My take on the ERE Wheaton levels
I've been thinking about the personal finance Wheaton levels. I was specifically intrigued by how many people interpreted the higher levels as necessarily requiring eco-hippy/permaculture/caveman communing-with-nature type lifestyles. I was trying to figure out if that lifestyle was necessarily required and what underlying ideas are present in the levels that makes it seem this way to so many.
In my interpretation, the lower levels think about everything in terms of money, the middle levels think in terms of a broader array of resources, and the highest levels are only about time. With higher levels comes increasing alignment of time spent with desires, ultimately requiring modifying desires to reach full coincidence.
I explored how each level looks from the following perspectives:
- Central lifestyle issue/tension
- Role of monetary capital/resources
- Role of non-monetary capital/resources
- Role of labour/time
- Capital and labour efficiency
I feel like some of the levels can be condensed if seen from this perspective, but there are some fundamentally different issues between the tiers (1-3, 4-5, 6-7, 8).
It looks like there are a lot of others grappling with progress lately as well, so I hope this offers some fresh, albeit limited perspective.
Here is the original table for reference.
Investor tier. The central issue in this tier is that some problems cannot be solved with cash, but cash is the only known problem-solving method. As a result, cash is constantly depleted. This issue is central through levels 1 to 3.
1: Negative or no monetary capital - perpetually broke or indebted. Non-monetary capital is largely unused, or valued only with respect to cash. E.g. a non-core family member is only valuable if they provide cash, or things that would otherwise cost cash.
Labour generates cash and little else. Cash is the only useful resource, by which all problems are solved and desires are met. Planning revolves almost entirely around immediate cash flows.
2: A cash reserve is maintained in order to bridge interruptions to cash flow, so the focus is on capital preservation. As a result, risk tolerance is very low - any equity or fixed-income investment is regarded as suspicious.
Labour provides cash, which is still the single useful but constantly depleted resource. The same central issue is present as at level 1, so the existence of a cash reserve is inherently a sacrifice in the name of stability. Unspent cash in the reserve represents unfulfilled desires or unsolved problems.
3: Monetary capital exists to yield more monetary capital.
Labour provides monetary capital, the single useful resource. The same issue is present as at level 1, but now a strategy exists to overcome this: the ability of capital to produce more capital. Through sufficient sacrifice, as unspent cash still means unfulfilled desires, enough capital to solve almost every problem can be accumulated.
Everything is still seen through the lens of cash, and social relations are no exception. Favours are valued and paid off with gifts of appropriate monetary value.
Looks crazy to level 1 people because having that much cash without spending it is inexplicable. The level 3 person might find that to be a constant tension as well.
DIYer tier. The central issue of levels 4-5 is that labour used to produce capital generates negative side-effects or additional desires that requires capital or more labour to counteract. E.g. exposure to toxins from welding repairs, or burn-out from a job. At level 4, the time requirements and learning curves to have labour replace spending can be onerous.
4: At this level, non-monetary capital starts to be valued. All forms of capital yield useful resources which can be used to replace spending cash. E.g. yard space can be used to grow fresh vegetables, or a set of tools can reduce car maintenance costs. The idea of payment in kind starts to be valued.
As less monetary capital is being spent solving non-monetary problems, capital efficiency improves. The demand to constantly spend cash decreases, so the investing focus switches to maintaining income.
Labour is used to produce capital and improve utilization of capital. The efficiency of labour at directly matching desires/needs is low as a result, and a capital reserve is still valued as a replacement for labour.
Looks crazy to level 2 people because doing unpaid work when able to pay someone else to do it is inexplicable. The level 4 person might find that to be a constant tension as well.
5: Some labour is now embraced as part of the target lifestyle, and methods of labour are chosen/designed to better match desires and needs. E.g. learning traditional food preservation/recipes as a way to both connect with heritage and live on cheap seasonal produce, or biking to places to both stay fit and get around. Less labour is spent undoing the effects of other labour (e.g. an active hobby job, instead of gym exercise to undo damage from a sedentary job), so labour efficiency improves.
Labour is used to generate capital and fulfill desires. Many problems which would be solved via cash at lower levels can now be solved or avoided with non-monetary capital or increasingly-skilled labour. Capital efficiency is Pareto-optimal as a result, as additional spending would not improve fulfillment of needs/desires.
Looks crazy to level 3 people because choosing labour over potentially more monetary capital is inexplicable. The level 5 person might find that to be a constant tension as well.
Designer tier. The central issue in levels 6-7 is balancing capital and labour flows in such a way that desires are sustainably fulfilled - e.g. over a project timeline, for one's family, one's lifetime, or for the Earth's resources. The approach to any problem must include assessment of the long-term fit of potential solutions and consideration of higher-order effects. As one gets less alienated from the products of their labour, cash starts to be seen as a inefficient medium of exchange.
6: Growing mastery over self allows some manipulation of one's own desires. As a result of better skill or shaped desires, labour-capital systems (like a job, or a garden) can more directly fulfill desires/needs.
Monetary capital exists mostly to attenuate stresses resulting from natural variations in results - e.g. a poor harvest, or a tenant moving out. As monetary capital exists to solve mostly monetary problems, capital efficiency is extremely high.
Non-monetary capital in the form of skills and social connections has more impact than land or tools. Non-monetary capital generates desired/needed resources, and requires mostly fun/fulfilling labour as an input, e.g. fishing as a major protein source or coaching for income. As a result, labour efficiency is high as it directly fulfills desires and needs - instead of having to translate labour into cash then back into fulfilling experiences. The existence of a monetary capital reserve represents flexibility and the ability to adapt to changing conditions. Depending on how resilient current conditions are, an adequate reserve can be very small.
Looks crazy to level 4 people because labour is seen as an input to be minimized at all costs, with desires met through use of capital alone - living like this is just too much work to be happy.
7: As labour-capital systems become more finely tuned, labour is mostly used to redistribute the resources required and generated by capital. Desires are fulfilled through this labour, e.g. constructing bespoke clothing from bartered cloth as a hobby. Mastery over self allows shaping one's habits to instinctively fit into these systems, e,g, learning to enjoy identifying edible mushrooms. Participation in other common systems like tourism, socializing or single-family housing may decline or stop as a result - depending on what is dropped, one may appear very eccentric. Money exists as a byproduct or a way to regulate outside interactions, e.g. setting high prices for work to select for audience. Skills are developed to a high enough level that they can be heavily relied upon to provide for needs.
Looks crazy to level 5 people because only "fun" labour is desired - the idea of shaping desires to match one's values seems inauthentic or at a minimum unsatisfying.
Guru tier.
8: At this level, complete mastery over self means that desires are strictly bounded in accordance with one's values. The combination of high skill levels and ability to control self means that world-class skill levels are attainable. Capital is almost entirely non-monetary at this point and the resources generated overwhelm what cash could buy. Time spent is Pareto-optimal as this person does exactly what they want and nothing more - doing anything else would be making their life worse.
From this person's perspective, they are living a life of "ponds: booze; trees: meat" with everything they want within their grasp. Monetary capital is similarly easy to produce but is immaterial to the system, as confidence in skills, and the usefulness of those skills, is so high. Critically, this level is a move away from the Renaissance Man ideal and towards being a Master - the resilience of the multi-pronged Renaissance Man provides less utility than Master-level skills have to the world.
The difference from level 1 and level 8 is mostly mental, despite both having potentially no monetary capital. The level 1 person wants everything and gets none of it, the level 8 person wants only one thing and gets everything in the process.
Looks crazy to level 6 people because dependence on skills, social capital, or local environment appears to lack sufficient redundancy or diversity to maintain a resilient, sustainable lifestyle - they appear one disaster away from ruin.