Pedal2Petal's post-ERE life

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Pedal2Petal
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Re: Pedal2Petal's post-ERE life

Post by Pedal2Petal » Fri Feb 05, 2016 12:37 pm

Social capital has been extremely valuable for me. It's really kicked the ass of financial capital in the last few years. I'll try to list a few of the benefits I've seen so far.

Cheap rent. In a city where average rent for a 2-BR is $2300 per month, we have been paying $900 by living in the rental suite of my in-laws. And if we get into a co-op it will most likely be through the people we know living in the co-op, and our rent will go up to around 1100$/mo, still miles short of the "average"

Free kid's stuff. Hand-me-downs are great. I think we've only bought one toy, very few clothes, a few diapers here and there. Stuff we've gotten free from family, co-workers, friends include 2 car seats, 2 strollers, half a ton of clothing and toys and diapers, and quite a bit of cash too. Of course we fully intent to "keep the karma train rolling" by helping out our pregnant friends with a nice big donation of hand-me-down baby infrastructure when the time comes.

Business deals. I made a big website purchase a couple of years back, but only had to put up 10% of the money for it, although I will end up owning 50% of the site. It was through connections made here that I found someone with cash to invest in something "risky" and it was through other channels that I met someone who shops around for websites who sent me a really top notch one. Then I got favorable treatment from the seller by making friends with him too.

Why Social Capital matters more than Ever

Watch out, because this is going to be a lot of my own opinion on how I see the world, rather than just the facts.

I hinted earlier that financial capital has been getting its ass kicked by alternatives in the last few years. Money is even becoming a liability, now that governments worldwide are flirting with negative interest rates. The world is running out of productive uses for excess money, which polarizes investing into either low risk, super shitty return, or super shitty risk, adequate return. The root cause is probably limits to growth, due to strain in ecological and energy systems. There will always be "edge cases" like the websites I buy at a P/E ratio of 2 or 3, but stuff like that doesn't package well into a global capitalist system so it hasn't been "colonized" by big banking.

There's always been tolerable risk factors with the usage of financial capital to grow more financial capital, but what if there's a more existential risk to the financial system itself? Money as debt won't work with a steady state or shrinking economy. Can you even live off the returns of paper assets at all in a contracting economy?

ERE is great because it's resilient in today's growing economy, and in tomorrow's shrinking one. The form of capital doesn't matter. I'm trying to shift the bulk of my portfolio into something I control, namely NOT money. Relationships are the new blue chip stocks. Daily eggs from a chicken sharing scheme are the new dividends. Knowing how to cook and garden and use a bicycle pays better than that second part time job. Fruit trees are trust funds.

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Re: Pedal2Petal's post-ERE life

Post by themodernchap » Mon Feb 08, 2016 10:48 am

I enjoyed the stuff about social capital. I agree. People used to know that too, people who werent religious used to go to church to get that social capital.

Very interesting reading.

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Re: Pedal2Petal's post-ERE life

Post by Ego » Mon Feb 08, 2016 2:54 pm

Great post about social capital! Like you, building and maintaining a network has paid great dividends for us. A few years ago we began looking at each of our expenses and asking one another how we might eliminate them one-by-one while still enjoying the benefits as if we had paid for it. It's funny how solutions began to present themselves when we started asking that question. Most of the solutions where the result of social capital.

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Re: Pedal2Petal's post-ERE life

Post by Ydobon » Thu Feb 11, 2016 8:38 am

An interesting post and while I largely agree re. social capital, how is getting a rent reduction from relatives as the result of the application/creation of social capital?

It may be that my understanding of the concept is deficient, but I was of the belief that social capital was essentially how networks leveraged their skills and assets to meet mutually agreeable outcomes for all. Surely you're just being given what amounts to a gift?

Not knocking the value of in-laws (we lived with mine practically rent free for several months after moving 600 miles for work), just not sure how it fits into your wider hypothesis.

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Re: Pedal2Petal's post-ERE life

Post by vexed87 » Thu Feb 11, 2016 8:44 am

I would regard a gift as a dividend from social capital. Put simply your social capital is access to resources through the human connections you have. Whether that's free labour fitting a kitchen from a family member, or a couch to stay on, it's all the same to me.

Great post P2P.

The way I see it, the stock market isn't going to provide the reliable returns to retire early, so my focus has shifted more from financial capital towards my knowledge and productive assets, by investing in myself I will be able to provide the things I need in retirement, whether that's furniture, or vegetables to put on the table. I figure I will stay productive until the day I die and the preconceptions I had about idle retirement when I first discovered ERE were naive.

Personally I think the free ride of eternal economic growth is over for the same reasons you mention, the tried and tested strategy of a 4% safe withdrawal rate is perhaps drawing to a close and I worry for all the MMM folk who blindly believe that the markets will always deliver for them. If you can have a few million in the bank, I'm sure they will be ok, but I bet a lot of people will be drawing down their principle, rather than living off the cream. Focusing on the other forms of capital adds resilience, and that's what I like about them.

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Re: Pedal2Petal's post-ERE life

Post by Pedal2Petal » Thu Feb 11, 2016 8:19 pm

Ydobon wrote:An interesting post and while I largely agree re. social capital, how is getting a rent reduction from relatives as the result of the application/creation of social capital? I was of the belief that social capital was essentially how networks leveraged their skills and assets to meet mutually agreeable outcomes for all. Surely you're just being given what amounts to a gift?
Vexed87 said it better than I could have, a gift is a dividend from social capital. Does that mean that a 30-year old NEET still living at home mooching off his parents is using his social capital to support his own sad little ERE?

I would argue yes.

To me there is a similarity between the "loser" basement dweller, the public sector worker who got his job through connections, and the trust fund kid who happened to be born into the "right family." They all are benefiting from their social capital in one way or another. Just because you were born into it, or married into it, doesn't make it something else. It just makes it unfair :twisted:

I also take exception to describing the NEET life as "sad" and "little" and "loser." I use the words tongue-in-cheek but don't believe them myself. I think NEETs are a logical result of, again, a shrinking economy that has no room for new entrants. I find myself identifying with them. If I were a bit stupider and a bit lazier and a bit less lucky, I think I'd probably be one myself.
vexed87 wrote:I worry for all the MMM folk who blindly believe that the markets will always deliver for them. If you can have a few million in the bank, I'm sure they will be ok, but I bet a lot of people will be drawing down their principle, rather than living off the cream. Focusing on the other forms of capital adds resilience, and that's what I like about them.
Again you've said it much more eloquently than I could. I too remain skeptical of the more "straightforward" MMM method. When my parents were my age, they were greatly influenced by the authors of "Your Money or your Life," who counted on a similarly optimistic rate of return. And I believe they are back to working again now? Speaking tours last I heard?

I'll leave you with a quote from Daniel Suelo, which I think of often. He has lived without money for 20 years, and is sometimes asked when he will go back to living like a typical American. This is his response:
The more I live this way, the more absurd it seems to go back to living in the prison of money. I was unhappy under money and I'm happy free of it. Why would I trade happiness for unhappiness again? Why would I trade freedom for slavery?
Last edited by Pedal2Petal on Thu Feb 11, 2016 8:37 pm, edited 2 times in total.

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Re: Pedal2Petal's post-ERE life

Post by jacob » Thu Feb 11, 2016 8:30 pm

@vexed87 & Pedal2Petal - +1... actually many more pluses. The fashionable 4% rule is too optimistic compared to history and most countries :roll: ... especially when it comes to the long run. A diligent paper-manager should aim for 3% in the 21st century environment while a passive paper-manager ought to aim for 2% or less. Paper has gotten rather overrated in recent decades compared to historical means.

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Re: Pedal2Petal's post-ERE life

Post by Pedal2Petal » Thu Feb 11, 2016 8:49 pm

jacob wrote:@vexed87 & Pedal2Petal - +1... actually many more pluses. The fashionable 4% rule is too optimistic compared to history and most countries :roll: ... especially when it comes to the long run. A diligent paper-manager should aim for 3% in the 21st century environment while a passive paper-manager ought to aim for 2% or less. Paper has gotten rather overrated in recent decades compared to historical means.
Now here's a related chart from the most recent post on Our Finite Earth. It looks a lot like a graphical representation of what you just said.

Image

Do you think this chart has any relevance here? Returns on paper assets are predicated on GDP growth, right? At least to a point. What happens to paper assets once GDP growth goes permanently negative?

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Re: Pedal2Petal's post-ERE life

Post by black_son_of_gray » Thu Feb 11, 2016 10:55 pm

@P2P: data here

I generally agree with the argument that the future will see less returns, but I'm not sure that fit line is too reliable. Very dependent on starting/ending points.

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Re: Pedal2Petal's post-ERE life

Post by 7Wannabe5 » Fri Feb 12, 2016 8:16 am

I absolutely agree in the importance of social capital. However, the other way to look at the same situation is in terms of human resources. Besides the usual reasons, my kids would be loathe to come crash in MY basement because they know that I would put them to work to earn their keep. When my peers complain about grown loafing dependent kids, I think that they are either afraid of their own children, not valuing the potential of their own children, or thoroughly lacking in the bit of imagination necessary to invent some work for them to do. How many people could live off the natural resources and energy inputs to my 3/10ths of an urban acre and other free inputs available within human (lentil?)powered travel distance? Kind of depends on how many of them have the ability to do something like "construct a wind turbine from dumpster scraps."

Another way to look at why, or in what situations, social capital will increase in value relative to money is that you only need money to trade with people you don't know or trust. So, the most important skill to have if you want to benefit from social capital is the ability to behave as though you trust other people. This is actually more valuable than behaving in a trust-worthy manner because more rare.

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Re: Pedal2Petal's post-ERE life

Post by vexed87 » Fri Feb 12, 2016 8:49 am

WRT growth;

Globally, the trend is definitely down, CHS nailed it in his lastest book - A Radically Beneficial World. Under the current regime, some localities may still see increasing growth rates, but not the west.

IIRC, there are 3 key inputs that drive long term economic and job growth, capital, labour and technology.

Capital - We have likely reached a point of diminishing returns of financial capital as proponents and beneficiaries of N/ZIRP and QE have picked all the low hanging fruit with their nearly free money. Other forms of capital, like natural capital are being depleted i.e. EROEI in oil is falling, high yielding ores are consumed leaving inferior lower yielding ores. These are the real upper limits to growth. Ecological collapse which translates to lost opportunity with the added the cost of cleaning up after industry lowers that ceiling of growth further.

Labour - Changing population demographics, i.e. falling worker population, or more importantly, workers relative to retirees and other dependants means reduced economic growth and output, however this can be confusing when you consider the amount of people out of work yet willing to work... but here's the kicker...

Technological advancement - Automation and globalisation is now destroying jobs faster than the western service sectors can create them. Couple technological advancement with erosion of jobs with an oversupply of labour and you have depressed wages, which on the face of it is great for business, but when you realise it means your customer base is being eroded, not so good. This is why we see growing wealth inequality, the benefactors of automation and globalisation (top 1-10%) get richer, while the 90% see worsening living standards as there niche jobs are slowly automated or outsourced to cheaper regions. No one can afford to remain uncompetitive in terms face of globalisation and automation. Adapt or go bust.

WRT paper-assets when/if growth turns negative;

In short to medium term, probably lots of volatility!

If growth remains negative >5 years, index investing in that market probably goes out of the window as a long term strategy. Individual companies may still do well, so you would need to get good at value investing, or revert to safe haven assets such as PMs etc. A long term negative growth.

Long term negative growth is a SHTF scenario where debt can no longer be serviced and has to be inflated away, or financial markets collapse completely. Alternatively massive wealth destruction of paper assets via debt jubilees. Socio-economic policies need to be changed to support sustainable practices, otherwise paper assets will become worthless in long run.

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Re: Pedal2Petal's post-ERE life

Post by JL13 » Fri Feb 12, 2016 10:21 am

Ydobon wrote:An interesting post and while I largely agree re. social capital, how is getting a rent reduction from relatives as the result of the application/creation of social capital?.
I'd like to add to this. I currently live in a space where I have about 30% rent reduction from a friend of a friend. He doesn't take the hit because it's a "gift", it's because I'm providing something else of value. Namely; low turnover and property maintenance. That $300 he would spend on vacancy, turnover, adn repairs. But because I take care of the place and pay rent on time (6 years now) he saves money and significant headaches.

I'm sure P2P's arrangement has similar benefits for the owners, regardless of relationship. Nepotism I'm sure isn't the only reason.

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Re: Pedal2Petal's post-ERE life

Post by JL13 » Fri Feb 12, 2016 10:29 am

7Wannabe5 wrote:Another way to look at why, or in what situations, social capital will increase in value relative to money is that you only need money to trade with people you don't know or trust.
YES! This is a huge concept. And I think there's a cost to this also! If you're entering into a transaction where there's not trust, you have to insure yourself against that. Consider for example, renting out a room or property on Airbnb. There's a risk that the tenants will damage your property. Surely Airbnb can cover you, after considerable headache and lost income during repairs, and then airbnb may have to consider litigation. These are all drags on transactions.

a lot of monetary transactions are subject to this hidden tax, so you're really paying for good/service + lack of trust premium. Trust premium being sort of a combination of agency cost and litigation costs. 2 trustworthy people transacting don't need to consider either!

I'm reminded about how Warren Buffet reiterates that he buys business with 2 pages documents without lawyers. The concept being that if you don't trust the person enough that you need a 100 page document, then you probably shouldn't be in business with the person.

This all ties back to P2P's "below market rent" - obviously his relates trust him to rent the room below market. Is this not really just the true rent price ex the 'lack of trust premium'? It's not a given that your relatives trust you not to destroy their stuff. I'm sure everyone on here has at lest one family member they wouldn't trust with anything of value!

Edit: Sorry to jack your journal P2P!

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Re: Pedal2Petal's post-ERE life

Post by Ydobon » Mon Feb 15, 2016 8:59 am

Absolutely nothing wrong with a bit of familial nepotism, I have certainly benefitted from it myself in the past.

I suppose my interpretation of social capital is perhaps a bit Jimmy Stewart - as something that you bank and then draw on in times of hardship. On reflection, it's perfectly sensible to think that you might 'spend it before you've earned it' in lots of situations. It gives me a whole new perspective on unsolicited gifts received from family members that made me feel guilty at the time! :)

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Re: Pedal2Petal's post-ERE life

Post by Pedal2Petal » Tue Jun 07, 2016 6:29 pm

Growing Calories

I'm growing as many potatoes as I can this year, party inspired by the main character of the book "The Martian" who has to grow potatoes on Mars to survive, and partly inspired by the book "Botany of Desire" which features potatoes as a world-changing crop for food availability. I put in the max potatoes I could in my 21 ft^2 garden, which was only a third of it. I didn't plant everything in potatoes because I want to rotate my crops to keep my soil fertility high long term. I maybe shouldn't have bothered as I probably wont have the community plot for long enough for nutrient depletion to affect me.

I am growing Yukon Gold, and a blue potato. They all came from local farm so they were not sprayed with "bud nip" or other chemicals that stunt shoot growth. They grow very strongly. I am also "hilling" them, adding more soil as they grow, then they will produce more potatoes from the buried stalk. I hill with pure compost, potatoes are very heavy feeders and need very rich soil. You can keep hilling them taller and taller, some people grow potatoes vertically, This article "claims" 100 pounds in 4 ft^2
I have total of 6 ft^2 in potatoes.

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I am not even considering harvesting them now. For big potatoes, I think you have to harvest late in the year. I think you can leave potatoes in the ground until winter and they just get bigger.

I am excited about potatoes and growing my own caloric staple. I have even started practicing eating potatoes every single day to get used to cooking with them. They're best fried.

Food from the Forest

But it gets even easier than that, because salmonberries are at the height of ripeness right now. Strangely enough, I'm the only ones that cares. I've picked pounds of them already out of local forests and parks. Blackberry season is next, so I'll be picking all summer.

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Keeping Expenses Zero

I'm with the kid now during the days so he has to come with me wherever I go. We use a bike trailer which has been amazing for cargo too. It's great having an excuse to use one of these.

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Re: Pedal2Petal's post-ERE life

Post by Gilberto de Piento » Tue Jun 07, 2016 7:42 pm

Mars will come to fear my botany powers.

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Re: Pedal2Petal's post-ERE life

Post by theanimal » Tue Jun 07, 2016 10:37 pm

That's great about the potatoes. I'm growing some up here in the Arctic as well. I have a friend here who grows 375-450 lbs of potatoes each year, in a ~3 month growing season (2 that are frost free). He plants whole seed potatoes. There's a horticulturist at University of Alaska Fairbanks who studied the topic and found that every time you halved the potato it suffered 25% injury rate. You can plant with whole seed potatoes 2 weeks before the last frost, just cover your garden with clear plastic.

And yes, you can hold off on harvesting them until much later in the season. We don't take them out of the ground here until September, so I imagine you could keep them in until October or so down where you are. As the flowers start to bud you can pluck them so that the potato plant won't be wasting energy.

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Re: Pedal2Petal's post-ERE life

Post by vexed87 » Wed Jun 08, 2016 5:50 am

Funnily enough, potatoes are the only thing that are thriving in my patches at the moment, everything else is wilted by our summer heat or destroyed by pests (or rogue family members with weedwackers, grrr!). I planted my potatoes using the trench method and piled soil up from the center of the trenches. I haven't bothered to add extra soil though. For a month and a half there were no shoots, I then had a busy period and returned to the garden for the first time in a week and they had exploded, although they are not doing quite as well as yours. It's my first year with potatoes and glad I've planted them or else I'll have nothing to show for all the work I put into digging the ground this year.

I'll definitely be growing potatoes again in future.

I can't wait to have a kid so I can have an excuse to use one of those trailers to do shopping ;)

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Re: Pedal2Petal's post-ERE life

Post by George the original one » Fri Jun 10, 2016 2:29 pm

Pedal2Petal wrote: I am growing Yukon Gold, and a blue potato. They all came from local farm so they were not sprayed with "bud nip" or other chemicals that stunt shoot growth. They grow very strongly. I am also "hilling" them, adding more soil as they grow, then they will produce more potatoes from the buried stalk. I hill with pure compost, potatoes are very heavy feeders and need very rich soil. You can keep hilling them taller and taller, some people grow potatoes vertically, This article "claims" 100 pounds in 4 ft^2
I have total of 6 ft^2 in potatoes.
Yukon gold variety of potatoes are determinate, setting their spud buds once, so repeated hillings are unlikely to produce more potatoes. I typically hill indeterminates twice, at every 4" of stalk growth, and then let them be. Harvest when the tops turn brown & fall over. Early red norland, the other variety I usually grow, are also determinate... however, I usually begin harvesting hill-by-hill on an as-needed basis after 2.5 months of growth for "new potatoes".

And I'm with animal, always planting whole potatoes. It's so damp and there's so much fungal growth here that I just don't take a chance on weakening what I plant.

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Re: Pedal2Petal's post-ERE life

Post by Pedal2Petal » Mon Jun 13, 2016 4:10 pm

theanimal wrote: I have a friend here who grows 375-450 lbs of potatoes each year, in a ~3 month growing season (2 that are frost free). He plants whole seed potatoes. There's a horticulturist at University of Alaska Fairbanks who studied the topic and found that every time you halved the potato it suffered 25% injury rate. You can plant with whole seed potatoes 2 weeks before the last frost, just cover your garden with clear plastic.

That's some seriously useful info. I did plant whole seed potatoes, because I had a 30 pound supply of seed potatoes and didn't have to be stingy with them. How big a plot does your friend put into potatoes each year?

Apparently if you let Yukon Gold get too big, it starts to develop a hollow inside. I saw it once or twice in my yukon gold potato supply. I'll have to keep that it mind.
vexed87 wrote:I can't wait to have a kid so I can have an excuse to use one of those trailers to do shopping ;)
I used to use a landscaper's trailer, but it was in the sort of city where that sort of thing is normal. But if you are ERE you are probably ok being "the eccentric one."

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George the original one wrote: Yukon gold variety of potatoes are determinate, setting their spud buds once, so repeated hillings are unlikely to produce more potatoes. I typically hill indeterminates twice, at every 4" of stalk growth, and then let them be. Harvest when the tops turn brown & fall over. Early red norland, the other variety I usually grow, are also determinate... however, I usually begin harvesting hill-by-hill on an as-needed basis after 2.5 months of growth for "new potatoes".
Another super useful fact that my potato mentor never told me. Can you tell me some indeterminate varieties I can try?

I did dig out a few potatoes today, and I noticed I had to dig very far down to find them. In other words, spud buds were only set once when the ground was much shallower, just like you said. I wonder how early on in the growth phase those buds are set, if it's 40 days after planting, early hilling might still have an effect.

Here are the 3 potatoes I dug out today, I just used a trowel to explore the outer edges of my patch. The two on the right are russets from the store, for size comparison.

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Looking Back at 6 months of Kettlebells

I've not mentioned these before, but I started kettlebells in January. My legs are ripped from a lifetime of cycling, but I've never found a way to integrate upper body strength training into my routine. Kettlebells changed that. Having weights at hand at all times means it's simple to use them throughout the day. I've lifted every day since January and have had tremendous results. I was shocked when I weighed myself to find I had gained 25 pounds of muscle and fat. They also helped to eliminate my back and wrist pain. I've gotten strong enough to upgrade from a 35 pound kettlebell to a 54 pound kettlebell.

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Now that I'm familiar with kettlebells, I do many of the same exercises with dumb bells when I'm out of town. Dumbbells aren't quite as versatile but their weight can be upgraded much more cheaply. If I had to do it all over again, I would consider dumbbells seriously, but probably still get kettlebells in the end ;)
Last edited by Pedal2Petal on Tue Jun 14, 2016 12:51 am, edited 3 times in total.

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