The Hourly Cost Fallacy

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The Fallacy of Hourly Earnings Thinking

Financial advisors tell you to calculate your hourly earnings to make outsourcing decisions… but can we really earn more even with endless amounts of time?

There’s a school of thinking out there that goes like this: say you are making $200k/ year working 40 hours per week. That’s approximately $100 per hour worked. If that’s the case, why would you spend three hours cleaning your house (an opportunity cost of $300), when you could hire that task out for half, or even 1/3 the price?

Back when I was working full time, my financial advisor (and many self appointed personal finance gurus) advised me to outsource many “low value added”tasks. And she wasn’t alone. Even the (famously leftish) New York Times seems to think we should hire a staff of cooks, cleaners, and child care support if we make over  certain salary – and the higher the salary, the larger the staff justified.

So I started hiring out the most odious tasks on my list: yardwork, even the simplest car maintenance, house cleaning, grocery shopping – so that I could focus on the big money maker in my life: at that time, my career as a brand manager in consumer packaged goods. This was one of those jobs where you spend the day agonizing over how to reduce your packaging by 5% to save paper costs, or figure out yet another flavor variation of your brand to squeeze out more shelf space and maybe even a few extra sales.

But a funny thing happened: the more menial tasks I outsourced, the more the number of hours spent working stayed the same. It was almost as if there were a fixed number of hours per day in which I could be productive (in my case, I’d say 4-5) and after that, marginal returns dropped to zero.

So I ended up going back to doing all the menial stuff myself – at least, the stuff I didn’t hate doing. But the whole process taught me a lot about the fallacy of maximizing productivity.

Here are some reasons why, IMO, you should do your own laundry, cooking, and cleaning, even if you are a Master of the Universe pulling down a 6-7 figure salary:

Productivity Limits: I’m sorry, but after 12 hours a day, I no longer have the ability to come with ideas to make Oreos more appealing to Moms 25-44. At that point, all I have the capability of doing all is scotch and laundry. I  could have hired someone for the latter, but it would not make that Oreo one bit more appealing.

Wasting time is fun: believe it or not, some people actually get more satisfaction out of cleaning out their sock drawer, or changing their own oil, than they would being productive via endless meetings, political infighting, or covering their behinds. So, compared to how they spend their time at “work”, household chores can feel like fun in comparison (or at least an opportunity to take a mental break and re-charge).

The alternative is even worse: who am I kidding? If I saved time by outsourcing my cleaning, I would not spend that time optimizing the package burst that says “now with lemon” on a diet Coke can. I would spend it binging on old episodes of “Three’s Company”, scrolling through social media feeds, or, at best, staring into space. Compared to those alternatives, doing my own laundry feels pretty productive.

Monetization Ambiguity: Even if I could spend the 13th hour running an analysis on the benefits of launching an Ultra Stuf  Oreo (vs. the currently popular Mega Stuf Oreo), would this really pay out? Will these ideas be embraced, recognized, manifested in my bonus or future promotional prospects? Normally I would say sure, roll the dice. But if you don’t see a future with the company (or vice versa), you might be better off spending that 13th hour re-arranging that disastrous sock drawer of yours.

Making money is not just a function of time – in fact, that is one of the least important components of earnings. Creativity, risk taking, ideas, a defined path forward… unless you’re an hourly wage worker, all of these are critical ingredients to making money and are needed before the first hour is even logged.

Until you have those ingredients, keep doing your own laundry and mowing your own lawn.

Have you stumbled onto the fallacy of maximizing productivity? Or maybe you’re one of the few that have successfully executed against it? Let me know in the comments!

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