JLF in Penge & Privatøkonomi

[FBeyer]

The June issue of Penge & Privatøkonomi (money and personal finance) features a three page interview with JLF.
And for once, it seems either JLF wrote it himself, or the journalist actually paid attention.

Expect even MORE wealthy Danes during the next month or so

Also: That yard is GREEN!!!

[wolf]

It is in Danish, isn't it? Do you have a link to a online article or is it printed only?

[Jason]

Congrats. If I wasn't told, I would have thought "Penge & Privatokonomi" were flamboyant Danish lion trainers.

[jacob]

Oh, so it actually got published. I was told it was supposed to be in the October (2017) issue but since I never heard anything, so I thought it got canned.

Is it the magazine or online?

[FBeyer]

I incidentally came across it in the library today. I don't have access to the online version unfortunately.

[Jason]

The June issue of Penge & Privatokonomi? Considering the demand, you were lucky it was available.

[FBeyer]

Oddly Penge & Privatøkonomi and Trolling People Across the Atlantic Digest are always in. Perhaps the demand is not quite what the librarians expected...

[Jason]

Well, as long as you are reading the latter, my guess is it will remain in circulation.

[Stahlmann]

if you translated whole, the post will get v& pretty quickly
maybe it's better to leave only the fat?

[J_]

@ Fish: thank you so much for this translation.
Jacob has delivered a very clear worded synopsis of his way to financial independence and philosophy.

[Fish]

So Fish got his first X! And hopefully also the last.

The original article (in Danish) can be found here: https://www.pressreader.com/denmark/pen ... i/20180530 The article starts on page 80. Access is free if your library is associated with pressreader as mine was.

I would like to extend my compliments to the author, Peter Møller Christensen, for writing a fine piece which portrays Jacob and his ideas in a positive manner that is very relatable for a normal person.

Even as someone deep in the ERE rabbit hole, the article still offers its share of “that’s an interesting way to look at it” moments and believe that it is worthy of being translated to English so that it might be understood by those who care about JLF and his ideas. Since this is neither the time nor place for that (no disagreement with moderator action)... I will simply recommend reading the article through the above link.

[Fish]

Where is the promised influx of more wealthy Danes? P&P has a circulation of 20k, so doing some back-of-the-napkin math: 20k magazines * (1 reader/magazine) * (1/5 read the JLF article) * (1/20 check out the ERE website) * (1/20 visit the forum) * (1/10 forum poster:lurker ratio) = 1 new forum member expected! (Or maybe that was FBeyer.) Feel free to question the assumptions btw

Has anyone else read the article? The first part is like a summary of the How I Became Financially Independent in 5 Years series on the blog. Although I must have read those blog entries 2-3 times, the timeline of Jacob's life story was much clearer after reading the P&P article.

1. Graduate college debt-free, because socialism.
2. Get accustomed to living on the amount of the student stipend (the SU-budget referred to in the article).
3. Become PhD student (pay raise!), but because of inborn miserly qualities, hold spending at SU-budget level instead of buying more stuff like everyone else. Accumulation begins.
4. Have no preconceptions of the money game and figure it out starting from basic principles.
   • Do the math and conclude that mortgages suck for the borrower, without needing to experience it first-hand.
   • Discover financial independence is possible.(*)
   • Realize that investing for higher yields and returns really speeds up attainment of FI.
5. Also develop an interest in becoming economically independent and start experimenting with lifestyle changes. (This was too hardcore for the article.)
   • Buy-nothing year
   • Car-free (walking everywhere)
   • No-heat winter
   • And more...
6. Obtain PhD and relocate to work as a postdoc in lower-tax capitalist country
7. Meet DW and realize some economies of scale
8. Become FI, start ERE blog, quit academic career, write ERE book, ...
9. "Skill of living" gradually increases to a point where Jacob is now living a middle-class lifestyle despite STILL spending like a 1994 college student... in nominal dollars.

On that last point... although there are a lot of lessons learned wrt aesthetics, I'd argue that Jacob checks a lot of the right boxes at a superficial level... married, well-educated, wealthy, lives in a house. Compared to single, low 6-fig net worth, van-dweller (homeless)... which is the type of mental image that first comes to mind when a normal person puts 7k/year and extreme early retirement together.

(*)@jacob - When did you first derive the chapter 7 equations relating savings rate and time to FI? I imagine the intuitive understanding must have come early with the Fortran program, but at what point did you work out the analytical solution for the first time? I think this will be of interest to future FIRE-historians.

This is my favorite quote from the article (it comes at the very end of the feature-box):

"It's not about sacrifice or minimizing, as much as it's about being smart and very strategic with expenditures. It is also important to understand that all this stuff is not something you learn from one day to the next. It takes years to learn for me too, but with time it becomes better and better, so you get more and more for your money," says JLF.

Thinking back on my experience, I wish that this were the FIRST thing I read about ERE. To a normal person, "live on $7,000/year" implies a lot of sacrifice because that's what it takes without any frugal-skills. If this were more prominently displayed on the ERE blog, it might prevent misunderstandings about what ERE is really about.

[jacob]

Compared to single, low 6-fig net worth, van-dweller (homeless)... which is the type of mental image that first comes to mind when a normal person puts 7k/year and extreme early retirement together.

Which aside from being married was also exactly where I was and what I projected when I wrote the blog or did you miss those years? I figured that humans would be to do the math and calculate that renting an RV lot in the bay area would easily allow me to rent/buy a stick house in most other places in the country for the same price, but I got a lot of flack for choosing the RV. Lots of stigma. Many people do consider one to be homeless. Many worry about safety. Lots of nasty comments on the interwebs. But I think our present situation looks nice and conventional enough now. Basically, the average person has certain boxes to fit people into and if that doesn't happen, then there must be something wrong with whoever they're looking at. A 65 year old retiree living in an RV is not considered homeless, but a 35 year old retiree is. People are not very logical.

(*)@jacob - When did you first derive the chapter 7 equations relating savings rate and time to FI? I imagine the intuitive understanding must have come early with the Fortran program, but at what point did you work out the analytical solution for the first time? I think this will be of interest to future FIRE-historians.

Late 2009. It was the last chapter I started and the second last chapter I finished (#6 was the last one I finished... mainly because it was kinda boring to me being mostly about examples and technical details). I was originally intending to do a tour-de-force of all investment methods, similar to https://www.amazon.com/dp/1580622011/ ... Then I realized it would add 100-200 pages but not really add anything that hadn't already been said many times before in many other books. That's probably the academic habit of not saying something if you can just "reference it away". I already knew that I did not want to repeat the mistake of recommending something simple in terms of "what to invest in" because of its inherent dangers. This left the 50,000' overview with the main point about arbitrary income streams and savings rate calculations.

I already knew the simple math: http://earlyretirementextreme.com/what- ... ate-b.html (back from 20080911) and it was not so "shocking" to me. My very first blog post ever was about the 4% rule (from 20071204): http://earlyretirementextreme.com/what- ... umber.html ...

Calculating it analytically became possible in 2009 because at the time I had been studying for the CFA and thus had recently learned about the NPV (and FV) of discounted moneystreams. The math itself is fairly easy with my background. Unlike the "simple math", this made it possible to include interest rates. The "simple math" approximation assumes 0% and thus only works for low years.

The contour graphs and the way of plotting them was something of a habit I had developed from my work in physics. They're essentially a way of reducing a 3D problem to 2D and gain new insights. Sometimes this is done in color instead, but publishing in color is expensive!($) Of course doing it analytically [for planning purposes] is overkill but it makes a strong/irrefutable point in terms of what 80% savings rates can do. This is also how I've used them the most ... to convince CFPs and other finance professionals. All of them would know the equations like the back of their hand ... it's just they never even thought of checking out the behavior of the equations over the entire variable range. So that last graph shows that.

Oh, and incidentally, those equations are perfectly formatted because at the time, I was also freelancing as a copy-editor for a scientific publisher in Berkeley. Every parenthesis is exactly the right size, so behold the beauty of my equations

($) Just one page in color would have made the paperback almost twice as expensive.

Thinking back on my experience, I wish that this were the FIRST thing I read about ERE. To a normal person, "live on $7,000/year" implies a lot of sacrifice because that's what it takes without any frugal-skills. If this were more prominently displayed on the ERE blog, it might prevent misunderstandings about what ERE is really about.

Over the years, I've learned a lot about what works and what doesn't work in terms of teaching or explaining things. This is partially why I'm always going on about Wheaton, Dreyfus, MBTI, Kegan, Dunning-Kruger, Mt Stupid, Cipolla, etc. I've spent a lot of time trying to understand other humans because of their failure to understand me. When I was a young and naive blogger, I figured I could just concentrate on having good ideas and those who read them would pick them up without bias like good scientists so to speak. Like, "that an interesting idea/way of life... let me think about how this could be useful for myself". Whereas in reality it's more like "that doesn't look like the way I've been doing it ... and I don't understand how it works ...there's probably a catch ... I'm guessing it's an awful way of life/unhappy person/...". Basically, ways to prevent people's heads from exploding when they learn about new things.

[oldbeyond]

Well, we're a species of social mammals thriving to a large degree due to our ability for cooperation/group cohesion, so the "yuck, that's crazy"-reactions might have some basis in evolution... That's also a way in which our era is different, you take a bit of flak for RV-dwelling etc, but the pitch-torches stay holstered, mostly.

Skill is really the mayor concept, if it didn't exist frugality would simply be a sacrifice contest, with Dear Leader being able to endure the most hardship.

[Fish]

I started reading ERE in 2014 so I fast-forwarded to “brick house in Chicago” which is the only reason I don’t get laughed out of the room when I bring up your ideas with my DW. The house really helps the ERE brand among normal people, because there’s an element of “I could see myself living like that.” Of course, we also have MMM applying a similarly high skill of living but with somewhat higher spending/capital requirements which puts him at ~85th percentile in terms of quality and quantity of stuff. His popularity thus comes as no surprise, but as we know, that kind of FIRE is only for the rich. Still inspirational though.

Calculating it analytically became possible in 2009 because at the time I had been studying for the CFA and thus had recently learned about the NPV (and FV) of discounted moneystreams. [...]

Of course doing it analytically [for planning purposes] is overkill but it makes a strong/irrefutable point in terms of what 80% savings rates can do.

I never made the connection between the CFA study and the development of the FIRE equations, but it makes so much sense! The first time I read the ERE book, the part where you derived the annuity formula seemed like a physicist rediscovering a common finance formula. Now it appears you provided it to allow a reader with a highschool level of math ability to be able to follow the derivation from start to finish. Since I live in a STEM-bubble my inclination would have been to skip all that with a reference to the formula for the partial sum of a geometric series... but I’ve since come around on that and think your approach was better.

For me, it was the analytical solution that clinched the argument that FIRE was possible. As time goes on, I’m appreciating how interdisciplinary it is, and surprised that anyone was even able to figure it out at all. There is the requisite math ability, knowledge of the relevant finance formulas, the scientist’s desire to nondimensionalize the problem and find the general solution. Only then can one combine the “simple math” and 4% rule and come up with the FIRE equations. And even more impressive that the same person went on to prove it in practice, on a median salary no less.

In this society, since income tends to correlate positively with math ability, the humans most likely to derive/understand the FIRE equations are also more likely to have the #easymode path to FI that makes frugality a semi-optional component. I believe you when you say that ERE likely wouldn’t exist had you become an electrical engineer.

I've spent a lot of time trying to understand other humans because of their failure to understand me.

I think this is why your ideas have been able to enjoy moderate success during your lifetime. This reminds me of Thoreau whose reputation and fame were almost entirely posthumous. Despite the advantage of being connected to the American literary community, his first book sold poorly (fewer than 300 copies... and being self-published, the remaining 700+ unsold copies remained in Thoreau’s home). Even his masterpiece took 5 years to sell the 2,000 copies of its inaugural print run. IIRC the ERE book sold about 10x that number in the same timeframe.

[jacob]

I never made the connection between the CFA study and the development of the FIRE equations, but it makes so much sense! The first time I read the ERE book, the part where you derived the annuity formula seemed like a physicist rediscovering a common finance formula. Now it appears you provided it to allow a reader with a highschool level of math ability to be able to follow the derivation from start to finish.

Yes, I always thought [that showing the work] was the better approach than the traditional way of leaving the problem or derivation as an exercise for the reader. I'm full aware that most readers either never bother or get stuck doing the "exercise" without help from a TA insofar they're doing it on their own. I know from myself how much I appreciate authors who show enough detail of the derivation for me to follow along mentally.

I really did write the book exactly in the way I would have liked to read it.

Other people, some of which later become front-runners, were then able to reconstruct my graphs(*) instead of just trusting a bunch of Ancient Egyptian Algebra. MMM had a home-made version of the graph in his earlier version of his famous shockingly simple math post. That part has now been replaced with a link to an app. I'm kinda bummed that he took the graph out but I can see why. Most people speak app these days. You can also see it here in color. I know it's a reconstruction, because I've never given my figures away in color (they're all B&W).

(*) The only sticking points have been the numerical solution---and sometimes the kindle formatting trips people up.

[Fish]

After comparing this with the b.dk/bt.dk articles and the 2016 Jyllands-Posten article, I believe the P&P article stands out as the most positive and the best introduction to ERE for mainstream readers. The others focus more on the ultralow expense level and frugal tips which comes across as a kind of sacrifice in the exchange sense. Thus ERE gets portrayed as “living on a stone” which is a Danish idiom for living very austerely. In contrast, the P&P article stands out for explicitly stating that ERE is not about living on a stone, sacrifice, or minimizing.

Also: judging by the pictures, the garden leveled up between 2016 (Jyllands-Posten) and 2017 (P&P). In the more recent pictures it almost looks like a small farm. Nice work Jacob! The permanent clothesline brings back childhood memories of my grandmother hanging up clothes to dry. It is a reminder of a bygone era, and perhaps a glimpse of a future where precious energy can’t be wasted to speed up an already-fast natural process.