There is no such thing as a dead-end to anything in life because…..see, you get it. Anyway, the whole point of getting a job is to get paid. The whole point of career advancement, you guessed it, is to get paid. If the end goal has always been to get paid, isn’t the job just a medium of exchange for money? Let’s do some math. Hypothetically speaking, you do well in a good job, you get a 3% annual COLA adjustment and you also get a merit increase every few years. Compare that against you do a decent enough job so that you don’t get fired, you get a COLA increase and never get a merit increase. Yes, you will probably be stressed worrying about losing your job. I would argue the person who works way-above-firing-replacement-level (WAFRL) aka the high performer is not really efficient with his or her time and will stress equally if not more than someone who works at-above-firing-replacement-level (AAFRL) aka the low performer due to “performance punishment.” When you realize not leaving a skilled job after a few years for a higher paying one typically means you are leaving money on the table, you will realize why the RAAALTE method I developed is important.
First of all, no one person or entity will pay attention to you every second and especially not forever. This means bosses may leave, your company’s situation may change, the ecosystem may change and heck, you may change. This means there are a lot of wasted movements/efforts you are performing daily that will yield little or no actual financial returns. It’s not just your time you are exchanging money for. Most of the time you are giving up opportunity costs such as time away from doing things you like or need to do like enjoying life, taking better care of your health by being in a better physical and/or mental state, time with your family and friends and developing your other times etc. I live in America which means I have the rights to exercise reasonable free speech as permitted by the law. All posted content(s) on this website are my opinions only which means they should not be taken as advice of any kind. I am a non-celebrity, non-public figure posting anonymously for my own entertainment on a website that is not affiliated with any individual(s), organization(s) and/or any entity/entities.
The Risk-Adjusted Above-Average Life-Time Earnings (RAAALTE) method for decision making.
The RAAALTE method, created by your favorite TPC, may help transition the Western world into a more MEI based society. In many of the non-democratic regions, they do not allow any deadweight to weight down their “common prosperity” initiatives with all kinds of “programs” and “incentives” to ensure its populace stay on the MEI side of the coin. WAFRL is basically the risk-free, default setting because with enough efforts and time, anyone who is decently intelligent and fully dedicate themselves to hone-in their craft will reach this level. AAFRL regards a lot of skills, balancing and slickness/finessment. The earnings differential between AAFRL and WAFRL is essentially the risk-adjusted upper bound incremental earnings above risk-free levels. If you can’t conformably side hustle, the job is probably dead-end.
Since I am just writing for fun and you are likely not a mathematician or a financier, I will make it easy for both of us. The RAAALTE method is simply taking the net present value calculation and modifying it. The NPV formula already takes into account compounding and opportunity cost expressed in money terms. The formula on the left-hand side will represent present value of future expected returns from performing at level that is AAFRL which translate into the English language as optimal side hustling which can include anything from moonlighting and entrepreneurship to learning a new skill or pursuing a degree/certificate, without getting fired with a safety margin of +10% extra effort above the expected getting fired level. The getting fired level can be gauged by “comping” the level of perform of the lowest performing active employee within your department. The net cash flow aka CF in this case will be what you make in your career at the AAFRL level including 401k, social security contribution and whatever other cash equivalent benefits you get plus what you will make once you receive the full payoff from your side hustle returns minus the calculatable cost you incurred maintaining AAFRL levels plus costs associated with pursuing your side hustle(s). Your “r” will be the rate in which you believe the discount rate will be. Given you are in control by doing something you actually feel comfortable in pursuing and likely have above-average control than most passive investments, I think the 10% ballpark average from US equity returns is a good rate to use for the discount count rate “r” representing the opportunity cost. The “t” or time period should be based on how many years you see yourself actively “working.” The “n” is the frequency of compound such as compounding once a month, once a quarter, once a year etc. Ra is the expect probability of the CF actually materializing. For example, if you expect there is only a 20% probability the CF will actually materialize, then take all the CF inputs and output as mentioned above, net it, then multiple it by the probability percentage of 20%.
Without any technical knowledge about finance, AI can probably help you calculation all of this based on frequency of compound, period..etc. The left and the right of the minus sign should be exactly the same. The difference is the one to the left of the minus sign represent the AAFRL level output and the one to the right of the minus sign represent WAFRL level output. I know money will grow money, since we are comparing apples here, we will ignore the money beget more money compounding impact beyond the number of years in this calculation. In essence, the RAAALTE formula modifies the NPV by replacing the “initial investment” calculation on the right side of the formula after the minus sign with the same calculation on the left hand side. RAAALTE tells the story of worthiness of extracurricular activities beyond the normal trajectory in financial terms whereas RAAALTE ratio tells the story of the portion of differential from the extracurricular activities compared with normal trajectory as a percentage. RAAALTE in principle combines the tangibles and the intangibles of everything in life expressed in absolute and comparative formats taking into account opportunity costs and time value of money.
Simply speaking the formulas should be thus:
Risk-Adjusted, Above-Average, Life-Time Earnings (RAAALTE) = AAFRL – WAFRL
Risk-Adjusted, Above-Average, Life-Time Earnings Ratio (RAAALTE Ratio) = RAAALTE/WAFRL
Whereas:
AAFRL = ((CF*Ra)/(1+r)^t compounding at “n” frequency
WAFRL = (CF*Ra)/(1+r)^t compounding at “n” frequency
To me, a RAAALTE ratio of above +500% is probably a no brainer decision. A percentage that is between 100% to 500% is probably a reasonable decision. Anything below a 100% is probably not worth the risk. For example if you expect to earn 1 million USD from AAFRL level and expect to earn 700K USD from WAFRL level which will derive a RAAALTE of 300K USD, at a ratio of about 43% (300K/700K), it might not be worth the risk.