Early Retirement Extreme

"Fisker says you should be able to retire after 5 years of full-time work. HIs justification: you’re capable of becoming ultra self-reliant and can decouple yourself from the market to fulfill your needs.<br/><br/>It’s a tantalizing premise. Fisker goes into great detail about his philosophy as well as the many lifehacks he uses to minimize his expenditures and maximize his investment income. Unfortunately, his writing style verges on “crazy hippie ranting alone in the woods” and is difficult to get through at times.<br/><br/>His most interesting point is that our modern society has fetishized specialization to the detriment of self-reliance and resilience. This causes us to spend a giant chunk of our life in school so that we can get a high-paying job and then can afford to pay plumbers, chefs, carpenters, etc because we’re not capable of doing anything outside of our own narrow specialization.<br/><br/>Fisker points out that this wasn’t always the case. Hundreds of years ago, the reflowering of western civilization birthed a new ideal - the Renaissance man. The Renaissance man rejects specialization in favor of a broader education and understanding of the world. Importantly, this is a far more resilient lifestyle than that of the specialist.<br/><br/>One of the reasons I love reading these early retirement guys is that they all talk about what to do when you retire at age 30. How do you “find something meaningful to do instead of work” once you’re retired? This is the question that we’ll need to answer as we enter the robot age… and personal-finance guys seem to be the only ones seriously thinking about it!<br/><br/>Best quotes below<br/><br/>######################<br/><br/>What I'll describe here is another kind of life, the life of an independently wealthy and widely skilled person--a modern Renaissance man<br/><br/>Instead, it's necessary to understand how the world works and how people have been specialized to the point of general incompetence, like ants, which only know how to do one job, but do it very well; this is not human nature.<br/><br/>In many ways, modern society seems to be using a slightly more complicated version of a Keynesian economic stimulus scheme where the economy is stimulated by having some people dig a hole, then having others fill it back in the next day. We create problems, spend the next day solving them, and then claim we have made progress. We're even following Keynes' suggestion quite literally when we dig resources out of the ground, fashion them into consumer objects, temporarily store them in our homes, rarely use them, and eventually replace them with a new and bigger model, while sending the old and likely still functional object to a landfill--back in the ground.<br/><br/>On the other hand, people in our "advanced" civilization know practically nothing about our world. Despite being wholly dependent on technology for all our needs, few understand how technology provides us with light, heat, food, communication, transportation, etc. All we know is how to turn on the ignition and press a button so technology magically performs its intended function. Despite their "education," students are still left to magical thinking and are thus unable to understand the direct causes in the world around them.<br/><br/>If you are sufficiently smart and ambitious to get into a top-ranking university, the value added by the educational institution apparently doesn't matter for your future success. In other words, top-tier institutions don't add value to create talent as much as they select or discover it. Thus, if you were smart and ambitious enough to actually get into an expensive top-tier university, you don't actually need to go to a top-tier university to succeed in life.<br/><br/>Creating a system based on specialized production thus increases productivity, but at the cost of increased risk to and pressure on the individual. Another feature of specialized work is that it depends on expending resources such as time and energy. Therefore, specialization is not an optimal strategy for those who seek balance in their life. Those who take some time or energy off to pursue other interests will surely be overtaken by another specialist, who sleeps less or does not have other responsibilities. The competition is intense.<br/><br/>On the homefront the growing use of time-saving technology doesn't result in time saved either. Rather, it results in more being done. For instance, thanks to the washing machine, clothes are now washed more than ever before, and as a result households spend as much time doing laundry as they did before washers moved into people's homes.<br/><br/>Unlike businesses, consumers rarely use debt to invest and generate an income. Instead, they use debt to purchase consumables like vehicles, houses, furniture, and electronics, which don't generate income. In this case, interest is no longer the cost of doing business. It's now the cost of living beyond one's means.<br/><br/>The systemic consequence of this waste is that prices in a debt-driven society are higher than they would be in a cash-driven society, simply because more money (credit) is chasing the goods. This leads to bubbles and crashes due to credit being either too cheap or too expensive, and a psychological lag leading to a bipolar economy of alternating optimism and pessimism.<br/><br/>Retirement for those who are too old to work and take care of themselves can't be financed by credit because of the difficulty in paying back the loan. Traditionally, those who are too old to take care of themselves have relied on having children and instilling a feeling of filial duty. However, those filial feelings are perhaps no longer as strong as they once were, with parents having sent their children off to institutions from a young age and only really interacted with them for a few hours a day, being busy with their careers and lawns. Children thus often prefer to send their parents to institutions of their own during old age, in turn.<br/><br/>Buy and hold is an investment strategy with no exit strategy. What this typically means is that stocks are usually liquidated when money is needed, rather than taking into account when a given stock is overvalued. The aggregate effect of workers investing in this manner is to turn the stock market into an elaborate demographical Ponzi scheme, where the value of investments depends on how many people are retiring and how many people are entering the labor market.<br/><br/>Nobody thinks of using improvements in technology and productivity to allow people to work less and require fewer assets to achieve the same standard of living. Instead, while everybody is richer, at least in terms of stuff, no one is any wealthier. Their wealth is "safely" out of reach. If it weren't, how many would still show up for work the next day?<br/><br/>For a consumer, food, shelter, etc. are tightly coupled to a paycheck, which is not good.<br/><br/>Unlike a business, which invests the money in assets with a higher return, allowing businesses to use debt as a leverage, consumers "invest" in higher consumption. The lack of return on assets to pay the interest means they must either work harder or longer for their consumption, and so they do. Add lifestyle inflation (see The pursuit of stuff, status, and happiness) and you have a process that inherently demands more and more work while quite possibly providing less and less contentment. This is the definition of a wage slave. Wage slaves are free to change their job, but they're not free to quit their job. Wage slaves are free to choose other products as long as they can afford it, but they're not capable of creating alternatives to buying products, because they're too busy working.<br/><br/>The Renaissance man is capable of many different things and doesn't restrict himself to vocational skills. He does his own taxes and researches his own investments. He can fix a computer or a broken appliance. He knows how to drive and fix a car, but he has enough time and athletic ability to ride his bicycle 20 miles instead, or run five miles to get groceries. Physically, he keeps up with people decades younger than himself. He can play an instrument, dance, paint, or write creatively. He can create interesting meals from scratch rather than recipe. Socially, he knows who to ask for help, who needs help, and how to put people together to efficiently solve problems. He is a leader or an inspiration to other people, whether it is personal, local, national, or global.<br/><br/>Doing something that is considered very difficult at least once in your life is highly recommended.<br/><br/>The Dark Ages gradually ended six centuries ago with the Renaissance, which seeded new ideas for a different world. The Renaissance ideal dominated our culture until three centuries ago, from the 14th to the 18th century, when it was superseded by modernism. Not surprisingly, this human ideal has almost been forgotten in our culture.<br/><br/>When a new field is invented, it's not the salary men, the businessmen, or the working men who dominate it; it's the inventors--the Renaissance men. A new field does not need to be commercial, nor does it need to sweep the world or usher in a new era. Whether it's raising goats or a family, starting an ecological community or an IT company, or preparing for the end of the world, the Renaissance man is the one who will get it done.<br/><br/>Yet this will all be decided by those who live now; in part by you, and none will be more ideally prepared for a changing world, indeed to change the world, than a Renaissance man.<br/><br/>It is hard to master even one narrowly scoped field of knowledge (see The cost of specialization), let alone two or more. Some people therefore claim that it is impossible to be a true polymath anymore. In my opinion, the modern ideal of a polymath should therefore not be an absolute measure of mastery in all subjects. Instead, the objective should be to strive for competence in a range of important subjects…. Once a threshold is reached, the synergy between different subjects will help you create new solutions. Since all human knowledge is based on a limited number of mental models, the stronger and wider this foundation of models is, the easier it is to gain new knowledge.<br/><br/>If you want to change your life, don't be tempted to outsource your life or your operations. You'll never know which kind of connections or synergies you're missing and you'll only make yourself more dependent on your suppliers.<br/><br/>It is curious that experts recommend that investments be broadly diversified, while at the same time recommending that job skills should be highly concentrated. The Renaissance man has a lot of diversified human capital, but it will be difficult, though not impossible, to sell it on a market tailored for specialists. Selling isn't the point, though. Rather than focusing on how to sell, it's often more efficient to focus on how not to buy! And a wide assortment of skills can substitute for a lot of otherwise required income.<br/><br/>Which skills should one focus on? The Renaissance men of the 17th century strove to increase their ability to defend themselves with a variety of weapons. play a variety of musical instruments and paint. debate politics and philosophy. advance knowledge and the sciences. be an accomplished author and poet. For our modern purposes, the fields can perhaps be grouped into seven generic fields--physiological, economical, intellectual, emotional, social, technical, and ecological.<br/><br/>There are few combinations more dangerous than an intelligent person without knowledge, experience, and wisdom.<br/><br/>It's commonly thought that independence is mainly achieved through a large income. Rather than working to establish such a large income, it can, however, just as easily be gained by acquiring skills instead.<br/><br/>With experience, you'll see that the number of such models in the world is actually quite limited. What this means is that any kind of human understanding is based on a small number of representations that are repeated over and over. Perhaps this is because humans are only capable of thinking in certain limited ways, so the same methods are discovered independently over and over by successful experts in different fields, or perhaps experts tend to borrow from each other, seeking inspiration elsewhere; it is probably a combination. This means that one doesn't need another 10,000 hours to become an expert in another field, even if it's only marginally related. It means that it's easier to master several different fields than is commonly assumed. It's important to understand that doing the right thing (good strategy) is much more important than doing things right (good tactics).<br/><br/>This is the consequence of specialization. The solutions to his problems, except the very specialized problem detailed in his job description, have been outsourced to the marketplace and personal competence has been lost or replaced with information on "where to find good deals." Eventually he comes to depend strongly on this marketplace and hence on his continued employment.<br/><br/>The solution is to reverse the outsourcing of ordinary life skills and gradually insource skills that were previously acquired in the marketplace to become less dependent on a single source of income. become less dependent on a multitude of store services. <br/><br/>For the Renaissance man, however, the end goal is to blur the line between work and life rather than a balance between work and life.<br/><br/>Most wants are internal, so focusing internally and "doing without" is often a less complicated way to solve a problem as it mainly requires strength of character rather than skills or connections. Rendering wants superfluous requires little technical skill, but it does require motivation and self-discipline.<br/><br/>With just a little experience, the only thing that will separate your work from that of a professional is that the professional can do it five times faster than you can do it--the first time… This means that anything done more than once is worth doing yourself.<br/><br/>Freedom is attained by creating a large gap between production (revenue) and consumption (expenses). This can be done in two ways--earning more or spending less. Nothing new there.<br/><br/>The strategy described in this chapter focuses on living inexpensively in a culture dedicated to extravagance, productivity, and material waste. It follows these guidelines: <br/>Reduce wants and needs from the marketplace to a minimum to decouple the buy-work connection. <br/>Decrease the volume and size but increase the sophistication of your activities and possessions. <br/>Measure prosperity by less activity, not more. Do fewer useless things. <br/>Work for the purpose of earning money for no more than five years of your life or five hours a week. <br/>Avoid generating waste and find ways to use the waste of others. <br/>Learn to use the system to your advantage, but don't be evil! <br/>Serve yourself rather than having others serve you. Instead, help them. <br/>Keep running costs down but pay for value. <br/>Maintain health to avoid the personal and monetary cost of sickness. <br/>Build up the capital to live as a capitalist or the skills to always find a new job. <br/>Focus on productive assets rather than stuff. <br/>Focus on developing skills rather than on passive entertainment. <br/>Gain the maximum in satisfaction with the minimum expenditure of money and energy.<br/><br/>From a skill-based-Renaissance perspective, possessions are problematic in the following ways and acquisition should therefore be considered carefully: They cost money. They take up space. They require maintenance. They often act as a gateway to additional or more expensive things. They can be taken away from you. They are hard to get rid of.<br/><br/>Generally, renting is an overused method when it doesn't benefit the consumer, and an underused method when it would benefit the consumer. Consequently, if you're used to buying something, you should look into how and where to rent. Conversely, if you're used to renting, calculate whether it's worthwhile.<br/><br/>Skills that are likely worthwhile include woodworking, electric work (wiring, soldering, etching print boards), engine work, vehicle maintenance, cooking, preserving, clothes repair (mending, hand and machine sewing), and house maintenance/handyman work.<br/><br/>If the curve is trending downwards, the fixer-upper strategy is to buy something in poor condition, fix it up and sell it later. This will make the holding cost zero. This way you can own expensive items, like boats or cars, for almost no cost.<br/><br/>I think that a good guideline per person for living arrangements is $200-350/month/person or about 10-15% of your net salary. If anyone tries to convince you to spend more, they're trying to sell you into a lifetime of wage work<br/><br/>The second method is to buy in bulk. Shop for groceries once a month. This will be similar to provisioning for a cruising boat, and books on cruising will offer detailed instructions for how to do this, even without the need for refrigeration. Alternatively, survival literature will provide plans for even longer food storage.<br/><br/>There is an absolute standard of fitness. To be fit is to be able to drag or carry an unconscious adult out of a burning house on one, maybe two gulps of air. Alternatively, it's to outsprint a dog, given a head start, and climb over a 7ft wall. To be fit is to be able to fight and defeat anyone who can outrun you and outrun anyone you can't defeat.<br/><br/>Budget $80/person/month for food and only shop once a week, keeping track of food costs with a notebook or by paying in cash.<br/><br/>In conclusion, I don't believe that adding members to our household would materially change the possibility, form, and implementation of financial independence.<br/><br/>Net savings--lifetime income minus lifetime expenses--equals a person's contribution to society. It illustrates how much the person has given versus how much the person has taken on an economic basis, as measured in money.<br/><br/>Within the context of the Renaissance lifestyle there are three financial strategies to pursue: Intermittent work, financial independence (early retirement), or semi-retirement supported by a form of part-time work.<br/><br/>N=log[(1)/(1- (P0)/(p)(i)/(1+i))]/log(1+i). From this formula--which incidentally is the point where you can wake up again if you fell asleep during the derivation--we see that if we have a P0=10 year fund which pays out p=1 annually at a 4% (i=0.04) interest, it lasts N=12.38 years rather than 10 years. In comparison, a 20 year fund with the same parameters lasts 37.39 years. This is highly interesting, because by doubling the savings before beginning the withdrawal, an additional 15 years was gained on top of the 2.38 years from the 10 year fund's interest. This equation is the key formula for extreme early retirement, so pay extra attention to this paragraph! The formula relates the number of retirement years (your life expectancy upon retiring) to the rate of return on your portfolio and the size of your portfolio given in either withdrawal rates p/P0 or the equivalent "years of fund" as illustrated by this table. Note that these two numbers are each other's exact inverse,108 since if P0 is given in years, then p=1 year. LOCATION: 3934<br/><br/>As is evident, saving three quarters of one's income creates financial independence in about five years!<br/><br/>With asset management, skill and wisdom are rewarded directly proportionally to the asset base, but never proportionally to the time base. This is probably the most important cultural barrier to overcome in a society that prides itself on being busy and productive. Frequently, asset managers get wealthy just by waiting and being wise. The real challenge, especially faced by professional asset managers, but hopefully not by you, is the tendency to ignore this fact."