The Income Energy Product: A More Meaningful Way to Assess the Value of Your Job
Why absolute and hourly income miss the main point
Compensation is one of the main criteria for evaluating a job.
A six-figure income has for a long time been a benchmark of success, and what many people — especially millennials — aspire to.
But while absolute salary is a very alluring metric, it only paints a very limited picture. Even if they might make the exact same amount, there is a huge difference between, to take an extreme example, an investment banker working an average of 90 hours a week and a highly successful author living off royalties and the occasional speaking engagement.
Absolute income says nothing about how much life we have to sacrifice in exchange for it. And more and more people are waking up to this fact.
In recent times, along with the rise in freelance work and the gig economy, there has been a shift in focus from absolute income to hourly income.
Hourly income captures much better the tradeoff we have to consider, and the value we put on one of our scarcest commodities: time.
While this is certainly a big step forward, I think it actually still misses the main point. More time is helpful, but it doesn’t by itself guarantee more life.
There is something even more scarce and valuable than our time that we are trading for income: our energy.
Just like more money is useless without the time to spend and enjoy it, more time doesn’t hold much value if we don’t have the energy to really live it to the fullest.
How much energy and attention we exchange for money really captures how much of our life we are trading for income.
Just because you only actively work X hours doesn’t mean that you have the other 24-X hours a day for yourself at peak energy.
Some jobs cause so much physical, mental, and emotional exhaustion that they essentially take up your entire 24 hour day.
On the other extreme, some select few of us are lucky enough to have jobs that actually fuel our off-hours and give us more energy back than we put into it. While such a job might also take X active hours, the remaining 24-X hours are not only not diminished, but positively boosted by the work.
The income/life-relationship turns from tradeoff to amplification.
Reclaiming My Energy
Personally, I had a number of different jobs in the past where I worked more or less eight-hour days. But how much energy and life was left in the remaining 16 hours varied dramatically between them.
A little over a month ago I decided to finally leave full-time employment entirely and set out to work only on projects that are deeply meaningful to me, such as building the business around my bestselling book Time Off, and exploring the mind-body connection through my own unique lens of music and AI.
About two weeks into this new adventure I felt something big: for the first time in months I was sad at the end of the workday because the day was already over and I still had so much energy. I wanted to keep working. The more I worked on the stuff I cared about, the more energized I felt.
But luckily this excess energy, creativity, and joy was not just restricted to work. I carried it over into my free time as well. And best of all: this was not an isolated occurrence. I started feeling this way day after day.
This realization got me thinking a lot about energy and made me reassess my goal of maximizing hourly income rather than absolute income.
I now believe that what we should really try to maximize is what I’d like to call the income energy product IEP, an energy-adjusted form of income.
The Income Energy Product
The income energy product is made up of two multiplicative factors: the absolute income I, as well as a coefficient of remaining energy CRE.
As an equation, IEP = I x CRE.
The absolute income is just what it sounds like: how much you make in, say, a year. The coefficient of remaining energy needs some explanation though.
Essentially the CRE captures the fraction of your daily available energy that you do not trade for your work.
If you have perfect work/life-separation with a job you just do during work hours and then completely forget about during off-hours, that’s equal to the fraction of time you’re not working, e.g. two thirds (16/24) for an 8-hour workday. This is the kind of job that you simply do for the money, but that otherwise doesn’t affect you positively or negatively.
Unfortunately, what more and more people are experiencing — especially with the added stresses of the pandemic — is work that is much more energetically draining than the mere hours would suggest.
If you work 8 hours a day in such a job, even though you still have two thirds of the day available to you, your remaining energy, your CRE, is significantly less than that. At the extreme end, with a job that completely burns you out and leaves you with zero energy, your CRE is zero.
While a CRE that’s lower than just the fraction of time you are not working is the current reality for most people, there is also another side. And I hope that over time, more and more people will be able to reach this state.
This is the regime of jobs that energize you and add value to your life beyond the financial remuneration.
If you still have a full day’s worth of energy in your free time despite putting some time and energy towards work, that’s a CRE of one.
But there is no upper limit. And the real magic happens when you get above one. Not only does your work not take any energy from you, but it amplifies everything else you are doing.
This is the kind of work people would do even if they weren’t paid for it. The kind of work that gives you a deep sense of meaning and purpose. This is also where a lot of peak performance is happening, and often a large part of such work is spent in flow states.
The Income Energy Product in Action
With the definitions out of the way, let’s look at some examples.
Let’s just say our investment banker from earlier averages 12 hours of work per day. That already puts him at a base factor of 0.5. But chances are that those kind of hours, especially if they happen consistently, leave him stressed or even burned out in his off-hours, dragging that value even lower.
Let’s say he essentially ends up getting only 20% out of his remaining day (which, if he’s genuinely burned out, is still be pretty generous). That’s a CRE of 0.2. Looking at the IEP, a $100k absolute income suddenly turns into a meager $20k energy-adjusted income.
Someone with far lower absolute as well as hourly income, for example a part-time preschool teacher who derives a lot of joy and energy from her job, might easily be able to match or surpass this through a much higher CRE.
Of course it’s worth noting that if your absolute income is not high enough to financially support you, this negatively affects your energy as well through all the stresses that come with the situation, and should be factored into the CRE. Up to a certain minimum threshold, absolute income does matter a lot.
Personally, quitting my full-time job and going freelance has more than halved my absolute income in the short term.
But I know my energy, happiness, and overall wellbeing have gone through the roof.
I’d estimate that my CRE has gone from well below 0.5 to at least 2 or more. Working on the things I’m working on is how I want to spend my time. It’s no longer a tradeoff, but a multiplier.
As a result, even though my absolute income might have halved, my income energy product has doubled thanks to my CRE being four times higher.
And it gets even better. The immediate CRE increase is not the only multiplier at play here.
In the long-term, I’m convinced that if I work on something meaningful and spend lots of time in flow, the absolute income will follow (if I want it to), catching up and eventually far surpassing any salary I could get in a normal employment situation.
Peak performance (and the financial rewards that can come with it) are almost mutually exclusive with a low CRE. Over time, a CRE above one leads to a positive feedback loop. Increased energy and wellbeing lead to more flow and performance, which in turn feed into greater energy and wellbeing.
Chasing the Right Metric
I invite you to pause for a moment and reflect.
If you’d have to estimate your own CRE, what do you think it would be? Is the highest paying job you ever had also the one with the highest IEP?
There is absolutely nothing wrong with your CRE being below one. At least for now, that’s the reality for the vast majority of people, and I know that I am speaking from an extremely fortunate position (although I do hope that we can gradually raise the average CRE).
We also shouldn’t forget that the IEP is still a product with two factors. In some cases, you might consciously choose a lower CRE if the associated income justifies this tradeoff.
Finally, it is worth noting that the CRE is a subjective quantity. In fact, it is subjective in two ways.
First of all, there is no hard rule to calculate it, we can at best estimate it.
But more interestingly, the exact same work can have a dramatically different CRE for different people. What fills me with meaning and energizes me might completely drain you and make you miserable, and vice versa.
However, despite this subjectivity, I think the coefficient of remaining energy and the income energy product are powerful assessment tools. We should all start to seriously consider our CRE and IEP, whether we use them to assess our current situation or try to decide between different career options in front of us.
As a final side-note: If we somehow find ways to define and capture the CRE more quantitatively, its average across a population, say a country, could even be a great indicator of wellbeing and progress that goes much beyond GDP (similar to metrics like the Genuine Progress Indicator GPI or the Index of Sustainable Economic Welfare ISEW). Through a similar product as the IEP, it could give us a wellbeing and energy adjusted form of GDP.
But this is a consideration for other times (and probably for people far more qualified in economics than I am).
For now, I just hope I got you thinking about your own income energy product, and hopefully set you off on a quest to maximize the right metric.