How Much is Your Time Worth?

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In his final letter to shareholders as CEO, Jeff Bezos took a victory lap by calculating all of the time Amazon Prime has saved for its customers:

Customers complete 28% of purchases on Amazon in three minutes or less, and half of all purchases are finished in less than 15 minutes. Compare that to the typical shopping trip to a physical store – driving, parking, searching store aisles, waiting in the checkout line, finding your car, and driving home. Research suggests the typical physical store trip takes about an hour. If you assume that a typical Amazon purchase takes 15 minutes and that it saves you a couple of trips to a physical store a week, that’s more than 75 hours a year saved. That’s important. We’re all busy in the early 21st century. 

So that we can get a dollar figure, let’s value the time savings at $10 per hour, which is conservative. Seventy-five hours multiplied by $10 an hour and subtracting the cost of Prime gives you value creation for each Prime member of about $630. We have 200 million Prime members, for a total in 2020 of $126 billion of value creation.

You may quibble with his estimates on how much your time is worth on an hourly basis but the amount of time saved for consumers is probably low for many households.

In 2020, my family placed more than 600 orders through Amazon. This number was higher than normal because of the pandemic but I doubt it goes down considerably in the years ahead.

My wife and I have three young children. It’s not exactly a walk in the park to take them all to the mall for new clothes or a sporting goods store to get soccer cleats. Now we can simply buy this stuff on Amazon and it shows up at our front door the very next day.

No rounding up the kids to get in the car. No trips to the store. No searching for parking spots. No aimlessly wandering around the store looking for just the right size or style.

All of that is avoided by ordering directly on your phone or computer with the click of a button.

Some people claim Amazon’s prices aren’t the best and that’s probably true. I’m sure you could find lower prices elsewhere.

But that’s not the point.

You’re not necessarily going to Amazon for the best prices. You’re going to Amazon for convenience. Prime as a convenience is worth every penny and then some.

And convenience is something I’ve grown to appreciate more in life as I’ve gotten older and accumulated more responsibilities.

When Door Dash came public in late-2020 I was initially bearish. I didn’t see how the idea made sense over the long-term. The economics of the business don’t seem to add up when you look at how high the prices can be for food delivery.

But I may have underestimated how much some people are now willing to pay for convenience.1

There are many reasons people are hesitant to pay for their time:

People are generally bad at managing their time. Being a parent with a full-time career requires maximum efficiency at all times. Phones are glued to our hands so it’s easier than ever to check emails, Slack and hop on Zoom calls at all hours of the day.

And the lines between work and home life have been blurred during the pandemic as more people than ever are now working from home. It’s harder than ever to strike the right balance.

People feel guilty spending money on “unnecessary” services or items. Why would I pay for something I can do myself!? This was me in my 20s. Now that I’m fast approaching my 40s I’ve changed my tune but I understand why many people feel this way.

It’s difficult to put a price on your own time when you’re not explicitly being compensated for it (or even paying for it).

People love complaining about being busy. Being busy all of the time makes you feel like you’re accomplishing something even if you’re mostly wasting time performing meaningless tasks. Checking items off your to-do list can give you a sense of accomplishment but most of the time it’s those little day-to-day hassles that cause the most stress in your life.

And the people who are most strained for time find it difficult to enjoy themselves because they always feel rushed if they’re not going directly to the next item on their list.

We complain about being busy yet fail to understand buying time is actually an investment, not an expense.

Here are some of my favorite ways to buy yourself more time:

Pay someone else for tasks that bring you no joy. Some people enjoy lawn work and gardening. Not me. I am more than happy to pay someone to mow the grass, fertilize and handle the edging. The same applies to snow removal in the winter and a bi-weekly cleaning service.

I also don’t try to fix anything myself around the house if I can help it because I am useless at fixing stuff and would probably only make it worse.

We utilized grocery delivery occasionally before the pandemic but now use it all the time. With three kids, the convenience far outweighs the cost in this equation. We don’t miss the grocery store one iota.

And outsourcing gives us more garbage time with family to do the stuff we actually want to do.

Budget your time as well as your money. The old personal finance guru quote goes something like this: Show me your checkbook2 and your calendar and I’ll tell you your priorities.

Most people don’t like budgeting because it has a negative connotation in terms of the stuff you can’t do. But budgeting your time can be a positive thing because it allows you to define the things you want to do.

Convenience is a line item on my budget because it buys more hours in the day.

Double down on the things you love to do. Research shows spending money on experiences, helping others and buying time can increase your happiness. Others are happy doing nothing in their down time. Some like working all the time.

Whatever it is you enjoy doing, the goal should be to do more of it and cut back on everything else when possible.

When I was young I said yes to everything — every job interview, every invite to a party, every night out at the bar, etc.

Now I find myself saying no to most invites because I would rather define how I want to spend my own time.

And I’m not saying either of these choices is right or wrong. A lot of it depends on where you are in life and your personal disposition.

But once you begin prioritizing your time it becomes much easier to pay for it because you understand how valuable it is.

Further Reading:
Why Are People Miserable At Work?

1I’m still not sure how much success Door Dash will have but even if it’s not them, someone will figure this out eventually.

2We should probably update this one from checkbook to online banking statement.

 

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