Adam Smith vs. ERE

[jacob]

This is akin to those calculations in which one might claim that a SAHM/D is working a $100,000 job because that's what it would cost to fill those functions by hiring a CEO for 3 hours, a psychologist for 2 hours, a chef for 5 hours, ... each virtual job billed at effective market rates.

Well okay... sure, I'm actually really living a $70,000 year lifestyle and not a $7,000. Every year, I write myself a check to pay for the $70,000 lifestyle that I've calculated that I actually enjoy. Then I tear that check up.

The difference is that I can pay for 90% of my supposed costs in monopoly money. The IT engineer can not.

[ThisDinosaur]

@7
So the individual's incentives are such that it's most expedient to [ditch the mug + move to better job + purchase new mug] is preferable to [sell mug on Offer Up ×(wait for& deal with cheap buyers) vs take up box space in moving truck...]

Tragedy of the commons. What tips the balance is how much the individual values not being a wasteful consumer and/or "the environment."

@jacob
It's not akin to that because a SAHM may highly value raising their own kids vs paying someone else to and funding that with unpleasant labor.

[jennypenny]

What is the virtue of the systems approach if not to optimize the relationship between your efforts and your goals?

I guess it does come down to the goal. If the goal is to stop working, then the FIRE route compresses the working part into fewer years and lets capital do the work after that. If the goal is FI, then having enough capital to cover the share of your lifestyle you can't/won't insource meets the goal.

ERE (to me) goes a step further because of the combination of skills, capital, and reduced inputs that provide a greater level of maneuverability. Yes, there is still 'work' but no job per se, and I feel like my effort goes directly into activities that I'm confident enhance my quality of life. I can also adjust what I'm doing without significant shocks to the system because I have the skills, time, and capital to change tack as needed. That might not be as productive in the traditional sense, but it feels much more stable.

That relates to another point. The exercise of insourcing teaches problem-solving and develops ingenuity. When someone is faced with a new problem, they might not see all of the different possible solutions if they are used to outsourcing. This forum is such a great example of how even seasoned DIY-ers can learn novel approaches from others.

[7Wannabe5]

@ThisDinosaur:

It was not my intention to highlight potential for the "sin" of waste, except perhaps to the extent that it overlaps with the sin of ignorance. As Farm_or noted, when you run your own generalist business (as opposed to being self-employed hyper-specialist/consultant), it becomes very clear where you are choosing to end the domain of your own application of skill-set and/or expansion of market(s.) I don't think this boundary is as clear in the mind of the average specialist/consumer.

Anyways, what finally occurred to me after recently reading a few books by the more optimistic techno-futurists, who also quote Smith, is that eventually hyper-specialization must fail, because it is simply incapable of making humans happy, because we are ingenious omnivorous scavengers with nimble fingers. I mean, even if you take on the perspective that there really isn't very much risk being created moving forward with status quo, and any pessimism is just "doomster porn", you have to then ask why is there a market for "doomster porn?" Or another way to express it would be that hyper-specialized careerism pretty clearly does not to seem to be the path to self-actualization.

[ThisDinosaur]

@jennypenny
Diversification of strategies makes sense to me. Wage work + save & invest + self sufficiency..., do them all because you never know which one will fail. But this seems like the opposite of a systems approach because its many solutions to one problem instead of one solution to many problems. Its arguably wasteful duplication of effort to do all three because one will turn out to have been "best" after the fact. At best its insurance, but it's definitely not a systems approach to follow all three strategies.

When I want or need to use goods and those aren't automatically provided to me, I define that as "work".
...
At its most fundamental level, ERE is about designing one's world so as to eliminate work (the kind that is required to satisfy needs and wants, not the fun kind that done voluntarily) and pollution (wasted effort, wasted goods, ...). When things are optimally designed goods will flow through me with little effort and waste.
...

This, I would say, is how I understand ERE. It has two parts: Eliminating work and pollution and considering human living as a dynamic time and probability dependent.

What if the things you enjoy doing dont pay enough or supply your other needs and wants? If building and gardening get you off, you are well suited to a happy life of chop wood, carry water. But if you really like five star hotel concierge service and flat screen TVs and sports cars, you have to either work for those things or change your wants. Both of those require "effort."

This may simply require more creativity than I have.

[ThisDinosaur]

@7Wb5
Doomster fantasies work to, among other things, soothe the anxiety about depending on other people & their systems. That's the appeal of ERE for me, too. But I'm concerned that there is a cost to scratching that itch, and we (EREers and doomers) are paying too high a premium for it. The analogy of a high fee annuity comes to mind. "Just give us your life savings, and we will make sure you never outlive your money!"

[7Wannabe5]

@ThisDinosaur:

For whatever reason, I don't experience much anxiety related to depending on other people and their systems. I just think it's gawd-awful boring to hyper-specialize. It's like your mind-body starts creating the same sort of feelings of discomfort it might generate if you ate nothing but blueberries for a month or if you were about to marry your first cousin three generations in.

[ThisDinosaur]

Specialization is boring. But suppose you are better at one thing than most other things and most other people. Doing less of that thing so you can do other things requires "sacrificing" some income. But if you choose to do the One Thing, you are "sacrificing" interesting variety for more income.

I dont know how to quantify or compare those two sacrifices. I dont know how to balance them. And Jacob's description of ERE systems implies there shouldn't need to be any "sacrifice" at all, (in the way I'm defining that word here.)

[Jin+Guice]

To come back at this problem from the Adam Smith/ traditional econ side, it's important to remember that current economic models are based upon conveniently and consistently ignoring certain aspects of reality. The general public understanding of this model is a bastardized version, reinterpreted through our cultural lens.

For example, the YMOYL life-energy idea is pretty solid economics; commute time, time spent doing work related tasks at home, time preparing for work as well as taxes and job related personal expenditures should all be used in the real hourly wage computation, yet how many people are doing this? It's not hard to end up with a $8/ hour real (again, think YMOYL) wage from a $25/ hour stated wage. This changes the marginal decision of outsourcing.

The basic labor model also ignores things such as the standard 40 hour work week and the dependency of health care on having a fulltime job. These can be added to the model, but they go beyond the 101 understanding that even a non-labor specialist economist is likely to think of. They also change the outsourcing decision, can you add 1 extra hour of work at will?

The point of all this rambling is that, even using the Adam Smith originated economic theory which has been in vogue for some time, specializing is not all that it's made out to be. Additionally, ERE indirectly addresses some obvious problems with traditional economics. One example of this is the ecological way of looking at our economy, rather than simply examining producers and consumers. Another example is questioning the economic axiom that "more is better" (local non-satiation for the ).

In Adam Smith's time, thinking and theorizing about how a capitalist system worked and what it's desirable qualities and inner-mechanisms are revealed counterintuitive thoughts and ideas. In a society where these economic ideas are widely "known" (if imperfectly) and internalized in our day to day lives, thinking about how these ideas (especially those that are popular) might be imperfect reveal the counterintuitive insights.

I don't think ERE stands in opposition to economic theory. It stands in opposition to the conclusions our society has drawn from economic theory and questions certain (to me) flawed aspects of economic theory.

[Jin+Guice]

@7w5 and @ThisDinosaur:

Thanks for giving my daily inner struggle a voice... I usually do this by walking around my house screaming obscenities, which is much scarier for my cats.

[Loner]

Many people quoting Adam Smith have obviously never read Adam Smith. This is true for even many economists, who should know better. Smith's view of specialization was a bit more complex than is generally given. He certainly didn't think specialization was the most awesome thing since sliced bread. He himself was, to an extent, a polymath who wrote not only on economics but also on philosophy, astronomy, literature and law.

Take this passage, for instance, from Wealth of Nations:

In the progress of the division of labour, the employment of the far greater part of those who live by labour, that is, of the great body of the people, comes to be confined to a few very simple operations; frequently to one or two. But the understandings of the greater part of men are necessarily formed by their ordinary employments. The man whose whole life is spent in performing a few simple operations, of which the effects, too, are perhaps always the same, or very nearly the same, has no occasion to exert his understanding, or to exercise his invention, in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgment concerning many even of the ordinary duties of private life. Of the great and extensive interests of his country he is altogether incapable of judging; and unless very particular pains have been taken to render him otherwise, he is equally incapable of defending his country in war. The uniformity of his stationary life naturally corrupts the courage of his mind, and makes him regard, with abhorrence, the irregular, uncertain, and adventurous life of a soldier. It corrupts even the activity of his body, and renders him incapable of exerting his strength with vigour and perseverance in any other employment, than that to which he has been bred. His dexterity at his own particular trade seems, in this manner, to be acquired at the expense of his intellectual, social, and martial virtues. But in every improved and civilized society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall, unless government takes some pains to prevent it.

It is otherwise in the barbarous societies, as they are commonly called, of hunters, of shepherds, and even of husbandmen in that rude state of husbandry which precedes the improvement of manufactures, and the extension of foreign commerce. In such societies, the varied occupations of every man oblige every man to exert his capacity, and to invent expedients for removing difficulties which are continually occurring. Invention is kept alive, and the mind is not suffered to fall into that drowsy stupidity, which, in a civilized society, seems to benumb the understanding of almost all the inferior ranks of people. In those barbarous societies, as they are called, every man, it has already been observed, is a warrior. Every man, too, is in some measure a statesman, and can form a tolerable judgment concerning the interest of the society, and the conduct of those who govern it. How far their chiefs are good judges in peace, or good leaders in war, is obvious to the observation of almost every single man among them. In such a society, indeed, no man can well acquire that improved and refined understanding which a few men sometimes possess in a more civilized state. Though in a rude society there is a good deal of variety in the occupations of every individual, there is not a great deal in those of the whole society. Every man does, or is capable of doing, almost every thing which any other man does, or is capable of being. Every man has a considerable degree of knowledge, ingenuity, and invention but scarce any man has a great degree. The degree, however, which is commonly possessed, is generally sufficient for conducting the whole simple business of the society.

Even though, given the epoch, Smith's "labour" referred to tasks such as those needed to manufacture a pin, I think his general idea still holds.

[ThisDinosaur]

I'm concerned when received wisdom from respected sources disagree. Specialist vs generalist. Is one right and the other wrong? Is it context specific? Is it one of those things where the group's interests conflict with the individual's?

That Adam Smith quote, Loner, implies there should be a balance ("T shaped" as Tyler9000 said) between general and specialized knowledge. Too little variety dulls the mind. But, given finite supply of time and effort, how do you find the balance? At what point does general skill acquisition cross from useful to waste of effort on the S curve?
http://earlyretirementextreme.com/bette ... urves.html
I dont have an intuitive sense for this. Possibly I'm just not far enough along on any generalist skills.

[Jin+Guice]

@Loner: Interesting quote, I would've never guessed it came from Adam Smith. You bring up another interesting point, many economics programs don't include reading the works of any great economists. Instead, their "major contributions" are taught in the form of models. Gone are the days of the economic treatise and here are the days of the highly technical and specialized economic journal article.

[jacob]

I've never read Adam Smith, but I suppose I should. The comment about barbarous societies reminded me of something

As mentioned in The lock-in (chapter 2), it is interesting that we refer to "primitive" people as primitive, when every primitive person is able to build his own tools and shelter, make his own clothes, provide heat and water, and knows what food is edible and what isn't. How many of us are capable of that? His technology may be primitive, but his general knowledge of his world far surpasses ours. A "primitive" can competently participate in every aspect of what his culture does. In contrast, we only know something about a very limited number of things in our culture, such as our job training and functions, and the only thing we share in common are opinions about local restaurants, the fictitious lives of the characters in a couple of TV serials, and a rudimentary understanding of the weather forecast. In that regard, our society is more akin to a highly developed insect colony where specialized members work for the greater whole.

Given the lack of diversity of individuals' skills, the popular measure of how well we're doing is given by a single number: Our net worth, or salary for those who don't have a net worth. Open any book on personal finance and one of the first numbers introduced is the concept of net worth. Your net worth is equal to the sum of all your financial assets, house, investments, and possessions minus the sum of all your financial liabilities, mortgages, and loans. This can be positive or negative, but it is still a one-dimensional number.

Net worth is only useful as a measuring stick if everybody plays the same game and has the same form of consumption. It is only useful in a world where money is earned with one skill and the lack of all other skills is compensated for by spending money.

However, real people, even specialists, are not so one-dimensional. A person may be able to cook his own food (reheating pizzas or boiling noodles is not cooking!). Compared to a person that needs to go out to eat or buy more expensive preprocessed food, that skill is an asset, because the person needs less money to eat. Yet how does one put a price on this asset? Similarly, a person with a high-paying job may be chronically stressed or sedentary and thus at a higher risk of developing various lifestyle diseases. Yet how does one put a price on this liability?

It may not be possible to put a precise price on such assets and liabilities, but it's possible to draw a diagram that illustrates them.

[Jin+Guice]

@ThisDinosaur: I have this problem too. I like the idea of the generalist more than the specialist but some specialization is obviously required. But how much? Is it possible to web of goals generalize to every skill or just a lot of them? Am I ever not going to higher an AC dude to fix my AC when it breaks in the middle of a gulf-south August? Should I build my tiny house completely from scratch? Is building a house out of wood even a good idea? I THOUGHT THIS WAS SUPPOSED TO REDUCE FRICTION.

The struggle is real.

[jacob]

The struggle is real.

#firstworldproblems

In response, I'd say look above to what Tyler9000(*) followed by Riggerjack said. I've derived a lot of compound value from having specialized to the highest Dreyfus level (phd + working experience). Replicating that level in another "sit in front of a screen" field (high finance) brought it home for me. I expect learning something similar---anything with equations and models---would be quite easy for me the third and fourth time around. Each time you can not only draw on previous experience; you can draw on the meta-cognition realized from what those different fields have in common when you learn the N+1 field #latticework

Speaking of tiny houses ... for me Neanderthal woodworking (handtools only) was starting from scratch. There was practically nothing I could use based on my previous experience of sitting in front of a computer for 16 hours a day when it came to oldschool woodworking. After 10 years of that, I think I'm decent at it ... and so, this would translate into similar "non-machined" work, like e.g. blacksmithing. Should I change to machining ... whether metalwork or woodwork with powertools, maybe I can use some combination of the above?

Or consider athleticism. We used to argue which is the hardest sport. There's no point in arguing this because it's obviously hockey. Why? Because if you're a good/great hockey player, you'll be at least average in any other sport one can think of. Power, strength, dexterity, agility, endurance, field vision, ... are all at good levels. You have no real weaknesses. If you're not fortunate enough to have the ERE equivalent of a sport that combines all these physical skills, like hockey, ... having done different sports also helps.

In a sense, ERE is the development of a lifestyle-design athlete. Speaking of fitness, crossfit is another example of systems-thinking.

(*) Compare the T to the graph in the book referenced in my quote above.

[BRUTE]

brute thought he'd have to jump in here to defend economics once again, but, luckily, Loner saved the day.

most critiques of economics lack from ever having read anything about economics. Adam Smith certainly didn't say "the more specialized the better", just as "the more the better" (quoted above) is not economics.

economics says there is an optimum for any given situation. if the optimum includes the personal development, anti-fragility, systems thinking, and holistic outlook of an ERE human, that doesn't invalidate economics - it just means this human values different things in life than the stereotypical Boomer Human mentioned above.

[Jin+Guice]

@brute: I agree with most of what you said but "the more the better" is economics. The argument warrants another thread (maybe the your libertarianism thread). If this thread already exists please point me to it. See: https://en.wikipedia.org/wiki/Monotone_preferences and https://en.wikipedia.org/wiki/Local_nonsatiation

[ThisDinosaur]

most critiques of economics lack from ever having read anything about economics. Adam Smith certainly didn't say "the more specialized the better", just as "the more the better" (quoted above) is not economics.

I'm NOT suggesting that Adam Smith or anyone else said we should be single function cogs.

If you read the initial post of the thread, you'll see that it's about a specific quote and how it relates to my questions about comparative advantage, opportunity cost, and the dollar value of my time and human capital.

Its suggested in the ERE book that Skill Of Living has an exchange rate with Cost Of Living. And in Jacob's ERE Wheaton scale, dollar amounts are given to compare progress. Implication being that if you can DIY more types of things, you will need less money and so less "work." But learning and doing both require time and effort (i.e. "work"). And frequently, DIY requires more work for the individual than it would for a relevant specialist with economies of scale.

I think the $ amounts on the ERE Wheaton scale obscure which individual is actually doing the most "work."

[7Wannabe5]

In reference to humans who live more primitive lifestyles, one of my courses on sustainability offered the anecdote of a Chinese farm woman, who was part of very sustainable system inclusive of recycling of her own night-water, expressing desire for her daughter to be educated in order to seek work in the city so that she could eventually "See Paris." OTOH, I recently happened upon another anecdote concerning a woman lodging complaints about a project that brought water to her village, because the two hour walk to fetch water that was part of her previous daily practice was her only chance to get away from her husband.

In "The Rational Optimist", Matt Ridley speculates that human females were the first traders, because human males are more inherently xenophobic, less likely to be friendly at boundary of tribe. Robin Dunbar has suggested that 150 represents the average maximum number of ongoing functional social relationships an individual human can handle, and this number also seems to correlate with maximum primitive human tribe size. So, one could also speculate that the maximum number of bartering relationships an individual could maintain might be around 150. Money, or something like money, is independently invented or re-invented at fairly low population levels.

Jacob noted somewhere that at the height of his specialization he was writing papers that would only be read by 5 other people out of the entire current planetary population. As a rare book dealer, I also sold many books on topics so specialized that demand over world market was only very intermittently existent. OTOH, I have also on occasion over the course of my life had paid employment which sometimes required changing diapers, and I would never again accept offer of employment, paid or unpaid, that required scaling up beyond 3 diaper change "clients" requiring my services

The general observation I am weakly attempting to make is that quality of life AND conservation of resources might be maximized if/when specialization is only rationally extended in alignment with human social and physiological realities. For instance, the average American kitchen is equipped to readily prepare dinner for 6-12 people every evening, but it is over-equipped for only feeding one person, and it is under-equipped for feeding 100 (I know because I once attempted this.) The human working in a pin-factory might or might not take pride in doing his part to provide the world with pins, but 40 hrs./week is almost certainly too much time to devote to one small, repetitious part of an impersonal manufacture at that scale. IOW, a good part of the problem is that the pin-factory line worker can't really know or even have much sense of the pin buyers in the way that Jacob knew of the 5 people that might read his research paper.