Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

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Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by 7Wannabe5 » Wed Aug 14, 2019 9:14 am

The purpose of this thread will be for me to get help figuring out how the interpretations of production functions given in the following works:

"Capital in the 21st Century"- Pickett
"The Technology Trap" - Frey
"Energy and the Wealth of Nations"- Hall and Klitgaard

- relate to the substitution of Skill for Capital towards Quality of Life in "ERE."

Starting points for discussion:

1) Pickett believes that elasticity of substitution of Capital for Labor is currently greater than 1; there are multiple unexplored or unexploited possibilities for investment.

2) Frey believes that the elasticity of substitution of Capital for Labor is currently much greater than 1; the future will be automated.

3) Hall and Kilitgaard believe that the availability of very inexpensive energy sources throughout the industrial/modern era (soon to end) has been overlooked major contribution to growth of production -> utility of substitution. Rotary mower vs. gas mower if gas is $20/gallon.

4) Jacob believes that it is easier for average Consumer/Producer to increase Skill (marginal utility of Labor) within the realm of household production of Q (Quality of Lifestyle) and reduce household ongoing Capital expenditure towards Q to level approximately equal to 1/5 ($8000 vs. $40,000) than it would be to raise Skill (marginal utility of Labor) within the realm of employment market to 5x average level ($40,000 vs. $200,000.)


I think that Jacob must be right because, as Picketty implies, there is currently almost no rational (energy or stuff level) basis for the marginal labor productivity of an individual warranting greater than $200,000/year salary. (Actually, one of the reasons I am currently motivated to study data science is I am curious about why this profession currently merits such a high wage. It can't just be 'because not that many people can do the math' , because there are many things that only a small percentage of people can do that are of no value to anyone.)

The question I have concerns what is going on analogously at the $8000/year Capital expenditure towards Q= Lifestyle Quality boundary?

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by jacob » Wed Aug 14, 2019 9:41 am

I think it's worthwhile to include some otherwise confounding variables.

In the past 20 years, since China joined the WTO essentially, the US has outsourced A LOT of [labor intensive] manufacturing. Chinese labor is available at $0.50/hour and environmental regulations are just a suggestion.

The US in turn has focused on efficiency and increasing complexity (information technology) and how to distribute/consume all these goods. The major growth industries in the US (FAANG stocks) are pretty much just about using data to figure out how to borrow money from China to buy labor-cheap goods and consume them. Those companies employ very few people ... I'll just take a wild guess and say <100,000 most of whom are probably facebook moderators.

It's a rather symbiotic system---as long as one factor doesn't become too big.

Most Americans find themselves somewhere between those two hard points. At the low-end, the under-educated have already lost the competition and so are now turning towards nationalism and populism. At the high-end, the educated are worrying about being replaced by robots.

All this is underwritten by continued access to rather pollutive technologies: fracking in the US, coal plants in China, Russian natgas in the EU.

I think the reason data science is paid a lot is similar to why webmasters were paid a lot 25 years ago. Supply and demand. The supply hasn't been commoditized yet + at some point some of the most "common data science" functions will be available via point and click at a level where MBA's can do it themselves.

So I suppose that's the answer to what's going on below $8k/capita. Labor gets outsourced. Stuff gets imported. Distribution gets increasingly complex. From a strictly individual perspective and from someone who is trying to push under $8k, I do find it rather worrisome that the parts I rely on to repair stuff mostly arrive from China via e-post (shipping containers). The alternative is to try to pick them up from the discarded waste-stream in the US or pay 50x more from Grainger. It's pretty indicative that the means that facilitates this is eBay a data-company with only ~15,000 employees.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by jacob » Wed Aug 14, 2019 9:56 am

I was wrong about my guesstimate. Amazon has 650k employees. Cf. Walmart's 1.4M. The median salary at AMZN is $28k/year.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by 7Wannabe5 » Wed Aug 14, 2019 12:15 pm

@jacob:

Yeah, I assumed that Amazon used a lot of robots when I shipped my inventory to their warehouses. Turned out they just paid a bunch of people the same wage I paid my teenage son to haul boxes around for me.

Also, the global middle class (over $11/day per capita) has been rapidly expanding in recent years, and average Chinese factory worker now earns $3.60/hr. (almost exactly half minimum wage U.S.) Therefore, some production has moved elsewhere where wage-rate is even lower. So, if $8000 was spent entirely on goods manufactured in China, and labor costs represent 30% of final price = $2400, that would represent approximately 666 hours of Chinese factory labor or 333 hours of U.S. minimum wage labor.

Obviously, this is somewhat moot since nobody who is trying to break the $8000 barrier is spending anything like that much on new consumer goods. Since my strategy ( or scheme :lol: )is primarily scavenger, one thought I had was that only $8000 is required because so much capital-acquired-towards-lifestyle is underutilized in our increasingly divided, but still quite affluent society. Of course, if current trends continue, eventually the hourly wage available for picking up scrap metal on the curb with a bike cart will be higher than that paid for schlepping around new stuff in Amazon's warehouses.

If the $8000 spent is weighted more towards "head tax" then the average pay-rate of government workers in vicinity of residence would likely be a more relevant factor. Picketty suggests that the high level of friction/inertia in this realm was significant factor for rise of middle-class in twentieth century Europe. Bureaucrats are likely to maintain reasonably well-paid employment when traders are jumping out of sky-scrapers, coupon clippers are decimated by inflation, and factory workers are shuffling through bread lines. (That's why I think doing something like getting a part-time government job would be neatest "head-tax" solution. )

Anyways, I have found it to be true that when attempting any project towards improvement or maintenance of Q (Quality of Life), such as the one classical_Liberal suggested on wolf's journal which was "learning to sail", allowing for even a tiny bit of seed money greatly expedites process or unblocks creativity. For instance, spending $400 to redecorate a room seems outrageous to me, $40 seems do-able, and $4 seems like an interesting quite difficult challenge, but 4 cents (okay, might as well say $0) is making it Primitive Technology or How To Make Everything level difficult- IOW, I am paying myself WAAAAAY less than global middle class income and only being partially compensated by the fun inherent in re-inventing the wheel.

But, still...Why $8000? I don't like arbitrary.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by jacob » Wed Aug 14, 2019 12:34 pm

7Wannabe5 wrote:
Wed Aug 14, 2019 12:15 pm
But, still...Why $8000? I don't like arbitrary.
The floor would be set by the marginal consumer who still acts normal. Typical examples of marginal consumers would be retirees w/o savings living on SS after an low-income career, part-time minimum wage service workers (waiters), and students. $8000ish is just the PP-adjusted number in the richer part of the first world.

Once you cross below it, you either have to stop looking normal (like live in a car or go w/o insurance) or effort for alternative solutions go way up because you have to find solutions outside the consumer-economy.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by classical_Liberal » Thu Aug 15, 2019 12:59 am

7Wannabe5 wrote:
Wed Aug 14, 2019 12:15 pm
IOW, I am paying myself WAAAAAY less than global middle class income and only being partially compensated by the fun inherent in re-inventing the wheel.
I brought this up in my journal awhile ago in different terms, and if memory serves @scott2 had a similar thread. At what point does selling your labor for money to avoid laboring make sense. Capital for labor ratio is only one of many factors to be considered. Frankly, for me, lifestyle factors (ie how much do I enjoy each type of labor) take a front seat in the decision making process. The poteintal for skill acqusion and independence from any system I do not have some ability to control a close second and third.

From a macro perspective, I think social safty nets provided in weathier countries have a large impact on expectaions for labor renumieration as well. I mean, if I can do nothing and get "x", I'd better get at least 2"x" if I sell my labor for 40 hours a week. This is in stark contrast to do nothing and die of starvation.

I also question the rather arbitray 8K to maintain "normal" as well. However, in all fairness, Jacob has put much more effort and time into figuring this out this than I ever will, so I tend to take his word as gospel in this realm.

I have very little to add towards answering the OP question, but look forward to what others have to say. As far as I am concerned it is the quinticessial question to my future endevours. I've had very little luck hashing this out myself.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by 7Wannabe5 » Thu Aug 15, 2019 10:11 am

jacob wrote:The floor would be set by the marginal consumer who still acts normal. Typical examples of marginal consumers would be retirees w/o savings living on SS after an low-income career, part-time minimum wage service workers (waiters), and students. $8000ish is just the PP-adjusted number in the richer part of the first world.

Once you cross below it, you either have to stop looking normal (like live in a car or go w/o insurance) or effort for alternative solutions go way up because you have to find solutions outside the consumer-economy.
Gotcha. In the U.S. a 2 person household with $16,000 income is at around bottom decile marker and a 2 person household with $160,000 income is around top decile marker, and the median is a bit over $60,000. I also know that $8000 approximates true cost of natural services adjusted sustainable spending level per human at current population levels. So, it kind of makes sense that at right around this level it gets more difficult because you are attempting to operate without (on average) benefit of your theoretical share of remaining fossil fuel glut. IOW, the consumer economy and the fossil fuel economy are pretty much the same thing. In a traditional agricultural society the elasticity of substitution is less than 1.

I would note or argue that focusing on giving the appearance of being at least minimally a member of the U.S. middle class (normal) is not necessarily very consistent with maximizing Q = quality of life. Obviously, this observation is consistent with ERE and the behavior of many members of the forum who choose to, for example, purchase a BIFL watch while living in a tent or buy season opera tickets while using a bicycle for transportation. Another way of expressing this would be operating from the perspective and with the freedom to seek value along the entire spectrum of the planetary/time social class structure.

Circling back around to the math that puzzles me. The elasticity of substitution of capital for labor in traditional agricultural society is less than 1 because land (rights to utilization/exploitation of natural services within defined boundary) is, by definition, just about the only thing in which you can invest (notable exception being government bonds or tribal society equivalent.) So, your options are limited to buy more land/hire more hands. The same holds true for a present day purist permaculture project, except for the notion of intelligent design. So, in Picketty's analysis, he neglects the aspect of intelligent design, because a first adopter of Norfolk rotation system would already be operating in a different technological design era than his neighbors, and also because the concept of intellectual property applied to agriculture or natural systems did not exist until well into the industrial era. IOW, permaculture is to open-source development as Monsanto is to Microsoft. It's not an attempt to replicate a 16th century turnip field, except to the extent that 16th century turnip growers were in possession of some recently re-discovered forgotten wisdom.

Where am I going with this..? classical_Liberal was very intuitive in jumping to what scott2 discussed in his thread, because that is what I was thinking about in conjunction with my recent reading and his remark about expense related to possibility of taking up sailing. One thing that struck me in reading scott2's thread was his remark about investing time/energy in re-training himself at bleeding edge of his current profession, thereby making his skills more in demand or not yet thoroughly commodified (rare/unique) simultaneous with hiring others to take on tasks such as house-cleaning which have been commodified since pre-history. Instead of hiring another human, he could have chosen to purchase a robotic vacuum. For classical_Liberal within the context of his own lifestyle, sailing might be as much a bleeding edge skill as data science is in the general employment market. IOW, the skills associated with the technology of sailing have not yet dispersed to him.

On some level it doesn't matter whether a skill is archaic like sailing or soap-making or new like data munging or microbial soil analysis when it is new to you. The interesting thing is that at this juncture in history, information, inclusive of educational materials, is dirt cheap. This is a relatively recent phenomenom. One of the things my 'ex' loved about the U.S. was our tradition of public libraries. In Tehran in the 1970s, the cost of textbooks alone could be enough to prevent an individual from learning a useful skill or trade such as engineering. So, if the most ERE-ish way an individual could do lifestyle design would be to maximize stock of skills and/or flow of new skills into stock, (as opposed to focusing on stock of wealth or wealth and health :roll: ) and if the process of adding a skill to stock of skills (whether at level of bare competence or extreme mastery) usually requires practiced integration of required knowledge, physicality, tools and resources over time, then it becomes clear that time/vigor/motivation are almost always going to be the limiting factors unless you are really devoted to acquiring or maintaining a skill which requires the use of very expensive, rare, or not widely dispersed tools and resources. A couple obvious examples being applied nuclear physics and sailing ;) However, even in these cases, the inexpensive path to access (given high level of motivation) would be first applying enough time/vigor to obtain high level of knowledge and physicality* required OR subset of skills necessary for direct obtainment of tools or resources (build a small basic sailboat from scratch using scavenged materials.)

Anyways, the way this would relate to my original post would be that if you subscribe to ERE philosophy then you believe that the highest quality lifestyle is the lifestyle of the Renaissance Human which is the lifestyle of a human who attempts to maximize Stock of Skills. Therefore, the elasticity of the substitution of skills for capital = infinity is a vaguely mathematical way of defining ERE, because whoever dies with the biggest stock of skills wins!! :lol:

*Which in my case was more like still looking okay in a bathing suit than being strong and fit. Gotta think outside of the box sometimes too.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by classical_Liberal » Thu Aug 15, 2019 11:46 pm

@7WB5
I really think you nailed it from a theoretical standpoint. The problem I have is how to rein this down to the level of actionable or intuitive (maybe a result of so much readily available knowledge). As in, I can intuitively grasp the risk/reward of the desire to learn to climb trees in a given daily weather situation. High desire to practice climbing trees & sunny, go for it! vs low desire to learn to climb trees and lightning in the distance, bad idea!

Learning a) a proper way to intuitively analyze whether or not it's worth it to add sailing to the list of skills given the potential cost to current lifestyle AND b) how to minimize labor, monetary or other cost associated with the skill acquisition is my goal. I think ERE/an adaptive system really helps solve for the later and is a personal work in progress. I'm having a lot of trouble determining where to start with the former. Also, if/when it just makes sense to outsource the skill with other skills sets (ie labor an hour to pay for 8 hours of someone else's labor)

Anyway, sorry if this is derailing where you wanted the thread to go.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by jacob » Fri Aug 16, 2019 7:07 am

Think of skills as a territory. With increasing number of skills, one becomes more familiar with the territory and also begins to form a map of where the missing spots (white areas) are. Without a guide (or a learning tribe), this process is formed by searching for missing parts (exploring). For example, right now I'm learning about electric motors (enough to know the difference between split-phase and capacitor run types and how to wire them) to upgrade the drill-powered lathe I built initially. This is not just random---several things have pointed towards having to learn about motors for my web-of-goals.

Whether it's worth outsourcing something comes with the same kind of experience that allows one to judge how long a job takes to do. This is also the experience that knows what a job is worth and what it should cost. Most people can do this in their own specialized field. They know whether a service is worth paying for and what service is ridiculous and how long it should reasonably take. A renaissance person is the same ... but in more fields.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by 7Wannabe5 » Fri Aug 16, 2019 8:27 am

classical_Liberal wrote:Anyway, sorry if this is derailing where you wanted the thread to go.
Not at all. As I mentioned, your reply on wolf's thread pinged this line of thought.
Learning a) a proper way to intuitively analyze whether or not it's worth it to add sailing to the list of skills given the potential cost to current lifestyle AND b) how to minimize labor, monetary or other cost associated with the skill acquisition is my goal. I think ERE/an adaptive system really helps solve for the later and is a personal work in progress. I'm having a lot of trouble determining where to start with the former. Also, if/when it just makes sense to outsource the skill with other skills sets (ie labor an hour to pay for 8 hours of someone else's labor)
I am going to have to bring some other books into the discussion in order to reply. I have been re-reading "The Renaissance Soul" by Lobenstine and I just finished "The Overstory" by Powers, "New York 2140" by Robinson, and "How to Invent Everything" by North. The last 3 books all deal imaginatively with the problem of how humans and other life forms on earth might survive as carrying capacity is approached. The sub-text of "ERE" which gets somewhat lost in the ratio of income to spending is Jacob's moral rational response to this problem which was his choice to lower personal spending to
carrying capacity/population level. "The Overstory" assembles a cast of characters with very different personality types and life experiences and how they deal with this problem as it particularly applies to depletion of forests from the late 20th century through the present/very near future. "New York 2140" also assembles a cast of varying characters and focuses on how they are surviving as city dwellers in the continuing aftermath of climate change. "How to Invent Everything" is a non-fiction work offering light touch, humorous, yet accurate instructions on how to re-invent essential technology if you were sent back to any era in the past in time machine (thereby neatly evading politics related to possibility of future need for such re-invention.)

Instead of reading these books and all the many others on similar topics I have read, you could just choose to accept the Jacob is right and $666 is approximately the level of personal spending you should first strive to develop skills adequate to achieve. However, not everybody ( you and me, for instance) has the same personality type or life experiences as Jacob, so the very short writing you might first read towards working this out for yourself would be this humorous, although also rather terribly accurate, piece on how your personality type would likely behave during apocalypse. It has been linked before elsewhere, but can't find at moment.

http://oddlydevelopedtypes.com/post-apo ... al_by_type

As evidence of the terrible accuracy of this article, as an eNTP, I am some sort of morph of mostly Maverick and some Wizard, so under category of Wealth I should fall somewhere in between "Boom or Bust" or "Can explain economic theory, but has no money." , which is, obviously and sadly, true. OTOH:
When ENTPs join a band of survivors trying to make it safety, they bring with them an unconventional perspective, a knack for brainstorming, an optimistic outlook, and a gun that shoots portals interlinked by wormholes. (It will explode after the first use.) The ENTP will also bake cakes using improvised ingredients.
ENTP's are not naturally very conservative. However, the path towards growth for an ENTP is towards "I" (the scientist) which equals something like "towards resource conservation through shared value of curiosity." So, what finally helped me click a bit more was doing a good deal of reading that allowed me to inhabit the perspective of a female scientist (also mostly biologists/ecologists-too difficult for me to inhabit the perspective of a male researcher in the hard sciences for very long, because cold/dry place.) So my highest functional post-mid-approaching apocalyptic survival plan would be something like "extreme innovation within conservative boundary." In practical terms this might look like reduce and maintain personal spending to $8000 per year, allow income/savings to freely bounce up and down within margins, creatively improve quality of life "bake cakes using improvised ingredients" within boundary of $8000/year.

You are obviously a highly developed ENTJ, because the direction of growth for an ENTJ is towards the Helper, and you switched careers from Finance Bro to Nursing. Therefore, your post-apocalyptic survival type is going to already be a morph between Warlord and maybe Ascendi? Dunno, you have to figure it out yourself. Also, too hard for me to empath how to do "ERE" with your personality type, but would suggest process might be similar.

Second suggestion would be that values clarification exercises towards web of current goals creation such as are provided in "The Renaissance Soul" might also prove helpful. It has been my experience that every few years, at least, my values focus shifts. For instance, "solitude" was one of the top 4 I chose out of around 50 values recently and "family" dropped off of my top 4 (accompanied by huge twinge of guilt), after consistently being on the list for 30 years. So, if I was considering "Sailing" as one of my 4 focal points for near future skill development, I would likely give it a check mark for "solitude", but if it didn't get a solid check mark for 2 or 3 of my other current top values, I would definitely consider whether there might be some better, easier, less expensive way to seek solitude.

IOW, you need to consider your take on current environment (state of world in this moment of history on down), your take on who you are essentially, and your take on where you currently want to go or grow when choosing current focus of skill set development. Also, as Lobenstine clearly communicates, this is a never-ending reiterative process. It's more than okay to change your mind as new evidence or insight become available.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by daylen » Fri Aug 16, 2019 11:38 am

According to that site, the intp wizard must kill the intj mastermind. :twisted:

..because let's be honest.. they are the only real threat.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by Dream of Freedom » Fri Aug 16, 2019 12:28 pm

I think for the most part it is fairly elastic. Though there are some things that require more labor than skill. Additional skill probably won't help with doing the dishes or mowing the lawn for instance. You could hire someone to mow and buy a dishwasher or save money and not but skill will help little.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by 7Wannabe5 » Fri Aug 16, 2019 12:42 pm

@daylen:

Yeah, as an eNTP I didn't really grok that because -"Warm Fuzzies: Surprisingly warm—for a Rational." More likely that I will do something like accidentally kill everybody with a casserole full of misidentified mushrooms cooked in some lead glazed pottery I lumped together.
Dream of Freedom wrote:I think for the most part it is fairly elastic. Though there are some things that require more labor than skill. Additional skill probably won't help with doing the dishes or mowing the lawn for instance. You could hire someone to mow and buy a dishwasher or save money and not but skill will help little.
Yeah, I agree that "doing the dishes" is pretty much core hard-to-skill-up personal care, unless maybe you think all sandwiches all the time is quality of lifestyle improvement. Mowing the lawn, otoh, could (should) be completely eliminated with permaculture skill. In fact, my super-secret project I am working on has something to do with eliminating this problem.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by bigato » Fri Aug 16, 2019 2:47 pm

I'll probably have this problem very soon and I'm very much looking forward to it

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by 2Birds1Stone » Fri Aug 16, 2019 6:29 pm

^ +1, though it's been fun figuring this out over the past few years.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by IlliniDave » Sat Aug 17, 2019 8:58 am

I'm having a hard time following the discussion because I'm not up on all of the prerequisites. Just mulling over the title of the thread is interesting though.

It's hard for me to set aside the notion of human capital, so in that framework skills derive from capital investment, just not necessarily financial capital. Rather than substitution of skill for capital investment, it feels more natural to me to look at them as complementary forms of asset allocation where your investable assets include financial and human capital.

Thinking about quality of life as a product is something I'd never attempted. In part it's because I have tended to correlate quality of life more with stripping away nonessential noise rather than putting something together. But refining is a form of production too. Just mapping out the sensitivities that would tend to push a life along a quality continuum (which requires defining that continuum) is a nontrivial endeavor (at least for me). As discussed above there's an adaptation aspect to it as well, across time both we and our circumstances change.

I tend to approach things like this simplemindedly, and cast things individually into sort of a make/buy decision framework. Most of the time it boils down to investing in skill where I enjoy or think I might enjoy the accompanying activities (or at least the accomplishment); and where I don't, opting instead to invest capital, i.e., use money to avoid the human capital cost so that it can be invested in an endeavor geared towards ascending the quality scale.

I approached that trade-off much differently when I was younger and financial margin was in short supply. Early in financial adulthood simple cost avoidance was almost an end in itself. During the midcourse years accumulation was nearly an end in itself (e.g., I would sometimes hire out tasks to free time to work extra hours when net wages would exceed the cost of hiring out, and I was willing to invest time in work-related skills). Now having reached a point while progressing through midlife where financially I should be okay, I'm starting to value time increasingly higher relative to the usual palette of financial considerations. Something I used to keep written down at work was roughly: retirement day is the day I can no longer afford to spend time earning a paycheck.

Akin to what bigato said above, I'll soon be transitioning to a different playing field where regular capital inflow will be much smaller. I try to imagine what it will be like when the big spigot is effectively shut off, but I think I'll have to wait and see when the time comes. However, most of the potential outcomes I can foresee seem to suggest frequently prioritizing quality of time over cost avoidance, but with considerable overlap. 7wb5 mentioned cooking as an everyday example. I have no yearning to be a great chef, nor do I have anything against going out for a nice meal; but cooking I've found to be a good means of anchoring a daily rhythm, something that for me seems to improve quality of life, even while cooking as an end in itself is not a source of great satisfaction. Something I want to be mindful of is staying open to experimentation and ongoing adjustment. More than once I've found prejudging to be a less than perfect process.

Anyway, sorry if I've lowered the level of the conversation too much as a latecomer to the discussion (and the prior ones mentioned). I just thought the subject title was interesting, and approaching a transition point it's a general topic of current interest.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by classical_Liberal » Sat Aug 17, 2019 8:12 pm

@Jacob
Your approach sounds like books I have read on psychotherapy. The therapist asks leading questions, listens, then notes any large areas of nonpurposeful avoidance. Generally, it's these "white areas" that are at the heart of problems. So if the idea "I wish I knew how to do this" while pursuing goals begins coming up often, that may be the time to explore it.

I still think there is value in simply knowing how to do something, even if the plan isn't to do it all the time. However, the problem seems to be knowing in advance what is worth knowing, even if the math does or does not support regular outsourcing. There are also logical and logistical reasons that some things can't be outsourced, even if it would be optimal for me to do so. ie I can't pay someone $15/hr to come in and spend .1hr a week to clean my toilet, even though I hate that activity. I would have to outsource all cleaning, some of which I enjoy, at a much higher cost.

@7WB5
Very good advice as usual. I think I need to continue to work on my tendency to feel permanence in decisions. This is an ongoing issue. I also think it wise to determine why I desire certain skills. ie sailing for solitude (side note, I'm not actually currently considering sailing, it was for example purposes only).

I have also come to the conclusion that one's preference on depth vs breath, and/or stability vs mobility, has a large role in many of my thoughts. I think either preference can have significant amounts adaptability build in, however, choosing one in any given realm is probably the most efficient course of action if goal is to reach minimal labor/monetary costs and max "Q". I recently posted on the Excessive Housing Costs thread wrt this as well.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by Jin+Guice » Sun Aug 18, 2019 10:20 am

This is something I struggle with greatly and my biggest ERE weakness. There's always a limit on the amount of DIY we are willing to put into certain activities. For example, you might build your own computer out of component parts. Are you going to learn how to mine the metals and then learn how to construct the parts? Probably you are not.

It's also generally possible to minimize the skill out of your life or hide the need for the skill. For example, if you don't use a computer, no need to learn how to build one. If you rent a room in a house without a yard, you don't need to learn yard maintenance or elimination skills and you outsource housework, hidden in your rent payment*. However, when you minimize something, you run the risk of decreasing your quality of life. This occurs, both by the absence of that thing/ activity and, by losing the deep pleasure that comes from adding another competency to your bag of tricks.

*This specific example goes to the point @c_L was making above about toilet cleaning and one I've seen him make before about housing. If you're willing to live with roommates/ only need a few hundred sqft. to yourself, there are very few buying opportunities. Thus it can be cheaper to rent and outsource the maintenance problem.

So if I'm trying to do/ get something, the three options I see are 1) purchase with money; 2) DIY; 3) stop trying to do/ get the thing. Most things are of course some combination of the three, but I think we can all agree that if I landscape my yard I'm largely doing 2, if I pay someone to do it, I'm largely doing 1 and if I move to a house without a yard I'm largely doing 3.

My previous strategy had been 3, and if that failed, 1. However, ERE has made me see the light of doing 2. The smart response is to take on one new skill that I'm highly interested in that would be useful and master. Predictably, me being me, I tried to figure out how to DIY everything that would be useful with no emphasis on how much interest I have. This has not lead towards the production of a quality lifestyle and here I am, reading this thread with great interest.

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by jacob » Sun Aug 18, 2019 10:32 am

The recent generational losses of (2) thanks to cheap and abundantly available consumer goods is why those who start on an FIRE savings plan often have to resort to (3) and proceed to complain about sacrifice because they are still shut out of (2) until they start learning; and learning takes time.

I have also noticed that minimalists are often very deficient in technical capacity (2)---they have no tools---but are okay with that. There seem to be two kinds of popular minimalists: Those who purchase an instagram-friendly lifestyle with money (1); and those whose main interest is traveling or hanging out with friends (3).

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Re: Elasticity of Substitution of Skill for Capital Investment Towards Production of Quality of Lifestyle

Post by oldbeyond » Sun Aug 18, 2019 11:48 am

Yeah, I guess ERE is about maximizing (given the particular constraints of the individual) skill in 1, 2 and 3 so that you select the most appropriate response in a given situation, whereas a some other strategies go all in one of them ("I'll save 5 million", "I'll make my own needles", "I need only my yoga mat and green tea"). Using all of the tools should maximize quality of life, while you might tilt in different directions in different spheres of your life. For example going all in on 1 for insurance, 2 for food preparation and 3 for plastic gadgetry.

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