It’s been five years since I retired from investing. I thought that would make it a good time for me to reflect on how I arrived at that decision as some of you may find the decision making process valuable.

In introductory economics classes, we learn about the utility curve and how people value goods differently and thus some will pay more than others for the same item.

If food is scarce, you value it more and will pay a higher price than when it is abundant. A diehard Swiftie will pay more for Taylor Swift tickets than I would. Wealthy people will pay more for convenience, etc.

What is often forgotten in those lessons is we use money as a proxy for utility. But utility is more than just the financial cost of something. Utility is the value we get from it. You can pay in more ways than just currency.

Most people think of a job as trading knowledge or productivity for money. In other words, you get paid to make a product, whether tangible (goods) or intangible (services).

The Value of Time

But it’s more complicated than that. When you perform a job, you are also trading your time – a finite resource.

We all value time differently and its value changes over the course of your life. Young people are typically willing to work more hours than older people, especially if they think it will advance their career.

But even this is a trade, as much as a preference. If you are younger, you understand working harder to get ahead will earn you more money in the future, so you are trading time today for more future dollars.

Of course, time preferences can change over, uh, time. I think it is more than anecdotal one-offs to say young workers today are less willing to invest more time into their career than prior generations when they were starting out.

Each of us will have our own value on time. It may be influenced by your family dynamics, health, outside interests, etc.

The point being, when evaluating the appeal of a job, we consider the hours required vs. the compensation and we all have different weightings.

The Value of Purpose

So then you are trading time and your productive output for money, right? Not so fast. There are other factors to consider.

If you are going to commit a lot of time to a job, you would prefer to enjoy it. For some people, that is as simple as liking the people you work with. For others, it is finding meaning in what you do or achieving personal success and recognition.

In simplistic terms, most people would take somewhat less pay to have a job they find meaningful vs. one they dread. This value you are willing to put on enjoying what you do I call purpose for this exercise.

Thus, you are trading productive output and time for money and purpose. This is a much more complex picture than a basic utility curve of payment for goods produced.

U(W) = f(M,T,P)

Which brings me to my equation for one’s personal utility curve. The utility of work – U(W) – is a function of how much you get paid (M), how much time it takes (T), and how much purpose you find in it (P).

Obviously, the goal is to maximize M and P while minimizing T. Since most people likely value more money above more purpose or less time, our function might look something like M = c + .5T – .5P where “c” is your salary at “normal” time and purpose.

In other words, you’d only accept a 10% pay cut to reduce your hours 20%. Similarly, the formula suggests you’d be willing to make 10% less to have 20% more purpose.

The .5T and .5P are for illustration. Everyone will have their own values and there is no correct answer.

My Function Five Years Ago

For most of my career, my function was pretty extreme. It was probably something like M = c + 5T -.1P. If you paid me enough, I’d put in as much time as I could.

As for purpose, I admittedly cared a lot about feeling important, but it was largely intertwined with compensation so the weighting was low. The more I could raise my profile the better I could do my job (as it improved information flow).

Over time, as I a) had more financial success and b) became less enamored with the investing environment, the weightings began to change.

Once I decided I was going to continue for only a few more years, my purpose weighting went up. Yet, I found less purpose in my role.

I had little left to prove, and I was less motivated by competition given I had already “won” a lot. Instead, I began to consider future options where I could have more direct influence than allocating capital.

Similarly, while my personal value on time increased, the weighting actually rose, rather than fell. The logic was, since I only had a few years left to get paid, I needed to commit as much time as needed to maximize them. More time working in the short term created more free time in the long term.

Changing Values

As I was nearing the decision to finally hang it up, priorities changed again. Time had become more important for a variety of personal reasons while incremental money wasn’t going to change my lifestyle.

Thus, my function changed to something like M = c + T – P. Time and purpose had become as (or even more) important than more dollars.

With this realization, the decision became obvious. I actually made it a year before I left, as I had some purpose reasons for wanting to complete one last year.

I would have considered a role where I could have worked 1/2 the time for 1/2 the pay but that wasn’t an option. It was all or nothing, and I valued nothing more.

The purpose is the tricky part. In reality, the purpose was correlated to time more than money. Getting the time back meant giving up the purpose. That was the tougher trade than giving up the money.

My Current Function

What’s changed in the last five years? My current function is largely about T vs. P.

My net wealth is actually up in retirement because my investment gains are greater than my spending needs, so no regrets for choosing to give up the M.

Certainly a big part of starting Informed was to trade some time to get some purpose back. As the time demands increased, I needed to reconsider the proper balance again. It’s a constant challenge.

I’ll never be comfortable with infinite time and no purpose. That’s not an interesting way to live for me.

Learning Your Own Function

How might this apply to you reading at home? The main takeaway is people over index on financial compensation when evaluating career choices.

You need to be aware of how you value time and purpose, as well and how those weightings will change over time. People now call this work-life balance, but I find that too simplistic.

As they say, you can never get the time back, but you can always make more money. But also recognizing when time will be less or more valuable to you can help you strategize when to emphasize career more and when to pull back a bit.

On that note, I’m a big fan of garden leave. It’s a great opportunity to recharge if you can land a role that will keep you sidelined for six months if you change jobs.

My biggest mistakes were not taking more time between roles (my first switch, I had my firstborn, took two weeks off, came back to quit one job and started the new job the next week…stupid – I obviously hadn’t developed this framework yet).

Purpose is obviously a personal decision. Plenty of people are happy with punching the clock for 40 hours and being done to focus on other things. Their purpose is outside the office.

If you’re one of those, the decision tree is a lot easier. But if you find a lot of your self worth tied up in your career, you need to make sure you account for the purpose variable in your function, whether it be in changing jobs or moving on to retirement.

Hopefully, this discussion gives some of you something to think about going forward and a better framework to make your own decisions.

7 thoughts on “On Money, Time, and Purpose”

  1. Good piece Ian. Two thoughts from someone in retirement … as Doomberg on Substack has said, what’s the “get to/have to” ratio? When a job has more things that you “get to do” compared to the things you “have to do” it is a rewarding job and one that most people will want to continue. When the “have to” is greater than the “get to” then you better receive adequate compensation for your time!

    Another perspective on this is the Japanese concept of Ikigai, which is the intersection of “what you love”, “what the world needs”, “what you are paid for” and “what you are good at”. Everyone has to find their optimal balance of all four.

    1. Excellent framework, Weston. The have to vs. get to was definitely part of it as well.

      My brain is pretty good at seeing 3D graphs in my head but I wasn’t smart enough to visualize a 4th dimension so I guess I stopped at three. 🙂

  2. A simplistic corollary delivers the “time value of time”, restated as “the earlier in life you work like a [pit pony / SoB / favorite simile], the less total time spent working like a [pit pony / SoB / favorite simile].” Thus one justifies the first years in a law firm / accounting firm / investment banking / et al.

    1. I like the time value of time. I am kicking myself for not having come up with it!

      But that’s exactly it. Call me a boomer but when I hear many 20 somethings today say they’d rather work less now and enjoy themselves,
      I don’t think they understand the compounding effect of choosing the time now rather than later.

      It’s like saving for retirement early. The more sacrifice you make early, the more reward you earn later.

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