Doing NPV calculations on time investments seems wrong. Should you spend $5000 now for 7 years of $1000/y cash flow, given a discount rate of 5%? Yep, $5786 NPV.
Should you spend 100 idle hours on it? That’s $57.86/h discounted future income. But feels wrong to think that way.
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The temptation is to use (bill rate * load factor) as opp cost. So if you charge $100 and sell 1000 of 2000 hour work-year time inventory (50 weeks * 40 hours), that’s a $50/hr opp cost. But if you can’t sell those idle hours the opp cost is value of 1 hour leisure 🤔
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The math is easier with elastic demand. Your value of leisure is where working an extra hour by lowering your price feels not worth it. So if you could make $40/hr for 1300h instead of $50/hr for 1000h, but choose not to, clearly you value marginal leisure hours between $40-50
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Problem is, most people can’t just lower or raise their prices arbitrarily and expect demand to shift smoothly. Unless they do pure commodity work in near perfect competition markets like rideshare.
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Ah I think I see the problem. Time investment is also future time commitment in maintenance *if* the cash flow materializes. Your 100h is just the upfront time. You’re commiting more future time that’s hard to estimate
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So 100h spent developing day a teachable course is also ~2-10h/y maintaining it to realize the future cash flow. So you have to discount more steeply if you think you’ll drop the ball.
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Also, you should model a scenario that you’ll kill a project *even* if it succeeds because you get bored, a better opp comes along etc. Best not to average this into 1 scenario. Q to ask is what would someone have to pay you to *quit* a long-term project at any point? Kill cost.
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A robust time investment is one that would have a very high kill cost under success.
This is why if an activity doubles as leisure (so leisure opp cost is zero), it’s very hard to kill.
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An individual's time is not fungible to the degree eg a corporation's human hours are
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What is the value of leisure when you factor in wealth? How much is an hour of leisure worth if am already have fuck-you wealthy?


