09 May 2016

In the finance world, it is well defined which investments are assets and which are liabilities. If an investment brings a net positive income over time, it is an asset. Otherwise, it is a liability, something to pay for every month - an outgoing cost.

Why would you ever have a liability? It is a bad idea. Every month you are losing money on it.

One reason is that there might be something non monetary that you are getting out of it. For example, a house can be a warm and dry place to rest.

Another reason is to have committed to liability in the past. Lets say you sign up a car lease. Usually these require minimum number of 2 or 3 years. So during that time you have to keep paying the monthly fee. It is a liability.

So it isn’t necessarily that a liability is always bad. It is bad, when the non monetary value it provides is too low. The liability becomes a burden and drags its owner. Leased car provides a means for transportation. So if the transportation is really valuable for you, and that remains true for the duration of the lease, then it is actually a net asset.

If we could put a money value on having a roof and transportation, then evaluating such investments would be a simple balance sheet exercise.

But not everything has an exact price tag. There are other dimensions besides money.

One of those is time. We all have the same amount of time income per day - twenty four hours.

We have sleep time-liability. Usually this amounts to about 8 hours per day. Sleep has high interest rate. When we under-sleep for a couple of days in a row, all our mental and physical abilities diminish. We pay the interest as decreased performance, and we still need to catch up on the sleep.

Then, we have nutrition liability. We usually satisfy this by eating food. Food also has large effect on our ability to use our time. When we over-eat we can enter food coma. When we under-eat, we get distracted by hunger and it is easier for us to make impulsive decisions. One of my rules of thumb in life is to never go shopping hungry. I’ll write about it some other time.

Then… there is nothing else. Every other time commitment is something that we optionally fall into. Sleep and nutrition are the only requirement for survival.

Social obligations, career, education, exercise, leisure - these are all ways we choose to spend our time. We can skip any of the above, or vary the amount that we do in our lives.

Often, we get other stuff in return. Like money. Or knowledge. Or opportunities.

The most common trade we do with our time is to trade it for money. We go into our career and perform the requested work, and get paid in money. Then, we can use these money to trade it for some other things. This is often how we get nutrition. Of course, it is possible to grow your own nutrition in your garden, but almost all of food people eat in the world they buy with money.

Money is a currency - we can exchange it for other things. We can exchange time for money, if we have a marketable skill. But we can also obtain money from other money. When money buys capital, this capital can generate more money.

Capital is a “money-asset”. Capital can generate money on a regular basis.

I’d like to talk about time-assets. Generally, the concept of time asset doesn’t make sense. We all have a fixed twenty four hours a day. The only way to get less, is to be traveling at the speed of light. See “Twin Paradox” to see how. But this doesn’t often happen to us. We have generally all have the same twenty four hours, every day.

We can’t earn more, or remove time. Whether we want more or less, we get twenty four hours. Deal. Done.

So when I talk about time assets I will make distinction between different types of time. Lets start with a simple example. We can have “focused time” and “unfocused time”. Focused time is the time during which we can operate well and achieve what we need to achieve.

So when we say stuff like “My time is worth $20/hour,” we actually mean that our focused time is worth that much. Unfocused time is worth zero. Nobody would pay us money to sit there and do nothing. Or even worse, to do a detrimental job.

If focused time is good, how do we get more of it? And aren’t we limited by the same twenty four hours limit? We are, but there are different levels of focus and ability that we could achieve. As we fill up a given level, to the most of our time, we can start leveling up our focused time. And we can repeat this process multiple times over.

So lets consider some focus-time-investments.

First, coffee. I love coffee. It is delicious and it helps me focus and do a lot. But it is a zero-sum game. I can get some focused time at the moment, at the expense of laziness later on. It is only helpful in the short term. And the same applies to all forms of caffeine.

Next, meditation. I find that meditation clears my mind, reduces my anxiety and improves my ability to focus for hours. Meditation is more powerful than coffee because for the twenty minutes spent meditating I can get multiple hours of focus. It usually amounts to a little bit more than coffee. YMMV.

Then exercise. Having enough exercise provides enough energy to the body, but having too much might incapacitate you for a while. Usually I feel exhausted after a long bike ride and unable to focus much. The benefits of exercise are definitely present, but only further in the future. Only after the physical recovery it is possible to get the increased focus. The body then works better and you have more energy.

TV, and media in general are a focus liability. Getting useless information is not just neutral, it is damaging. We have to do extra work to clean up this information for our mind. Sometimes we get tricked by advertisement in media to make bad decisions. Some of them reduce our ability to focus. Others require a lot of our time to maintain. Having less available time means less focused time.

I’d like to talk more in detail about the different types of focus assets and liabilities, but this post is getting too long. Next time, more.

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I write these posts to clarify my thoughts and improve my communication. They are mainly written for myself, and my future self, but I'd love to hear any comments you might have, especially if you disagree with what I've written, or if you've found it valuable in any way. Message me on Twitter @themitak or email me at comments@dimitarsimeonov.com.