Read on Twitter
The FIRE (Financial Independence, Retire Early) movement has a number of powerful ideas...
I‘m very glad that I found it when I did...
And their core thesis is 100% DEAD WRONG.
THREAD:
First off, what is the FIRE movement... (cont’d)
I‘m very glad that I found it when I did...
And their core thesis is 100% DEAD WRONG.
THREAD:
First off, what is the FIRE movement... (cont’d)
The FIRE movement, roughly speaking, is a group of middle class people who believe they can escape the rat race & retire early by investing aggressively.
The most prominent (and most interesting) guru is blogger Mister Money Mustache. As money gurus go, hes quite honest.
The most prominent (and most interesting) guru is blogger Mister Money Mustache. As money gurus go, hes quite honest.
Mr. Money Mustache also espouses a sort of traditional “Teddy Roosevelt” environmentalism and extreme frugality.
The first point I agree with completely, & the second point is hard to find fault with... though it’s not the path for me.
Buying very few things is a good goal...
The first point I agree with completely, & the second point is hard to find fault with... though it’s not the path for me.
Buying very few things is a good goal...
But I believe there is enormous value in beautiful and well-crafted objects...
And those tend to be expensive.
One of the common criticisms of the FIRE movement is that it’s unpatriotic or uncivil to leave the working class.
This I disagree with strongly.
And those tend to be expensive.
One of the common criticisms of the FIRE movement is that it’s unpatriotic or uncivil to leave the working class.
This I disagree with strongly.
If you’re financially independent and can provide for yourself and your family, there is nothing amoral about retreating to a life of hunting, fishing and quiet contemplation.
And this is what Mr. Money Mustache has seemed to have achieved.
Most notably, he did it...
And this is what Mr. Money Mustache has seemed to have achieved.
Most notably, he did it...
With a middle class salary by investing extremely aggressively.
He claims to have retired by 30 without ever making a six figure salary. I believe him
But here is where we get into trouble. The post 2008 bull market was unprecedented in human history.
He claims to have retired by 30 without ever making a six figure salary. I believe him
But here is where we get into trouble. The post 2008 bull market was unprecedented in human history.
And the common notion in FIRE circles is that if you live frugally, work a middle class job, and invest extremely aggressively in total market index funds, you’ll be able to do the same.
Followers of @Lindyman and @NNtaleb et al. should easily spot Taleb’s Turkey fallacy.
Followers of @Lindyman and @NNtaleb et al. should easily spot Taleb’s Turkey fallacy.
The assumption that big stock indices will continue to return enough money to allow for a comfortable retirement in one’s thirties is a bad one.
Its like the turkey who has been pampered his whole life deciding that the good times will roll forever...
Right before Thanksgiving.
Its like the turkey who has been pampered his whole life deciding that the good times will roll forever...
Right before Thanksgiving.
But that’s not actually the most pernicious assumption.
The other, less obvious assumption is that one will be able to CONTINUE earning a middle class salary, uninterrupted for at least 15-20 years.
Any of the family men out there know that the only guarantee is that...
The other, less obvious assumption is that one will be able to CONTINUE earning a middle class salary, uninterrupted for at least 15-20 years.
Any of the family men out there know that the only guarantee is that...
You will experience brutal, unpredictable disasters.
Career, family, medical etc.
Even if you do everything right “man makes plans, while God laughs.”
Meanwhile the smart money is nowhere to be found. The intellectual foundation of FIRE is the famed trinity study.
Career, family, medical etc.
Even if you do everything right “man makes plans, while God laughs.”
Meanwhile the smart money is nowhere to be found. The intellectual foundation of FIRE is the famed trinity study.
The Trinity study shows that a portfolio of roughly $1 million invested in an index fund has historically been able to sustain about a $30,000 a year lifestyle.
Not exactly the high life, but for many it sounds better than the 9-5 grind.
Heres the huge problem though:
Not exactly the high life, but for many it sounds better than the 9-5 grind.
Heres the huge problem though:
Public equities are no longer the engine of value creation.
Private businesses can now raise tens if not hundreds of billions in private markets.
And that’s not even mentioning the world of crypto. Until very recently companies had to go public to raise significant capital...
Private businesses can now raise tens if not hundreds of billions in private markets.
And that’s not even mentioning the world of crypto. Until very recently companies had to go public to raise significant capital...
But now thats no longer true.
If you’re only invested in stock index funds, you’re missing out on enormous wealth.
So it’s far from clear that stock returns will even be positive going decades into the future...
Let alone similar to America.s historic bull runs...
If you’re only invested in stock index funds, you’re missing out on enormous wealth.
So it’s far from clear that stock returns will even be positive going decades into the future...
Let alone similar to America.s historic bull runs...
Now, I personally have a significant portion of my portfolio in large index funds...
And it’s certainly miles better to do that, than what most people do w/ their money..
But the idea of betting my future...
My families future...
On absurdly anomalous bull markets is insane
And it’s certainly miles better to do that, than what most people do w/ their money..
But the idea of betting my future...
My families future...
On absurdly anomalous bull markets is insane
And I do think there is something darker beneath the surface.
This is a way to make people feel good about wage slavery for decades at a time...
And the specific mechanism of the 401k is deeply sinister.
The government is willing to let you keep tens of thousands of dollars?
This is a way to make people feel good about wage slavery for decades at a time...
And the specific mechanism of the 401k is deeply sinister.
The government is willing to let you keep tens of thousands of dollars?
That would otherwise be paid in taxes... simply out of the goodness of their hearts?
I don’t buy that for a second.
The only reason 401ks are tax-protected is because very powerful people want it that way.
They want you to shovel all your hard-earned money into their hands...
I don’t buy that for a second.
The only reason 401ks are tax-protected is because very powerful people want it that way.
They want you to shovel all your hard-earned money into their hands...
And let them hold on to it for a few decades.
But the type of financial moves that can change your life rapidly?
(Local real estate rentals, founding a small business etc.)
Extremely difficult or all but impossible to do through retirement accounts.
But the type of financial moves that can change your life rapidly?
(Local real estate rentals, founding a small business etc.)
Extremely difficult or all but impossible to do through retirement accounts.
So all of this begs the question - what do we do instead?
Do we just accept wage slavery?
No - I don’t.
And I believe I’ve figured out a better way, after some very hard years. I will have more on this later on.
Do we just accept wage slavery?
No - I don’t.
And I believe I’ve figured out a better way, after some very hard years. I will have more on this later on.
When I do share those thoughts - it will be here: http://pinebaron.substack.com
