Do the ROIT Thing

As we embark on the New Year, I find myself thinking about two big subjects: time and money. We Fools pride ourselves on the fact that we consciously choose to invest, rather than spend, our money. To invest is to think long term, while to spend is to think short term (or not to think at all). Yet rarely do we use the word "invest" when talking about time.

We spend it, waste it, blow it, and never seem to know where it went when it's gone. This last one makes a powerful argument for investing, rather than spending, time. Maybe if we were to invest, rather than spend, our time, we might not be so baffled by it's inevitable disappearance.

But before we continue, let's clear up a major misconception: Time is not money. You can save money, but you can't save time. Say, for example, the Grim Reaper appeared at your door. Try telling him to come back next year. Time is also much more valuable than money. Don't believe it? Try this: Imagine looking out your window right now and seeing our pal, the Reaper, skipping down your street, playing eenie-meanie-miney-mo with the houses. Would you rather be certain that you have a trillion dollars in the bank or at least one more hour to live? I'll take the hour, thank you very much.

But while time is more valuable than money, we don't have a single metric, ratio, or calculation to help us invest our time more Foolishly. Yet when it comes to investing our dough, we have the Flow Ratio, the Cash King Margin, ROE, ROA, ROIC, the P/E ratio, the PEG ratio, and the dreaded Cleveland Sheckle Bender (just making sure you're still with me). You see where I'm going with this....

That's right, dear Fool; I've coined a metric to help us invest time more Foolishly. It's called ROIT (Return on Invested Time) and pronounced royt. The cool thing is, it will not only help you invest time more Foolishly but also make you sound like a feisty Englishman using a synonym for the word "correct."

Fear not if this sounds tricky. To determine ROIT, we simply take the Importance Factor (IF), multiply it by the Fun Factor (FF), and then subtract the sum total of the Opportunity Cost (OC) and the Harm Factor (HF). So it looks like this:

ROIT = IF x FF – (OC + HF)

Now, let's look under the hood of this fascinating metric and take her out for a test drive.

The Importance Factor
Foolishly invested time offers five key life benefits. We give two points for each benefit. These may be a tad mushy, but I'm sticking with them. They are:

• Connecting more deeply with others
• Contributing to a more secure, just, and/or healthier world
• Promoting physical, psychological, and/or spiritual health
• Gaining knowledge, insight, or understanding
• Creating something meaningful, interesting, or beautiful

So, in short, time spent doing nothing even remotely interesting brings an IF of zilcho, whereas time invested in all of these benefits gets the maximum IF of 10.

The Fun Factor
This one's a multiplier, because I think having fun is the key to having a meaningful life. We'll keep with the 0-10 scale, with 0 representing an anesthesia-free root canal, while a perfect 10 probably involves items ill-suited for a family friendly website.

The Opportunity Cost
No matter what you do, you can always be doing something else. (Pretty profound, huh?) So this one's really just a matter of volume. I'm comfortable with the following scale:

0-4: Time investment is one day or less
5-7: Time investment is a weekend to a month
8-10: Time investment is ongoing

The Harm Factor
We'll stick with the good ol' 0-10 scale, with 10 representing inflicting serious emotional or physical harm, and a 0 inflicting no harm whatsoever. Assuming we're not psychopaths, this refers to subtler things that take their toll over time, like shooing the kids from the TV, blowing off chores, or spending loads of money selfishly.

Danger: truth-stretching ahead!
In determining the ROIT of my most common activities, I notice a powerful urge to stretch the truth far enough to make even the highest-paid yogi sick with envy. For example, in doing the ROIT of watching Sunday football, I tried to give myself two points for health benefits, because surely the Hefty sack of cheese Doritos I inevitably maul is loaded with lots of bone-building calcium, right?

OK, now that we know how it works, let's apply it to our everyday lives. And what better activity to ROIT here in Fooldom than stock-picking? All Fools must inevitably come to a point where they either wish to wheelbarrow their portfolios into the S&P 500 and take up sleep-eating, or commit the time it takes to master this great art.

First, we start off with our metric, ROIT = IF x FF – (OC + HF), which means we first determine the Importance Factor. I'm going to give Foolish stock-picking a whopping 9 because it allows me to connect with fellow Fools, contribute to my family's security, boost my self-confidence, gain loads of knowledge, and is likely to create something beautiful, such as a peaceful retirement. I deducted a point here for the last one because I had to use the word "likely."

For the Fun Factor, I really enjoy researching new companies, and I get a charge out of following the market. So I'm comfy with a big fat 8 here. The Opportunity Cost is significant, though, as Foolish stock-picking, to me, means drilling down and really getting jiggy with 10-Qs, 10-Ks, and so on. That's pretty time-consuming, so I'm going with a full 10. As for the Harm Factor, I do have a tendency to obsess and disappear into my office like a mad scientist, but that's about it. So I'll give mastering Foolish stock-picking an HF of 2.

Now let's tally my ROIT for Foolish stock picking: 9 x 8 – (10+2) = +60. This seems like a pretty good score, but since this is a new metric, we need some other common activities to compare it to.  Let's see how it stacks up to the ROIT I gave a few other common uses of my time:

• Watching sports (-9)
• Convincing wife her behind isn't fat (+15)
• Planning workout programs I never do (-4)
• Yakking on phone with friends (+27)
• Pacing nervously and mumbling (-18)

Well, the good news is that it sure looks like Foolish stock-picking is a valuable investment of time. The bad news is... I gotta get a life. Yikes.

Dan Rubin posts to the boards as BroadwayDan and was thrilled to spend the holidays in glorious Sweet Home Chicago, where he invested his time devouring as many deep-dish pizzas as possible.