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Why FIRE Doesn't Work and Who This Side is For
Level 2 - Value Investor
Welcome Avatar! This is called a value investor post because it’s basically a version of NGMI directed at FIRE guys. By definition they are NGMI. While we are well aware of the math behind FIRE and it is 100x better than the typical dude levered up with a negative net worth… it really isn’t what this side of the web is about. To make it clearer, we’re going to spell it out in detail and likely enrage a large chunk of people. Is what it is.
Part 1: What is the Point of Life
Some say family. Some say religion. Some say a mix of the two. So on and so forth.
The big picture concept here (at least on this side) is that you want to maximize your potential and *limit regrets*. The chances that your potential is being maximized by taking a 45 minute commute each way to stare at a computer screen with florescent lights for 50 hours a week is unlikely. That looks a lot more like prison/hospital beds than anything else.
Before moving on from that point, we’re well aware you have to start somewhere. Unless you were born into some extremely lucky genetics (pro athlete, sudden pop singer, movie star etc.), you’re going to have a gutter feeling experience in your early 20s.
You’re energetic, full of hope and of course broke.
Assuming you agree with that general premise, the key is to balance out the risk spectrum over time. In your 20s you can be a bit of a penny pincher. No one expects a 21 year old dude lifting heavy weights to be popping bottles of Louis XIII or Dom Pérignon. The trick? You have to bet on yourself at some point.
The goal of life is to maximize your potential and limit regrets.
The second part is completely missed by the FIRE group. They have found a way to maximize their paychecks but they haven’t figured out that they are guaranteeing regret. Think about it. The people on track for things like FIRE are typically smart and calculating. They are great people to start businesses. But. They don’t.
Imagine they get to 70-80 years old and someone walks up to them and says “hey you know those 5 business ideas you had, four of them would have made 10s of millions and one would have failed”.
How would that sensation feel? If you want a glimpse of what it looks like we suggest you check out end of life care.
Part 2: When to Stop the Scarcity
FIRE in general comes from a belief of scarcity. Since wages practically never keep up with inflation, the FIRE crowd looks for millions of ways to cut cost. They do this with extreme coupons, extreme reductions in overhead and extreme budgeting. The problem with this habit is it instills a belief of risk aversion. This is not good long-term as you’re managing your life as if you’re already retired (not exactly logical).
Fighting Wage Growth: Instead of trying to cut costs to keep up with inflation try to spin that narrative around.
If you’re unwilling to even invest say $10K into getting good at affiliate marketing/copy writing what you’re saying is you’re less productive than the US government.
Think that through! Don’t get to complain about taxes if you can’t get a better return than the Treasury Department!
If you can’t get a better than 5% return investing in yourself, you’re saying explicitly that risk free assets are more valuable than you.
If that doesn’t mean low self esteem we’re not sure what does. There is no situation in which your first nest egg of say $50K-100K should be going into government bonds or “safe dividend stocks” because you should be able to beat those efforts with blood sweat and tears. (Autist Note: yes. This assumes you have 6 months of emergency money on top of the initial $50K-100K, don’t be reckless!)
Oddly, most don’t see it like this. They prefer haggling and scrimping to get their savings rate up. Not realizing that they are announcing loudly and publicly that they have no self belief. If someone smart enough to make 6-figures can’t bet on himself with a measly $10K that speaks volumes.
Simple Cut Off: After a couple of years of work experience and avoiding frivolous spending you should be able to save 25% of your earnings pretty naturally. Don’t think this is extreme at all. At that level you’re not going to have any leverage to create financial freedom without risk.
Say you earn $100K and save $25K. Even if you skrimp, claw and suffer to get that to $40K it’s not really life changing money. You’re never going to be broke, you’re never going to be a paycheck away from bankruptcy etc. Now. If you saved an extra $50K and that turned into a business that sells for $250K, that is life changing. Just plug in a single time lump sum of $250K invested for 30 years and compare it to an extra $15K saved for 5 years compounded… it’s nasty
Below is rudimentary proof, of the calculations.
This means the quick math is once you’re able to save around 25% it just doesn’t move the needle. Your W-2 isn’t going to save you. You know this which is why you’re attempting to get ahead by cutting costs.
But there is a better way. Increase earnings.
Part 3: Increase Earnings
Hopefully you’re convinced at this point. Now without using any spread sheets you can figure this one out yourself.
Person A makes $100K: Since inflation is supposedly going down, he gets a 3% raise. If he works “really hard” he gets a 7% raise. Say he works the extra 5 hours. He goes to all those meaningless happy hours. He goes to the degrading team building sessions where you’re forced to solve riddles written for children in a group setting. Now at $107K.
Person B makes $100K: He’s well liked and does all the basic political posturing. If the head of the group shows up, he is on time. Buttoned up and clean cut. However. He decides to bet on himself and learn basic online sales, consulting or even go into a trade. It doesn’t matter since there are a million ways to skin a cat. He makes $10K and gets a 3% raise. Now he’s at $113K.
A couple of years pass, person A makes $150K and person B makes $135K at their W-2. Meanwhile… person B is still growing his niche business and is scaling up to $50K! While this is pennies compared to the salaries person B is now $35,000 ahead of person A.
Ruh Roh! Recession.
Both person A and person B get fired and look for new jobs. They both find them but surprise, surprise both get the same pay! They get punched down a bit and both make $120K. Guess what though? Person B is still making $50K from the other income stream and is now $50K ahead and making $170K.
Now imagine this scaled up. It only multiplies.
Over 10-20 years you’re looking at millions and millions of dollars. For the FIRE guys that didn’t rage quit reading this, just plug in $50K into the compounding formula…
Part 4: Procrastination is a Killer
Now at this point you can’t argue the quick math. Instead what you see is horrible guidance. You should start NOW. The longer you wait the harder it is to get motivated and see momentum.
Imagine being a high up person making $300K, $500K or even $1M! Now envision them receiving their first paycheck of $10K after learning the basics. Disgust would ensue without fail. Honestly, don’t even blame them for quitting, it is pretty difficult to care about a 3% or lower increase to earnings compared to a 10%+ change for a 20 year old.
Killing Your Own Dreams: From what we’ve seen the majority just enjoy killing their own dreams. They say 9/10 businesses fail and ignore that you will learn a billion things from your first failure (if you have one).
They ignore that a ton of those 9/10 businesses were designed to fail due to tax deductions and of course the classic money laundering game played with shell companies.
This stuff happens all the time and is all part of the number to discourage you from trying to escape white collar prison. The only real difference is the uniform. It is a button up shirt and you can sleep in your quarters with free time for about 10 hours a day.
Part 5: Up to You to Decide
There is always a way to make excuses. You don’t have time. You’re too busy. You don’t have an “idea”. All of that is largely non-sense. You know it’s just another attempt to avoid taking action.
In reality you’re more scared of wasting time and money on your first venture (which to be honest will probably fail). We’re more than happy to say it will likely take you a few years to really hit your groove. Well unless you’re like the hundreds in the jungle generating $10M+ in top-line at this point and knock it out of the park like a Cartoon Gator and Cartoon Deer (Source) - $1M valuation business already (update post soon)
Enjoy the process though, it’s just like playing a sport. Just because you watched YouTube video doesn’t mean you can complete the task.
On that note, is an extra $20K really going to change your life in 2053 invested in dividend stocks? Run the numbers. You know the truth. You’re scared of betting on yourself.
At this point, the FIRE people who accidentally found this website are likely puking their guts out. They will claim that it is “scammy” to sell tooth paste and other legitimate products.
There will always be some scammers out there but the reality is that the majority of people do it the same old way. The hard way. Grinding in e-commerce, grinding in real estate, grinding in amazon arbitrage, grinding in ads… so on and so forth.
Either way, on Wednesday we have a overview of trend spotting and will even provide yet another option that requires no real IQ to complete. (IQ is largely irrelevant for $25M+ net worth anyway IYKYK).
On that note. Back to zee tent.
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