Early Retirement Extreme by Jacob Fisker

Rating: 7/10

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High-Level Thoughts

An excellent introduction to many of the early financial freedom concepts, it just felt like the narrative drifted too much at parts and had to be skimmed. Definitely some good lessons and takeaways, though.

Summary Notes

The lack of concrete specifics is intentional because they won’t pertain to very many people. The approach is deliberately open-ended to make the concepts applicable to as many different situations as possible.

This is not an academic work. I have resisted the temptation to follow the medievally inspired academic tradition of citing old books to make statements based on authority. I find that showing the derivation from basic principles is more useful for application. Instead of references, I have provided a bibliography of books in the appendix of this book, each of which will add to the subject.

This incidentally is why reading the classics is very worthwhile–concepts get discovered, forgotten, and then rediscovered, either independently or by reading old books.

This endless working and paying is called “making a living,” yet people are so busy “making a living” that they have no time for living.

Like birds, which never seem to have a flight plan, yet always seem to fly together in a swarming flock, we don’t question.

Many creative means of spending money have been devised. Instead of spending 30 seconds opening a can of tomatoes with a traditional can opener, it’s now possible to spend 30 minutes working to pay for an electric can opener that can open the can in the same amount of time.

Alternatively, it’s also possible to return to the cave for a few months every year to earn money for the next adventure out of the cave. This is living on the economy, so to speak, rather than living in the economy.

To use a sports analogy, this book will teach you how to think and work out like an athlete so that you can become an athlete, rather than present a few easy workouts to lose a few pounds and “get into shape” before the beach season begins.

You put 15% of your income into a retirement account for 40 years, plan to retire at 65, then try to spend the remainder of your life making up for lost time and health. Are you willing to take that deal? If not, there’s another way: Don’t accept the chains;

Directions are succinct and useful until you get lost or need to change your plans. Maps allow for optimization and the freedom to choose your destination, but they require navigational skills.

For example, the mistake many make when becoming frugal is that they don’t replace their previous vision of accumulating more stuff with an equally strong vision of doing something else.

During children’s typical 12-year stint in the public school system, the most “successful” (read well-adjusted) learn not to question authority, not to ask questions which don’t pertain to the task at hand, to follow procedure, that trying is better than doing, to be a team player, and not to stand out. Most importantly, children are trained to sit still for increasingly longer time spans while doing mentally menial busywork.

Despite being wholly dependent on technology for all our needs, few understand how technology provides us with light, heat, food, communication, transportation, etc.

It would never occur to them that the majority of their collection of 20 different and highly advertised cleaning products could all be replaced with the vinegar and baking soda which people used to use. It would never occur to them to chop garlic with a knife instead of using one of the many different designs of garlic press.

The focus has moved from a healthy lifestyle to affordable health insurance, making health a product rather than a state of being.

Critical thinking has been replaced by opinions derived from pundits and political and religious leaders since people prefer having other people think for them.

World affairs are replaced with celebrity reporting, and satirical news is often more analytical than real news.

In conclusion, after “growing up,” the only thing children know is that problems are solved by buying products; that in order to buy something, one needs a job; and in order to get a job, one needs a college degree, which happens to be considered a brand name product as well.

85% of college graduates eventually find jobs in a field different from the one they graduated in.

While college means different things to different people–whether it’s a place for higher learning, a two-to-four-year binge party, or simply a brand name admission ticket required by the job market–the increasing demand for education and resulting higher cost means that many students take on debt. Student loans are often considered an investment

The reward for running on this treadmill occurs not through the satisfaction of doing a good job, but from the semimonthly paycheck.

Enjoyment is often limited to buying things because there’s no time to use them, since the buyer has to get back to work and earn more money.

Living to work and spend, it’s not surprising that people derive their main identity through their job title and their purchases: “What do you do for a living and which brand names do you buy to express your lifestyle?”

People are not selected for the best attributes, they’re selected for the fittest attributes. A world without trees selects the short-necked giraffe, which is better adapted. Similarly, the career track selects people who are willing to give up their lives for the sake of work.

If you ever wondered why your boss is incompetent or why it’s so hard for you to advance, chances are that he started his career during a period of economic expansion, which required scraping the bottom for all the new positions to be filled, while you didn’t, relatively speaking.

This creates a problem as specializations change, and a person might get promoted to a specialization, typically management, where he isn’t competent (his highest level of incompetence) and never will be. In such a system, work is only done by those who are yet to reach a position in which they’re incompetent.

In the past, pursuing this goal was admirable since any increase in production resulted in an increase in well-being: better food, better medicine, better clothing, better housing, better work, and better living. At some point, the focus changed from better to more: more food, more medicine, more clothing, more bedrooms, more bathrooms, and more work.

Like the big gas guzzlers used to drive back and forth to them, they’re very energy-intensive, and thus, in light of nascent resource constraints, are also outdated and old-fashioned.

On the home front the growing use of time-saving technology doesn’t result in time saved either. Rather, it results in more being done. For instance, thanks to the washing machine, clothes are now washed more than ever before, and as a result households spend as much time doing laundry as they did before washers moved into people’s homes.

Unlike businesses, consumers rarely use debt to invest and generate an income. Instead, they use debt to purchase consumables like vehicles, houses, furniture, and electronics, which don’t generate income. In this case, interest is no longer the cost of doing business. It’s now the cost of living beyond one’s means.

  1. First, reduce waste and increase efficiency.
  2. Second, having significantly reduced expenses, invest the difference in businesses.
  3. Third, find something meaningful to do instead of work.

For a consumer, food, shelter, etc. are tightly coupled to a paycheck, which is not good.

loosely coupled system is less likely to fail. Loosely coupled systems have slack. They’re flexible and resilient.

It naturally follows that slack or loose couplings have a cost, in that they’re less efficient under normal operations. Conversely, they’re less costly under disrupted operations, such as in catastrophes. Changing the tightness or looseness of a coupling is therefore a way of adjusting risk versus profit.

When activities are linear, the result from adding activities or from increasing the effort is very predictable.

Contrast this with the nonlinear work of an entrepreneur, a scientist, or a football coach.

Most salary men are specialized wage earners who earn money from one source only.

Salary men have options, but they do not create options. This linearization makes them predictable and subject to indirect control. This control is exerted by providing a choice within a narrow range.

A working man should therefore not have a tightly-coupled budget like the salary man, as job loss can result in homelessness or the inability to purchase products.

A salary man is rarely without a job, but when he is, it’s a high-stress event, almost like a death in the family.

A Renaissance man is a person who is competent in a wide range of fields, covering intellectual areas as well as the arts, physical fitness, and social accomplishments.

Don’t worry about whether you can eventually become an expert (see Gauging mastery). Rather, try to constantly improve on the subjects you already know and seek out useful things to learn.

It is curious that experts recommend that investments be broadly diversified, while at the same time recommending that job skills should be highly concentrated.

Learning must become a habit (see Ergodicity and destiny) that is applied to all aspects of life before it can be said that a person is truly an educated person.

Fundamental principles, concepts, or structures are more important than technique, because it is only possible to understand structures in the world if one has formed a corresponding structure in the mind.

Sadly, many educations focus more on technical details because they are more easily testable.

However, working in the same place for five years does not imply five years of experience. If you’ve been doing exactly the same thing, day in and day out for five years, and it only took a day to learn, you have one day’s experience, five years over.

People remember most of what they do, some of what they say, but little of what they see or hear. It’s therefore important to do things.

Compared to a plan, which may be thought of as a string of actions, subject to complete failure if it breaks, a strategy is better thought of as a web of actions. A web does not fail catastrophically if it’s cut in a single, or even a few places. It’s resilient, whereas a plan is not. This is why having a strategy is much preferred to having a plan.

What this means is that any kind of human understanding is based on a small number of representations that are repeated over and over.

The solution is to reverse the outsourcing of ordinary life skills and gradually insource skills that were previously acquired in the marketplace

If you find yourself in a situation where you can’t solve a problem, solve another problem–an omnivore always has more options available when solving the problem of eating.

In a world of abundance, delayed gratification is the optimal strategy.

In other words, arrange your life like an orchestra or a sports team, which don’t depend on any single player.

Rather than using better tactics to reach goals, the goal-setting method must become better.

If one manages to maintain a strict focus on the goal, then by the time the goal is reached, this strategy will have caused so much collateral damage that the work is not complete; the damage must be fixed first. Often this “fixing” creates additional problems.

This figure requires a rudimentary understanding of vector spaces from “linear algebra 101.” It shows the difference between a heterotelic and a homeotelic response in a world that only has two possible goals. The homeotelic response moves closer to both goals whereas the heterotelic response, while moving further towards goal-1, actually moves away from goal-2.

An important part of the systems thinking approach is to continuously increase the number of different problems that the strategy aims to solve or the number of different goals that the strategy intends to meet.

If you take all your actions, which are now vectors in “goal-space” and add them, this will give a strong indication where in “goal-space” you are likely to end

What are the optimal ways of putting solutions together to find the maximum range of use?

Turn the problem on its head by changing it. Instead of looking for ingredients (blocks) for recipes (instructions), look for recipes for ingredients. This is strongly facilitated by carrying many recipes–that is, ways to accomplish something–in your head.

For example, when tackling an obstacle like a heavy weight, don’t remain confined to seeking out ways to make the weight lighter. A different solution is to become stronger.

It’s quickly realized (after about a month) that happiness does not stem from being surrounded by possessions, but that being surrounded by them is the result of an addictive habit.

This figure shows total cost as a function of rate of use. For instance, once a month baking warrants a pair of forks tied together, whereas baking daily warrants a hand mixer. Specifically, anything used less than once a month warrants improvisation.

To get anywhere, it’s thus very important to quickly build a substantial foundation.

Rarely do we step back and re-examine our strategy (lifestyle design). Most of the time we simply adopt the tactics that are handed down through the system without a second thought (see The lock-in).

Keep in mind, however, that hacking existing methods isn’t going to accomplish the same level of satisfaction as devising new methods that are more suitable to the new strategy.

On an absolute scale, spending less also allows for much greater choice in how you earn your money.

The final problem is a curious aspect of living in a society of material abundance: Things are much harder to get rid of than they are to acquire in the first place.

The most helpful thought for avoiding new stuff is to realize that you have lived fine without it for this long, so why get it now? This will eliminate 99% of all electronic gadget lust.

Culturally speaking, we have been programmed to believe that an empty feeling in the stomach is undesirable and a full belly is good. However, throughout and before history, warriors and pre-farmers–that is, hunter-gatherers–have followed a diet of eating almost nothing during the day followed by a large meal at night after the fight, or hunt, as it may be.

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