Insurance is Expensive Journal

Where are you and where are you going?
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Qazwer
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Insurance is Expensive Journal

Post by Qazwer »

I am a salaryman. I have previously been motivated to change. But, at this point in my life, my lack of outside skills and lack of desire/fear of learning new things limits me. I spent my life up to my early 30s in school to get here. Yet, I have a child that I have mixed feelings on how to raise. I see the increasing returns to expertise and excellence in a narrow field. The connected world increases returns for the best. FAANG incomes are insane. But the world is ever more uncertain. The future is not clear. I see the advantage of being a Renaissance man especially in an uncertain future. I now children will lead their own lives, but I do not know which is the best path to encourage. Any advice will be appreciated.
Last edited by Qazwer on Wed Feb 10, 2021 10:46 am, edited 1 time in total.

Qazwer
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Re: Salaryman journal

Post by Qazwer »

I have a very risk avoiding lifestyle. The risk/benefit ratio just is not there. I invest in a basic 3 fund Bogleheads manner. I think it may be possible to beat markets. I think this is more true in those smaller, local. It applies in real estate, electronics. But that requires work. I am secure enough. Risk is a non-transferable attribute. I might take risk in one area but not another. Theoretically, it can also be a balance. I am limit risk in one area to increase that in another. Unlike my younger self image, I have adopted an across the board low risk life. I am not sure if I like that about myself. Intellectually, it makes sense. But it feels like it misses something. But each time I think to reach, I feel like I can do more good in my niche.
I also wonder how much of it us rationalization. I have always avoided risk. I have chosen delayed gratification. The riskier choices just sound like more fun and fit in some self idealization I have - a map of myself that I keep in my head.

Qazwer
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Re: Salaryman journal

Post by Qazwer »

I do not know how much it is avoiding risk versus delaying gratification. I go back and forth on that in my mind constantly. Morgan Housel talks about not making huge mistakes and not failing over decades as being successful in investing. Maybe that is also true in life decisions.
https://www.collaborativefund.com/blog/traits/

A great general is one who can at least always do average. Buffett is so rich because of the decades of compounding without large losses. Most of his money came after he was 65 and he started as a teenager. But there is something that feels hollow in just being average and letting compounding work, whether that is in money or skills. I keep getting better the more I do something, but it is not as much fun. But with a winner take all society, it is better to have decades of compounding in skill. Yet OTOH breadth is more satisfying even in a competitive world. Not to mention if the world changes that breadth can be a saving grace. It loops back to not knowing how the future will look. I guess I believe in hyper-specialization for me now. I just see how you all can succeed even in this world with understanding flows and being embedded in a larger system. YOLO can mean youse pays youse money youse take your chances on whatever strategy you choose. But I keep looping back to maybe it is not the strategy you choose but finding one congruent with your make-up that could work. Did I choose delayed gratification or did my genetics/environment?

Qazwer
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Re: Salaryman journal

Post by Qazwer »

I reread the collapsology what is your intuition thread. My intuition is that insurance is expensive. In the current epoch, financial capital and human capital aligned with increasing financial capital are valuable. Herodotus and Thucydides wrote about collapse. The US has had a strong current about believing the next collapse is near since the first Europeans came over. I think collapse could occur in a lot of different ways and I just do not know how is the most likely. It will probably happen in some way. But I will probably be wrong how. Protecting against collapse has costs. The most recent dry run has shown the importance, at least for now of financial capital and creativity. This society is so rich that you can work for 5 years and then live a good life off that. I am not sure how much longer that will last. But I am relatively sure that the strong (however defined), the useful (whatever the salaryman equivalent is on that epoch) and the creative (ERE folks) will succeed. ERE and understanding how society works - looking at all the dynamics - has always been a reasonable strategy. Flexibility has been very useful over time. I am just not sure if it is optimal on the individual level. Societally decreasing consumption if done at a high enough frequency has value. I just do not see how you overcome the free rider problem. I also wonder if I have blinders on given my internal wiring.

Re-reading the peaks and flows thread reformats my internal question. I view the current world as optimized to an amazing degree to monetary. Such that it dominates the entire web. One could build a web but at a cost of minimizing pieces that you already have (neglect individual nodes or connections for the total). I think that one can live a really good life without focusing exclusively or largely on the node - single connection. The world might change though and insurance against that is building a stable web. The cost of that is individual though. I hate building physical objects - have done it for school. I like learning and thinking about them. I have an ambivalent feeling towards money but I find it useful. The question is am I at a local peak in this model or global peak given how I am built. Am I at the peak of Mt Stupid? I also think the world will change. I am just not sure how. Building a stable web is resilient but at the cost of strength of optimization. Is it worth it in my lifetime or that of my kid? I do not think the world is predictable enough to plan beyond that other than to encourage education and a sense of watch for need for adaptability to whatever the current rules are.

Miss Lonelyhearts
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Re: Insurance is Expensive Journal

Post by Miss Lonelyhearts »

Qazwer wrote:
Sat Feb 06, 2021 4:11 pm
I now children will lead their own lives, but I do not know which is the best path to encourage. Any advice will be appreciated.
How do you wish you were raised?

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

I am glad with how I was raised. Education was encouraged. My parents scrimped for good private schools and then paid for almost all of my college. They are loving great parents. My concern is that I do not know if pushing school is the best thing, especially through professional school. I was in constant after school activities. But I never had a job. I never went camping. I never built up livable skills outside of excelling at school. I also know that it helped me. So I am not sure that I wished to have had been raised any differently.
I just look at the path not taken and wonder. Especially given the changing world, is that path the best?
Good question - thank you

Miss Lonelyhearts
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Re: Insurance is Expensive Journal

Post by Miss Lonelyhearts »

Well, a reasonable starting point may be integrating some of things you identify as having "missed out on" into your own parenting. This doesn't preclude duplicating the things you recognize as valuable, but it's also an acknowledgment that there's some value to be had in building practical skills. It's also an opportunity to model the skill of learning new skills, which your kid(s) will most certainly pick up on. Plus, hiking and camping are fun!

Source: childless :twisted:

Hristo Botev
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Re: Insurance is Expensive Journal

Post by Hristo Botev »

FWIW, we try not to encourage or discourage college for our kids (8 and 10)--when it comes up we just discuss it as an option; and we find ourselves constantly telling DD to not stress so much about tests, etc. So far the kids are excelling in school, but I don't think that has anything to do with them thinking we'll be disappointed with a B or a C or whatever; I'm not sure where they get that self-imposed pressure from.

Also, it's probably a little intentional that I "force" my kids to watch This Old House with me, and any number of other shows focusing on the trades, and we've mostly surrounded ourselves and our kids with family friends who've not gone the meritocracy route (or they did but then rejected it in their late 20s and 30s). We also pulled our kids out of fancy local public schools, in large part because there is just way, way too much focus on academic success within that school system, at the expense of all sorts of other stuff that I'd view as way more important (caveat: I tend to think that a school's job is to babysit my kids and, while they are there, teach them to read, write, and do arithmetic; everything else they'll need to know they'll learn at home or on their own or in the form of on-the-job training).

Certainly DW and I both always had jobs growing up, after school and summer jobs (I started in elementary school with a paper route and then a neighborhood lawn mowing business in middle school); and that experience is way more valuable than probably anything I ever learned in school (admittedly, I wasn't trying very hard or paying much attention, so who knows). Also, I cringe at the idea of my kids doing summer "internships." Get a job, make some money, and get to know some folks you wouldn't likely come in contact with in any other setting.

AxelHeyst
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Re: Insurance is Expensive Journal

Post by AxelHeyst »

Delayed gratification - of what? Risk avoidance - of what? How do *you* define success and failure? And are you happy with those definitions? Have you thoroughly poked and prodded them?

Some people define "never being hungry or unsheltered" as success. Some people define "never being unfree" as success. These two people's lives are going to look very different, but both may feel a glowing sense of contentment when they consider their life choices.

An exercise: you are old. You've done everything you're going to do. You are going to die soon. Look back over your life. You smile to yourself and are happy with the choices you made, and the choices you made for your kid. What choices did you make? Why are you happy about them?

Repeat this exercise for a variety of scenarios:
-No collapse. The economy keeps doing basically what it's doing right now until you die.
-Long Descent collapse. Things get worse here and there, but if you had your eyes open and head up you avoided any real crushing circumstances.
-Serious collapse of the economy and social rule of law. Everyone's money got wiped out, everyone had to deal with how to survive localized famines, only the clever and the lucky survive.
-Look to history for broad scenarios, attempt to map them to today, and run the model.

What are the common traits? What choices lead to success-as-defined-by-you for you and your kid?

You might like Herman Hesse's Narcissus and Goldmund.

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

Thank you for the excellent responses and questions
I reread Narcisdus and Goldmund (excellent suggestion). I am still processing it and the responses.
I guess I view success as being able to never worry about money (which has its own tautology), respect of others and to paraphrase Narcissus, to be able to be in a place where my skills allow me to do the most good. I value the last greatest of all. I value freedom but I do not prioritize it. Those contradictions lead to internal conflicts but I have yet to find a way to optimize for everything. But I think the trade offs I have navigated are good for me in retrospect.
I do not fear massive turn down and breakdowns that much. I have learned that I would not put me in a 12 man team in a SHTF situation. But once we get up to a few hundred let alone a thousand group or more than my human capital has clear value even in deep crash situations.
I think what I fear more is exaggeration of current trends of winner take all for the next decades. The meritocracy is expensive to do all that is needed. It has huge sunk costs. Any web that does not prioritize those can be at a marked disadvantage with the growing rural/urban technology divide. People become embedded in local networks which are hard to break. This is great if the underlying resources to support the community exists, if there is no indirect attempt at taking a portion of that and you are willing to accept its limitations. Technology in multiple forms though seems to continue to improve. It’s price if affordable for some and not for others. As of now, I do not view that difference to be markedly important in how you can live now. But I see that changing. Health, education, mobility and human interactions could look different from now in ways I cannot even imagine. I think that is the future I most fear is and think is the most likely one.
I would be fine with the current continuing. I would be fine with a 50% crash. I would be fine (although would not enjoy) a marked collapse - or at least as good as any plan I could conceptualize. My worry is more the 4th choice where the world continues to ‘improve’ along its current trajectory.

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

I think a lot comes down to the kind of freedom one considers. I am OK being told what to do as long as it is not outright dangerous to others. I want to be able to do what is the best for those around me. I hate it when I cannot. You can tell me what to wear, what to do, where to be when etc. That freedom I can give up with only some regret. I can trade that off. I just really hate the Dilbert style stuff when it impacts others life. That realization that I value at least that portion of freedom is what lead me to care about money (I had forgotten why I even went down the path of caring about having investable assets). Before that I assumed I would just work for the rest of my life. I considered my work my life goal. That life of being indifferent about money was prior to having a family. I think I need to reset and review my goals to see how they align with my current actions. Part of me is living my past lives still. I think I may be writing this journal to deconflict my varying self images.

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

viewtopic.php?p=58417#p58417

I really like Jacob’s analysis of investment types. I think the key concept is to know yourself. Know whether you are a god as indicated by the Oracle at Delphi. I am not. I think that is why I like the Boglehead philosophy. Yeah a lot of the time someone will eat my lunch. But then I just go buy a sandwich. I am not the type to gamble currently if I have a 51% chance of winning or even a 70%. I prefer lower payouts with a 95% chance.

I like the analysis in the whole thread of reading of building robustness vs resiliency. But I view this in the context of limited time. Building resiliency is not free in time or concentration or emotional setting - it therefore costs in robustness. Robustness is therefore potentially a reasonable strategy. There has to be watching though for failure. Different strategies fit different people’s biology and are better optimized for different epochs.

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

“More money has been lost reaching for yield than at the point of a gun.” – Raymond DeVoe Jr.

I am trying to rethink why I view money as the easiest answer to problems and the need to optimize it at all. For so long I really just did not care. Part of might have been a period in work. Part of it might have been having a family. I think it has to do with my personal history. I have been struck though with a puzzle of the importance of money in ERE. The amount is minimized by creating alternatives to its need. Therefore, it as a goal through labor indirectly decreases. Yet I see a stress on optimizing that which someone already has. I have personally settled on what to me is a risk averse method in having index funds. It may not even return what I invest. That would suck. But I do not see them going to zero under non-world changing futures. But I am seeing the desire to find the next new thing in trading or investing in technology as a core component of ERE posts. That is risky. That takes time to learn. Why is that node stressed? Why not spend the time to learn carpentry or electronic repair? If trading, why the need to trade against Wall Street? Why not niche arts or computing equipment or the infinite other markets that exist?
I chose safety with Wall Street. I thought it was to avoid risk. But maybe it was to allow me to optimize other goals - still working that one out.

I keep looping back to kinds of freedom and value presented to them but I am not sure.

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Sclass
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Re: Insurance is Expensive Journal

Post by Sclass »

I have to say it is really interesting listening to you think out loud. You have a complex brain. A lot of voices in there eh? :D

I’ve been asking myself a lot of the same questions. After the fact though. I wasn’t smart enough to ask this stuff when I was in the middle of it. In my endgame I’m seeing how silly all the little paths are. At least you are questioning the whole deal now.

Money seems to be the common denominator.

Despite what I was told as a kid I’m starting to think money is almost everything.

But that’s after I’ve made and sold out my physical things for money.

I trade Wall Street because it’s big, liquid and easy. I have a lot of rare art in my parent's home. Dusted it off yesterday. G.....n idiots. Why mom why? I dread trying to sell it but inevitably will. Why didn’t they leave paper?

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

@Sclass exactly a lot of voices that I am trying to think through - that was a very helpful metaphor - all the dead authors, former teachers, colleagues with critiques etc.
I was built and then built myself to collect them - different models of reality. All models have domain specificity and something simplifying making them both useful and incomplete.
Money is the easiest simplifier in the current system. Optimizing for it feels wrong due to many of those voices though. I know some of those voices only make sense in the paths not taken in my life. So which domain am I in?
It is the sign on the door that states ‘You are here’ Then you optimize. We all have to reconsider where we are and optimize for that intermittently. I guess I am at one of those points.
Helpful - thank you

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

‘ In hindsight there was as much speculation in the 1990s that Kodak and Sears would keep their market share as there was that eToys and Pets.com would gain market share.’ Housel

Premise: I cannot predict the future (or even understand what the important predictors will be)
Premise: The world may be different than the recent stability in the US (see Texas)
Premise: Optimizing for one approach or mitigating risk of one outcome costs in not being able to do another (insurance is expensive)
Partial conclusion: it is difficult to pick a stable location or sub-group (also consider growing rural to urban divide in financial changes over the past 150 years and the difference in tech cities in the US over the same time period)
Key life skills: being able to add value
being able to understand the system in place
being seen as adding value to the system in place

Voice in my head: had an anthropologist colleague who could shift in most any circumstance. He excelled at committee meetings. He could teach. He could do research. He was good at hiring. But what always amazed me was his main research field required that he also work in drug houses to understand their dynamics. He was a dude that no one would imagine could safely traverse that world looking at him. But that is what he regularly did. He made friends through out. But what truly impressed me was his quiet and thoughtful analysis of all the people around him constantly. I did not have the word at the time, but I was also impressed by his situational awareness.
That is one of the main skills I should try to teach my kid. How to analyze the dynamics of a situation. How to understand the people in it. Not from a purely intuitive level (although that can help) but also from a theoretical one to an applied setting
If the world changes, then the ability to quickly build community is key. If the world stays the same, then the ability to quickly build community is key.

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

Premise: the technology of an era is a key to what is valued and possible

Our current epoch and the portion of the world I live in are ones marked by abundance in goods. Many of which are not needed for that which I personally value. Mismatch between personal value and that of society. The problem is that I live in a society/culture which has a long history of that feeling. A long history of we should return to simpler times when ... There is the risk of societal control of those who do not move with the times from such things as money/taxation (voice Debt a 5000 yr history) to outright oppression. I guess it comes down to what one values. You add to that with a child that you are shaping potentiality of access to different goods that might or not be valued to another.
Technology feels like it is about to leave a great stagnation. But that can be an artifice of me living in the time. It will be hard to beat the change of a century plus ago of the time of AC, transportation, food etc. But of course this time is different. This time us because it feels different with biotech, computers etc I keep wanting to think I am being sarcastic here but a part of me really thinks it is.

Partial conclusion : given the lag time of developing human capital, you have to purchase future goods/technologies with time spent currently

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

Argument against preparation for future consumption
Premise: mostly assuming continued decrease in cost of technologic products over time
Premise: technology drives consumption goods

End of Technologic History Thesis - some forms
1. Nothing new worth buying has really come up in the past 50 years and so unlikely will in the next 50
2. Some interesting things have been invented but the cost to mass use has dramatically decreased so that most people can easily afford technological advances and the concept of that it will take a lot to get something new is just not worth it - wait a couple of years and it will drop in price - given substitution of current consumption with now cheaper goods - costs could actually be less than what you spend on current inferior thing (improving lifestyle with deflationary costs)
3. Current and future technologies are harmful - we should return to the technology of a previous era
4. Future technologies cannot progress due to resource limitations and the only useful technologies are older ones

I think a lot of my angst relates to disagreements with these. Not sure why and how though yet
I think some of it is the bespoke nature of some of the more interesting medical research. I think we are at a stage of almost adoption of the benefits of communication technologies (rule of thumb to take 30-50 years with new technologies in past) I wonder if computing design will reach new heights soon (timeline thing again)
I also wonder about energy production. The current pathways have limits but wind, solar and bio-organic might change over the next couple of decades.

I think it is sort of a Pascal’s wager at the cost of my current life energy. If I am wrong, then I worked extra in a job that I have some things I like about it but have less time. If I am correct about there being an expanding future, then not having a general position with capital to take advantage of it is dangerous and boring.
It is a hedged bet though - live in the moment with family and friends but save extra for a potentially interesting future.

Baumol cost disease
https://en.m.wikipedia.org/wiki/Baumol%27s_cost_disease

Likewise for things with true fixed human time costs, nominal costs need to increase

But even those things are potentially susceptible to technology decreasing costs
Hiring a string quartet for a wedding will become increasingly difficult for nominal cash
But we can now stream their music for free
Speakers have become continuously cheaper

So there is a version of End of Technologic History Thesis that makes things cheaper universally
All important parts of the human experience already have been found and technologies merely makes them easier to accomplish with ongoing improvements everything of value to a life will only get cheaper

Qazwer
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Re: Insurance is Expensive Journal

Post by Qazwer »

I do not understand the progressive nature and what sounds like woo woo nature of Wheaton levels. You can only understand apprentice the higher levels once you reach near to them.

I am Wheaton 3 but most of the time I want to be 2. But I can see how you can live a good life at each of the levels including disconnecting from monetary completely. It seems like basic economics.
You define your values. You optimize on multiple forms of capital - not just monetary. You use basic search functions to pick. You look for self-reinforcing strategies across capital types and chose amongst them based upon current and future planned capital with a high reliance on human but considerations of social.

For Wheaton 8 - per the wiki you only need to pay head tax in the form of health insurance and property tax and health insurance. Yeah, no.
You do not need to pay either. You can optimize so that head tax is not needed in this society. You choose where to live. You choose the degree of outside health care to consume. You are though limited by the bundled nature of a lot of goods. You cannot own a home and pay for roads but not street lamps in the form of tax. The bundle is also not something that to the degree you are involved in the monetary flow with government you can control. But you can choose where and how you live including with social capital or human capital receiving those with no financial outlay. Likewise with healthcare, it is hard to unbundle it and only purchase the pieces you may desire. One, you would need to fully understand those implications (non-trivial problem). Two, you would need to find someone willing to sell you that piece.

What am I missing?

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