How to Earn Money From Your 'bad' Habits by Investing
There must be a simple systematic way to profit from things we are addicted too? Netflix binges š
We are constantly told by our favourite internet entrepreneurs, productivity hackers and know-it-alls in general, that there are optimal ways to utilise our time to yield the greatest utility. A big chunk of the economics is dedicated to formulating just that. It really does bring up philosophical debates about what the meaning of life is: to build, to enjoy, to create, to work?? to be perfectly efficient super creatures??? Iāll save that for another day, but what I will explore, is whether there is a way systematically profit from things we are addicted to.
Let me begin by making a statement, and if you donāt read the whole of this blog which explains the reasoning behind it, then at least you would have read the statement - the absolute key takeaway.
āThe best way to offset the downside of being addicted to Netflix is to buy its stock so that at least you participate in the gains the company makes from taking money every month from the pockets of addicted people just like us.ā
If there is a service that I knowingly or begrudgingly overuse or find myself dependent on, I look to acquire some sort of exposure to it. Whether that means developing ownership through shareholdings, participating as a creator or using affiliate partnerships to get exposure to the companyās success. Iām most interested in ownership through shareholdings. Due to restrictions based on the nature of my day to day work, I must invest on a broad basis so my way of doing this is to buy the trend. So I may look for a broad based ETF that owns a basket of streaming stocks, including Netflix potentially as the largest weighting. The cleaner and more pure way would be to outright buy Netflix stock.
Now, I am not saying go and buy Netflix stock but I think it highlights my earlier statement in superb fashion. Itās a simple principle. If you find yourself overusing a product or service, it probably gives a decent non-financial indication that it is actually a quality offering. Your addiction actually serves as due diligence into whether there is sticky revenue generation. Granted this is skewed towards B2C type customers and rightly so because as the customer you directly have an insight in to the āCā part of the equation. That is far more difficult to achieve when you are an outsider looking into a B2B relationship. Alas, I digress, back to the matter at hand.
If you find yourself spending too much on pampering products, buy LāOreal stock. If you find yourself spending too much on designer garments, buy LVMH stock. If you own you house on a leasehold basis, buy your homebuilders stock. You get the drift, if you feel as though you are getting the shorter end of the stick by overusing a service or overbuying a product, align your pockets with the company that enjoys the longer end of said invisible stick.
So what does this actually mean in practice, how does it play out? The key is working out some sort of systematic scale that is logically defined and easily replicable. For example, letās say we want to invest in Netflix shares and target returns to cover our Netflix bill for as long as we are subscribed, I dunno 20 years or something right? So we need to work out some numbers: the amount to invest and the profit target.
Letās work out the percentage Netflix represents of your total monthly expenditure:
[ London average adult expenditure: Ā£824.49 ]
In this case, itās around 1% given subscription is about Ā£8.99. This will help form the target returns on the minimum amount we want to make on the investment.
On top of that, work out the amount of hours you spend watching Netflix. Iām just going to use some average numbers.
[ 2hrs18mins in the UK per day as of 2018 = 69 hours per month ]
Now multiply the total hours spent watching Netflix per month by your hourly rate:
The amount you would charge someone for 1hr of your time for work purposes = Ā£14.80 which is the median hourly wage in the UK
In this example, the equation would look like: 69 hours * Ā£14.80 = Ā£1021.20. We now have an indicative size of investment to put to work, derived from the hourly rate we forego by binging and not working. Looking back at subscription costs, Ā£8.99 is about 0.90% of Ā£1021.20 so on a monthly basis, that is our minimum investment target. If we stay subscribed for the next 5 years, Ā£540 is the target over that time period which is about 50%.
From this, we have derived a sensible amount to invest into Netflix shares to help offset overuse of the service. No more feeling guilty for binge-watching, by streaming you are actually helping your investment. By using a systematic approach, we can see how much time in Ā£s is given to Netflix and therefore how much makes sense to put to work within the same machine as a means to earn it back.
I am not telling you to sell your house and put it all into Netflix shares, I am here to get the brain juices flowing and hopefully helping to get you thinking creatively and systematically.
A similar approach can be taken for a whole host of areas which I will explore in the future. Some pertain to overusing services and overbuying products while others are more to do with hedging existing income through investing.
As with all investing, there are significant downside risks as well as potential to make Ā£Ā£Ā£ so if you are new to the game, please ensure you have looked at my 10 pre-investing keys, be sure to do independent research and seek advice from professionals before getting stuck in.
Catch you next time āš¾
Josh.