Modeling
Human Resources — Non-Renewability
A person’s most precious resource is their time and energy (energy can also be called attention). We call this most precious resource human resources. It is precious because, at least from the current perspective, a person will eventually die, which means the total amount of human resources they can command in their lifetime has an upper bound. Some people may live longer, and some may seem more energetic, but ultimately there is an insurmountable limit.
The most essential characteristic of human resources is non-renewability. Similar to non-renewable resources, the only way to “expand” it is by reducing expenditure. In other words, what we pursue is to spend our human resources as much as possible on the things that truly matter in our lives, rather than on the things that merely satisfy the necessities of living.
A person no longer has to sell their time to meet the necessities of life. — Li Xiaolai, The Road to Financial Freedom
Compounding Things
In contrast, there are things with compounding properties, such as capital. Formally, we can describe this property with a simple mathematical formula:
$$
k(1+c)^x
$$
Where k represents the initial value, c represents the average growth rate per unit of time, and x represents time.
The essence of compounding is that the output of a thing can be fed back into its input.
This property is crucial. For example, in investing, our assets grow like a “snowball” over time, and the returns on investments serve as principal, continuously expanding the scale.
On a broader scale, one important reason why Homo sapiens became what they are, distinct from other animals, is that the evolution of the brain enabled the maturation of symbolic abstract thinking. This allowed what we call “knowledge” to accumulate and develop across individuals and across generations within the population.
Don’t underestimate this point. This property creates a “compounding” effect—the output of human knowledge continuously feeds back into the input, causing overall knowledge to accumulate at an exponential rate. This allowed biological evolution to break free from the nearly linear pace of genes and develop at an exponential rate. The 300,000 years of human development is but a fleeting moment compared to the 3+ billion years of Earth’s biosphere, yet humans have leveraged this compounding effect to achieve unprecedented accomplishments. We can clearly see that the closer we get to modern times, the faster this pace becomes—so fast that our biological evolution lags far behind our knowledge. Such is the power of compounding.
Consider the increment of things with compounding properties. If we take the derivative with respect to time x, we find that the result is still an exponential function:
$$
k\ln(1+c)(1+c)^x
$$
This means that even if the growth rate of compounding itself remains unchanged, the increment will grow larger over time. As long as the initial value is large enough and the compounding state is maintained, we don’t need to work hard to change c to obtain a substantial, continuously growing increment.
But human resources are exactly the opposite. Let the total amount of human resources a person possesses in their lifetime be $I_{all}$, and the total human resources that must be spent on meeting the necessities of life be $I_{necessary}$. Then we can simply decompose I into two parts:
$$
I_{necessary} = a x + b
$$
Where x also represents time, a represents the long-term recurring component, and b represents the short-term one-time component. The long-term recurring component is the amount we need to spend every day throughout our lives—it is persistent. The short-term one-time component is the amount invested all at once in a few moments—it is not persistent.
What we pursue is to put as much of our discretionary human resources $I_{free}$ as possible into the things we truly care about. Let’s first consider the discretionary human resources $I_{free}$:
$$
I_{free}
= I_{all} - I_{necessary} = I_{all} - ax - b
$$
Taking the derivative again, we find the result is -a. This means that if we can reduce the value of a as early as possible—those persistent, daily recurring investments—then our discretionary human resources will be greatly increased. Even if this comes at the cost of increasing the short-term one-time component b, as long as there is enough future time x, we can still gain more $I_{free}$.
This might sound a bit abstract, so let’s use a simple, concrete example to illustrate. Suppose a person’s belongings are scattered around in disarray, and every time they need to find something, it takes a lot of time to search—sometimes they can’t even find it and have to buy a replacement. It’s foreseeable that if this state continues, according to the law of large numbers, they will inevitably spend extra time on similar things at some point in the future, which converts the potential $I_{free}$ into $I_{necessary}$.
But if one day they decide to thoroughly organize their belongings, use storage cabinets to categorize them, and maintain this state going forward, they are essentially transferring the long-term component a of the originally occupied $I_{necessary}$ into the short-term component b. In the long run, this is guaranteed to save potential human costs.
This is also one explanation, under this mathematical model, for the oft-repeated importance of “developing good habits.” In the long run, a good habit can continuously save you potential human costs.
Conclusions Naturally Derived from This
To increase $I_{free}$, we can approach it from the following angles:
- Increase $I_{all}$. This includes maintaining the length of life as much as possible, as well as the daily “utilization rate” of human resources.
- The length of life can be achieved by maintaining a healthy body. A healthy body can also, to some extent, improve the utilization rate of human resources.
- Additionally, having an excellent human resource allocation mechanism can improve the efficiency of human resource utilization.
- Reduce $I_{necessary}$.
- Reduce the value of a as much as possible. This can be achieved by:
- Improving work efficiency. This can be done through continuous skill refinement. For example, improving the efficiency of tightening screws.
- Through a systematic optimization, reducing as much of a as possible at the cost of a certain increase in the short-term component b. For example, by designing a storage system for items to reduce the human cost of retrieving them over the long term.
- Reduce the value of a as much as possible. This can be achieved by:
For things with compounding properties, such as wealth, knowledge, and connections, we should start accumulating as early as possible and maintain a state that yields long-term compounding returns. These compounding resources can help reduce our $I_{necessary}$.
Additionally, we expect that the $I_{free}$ we possess can be used more efficiently to pursue the things we are truly interested in. Therefore, finding our sense of life’s meaning and figuring out which things truly interest us is also very important.