3410: Monday Master Class: How to Use Time Arbitrage to Maximize Your Productivity Profit by Cal Newport

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[00:00:38] This is Optimal Living Daily, Monday Masterclass, How to Use Time Arbitrage to Maximize Your Productivity Profit by Cal Newport of calnewport.com. And I'm Justin Malik, your personal narrator, and the guy that reads to you every single day of the year, including holidays.

[00:00:54] It's kind of like an ongoing audiobook, but free. Now the title of this post may be a little intimidating, it kind of was for me, but don't worry about it, take a listen.

[00:01:04] He starts off by talking about what arbitrage is, and then goes from there. I think you'll enjoy it. So with that, let's get right to it as we optimize your life.

[00:01:17] Monday Masterclass, How to Use Time Arbitrage to Maximize Your Productivity Profit by Cal Newport of calnewport.com.

[00:01:25] The Wonders of Arbitrage.

[00:01:27] In this article, I explain how to apply the well-known concept of arbitrage to the hours in your daily schedule.

[00:01:34] By taking advantage of the different values of these hours to different types of work,

[00:01:38] you can use time arbitrage to maximize your productivity profit,

[00:01:42] which describes the value you extract from the day in terms of both work accomplished and relaxation achieved.

[00:01:49] We are at our best when we balance both.

[00:01:52] Arbitrage Basics.

[00:01:54] Arbitrage is a simple concept.

[00:01:56] In finance, it describes the simultaneous purchase and sale of assets that generates a profit due to a difference in price.

[00:02:04] For example, let's say that at this moment, my most recent book costs $10 in Hanover

[00:02:09] because Dartmouth students are all brilliant and the advice is generally not needed.

[00:02:14] In Cambridge, however, it costs $20 because Harvard students need all the help they can get.

[00:02:19] If I put phones up to both ears and buy 100 copies from the Dartmouth Coupe while selling 100 copies to the Harvard Coupe,

[00:02:27] I've just made myself a tidy $1,000 profit.

[00:02:31] Arbitrage beyond money.

[00:02:33] The concept of arbitrage can be extended beyond finance.

[00:02:37] For example, geo-arbitrage.

[00:02:39] Tim Ferriss has been recently promoting the concept of geo-arbitrage.

[00:02:43] The basic idea?

[00:02:45] Consider a task like doing research for a freelance article that requires 5 hours.

[00:02:50] If you're being paid $1,000 for the article and it takes 10 hours total to finish,

[00:02:54] then the task of research is worth $500 to your editor.

[00:02:58] Assume, however, that a virtual personal assistant in Bangalore will do the same research for $10 an hour.

[00:03:04] You can now buy the asset, 5 hours of research, for $50 in India,

[00:03:09] and then sell it to your editor for $500, making a profit of $450.

[00:03:15] Social arbitrage.

[00:03:17] Keith Ferrazzi introduced the idea of social arbitrage to help explain the world of interpersonal networking.

[00:03:23] Assume you have two good friends.

[00:03:25] One is the CEO of a major tech company.

[00:03:28] The other is a freelance writer.

[00:03:30] Assume the writer is working on an important article about the tech industry.

[00:03:33] The cost of your friendship to ask the CEO to chat with the writer is small.

[00:03:38] It's only slightly annoying, requiring maybe 20 minutes of the CEO's time.

[00:03:42] The benefit to your relationship with the writer, however, is major.

[00:03:47] The connection will be key for him to complete his article, earning him money and respect.

[00:03:51] Therefore, you can buy the favor for cheap from the CEO and then sell it for much more to the writer.

[00:03:58] The introduction yields a large net gain to the overall strength of your network.

[00:04:03] Time arbitrage.

[00:04:05] Time arbitrage concerns the hours in your daily schedule.

[00:04:08] As with any arbitrage system, we need a notion of value.

[00:04:12] For time, value can be defined as the amount of productive work or relaxation accomplished during the interval.

[00:04:18] We also need a notion of buyers and sellers.

[00:04:21] In this context, the buyers and sellers are activity types.

[00:04:25] Scheduling your day, therefore, can be seen as a market in which you are buying and selling hours to and from activities

[00:04:32] with the hope of making money through value differences.

[00:04:35] To understand what value differences you have to play with,

[00:04:38] we have to define the different activity types and how they value time.

[00:04:42] Concentration activities.

[00:04:44] These include studying, reading, working on a problem set, or anything else that demands concentration.

[00:04:50] Earlier hours are worth more than later hours for these activities.

[00:04:54] You have more energy earlier in the day and can therefore better concentrate.

[00:04:59] In addition, isolated hours are worth more than consecutive hours.

[00:05:03] That is, an hour surrounded by non-concentration activities is worth more than an hour in the middle of a marathon session.

[00:05:11] Too much consecutive concentration and your mind begins to tire.

[00:05:15] Mechanistic activities.

[00:05:17] These include errands, producing flashcards, tracking down sources in the library,

[00:05:22] or any other activity that does not demand concentration to complete.

[00:05:26] All hours are worth the same for these activities.

[00:05:29] Relaxation activities.

[00:05:31] These include any activities meant to relax yourself and generate contentment.

[00:05:35] For example, dinner with friends, going to see a talk,

[00:05:39] pulling together a pong game, web surfing, or watching TV.

[00:05:42] Later hours are worth more to these activities.

[00:05:46] Early in the day, it's hard to fully relax because you know you have more work left to do later.

[00:05:50] In addition, consecutive hours are worth more than isolated hours.

[00:05:54] Little bursts of relaxation don't relax you as much as being able to really let go for a while.

[00:06:00] Becoming a time arbitrageur.

[00:06:03] Here's an exercise.

[00:06:04] Look at your schedule for yesterday.

[00:06:07] Map out how you spent your free hours.

[00:06:09] Label each of these hours with the appropriate activity type from earlier.

[00:06:13] Now imagine you're an arbitrageur.

[00:06:16] You want to buy up the time from the day and then sell it back to activities in a way that maximizes your profit.

[00:06:22] The key here?

[00:06:23] Look for inefficiencies.

[00:06:25] Find places where activities own time that is of low value to them.

[00:06:29] Buy it on the cheap.

[00:06:30] Then sell it to activities that value it much more.

[00:06:33] For example, perhaps you dedicated pockets of free time in the early afternoon to relaxation activities like surfing the web and watching TV.

[00:06:41] This is the typical student mantra.

[00:06:44] I'll work later when I have more consecutive hours of free time.

[00:06:47] You can buy these hours at a low price because relaxation does not value early isolated chunks of time very much.

[00:06:54] Next, resell the time to concentration activities like working on a reading assignment.

[00:06:58] The latter will pay quite a bit more for these same hours.

[00:07:01] Or maybe your night was spent in a marathon of concentration activities like studying for a test.

[00:07:07] Buy these hours on the cheap and sell them to relaxation activities.

[00:07:11] Again, generating a tidy profit.

[00:07:13] Once you've sold your high profit late and early hours, sell the remaining chunks to the mechanistic activities.

[00:07:19] All time is worth the same to these activities, so they can be used to fill in the holes left after you maximize the value generated by selling hours to the concentration and relaxation activities.

[00:07:29] Living the time arbitrage or lifestyle.

[00:07:32] The example activities given were specific to college students, but the three main activity types, concentration, mechanistic, and relaxation are applicable to all walks of life.

[00:07:44] In the business world, for example, concentration might cover working on a new marketing idea.

[00:07:49] Mechanistic might cover answering emails.

[00:07:51] And relaxation might cover time with family.

[00:07:54] The valuation formulas still work.

[00:07:56] The key is to understand that all hours are not made equal.

[00:08:01] When you begin seeing your free time in terms of the different value it brings to different activities,

[00:08:05] and you develop a thirst for maximum productivity profit,

[00:08:08] you'll be surprised by how much more value you can wring out of each day.

[00:08:17] You just listened to the post titled,

[00:08:18] Monday Masterclass, How to Use Time Arbitrage to Maximize Your Productivity Profit,

[00:08:23] by Cal Newport of calnewport.com.

[00:08:26] I'll be right back with my commentary.

[00:08:28] Thank you to Cal.

[00:08:30] Personally, running this podcast has taught me a lot about how different hours of the day have different values.

[00:08:36] In the beginning, I used to record episodes whenever I had free time thinking all hours were equal,

[00:08:41] often recording at midnight, sometimes even later.

[00:08:44] But I quickly learned that trying to narrate articles when I was tired,

[00:08:48] that all that just led to a lot more editing work later.

[00:08:52] I think what really stuck with me from this article was this idea that early hours are worth more for concentration work.

[00:08:59] I've definitely found that to be true in my own life.

[00:09:01] When I need to edit episodes or work on something that requires deeper focus,

[00:09:07] doing it first thing is so much better than trying to squeeze it in late at night.

[00:09:10] I know for me, I try to batch similar tasks together now.

[00:09:14] So maybe I'll do all my emails a bit later when my energy isn't at its peak.

[00:09:19] And then I save those earlier hours for batching recording and editing when I'm fresh.

[00:09:25] But you don't have to completely overhaul your schedule right away.

[00:09:28] Maybe just try one small change.

[00:09:30] Like if you usually check email first thing in the morning,

[00:09:33] try doing something that needs more focus during that time instead.

[00:09:38] So hopefully this gave you something to think about as you plan your day.

[00:09:41] No, it did for me.

[00:09:42] And let me know what works for you.

[00:09:43] You can always reach out through oldpodcast.com or reply to my free weekly newsletter.

[00:09:49] But I'll leave it there for today.

[00:09:50] Hope you're having a great day and I'll see you tomorrow as usual,

[00:09:53] where your optimal life outweighs.