You’ve surely heard the phrase “Time is money,” but in The Wall Street Journal, George Gilder and Gale Pooley make the case that, since decoupling the dollar from gold in 1971, money is, in fact, time. They write:
With every new product launched across the economy, these learning curves imply that if the real economy is growing, most real prices—that is, prices adjusted to account for inflation and purchasing power—must be declining.
How can the laws of enterprise and business consulting diverge so significantly from the accepted wisdom of economic analysis and political rhetoric? More baffling, how is it that products are becoming simultaneously more expensive and more affordable?
This paradox is possible because while we buy things with money, we actually pay for them with our time—not in dollars and cents but in hours and minutes of work.
The consumer-price index tells us nothing about changes in affordability. To measure affordability, we must compare the prices of goods and services to hourly compensation (wages and benefits). We call the resulting ratio the time price.
The original proponent of time prices was Yale economist and Nobel laureate William Nordhaus, who in the 1990s produced a paper showing that traditional economic data have understated progress in lighting technologies—from whale oil to light-emitting diodes—by a factor of thousands. At the same time, economic data fail to capture the rise in living standards made possible by these lighting innovations.
Action Line: Time is your most valuable commodity in retirement. Use it wisely by avoiding risk and focusing on your margin of safety. When you want to talk about your time and your portfolio, email me at ejsmith@yoursurvivalguy.com. And click here to subscribe to my free monthly Survive & Thrive letter.
