We are human, and that means we are not perfect in our decision making. Far from it, in fact. One area that we often make irrational decisions is around the value of time.
Take this experiment, for example:
- You are shopping for a shirt that costs $50, and you hear that it is available at a shop 15 minutes away that is having a 50% off sale, making the shirt $25. Will you drive to buy it?
- You are shopping for a suit that costs $1,950, and you hear that it is available at a shop 15 minutes away that is having a 1.3% off sale, making the suit $1,925. Will you drive to buy it?
Most people answer “yes” to question A, but “no” to question B, even though the outcome is exactly the same: a 15 minute drive to save $25.
This example is an easy one to calculate, so there is no excuse for confusion. Yet most of us still make an irrational decision and provide a different answer to questions A and B. Even after we are shown how irrational it is, many will still do the same thing again. So imagine how bad our decision making is on complex problems where the comparison isn’t so obvious!
So we know that the rational thing to do is to answer “yes” to both questions or “no” to both questions, but not a different answer to each. Whether you choose “yes” or “no” should depend on how you value your time. What is worth more to you: the 15 minutes or the $25?
One of my favorite sayings, although I can’t recall the origin, is “Linux is the cheapest operating system in the world… if you value your time at zero”. As most will know Linux is free, but the quote implies that you will spend more time setting up and managing a Linux system than other operating systems, so it is far from the “cheapest” option for everyone.
The rational question to ask next is “how much time are we talking about, and how much is my time worth?”, and only then can we decide whether Linux is still the cheapest option for us. If it takes two hours to set-up and you value your time at $10 an hour, Linux is still much cheaper than Windows. If it takes ten hours, and you value your time at $200 an hour, that’s a different story!
These are just two examples of where having some understanding of the value of your time can be of benefit to you and improve your decision making. Not many people I know, however, actually think about what their time is worth to them.
Here is my suggestion as to how you can start conciously making decisions about the value of your time which, up until now, were probably being made subconciously (and poorly!):
- Imagine if a magic genie came to you and offered to extend your days to 25 hours and the extra hour was yours to do whatever you want without any interuption, feelings of guilt or cost to other aspects of your life. So you could spend time with the kids, play video games without interuption, sit and watch the football and drink beer, or go shopping. What is the maximum you would pay for this bonus hour each day?
- If your boss asked to work an extra hour each day, doing only the most menial task and which has no redeeming value other than the pay you will receive (ie. it’s not fun, educational, benefitting your career, hleping others, etc), what is the minimum you would need to be paid to work this additional hour?
Hopefully you have picked an answer for both questions, and they are not too different to each other. (However, if you are like most people, you probably picked a higher number for B than A, even though the outcome is the same – one extra hour a day for a set amount of money. The reason for this is most people put a higher value on dollars they already own and which they stand to lose, or payout, over dollars that they stand to receive.)
Now average the two numbers you picked. This is a good estimate of how you value your time.
This number will be different depending on your current circumstances. If you are working 60 hours a week and getting paid $200,000 a year, you would probably pay a lot for an extra hour each day, and it would take a lot to get you to work an extra hour each day doing a menial task. A value of $200 an hour, or more, is not out of the question. On the other hand, if you are not working at all and don’t have any income, an extra hour each day is not that valuable to you and you could probably do with a bit of work, so $35 an hour may suffice.
So why is it so important to think about this? We make decisions every day that could be improved by thinking conciously about things which, until now, we left to our subconcious, and in doing this we can turn a few irrational decisions into rational ones. “Should I do this task or give it to one of my team?”; “Should I outsource this role to someone else?”; “Should I drive further to buy a product that is on sale or buy it locally and use that time for something more valuable or fun?”; “How much is it really costing me to spend one more hour in this online video game?”; “Should I pay a consultant to do this for me or try to do it myself?”; “Is that free software really a better option for me than the paid alternative?”
Further Reading
The science behind our behaviour and decision making is something that has interested me for years, firstly in understanding how it impacted investment decision making in my previous role, and now how it affects the decisions of small business owners, clients, staff, marketers, etc. If you want to do more reading on the topic, here are some of my . There are also some blog posts and videos in the Articles section, including a great video of Dan Ariely at TED asking .
