How you are wasting $480 A week by not delegating22 Jul 2016 | 5 mins reading time
When I was sixteen my friend David told me a story about Bill Gates that changed everything.
David told me that Gates makes around $300 per second, so if Gates were walking down the street with $1,000 falling out of his pocket every second, it wouldn’t be worth it for him to stop and pick the money up.
I’m not sure how these numbers hold up today, but after hearing this my head was spinning. How could it be possible? If the money falls our of his pocket he was losing money. The answer is a phrase that I learned later while in college: opportunity cost.
“Opportunity Cost: The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action.” -Invstopedia
If Gates stopped he would be giving up the four seconds it would take for him to bend over and pick up the $1,000. Conversely, if he continued executing his existing strategy of walking instead of stopping he would make $1,200 in that same four seconds.
Here is the breakdown of his options:
- Stop: $1,000
- Continue: $1,200
- Difference: $200 (in favor of continuing)
This concept is something that can be difficult to grasp at first but once you understand it you will never see the world the same way.
Let me explain in a context you may understand
Imagine if you are in sales and you are required to close $2M in revenue this year for your company.
We know that sales isn’t a linear process so your hourly rate fluctuates based on the lead that you are working on at any given time. For example, if you have a super hot or large piece of new business that you working on, your time could be worth $1,500/hr or more during that timeframe.
I could work this into the calculations, however, to simplify the math lets assume that each hour spent working on sales generates a given amount of fixed revenue. There are 2,080 working working hours in the year and given a $2MM quota for the year your time is really worth ~$961.54/hour.
- $2,000,000 Quota
- 2,080 working hours
This means that any investment of your time should, at a minimum, should generate over $961.54/hour otherwise you would never get to your goal of $2MM.
Multitasking is a myth
When doing something that requires no brain function, such as eating while watching “The Wire” multitasking can be extremely productive.
However, research has found that multitaskers take 50% longer to accomplish a single task if the task requires higher brain function. This means that although it may seem like multitasking could be a viable shortcut, it really is not. Doing two things at once, really means doing two things in twice the time.
Given that you are locked into one task that needs to generate the $961/hr, let’s see how the various day to day tasks of an executive stack up.
Managing your own schedule costs $4,615
Researchers from Doodle ran a panel of 1,500 executives and administrators and found that the average amount of time spent scheduling per week is a staggering 4.8 hours. I don’t know anyone who enjoys scheduling and although it is absolutely critical, is it is something that can definitely be done for less than $961/hr.
- 4.8 Hours per week
- $961.54 per hour
- $4,615 total amount invested per week on scheduling
Making travel arrangements costs $961.54
Assuming that you spend 1 hour researching and booking travel trip the math is fairly easy at $961.54 per trip. When your travel starts to scale to 3 or 4 trips per month, this can get extremely expensive quickly.
- 1 Hours per trip
- $961.54 per hour
- $961.54 total amount invested per trip that you book
Compiling your expense report costs $802
If you aren’t fortunate enough to be at a company that uses Expensify or Concur, you are probably doing expense reports with excel. Assuming you have $5,000 in expenses with an average per transaction of $200 you will have 25 receipts per month. Making a copy and entering the data into excel probably takes you around 2 minutes per receipts, which means that every month you invest 50 minutes or ~$802 into doing your expenses.
- 0.83 Hours per expense report
- $961.54 per hour
- $802 total amount invested per report
Switching tasks even costs you $480/week
The other major cost is in switching from one task to another. In the engineering world, people call switching between unrelated tasks context switching€ and understand that there is a significant cost in it taking place. For instance, if you are polishing up a $500k proposal then stop to send a calendar invitation to another client, the cost of the context switch is more than you would imagine.
Remember, multitasking is a myth. It takes the mind a couple of minutes to stop thinking about the proposal, switch into the context of the other client, send the invitation, and switch back into the proposal context. These couple of minutes may not seem to be a big deal in isolation, but they start to add up. For someone doing 3 meetings per day that cost is 30 minutes per week or $480.77.
- 0.5 Hours switching
- $961.54 per hour
- $480 invested per week simply switching tasks
First Class And Beyond
This paradigm can even be extended into other areas. For example, flying first class could be a good investment for trips of a certain length. There is a cost associated to getting off of a 5 hour flight after being on the road for 20 days and not being fresh enough to pitch a $500k deal. Identify the cost and compare it to the upside of the opportunity.
First class tickets, house cleaners, or assistants may look like a luxury to someone who doesn’t understand opportunity cost but having this understanding means that your monetary cost should not be your only consideration.