One of the companies I own, ATS Acoustics, made the Inc. 5000 list for 2010. This list ranks the fastest-growing non-tiny companies in the U.S. based on their size in 2009 compared to their size in 2007. We ranked at position 1,272. This is a pretty cool accomplishment and we are pleased and grateful.
Five years ago I, and Phil, my only employee at the time, decided to set up a recording studio in unused space in our office building. I clearly remember saying, “It will probably never make any money. Who pays for recording studios any more? But it will be fun and we’re excited about it so I guess we’ll go ahead.” I had zero foresight to the spinoff business, ATS Acoustics, that came out of the recording studio project, and is now a multi-million dollar company. The seed grew into something much bigger. It was impossible to predict or measure the size of the tree at the seed stage.
Five weeks ago I was working on my Time Audit iPhone app, and I almost dropped the project. I said “It will probably never make enough money to pay for itself. App development is super-competitive. But it’s cool technology and I want to learn it, so I guess I’ll finish it.” And I did. Last week a government-funded research group came to me with interest in contracting a custom version of Time Audit that will be used in transportation safety research. Their research will probably end up saving lives, and Time Audit might have a little role in that. Time Audit is not a tree yet, it’s just a seedling, but it’s already clear that I had no ability to predict, let alone measure, the future potential at the seed stage.
Despite this difficulty in measuring, rational planning depends on estimates of the future potential of seeds. We have to decide which seeds to spend time and money nurturing, and which seeds to ignore. I don’t think this challenge can be reduced to simple answers. Here are two observations:
1) It’s not necessary to evaluate the future value of each seed accurately. It’s only necessary to correctly evaluate the relative potential of each seed you have to work with. Invest resources in the seed(s) you estimate have the most potential compared to the others.
2) In both of these cases, I felt resistance in me saying “I really should not do this project just because I’m energized about it.” I felt it was a little irresponsible to do an iffy project just for fun, but I did the project anyway. I couldn’t have been more wrong in thinking it was irresponsible to have fun starting that recording studio. So pay attention to your energy and interest level, even if the numbers are foggy at the seed stage.
You can’t manage what you can’t measure. This is true of time too.
A time audit is an exercise in tracking your time to see what you spend it on, and how that matches with your values. Almost everyone feels like there is not enough time to go around. With a time audit report in front of you, you can make informed decisions about what to do about that.
I did this exercise last year as part of the leadership coaching program I am a part of. I used a spreadsheet, but at the time I thought this would be a perfect candidate for an iPhone app. About a month ago I decided to make the app.
So here it is. My Time Audit iPhone App. It beats the spreadsheet hands down.
Some people view frugality as inherently virtuous and valuable. This is a serious oversimplification. Sometimes spending less on something is a very bad idea. This applies to time as well as money.
The apple farmers from my last post will not benefit by spending less on new apple trees. How about a wheat farmer who decides to save money on seed by planting only half his land this year? Being frugal with investments (things that produce additional value over time) is counter-productive.
I see three major postures:
Remember I’m not just talking about money. Tools, infrastructure, learning, savings, system improvements, personal growth, and healthy relationships are some investments worth overspending on. Don’t be frugal with those things.
I think most people in wealthy countries are acting primarily on consumerism. They feel a little bad about this, sensing that it can’t be right somehow, so they add a layer of frugality to the whole thing. Frugal consumerism is a confused strategy resulting in very low investment in the long term. The U.S. personal savings rate (the portion of household income that is saved or invested) is around 4% these days, and came close to zero before the recession.
I suspect at the deepest level misplaced frugality springs from survival instinct. It’s a defensive posture. Why invest in the long term if short-term survival is (or feels) uncertain? For a squirrel, it makes sense to prioritize running away from predators above storing up nuts for winter. For a business, it makes sense to prioritize avoiding bankruptcy above long-term expansion plans. There’s a time and place for defensive postures. Survival really does matter.
If you are struggling to survive in your money or time management, focus intensely and immediately on what you can do to make changes to your life to create some breathing room. You must get out of crisis mode so you can start making decisions with a longer-term view.
However, if you are not about to be eaten by whatever eats squirrels, be generous, not frugal with your investment spending.
Caveat: There will always be more investment opportunities (for time, money, and relationships) than you can afford to invest in. Be generous in allocating resources toward investment, but choosy about what and who you invest in. More on that next post.
When you invest rather than consume there is a cumulative effect that can generate incredible momentum. This applies to all resources, including money, and especially time.
Contrast these fictional apple lovers.
Charlie Consumer spends a few hours each year working for a local apple farmer. In return the farmer gives him a bushel of apples. The first year he spends a few hours and gets a bushel of apples. The fifth year he spends a few hours and gets a bushel of apples. The thirtieth year he spends a few hours and gets a bushel of apples.
Ivan Investor spends a few hours each year working for the same farmer. In return the farmer gives him a young sapling apple tree that costs the same as a bushel of apples. Each year Ivan Investor plants the young apple tree he earned. The first year he spends a few hours and gets no apples. The fifth year you he spends a few hours and gets a few bushels of apples. The thirtieth year he spends a few hours and gets hundreds of bushels of apples.
(If you protest that apple trees require ongoing labor and care, note how the farmer that Charlie and Ivan worked for paid for that labor. It wasn’t with his time.)
Ivan produced this huge momentum because he invested his time in something that generated additional value over time. In this case it was tangible physical value, but it could just as easily be human, relational, or spiritual value. Generating the spare time to invest in the first year is the hardest part. (If Ivan needed to eat those apples to survive, he never would could have afforded to plant the first tree.)
Manage well to create room today to invest part of your time in things that generate additional value over time.