The Education of Axel Heyst

[2Birds1Stone]

Depreciation really opens your eyes to the true cost of ownership, one of my favorite parts of the ERE book.

I learned this lesson several times over the past few years. Purchasing a car in 2016 for $17k and selling it for $9k 42 months later was a real eye opener.

Most recently I purchased a bicycle in Lisbon for $190 and am selling it tomorrow for $100. I could have taken more time to shop for a deal (but was hard at the start of the pandemic here and may have taken up valuable riding time), as well as taking more time to sell it for a higher price (but didn't want the hassle of dealing with flaky buyers or be left holding the bike when it's time to leave for the airport), thus my cost of ownership for 2.5 months will be $90. Well worth it, and now I consider the price and value of everything I acquire.

Instead of accounting for the purchase price of my car in my ERE spreadsheet, I tracked the depreciation as an expense (estimated) over the 3.5 years of ownership, but then went back and amortized the actual decrease in value after selling and evenly spread it across that time period.

[AxelHeyst]

Hahaha, ERE accounting! Now try this... How often do you actually need to move Serenity? ....

I have thought along these lines! And I'm not at the point of not needing a tow vehicle, but I could definitely see being in that situation soonish, able to get away with occasional tows with friend's trucks etc. But it also happens that auto mechanics and homebrewing biodiesel are two things I'm very interested in getting in to after I quit. My first thought was to get an old Mercedes 300D and tinker with that when I no longer need a truck... but another idea is what I already mentioned, converting an old classic truck in to a diesel frankentruck. Obviously a lot more ambitious, but it'd serve the same purpose (learn to wrench, learn to biodiesel) while retaining my ability to tow. That's a call to make after I quit and see if I'm still interested.

Instead of accounting for the purchase price of my car in my ERE spreadsheet, I tracked the depreciation as an expense (estimated) over the 3.5 years of ownership, but then went back and amortized the actual decrease in value after selling and evenly spread it across that time period.

I really dig this... I think I'd be at a loss to estimate cost of ownership with some of my weirder projects (see above re: frankentruck), but, eh, I'm actually pretty comfortable making wild ass guesses and calling them "engineering intuition".

...

In Josh Waitzkin's book The Art of Learning, he has a bit in there about "learning the numbers to forget the numbers". Beginner chess students learn the numeric value of various pieces, exchanges, gambits, etc. In their early games they're doing all these calculations in their head to arrive at the "right" cost analysis for their moves. As they progress, they eventually don't have to do the mental math any more, because they've done it so often, it becomes intuitive and below the level of consciousness. This frees up their minds to focus on more advanced stuff: deep chessic philosophy, metastrategy, whatever it is they do. There's no way to skip the 'numbers' phase, you have to go through it to build proper intuition, but no advanced player is doing explicit number calcs. (Just another way to talk about progression through Wheaton levels, I suppose.)

I think what you wrote is a stage that I hope to achieve as quickly as possible, but it is too early for me to jump to it -- I assume I'd more likely revert to higher spending practices than achieve that zen flow state. I'm still in the 'numbers' stage, and I need to continue to focus on improving my Numbers game and practicing it until it becomes intuitive and drops below the level of conscious effort. And then I'll free up the mental / energetic space to productively think about different capital type exchange rates, etc.

From a controls perspective, I'm a system with a very high frequency (ERE noob), and require tight negative feedback (frequent attention to the numbers) to keep from going unbalanced (reverting to pre-ERE spending habits).

[AxelHeyst]

...

Ah, I misunderstood you at first. You are saying something more profound. Thank you for taking the time to clear that up for me.

Using the language of "one-off" is problematic, I see that now.

It seems to me that perhaps one way to frame this, is a failure to distinguish between operational and capital expenses - or, perhaps, to assume that our lives only have operational expenses, and having a spiritual meltdown every time we get hit with a capx we didn't foresee because our spreadsheets weren't built to capture capx.

Having a capx investment line item feels much better than having a "one-off" line item. One-offs feel like a failure; capx feels like I'm making an adult decision about an investment that will improve my life in some way, and helps me think about it more clearly and without this guilt that "one-off" implies.

So, that to me feels like a better way to approach the trees perspective. And making sure to mainly keep my critical eye on the big picture of yearly expenses, to keep my perspective on the forest, is how to not get stuck in the weeds.

Thoughts on this? Am I still missing something?

[classical_Liberal]

Thoughts on this? Am I still missing something?

There is absolutely no offense intended here, but you guys may be hitting a communication wall.

I think @AH missed the point of my last comment as well. I wasn't actually suggesting he produce something to trade to move his trailer. Although it wouldn't be a bad idea, it's just one of many. My point was that it's very difficult to determine the value of what you produce in that circumstance. Because the value could potentially be viewed as saving housing expenses of $1000/mo, or maybe it's only worth $100 roadside sale value. So my point was that financial value isn't the best way to look at nonfinancial nodes in a system. I was pointing it out because it took me at least six months to make this realization on my own last year.

I think @bigato is trying to make the same point from a spending perspective. It doesn't really matter how you spend, as long as the return on it has greater value to the overall system. So, we shouldn't look at cost of any individual item without understanding how it impacts the whole. And we shouldn't try to cheat the input values because that makes the whole equation unbalanced.

Whereas @axelhyst is really in a situation of still needing to categorize and the balance budget of individual line items to get a "feel" for the financial side of ERE systems thinking.

I think this issue goes back to people who come from places other than consumer land, having different starting points and learning processes than what the ERE Wheaton scale represents. Because I'm on the complete opposite end and trying to get a "feel" for the real value of nonfinancial system nodes, without using financial terms.

[AxelHeyst]

Whereas @axelhyst is really in a situation of still needing to categorize and the balance budget of individual line items to get a "feel" for the financial side of ERE systems thinking.

I feel like I can understand what you both are saying, but I can't grok it - at an internal level - yet. And I'm concerned that if I shift my focus to it now, before I've totally internalized this lower-Wheaton level of fiddling with my purely financial spreadsheets, my grasp of where I'm actually at now is going to slip out of my grasp, and I'll bump back down a level and have to ~start over.

For example, I get this: "...we shouldn't look at cost of any individual item without understanding how it impacts the whole." Makes perfect sense. But at the level of what I can do at an actionable level, I'm still a spreadsheet jockey, and I'm struggling with how to practically implement this. I suspect that it's because I'm currently using a tool (spreadsheet) that is inappropriate for the job (understanding item cost impact on whole system). The more appropriate tool is, I don't know, discursive meditation or something. But until I've worked my spreadsheet so much that I don't *have* to work it anymore, because I've built a personal finances intuition that is pretty well dialed, I won't be able to use the appropriate tool.

But surely there's value in getting this input now from the Levels Above, if only to keep in mind not to grasp too tightly to my current level of understanding and practices? To not get stuck in the grind, and focus on putting in intentional "deliberate practice" with it so I can graduate asap?

Perhaps I need to keep coming back to these higher level ideas on a regular basis and play with them, as a way to gauge how close I am to being able to adopt them.

[classical_Liberal]

@AH
Just to clarify, I'm not sure these are necessarily "higher" ideas, just different. I guess that's for you to decide, because I don't know the workings of your mind. However, I have a suspicion from your writings that you intrinsically already have a very good feel for the value of nonfinancial stock and flows. It's second nature to you. I have that level of feel for the financial spreadsheet stuff.

So I think people from our different backgrounds can really help each other. It's just tricky in communication because I view you as a level above me in these areas, so It's easy for me to talk in terms of higher level financials and expect you to be right there with me. Whereas when you talk about nonfinancial capital stocks like family compounds, and/or building Serenity's systems for off grid, I'm lost as to how to even get started in such a task without thinking, "how much will it cost me and what's the financial ROI?"

@bigato is further ahead of me in both realms, but I can keep up with him when dealing with the financials.

[AxelHeyst]

Ya'll are making me think, much appreciated.

For a change of pace, here's an ERE thing I did today:

I need to do some maintenence. Moto stands are ~$70. This is both a lift and a jack, and I just pulled the wood out of the kindling pile. It's surprisingly stable. (in case it's not obvious, that stack of 2x4's are screwed together...)

Here's a gratuitous shot of a recent sanity rip.

[RoamingFrancis]

Mashallah what a great way to fix a motorcycle.

For some reason, I've recently been slipping into a consumerist mentality and wanting to throw money at stuff. I'll be getting some bike repair lessons from a friend soon; hopefully that'll help XD

[mooretrees]

Nice stand! DH build one for himself last year, now it's got our future touring Guzzi all torn apart on it. He built his higher because he was tired of bending over. Also 15 years older than you too . He has dreams about building some Frankentruck too! I think if you two ever got together there would be some bromancing going on. If you do head to the Midwest, what route will you go? Any interest in meeting ERE folks along the way? We'd happily have you moochdock in our neck of Eastern OR. Would be fun to park your rigs next to our skoolie. Though totally understand if that's not along the way.

[AxelHeyst]

@mooretrees I literally had that thought about your DH maybe a week ago after reading one of your posts hahaha. OR is definitely on our hit list, we have friends trying to move to Bend and it’s just awesome so I’d love to swing by and moochdock. Our plan to get out East soon is fading in light of how crazy this country is at the moment, DW doesn’t have a good feeling about it and I’ve learned to listen to her intuition. But expect a DM when we do get anywhere close to you!

@RF Same, well likely cruise pretty near to you whenever we do make it out so we need to hang out.

[AxelHeyst]

Let’s suppose a hypothetical semi-ERE minded individual is facing an opportunity to re-negotiate his terms of employment to be super low hours (~4hrs/week) and ‘super’ low pay (10-20k/yr). He may or may not be able to retain full benefits, he’s not sure yet.

Is there a known sweet spot in that income range that he should target in his negotiations? I.e. some threshold above which will trigger undesirable tax ramifications, or below which will trigger ability to take advantage of some, um, advantages?

Asking for a friend.

(I’m going through @GnJ’s recent post now which seems quite relevant. Any thoughts on this specific scenario - ability to pick a target low salary number - are highly welcome.)

[AxelHeyst]

It sounds like a sweet deal in any case!

I am *so* excited that this might work out.

[MidsizeLebowski]

This is very exciting, interested to see how this plays out for you as it's something I've entertained pursuing... Care to share the particulars of your scenario?

[classical_Liberal]

Asking for a friend.

I like your friend.

Taxes and ACA subsidies are what matter. If your friend was in an expanded medicaid state she would probably want to be above that threshold, trying to max subsidies. It all depends how it's set up... Employee or consultant (ie W2 or 1099). The later and you have more ways to maneuver, but even with the former you can make it work.

From the healthcare front, personally, I'd rather be on the higher end of income because medicaid scares me more than a few hundred dollars a year more of ACA costs. States seem to change medicaid recapture rules too often. But I have an inherent distrust of government. You could always opt out of the broken system and do a healthshare instead, then no income rules to deal with. Hopefully by the time your older and need better coverage, the situation will be fixed. Honestly though, if I could get near free ACA, I'd probably take it.

[AxelHeyst]

At work, I combined engineering and digital art. My background is engineering, I self taught digital art.

I hired a legit digital artist right before Covid. He’s a far better digital artist than I am, but he doesn’t know much about our industry. Also he doesn’t have any relationships in the company yet because he’s so new.

His name got put on The List for the final (?) round of Covid induced layoffs.

I counteroffered with: keep him full time, I’ll go to super reduced pay and my job description will be “get new guy connected to the right people so he gets work, and be a translator between him and the engineers so he can crank out good ish.” Me at 10-20k plus his salary is <= my full salary, so it’s equal to or better than just laying him off from a cost perspective.

[AxelHeyst]

Thanks c_L, very helpful to guide my research.

[classical_Liberal]

Oh and PS after the explanation. Congrats!!! This sounds like the perfect opportunity for you! err, your friend I mean.

Edit: @AH fyi. If they want to keep you W2, see if you can still keep access to the 401K or whatever pretax vehicle without matches. My employer let me, because, what do they care if they don't match. It allows you to manipulate your MAGI at will through contributions.

[2Birds1Stone]

If the hours would be constant, go for as much pay as possible. You can manipulate your income through retirement vehicles such as 401k or tIRA. For tax purposes the standard deduction of ~$12k means you will pay almost no fed taxes on any amount $<20k + whatever you can sock away in a 401k/IRA.

More importantly, Congratulations! This would be my dream scenario. It also keeps your resume up to date if you need a job in the future.

[mooretrees]

This could be great, though it does sound like it has an end date? Do you stay on once he is up and running? Even so, it's a great place to be and way to go looking out for BOTH of you!

[AxelHeyst]

Thanks for the grats all but it's not a done deal yet. And to your question @mooretrees, there are so many ways this could go. It could last a few months, a few weeks, or a few years. I'm not attached to longevity. I'm stoked to be taking a step in the right direction -- away from full time high stress work -- sooner than I thought I'd be.