Have you ever wondered why most banks tend to have clocks posted outside their buildings? Is it just some kind of tradition that started somewhere, or is there a deeper meaning involved? Well, it’s not accident that banks and banker are obsessed with clocks. More than anyone else, bankers understand: Time is money.
On a simple level, it’s not difficult to understand why. Just for the sake of example, let’s say you borrow $1000 from a bank at rate of 5% annual interest. In one year, you would pay back the loan, the $1000 plus 5%, for a total of $1,050. The bank used “time” – one year, to change your $1000 to $1050.
The concept that time is money goes back to at least to a man by the name of MartÃn de Azpilcueta, a Spanish economist who lived in the 1500s. He was one of the first to develop a specific concept or theory of money and its connection to time.
But the idea that “time is money” can be traced back to at least 200 years before the days of Azpilcauta The tradition of banks posting clocks outside their establishments began in the early Middle Ages, according to sociologist Morris Berman. After the Thirteenth Century clocks in Italian cities “struck the 24 hours of the day,” Berman said in his book, “The Reenchantment of the World.”
It’s no accident that a new form of economic commerce was emerging in the 13th and 14th Centuries, Berman said, especially in Italy, where a new form of economic reckoning was replacing the old, crumbling feudal systems. That new form of economics was the dawning of a new kind economic system: Capitalism. Of course, true free-market capitalism as we know it today would not solidify until about the 1700s, but the idea that money could be affected or leveraged by the passage of time was off and running in Europe well back into the Middle Ages.
Today, most people take it for granted that “time is money.” It’s a concept that has become so embedded in our every day way of life, and set so deeply into our thinking, we can’t imagine a time or world when this wasn’t so. But before year 1200, say, almost no one thought of time as money. An actual mechanical clock for people to read was rare. (Sundials and water clocks go back many centuries, but that’s another story!). Before the invention of modern clocks, there was not such an obsession over time.
Millions of people today get paid “by the hour” which really drives home the concept that time is money. “If I work 8 hours for $10 per hour, I earn $80!” And note how the concept of time works into our language in many ways. If a person puts in more than 40 hours per week, that is considered “overtime.” This latter “kind” of time, “overtime,” is often more valuable than “regular time” because the person gets a higher rate for working more hours.
Because time is money, the business of “effective time management” has become an industry in itself. You can buy books on how to use your time more wisely, take seminars on time management, and learn “tricks” to make more effective use of your time. We all are interested in using our time better because this generally helps us to make more money.
Interestingly, one of the ways to make even more money is to get away from working for pay based strictly on time. Some people don’t get paid by the hour, but rather by the year, with an annual salary. Salaried jobs in general are higher paid than hourly wage-working jobs. The trouble with hourly wages is that there are only so many hours in the day, so no matter how much you want to work, your time is limited.
But those who want to make real money, big money, learn to leverage time to their advantage. That’s what banks do. After a banker makes a loan, his work is finished and time becomes his ally. The banker creates a loan, and then another, and another – and soon he has all kinds of instruments earning money for him – and his money is being compounded by time. It’s an incredibly way to make time work for you, rather than working “for a time” to earn a finite about of money.
Most have the “time is money” embedded into our consciousness from a very early age, to the point that we assume it is a natural part of existence. But there is nothing natural about it – it’s an artificial concept that has been around for only the last 500 or 600 years.
