Time is the Stuff that Life is Made of

“A Man is Rich, Only in Proportion to the Number of Things he can afford to let alone”
– Henry David Thoreau

The Rule of 168

Do you really want to have a great quality of life?

If so, I can share the secret with you.  Like most important truths in life, it’s really pretty simple.  In reality, there are three and only three facts that really matter to the quality of your life here on earth, which together I call “The Rule of 168”:

  1. There are only 168 hours in every week. No matter your age, how much money you make, how much power you accumulate, or how smart you are, there are no exceptions to this fact.  Your quality of life is a direct function of how you choose to spend those hours.
  2. Some things in life can be delegated, but many of the most important things cannot. You can’t pay someone else to spend time with your family for you, take a vacation with you, read a great book for you, or play golf for you.
  3. The key to a high quality life is to focus on the truly important things, which are most critical to your quality of life and which cannot be delegated, and find someone else to take care of all of the less important things.

In other words, it is smart to pay someone else to mow your lawn, launder your shirts, change your oil, or clean your gutters, so that you can do all the things that you can’t pay someone else to do, like exercise, spend time with your family, take vacations, play golf, volunteer for a charitable cause, or become better in your career.

The quote above from Henry David Thoreau is incredibly insightful, about what it really means to be “rich”.  One of the primary benefits of worldly riches is that money can buy you the freedom of your time and allows you to multiply the number of things you can “afford to let alone”, and pay someone else to do for you.  After all, as Ben Franklin said, “Time is the stuff that life is made of”.

That’s it.  It’s that simple.  If you can simply master this rule, and spend your precious time on the things that are really important, and don’t waste time on things that are not important, you will have an amazing life.

The Service Economy

The good news is that, in America today, we live in a Service Economy. Most Americans embrace the idea of paying for services we don’t want to do ourselves, and our economy revolves around the service sector. As a result, there is no shortage of interesting opportunities to offload things you don’t wish to do yourself, and to pay for services to make your life better.

The financial services industry is no exception. Firms try to differentiate themselves among a crowded field by making claims of better investing performance, lower fees, smarter advisors, or more exclusive brand names. We believe, at the end of the day, the true Value of professional financial advice is that it should allow you to:

Delegate the management of your wealth to an advisor who you trust, so that you can simplify your life and focus on the things that are more important to you.

This value hinges most importantly on the phrase “an advisor who you trust”…after all, if you don’t trust the people handling the details of your money for you, it is impossible to feel comfortable delegating that job. Unfortunately, the public perception of the trustworthiness of the financial advice industry is less than pristine.  As a result, many providers have difficulty making a credible claim to a value based on trust. Instead, many choose to base their value on something which is unpredictable, and difficult to deliver consistently…the promise of superior investment performance.

Investment performance is by nature unpredictable and inconsistent – even the very best investors endure periods of time when their “relative performance” is disappointing. Although having an experienced advisor gives you a better probability of achieving investing success than if you tried to do it on your own, there is no “Black Box” or “Magic Formula” to investing success. Financial advice firms who make a promise to clients that they will always consistently provide superior results will invariably disappoint. As a result, it is very common for clients to become disillusioned by their advisor when performance lags, and end up jumping from advisor to advisor, in search of the “Holy Grail” of investing success. Instead, they end up missing out on the consistency and confidence that comes from a long term relationship with an advisor based on mutual trust.

In reality, a great advisory relationship should be based on your ability to offload the management of your money to someone more experienced, and more focused than you, so you don’t have to worry about it and can focus on more important things.

Is it Worth it?

By promising consistently superior investing performance, it is easy for a financial advisor to justify charging a big fee. After all, if your advisor helped you to “beat the market”, even after paying her fee, then she is worth every penny. If her value proposition is to enable you to delegate the job of managing your wealth, it may be more difficult to command a big fee – until you consider what you are actually delegating:

The 10,000 hours to Mastery

  • In his best-selling book Outliers, Malcom Gladwell explores the idea that mastery of any complex task requires a critical, minimum level of practice, which researchers have identified as 10,000 hours.
  • For most people, planning their long term financial success is the most important project they will ever undertake, and is one that requires Mastery of the subject matter. It is probably a good idea to pay someone who is willing to (or already has) spend those 10,000 hours, so that you don’t have to.

There is an old legend that Henry Ford once balked at paying $10,000 to General Electric for work done troubleshooting a generator in his manufacturing plant, so asked for an itemized bill. The engineer who performed the work sent this:

Making Chalk mark on generator: $1
Knowing where to make mark: $9,999