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Value of Money

I did some very simple math today that makes me think that I finally understand the value of money and total compensation. The math is 52 * 5 but, we’ll come back to that

I recently (a year ago, damn) got off the startup merry-go-round. Startups have a lot to offer but, especially if you are doing early stage startups like I was, there’s always the chance that you’ll suddenly be getting a bunch of emails from your co-workers about “How they will miss everyone” and the “Great experience they had” while you’re on a layover coming back from vacation. My experience is that startup founders are an optimistic bunch by nature and will keep going on about how exciting things are and the supportiveness of the board right up until the board takes control, fires them, lays off a third of the company, and sells your project to a company in Portland. (True story)

One of the awesome things many SF based startups are offering is unlimited paid time off (PTO). The best ones have yearly minimums of time you must take. This reduces the amount of liability they are carrying from traditional accrued vacation and simplifies the process (no tracking). In getting off the merry-go-round I’ve gone back to a traditional PTO model. First mistake was not negotiating PTO. I had been working in Startuptopia for long enough it didn’t even occur to me.

Where I used to take time off when I needed it without really doing any big analysis I now need to consider for each occasion, “What is this going to do to my balance?” This is the mixed blessing. Yeah, it sucks having some N (days) of PTO that you have to manage and doubly so when it turns out to be less that you took the previous year but, it gets you thinking about it directly and leads to thinking and blog posts like this so overall, win.

The following math is all “back of the envelope” at best

We can all pretty much expect that at some interval we’re going to have a conversation with our employers about adjusting compensation. I started thinking about what is really important to me about compensation. Obviously dollars are dollars and I’ve got retirement/savings/speculation accounts that all want those dollars. That having been said, I’m still doing pretty well. I can work one job and still afford to live in SF provided I don’t move out my rent controlled apartment.

Money has decreasing marginal utility. The more of it you have the less valuable each additional dollar is to you. Give a broke guy a $20 bill and he’s ecstatic, give one to Bill Gates and he won’t even notice.

Time on the other hand has a more or less fixed value. Within a certain tolerance Bill Gates and Joe Brokeass can only do the same number of things per hour whatever those things are. Bill Gates can not watch more movies per hour than I can.

52 * 5 #=> 260

Ignoring holidays and vacations that the number of workdays in the year.

Assuming that at least yearly you’re getting a cost of living adjustment and hopefully some kind of performance bump let’s say next year you can expect a 5% raise (also because it’s a round number that makes doing the math easier)

260 * 0.05 #=> 13

What if instead of taking the more cash you offered to forego the bump in salary and instead take a huge bump in PTO. Assuming 2 weeks vacation (10 days) and another week of sick leave (5 days) your baseline is 15 days. You’re looking at almost doubling your time off.

It’s up to you. Do the math and ask yourself which one you would really rather have

Other Time

There are other ways to reclaim time. I have problems with this myself.

I make more per hour that the average hourly rate to have a task rabbit come clean my house. Theoretically I can reclaim almost all the time I spend cleaning by outsourcing it. The margin just isn’t as high as I would like to be when comparing my salary. In order to really make that work I would have to convert that time that I spend in cleaning the house on getting or working for higher margin clients (freelancing) or doing something else higher value than just my day job. So when it comes time to clean the house even though I’m really bad at it…. I grab the bucket and mop myself.