Early Retirement Extreme Forums

jacob wrote:For example, I grok that "abs are made in the kitchen", but I'd rather keep eating hotdogs on football Saturday (Go Irish!)

hold on, hold on... there are hot dogs made out of lentils?

Mental lentil dogs

IlliniDave wrote:This is good. To me ERE seems to be a progression from 21st century conventions back towards homesteading. In a sense in the extreme it's like homesteading with a big bank account and possibly residual income from conventional life.

Perhaps, but in the ERE community there has long been a homesteaders vs. nomads dichotomy. The early days of the ERE blog even seem to me to have been a bit closer to the nomadic side and have moved more towards homesteading as time went on.

BRUTE wrote:thinking about it more, brute thinks a definition of ERE should be considered. from the wiki:

Early Retirement Extreme (ERE) is a movement of individuals integrating ideas from various domains toward the goal of achieving financial independence extremely rapidly.

for brute, this defines ERE, and separates it from other FI approaches. instead of defining FI as a financial problem only, and trying to solve it exclusively with financial means, ERE utilizes any strategy or tool from any domain that could help.

So observe how this definition is also and already in the table under the correct level 7

creatively constructing redundant, stable, self-reinforcing systems of diverse elements where inflows and outflows are matched throughout the systems

I think the reason ERE stands out here from other personal finance sources is solely because ERE is still the main and practically only personal finance work whose focus was at this level. However, this focus level is common amongst permaculturists. In fact gardeners likely won't start referring themselves as permaculturists before their general focus is around stage 6 moving towards 7+. Because of this, I've had a much much easier time explaining ERE to permaculture people than I have to e.g. bogleheads who in gardening terms are more like monocrop farmers going for maximum production with fertilizers and machinery.

this is why it's so hard to define progress or levels in any particular domain - every individual doing ERE likely has different domains they're picking from, and therefore exists in different dimensions.

I think you're still thinking in terms of karate belts or standardized test rankings.

You're trying to figure out what level a given person is at based on a bunch of multiple choice tests. Hence all the talk about being level 2 this and level 10 that and the difficulty/impossibility of finding an appropriate weighing of these factors to find one single ERE-score.---Perhaps refined by doing even more testing of different columns. It seems like you want a standardized test/curriculum in which where the goal is to specify some clear goals with appropriate learning material that people can work on and then level up. You're essentially advocating an analogue to the educational system and what you're looking for is some GPA equivalent based on examining all the ERE-classes and you want one column for each possible class, e.g. investing, DIY, cooking, minimalism, nomadism, homesteading, ...

That's not my goal with my table.

What I want to know is how people think. I want to know how they came up with the answer; not what answer they came up with. It's been my experience that people who think in similar ways also tend to approach problems in similar ways and consequentially tend to come up with solutions that correspond to their approach. The MOST important column in my table is the Focus column. It's also been my experience that it's really hard to grasp and naturally think in ways that are both significantly higher and lower than one's own in the focus column. (Yeah, sure one can fake it, but only for so long and what's the point anyway?!) The [much] higher levels are difficult because one has never been there. The [much] lower ones are hard because one has either forgotten or find it hard to avoid using one's experience to go into higher levels (that's the curse of knowledge problem I've linked to a few times above).

BTW,

Read http://epubs.surrey.ac.uk/1198/1/fulltext.pdf ... and tell me what, if any, kind of standardized testing would be able to resolve what one's learning stage is at the meta-level (where one integrates all one's classes). I don't think it can be done.

The Focus column in my table, not coincidentally, is simply the Dreyfus learning levels expressed in personal finance-language.

http://www.bumc.bu.edu/facdev-medicine/ ... -level.pdf

This paper uses chess as an example.

I highly recommend reading this book: https://www.amazon.com/Amateurs-Mind-Tu ... 890085022/

This is a chess book about what goes inside the amateur's mind when they play the game and it's ranked by ELO levels. Players of different chess strengths have different thought processes which determine how they play. I think it's useful even for non-players just to recognize that what appears similar on the surface might be very different in people's heads. Indeed, I think many don't sufficiently appreciate the difference in thinking-levels and some aren't even aware they exist.

I think the same holds for what goes on inside people's mind when they think about personal finance. Players of different pf-strengths have different thought processes which determine how they play or see the game.

From a review:

If your no good, you won't like it. If your too good, you won't like it. If you've been playing chess for at least two years and are struggling to get any better... you will find it absolutely amazing. Chess will begin to make sense. Silman focuses on one topic at a time... He then shows you a problem position. He shows these positions to some of his students of different strenghts and asks them to play against him but to think aloud as they play. He comments on what they are doing poorly and well. He teaches you how to think, not just how to play.

The other columns in my table are essentially the different stages of "thinking aloud". Sure, sometimes a beginner might say something that corresponds to a much higher level ... or sometimes an expert may say something stupid, but in general, most people will think in ways that correspond to their level and act accordingly.

The utility of my table is that it does no good for a noob chess player to go take lessons from Kasparov because Kasparov (unless he's a genius teacher) is unable to present the material in ways that a noob can understand.

The same holds for personal finance.

@Jacob: I think your table more or less captures the different Wheaton levels of personal finance. I found the PF blog-space categorizes people by stages by comparing income and net worth relative to expenses (typical example). While motivations might correlate well, people in similar financial situations will have completely different mindsets that correspond to financial knowledge.

This is an attempt at describing the mindsets using your scale. It may not be completely correct and is intended as a starting point for the forum’s collective understanding. At level 6 and above, I stole your descriptions because you described it a lot better than I could (or maybe I don’t get it?). I’m still not satisfied with level 8 because it just feels like a difference in degree from level 7, not in kind. Maybe it should be deleted.

Level 1 (Scarcity): Views money as a medium of exchange. Work for money and trade money for stuff. Understands income. Debt is like a cheat code because it enables the purchase of stuff that is otherwise unaffordable. No concept of investing.

Level 2 (Accumulate): Views money as a tactical resource. Money can be saved for a rainy day. Understands interest. High-interest consumer debt and payday loans are avoided. Values having a high credit score to reduce cost of borrowing. Thinks the stock market is like gambling.

Level 3 (Exponential growth): Views money as a strategic resource. Money can be accumulated towards larger goals like buying a house, or saving for retirement. Understands net worth. May intentionally take on low-interest debt (mortgage, car loan) and invest the difference expecting higher returns. Investment is usually understood at this level and above. Budgets are seen as a sacrifice in the loss sense.

Level 4 (Embracing efficiency): Views money as life energy. Money should be carefully spent. Understands expenses, and tries to minimize them. Aspires to being completely debt-free. Invests in paying down all debt including the mortgage. Budgets and frugality are embraced.

Level 5 (Optimization): Views money as a store of value. Money enables freedom. Measures net worth relative to expenses. Optimizes operating expenses. Invests for retirement. Frugality is fully internalized and budget is primarily used as a retirement planning tool.

Level 6 (Yields and flows): Views money as a unit of account. Money reliance is fragile. Understands capital and yield in non-financial contexts. Manages cash inflows and outflows and realizes savings becomes less relevant when these are in balance. Diversifies income sources, and sees the point in investing for income. Robustness, not frugality, is motivation for addressing needs without money.

Level 7 (Systems theory): Views money in a context other than currency. Sees everything as a set of interconnected systems and money is just one of many inputs and outputs. Practices true lifestyle design. Creatively constructs redundant, stable, and self-reinforcing systems of diverse elements where inflows and outflows are matched throughout the systems.

Level 8 (Chop wood, carry water): Views money as all of the above, or something else? Sees money as a force that distorts the natural interactions between people and the environment and seeks to transcend it. Systems are perfected by minimizing undesirable work and using resources as part of a complete and naturally flowing cycle. Focus is on making money irrelevant to the systems by eliminating waste and "closing the loops."

If we accept this vision of level 8, then the next logical progression is level 0 or 9 (the true chop wood, carry water level?) where money doesn’t exist as a concept because of ignorance (like a child whose needs are entirely provided for) or because the person has completely transcended it. Possible examples include living in a world of extreme abundance, a set of closed, self-sustaining systems of one’s creation, or operating in a mythical "gift economy" where everything is freely given and debt does not exist. It’s interesting to think about, but likely too many Wheaton levels removed from us to be practical. Unless you have a strong vision of it, I almost prefer deleting level 8 and sticking with levels 1-7 because it doesn’t imply as much of a linear progression or so much the value judgment that one is better than another.

BeyondtheWrap wrote:

IlliniDave wrote:This is good. To me ERE seems to be a progression from 21st century conventions back towards homesteading. In a sense in the extreme it's like homesteading with a big bank account and possibly residual income from conventional life.

Perhaps, but in the ERE community there has long been a homesteaders vs. nomads dichotomy. The early days of the ERE blog even seem to me to have been a bit closer to the nomadic side and have moved more towards homesteading as time went on.

Having myself drifted from one end of this spectrum to the other and back again, I would have to say that one of the things that has kept me interested in the basic tenants of ERE is its ability to speak to both ends of this spectrum. To me the common element regardless of nomadic/homestead is conservation of resources, particularly energy, whether that energy is money earned and saved, food grown, etc, etc until a stable, resilient system is in place. For me financial independence, while certainly part of the picture, is the least interesting aspect (perhaps because I ended up here from reading about peak oil and was particularly interested in how to set up a system in which removing all money from my life would have as little effect as possible.)

I've lost track of who to quote in the thread now, but I think this was Brute's take:

creatively constructing redundant, stable, self-reinforcing systems of diverse elements where inflows and outflows are matched throughout the systems

which can apply equally to both nomads and homesteaders and everyone in between.

BeyondtheWrap wrote: Perhaps, but in the ERE community there has long been a homesteaders vs. nomads dichotomy. The early days of the ERE blog even seem to me to have been a bit closer to the nomadic side and have moved more towards homesteading as time went on.

Okay I've no horse in that race. Actually, in the sense I was thinking, they could be functionally equivalent when it comes to the ultimate metamorphosis to independence of the financial system and specialization mentioned above where a person relies on his own skill and labor for essentially all needs.

@jacob:good and helpful summary, but
please explain what you mean with BLM (6)and SWR-"schmess-dubya-R"(8).

jacob wrote:I think you're still thinking in terms of karate belts or standardized test rankings.

no, in fact brute was trying to convince jacob that jacob's table is still a belt system, despite all the anti-belt pro-swordmanship rhetoric.

@J_ BLM is the Bureau of Land Management. A lot of territory in the Western part of the US is owned by the government and you can stay there for free (I think 14 days before you have to relocate). Level 8 refers to SWR being a silly concept at this level, see https://en.wikipedia.org/wiki/Shm-reduplication ... e.g. fancy-schmancy.

@brute - I can see how you can think the table is a belt-system. Can you see why some others as well as myself can think the table is something else? Insisting that it's a belt-system w/o acknowledging other perspectives just tells me that I can't haphazardly share the table publicly because the use of ordinal numbers will automagically result in about half the people seeing it to start ranking themselves or playing progress-quest with the entries.

This is similar to how about half of all college students think that college is just about collecting a bunch of grades in a bunch of classes w/o considering how their actual education has more to do with whether they're capable of integrating those lessons and applying them elsewhere. IOW, the GPA-for-the-sake-of-GPA crowd operates very much in a context-free environment. In Dreyfus terms, they're advanced beginners.

Similarly misuse obtain from MBTI testing when people think that their personality obtains from the test-score rather than the test-score resulting from their personality.

The main reason that the table is not and can not be a belt system is simply that there's no one who prevents any teaching of higher levels before one has graduated in some way from the lower level. People are therefore gauged strictly on their skill as it appears; not by some authority that hands out belts.

like brute mentioned in his lengthy reply, that's what jacob gets if he writes down a fixed number of columns with numeric levels of 1-10. this is just inherent in the form. that's why brute recommended non-numbered, independent (vs. grid organized) axes that can still be ordered.

so it's not that everybody is misunderstanding jacob, it's that jacob chose a medium that seems unfit for what he's trying to accomplish. if brute understands jacob's intent correctly.

in a way the college analogy is apt - by standardizing and grading everything, the system incentivizes people to ignore non-standardized, non-numered, non-measurable pursuits.

brute's understanding of jacob's intent, maybe to clarify as brute may have gotten it wrong:

jacob wants to have a type of "manual" so that if he encounters an individual with interests in somewhat ERE related topics, he can point them to a few appropriate interesting steps on wheaton levels just above them, so they won't freak out but actually be able to make use of it.

this "manual" would be a formalization of knowledge that jacob and other ERErs have acquired over the years.

maybe to jacob, "Paradigm" is the main column, with the other ones being side effects - i.e. a human who thinks in terms of "Optimization" (maybe an engineer) would likely have MMM-type CoL, FI goals, and experiences/vacations.

to brute, this is confusing in the grid in two ways: first, because Paradigm seems to be on equal terms with all the other columns just from the layout. second, because in brute's not so humble opinion, paradigm is very local to certain domains. brute optimizes in some domains, but chops wood & carries water in others. for example, brute has been washing his clothes by hand in a bucket for a year now, even though brute has a free laundry machine that came with the apartment he's renting. chop wood & carry water. on the other hand, brute currently has a negative savings rate and still eats lot of steak.

while brute is obviously a unique snow flake, all individuals are in some way.

brute's recommendation: form follows function, but function also follows form. this table seems to invite others to think about this mental model in a way that jacob does not want them to think about it. maybe another form is more conducive.

I see brute's point. Naming the boxes rather than numbering or lettering them, putting them in some form other than a matrix hides the "level" aspect that people have been trained to see when they look at a matrix.

I think a bonus observation of this exercise is that there are also Wheaton levels when it comes to one's perception and use of tables

what is jacob's goal for this ERE roadmap? what does he want it to achieve?

edit: and yes, customer interviews with user stories. old habits die hard.

jacob wrote:I think a bonus observation of this exercise is that there are also Wheaton levels when it comes to one's perception and use of tables

Another possibility.

https://en.wikipedia.org/wiki/Law_of_the_instrument

Wheaton hammer

Use a Venn diagram? Certainly provides for more shades & mixtures compared to a table.

It is clear that this table is strangely divisive in opinions, but rather than repeat the whole argument again---what the table is for, how it works, and how it doesn't work---it might be illuminating to see what similarities you otherwise share with people who have the same opinion about/take on/approach to the table as yourself.

Have we identified all the relevant mindsets and accurately characterized them? I tried doing this above, using Jacob’s levels and limiting it to the personal finance dimension. The ordinal numbers on the PF Wheaton scale are not a rank, but are used to provide an indication of “Wheaton distance” between mindsets. A difference of 1 indicates that the mindsets are somewhat able to relate to one another, while 2 is difficult, and 3+ is incomprehensible.

Here’s a quote from Jacob from a thread that discussed mindset as it pertained to class (viewtopic.php?f=3&t=8041&start=50#p124898). I think it’s pertinent here (substitute “class” with “PF Wheaton level” and it still makes sense).

jacob wrote:I get the impression that you still think of class as some kind of ordinal ranking system with one being above the other, etc. Better to see classes as different kingdoms. Different kingdoms have different values and customs. (...)

You can move to another kingdom but that's not immediately going to make fit in and be one of them. You're not going to instantly change someone's cultural makeup by giving them a new passport. You're not going to change someone's class by transferring $50M in or out of their bank account. Someone, say from the underclass, winning the Powerball is not immediately going to start acting or thinking like a wealthy person. They're not going to instantly develop a strong opinion on the capital gains tax. If they're from the middle class they're not instantly going to switch everything out of their Vanguard index religion and into a checking account having suddenly understood that ROI no longer matters for their personal accounts---that money is now a resource like air which will never run out. Rather they're going to act according with their underclass understanding of money and spend the money on luxury cars and bling. Conversely, let Trump go bankrupt for the fifth time. He's not suddenly going to switch to thinking or speaking like a college graduate while deciding that his best strategy will be to apply for a position as a store manager at the local home improvement center in order to "build up his FICO score". In particular, he would not try to regain his wealth like a middle class person tries to become wealthy---by diligently saving in index funds and negotiating better salaries.

jacob wrote:It is clear that this table is strangely divisive in opinions, but rather than repeat the whole argument again---what the table is for, how it works, and how it doesn't work---it might be illuminating to see what similarities you otherwise share with people who have the same opinion about/take on/approach to the table as yourself.

As others have mentioned, the trouble with these things is that whenever there are scales or lists, they tend to invite competitive behavior to establish differentiation. It appeals to our cognitive biases of Associative Coherence, Substitution, Representativeness and the Conjunction Fallacy.

But OTOH, it IS amusing. This thread actually reminds me of the "Tar Baby" story, with jacob playing the part of Br'er Rabbit. Let me know when you are ready to be flung back into that ERE Briar Patch.

BTW, what is GRS?

maybe the trouble is with the original Wheaton scale - it seems that all criticism of the jacob-table also applies to the Wheaton scale. maybe Wheaton just doesn't have forum members that have read Tufte and design tools for a living