A-Cruel Life Accounting

Rainbow falls

I once heard a VC say that you shouldn’t do anything unless the cost of it is more than your earning power per hour.  His solution is that you should hire someone if that is less than the cost for you to do it.  For example, if you earn $50/hr, any activity that you could hire a person for less than $50/hr, you should hire.  Landscapers, cooks, cleaners, etc.

It sounds like such a great idea.  But I would argue that it only works if your life operates on accrual accounting.  In this case you can price something based on your potential earning power.  As I was raking leaves [EDITORS NOTE: I first started this post during spring cleanup] and thought about the appr $250 I would have to pay someone to do it for me, I realized that most of us operate on cash accounting.  Do I actually have $250 that I could pay someone?  Would I actually earn more than that in cash if I sat down to do work?  Could I drop my rake, take off my gloves and sit at my desk for the next few hours and earn $250 after I called a landscaper?

In most cases the answer is no.  That VC was pointing out the cruel reality of his world vs mine.  Most of us live in the cash reality; picking up sticks, raking leaves, cutting the grass, shoveling the driveway, changing the car’s oil and fixing the sink when it gets clogged is part of life.  Those with money make the accrual argument, because they can write a check or drop a credit card and not think about the balancing of that transaction to income earned.  They take a macro view of the world at the end of the month, accruing their inflated revenue to the expense paid.  As long as you are still in the black, you can make lots of spending rationales.

I still believe the philosophical argument has merit.  Making the “right” choice regardless of a cash-based weighting of the cost, is definitely the right way to go.  These choices manifest themselves most in political arguments or more tangibly, environmental ones.  For example, not wasting energy has very little cash cost right now, it only burdens society financially when we accrue the incremental cost of cleaning the pollution, the health effects on the body, and the infrastructure costs of climate change much later.  If you weigh THOSE costs vs the cost of being slightly warm/cold by turning off your car while you wait to pick up your kids in the school parking lot, you see a much different calculus.

I don’t know the answer to making this giant leap in society.  But the person who figures out how to enable people to practically make accrual accounting choices for humanity, instead of cash-based short-term reactions, is going to change the world in a way that nothing else has in the course of history.  People making enlightened choices about what they are doing and its relative fully loaded cost to society, without regard to their cash position at that moment?  What a power force of nature that will be.

About Josh Rutstein

I am an aspiring entrepreneur and hopeful political candidate. Father of 2 very special girls, husband to an amazing woman, and passionate American. I snowboard whenever possible and follow a 20x mentality for exercise. I also play golf and ultimate frisbee and am a die hard New England Patriots fan and season ticket holder. Everyday I wake up wanting to make this country a better place, someday I hope to actually succeed.
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