Time’s Money, Except When It’s Not
I spent many years working at a series of startups. One of the common features of many startups is a regular meeting to keep everyone up to date on the state of the company. At several of my startups, this meeting happened on Friday mornings. In addition to the technical issues, these Friday morning meetings always featured a chart which looked something like this:
This type of chart shows the amount of cash the company has on hand. The slope of the curve is called the burn rate. When you extrapolate into the future, you reach a day where the line hits zero. That’s your drop dead date. If nothing changes between now and then, that’s when you give up and go home.
Lately, I’ve been working at a larger, profitable company. If you created a similar chart for this company, it would go up to the right, not down. The difference between the two situations has an enormous effect on how employees think.
When you regularly see the drop dead date moving closer and closer, you get a very real sense of the value of time. That’s important when you need to make decisions.It’s often the case in business that you don’t have sufficient information to make the best choice. It’s very tempting in that case to do nothing until you can get more information. The chart above clearly shows the problem with that approach. In a lot of cases, you just need to make the decision with the information you have and keep moving.
Life’s very different when you change the sign of the burn rate. After awhile, everyone gets used to thinking that time is free. When you don’t feel that you have enough information to make a good decision, you just put together a task force to collect more information and schedule another meeting a month or so in the future to reanalyze the decision.
The problem with both of these views of time is that the gray, dashed line in that chart isn’t real. It’s an extrapolation. Great thinkers from Mark Twain to Randall Munroe have warned about the risks of confusing extrapolations with reality. The problem is that the company is interacting with an outside world, and the reality is that the outside world is constantly changing. If a culture develops where it is the norm to defer decisions when there’s uncertainty, then a company looses the ability to react to the changing environment.