Rise and shine

At the turn of the twentieth century the new category of ready-to-eat breakfast cereals was blossoming. One of the newer entrants was a product named Grape-Nuts, created by an entrepreneur named C. W. Post and still available on shelves today. It was notable then and now for containing neither grapes nor nuts, but also for being the first target of an innovation that has gone on to influence industries around the world: the coupon. Bearers of these incentives issued by Post would receive 1 cent off the price when purchasing a box.1

This is a roundabout way of providing a discount; instead of requiring shoppers to keep and produce a slip of paper at the store, why not simply reduce the price and make life easier for both buyer and seller? The answer is fairly straightforward, especially for anyone who has spent significant time hunting through junk mail or the internet in search of minor savings. Coupons are designed to identify those people who value the potential discount more than the time they spend acquiring it. The effort they demonstrate through this process means they can ultimately pay less than others who make a different calculation.

This is known as price discrimination, and it’s an effective way of sorting customers according to their ability to afford your product.2 

The rise of online shopping, and instant access to information could alter this dynamic, reducing friction and allowing bargain-hunters to snap up discounts with minimal effort. Anticipating this, many businesses have created digital discount programs that are intentionally inefficient, requiring users to page through the virtual equivalent of supermarket circulars and manually “clip” coupons, or hunt for codes to add online that have complex purchase requirements or need special apps to activate.

But using time as a proxy for money isn’t always a profit-maximizing endeavor on the part of big companies. When the smash Broadway hit Hamilton began selling out theaters across the continent producers could have simply raised ticket prices to ensure that deep-pocketed aficionados of Founding Father-based hip-hop musicals could always find a ticket for purchase.3 Instead they reserved blocks of seats that would be sold for a nominal $10, but only to those who were willing to come to the box office in person to wait in line at an inconvenient time, when most people would presumably need to be at work. Once again, those who couldn’t afford full price were able to prove it by sacrificing their time.4

However adding burdens like these isn’t only for those with limited resources; sometimes the phenomenon works to the benefit of those with a lot of money.

Targeting the 1%

The sum of current tax laws in the United States runs about 2,600 pages long. In addition to supporting an army of lawyers, accountants, tax preparers, lobbyists, and assorted hangers-on, it accrues benefits to those whose income or wealth justify the huge effort required to sort through and understand just exactly where the most favorable condition, quirk, or loophole resides. Unlike for coupons, this burden accrues benefits primarily to the wealthy, for whom the resulting tax reduction more than offsets the effort required.

The majority would benefit very little from attempts to navigate this system, or to persuade legislators to nudge some statute in their favor, but for a select few with unusual situations the effort required to mold the system to fit one’s needs is worth it. The process for claiming these tax savings is byzantine, but that’s a feature, not a bug: it ensures that only those with high resources take advantage of them (and, not incidentally, that the average citizen won’t be able to understand exactly what’s going on).

Similar concepts are at work in air travel, where bypassing lines or boarding the plane early is possible for those willing to pay several multiples of the cost of an economy ticket, despite the fact that such premium passengers arrive at exactly the same time as those in cattle class.5 The more inconveniences there are with the standard offering—a forced checked bag means a wait at the carousel upon deplaning, a crowded security line means more time at the airport and less with family or friends—the more likely those who can value their time highly will pay up.

The time-value matrix

Taken collectively these different ways to value someone’s time can accrue to the benefit of an organization, or to the benefit of the customer. They can also be targeted at the bottom or the high ends of the distribution:

Kind of like the movie, this matrix is also everywhere if you look

It’s helpful to recognize the numerous ways the organizations you interact with are putting a price on your time. From a personal perspective be sure to value your own time accurately, and act accordingly. That free doughnut given to the first 10 people at the new bakery might not be worth 15 minutes of your morning, but a pass that lets you cut to the front of an hour-long line at the theme park while on your brief vacation just might be. The first purchaser of the latest item also pays more than the one willing to wait until the end of the season; make sure you understand which spot on that continuum you’ve chosen, and why.

And as a leader of an organization, remember that the people you serve value their time differently. Segment those who are willing to pay more to save time from those who lack that ability. Figure out ways to capture and share that value. Perhaps more importantly, find ways to provide access to those groups that would otherwise be shut out from what you offer, by allowing them to prove through time what they’re not able to show with money.

It’s not always the case that time equals money, but the concept can influence interactions in ways you may not have  considered. How are you valuing your time?

References

The site Coupon Sherpa provides a brief history of coupons. Although Coca-Cola had the first coupon it was for a free drink, focused on trialing the product and not discounting.

The New Yorker’s article on LBJ illuminated the favorable tax treatment of oilmen that supported his ascent.

Estimates of the true length of the U.S. tax code from Vox.

  1. In a strange alignment of history, Post’s only daughter would use part of her staggering fortune as inheritor of the company to build Mar-a-Lago, Donald Trump’s current vacation retreat. So when Xi Jinping has a tête-à-tête in Palm Beach with the President, just remember Grape-Nuts made it happen. ↩
  2. To be more specific, this works due to something called marginal cost. If a sandwich costs me $5 to make and for one John is willing to pay $10 and Priya $8, I make the most if I sell to each of them at their maximum price. Because it’s hard to know exactly how much someone will pay, and probably illegal to charge different prices, I price it at $10 and get Priya a $2 coupon that John won’t bother redeeming. Problem solved. ↩
  3. At the peak of the frenzy tickets were selling for thousands of dollars on the secondary market but nobody seemed to regret going, so okay I guess. ↩
  4. This isn’t purely altruistic, because having hordes of young theater-lovers creating a public spectacle only adds to the hype of the show, and these tastemakers are far more likely to tweet about it afterwards than the distracted hedge funder sitting in the dress circle. ↩
  5. Actually, since the back of the airplane always touches down first, you could argue that those up front arrive last. ↩