Contents

  1. Subtleties abound
  2. A pipe dream
  3. Limited loss, unlimited gains
  4. Personal productivity
  5. Hunt the multipliers

Subtleties abound

All the past participles in that title at the top are fairly distinct by themselves. However, prepend the word time and they become more subtle. Each is sort of an evocation about the time spent doing something. Time lost is perhaps a lamentation, somewhat accidental maybe. Time done is a statement of retribution endured. Time wasted is kind of a disappointment, an opportunity lost. And time killed is a rather nonchalant form of indifference (my favourite pastime).

What about time gained? Does that even make sense? How can time spent lead to time gained? Hmm…food for thought, me thinks. My previous post discussed a legitimate case of time gained, thanks to Einstein’s relativity. But it is a minuscule effect during the course of a human’s life. I suppose what I’m alluding to is the subtle task of deciding what to spend time on, while being rational and utility maximising.

A pipe dream

Well, a “rational and utility maximising” human does not exist. At least not for 100% of the time that he or she happens to be alive. Longstanding psychological studies have found all sorts of cognitive biases that stop us from making rational decisions in general. Time is a tricky resource to deal with (if one can call it a resource) because it is depleted quietly and replenished mysteriously, until one shuffles off the mortal coil. Still, it’s worth understanding the economic orthodoxy, according to which we are supposed to frame our choices and decisions about spending time in the following terms.

Opportunity cost: before making a decision, rank all the alternatives and consider the cost of not choosing each one in favour of the first ranked option. It’s a useful tool for sure, especially when it comes to making money-related decisions. Time, on the other hand, is a little tricky. If you happen to be nonchalantly indifferent about time killed doing something that won’t payoff big in the future, it’s not worth worrying about. But, then again, it might create regret in the future, which is hard to deal with for most people. Hence the difficulty lies in estimating such utilities (more on this point further below).

Sunk cost: after having made a decision, forget about any cost that is simply unrecoverable and be memoryless in your next decision, i.e., evaluate all the options according to their opportunity costs at that point in time only. This turns out to be practically impossible for most of us because we can’t forget an unrecoverable cost so easily. And we also have certain biases (such as loss aversion) that make us overvalue unrecoverable costs. It’s the kind of predicament that leads to a litany of fallacies and examples of bad decisions; among them is the overwhelming tendency to think that any amount of time spent doing something is a non-negligible sunk cost.

Limited loss, unlimited gains

I don’t find any intuitive appeal in the aforementioned manner of evaluating choices. I have no doubt that thinking about opportunity costs while ignoring sunk costs is the rational thing to do (I understand the mathematics). However, the human mind didn’t evolve to make decisions purely on a rational basis. That requires far too much understanding and forgetfulness that ultimately lead to a reduction in fitness. Instead, I’ve learned to prefer the approach advocated by Nassim Nicholas Taleb in his books, which is about focusing on limiting the loss while making the gains unlimited whenever faced with a decision under uncertainty. Spending time doing something is one of those perpetually uncertain choices we face, and Taleb’s trick is very handy here.

The difficulty in evaluating the opportunity cost of your time (as a limited resource) is that the value derived is uncertain. Whenever you attempt to be rational, you have to make questionable assumptions about the utility of your limited time spent doing something else. At that point, it’s tricky to track the entanglement of probabilities that enter the picture. What Taleb argues in all of his books is that we have historically failed to estimate probabilities of the rare and extreme events in our lives at every scale. This leads to severely flawed estimates of opportunity costs when making big decisions, as far as I see things nowadays.

What about the tendency to see any time spent as a non-negligible sunk cost? I think that that picture is made clear by the lens of limiting losses with the potential for unlimited gains. Of course you cannot get back the time you’ve spent already. But as I mentioned earlier, time has a mysterious way of replenishing itself in the future. I think the lens of sunk cost distorts the picture of the real world in such a way that we don’t take account of multiplying effects. Phrased another way: time gain can result from time spent due to unforeseen multipliers.

Consider writers for example. Best selling authors never know whether their works will become best sellers or not. They just go ahead writing anyhow, at least to satisfy their insatiable urge to write. The time they’ve spent writing is really a limited loss, not automatically a sunk cost that’s unrecoverable. Taleb points out a whole host of similar examples in his books.

Personal productivity

I’ve come to view my productivity through this lens of limited loss with the potential for unlimited gains. It’s practically impossible to boost one’s productivity without spending time on two activities: a) learning new skills, and b) building better tools. The traditional definition of productivity is a fraction where time is on the denominator and output is on the numerator. You have to increase output and/or decrease time in order to boost productivity. For the former, you need better tools, and for the latter, you need new skills. This is not a novel point by any means. I reckon it’s a much better narrative though, with deep intuitive appeal.

Hunt the multipliers

There were many instances early in my career where my time was beyond my control. Consequently, I ended up observing the decisions made by others as to how I should spend my time. Their justifications were almost always in terms of overvaluing sunk costs and underestimating opportunity costs. This doesn’t mean that they were incompetent, rather that it’s simply very difficult to be rational without being paralysed by the computational load of maximising utility for each decision under uncertainty, and that’s after ignoring the fact that we don’t know how to estimate extreme risks!

The easy way out of the trap is to focus on gains when it comes to thinking about time spent doing something. Take it as a given that your time spent doing something is a limited loss only, nothing more. Then, as long as you hunt all the hidden multipliers, you’ll do just fine in replenishing your lost time (with surplus) in the future.