Outsource It

Gary North

July 4, 2009

Put a price tag on what you do for yourself. But also put it on the cost of doing it.

I recently read a tip that says that when you do something the saves money, pay yourself. Put the money in a savings account. But the tip leaves out the cost of your time.

Businesses should put costs on all of their operations. If a business has an employee do a project, his department should be paid from the central fund. This way, senior managers can see if the job should be outsourced -- dropped by the firm. This is doubly important for non-profit organizations, where there are no profits to measure success.

Most firms don't do this. Why not? Because it would lead to that crucial cost estimate: the price of senior managers. Senior managers know they are overpaid. They don't want objective estimates of whether they should be outsourced. So, they don't implement a corporate impersonal payments system.

"If you make a sack lunch to take to work, you should put the savings into an account." So said the tip.

But it works both ways. The price of the time you spend making that sack lunch is an expense. This should be subtracted from the savings. The more valuable your time, the more expensive it is to do it yourself.

Warren Buffett and Bill Gates should not be making sack lunches.

The lesson: your time is valuable. Don't treat it as a free resource. You will waste it if you do.

I don't mow my lawn. I don't plan ever to mow my lawn. The time cost is too high.

You should strive to become so productive that odd jobs are a net loss. Outsource the odd-jobs. No more "honey-do."