The Education of Axel Heyst
Re: The Education of Axel Heyst
Ah that makes sense. Thanks.
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Re: The Education of Axel Heyst
Fatbikes make great bikepacking rigs. My fatbike was my only bike for 5 years and I used it for everything from running errands, ripping xc singletrack, riding beaches at low tide, gravel, packed snow, etc......I know @theanimal has experience with it up in Alaska.
I had a bulletproof 2016 Specialized Fatboy, aluminum frame, carbon fork, 4.6" tires. Ran em 8-10 PSI for riding hard surfaces and 4-6 psi on sand/snow. I am heavier than you though. The bike had mounting points for paniers and a rear rack.
Edited: I hit "reply" to your thread yesterday and didn't get around to replying till this morning.....and see that he already chimed in =D
PS - I disagree that fatbikes are all that heavy. Mine wasn't even full carbon and came in at 30 lbs with pedals. That's not super light, but the lack of suspension fork and other doodads makes fatbikes surprisingly nimble and easy to pedal/climb with.
I had a bulletproof 2016 Specialized Fatboy, aluminum frame, carbon fork, 4.6" tires. Ran em 8-10 PSI for riding hard surfaces and 4-6 psi on sand/snow. I am heavier than you though. The bike had mounting points for paniers and a rear rack.
Edited: I hit "reply" to your thread yesterday and didn't get around to replying till this morning.....and see that he already chimed in =D
PS - I disagree that fatbikes are all that heavy. Mine wasn't even full carbon and came in at 30 lbs with pedals. That's not super light, but the lack of suspension fork and other doodads makes fatbikes surprisingly nimble and easy to pedal/climb with.
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Re: The Education of Axel Heyst
The fatbike I mentioned in my previous post was just under 35 lbs, at least on my bathroom scale. It had a Bluto suspension fork and wasn't tubeless so not exactly built to be lightweight.
Re: The Education of Axel Heyst
Before the Capra, I rode a 2005 Santa Cruz Bullit for years. It's 42lbs stock, and I had some ridiculous fork on it (marzochhi bomber 180mm iirc?) so mine was probably closer to 45lbs. Switching to the Capra was amazing, but point is, mid 30's doesn't sound too bad to me. Particularly for a style of riding where I'm not constantly sprinting to keep up with and/or beat my younger, fitter friends on carbon fiber beauties with dropper posts and the benefit of an decade's worth of frame geometry innovation.
Re: The Education of Axel Heyst
I think part of the art of life is finding the right balance between being in the present, following the process, putting one foot in front of the other, etc, on the one hand, and taking a second to review the landscape, where you're at, where you want to go, and what's the best way to get there. Strategy vs. tactics, planning vs. execution. You need both, but in my experience doing them at the same time is not a good idea. Being in planning mode distracts from good execution, and when you're in the thick of execution it's difficult to pull your head up far enough to gain proper perspective and distance.
I have regular scheduled times set aside for strategic thinking, but sometimes I suffer a sudden attack of unavoidable strategic thinking, hah. The common trigger for that strategic re-evaluation is FUD - an onset of fear, uncertainty, doubt, usually as a result of new information or experience. (Boyd alert: action spurring change in environment creating new information observed which updates orientation which forces activity in the decision node... a subtle or not so subtle sense that my orientation is out of phase with reality as I observe it, triggering a realtime re-alignment).
As my semiERE 'incidental income' idea slides from theory into practice, I'm going through a FUD-triggered re-evaluation. I'm not FI. I'm a little over halfway there for a subJafi burn rate. After going all-in on ERE in January 2020, I was FTE for six more months before dropping down to 8hrs/wk, and then 0hrs/wk a year after that in mid 2021. I had gotten out of consumer debt only a few years prior. My accumulation phase was very short. A year ago I could not have explained to you what a bond is or where they come from.
I've known since I started this path that I wanted to get to very low spending. None of my experiences over the last three years have made me think that I might want to plan for a personal lifestyle burn rate over 1jafi. Almost everything I like doing is better the less money you spend on it.
When I started this path, I was burnt. out. on my career which I'd been bouncing off the rev-limiter on for twelve years. I was glad to go down to 8hrs, and I was glad to be asked to step off the bus. That burnout which involved serious disillusionment with the purpose and efficacy of my work, and the damage done to my relationship with intrinsic motivation and stoke, meant that getting as far away from FTE as I could was a good move. I don't regret it at all.
Now, though, I feel very refreshed, and like I've got some proper distance from the idea of wrapping Purpose up with Livelihood, and I've been doing some great work rehabilitating my access to intrinsic motivation and stoke.
...And I'm halfway to a lean FI number. One of the whole points of FIRE math is that if you accumulate a sizeable stash early, and tend it responsibly, it'll just grow/go runaway and money will be a solved problem. I'm finding myself annoyed with having to spend cognitive bandwidth on making money, annoyed that I'm 36 and wasn't wise enough when I was younger to build my stash, and realizing that there are several possible futures where events outside my control deplete my stash. Having such a small stash and pursuing a lifestyle where I only break even or make slightly more, meaning the stash will grow only slowly, means I'm exposed to certain risks that would be mitigated with a larger stash.
And if I went back to FTE at even a little less than I was making before, I'd hit my number in a year. I don't want to work FTE for a year, but it's just a year, and I'd be buying a level-up in strategic stance.
Plan Options:
1. Find a remote job doing the kind of thing I was really good at (not the overhead stuff, the billable stuff, 3d technical design modeling), and do it for a year or 18 months to hit my FI number. I don't know if there are a lot of remote jobs doing this. I'd probably only do it if I could be 95+% remote.
2. Put my Renaissance man CV out there to cool people and orgs doing work I feel tight alignment with, and accept either FTE or PT knowledge work. Probably cross the FI line in 2-4 years.
3. Original plan: semiERE ecohandyman design/build stuff. Earn CoL at bare minimum, but after a year or two of tweaking my systems and building skills and my network I'd probably be earning at least 2x or 4x my CoL. Cross FI within ten years or so.
Part of (3), though, is that I'd have the time to spend on writing and seek to be publishing stuff that could possibly earn money. I've wanted to Be a Writer since I was a kid, and in some ways it feels like my whole career and life trajectory has been the story of Steven Pressfield's Resistance winning over my desire to write. The point of writing isn't to make money, and I wouldn't put the pressure of paying the bills on my writing. I just want to write, so I will. But there's a potential there for what I write to throw off passive income.
For now, I'm only two months into the original plan of (3). I'm going to stick with it and iterate it at least for six more months. I guess I just wanted to document my thought process and to make it clear that there are always strategic re-evaluations going on here. And, to invite comment and feedback.
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Re: The Education of Axel Heyst
The cognitive bandwidth issue is something I've thought about a lot and would likely be a real issue for me personally if I go the SemiERE route. Different flavors of SemiERE can eliminate that potential problem (downshifting, sabbaticals, etc.), but the monetizing hobbies and renaissance skills approach can keep the hustle going. Perhaps in a properly designed system it doesn't feel like a hustle, but I suspect that with my personality it would constitute a significant challenge. Have you observed a noticeable change since you've returned to the homestead? Are there benefits/incidental yields/serendipitous encounters I'm overlooking as a salaryman with this mindset?AxelHeyst wrote: ↑Mon Nov 07, 2022 12:06 pm...And I'm halfway to a lean FI number. One of the whole points of FIRE math is that if you accumulate a sizeable stash early, and tend it responsibly, it'll just grow/go runaway and money will be a solved problem. I'm finding myself annoyed with having to spend cognitive bandwidth on making money, annoyed that I'm 36 and wasn't wise enough when I was younger to build my stash, and realizing that there are several possible futures where events outside my control deplete my stash. Having such a small stash and pursuing a lifestyle where I only break even or make slightly more, meaning the stash will grow only slowly, means I'm exposed to certain risks that would be mitigated with a larger stash.
And if I went back to FTE at even a little less than I was making before, I'd hit my number in a year. I don't want to work FTE for a year, but it's just a year, and I'd be buying a level-up in strategic stance.
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For now, I'm only two months into the original plan of (3). I'm going to stick with it and iterate it at least for six more months. I guess I just wanted to document my thought process and to make it clear that there are always strategic re-evaluations going on here. And, to invite comment and feedback.
It is pretty clear that you don't really want to return to FTE at the moment, so it seems like a particularly bad idea. Taking six months to continue your current lifestyle and then reevaluating seems much more reasonable. Money isn't really an issue for you right now, is it?
Paid, full-time employment can certainly offer benefits beyond the monetary reward. I think the most successful transitions back to work are those where someone is excited about the professional opportunity, where they have access to resources and networks that are typically only available to a FTE, and the paycheck is just a bonus. It doesn't sound like you are quite there yet.
Re: The Education of Axel Heyst
Probably. I overlooked stuff, and have no idea how I could not have, so I just assume anyone will. You can't know it until you do it. The day I landed back in the states, I knew my parents wanted me to do some projects for $$$ for them. A week after I landed, a neighbor asked my dad for help with his PV system revamp, but it was going to be a whole thing and my dad is over doing that sort of thing, so he told the neighbor to hire me to do it. Two weeks after that, another neighbor called and asked if I'd help him with around-the-homestead stuff, a couple hours a day, a couple days a week.Western Red Cedar wrote: ↑Mon Nov 07, 2022 12:49 pmThe cognitive bandwidth issue is something I've thought about a lot and would likely be a real issue for me personally if I go the SemiERE route. Different flavors of SemiERE can eliminate that potential problem (downshifting, sabbaticals, etc.), but the monetizing hobbies and renaissance skills approach can keep the hustle going. Perhaps in a properly designed system it doesn't feel like a hustle, but I suspect that with my personality it would constitute a significant challenge. Have you observed a noticeable change since you've returned to the homestead? Are there benefits/incidental yields/serendipitous encounters I'm overlooking as a salaryman with this mindset?
So I put in exactly zero hours of effort to find work, and within a month I've got >CoL income, with near complete flexibility, on projects I enjoy, learning things I'm interested in, working with people I like. By no later than Christmas I'll have finished all the current projects and earned about half a year's CoL, working 10-20hrs a week. My one neighbor likes to talk and I'm learning the latin names for all the plants around here, how to stabilize slopes and how to think about plant placement for shading and aesthetics (he was a landscape architect). He gives me his extra new yorker and sun magazines, and bud. He's got piles of salvage laying around the property that I'm going to dig through for some of my own builds. #incidentalyields I'm actually in anti-hustle mode: I'm trying to keep a low profile so more neighbors don't ask me to do stuff until I've finished what I'm currently working on.
Agreed, and nope, I have 3-7yrs liquid or convertible by the time I'd need it.Western Red Cedar wrote: ↑Mon Nov 07, 2022 12:49 pmIt is pretty clear that you don't really want to return to FTE at the moment, so it seems like a particularly bad idea. Taking six months to continue your current lifestyle and then reevaluating seems much more reasonable. Money isn't really an issue for you right now, is it?
Well put. Thanks.Western Red Cedar wrote: ↑Mon Nov 07, 2022 12:49 pmPaid, full-time employment can certainly offer benefits beyond the monetary reward. I think the most successful transitions back to work are those where someone is excited about the professional opportunity, where they have access to resources and networks that are typically only available to a FTE, and the paycheck is just a bonus. It doesn't sound like you are quite there yet.
Re: The Education of Axel Heyst
As someone who followed the FIRE math - money doesn't feel like a solved problem. I think that sentiment was popularized by FIRE rising to internet fame during the 2010's bull run. Maybe it's true when investments are winning, but you can always have more security. I think that mindset is individual and maybe independent of one's wealth.
For me personally, watching the market move carries significant cognitive load. My life has an enormous dependency, and I have little control over it. Investment strategy carries a huge faith based aspect. Further complicated by a tremendous amount of noise. What I can afford is impacted by economic policy, international politics, the environment, other investors, even internet memes.
Small mistakes have large and lasting consequences. We took a 40% bond position in March of 2020. Ouch. It's easy to second guess the choice in hindsight. Truthfully though - I tried my best to make an informed decision, balancing all of life's priorities. I'll never have perfect knowledge.
Not to say reaching a FIRE number doesn't hold value, but it is far from a panacea. You could always have more. That doesn't go away.
With that said, I wouldn't put life on hold via path 1. I think starting with 2 or 3 is the better choice. The "right" problem is building a life you want.
Re: The Education of Axel Heyst
Yup, money was definitely NOT a solved problem for my friend who was worth north of $100 million. However, it might have been a more interesting problem for him than for somebody digging through the sofa cushions looking for beer change.
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Re: The Education of Axel Heyst
A possible SWAN solution for runaway modes is an annuity for the budget and investing everything beyond this. That way the problem reduces to a) keeping score; or b) being a responsible manager of wealth.
Re: The Education of Axel Heyst
You have to live in a country where annuities are insured in government (they are in Poland for example), otherwise one bankrupcy can kick you out on the street/back into the job market...
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Re: The Education of Axel Heyst
As someone who is 2 years down path 1, it appears to have been worth it. Record breaking income year during the first real bear market in my investing career was a lucky break after a 13 month hiatus from work. This will depend on your age, how much you can enjoy life while working, etc etc. highly personal decision.
I somewhat disagree with Scott 2, as money does feel mostly like a solved problem once you are 25-30x annual spending. Especially when you're open to serendipitous sources of income, as you very much are exemplifying.
It's easy to get stuck in the "more is better" mentality when you have a high income, and it can be really hard to give up. YMMV
I somewhat disagree with Scott 2, as money does feel mostly like a solved problem once you are 25-30x annual spending. Especially when you're open to serendipitous sources of income, as you very much are exemplifying.
It's easy to get stuck in the "more is better" mentality when you have a high income, and it can be really hard to give up. YMMV
Re: The Education of Axel Heyst
Thanks for the comments. Yall got me thinking about what makes money a solved problem for some people and not for others. I know it's really complex and personal, with layers of psychological factors etc. But I came up with a model that for me helps me navigate through those more complex squishy factors.
I naturally err on the side of not caring about money very much. This got me in trouble in my 20s. I was an irresponsible steward of my financial flows, not because I was a high roller but because I was negligent in my attention to it. The link between money and security was tenuous at best in my mind. Thank god I set up the matching 401k while I was employed, otherwise I'd have peanuts right now.
So, it requires conscious effort on my part to look out for my financial future. In my 20's, I lacked good strategy and good process, so I didn't think about money and spent a bunch... because I had a sloppy emergent financial process/goal/effect. Now, I mostly don't think about money and I *don't* spend much... because I've internalized a frugal strategy/process/goal/effect.
I've also (so far) decoupled a sense of quality of life from spending. I'm converging on what appears to be a baseline of 'enough', a level of spending where I have this sense of 'yeah, this'll do'. I don't see spending over that amount as significantly increasing my QoL, truly. From that enough level, the slope of QoL curve goes to zero.
Actually, hold up, it's worth it to make a graph for this:
This is my mental model of the relationship between my QoL ceiling and level of consumption. Anything beyond about $5k is the zone of diminishing returns, and I don't believe anything above $10k would induce any gain in QoL.
I say ceiling because there is a lot of other factors that impact QoL, of course. Relationships, physical and mental health, etc. This graph doesn't say anything about what my QoL *is*, rather, it says something about what my level of consumption caps my potential QoL at. If everything else is going well, but I only have $1k/yr available to spend, this model suggests my QoL will be low. If I have $7.5k to spend, but my relationships are toxic and my health is shit, my QoL is going to be low... but not because of money.
(Arguably, if you were to graph the Buddha's QoL Cap / consumption graph, or Boyle's, it'd just be a flat line at QoL=10. Spending is irrelevant to their QoL cap because they fully decoupled, fully de-financialized their lives. Interesting, but a topic for another time.)
The most critical number here is the x,y of the knee, the point at which the graph goes from linear to exponential decay, which implies the slope of the linear portion of the graph.
Maybe the most important part of this, though, is having a clear idea of where one's knee is, which is what 'enough' is. To me, a knee of $4,500/yr and a QoL_cap of 9 sounds about right, plus or minus $500 and 0.5QoL. (Like I said above, though, I need more time to see how this goes, so my knee in another year or two might actually be $8,000 or even $3,000, I don't know. For now let's just assume $5k is a good estimate of my 'enough' point.)
The point of internalizing diminishing returns above my knee is that any amount of money I have in excess of enough means very little. Let's say I have 90% confidence that my stash will supply me with my enough number for the rest of my life. Now, let's say I have 90% confidence that my stash will supply me with 1.5x or 2x my enough number for the rest of my life. That changes my QoL not at all, or only a very small amount, because either way I'm above the linear slope of the graph and my attention is better spent attending to the other elements of life that effect (affect?) QoL, like how much sex I'm having or what cool stuff I'm building.
What *does* matter is that level of confidence. There IS a SWAN difference between saying I'm 90% sure my stash will supply me with enough for the rest of my life, and saying that I'm 60% sure than my stash will supply me with enough for the rest of my life.
This is my understanding of why Jacob says the goal of ERE investing activities is to avoid portfolio failure, not to maximize/optimize returns. Step 1: Get over the knee Step 2: Increase the confidence percentage/decrease the probability of failure.
Why I think self-knowledge of one's knee is the most important part, is because if your knee is fuzzy or you don't even know it (should) exist, then you constantly live in the linear portion of the graph, where every twitch of your portfolio has an impact on your perceived QoL cap. Causing you to expend attention on your portfolio, causing you to expand your perception of the relative importance of your portfolio in your life (because it's what you spend time thinking about...)
So it's two different kinds of perspectives on what the portfolio represents. It goes from 'is this enough? how sure are we about that?" to "okay my portfolio dropped/spiked 8.7%, how many QoL points did I lose/gain?" It's gone from discrete, yes/no, pass/fail, to continuous: total ruin bad meh okay good great fantastic.
At this moment, the amount of dollars I have divided by the number of dollars I think is 'enough' for a year is 25. If you count some stuff I could sell it's 30. Based on how things are going, it seems like it's going to be really easy to earn 'enough'/year doing stuff I want to do anyway, so I don't predict a need to draw from my stash anytime soon. And it also seems pretty likely that I'll earn 2x or 3x 'enough' without trying very hard pursuing option 3, which would have me crossing 33x in 5 years or so. If I get to a point where option 2 attracts me (for non-financial reasons), then I'll zoom past 33x in short order.
So right now, my financial attention is strategically best spent increasing my confidence that my asset management and income generation system will not result in failure, which I define as dropping into the linear portion of the QoL/consumption graph. How to do this?
1) Study investing, and here I think of investing in the broadest possible terms. This is number one because at my current level of ignorance, I couldn't even begin to assemble a confidence number that would make any kind of sense. I know enough to not feel secure at 25x of a theoretical/unproven CoL number, and I know enough to know that there's more to it than just one day saying 'yay 33x I'm done!!11". The idea of an annuity for the enough number and surplus going to investing is interesting.
2) Develop income generation systems that are aligned with my WoG and generate between 1 and 3x my CoL.
3) Continue skill development with an incidental yield of lowering my 'enough' number further by definancializing further areas of my life, e.g. growing my own veggies instead of needing to buy them from the store. (This is number three because it's what I've spent three years cranking on, I believe I'm in a zone of diminishing returns, and 1 and 2 are lower hanging fruit now / greater leverage points).
edit: The Kahneman study from 2010 is obviously relevant here, but I haven't read it yet.
I naturally err on the side of not caring about money very much. This got me in trouble in my 20s. I was an irresponsible steward of my financial flows, not because I was a high roller but because I was negligent in my attention to it. The link between money and security was tenuous at best in my mind. Thank god I set up the matching 401k while I was employed, otherwise I'd have peanuts right now.
So, it requires conscious effort on my part to look out for my financial future. In my 20's, I lacked good strategy and good process, so I didn't think about money and spent a bunch... because I had a sloppy emergent financial process/goal/effect. Now, I mostly don't think about money and I *don't* spend much... because I've internalized a frugal strategy/process/goal/effect.
Frans P Osinga, Boyd: Science Strategy and War, pg 10. wrote:"Flawed strategy will bring the most expert and battle-hardened forces down, while the absence of a strategy does not mean no strategic effects will result from tactical actions. Strategy abhors a vacuum: if the strategic function is lacking, strategic effect will be generated by the casual, if perhaps unguided and unwanted accumulation of tactical and operational outcomes."
I've also (so far) decoupled a sense of quality of life from spending. I'm converging on what appears to be a baseline of 'enough', a level of spending where I have this sense of 'yeah, this'll do'. I don't see spending over that amount as significantly increasing my QoL, truly. From that enough level, the slope of QoL curve goes to zero.
Actually, hold up, it's worth it to make a graph for this:
This is my mental model of the relationship between my QoL ceiling and level of consumption. Anything beyond about $5k is the zone of diminishing returns, and I don't believe anything above $10k would induce any gain in QoL.
I say ceiling because there is a lot of other factors that impact QoL, of course. Relationships, physical and mental health, etc. This graph doesn't say anything about what my QoL *is*, rather, it says something about what my level of consumption caps my potential QoL at. If everything else is going well, but I only have $1k/yr available to spend, this model suggests my QoL will be low. If I have $7.5k to spend, but my relationships are toxic and my health is shit, my QoL is going to be low... but not because of money.
(Arguably, if you were to graph the Buddha's QoL Cap / consumption graph, or Boyle's, it'd just be a flat line at QoL=10. Spending is irrelevant to their QoL cap because they fully decoupled, fully de-financialized their lives. Interesting, but a topic for another time.)
The most critical number here is the x,y of the knee, the point at which the graph goes from linear to exponential decay, which implies the slope of the linear portion of the graph.
Maybe the most important part of this, though, is having a clear idea of where one's knee is, which is what 'enough' is. To me, a knee of $4,500/yr and a QoL_cap of 9 sounds about right, plus or minus $500 and 0.5QoL. (Like I said above, though, I need more time to see how this goes, so my knee in another year or two might actually be $8,000 or even $3,000, I don't know. For now let's just assume $5k is a good estimate of my 'enough' point.)
The point of internalizing diminishing returns above my knee is that any amount of money I have in excess of enough means very little. Let's say I have 90% confidence that my stash will supply me with my enough number for the rest of my life. Now, let's say I have 90% confidence that my stash will supply me with 1.5x or 2x my enough number for the rest of my life. That changes my QoL not at all, or only a very small amount, because either way I'm above the linear slope of the graph and my attention is better spent attending to the other elements of life that effect (affect?) QoL, like how much sex I'm having or what cool stuff I'm building.
What *does* matter is that level of confidence. There IS a SWAN difference between saying I'm 90% sure my stash will supply me with enough for the rest of my life, and saying that I'm 60% sure than my stash will supply me with enough for the rest of my life.
This is my understanding of why Jacob says the goal of ERE investing activities is to avoid portfolio failure, not to maximize/optimize returns. Step 1: Get over the knee Step 2: Increase the confidence percentage/decrease the probability of failure.
Why I think self-knowledge of one's knee is the most important part, is because if your knee is fuzzy or you don't even know it (should) exist, then you constantly live in the linear portion of the graph, where every twitch of your portfolio has an impact on your perceived QoL cap. Causing you to expend attention on your portfolio, causing you to expand your perception of the relative importance of your portfolio in your life (because it's what you spend time thinking about...)
So it's two different kinds of perspectives on what the portfolio represents. It goes from 'is this enough? how sure are we about that?" to "okay my portfolio dropped/spiked 8.7%, how many QoL points did I lose/gain?" It's gone from discrete, yes/no, pass/fail, to continuous: total ruin bad meh okay good great fantastic.
At this moment, the amount of dollars I have divided by the number of dollars I think is 'enough' for a year is 25. If you count some stuff I could sell it's 30. Based on how things are going, it seems like it's going to be really easy to earn 'enough'/year doing stuff I want to do anyway, so I don't predict a need to draw from my stash anytime soon. And it also seems pretty likely that I'll earn 2x or 3x 'enough' without trying very hard pursuing option 3, which would have me crossing 33x in 5 years or so. If I get to a point where option 2 attracts me (for non-financial reasons), then I'll zoom past 33x in short order.
So right now, my financial attention is strategically best spent increasing my confidence that my asset management and income generation system will not result in failure, which I define as dropping into the linear portion of the QoL/consumption graph. How to do this?
1) Study investing, and here I think of investing in the broadest possible terms. This is number one because at my current level of ignorance, I couldn't even begin to assemble a confidence number that would make any kind of sense. I know enough to not feel secure at 25x of a theoretical/unproven CoL number, and I know enough to know that there's more to it than just one day saying 'yay 33x I'm done!!11". The idea of an annuity for the enough number and surplus going to investing is interesting.
2) Develop income generation systems that are aligned with my WoG and generate between 1 and 3x my CoL.
3) Continue skill development with an incidental yield of lowering my 'enough' number further by definancializing further areas of my life, e.g. growing my own veggies instead of needing to buy them from the store. (This is number three because it's what I've spent three years cranking on, I believe I'm in a zone of diminishing returns, and 1 and 2 are lower hanging fruit now / greater leverage points).
edit: The Kahneman study from 2010 is obviously relevant here, but I haven't read it yet.
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Re: The Education of Axel Heyst
Sustainably dropping to $5k and even thriving at this level is impressive.
At this burn rate, as you say, your stash amounts to 25x and you're confident to easily get an additional 1-3x of your yearly expenses from other income streams so you will still be accumulating.
What's not to like?
I see no need for seeking employment at this stage. You just stay the course.
If these income streams don't require special attention to reach 1-3x level, it seems as a good time to learn more on tending your capital. Otherwise, I would prioritize the former.
Just a few questions regarding future projections.
Do you expect any of your expenses or needs to evolve/go up with time? I am thinking of healthcare for instance.
Also, at this stage, you are single. Do you expect that to change in the future? If yes, could this lead to some adjustments?
At this burn rate, as you say, your stash amounts to 25x and you're confident to easily get an additional 1-3x of your yearly expenses from other income streams so you will still be accumulating.
What's not to like?
I see no need for seeking employment at this stage. You just stay the course.
If these income streams don't require special attention to reach 1-3x level, it seems as a good time to learn more on tending your capital. Otherwise, I would prioritize the former.
Just a few questions regarding future projections.
Do you expect any of your expenses or needs to evolve/go up with time? I am thinking of healthcare for instance.
Also, at this stage, you are single. Do you expect that to change in the future? If yes, could this lead to some adjustments?
Re: The Education of Axel Heyst
Money felt solved when I had a secure job, 75%+ savings rate and markets only ever went up. Expense fluctuations were noise. The only constraint on my system was time. I know what it feels like to have "unlimited" money. Depending on my portfolio is different.
I picked a comfortable SWR percentage. When negative returns combined with inflation, my purchasing power dropped by a third. Holding consumption steady meant increasing my SWR by 50%. That held my attention. I took corrective action. I reduced slack in my spending. I raised my SWR.
While quality of life remained high, my loss aversion was highlighted. My entire lifestyle depends on that portfolio. The math says I am sufficiently diversified, but emotions aren't rational. Having greater understanding of my financial ignorance, my confidence is permanently lower.
A couple random notes:
1. It's no longer possible to buy an inflation adjusted annuity in the US. The closest you can get is delaying your social security. It's a good hedge for longevity risk, but much more relevant at 60 than 40. Over a 50 year time span, non-inflation adjusted annuities become very expensive.
2. The gap between "I know about investing" and "I have an advantage" is large. There's a survival bias. Distinguishing luck vs. skill can take decades. While they'll insist otherwise, most active investors don't know which bucket they fall in. There is an ongoing arms race, so the target is constantly moving. Active capital management is a lifestyle and requires constant evolution. I'd be clear on the goal for your learning.
3. That QoL graph is going to vary over time. Enough is a moving target. There's not much space for the numbers to go down.
4. The downside of depending primarily upon financial capital, is there's not a great way to safely earn more later. Greater reward means greater risk.
5. More localized systems offer greater opportunity to scale. Linearly - you can work more. Exponentially - you can add leverage. Provided those activities are additive to your overall web of goals, I'm convinced this is the most rewarding long term answer.
I picked a comfortable SWR percentage. When negative returns combined with inflation, my purchasing power dropped by a third. Holding consumption steady meant increasing my SWR by 50%. That held my attention. I took corrective action. I reduced slack in my spending. I raised my SWR.
While quality of life remained high, my loss aversion was highlighted. My entire lifestyle depends on that portfolio. The math says I am sufficiently diversified, but emotions aren't rational. Having greater understanding of my financial ignorance, my confidence is permanently lower.
A couple random notes:
1. It's no longer possible to buy an inflation adjusted annuity in the US. The closest you can get is delaying your social security. It's a good hedge for longevity risk, but much more relevant at 60 than 40. Over a 50 year time span, non-inflation adjusted annuities become very expensive.
2. The gap between "I know about investing" and "I have an advantage" is large. There's a survival bias. Distinguishing luck vs. skill can take decades. While they'll insist otherwise, most active investors don't know which bucket they fall in. There is an ongoing arms race, so the target is constantly moving. Active capital management is a lifestyle and requires constant evolution. I'd be clear on the goal for your learning.
3. That QoL graph is going to vary over time. Enough is a moving target. There's not much space for the numbers to go down.
4. The downside of depending primarily upon financial capital, is there's not a great way to safely earn more later. Greater reward means greater risk.
5. More localized systems offer greater opportunity to scale. Linearly - you can work more. Exponentially - you can add leverage. Provided those activities are additive to your overall web of goals, I'm convinced this is the most rewarding long term answer.
Re: The Education of Axel Heyst
Healthcare is the largest unknown. I don't expect my healthcare costs to go up, but they could (e.g. I could develop a disease or get hit by a truck or something).OutOfTheBlue wrote: ↑Sun Nov 13, 2022 12:44 amDo you expect any of your expenses or needs to evolve/go up with time? I am thinking of healthcare for instance.
Another possible outflow of cash is beyond-personal-system projects, such as if I decide to really crank up the permaculture project aspect of what I'm doing here and go ahead with some capital expenditures to get infrastructure up and running faster than if I scrounged everything. I consider those to be in a blurry zone between personal and business expenses. Ideally, or perhaps necessarily, those expenses would pan out either by decreasing some current expenses (e.g. I spent $5-10k on materials to build a walipini, but beginning a year after that I no longer buy vegetables or meat because I grow/raise my own, and beyond that yields from my walipini flow to others and neighbors which results in inflows from them...) or by generating new sources of income (I spend money setting up a sort of eco workshop hipcamp thing that generates income).
No. I'll probably explain myself a bit more at some point, but short answer is that I'm perma-single by choice.OutOfTheBlue wrote: ↑Sun Nov 13, 2022 12:44 amAlso, at this stage, you are single. Do you expect that to change in the future? If yes, could this lead to some adjustments?
Re: The Education of Axel Heyst
To avoid portfolio failure, aka to be able to construct an investing approach that I feel reasonably confident that I am competent to steward my portfolio to return my 'enough' number until I shuffle off. The trick (as you mentioned) is defining what 'reasonably confident' is, not fooling myself, etc.Scott 2 wrote: ↑Sun Nov 13, 2022 11:11 am2. The gap between "I know about investing" and "I have an advantage" is large. There's a survival bias. Distinguishing luck vs. skill can take decades. While they'll insist otherwise, most active investors don't know which bucket they fall in. There is an ongoing arms race, so the target is constantly moving. Active capital management is a lifestyle and requires constant evolution. I'd be clear on the goal for your learning.
An aspect of my approach is to have backup in case my portfolio does fail. Another way of saying this, I think, is to develop the skills and networks (social capital etc) to reduce my 'enough' number to near zero. A small, limited, but concrete example of this is my workawaying experience over the summer. For two months I had a good quality of life and I spent $87 per month. If I'd been in the US, I would have spent $40/month. And that $40 was books I didn't really need to buy, so I could easily have spent zero dollars.
Now, workawaying is fine while I'm in my 30s and my health is good. If my portfolio fails when I'm 65 (and SS also fails), my backup plan is going to look different. Broadly, the strategy is 'develop skills such that I'll be worth feeding and giving a bunk to in exchange for doing useful skilled things". It's possible that one of the things I'm going to do with the next couple decades of my life is actually build that local community project thing that would become its own entity.
...within my current paradigm. But, yes, agreed.
Amen.
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Re: The Education of Axel Heyst
Re investing, @Ego wrote once elsewhere that he assumes a negative ROI on his assets, for reasons I don't remember so I won't put words in his mouth.
I occasionally think along those lines and it dramatically changes my perception, in that I think about how not to lose what I have got. Gaining something turns into a bonus. On a deeper level this can also ring true as we all sail sinking boats with expiration date of mostly 90 years, give or take a decade.
A thought experiment of the sort that made one of my professor once look at me puzzled would be to consider in what circumstances, reality or in what frame of mind would the QoL be a decreasing function of Annual consumption in $, possibly with a broader domain. What would be the negative annual consumption, whether it could be called annual production, how does this relate to leaving the world richer than one found it, is producing 100,000$ worth and consuming 100,000$ worth, bringing one to 0 on x axis, equivalent to producing 5,000$ and consuming 5,000$, and so on.
As for skills for old age, I think the ability to listen will turn timeless precious, feels like one can't go wrong with that one.
I occasionally think along those lines and it dramatically changes my perception, in that I think about how not to lose what I have got. Gaining something turns into a bonus. On a deeper level this can also ring true as we all sail sinking boats with expiration date of mostly 90 years, give or take a decade.
A thought experiment of the sort that made one of my professor once look at me puzzled would be to consider in what circumstances, reality or in what frame of mind would the QoL be a decreasing function of Annual consumption in $, possibly with a broader domain. What would be the negative annual consumption, whether it could be called annual production, how does this relate to leaving the world richer than one found it, is producing 100,000$ worth and consuming 100,000$ worth, bringing one to 0 on x axis, equivalent to producing 5,000$ and consuming 5,000$, and so on.
As for skills for old age, I think the ability to listen will turn timeless precious, feels like one can't go wrong with that one.
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Re: The Education of Axel Heyst
Yes, and to clarify a bit. The conventional worry is based on risk=volatility. My worry is the possibility of being permanently driven below the knee. To be sure, more money helps here, but there are ways to structure a portfolio.
To wit, you can draw a similar graph on the [financial] income side in terms of what it would throw off in terms of risk. [This is what a wiser or more dynamical risk-reward curve would reflect---again not conventional---to learn more see my Howard Marks recommendation.]
Basically the idea is to make the income side FLAT above and a bit beyond the knee on your spending side... and only then have it rise. The slope at this point doesn't matter as much.
Remember the standard rule of fixed income? The duration of your assets should fix the duration of your liabilities? (The problem is that the default investment strategies tend to have a waaaaay longer duration than most people's liabilities. Therein lies the non-SWAN.)
This is perhaps easier to understand for those who understand options. What you show on the spend-side is a short put option. SWAN is being able to match this with enough long call options on the investment side to eliminate the potential lifetime short put (being alive is essentially a short put because we're all gonna die) ... and generally, it's easier to raise the gap ITM if one is willing to reduce the slope of OTM gains. If you don't understand options, this is a very complicated way to say something relatively simpler. OTOH, if you do speak options, you should grok SWAN instantly.
DO NOT TAKE THIS AS LITERAL INVESTMENT ADVICE. THIS IS MERELY MEANT TO EXPLAIN A CONTINGENT/SYNTHETIC PAYOFF DESIGN AT THE PORTFOLIO LEVEL.
(I'm not entirely sure if communicating this much quant-nerd speech is useful to anyone. I mainly wish to point out how knowing this lens could be helpful as yet another mental model in the latticework. Perhaps there are some insights to be gained from using this lens.)
Key point: Learning options theory is perhaps more useful for thinking about risk and payoffs using a standard language than actually using them in a portfolio.
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Re: The Education of Axel Heyst
Before I forget:
Also, "doing the right thing is more important than doing things right". Of course, "doing both" is always best.Sun Tzu wrote: Strategy without tactics is the slowest route to victory, tactics without strategy is the noise before defeat.