JL Collins - The Simple Path to Wealth

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Fish
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Re: JL Collins - The Simple Path to Wealth

Post by Fish » Sat Jun 17, 2017 11:47 am

@P_K Thanks for providing the link and suggested reading order!

@jacob So as far as I understand it, some reasons not to use to indexing as a FIRE investment strategy are:

1) Data trends suggest that the future will not look anything like 1975-2015.
2) Systemic risk due to the success of the investing strategy being coupled to the success of the economy. If the economy tanks, so do your investments and you'll be competing for a job with a bunch of other people who have lost theirs (but their work experience will be more recent!).
3) Systemic risk due to lack of strategy-diversification when it comes to investing. If indexing fails then a lot of people lose a lot of money. Workers will extend their careers because they don't have enough capital to retire. Other retirees will want to go back to work because they no longer have enough capital to support their desired standard of living. This will put additional pressure on the job market.

Combining factors 2 and 3, FIRE with heavy reliance on TSM is exposed to a huge downside risk that a systemic failure of the economy entails. Suppose I FIRE, expecting that if investments don't pan out, I'll just go back to work. But if everyone else has that same contingency plan, then they're all looking for work when I need work. If the jobs aren't there (which is likely when this happens), it's a disaster.

Some solutions I can think of are to hedge the downside by investing in something that's less correlated (akin to PP), or to invest in index funds, but continue focusing on earned income to increase the savings buffer and also keep a foot in the door of the job market in case the economy goes down.

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Re: JL Collins - The Simple Path to Wealth

Post by TopHatFox » Sat Jun 17, 2017 12:09 pm

@Fish, while all of that is true, I think a good asset allocation including more than TSM would solve a lot of the problems you mentioned. Someone that is indexing could have radical life strategies in case if things do go bad, such as living in a cheaper country, an RV, backpacking for a while, etc. They could also save a large buffer so that things would have to get *really* bad economically for their lifestyle to feel it.

Is the alternative to learn a particular active investment really well, and having a pulse on it consistently? But what if you're sailing for months, or backpacking a thru-trail, or simply forget? The demand of constantly having to be with your investments is also a risk.

There's also the upside with indexing a well-diversified portfolio. What if the economy actually does decent to good? Then the indexers well diversified portfolio is awesome. If they don't spend most of those returns anyway because of the large buffer, they're in even better shape.

Finally, while the well-diversified indexer is financially independent, they could learn useful skills such as welding, woodworking, house building, accounting, etc. These skills are likely really valuable wherever one goes, even during recessions.

Thoughts?

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Fish
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Re: JL Collins - The Simple Path to Wealth

Post by Fish » Sat Jun 17, 2017 1:15 pm

@Olaz Of course! How could I forget... the first 90% of the ERE book has all of the lifestyle strategies needed to hedge bad macroeconomic outcomes. As Jacob implied on the "About ERE" page, economic independence (ERE) is superior to financial independence (FIRE) because the latter relies on the economy to work. Ultimately, since investing strategies can't fully decouple FIRE from the economy, to be successful in all economic climates requires a change in basic lifestyle strategy.

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Re: JL Collins - The Simple Path to Wealth

Post by MZMpac » Tue Jun 20, 2017 4:53 pm

TSPW was actually the first FIRE book I read. So for me it was a home run. I knew little about investing, and I liked his casual style plus the way he demystifies investment terminology. He presents it as such a fail-proof method that I was almost skeptical. So of course I read other FIRE books, which come to a similar conclusion. All FIRE material is based on the same premise---avoid debt, save 50%+ of your gross, live modestly, and stay the course.

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Re: JL Collins - The Simple Path to Wealth

Post by Dragline » Tue Jun 20, 2017 10:50 pm

Well, there's more than one way to skin this cat. And a lot more ways to end up with cat fur in your mouth. This one is as good as any if you can stomach the downturns.

@Fish -- yes, switching horses midstream is a way to choke on cat fur. Pick something you can stomach and hold on to your stomach.

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BRUTE
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Re: JL Collins - The Simple Path to Wealth

Post by BRUTE » Tue Jun 20, 2017 11:04 pm

a cat in the mouth is better than two horses in the tree, right? shit, brute thinks he's getting his animal metaphors mixed up..

ThisDinosaur
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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur » Mon Jun 26, 2017 8:19 am

Has anyone found any free online sources for Jacob's Startup Curriculum books? I prefer to read these things on my phone, or from a printed pdf.

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Re: JL Collins - The Simple Path to Wealth

Post by jacob » Mon Jun 26, 2017 9:35 am

@ThisDinosaur - Some libraries might offer a kindle version. None of them are public domain. They're ~1000 page textbooks. All of them would cost you $37.38 on amazon used (shipping cost included). It is a small price.

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur » Mon Jun 26, 2017 9:47 am

It's a small price, but its less about my cheapness with money than my time frugality. I sneak my FI education into short bouts of reading at work or after I put kids to sleep (this can take hours). I can't carry an economics text book around at work, but I can peak at my phone for 15 minute stretches. Or pull a printed pdf in 8-point font out of my back pocket.

Do those books contain anything significantly different from other public domain books on the same topics?

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Re: JL Collins - The Simple Path to Wealth

Post by jacob » Mon Jun 26, 2017 10:01 am

ThisDinosaur wrote:
Mon Jun 26, 2017 9:47 am
Do those books contain anything significantly different from other public domain books on the same topics?
I don't know about any public domain books at that level, but these books are pretty standard when it comes to economy and finance. They are widely used ["classics"] and they used to form the basis of CFA level 1 (before the CFA institute got greedy like other textbook publishers). If you can find 5000 pages of public domain material that's newer than 1960/70 or so, it would probably cover the same material.

Since the books are so cheap (compared to the cost of paper and ink of printing them out), an alternative solution would be to just tear out the pages of the chapter you're currently reading and then throw it away after you're done.

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Re: JL Collins - The Simple Path to Wealth

Post by fiby41 » Wed Jul 05, 2017 12:13 pm

jacob wrote:
Mon Jun 26, 2017 10:01 am
Since the books are so cheap (compared to the cost of paper and ink of printing them out), an alternative solution would be to just tear out the pages of the chapter you're currently reading and then throw it away after you're done.
Camera phones are a thing.

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Re: JL Collins - The Simple Path to Wealth

Post by jacob » Wed Jul 05, 2017 12:25 pm

@fiby41 - Haha! Be my guest ... How do you write notes in the margin on a cellphone picture?

This is where I would say something about time-value of money and accept "hourly wage" arguments to justify my personal level of laziness and comfort ;-) Everybody has their limits. Also, I AM the guy reading 1000-page textbooks on the subway ... hauling them around in a backpack for a two mile walk between the train station and home.

I recall having to copy an out-of-print/ever-published/stapled 120 page book(*) during my masters project in the late 1990s. The copier was in a small room and only accepted manual feed. After 15 minutes and 20-30 pages, the stench of ozone was strong.

I don't really have any theoretical objections to using a phone to photograph every page in a 1000 page book and subsequently reading it on a 3" screen though. Maye there's even an app for that!

(*) About applying this https://en.wikipedia.org/wiki/Lanczos_algorithm to nuclear transition levels which require very large and otherwise non-computational matrices. Very clever stuff. Nerds might enjoy. Otherwise, just ignore. Danish nerds (age 40-70 or so) might appreciate how I managed to piss off all the other users on the Uni-C supercomputer because I figured out how to use chron-jobs to load up the queue with my jobs. Wonder if Uni-C is still a thing. Google shows nothing.

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BRUTE
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Re: JL Collins - The Simple Path to Wealth

Post by BRUTE » Thu Jul 06, 2017 1:09 am

brute has never understood why some humans write into their books while reading. brute has tried it, and it has only distracted him from reading.

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur » Thu Jul 06, 2017 6:08 am

Agreed. I use notes to summarize long texts in my own words. Leaving out things I already know, or think I'll remember with one reading.

@Jacob, Given my specific constraints or "personal level of laziness and comfort," what would be the next best thing to those specific books? What are some of the high yield concepts you learned from them?

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Re: JL Collins - The Simple Path to Wealth

Post by jacob » Thu Jul 06, 2017 7:45 am

@TD - Given my specific constraints and personal level of laziness and comfort, I can't tell you :P

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur » Thu Jul 06, 2017 9:04 am

Dammit! But I'm so very very lazy and uncomfortable!

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Fish
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Re: JL Collins - The Simple Path to Wealth

Post by Fish » Thu Jul 06, 2017 9:39 am

@TD I got the McConnell/Brue econ textbook and finished the first part (6 chapters/110 pages) which was a remedial but well-written and well-organized review of basic economic concepts (e.g. supply and demand).(*) There is more difficult, less familiar/intuitive material ahead. Even if the concepts would not be novel to you, there is a value in studying the book to absorb the author's framework and organization and see connections between concepts that are otherwise not apparent. IOW, there's a big difference between having a collection of facts and also being able to see the connections between them.

With learning, you can be Pareto-efficient in acquiring facts by focusing on the big ideas. I don't know of a way to apply hacker-mentality to speed up the connection of ideas. I either have to spend a lot of time thinking about the subject, or read what someone else has written (after they have spent a lot of time thinking about it themselves). Reading a textbook is already very time-efficient in this regard.

In my simplistic view, a textbook is comprised of:

1. Concepts
2. Elaboration of the concepts
3. Connections between the concepts, and to other ideas

CliffsNotes will contain an outline of facts (1) and maybe an elaboration on the most important ideas of a book (2). If you take this 80/20 approach to learning, you likely think textbooks are full of fluff. Otherwise, you'll realize that (3) is being sacrificed due to constraints of the format and reader.

What we have is not a shortage of facts (which humans and computers already do very well), but a shortage of understanding of how those facts are connected. I have always thought of a "Jacob" as a person who a) reads a lot, and b) connects the dots. If this is what you aspire to, it would make sense to read textbooks to absorb the connections that have already been made, and free your mind to work out the connections that are not yet widely known. That's where the alpha is (for now).

(*)I have found it very interesting reading this book with an ERE perspective, which makes me question a lot of fundamental economic assumptions, such as wants being unlimited, and specialization being advantageous. While this may be true for humans in aggregate, it does not need to hold for the individual.
McConnell/Brue 15e, p.62 wrote:The majority of consumers produce virtually none of the goods and services they consume, and they consume little or nothing of what they produce.
As we well know, being economically independent requires operating under a different set of behaviors. Kind of like those who don't learn history are doomed to repeat it, those who do not learn economics are destined to be controlled by it.

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur » Thu Jul 06, 2017 11:09 am

Well, in all seriousness, yes I do like shortcuts when they actually deliver. But I would read these texts cover to cover if I could get them in my convenient, preferred format. My experience is that some textbooks really are better than others. The 'fluff ratio' is determined both by the quality of the writing and my level of knowledge before I start reading. But I doubt Jacob would have recommended them if he thought they weren't high quality.

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Fish
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Re: JL Collins - The Simple Path to Wealth

Post by Fish » Fri Jul 07, 2017 11:56 am

ThisDinosaur wrote:I would read these texts cover to cover if I could get them in my convenient, preferred format.
Several books in Jacob's curriculum have newer editions which include ebook formats. For example:

(2) https://www.amazon.com/gp/aw/d/B00B82G7UG
(3) https://www.amazon.com/gp/aw/d/B00HZ3AZ6E
(4) https://www.amazon.com/gp/aw/d/B00I51KLBE
(5) https://www.amazon.com/gp/aw/d/B01DUEBDIK

Prices range from $93-249 (about 50-75% off if renting). By comparison the entire 7-volume paper book collection for <$40 seems like a great deal.

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Re: JL Collins - The Simple Path to Wealth

Post by ThisDinosaur » Mon Jul 10, 2017 1:58 pm


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