"The time is out of joint. O cursèd spite, That ever I was born to set it right!" – Hamlet

I have and always will think about time as a precious gift, but my reading list lately has opened up my eyes to the way in which economies and businesses think about time. Specifically I have been reading the book The Price of Time  which highlights how time is commodified and sold back to us by introducing and exploiting the notion of interest.

A quick summary of The Price of Time

The Price of Time talks a lot about the interest and how it has been calculated and applied over centuries of commerce. Now the content I mostly disagree with but there are some important ideas that are generally true. Here is my summary:-

  • Interest is the difference in monetary values across time, the rate at which present consumption is exchanged for future consumption.
  • Interest represents the time value of money.
  • Interest shows how much people are willing to trade their current spending for future spending.
  • Interest reflects the time preference of money.

My favorite way of thinking about interest is that it is human impatience crystalized into a market rate.

Handling ZIRP

A zero interest rate periods (ZIRP) is a specific time frame during which credit is offered within an economy with no interest. So what happens when you have a ZIRP, what happens when human impatience has no cost or penalty? When interest rates falls at or close to zero business, and especially startups, are tempted to invest in projects that are risky, and promise distant or uncertain rewards. ZIRP opens up an entire class of uses for money that wouldn't exist in most other monetary environments.

For example, you find VCs open to funding clearly ludicrous ideas that are likely to fail, but zero interest means it does not cost that much to take such obvious risks. I mean where else would you safely put your money anyway? This kind of thinking metastasizes throughout the entire market. Check out the unprecedented zero interest runs during 2008-2015 and 2020-2022.

ZIRP doesn't just have macro impact, it also trickles down to your division,and all the way to engineering and product teams. It influences :

  • The cost and risk of hiring people
  • Risk tolerance for niche ideas.
  • The unit of time by which you measure risk and reward (from months to years)
  • Whether green field ideas are easier to fund

As a product owner knowing whether your macro (or even micro) economics have entered or exited a ZIRP environment is important. It should make you seriously reconsider what a safe idea looks like verses a speculative bet. A good idea is always good, regardless of the constraints but ideas that require risk, patience or long range vision are easier when speculation and patience are cheap. Recognize these moments you get to swing for the fences!

La grande horloge is large brass colored clock fixed to steel and glass wall.

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