Tag: Value

Leverage

I’ve been reading ‘self-improvement’ books for the last five years. Some of those books dealt with financial and life management, where you leverage the money you earn to create more value for yourself. But until you reach that point in your life, it’s only a theoretical exercise to engage with – there is no point in thinking deeply into investing options or buying your way into freedom until you have money to buy options. I’m sure there are self-improvement adherents who will vehemently disagree with this, but the reality is you aren’t going to gain access to the game by saving money not buying lattes or avocado toast unless you are playing a really long game with a lot of good luck.

I’ve now hit a point in my life where options have opened up for my family, and we can make choices and trade-offs to build out a lifestyle that works best for our goals. This is not to say that all options are available to us – we have to carefully look at the tradeoffs and determine whether the downsides of any option are something we are comfortable living with (e.g. to pay for a given option, should we, say, reduce from two cars to one).

Part of this exercise is critically examining each of our assumptions and systems to determine if they are moving us towards what we want, or if they need to change to better align with what we want. This is where the concept of leverage has entered my mind, because when evaluating costs or expenses, it’s important to note that not all expenses are net negative. Some expenditures end up buying more value than what we spend on them.

This is the game in a nutshell – you trade your time for money. Money represents quantified time and effort that can be exchanged in markets with mixed goods. I spend time at work and my employer gives me money in return. I then take that money to purchases goods or services.

Until now, most of the way I thought about the game was surface-level transactions of 1:1 value transfer – I work x-hours for y-dollars. I then trade y-dollars for a good or service with a transactional value of y-dollars. I haven’t really given much thought to the value (that is, how much I value it subjectively) of the good or service provided back to me, and whether that value is higher than what I’m spending. I suppose I’ve thought about it in an abstract way, such as I receive more enjoyment from the thing than the money I spent on it; the opportunity cost is not higher than the value I’m getting from it.

By focusing on the surface-level transactions, the only metric that was critical was to ensure the revenue was not exceeded by the expenses, that I wasn’t spending more money to buy value than I was getting in exchange for my labour. It’s worked up until now, but the direction my family wants to head requires me to think more deeply about what those expenses are buying us.

Ideally, I should be seeking to engage leverage – I trade time for money, then use the money to buy time in greater quantities. What might this look like?

  • With my wages, I can lease or own a car. The money I spend on the car frees me up to commute to work on my own terms. I could get to work more cheaply, such as public transportation or cycling (ignoring environmental costs in this calculation), but then I’m trading cost for time. Having my own vehicle is more convenient, more comfortable, and faster, allowing me to maximize time at work and time at home.
  • With my wages, I can pay for cleaners to clean my house. This frees up more leisure time and cuts down on bickering in the house. It is cheaper for me to buy the supplies and do it myself, but I value the leisure and time with my family more than the cost.
  • With my wages, I can pay for daycare for our child. My spouse or I could quit our job to care for our child at home full time and save the money. However, the money we spend on childcare frees us up to earn multiples of what we spend for the childcare – e.g. at $1,000/month, we would spend $12,000/year for daycare so that we can make north of 5x of that in our jobs.

This is not an easy exercise as many of our expenses feel necessary on the one hand, or scary large in context. However at this point in our lives, we have to accept that our raw effort will only diminish (I can’t work all-nighters like I used to without significant physical cost), and there are no more hours in a day we can squeeze out through discipline and efficiency. We must now turn to leverage and force multipliers to translate what we have into higher value.

Stay Awesome,

Ryan

Initial Assumptions

I was reflecting on Seth Godin’s musings about the number of moons in our solar system. The initial assumptions we use to make predictions about our world can sometimes be orders of magnitude off from truth.

We as humans don’t like to be wrong, but we shouldn’t be overly concerned with our initial assumptions being off the mark. After all, if we knew the truth (whatever “truth” happens to be in this case), there would be no need to start from initial assumptions. It is because we are starting from a place of ignorance that we have to start from an assumption (or hypothesis) in order to move forward.

The problem lies with whether we realize we are making assumptions, and how committed we are to holding on to them. Assumptions made about the physical world can often be value-neutral, but assumptions that intersect with the lived experiences of people always come pre-packaged with history that’s value-loaded. It’s fine to make an assumption that your experiences are shared with others, but that assumption can only be carried so far. At some point, you have to acknowledge that there will be a lot missing in your initial assumptions that need to be accounted for.

The lesson then is this: when working from an estimation or prediction, be careful with your initial assumptions. It’s fine to begin with your own experiences, but always put an asterisks beside it because your experience is likely not universal. We must guess, then check. Test, verify, then revise.

Aiming at truth is a noble goal, but we should settle for asymptotically moving closer towards it as it more likely reflects reality.

Stay Awesome,

Ryan

Friday Round-up – July 3, 2020

As I noted in my post earlier this week, I missed my last Friday roundup post. This is my first effort in doing better.

Here is my round-up list for the week ending on June 26th July 3rd, 2020.

📽 Video: The Toxic World of Self Help: Hustle Culture, Toxic Positivity, Addiction, and Fake Gurus. | James Jani (YouTube)

I am guilty of buying into the world of self-help. The vast majority of my reading over the last five years has been variations on the self-help genre (to the point that I’ve coined the term animated bibliography to describe its form). I know that the returns on investing in self-help diminishes quickly, and I am aware of how dubious the promise that self-help sells is, but I constantly find myself getting sucked into it. This video doesn’t necessarily say anything new that I haven’t realized myself, but it pulls it together nicely with many examples of how dark this world can be for the copycat authorities that use the same tactics in different domains. This video is a good summary and reminder to myself the next time I’m sold the promise of a better life through tactics and strategies for sale.

Listen: A Recipe for Caesar | Common Sense Podcast by Dan Carlin AND Jon Stewart | Joe Rogan Experience Podcast

I covered a different interview with Jon Stewart in my last published Friday roundup, but I wanted to link these two different podcast episodes along a similar theme, despite the shows being wildly different. I noticed that both Dan Carlin and Jon Stewart remarked on the difficulty that comes with being a voice that people turn to when making sense of the world. Stewart noted that towards the end of his time on the Daily Show, he sometimes struggled to be the person to go on television and say something smart or comforting after a tragedy struck (it might have been part of the reason why he burned-out and needed to retire). Similarly, Dan Carlin has not put out an episode of his podcast Common Sense in a few years, but he released this episode earlier this year. In it, he notes that he’s tried recording an episode multiple times but felt he was adding nothing of substance to the conversation. He struggled to, like Stewart, be a voice for people (like me) who turn to him to help understand the world we find ourselves in. I listened to both of these episodes in the same week, and gained a new appreciation for those like Carlin and Stewart who make livings giving me monologues to pre-digest current events. It must be tough to strike a balance by being both insightful and non-inflammatory, where you avoid stoking the audience against “the other side” (whatever side that happens to be at the time). A YouTuber I follow recently commented on folks like Tim Poole whose sole purpose is to inflame the left/right hostility, rather than adding anything of substance to the discourse. It’s causing me to slowly evaluate what voices I allow in and whether they’ve earned their place in my attention.

Read: Why I’m Leaving Academia | Ozan Varol

I have some deeper reflections that this article prompted, but I wanted to capture this here first. Varol has been a law professor for 10 years now, and with the success of his recent book, he’s decided to move on from his teaching duties to pursue other endeavors. This reminds me of Nassim Taleb’s idea of via negativa. Varol specifically invokes this idea (though not by name) by reflecting that decisions he’s made in his life that had the greatest positive impact were often decisions that “subtracted” from his life. It’s a reflection I applied to my own circumstances and still need a bit more time to process.

Watch: Every Race in Middle-Earth Explained | WIRED (YouTube)

Because we all need to have some fun once in a while, here is an informative half-hour from a Tolkein scholar who covers the history of Middle-Earth through its inhabitants.

Stay Awesome,

Ryan