It must have been about a year ago, just after I moved from San Francisco here to New York. I was having steaks with my good friend and soon to be business partner, Kyle. Kyle and I transferred to Vanderbilt at the same time, were placed a few doors down from each other in an awful, mold-ridden dorm which we would both soon move out of (and which was knocked down by the time we graduated), and spent our first night on campus drinking whiskey together with another future friend of ours. Over the next few years, Kyle and I hung out a lot, studied together often and discussed a lot of business and investing ideas while procrastinating from said studies. This past year, a few months after the aforementioned dinner, we bought in 50/50 on a real estate investment, a multi-family duplex in his hometown of Lexington, Kentucky. I never imagined that I would become a Kentucky homeowner, but because of Kyle, now I am. Our investment is going very well so far and I am confident that Kyle and I will be doing a lot more together in the future, real estate or otherwise.

Going back to that dinner, over my ribeye and glass of wine and his filet and Coca-Cola, Kyle and I discussed where each of us were and where we wanted to be headed, in terms of our careers mostly as the majority time consumers of our lives in general. I was working as many hours as ever in investment banking and he had recently moved on from banking and into equity research. In discussing his decision to make the transition, he made a somewhat obvious point that I think tends to get overlooked and underestimated nonetheless, which is why I am choosing to write about it today. That is, he pointed out that we should be thinking about the value of our time in terms of hours rather than years.

Most career-oriented jobs advertise salary to their prospective applicants. I used to think of my income in investment banking as a combination of salary and bonus because the latter comprises an unusually large percentage of most people’s overall annual income in the industry (i.e. the end of year bonuses are often more or less equal to annual salaries for top performers).

After Kyle’s comment, I started to think about income more often in terms of dollars per hour. Think about the following hypothetical. All other things equal, would you rather work 80 hours per week for $100,000 or 40 hours per week for $75,000? The former pays $24 / hour and the latter pays $36 / hour. Most logical people would opt for the latter as the difference in the hourly rate is just too great. The decision would be more difficult however if the 40 hours per week job only paid $60,000. In that case, the income per hour of the 40 hours per week job ($29) would still be greater than that of the 80 hours per week job ($24), but the larger difference in annual salary becomes a bit more difficult of a pill to swallow ($100,000 - $60,000 = $40,000). I am not advocating for choosing one job over the other, even in this idealistic situation where everything else was somehow exactly equal, which of course in real life it would never be. I am simply advocating for people to more deliberately consider the time they expect to give in exchange for a salary when considering an offer.

Further on the hypothetical situation above, even if you were to take the 40 hour per week job at a salary of $75,000 and you are one of the increasingly popular breed of millennials who wants to work 80 hours per week still, that is totally fine. You can spend your time working on things that you are interested in and passionate about, invest your time in learning new skills and/or subjects, or if short-term income is your primary focus, get another part-time job or create your own side hustle for evenings and/or weekends. If you make more than $12 / hour for 40 additional hours of work, you would make more annually than the 80 hour per week job that paid $100,000.  For comparison's sake, the much debated minimum wage for food service workers in New York City is $15 / hour...

Moreover, as with most other things, when it comes to your free time, or disposable time as I prefer to call it, scarcity increases value. The less disposable time you have, the more precious it becomes, the more valuable it becomes. Think about it in extremes. If you had no disposable time (free time to do with what you wish), you would not be able to sleep at your own discretion (this is unfortunately a reality for some people who work long hour jobs or multiple jobs including night shifts). As such, most people would demand more money in exchange for working their 16th, 17th, and 18th hour of the day than the 4th, 5th, and 6th. They probably have at least six hours set aside to work anyway and will take what they can get in terms of income in exchange for that time. The 16th, 17th, and 18th hours on the other hand cut into the human necessity of sleep and for that reason they are very valuable. The same goes for the less extreme hours in between. There must be a gradual increase in the value of every hour between those two ranges of hours. The less disposable time you have, the more important are the things you have to cut for work such as time for meals with family or friends, time to go to the gym, time to read a book or watch TV, and time to just relax or enjoy your weekends.

Of course, this point about considering income per hour rather than annual salary cannot be considered in a vacuum because there are a host of other related factors that are also important in making decisions around what to do for money. For example, if the day to day composition of your work includes a number of tasks, practices and activities that you like or even love doing or that you might be doing anyway if you had the freedom to choose what to do with your time, then you should be willing to accept less income in exchange for your time because there is less of a difference in the enjoyment or utility of what you have to do for that income versus what you might otherwise be doing.

Once in a while you hear people who love their jobs say things like "I feel like I have never worked a day in my life" or "If money was not a thing, I would be doing exactly the same work that I am doing now". Those people are mostly outliers and exceptions for now, but the optimist in me convinces the pragmatist that one day in the not too distant future it will become much more common as more menial tasks become automated and some form(s) of universal basic income increasingly provides people with more disposable income/time to live their lives as they please. In the meantime, most of us will continue to feel that we have to make some sort of trade off involving time for money. I suggest that we think about that trade-off in terms of hours as opposed to years. Forget salary.