • Erik Cox May 8th, 2008
    4:56 pm

    Wow, cool guest post Tim… I enjoyed it!

  • Alex Weber May 8th, 2008
    5:53 pm

    Hey everyone,

    This post vibes very well with another one over at ProBlogger about meta-improvement.
    In this post they talk about the act of improving your ability to improve. Heady, but makes sense… improve your ability to improve and you’ll consistently better yourself faster and more effectively.

    I love this idea. Thanks for the post!

  • N D May 8th, 2008
    7:52 pm

    A great post which once again highlights certain aspects and principles that were explained in 4HWW — things like the 80-20 principle and thinking of time and mobility as currencies and not just money…it seems that time just like money can be invested in and reinvested resulting in a net increase of available time. However unlike money, which can be put into an account and if left alone can gain (or not gain) interest, time is always moving forward. And thus cannot be quantified in the traditional sense.

    Outsourcing, geoarbitrage are all great ideas and ways to increase the available amount of time while completing the same amount of tasks and at a decent price. Resulting in an increased amount of time, money and essentially mobility.

    In practice: Nowadays before engaging in almost any activity whether it be for fun, work, miscellaneous events — I quickly evaluate the time-cost value of the activity…certain questions pop into my head like “how much money and time is this going to cost me?”…”is the financial/personal/emotional gain worth the time/money being spent on the activity?”….and it is through quick analytical thinking such as this coupled with the principles I learned in 4HWW and through various people in this blog that I have managed to save not only time and money…but also —in many cases— my sanity.

  • Rhonda Newfie Hackett May 8th, 2008
    8:08 pm

    Ok, so dude - I’m a clincial psychologist - the ANTI, really - the most eff-ed up people in the world are psych folks; current company included of course :), my dearly beloved is a family doc; I’m a die in the wool Catholic; likewise his wool is died by the hard-core Hindu Indian - no really, we love each other, and have two perfectly, well-rounded kids (if you believe that I have a something to sell you in a place you least need it…they are 13 and 9, boy and girl - nothing well-rounded about them in other words - case in point? my nine year old daughter recently informs me she will never give birth “why?” i foolishly ask - ‘hello Mama, a human being springing forth from your vajayjay - it’s got to hrt”….who am I to argue? as I boast a combined 34 hours of torture to spring their lives forth into the world? - anyhooooo - we, the doc and me, the anit-doc would love to chat with you….any chance you’d give me a buzz? we can offer you a free stay at a totally suburban Denver neighborhood in which we are the only token mixed couple

    ###

    Hi Rhonda,

    I think I’ll be in CA for most of the foreseeable future, but if I land in Denver outside of the airport, I might just let you know :) Tim

  • topseekrit May 8th, 2008
    8:20 pm

    Hmmm I guess my brain operates a lil differently…I immediately thought of living a healthy lifestyle (physically, mentally, socially, and spiritually) when I first saw this post. Doesn’t exercising, eating right, safe environment, the grace of God etc. ultimately defines how your time is compounded here on Earth?

  • Tom May 8th, 2008
    9:42 pm

    Wholly *#&^$

    I have been doing that but did not know it.
    It has been a MAJOR part of my success to date.
    And now that it is defined I think I know how to add
    the 80/20 rule to more effectively compound
    my time.

    By focusing on compounding time as a specific
    project and simply applying the same principles to it
    as I do to other business processes.

    THANK YOU.
    ( This is why this is my favorite blog. ) Tom

  • Aaron May 8th, 2008
    10:08 pm

    @ John

    I totally agree with you that it is impossible to compound time. We never know when our time is up. So the only freedom we have is to live with impeccability. As many of you have stated, you can do one of two things with time…Invest it or Spend it. I don’t think there is a gray area. I invest my time not for what it will bring me later, but what it brings me right now. When investing my time and living impeccably I feel powerful. I don’t feel good if I lounge in front of a TV watching a stupid show. So instead of always thinking about the future, which is what this post propogates, finding the peace in the moment is where it’s at…compliments of Mr. Tolle.

  • Tim Ferriss May 8th, 2008
    10:37 pm

    @Karl,

    Great question. I was just discussing this today with a few self-made decamillionaires. It’s not just 4HWW. The more successful you are in any field, the fewer people will identify with you. You might still be down-to-earth enough to identify with them, but the opposite may not hold true. Often doesn’t.

    It may be lonely at the top, but there are still plenty of interesting people there ;) Better than the alternative, methinks.

    Cheers, Tim

  • DennisD May 8th, 2008
    11:21 pm

    Are you kids serious?

    Read the email again - compound time? The man talks about being more efficient, and you guys act like he just found the cure for cancer.

    Stop with the brown nosing.

  • Daniel May 8th, 2008
    11:24 pm

    Be in the moment - being a great janitor or whatever else turns you on… have a mind like water as you use your physical or mental labours as your meditation.

    But choose how to invest that moment.
    If you have a personal “highest and best use” that varies from how you currently use your time, you owe it to yourself, your family and the world to move yourself closer to that purpose.

    You can completely accept where you’re at while working on expanding, growing and developing in the same way as you can work towards “a better life” while being intensely Present.

    Yet, to me, “Compound Time” is not as much a prescription as a description.

  • Manan May 8th, 2008
    11:29 pm

    Tim,

    [REALLY REQUIRE YOUR GUIDANCE/THOUGHTS - ESPECIALLY ON THE 2nd POINT]

    Was thinking today…

    1) You had said “In order to increase output, you need to decrease input”. But in one way if I had not read the book 4HWW (input), I would have not improved my efficiency/productivity (output). So isn’t taking time out for input equally important?

    2) I have a family business which is going on since 58 years. My brother expired and now everything ultimately will be handled by me in the future. People used to keep saying “Do an MBA”. If you were in my place, would you still leave the company for a year or 2 and do an MBA, or spend those 1 or 2 years having hands-on experience?

    For you info: We have our own line of publications. I have already been working here since 3 years - and am currently handling our website, administration, circulation and technology related departments. I am also part of ad sales department. I am 24 years of age. As guidance I have my CEO who is there for me on a daily basis & my father - who helps occasionally (If required. Although he is spending less time for this business now)

    REALLY REQUIRE YOUR REPLY ON THIS ONE - as these decision can alter my future in a big way. Thanks

  • Tim Ferriss May 9th, 2008
    1:20 am

    @Manan,

    I can’t offer much guidance here, but I am always skeptical of the value of an MBA, unless it’s required within a big company to get promoted. Assuming that’s where you want to stay.

    I also applied to Stanford B-School three times and — in the end — decided my time was better spent in the field. I might change my mind, but it’s unlikely.

    There are some genius professors in some programs, and incredible people in all good programs, but it’s not a question of bad vs. good. It’s staying in your company vs. MBA.

    If you want to stay in your family business, I don’t see a reason. If you want credentials for expanded options in the future, it might not be a bad choice for a 24-year old.

    Anyone else? Tim

  • Daniel May 9th, 2008
    1:31 am

    @Manan - ceteris parabi, do the MBA.

    If you’re not sure that it would be unnecessary, you probably need to do it.

    Taking over the family company is a big deal and you’re gonna need to have the broader skills, contacts and awareness to take things to the next level.

    Besides - B-School is crazy-fun!!!

    Disclaimer: I have one.

  • Manan May 9th, 2008
    6:17 am

    @Tim & Daniel

    Thank you for your thoughts and feedback. Very helpful to have an opinion from 1. one who is extremely successful & has not done MBA, and 2. another who (Im sure is successful in his own way &) has done an MBA! :)

    Thanks a ton

  • Compounding Time May 9th, 2008
    6:50 am

    […] in Time, and compounding it in the same way you have a compound interest on an investment. Lifestyle Investing: “Compound Time” Like Compound Interest? In my own words, It’s more about creating an environment for yourself where you put in little […]

  • Richard May 9th, 2008
    8:23 am

    It could be difficult to add a compound ratio to time but you can place a value on the return on time. If you run a service business or consultancy you can demonstrate the value of time by showing your clients what will return an investment as opposed to wasting time. For example, you could charge more for time wasting activities like meetings. Meetings generally have little or no ROI so they need to have a higher price for clients to use that time. Networking meetings are the exception because they are speculative.

  • Drew Kime May 9th, 2008
    9:32 am

    I can’t believe no one has said this yet: “Sharpen your saw”. You know, “The Seven Habits of Highly Effective People”? Heard of it? This isn’t exactly a groundbreaking concept.

    Sure, this is an interesting persepctive on it, describing it in terms of compound interest on your time. But really, all it means is that you need to take some of your time away from work to make yourself more productive at what you do when you return to work.

  • Jitendra_India May 9th, 2008
    9:58 am

    Tim,

    First of all a great idea! However, while money is tangible and actually compounds with a given rate of interest over a period of time when invested, saved time (through outsourcing and other means) on the other hand, unfortunately cannot actually compound, it can only ADD up.

    Time is even rarer than money and cannot be grown (fixed 10,000 days)!.

    Regarding utilization of saved time to build skills, mastery can be built only upto a certain level (eg., building your body), unlike money which can be compounded infinetly.

  • Jonathan Hearn May 9th, 2008
    10:27 am

    Tim,

    Good post. Long time fan and inspired. I read your book a while back and it motivated me to make a change. The culmination of this is my site that launched today. It is so new that the bots have not even touched it. I am considering post a project on Elance to market it. Would be thankful for any advice or opinions you may have on the site/application. Thanks Tim, I am certain this is my route to my own 4hourworkweek. Cheers, JON

  • Ben Murphy May 9th, 2008
    11:14 am

    Tim,

    This post reminds me of Ray Kurzweil’s idea about ‘the singularity’ as outlined in his books “The Age of Spiritual Machines” and “The Singularity is Near” - it deals with the concept of exponential increases in processing power / machine intelligence, but there are a lot of similarities to the idea of personal efficiency.

    You might want to check them out.

  • Karl May 9th, 2008
    11:17 am

    Hi Tim -

    Thanks for the reply. One refinement to my question:

    Old world: obvious divide / culture gap between very successful and moderately successful people.
    (“Man, Bill Gates never wants to go the the Waffle Hut with me any more…”)
    New world: two people, identical mid-level incomes - one hard-working salaried employee, other a 4HWW-inspired pet-supplement-company operator. From a cash persepective, the two are the same, but there’s a huge culture and freedom gap between the two - and a resulting social disconnect.

    That’s the area I’m curious about - because unlike massive wealth which tends to impact many areas of a persons life, implementing the 4HWW can create subtle social strains ‘in-place’. And, it’s a historically new problem. And, it’s all your fault. ;)

    The problems of the suddenly-wealthy are pretty well known (and hillarious!), but the problems of the suddenly time-and-freedom rich are more interesting.

    So, I’m not sure the self-made decamillionaires would have a lot to say about this… Or do they?

    Best, Karl

  • chris d May 9th, 2008
    12:36 pm

    Tim,

    Good on ya for wanting to pick up a programming language. The crucible of my Computer Science degree was the semester we had to complete a non-trivial assignment in Scheme. Just be prepared to be chased around in your dreams by rogue parentheses.

    I still struggle with human language acquisition, but I’ve got programming languages sorted. I always wonder if programming languages actually count as “real languages”.

  • Antonio Fisher II May 9th, 2008
    1:48 pm

    I loved this post…I can apply it right now…we all have the same 24/7 and time is something that once its gone you don’t get it back….so this thinking is right own…I broke it down to 3 simple steps for my own understanding.

    Develop a system of doing things.

    Out source as much as that system as possible

    With the free time you now have, Improve you personal skills in areas that directly effect income…or any other variable you are considering

    With the new skills, your effectiveness doing the remainder of the non outsourced actives increases…resulting in more income and less time spent on that activity

    Thus leaving you more time to go to the jungle and hang with the people and going dancing at a samba club in Brazil…that is my goal

  • Kevin May 9th, 2008
    5:11 pm

    Insightful post! I am in the field of behavioral research and learning theory and think you would appreciate reading about the theory of behavioral economics. There is much written about this in the Journal of the Experimental Analysis of Behavior (JEAB), and they devoted an entire issue to this here- http://www.pubmedcentral.nih.gov/tocrender.fcgi?iid=126427

  • Daniel May 9th, 2008
    6:18 pm

    @Manam and Tim

    B-School can be a great waste of time too - for me, it wasn’t the content that was important as much as fulfilling my sense of what I needed to do… so if you feel you should, do it. If you don’t, save youself the time and money and join the samba dancers down in Brazil ;)

    You have a great opportunity - use it rather than being trapped by it.

  • Keith Hudson May 9th, 2008
    6:59 pm

    Can we compound time, as we can compound interest? Money is a medium of exchange that allows us to store the output of our efforts until a time when we wish to use it. Interest is the rent we get for allowing someone else to use that money while we are not putting it to other purposes.

    Compound interest is not some form of magic. It merely describes the mathematical concept that when a starting sum is multiplied by a number greater than one, if the product of the multiplication is added to the original sum, and multiplied again by the same or another number greater than one, the resulting accumulated sum grows exponentially, rather than linearly.

    Perhaps compound interest could be viewed as a mathematical expression of the value of patience, or as an illustration of the Law of the Harvest (“as you sow, so shall you reap”).

    Although it appears that interest can be compounded infinitely, no one individual can benefit from compound interest for a greater period than his or her lifetime. And as Warren Buffet can attest, as the accumulated sum resulting from compound interest grows very large, it becomes more and more difficult to find a single entity that wishes to pay the same rental rate one could get for the use of a smaller sum. In fact, when the invested sum becomes large enough, some portion of it may end up being rented out at multiples LESS than one (that is, a negative interest rate)! And compounding a sum invested at a negative interest rate turns the whole compound interest “magic” on its head!!

    So, can we compound time? Tim Ferriss (4HWW) suggests methods for increasing the effective use of one’s time in order to reduce the time needed to meet one’s basic needs, and suggests putting the time thus liberated to pursuing a positive answer NOT to the question “Am I happy?” but “Am I excited?”.

    Perhaps as one compounds one’s time, the key question one asks is not “Am I happy?”, nor “Am I excited” but “Am I making a positive difference in other’s lives?” or “Am I making a difference in as many other lives as I am capable of?”

    I believe that both Warren Buffet and Bill Gates are real life examples of asking “Am I making a difference in someone else’s life?” after having amassed through investment, a sum of money so large that it no longer has any direct relationship to the level of creature comfort (or excitement) one individual can enjoy. Or perhaps it reflects a basic truth that making a difference in the lives of others is a higher form of excitement than can be experienced in any other way.

    Look at Tim’s involvement in raising awareness and funds for good causes of many kinds.

    May I suggest that the ultimate compounding of one’s time is moving inexorably, through one’s day to day choices of how to use one’s money and one’s time, toward a place where every waking moment is devoted to improving the lives of others, without thought of personal reward. And the ultimate paradox, I believe, is that if one can approach that level of service and self-effacement, one becomes, ultimately, the best person one can be, which is the ultimate personal reward.

    Perhaps John (posted May 8 at 4:53 pm) hinted at just that, when he said that although time is a finite resource, love is not. I define love as a desire for the betterment of another. Can compounding my time and money empower me to compound my love for others?

  • Manan May 10th, 2008
    1:09 am

    @ Daniel

    Thank you for taking time out to help me take a decision.

    Looking at the entire picture, I think it is better I spend time working at my business. One can always hire MBAs to know their thinking and make use of their experience/knowledge.

    And if I ever feel im lacking knowledge in a particular area - I can always do some short courses to take care of it. Plus, reading the right books like the 4HWW can always help improve efficiency/productivity and help build a clearer vision for the company.

    So finally, I guess, going to Brazil is a better option! :)

    @ Tim

    Thanks again for taking time out of your busy schedule (on my earnest request) to share your thoughts. It means a lot to me.

    Take care

  • Michael May 10th, 2008
    8:19 am

    Time can definitely be compounded, just about indefinitely. The 20-80 principle is just one way, of course. You don’t just apply the 80% discard once, but continue applying, over and over, so that the 20% gets better and better over time. It becomes a matter of both decreasing the number of hours you work and increasing the effectiveness in the hours that you do work.

    Learning another language can be another example of time compounded. If you spend 6 months learning Spanish, for example, then you have suddenly expanded your potential international markets to all of Latin America, Spain, and Philippines. Same for Chinese.

    Learning to use a computer and how to work the internet is another.

    And here’s another angle: You don’t necessarily have to become a total computer geek to make computers work better for you. You just have to know what they are capable of, then hire someone else to make it happen. And you don’t have to learn enough Chinese to debate subtle issues in the Tao in order to do business with Chinese speakers - that’s why you hire native speakers.

    The whole point is, of course, that you can’t to the same thing every day in your job and expect to become bigger and better. Water cooler time does not compound, nor does time spent producing progress reports for bean counters. Nor does time spent learning the new time sheet system.

    And finally, think of ideas. A new idea can increase exponentially in value from none at all (if you don’t know about it). ESPECIALLY new paradigm ideas - like being able to get all your job responsibilities taken care of in 4 hours instead of 40. Who would have thought …

  • Gates VP May 11th, 2008
    7:39 pm

    Yes you can compound time, we call this experience. The limitation with most “time” compounding is that it’s not necessarily exponential or continuous. Anything involving physical labour tends to “peter off”. I’ve seen experienced McWorkers make hamburgers at 2x the speed of the regulars, but nobody does it at 4x b/c the basic physics prohibit it.

    However, when working with technology, particularly software (my field), these limitations are far less pronounced. I know programmers that are literally 5-10x more productive than the average one. In fact, the best ones accomplish tasks on the weekend that the weakest ones could not accomplish given a month.

    Part of that success is just inborn, but a big part of it is hard work and building your “toolbox”. Good time managers build and refine their toolbox. Good engineers handle more projects in less time. The best programmers build “toolboxes of efficiency” that they carry around with them.

    To whit, my company recently lost a support person. I spent twenty hours expanding the tools we use to do support and now I’m doing his job in less than 2 hours / day. We’ll still replace him as we’re growing, but I’ve just compounded time. The tool I’ve built not only increases manageability of support issues, it also provides mechanisms for allowing the incumbent support to “self-optimize”.

    The best at any knowledge-related field are identified as such by their ability to complete actions in less time. We call this experience and skill (and sometimes education), but it’s basically time compounding.

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