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.
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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End of conversation
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