The Education of Axel Heyst

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Ego
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Re: The Education of Axel Heyst

Post by Ego »

I have mentioned before the study about bicycle light safety. They tested whether it is safer to use a blinking bicycle light or a non-blinking light and found that blinking bike lights attract attention and drivers unintentionally turn toward the direction where their attention goes.

Emerson said something like, "You become what you think about." I am fortunate that I have something of a grasp on how my mind works. I know what I enjoy thinking about and I have enough control over my time that I can indulge thinking about the things I enjoy. I am also fortunate that those things tend to make a little money and take me in directions I want to go.

Who knows? I may have it in me to learn to enjoy thinking about investing. I always kinda figured that if I were to spend enough attention on it and gained enough knowledge to become proficient, the process would redirect me to a place I really didn't want to go. And somehow I doubt that I would like the person I became as a result of spending my attention in that way. I could be wrong.

But this isn't about me. This is your journal. I guess my point is, be careful which blinking lights you turn on for yourself.

7Wannabe5
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Re: The Education of Axel Heyst

Post by 7Wannabe5 »

What Ego said. Focusing a lot of energy on being the winner in zero sum games can definitely turn you into an asshole to the extent you do that. OTOH, if your “killer” energy is currently weak relative to other humans, it’s not the worst gym you might choose, because mostly inhabited by “civilized” assholes.

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Re: The Education of Axel Heyst

Post by Jin+Guice »

@Ego & 7:

How do both of you aspire to retire early if not putting some of your money in investments? What do both of you currently do with your savings?



It's interesting that when I read books or watch movies about wallstreet breauxs, it's all prostitutes, cocaine, yelling and fucking people over to get yachts. Then I go to learn about it and it's all business definitions, financial statements, and supply and demand graphs.

I'm not sure which one is the blinking light that's going to turn me into an asshole, but I'm not super stoked about either.

I do feel like there's some philosophical knowledge to be gained from investing.

Anyway, not trying to be an asshole to either of you, just genuinely curious what do to with all this money if not invest it somehow.

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Ego
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Re: The Education of Axel Heyst

Post by Ego »

Jin+Guice wrote:
Thu Jun 24, 2021 9:35 am
How do both of you aspire to retire early if not putting some of your money in investments?
Ah, don't get me wrong. We have investments that are probably not much different than the average ERE lurker but not the level of the average person who posts in the investment threads.

My point is that many here aspire to @Jacob level knowledge, skill and investment prowess. After retiring he studied and obtained a CFA for fun, then took a job at a hedge fund to gain that knowledge and ability. If that is something that is fun for you then go for it. I was just presenting a different perspective.

People without money tend to believe that having money is only good. They think there is no downside to having a big stash. Those who earn it or know others who maintain dynastic wealth may have glimpsed at how having extreme amounts of cash can make people a little crazy. Loss aversion and the compulsion to extract the most ROI can drive people nuts. The extremes can often shine a light on what's going on for those who are moving in that direction.

If the ultimate goal is to make money a solved problem then there is more than one way to skin that cat. While there may be plenty of wrong ways to do it, there is more than one right way.

ETA, said another way, solved problems are only solved to the extent permitted by the required maintenance of the solution.

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Re: The Education of Axel Heyst

Post by 7Wannabe5 »

Well, take anything I say on the subject with huge grain of salt, because I am such a slut for free time, I have always almost immediately cut back my hours spent earning to match frugal income needed just as soon as stash required for my next endeavor is obtained. For instance, I read YMOYL way back when it was first published, but only stuck with the program until I had enough stash to buy house and stay home with my babies.

Also, my recent experience being hospice person for mega-multi-millionaire friend very much revealed the dank side of wealth maintenance and the miser-hoarding dysfunctional edge of frugality.

I’ve also read several books on the history of mathematics applied to the stock market which basically led me to the conclusion that mathematics does not actually apply to the stock market :lol:

That said, I do okay with the little roll I do invest. Mostly I follow Intelligent Investor protocol, because I am already reading a bajillion different books on different subjects anyways. My analogy to my book business would be that I try to buy small (limited print) stocks that are put out by University Presses or similar quality publishers. One thing I learned by osmosis from my mega-millionaire friend is that he was always saying “Why would you buy that when you can buy this?”

white belt
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Re: The Education of Axel Heyst

Post by white belt »

Jin+Guice wrote:
Thu Jun 24, 2021 9:35 am
It's interesting that when I read books or watch movies about wallstreet breauxs, it's all prostitutes, cocaine, yelling and fucking people over to get yachts. Then I go to learn about it and it's all business definitions, financial statements, and supply and demand graphs.

I'm not sure which one is the blinking light that's going to turn me into an asshole, but I'm not super stoked about either.

I do feel like there's some philosophical knowledge to be gained from investing.

Anyway, not trying to be an asshole to either of you, just genuinely curious what do to with all this money if not invest it somehow.
I know this wasn’t directed at me, but I will point out that there is a broad spectrum that ranges from the most passive target date funds on one end all the way to day traders on the other end with everything in between. There is also the difference between investing and trading. There are people who specialize in growth stocks, value stocks, bonds, momentum, trend following, specific commodities, and so on. A lot of the Wall St movies show traders or salespeople because that is seen as more exciting. No one wants to watch a guy rebalance his macro portfolio once a quarter after checking a few key technical indicators. Also, there are a wide variety of personalities in finance, e.g. Jacob worked as a quant but is probably the polar opposite of the Wall St Bro stereotype/temperament.

But 7W5 and Ego are correct that it is certainly not for everyone and some people will choose to just keep money in savings accounts or index funds so they can focus their time and energy on more fulfilling tasks. I get the vibe that the semi-ERE strategy of having a variety of skill sets to always earn money part time is a good alternative to having a large financial portfolio that requires management. Of course in true renaissance fashion you could strive for both, but on the forums it seems the best semi-ERE hustlers are those who don’t have enormous portfolios.

As I understand, the point of the startup curriculum in Finance that Jacob advocates is not only to educate oneself on foundational knowledge, but also as a filtering mechanism to find out if you really have any sort of interest in this stuff. I think somewhere he pointed out that if you can’t even muster the motivation to read a few textbooks, then you should probably just stick with something simple like indexing.

I personally listen to the above finance related podcasts because it helps me to understand the world better. I didn’t like having gaps in my knowledge and not understanding the role of monetary policy, fiscal policy, and so on because it does have an impact on my life. I like big picture stuff like that. Those podcasts are also generally months ahead of mainstream media on major stories, which I find useful because it give me some time to act if necessary before the masses (e.g. MacroVoices was reporting on how COVID would be a global pandemic in January 2020, months before the US started lockdowns). The catalyst to this was when COVID-19 hit and I was left completely befuddled by what was going on in the world, so I decided to dive more into some of these topics.

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Re: The Education of Axel Heyst

Post by jacob »

Especially for the uni-dimensional FIRE strategy, which is essentially switching out one's job horse for a finance horse, it's hard for me to accept the common unwillingness to at least have an informed opinion on which horse one has put in charge of pulling one's wagon. It's a bit different for ERE insofar there are multiple horses in the race.

Primarily, though, it's about
1) making informed investment decisions as opposed to uninformed/dogmatic decisions. Frankly a lot of the FIRE world lives in an index-bubble both literally and figuratively in the sense that this is the only strategy they have ever considered or experienced. They are doing the political equivalent of informing their entire world view based on the investment-tribe they've chosen between 2010 and 2020 in which the only source of experiential elderly wisdom having only ever seen interest rates decline. I understand this [indexing] is better than random speculating or doing nothing ... but a little knowledge is a dangerous thing for the system as a whole.

2) avoiding catastrophic failure and not about "beating the market" or not bothering to try in the first place. That's the other false presumption that one should either be beating the market or be in index funds to get the average return. No, one's goal should be to avoid portfolio failure. It doesn't matter if you beat the market by 5% if the market just dropped 80%. And if the market just dropped 80% taking you along with it, arguing that "this is not a problem because then we all got bigger problems" is highly ironic because that's exactly it. It won't be "we all"; it will be those who trusted their financial future based on a few slogans aided and comforted by tribal reassurances. We've seen how this goes down in other domains...

IIRC, this was a driving point in my interview with madfientist.

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Ego
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Re: The Education of Axel Heyst

Post by Ego »

jacob wrote:
Thu Jun 24, 2021 12:07 pm
No, one's goal should be to avoid portfolio failure.
Should be?

For context https://youtu.be/Vfc1YMfDFY4?t=163

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Re: The Education of Axel Heyst

Post by jacob »

Yes, should be. Otherwise the beginning is only tentative. For a demonstration see how the tone of the FIRE movement changes whenever there's a 10% drop. The Hero's Journey is quickly dropped in favor retreating back into the safety of "working one more year" or chanting "the market always goes up".

In Maslow terms, the base needs to be solid(*) in order to focus on higher goals. You can absolutely see how the lack or existence of security changes what people think about. E.g. a lot of the older FIRE crowd can fall back on SS or pension plans and so it is easier for them to be dismissive of sheer portfolio robustness than if you're 35.

(*) And I think this solidity is better achieved by being able to reason why it is so than by referring to some internet blogger "who said so" or a sloganized set of ideas that won a Nobel Prize before one was born.

I'd also add that the means of achieving this goal need not be technical mastery of some specialized investment skill (e.g. MPT, value analysis, Monte Carlo, or RE investing)---this is mostly useful if you want a job working or if you're just innately interested in it as a hobby---but rather an appreciation of "simple" concepts like price/value divergence (something that EMH insists is impossible), Keynesian beauty contests, ... and the existence of different perspectives, because it is these that will prevent one from becoming trapped in an outdated perspective.

The meta-goal of reading the investment curriculum---and this may be destroyed by becoming aware of it---is not so much in mastering all the stuff but in learning how deep the rabbit hole is after just scratching the surface.

Basically the goal is to avoid being an example of "what not to do" for the next cycle of FIRE. Lazy is the hard way of learning the same investment lesson over and over.

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Re: The Education of Axel Heyst

Post by RoamingFrancis »

Interesting stuff. I've found myself drifting further and further into an alternative lifestyle, and from here I basically see a couple options going forward:

1) Get myself into a career that is meaningful and fun. Ideal would be ethnobotany professor + mindfulness teacher. Having tenure is basically being ERE, right?
2) Build up my non-shitty income streams; do classic FIRE.
3) Invest in social capital to do a "full Rob Greenfield" version of ERE.
4) Go moneyless. I've read some of Suelo and Boyle's work; I think going moneyless for a year might be interesting, but I don't see it as being a long term strategy.

I have many issues with investing, some of them ethical, but others just being that I find it absolutely uninteresting and would do anything to avoid spending my precious life energy on it. Index investing is the most complex I'll ever get, and even that I have mixed feelings about. Thoughts, anyone?

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Re: The Education of Axel Heyst

Post by jacob »

RoamingFrancis wrote:
Thu Jun 24, 2021 3:03 pm
I have many issues with investing, some of them ethical, but others just being that I find it absolutely uninteresting and would do anything to avoid spending my precious life energy on it. Index investing is the most complex I'll ever get, and even that I have mixed feelings about. Thoughts, anyone?
It's like saying one hates sweating and finds physical activity completely uninteresting and that at best there might be a bit of brisk walking. Technically that's exactly what 90% of humanity do anyway, both wrt physical activity and financial activity. However, in order to get extraordinary results, one has to do extraordinary things even if they're not all pleasant.

When I was 20 I thought anything having to do with money or business was beneath my lofty sciency concerns. Obviously my thinking changed once I realized the innate power of mastering the monetary construct. Implying you might change your mind later. To change a little story: There was once two fish swimming along towards their next adventure until they ran into an older fish: "Good morning you fish, you realize you're swimming upstream right?". The two fish swam along a bit further until one suddenly asked the other: "What the hell is upstream?"

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Re: The Education of Axel Heyst

Post by RoamingFrancis »

Thanks for your response, Jacob.

What Rob illustrates to me is that if you decouple how you get your needs met from industrial production, it's possible to have a good life with little money. And humanity's sages have always warned that chasing wealth doesn't lead to happiness, provided that one is able to meet one's basic needs.

Perhaps this illustrates an idealist/pragmatist tension in me—if Western culture supported wandering sadhus and philosophers, I'd be the first to jump on board. I'm in a similar place to where you were when you were 20; money just seems like an inconvenience to put up with while I explore other things that fascinate me.

If you were in a discussion with someone like Boyle, Suelo, or Greenfield, how would you defend the accumulation phase of ERE?

Thank you for your input; I always learn something when dialoguing with you. I'm definitely open to changing my mind. With your fish allegory, is your point just that life is easier with a stash?

Best,
RF

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Re: The Education of Axel Heyst

Post by daylen »

RoamingFrancis wrote:
Thu Jun 24, 2021 5:34 pm
With your fish allegory, is your point just that life is easier with a stash?
A point is not always required or intended. As a frame, it can be used to color perception. Judgements/frames and perceptions/points may be thought to write each other into existence. A simple point can project a wide frame upon meditation; inversely, a simple frame can project many points upon interaction.

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Re: The Education of Axel Heyst

Post by Dave »

I think @jacob’s point with the fish story is that by ignoring money/investing, you are unwittingly creating a situation with more resistance than otherwise would be the case with some knowledge and financial capital “optimization”.

You don’t have to go all-in on spending your time on investing, but by learning some and putting the wind at your back (rather than the opposite) you will find yourself with a larger overall resource base to accomplish what it is you want to do in your life.

To ground this in a simple example, this probably is something on the order of @jacob realizing that he could earn several % more by investing his cash in something other than a savings account.

While maybe it’s not important for you to grow your portfolio as big as possible in your life, moving cash in a savings account to stocks essentially shifts the economics from one where the bank’s shareholders are earning a return on your excess deposits (the return they are earning on their invested assets less the rate they are paying you in interest) to one where you are earning excess return above the savings rate, and that excess money can be funneled towards any personal endeavor or organization that you deem valuable.

That may seem immaterial, but it's not unreasonable to think of a situation where a few extra % per year could result in $5,000-10,000 or more of extra money annually that could be allocated towards causes, freeing up your time from having to work a set number of hours at something you are only doing to make money (and otherwise would not be doing), or building up a stock of financial capital that would be able to bridge you into new endeavors.

Basically it's opportunity cost - by not having your finances set up well you are paying the opportunity cost of the ability to accomplish more things. So the consideration is comparing whether the boredom/pain of learning and managing your finances is worth more or less than incremental financial capital/financial yield that would follow more knowledge/effort.

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Re: The Education of Axel Heyst

Post by zbigi »

Dave wrote:
Thu Jun 24, 2021 6:40 pm

That may seem immaterial, but it's not unreasonable to think of a situation where a few extra % per year could result in $5,000-10,000 or more of extra money annually that could be allocated towards causes, freeing up your time from having to work a set number of hours at something you are only doing to make money (and otherwise would not be doing), or building up a stock of financial capital that would be able to bridge you into new endeavors.
The problem I see with that approach is that the "few extra percent per year" is basically the dream - even large financial organizations are admitting that expecting say 2+% of return per year with lowish risk is going to be tricky going forward.
Hence I personally keep 80% percent of my money in Polish government bonds which guarantee 0-1% of post-tax return (above inflation). This means that I'm basically only spending capital and my money is not really working for me - but it's the only play that I see currently that is acceptable risk-wise.

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Re: The Education of Axel Heyst

Post by Dave »

@zbigi

It's true that achieving this level of outperformance is not as easy as reading a few books and spending 10 hours per year managing your portfolio. Definitely agree there. But there are organizations and individuals who have done so over long periods of time, so it's not impossible. I won't say more on this because if you believe it's not possible (even though 50% does each year) then there is no point to trying.

The other thing to consider is what @jacob said above - getting the highest return or beating the market is not the only goal an investor should have. I think the phrase beating the market to be broader than outperformance, as it also encompasses achieving similar returns at lower risk or even less returns at very small risk.

Speaking a bit more generally of investment opportunities, I think the game is a little harder right now if you're only playing in the field of indexes. If you are open to being more targeted, be that individual stocks (like myself), local real estate, or more niche areas, there are "always" pockets of opportunity that offer attractive risk-adjusted returns.

But it's not going to be easy to achieve.

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Re: The Education of Axel Heyst

Post by jacob »

RoamingFrancis wrote:
Thu Jun 24, 2021 5:34 pm
If you were in a discussion with someone like Boyle, Suelo, or Greenfield, how would you defend the accumulation phase of ERE?
In his no-technology book, Boyle has a discussion about the ostensible hypocrisy of engaging with the society one critiques. In particular, what is technology? Does living without technology mean living without fire, which is a kind of technology, for example? The answer which I agree with is that one can have higher ideals than is possible to execute given that we live in this world. The keyword is "appropriate". And just like there's an appropriate technology for living better, so do I think there's an appropriate level of money usage.

The level can be set by strict convenience (ala s-curve) because it's easy enough to spend 50% less than one's neighbor, a bit more challenging to spend 75% less, but really hard to spend 100% less (aka not using money at all). It just so happens that the main way to interface with industrial society is money. Therefore it is useful to "speak the language" even if one does not live there. "Speaking the language"(*) also prevents the naive critiques ("corporations are evil, so we should just outlaw them") often seen from idealists who have never experienced the challenge of running a business well enough to pay wages let alone running a household w/o going into debt.

(*) Boyle has an economics background and so made a deliberate choice. Dunno about the others. However, there are multiple depths to understanding what money is. See Dave's post above. E.g. if you buy stocks, the money doesn't go away.. it just goes to whoever owned the stock. The amount of cash and amount of stocks tend to stay mostly constant. As such it's the distribution (who owns what) that's important rather than the idea of a "stash" which is kinda navel-gazing (misses the larger picture). In that sense, it's right(eous) for people who live on the fringe of the system to seek rent in order to do this. "Render unto Caesar..."

It can also be done in the recognition that industrial society actually does provide some good things. They're not all bad. For example medical services. Greenfield has made his peace with it but I wonder whether he's willing to die from appendicitis or a tooth abscess if it comes to that. Also clothes, clean water, and electronic access to other people in the world.

I wouldn't think of it as an accumulation phase though. That's more of a FIRE idea. No reason to work in the salt-mines with the specific purpose to get a stash. OTOH, if the money is there for something one likes doing, it's also unproductive (in the above sense of eliminating connections) to not stash it away. Saying no to money or saying no to living by working in the mines are both two extremes I would avoid.

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Re: The Education of Axel Heyst

Post by RoamingFrancis »

Boyle is grounded in a sound philosophical critique. My impression of Suelo, based on reading The Moneyless Man was that he was something of a tortured soul who found living moneyless therapeutic. It interested me, but it didn't inspire me per say. The other moneyless person I find inspiring is Peace Pilgrim, who was more of a spiritual genius and probably has more in common with the Buddha than she does a rigorous critique of the monetary economy.

Though both Boyle and Peace Pilgrim emphasize that each person has their own unique calling, and I think that depending on what that is, involvement with money may make sense. Access to money also seems essential as a transitional strategy—grassroots environmental movements will need funding from companies like Patagonia to get anywhere. And Rob is only able to carry out his projects because he has sponsorship from the Live Like Ally Foundation, and possibly other places with big stashes.

I like your idea of finding appropriate engagement with the society one critiques. You say this level of engagement can be found by an S-curve of convenience—do you mean to imply it should be set by an S-curve of convenience?

Good point about speaking the language as well.

Yeah, I've been working to develop the skillset for what I deem an "income stream homeotelic to my Web of Goals." I haven't obtained much of a financial yield yet though—have been doing sporadic translation and landscaping, and due to my farmstay situation have control over a lot of my time.

A summary of Boyle's critique of money, out of The Moneyless Manifesto:
  • People assume I agree with the old misquoted adage, money is the root of all evil. I don't. Instead I propose that it is our deluded sense of self which is the root of many of our current personal, social, and ecological crises. Money is isntrumental to maintaining and affirming this delusion.
  • Our disconnection from what we consume facilitates ecological destruction
  • Money + economies of scale = ecologies of industrialization
To expand a bit on ecologies of industrialization:
Our realization that efficiencies can increase with scale, (and this is the important point) coupled with the ability of money to logistically allow humanity to reach such incredible scales, means that cost-efficiency demands production on vast scales, which requires both vast material inputs and vast monocultures of consumers demanding identical products... Without money, the maximum scale we could reach is one where real relationships based on trust were possible, most likely a village with a population of approximately one hundred and fifty people or fewer (give or take eighty), which is the famous number of people that research by anthropologist Robin Dunbar suggests we can have a meaningful relationship with.
  • Division of labor + money + economies of scale = hyperspecialization, which you critique in ERE
Without money, the division of labor in any small community would find its optimum level, instead of its maximum level. The difference between optimum and maximum is crucial; efficiency, like everything else, has its optimal level.
  • Money causes waste - he talks about how he wasted absolutely nothing when living moneyless
  • Prostitution is to sex what buying and selling is to giving and receiving
I agree with much of his critique, but then you run into the inevitable question of how to respond in a society that is bonkers about consuming and accumulating wealth. A handful of people have gone moneyless, which is admirable in a sense, but Boyle's account of living moneyless doesn't sound particularly appealing as a long-term strategy. In his first book he tells stories of his dedication to moneylessness leading to him breaking up with his girlfriend due to distance and causing friction with his friends when they went for a drink at a pub. Elsewhere (I forget where exactly) he discusses a medical problem he had, I think a testicular tumor or something. A friend of his agreed to pay for it, and he recounts traveling eighteen miles to the city by bicycle with testicular pain. It seemed that although his dedication to his ideals is admirable, it would have been wiser to just compromise.

Food for thought. I will be contemplating what "appropriate engagement" looks like in a society where 100% execution of my ideals is impossible. Thanks again.

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Re: The Education of Axel Heyst

Post by 7Wannabe5 »

“jacob” wrote: if you buy stocks, the money doesn't go away.. it just goes to whoever owned the stock. The amount of cash and amount of stocks tend to stay mostly constant. As such it's the distribution (who owns what) that's important rather than the idea of a "stash" which is kinda navel-gazing (misses the larger picture).
Yes, but there’s also a sense in which words like “stash” or “roll” are used to indicate or boundary preferred relative liquidity/security. For instance, I just spent the morning projecting how low* my “stash” might go over the next year as I “roll” money into 3 or 4 different personal projects which I semi-optimistically predict will either save or make me money as well as other yields in the future. An obvious example would be that nobody refers to the equity they hold in the house in which they live and run their business and harvest cherries from backyard orchard as their “stash” or their “roll”, although they could in theory fire-sale the whole kit and kaboodle in 24 hours.

*Waaay lower than would allow most here would sleep well at night, although tweaked to Okey-dokey for me :lol:

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Re: The Education of Axel Heyst

Post by jacob »

@7wb5 - The point is that these guys are motivated by ideological systemic reasons to a degree that they're willing to constrain their personal boundaries. However, the total rejection of all things money means that tactics become systemically counterproductive. E.g. an activist deciding that stocks are evil and so they keep their money in the bank while refusing to learn how the evil financial system actually works. The bank, having no compunctions, uses that deposited money to leverage corporate CD issues and so scores the interest while promoting ends that the activist is fundamentally against. Or maybe the activist keeps their money under the mattress, thus raising the cash value of the cash richest and first issuer players, ... again the opposite effect of what was intended.

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