Author Topic: Doomed Article  (Read 16862 times)

steveo

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Doomed Article
« on: March 04, 2014, 12:10:03 AM »
http://www.mrmoneymustache.com/2014/03/03/why-we-are-not-really-all-doomed/

I thought that this was a great article. Not much else to say but this is what I like to read.

dragoncar

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Re: Doomed Article
« Reply #1 on: March 04, 2014, 12:50:17 AM »
I like the article, but someone clearly hasn't studied the dark ages.  Knowledge can definitely be lost.  After 2000 years, we have finally discovered the secret of Roman concrete:
http://www.businessweek.com/articles/2013-06-14/ancient-roman-concrete-is-about-to-revolutionize-modern-architecture

HappierAtHome

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Re: Doomed Article
« Reply #2 on: March 04, 2014, 01:10:14 AM »
It seemed to me that the boom-bust cycle was missing from the article - things do get worse economically (in one sense) on a regular basis, and then swing back up. Attempting to predict the next recession does not make you a negative nancy, it just means you're attempting to interpret where the cycle will go next (which is probably pointless anyway, but that's a separate issue).

Maybe I'm just obsessed with the economic cycle because I was reading the blog post on prospering in a booming economy earlier today and nodding along with agreement about waiting to buy a house until the next recession.

matchewed

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Re: Doomed Article
« Reply #3 on: March 04, 2014, 06:30:46 AM »
It seemed to me that the boom-bust cycle was missing from the article - things do get worse economically (in one sense) on a regular basis, and then swing back up. Attempting to predict the next recession does not make you a negative nancy, it just means you're attempting to interpret where the cycle will go next (which is probably pointless anyway, but that's a separate issue).

Maybe I'm just obsessed with the economic cycle because I was reading the blog post on prospering in a booming economy earlier today and nodding along with agreement about waiting to buy a house until the next recession.

I don't think he's advocating that the world will be a consistent level of puppies and rainbows, but if you've got that 50%+ savings rate then those bust portions aren't really all that bad. Having resources and skills in those times is key to riding it out with little pain.

Also I view his comments as a long view approach. You notice he talks about the progress of technology briefly (the nailgun) and how years ago no one had them, now everyone has them, and that there are alternatives to them if they fail (the hammer). It's rather stoic to consider what you'd do if things went south, but once you have that worst case scenario you may realize the worst isn't so bad.

enigmaT120

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Re: Doomed Article
« Reply #4 on: March 04, 2014, 03:24:40 PM »
I like the article, but someone clearly hasn't studied the dark ages.  Knowledge can definitely be lost.  After 2000 years, we have finally discovered the secret of Roman concrete:
http://www.businessweek.com/articles/2013-06-14/ancient-roman-concrete-is-about-to-revolutionize-modern-architecture

I thought about the Roman concrete, too, when I read the Doomed Article.  But I only recently learned that people had forgotten how to make concrete.  That still boggles my mind. 

On the other hand, no Googling, how many people know the recipe?  I don't know how to make Portland Cement.


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Re: Doomed Article
« Reply #5 on: March 04, 2014, 07:48:44 PM »
I like the article, but someone clearly hasn't studied the dark ages.  Knowledge can definitely be lost.  After 2000 years, we have finally discovered the secret of Roman concrete:
http://www.businessweek.com/articles/2013-06-14/ancient-roman-concrete-is-about-to-revolutionize-modern-architecture

Was it lost or undergoing field testing?

irononmaiden

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Re: Doomed Article
« Reply #6 on: March 04, 2014, 08:40:04 PM »
I liked the post, but this part stuck out to me:

Quote
Even in 2008 when things got hokey and a big house of cards collapsed, some humans just stacked up a few new cards in a haphazard way and we all agreed to continue using it, and thus we all remained happy and productive.

The burst housing bubble and stock-market crash basically wiped out the first 10 years of my career earnings. Sure, society didn't collapse. But the crash certainly has a lasting negative impact on many individuals.

matchewed

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Re: Doomed Article
« Reply #7 on: March 05, 2014, 05:08:33 AM »
I liked the post, but this part stuck out to me:

Quote
Even in 2008 when things got hokey and a big house of cards collapsed, some humans just stacked up a few new cards in a haphazard way and we all agreed to continue using it, and thus we all remained happy and productive.

The burst housing bubble and stock-market crash basically wiped out the first 10 years of my career earnings. Sure, society didn't collapse. But the crash certainly has a lasting negative impact on many individuals.

But only if you pulled out of the market during the crash. Today you would have more than recovered. It's the rosy future way of looking at things. It's only a lasting negative impact if you view it as such. I view 2008 as a great investment opportunity and lesson learned about the affordability of a home; it also got me to learn more about several financial topics I might have otherwise remained ignorant about, the fed, subprime mortgages, and the value of credit in our larger economy. I'm not saying people haven't been hurt or lost their jobs, but hopefully those people are still alive and figuring out how to make their lives better. That isn't a bad thing.

irononmaiden

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Re: Doomed Article
« Reply #8 on: March 05, 2014, 05:53:44 AM »
But only if you pulled out of the market during the crash.

Nope, because I had just started implementing a passive-income strategy relying on the dividends from financial stocks, and I happened to choose ones that are still at 25% of their pre-crash value. My home value is also still way down (like, six-figures down), so we can't sell or we take a bath.

And I'm just gonna go ahead and say ... please don't nitpick the choices I had made. I was saving for early retirement and had bought a very modest home well within my means. I got burned, period.

If someone is going to start qualifying that "Well, you'd be fine if you had done this specific thing" that just proves that everything doesn't always end up totally fine.


matchewed

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Re: Doomed Article
« Reply #9 on: March 05, 2014, 07:24:20 AM »
But only if you pulled out of the market during the crash.

Nope, because I had just started implementing a passive-income strategy relying on the dividends from financial stocks, and I happened to choose ones that are still at 25% of their pre-crash value. My home value is also still way down (like, six-figures down), so we can't sell or we take a bath.

And I'm just gonna go ahead and say ... please don't nitpick the choices I had made. I was saving for early retirement and had bought a very modest home well within my means. I got burned, period.

If someone is going to start qualifying that "Well, you'd be fine if you had done this specific thing" that just proves that everything doesn't always end up totally fine.

Take a deep breath, I'm not taking pot shots at you. I'm talking more generally. And even within the context of you specifically, the mere fact that you have the resources to engage in a discussion with someone 900 miles away means you're pretty far from doomed. You might be doing quite well in fact. :)

arebelspy

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Re: Doomed Article
« Reply #10 on: March 05, 2014, 07:58:14 AM »
But only if you pulled out of the market during the crash.

Nope, because I had just started implementing a passive-income strategy relying on the dividends from financial stocks, and I happened to choose ones that are still at 25% of their pre-crash value. My home value is also still way down (like, six-figures down), so we can't sell or we take a bath.

And I'm just gonna go ahead and say ... please don't nitpick the choices I had made. I was saving for early retirement and had bought a very modest home well within my means. I got burned, period.

If someone is going to start qualifying that "Well, you'd be fine if you had done this specific thing" that just proves that everything doesn't always end up totally fine.

Well that's why many advocate index funds, over individual stocks.  Hopefully it was a lesson for you.  And if you kept buying as they went down, and bought near the bottom, and are buying now, you're probably doing pretty well.  If those stocks were good buys at 4x their current value, they must be screaming deals at 25% of their highs.  If they're not a good deal now, then how could they have been when they cost 4x as much?  Seems like you got sucked into a bubble.

No one is saying you won't make mistakes.  We all do.  I personally lost a lot in the stock market 2008-2009 due to dumb mistakes from lack of knowledge and overconfidence arrogance.  But just that, even when bad stuff like that happens, the sky isn't falling, you aren't doomed, and everything will be amazing again.

Trust me, I understand (I bought multiple properties in 2007/2008 that are still underwater).  I'm not nitpicking your choices, but I am pointing out that you could take a completely different attitude towards it.

The best thing to do is learn from those experiences, pick yourself up, and move on with your optimism gun firmly at your side.  Because an attitude of "woe is me, that sucks, etc." will not help you one bit.  If you're choosing between the two, choose the one that makes your life better.
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thepokercab

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Re: Doomed Article
« Reply #11 on: March 05, 2014, 08:28:24 AM »
I can see how someone might read an article like this, and walk away thinking "wow, what an elitist prick.  I'd be that optimistic too if (insert shitty things) hadn't happened". 

Aside from the frugality aspect of things, this has been something that I've been spending more time on personally-  just being more positive and less reactionary and negative.  I feel like if I had read this MMM article a few years ago, the left leaning political side of my brain would have exploded in a cacophony of statements such as "bahhhh corporate greed is suffocating us..." But, now I take a breath, sip on some of my fancy pants coffee, and try to remember that actually, things are alright and that I have control over my life, not a bunch of shadowy figures somewhere determining interest rates, or what not.  In fact, for me, harnessing the power of positive thinking has been more of challenge than trying to be more frugal.  But, i'm working on it. 


dragoncar

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Re: Doomed Article
« Reply #12 on: March 05, 2014, 09:51:49 AM »
I can see how someone might read an article like this, and walk away thinking "wow, what an elitist prick.  I'd be that optimistic too if (insert shitty things) hadn't happened". 

Aside from the frugality aspect of things, this has been something that I've been spending more time on personally-  just being more positive and less reactionary and negative.  I feel like if I had read this MMM article a few years ago, the left leaning political side of my brain would have exploded in a cacophony of statements such as "bahhhh corporate greed is suffocating us..." But, now I take a breath, sip on some of my fancy pants coffee, and try to remember that actually, things are alright and that I have control over my life, not a bunch of shadowy figures somewhere determining interest rates, or what not.  In fact, for me, harnessing the power of positive thinking has been more of challenge than trying to be more frugal.  But, i'm working on it.

I wouldn't say elitist, but MMM does often come across as naively egalitarian (well his persona does) in that he believes everyone can "do what he did" but doesn't usually recognize that he and his wife had extraordinary incomes and great investment returns.  I too believe almost anyone can retire early, but it will be significantly harder for those with lower incomes. 

Jamesqf

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Re: Doomed Article
« Reply #13 on: March 05, 2014, 10:40:48 AM »
Have to say that this one bothered me.  Short term, yes, he's right about rejecting the doom & gloom.  Long term, though, it seems as though a lot of the 'increased prosperity' is closer to the Indian tribe who sold Manhattan for $23 worth of beads & trinkets.

ShortInSeattle

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Re: Doomed Article
« Reply #14 on: March 05, 2014, 11:31:20 AM »
I'll add something. Worrying about doom, even if it does happen, is probably useless. If we are doomed, you'll probably be less screwed than a non-mustachian, and there is little you could have done anyway. Most doomsayers want to sell you something, like gold. You can't eat gold, and it is a poor weapon against the zombies.

Sure, we could get bombed into kibbles and bits, hyperinflation could strike, the stock market could crash and stay crashed, Firefly could go off the air.....

A reasonable person makes reasonable plans. Having emergency food and water at home and work is smart. Having lots of diversified investments is smart. Staying fit and healthy and resilient is smart. Having an emergency fund (or a big stache) in case of job loss is smart.

A reasonable person is prepared for the ups and downs of the market. Knowing that your stache will rise and fall is smart. Heck, if you can be patient, buying assets in the dips is awesome, although these things are impossible to anticipate precisely.

So you make reasonable plans for emergencies, but i think overall MMM is right that life is pretty great. We live in a world where you can retire before your hair is gray, where you can get hot and cold running Netflix for less than $10/mo, and where Joss Whedon is still making movies.

PS: Whenever I hear about a doomsayer, I think of this guy..  http://m.youtube.com/watch?v=6bbIBs0P2t0

steveo

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Re: Doomed Article
« Reply #15 on: March 05, 2014, 12:05:12 PM »
I wouldn't say elitist, but MMM does often come across as naively egalitarian (well his persona does) in that he believes everyone can "do what he did" but doesn't usually recognize that he and his wife had extraordinary incomes and great investment returns.  I too believe almost anyone can retire early, but it will be significantly harder for those with lower incomes.

I don't think they had extraordinary incomes and great investment returns. I think they had good solid middle class incomes for their age but its not like they were lawyers or bankers earning hundreds of thousands of dollars.

As for the doomed question - in reality society keeps progressing and creating more and more stuff for cheaper and cheaper and if you keep your house in order you should be fine.
« Last Edit: March 05, 2014, 12:08:07 PM by steveo »

dragoncar

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Re: Doomed Article
« Reply #16 on: March 05, 2014, 12:47:27 PM »
I wouldn't say elitist, but MMM does often come across as naively egalitarian (well his persona does) in that he believes everyone can "do what he did" but doesn't usually recognize that he and his wife had extraordinary incomes and great investment returns.  I too believe almost anyone can retire early, but it will be significantly harder for those with lower incomes.

I don't think they had extraordinary incomes and great investment returns. I think they had good solid middle class incomes for their age but its not like they were lawyers or bankers earning hundreds of thousands of dollars.

Wut?  From http://www.mrmoneymustache.com/2011/09/15/a-brief-history-of-the-stash-how-we-saved-from-zero-to-retirement-in-ten-years/

Year012345678
Income (2014 dollars)600008200082000105000168000208000222000217000234000
Percentile617373829195959595

To me, those numbers are extraordinary (especially since only years 3 on include his wife's income)

It looks like he also averaged 6-8% returns from 2001-2005, a period during which the S&P500 returned -5.508% in total (dividends reinvested).  Dude's a superstar.

dcheesi

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Re: Doomed Article
« Reply #17 on: March 05, 2014, 01:12:33 PM »
I'll add something. Worrying about doom, even if it does happen, is probably useless. If we are doomed, you'll probably be less screwed than a non-mustachian, and there is little you could have done anyway. Most doomsayers want to sell you something, like gold. You can't eat gold, and it is a poor weapon against the zombies.

Sure, we could get bombed into kibbles and bits, hyperinflation could strike, the stock market could crash and stay crashed, Firefly could go off the air.....

A reasonable person makes reasonable plans. Having emergency food and water at home and work is smart. Having lots of diversified investments is smart. Staying fit and healthy and resilient is smart. Having an emergency fund (or a big stache) in case of job loss is smart.

A reasonable person is prepared for the ups and downs of the market. Knowing that your stache will rise and fall is smart. Heck, if you can be patient, buying assets in the dips is awesome, although these things are impossible to anticipate precisely.

So you make reasonable plans for emergencies, but i think overall MMM is right that life is pretty great. We live in a world where you can retire before your hair is gray, where you can get hot and cold running Netflix for less than $10/mo, and where Joss Whedon is still making movies.

PS: Whenever I hear about a doomsayer, I think of this guy..  http://m.youtube.com/watch?v=6bbIBs0P2t0
Exactly. It makes sense to prepare for short-term disasters and other major fluctuations. But if something like an actual apocalypse ever hits, the situation will be so exceptional and chaotic that all the prep in the world won't matter as much as blind dumb luck in determining survival. So why worry about it?

Unless/until you *know* that civilization is coming to an end, it makes sense to spend most of your time and effort optimizing things for the most likely scenario, which is that civilization, and most of us in it, will continue to muddle though. (gratuitous Whedon-y film quote) "Until such time as the world ends, we will act as though it intends to spin on." (/gratuitous Whedon-y film quote ;)


Mannerheim

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Re: Doomed Article
« Reply #18 on: March 05, 2014, 01:25:33 PM »
I realize that aggressive optimism is a big part of MMM's schtick and I see the value of it, especially in terms of helping to shake people out of complacent or conformist behaviors. I also agree that obsessing over crashes and collapses can become an excuse for avoiding personal responsibility and an unappealing personality trait when taken to extremes. Lastly, I agree with the basic advice that we should focus on those things we can personally control, and be very cautious about making major life decisions based on some doom-and-gloom scenario from the internet.

That said, I thought this article overstated its case. It's not mature or responsible to just assume that things are awesome today and will always get better, therefore no worries, man. "Just keep your head down and increase your skills and acquire productive assets" is good as far as it goes, but it will always require subjective guesses about what is or isn't a productive asset. People who bought homes in downtown Detroit in the 70's, or who started tech companies in the late 90's, or started their own contracting firm (or pursued a finance career) in the mid-2000's, or took out huge loans to get a college degree in the last few years, were all working hard to develop skills and acquire assets, that very likely turned out to be economically disastrous and may have set them back many years in their attempts to build wealth.

It's good to believe in yourself, your willpower and self-discipline and ability to learn new things and adapt to changing circumstances. It's also good to strive to maintain a positive attitude in the face of adversity. But it's also necessary to have clear-eyed perception that risk is part of life and everything fails sooner or later, and do your best to gather enough information to exercise good judgment. When buying a house is it being a boo-hoo doom-and-gloomer to take a hard look at valuations, interest rates, comps, and rental prices to make a prudent informed decision? Or should we just ignore all that stuff and claim to be on a "low information diet" about things we can't personally control (and yes, I realize the point of that post was to not spend excessive time on the internet, but the answer is not to just stick your head in the sand)?

Someone who is nearing early retirement and is heavily invested in stocks will naturally be worried about the market. It can fall by half in a year (or by 20% in a DAY). I wrote another post elsewhere on the forum recommending the Permanent Portfolio, which has a lot less volatility than stocks, but apparently I am a tinfoil hat survivalist kook for including an allocation to gold, even though it crushed stocks from 2000-2010 (this pattern has reversed since then, providing a nice smooth low-volatility net return). Claiming that it doesn't matter if stocks crash because they will soon recover all the losses is a novel idea, I wonder what the average Japanese person thinks of it.

The nailgun thing really made me laugh. It's like the bit where Louis C.K. can't understand how his fellow airplane passenger can possibly be unhappy when their plane has a wi-fi internet connection. Comedians are supposed to have some insight into human folly and vanity, yet apparently he doesn't have enough life experience to appreciate that gadgets and technological gimmicks don't really have much to do with human happiness, or that having or not having an internet connection on a plane is approximately #1,423,918 on the list of things that actually matter to anyone. It's embarrassing enough coming from him, but just plain dumb to hear MMM, who constantly talks about how getting nicer stuff is not the key to improving your quality of life, claim that everything in the world is awesome because his fancy construction toys are cheaper than they used to be (even as he admits that the lower cost is due to the manufacturing being outsourced to Chinese workers who live in conditions approximating slavery). If you want to talk about actual quality of life factors and claim that life is so much more awesome today, let's do an experiment. Compared to, say, 50 years ago:

- How many more people are overweight or obese? How much of their daily calories comes from corn syrup and soybean oil?
- How many people exercise regularly and get enough sleep?
- How many friends does the average person have? How many of their neighbors do they know well?
- How likely are people to get and stay married?
- How many family members living within 50 miles does the average person have?
- How easy is it to support a family in a middle-class lifestyle off a single income and without a college degree?
- What percentage of kids are born to married parents?
- How involved in community activities is the average person?
- How many people go to church regularly (I realize church is not for everyone but there's very strong evidence that religious people are on average happier, so it counts as a quality of life issue)?
- How much faith do people have in the honesty and transparency of government, big business, the media, and other important public institutions?
- How many people are being medicated for depression or anxiety?
- How safe are public spaces? Did big cities back then all have significant areas that are no-go zones for law-abiding citizens like they do today?

That's just for a start, I'm sure other examples will occur to the reader. Believe it or not though, it's possible to recognize bad things about the world and still be a basically positive and upbeat person (this is the real essence of stoicism, not denial that the bad things even exist as the original article seems to suggest). I don't spend all my time worrying or thinking about this stuff by any means, but I also don't want to be a sucker and make stupid decisions because I was too scared to educate myself about possible pitfalls and risks. The nuanced argument is that there is a balance to be struck, and sometimes MMM comes across as a little sheltered when he is so adamant that things can only possibly get better from here because gadgets.

steveo

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Re: Doomed Article
« Reply #19 on: March 05, 2014, 04:13:29 PM »
To me, those numbers are extraordinary (especially since only years 3 on include his wife's income)

It looks like he also averaged 6-8% returns from 2001-2005, a period during which the S&P500 returned -5.508% in total (dividends reinvested).  Dude's a superstar.

To me a salary of $125k for one person and $70k for another is not superstar status. Yes it is really good and that is more than what my wife and myself make and I'm 40 however its still not what I consider elite. Its more like a really solid income that would lead most people to retire at 65.

Those investment gains are special if you consider the return for the market and MMM's returns however I doubt he did anything really special like trade derivatives to make a fortune. Basically I still think that the main reason for MMM's early retirement is reduced spending.

Lans Holman

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Re: Doomed Article
« Reply #20 on: March 05, 2014, 04:53:44 PM »

- How many more people are overweight or obese? How much of their daily calories comes from corn syrup and soybean oil?
- How many people exercise regularly and get enough sleep?
- How many friends does the average person have? How many of their neighbors do they know well?
- How likely are people to get and stay married?
- How many family members living within 50 miles does the average person have?
- How easy is it to support a family in a middle-class lifestyle off a single income and without a college degree?
- What percentage of kids are born to married parents?
- How involved in community activities is the average person?
- How many people go to church regularly (I realize church is not for everyone but there's very strong evidence that religious people are on average happier, so it counts as a quality of life issue)?
- How much faith do people have in the honesty and transparency of government, big business, the media, and other important public institutions?
- How many people are being medicated for depression or anxiety?
- How safe are public spaces? Did big cities back then all have significant areas that are no-go zones for law-abiding citizens like they do today?


OK, if I had a cherry farm I would totally hire you to do some picking.  How about a simpler thought experiment.  Imagine you are about to be born to a completely random family somewhere in the world.  You don't know what race, gender, etc. you are going to be.  Would you really say that you would rather be born in 1964? 

dragoncar

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Re: Doomed Article
« Reply #21 on: March 05, 2014, 06:23:45 PM »
To me, those numbers are extraordinary (especially since only years 3 on include his wife's income)

It looks like he also averaged 6-8% returns from 2001-2005, a period during which the S&P500 returned -5.508% in total (dividends reinvested).  Dude's a superstar.

To me a salary of $125k for one person and $70k for another is not superstar status. Yes it is really good and that is more than what my wife and myself make and I'm 40 however its still not what I consider elite. Its more like a really solid income that would lead most people to retire at 65.

Those investment gains are special if you consider the return for the market and MMM's returns however I doubt he did anything really special like trade derivatives to make a fortune. Basically I still think that the main reason for MMM's early retirement is reduced spending.

Ok, so a household salary of $234000 (todays dollars) is not "extraordinary," "superstar," or "elite," but it is "really good."  It's not middle class, and don't give me any of that "200k isn't enough to live in New York" BS.

steveo

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Re: Doomed Article
« Reply #22 on: March 05, 2014, 06:32:35 PM »
To me, those numbers are extraordinary (especially since only years 3 on include his wife's income)

It looks like he also averaged 6-8% returns from 2001-2005, a period during which the S&P500 returned -5.508% in total (dividends reinvested).  Dude's a superstar.

To me a salary of $125k for one person and $70k for another is not superstar status. Yes it is really good and that is more than what my wife and myself make and I'm 40 however its still not what I consider elite. Its more like a really solid income that would lead most people to retire at 65.

Those investment gains are special if you consider the return for the market and MMM's returns however I doubt he did anything really special like trade derivatives to make a fortune. Basically I still think that the main reason for MMM's early retirement is reduced spending.

Ok, so a household salary of $234000 (todays dollars) is not "extraordinary," "superstar," or "elite," but it is "really good."  It's not middle class, and don't give me any of that "200k isn't enough to live in New York" BS.

I think you are missing a couple of points here though. Firstly the salaries were 125k and 70k, 70k to me is not huge. 125k is really really good however its not like the 500k or 1 mill that some bankers or lawyers can earn. That was also the top salaries that they earned - its not the average salary on the path to FI. The extra income was from investments which they had previously paid into to earn that income.

dragoncar

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Re: Doomed Article
« Reply #23 on: March 05, 2014, 07:54:34 PM »

I think you are missing a couple of points here though. Firstly the salaries were 125k and 70k, 70k to me is not huge. 125k is really really good however its not like the 500k or 1 mill that some bankers or lawyers can earn. That was also the top salaries that they earned - its not the average salary on the path to FI. The extra income was from investments which they had previously paid into to earn that income.

Ok, their average household income (in todays dollars) was $153k.  That's 89th percentile.  Nobody said anything about bankers or lawyers.  The point is that it's WAY easier to ER on that kind of money (3x median).  I know, because I'm doing it too.  But if I earned mid-$40ks it would be harder.  Doable, but harder.

And the above does not include investment income.  Investment income/gains were above and beyond, adding an extra $15k/year on average.

I'm not trying to be a complainypants about MMM's accomplishment -- it's certainly great.  My point is that it's very easy to be outrageously optimistic when things have gone your way.  Your perspective gets skewed.  It's the same type psychological twisting that causes certain high-earning strawfolk to say "hey, poor people stop complaining -- if you want more money just get a better job and earn it!".

arebelspy

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Re: Doomed Article
« Reply #24 on: March 05, 2014, 08:04:20 PM »
My point is that it's very easy to be outrageously optimistic when things have gone your way.  Your perspective gets skewed.

I agree with this, to a point.

On the other hand, are you sure that's the direction of the cause and effect?

You say: Things go right for MMM -> He is optimistic.

Why not He is optimistic -> Things go right for MMM?

;)
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dragoncar

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Re: Doomed Article
« Reply #25 on: March 05, 2014, 08:49:34 PM »
My point is that it's very easy to be outrageously optimistic when things have gone your way.  Your perspective gets skewed.

I agree with this, to a point.

On the other hand, are you sure that's the direction of the cause and effect?

You say: Things go right for MMM -> He is optimistic.

Why not He is optimistic -> Things go right for MMM?

;)

Because optimistic people fail all the time.  I'm not saying he's optimistic because he succeeded, but if he had failed I doubt he would be as optimistic.

arebelspy

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Re: Doomed Article
« Reply #26 on: March 05, 2014, 08:56:30 PM »
Because optimistic people fail all the time.

Do they?  Or were they not optimistic hard enough?

if he had failed I doubt he would be as optimistic.

Probably.  But maybe not.
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ShortInSeattle

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Re: Doomed Article
« Reply #27 on: March 05, 2014, 09:02:56 PM »
Unless/until you *know* that civilization is coming to an end, it makes sense to spend most of your time and effort optimizing things for the most likely scenario, which is that civilization, and most of us in it, will continue to muddle though. (gratuitous Whedon-y film quote) "Until such time as the world ends, we will act as though it intends to spin on." (/gratuitous Whedon-y film quote ;)

Love it. :)

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Re: Doomed Article
« Reply #28 on: March 05, 2014, 09:14:03 PM »
Because optimistic people fail all the time.

Do they?  Or were they not optimistic hard enough?

if he had failed I doubt he would be as optimistic.

Probably.  But maybe not.

But he did fail!! Remember 'Mr Money Mustache's Big Mistake'? He just didn't let it be an excuse not to be happy and successful again afterwards. He went right back to being optimistic, after changing his plans so that he wouldn't make the same mistake again.

dragoncar

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Re: Doomed Article
« Reply #29 on: March 05, 2014, 09:41:54 PM »
But he did fail!! Remember 'Mr Money Mustache's Big Mistake'? He just didn't let it be an excuse not to be happy and successful again afterwards. He went right back to being optimistic, after changing his plans so that he wouldn't make the same mistake again.

If you make a mistake, and turn the mistake into a success, you haven't failed in my book.  I'm not telling anyone to give up at the first sign of adversity, but honestly I feel that by recognizing the additional difficulty involved in ER at an "average" salary can help keep others from being discouraged because it's just not as easy as they were told.

Because optimistic people fail all the time.

Do they?  Or were they not optimistic hard enough?


I will endeavor to optimism harder.

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Re: Doomed Article
« Reply #30 on: March 05, 2014, 09:46:18 PM »
Ok, their average household income (in todays dollars) was $153k.  That's 89th percentile.  Nobody said anything about bankers or lawyers.  The point is that it's WAY easier to ER on that kind of money (3x median).  I know, because I'm doing it too.  But if I earned mid-$40ks it would be harder.  Doable, but harder....
It's the same type psychological twisting that causes certain high-earning strawfolk to say "hey, poor people stop complaining -- if you want more money just get a better job and earn it!".

I'm in agreement with you on this point. I just think that a lot of families earn that income and squander it.

Because optimistic people fail all the time.  I'm not saying he's optimistic because he succeeded, but if he had failed I doubt he would be as optimistic.

MMM might be optimistic no matter what however I agree that optimistic people fail all the time.

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Re: Doomed Article
« Reply #31 on: March 05, 2014, 10:19:13 PM »
Because optimistic people fail all the time.  I'm not saying he's optimistic because he succeeded, but if he had failed I doubt he would be as optimistic.

MMM might be optimistic no matter what however I agree that optimistic people fail all the time.

You only fail if you give up.
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Re: Doomed Article
« Reply #32 on: March 05, 2014, 10:25:37 PM »
Because optimistic people fail all the time.  I'm not saying he's optimistic because he succeeded, but if he had failed I doubt he would be as optimistic.

MMM might be optimistic no matter what however I agree that optimistic people fail all the time.

You only fail if you give up.

There are tons of people in my graduating class who were super optimistic about becoming a highly paid lawyer.  Not all of them were able to find a job in the heart of the super recession.  Some of them took contract work for barely above minimum wage.  They did what they had to do, but that's a black mark on your resume.  Are they starving?  No.  I'm sure they can turn it all around and make up for lost time.  But they won't be retiring 10 years out of school either no matter how low they get their expenses*

*unless you consider living on general welfare to be retired

madgeylou

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Re: Doomed Article
« Reply #33 on: March 06, 2014, 03:29:45 AM »

- How many more people are overweight or obese? How much of their daily calories comes from corn syrup and soybean oil?
- How many people exercise regularly and get enough sleep?
- How many friends does the average person have? How many of their neighbors do they know well?
- How likely are people to get and stay married?
- How many family members living within 50 miles does the average person have?
- How easy is it to support a family in a middle-class lifestyle off a single income and without a college degree?
- What percentage of kids are born to married parents?
- How involved in community activities is the average person?
- How many people go to church regularly (I realize church is not for everyone but there's very strong evidence that religious people are on average happier, so it counts as a quality of life issue)?
- How much faith do people have in the honesty and transparency of government, big business, the media, and other important public institutions?
- How many people are being medicated for depression or anxiety?
- How safe are public spaces? Did big cities back then all have significant areas that are no-go zones for law-abiding citizens like they do today?


OK, if I had a cherry farm I would totally hire you to do some picking.  How about a simpler thought experiment.  Imagine you are about to be born to a completely random family somewhere in the world.  You don't know what race, gender, etc. you are going to be.  Would you really say that you would rather be born in 1964?

Amen! The Good Old Days were probably pretty good for white dudes like Don Draper ... but more than a little tougher for everyone else.

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Re: Doomed Article
« Reply #34 on: March 06, 2014, 12:19:17 PM »
Optimism is a wonderful survival technique. Example: after being unable to do many basic physical activities for 6 weeks during postpartum recovery, getting the ability to walk around the neighborhood was so exciting again. We take so much for granted, and any day that I can wake up, the sun is still shining, and I have legs that can propel me where I need to go, I consider life to be good. Stressing out about the "problems of the real world" would just keep me from recovering faster. Being optimistic and appreciative and resilient is much better than sitting around on my couch whining about how I can't walk and soaking in too much doomsday news about the government and the economy and murder and robbery and crimes happening in countries I'm never likely to visit in my life...... yada yada. I hate the news, I love MMM.
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tipster350

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Re: Doomed Article
« Reply #35 on: March 06, 2014, 10:48:34 PM »
I rolled my eyes over this blog entry. To me it demonstrates a lack of life experience. I agree with the assertion above that it's easier to be optimistic when things are going your way. Some lucky people skate through life not making too many financial wrong turns and not getting hit with a nasty divorce, unexpected and unrecoverable job loss, etc. Others aren't so lucky as the years go on. It's not all about optimism, hard work, staying focused, avoiding politics. Sh!t happens. People who develop resiliency in life and have contingency plans will do usually do better when the hits come but there are no guarantees.

I'm not a fan of the low information diet, as I feel a personal and civic responsibility to stay informed and participate in making the world a better place. I get that focusing too much on all the political shenanigans and negative issues can drag a person down. But I don't agree personally or have the personality to keep my nose down and ignore what's happening. I'm still a basically happy and upbeat person, and being informed and acknowledging risks doesn't take away from my ability to save for the future.

arebelspy

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Re: Doomed Article
« Reply #36 on: March 07, 2014, 06:18:47 AM »
I rolled my eyes over this blog entry. To me it demonstrates a lack of life experience.

To me it represents a wisdom you probably don't see due to lack of life experience.  ;)

Sure, it's easier to be optimistic if things go your way.  No one is arguing otherwise.  Sure, bad things happen.  No one is arguing otherwise. 

The bottom line question to me: which makes your life better?

If stuff goes your way, it's better to be optimistic.  If stuff doesn't go your way, it's better to be optimistic.  If good things happen, it's better to be optimistic.  If bad things happen, it's better to be optimistic.

Either way, no matter what, having a positive attitude will work out better for you in the end, you'll have a happier, more successful life.

That's how I view it.  It doesn't matter if things have gone well for you, or not.  Literally your whole post complaining was irrelevant.  Be optimistic anyways, even if everything you said was true.
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madgeylou

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Re: Doomed Article
« Reply #37 on: March 07, 2014, 07:15:30 AM »
listen to robert anton wilson on this:

"maybe things are going to turn out okay, in which case the pessimists are killing themselves being miserable for no reason."

http://youtu.be/llLY9VUKpRM


tipster350

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Re: Doomed Article
« Reply #38 on: March 07, 2014, 07:33:28 AM »
arebel, my post may be irrelevant to you but you missed my point. Just because I see things differently doesn't mean my words are irrelevant or that I was complaining.

arebelspy

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Re: Doomed Article
« Reply #39 on: March 07, 2014, 07:43:43 AM »
arebel, my post may be irrelevant to you but you missed my point. Just because I see things differently doesn't mean my words are irrelevant or that I was complaining.

Well.. likewise. I think you missed my point as well.  :)

I agreed with basically everything you said, and then added on.  But please explain to me, what is your point then that I missed? 
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LalsConstant

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Re: Doomed Article
« Reply #40 on: March 07, 2014, 11:56:24 AM »
The recent post about not being a doomer got me thinking, how does one rationally analyze and plan against systemic political risk when making retirement plans?

To me, optimism isn't mutually exclusive to considering that these things happen and making that part of your decision making process so you can kick ass.

Right now I pretty much ignore it because I lack any metrics, but in my mind there's a superscript footnote reference next to all of my asset balances.

You'll notice I'm avoiding mentioning any particular program to the extent that's possible to do and still meaningfully discuss the topic.  That is because I don't wish to debate the merits or viability of any particular program, including that one, because we have lots of other wonderful discussions about that.  That's a whole separate issue from how we account for the risks surrounding those programs.

Some have called this concept "off spreadsheet risk".  I call it political risk.

Also I'm framing this as an American but I'd think any nation with tax rates (all of them...) on wages or investments would have similar issues, just with different considerations and structures.

But how do you rationally account for political risks in your planning?  I'm really struggling with this lately because I get double dipped for two government retirement programs, both of which have considerable off spreadsheet risks.

And it's not just these either, like many of you I have tax advantaged retirement accounts, which could plausibly be confiscated, have their tax advantaged status removed, etc. or, far more likely, could be used against me in future means testing to reduce benefits from the government.

I would think one would calculate the expected event based on the subjective probability of all adverse events, however that's meaningless for planning purposes because it's subjective. 

Surely in the realm of political and actuarial science some index tracks the likelihood of these things?

arebelspy

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Re: Doomed Article
« Reply #41 on: March 07, 2014, 12:04:06 PM »
Surely in the realm of political and actuarial science some index tracks the likelihood of these things?

From William Bernstein's Retirement Calculator from Hell Part III:
http://www.efficientfrontier.com/ef/901/hell3.htm

Quote
A wide variety of web-based services are now available, such as Financial Engines, ClearFuture, and mPower, that will calculate the flip side of the above, estimating the success probability of the investment phase of your retirement plan.

The hard part, of course, is how to interpret this kind of output. Realize that these probabilities are merely an imperfect estimate of the investment risk you are taking. In other words, they assume the continuity of financial and political institutions over the period studied. Consider the implications of the above 97% success rate at a withdrawal of $2,500 per month ($30,000 per year). For this to be a useful estimate of your true chance of not running out of money, the "success rate" of your ambient political, economic, and military environment must be at least 97% over this 40-year period. Do you think that this is likely? Only if you are an historical illiterate (which, I’m afraid, subsumes many finance academics).

Let’s examine a small sampling of possible political, economic, and military failure modes:

The mildest scenario is that of catastrophic inflation, as experienced in Germany and Hungary in the 1920s or, more recently, in much of the developing world.

Political failures are slightly worse, since these threaten the basic human motivation to work and produce. The state, for whatever reason, can decide to confiscate your assets or, worse, society’s means of production. Anyone who judges this unlikely should turn on CNN during any G-8 or WTO conference.

Local military action. Probably the lowest-probability item on this list, but something to think about on other continents.

The Big One: Some deranged prime minister or colonel in central Russia, Pyongyang, or South Asia could let loose the four horsemen upon the planet.

So, think about what a 97% 40-year success rate means: the absence of all of the above for approximately the next 1,200 years. (A 97% success rate means a 3% failure rate; those 40 years divided by 0.03 is 1,200 years.) Ignore for a minute the uncertainties of the less-developed world and think only about the winners: Germany—in this century alone, three episodes of military and/or economic disaster, the first two associated with mass starvation. Japan—wartime devastation even worse than Germany’s. England—near brushes with disaster in 1812-1814 and in both world wars. And even the United States—repeated banking failures, civil war, and the near-bankruptcy of the Treasury in the 19th century. The near collapse of the capitalist economy in the 1930s. And oh yes, I almost forgot—the entire globe barely missed mass incineration in October 1962.

History’s best-case scenario was the Roman Empire, which survived more or less intact for about seven centuries (if you ignore the odd sackings of the capital after 200 A.D.).

A wildly optimistic historian might give us another few centuries of economic, political, and military continuity. Back-of-the-envelope, that’s about an 80% survival rate over the next 40 years. Thus, any estimate of long-term financial success greater than about 80% is meaningless.

(Emphasis original.)

Worth reading the whole thing.
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beltim

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Re: Doomed Article
« Reply #42 on: March 07, 2014, 12:12:29 PM »
Arebelspy, that kind of discussion is exactly what MMM completely ignored.  Thanks for the link

arebelspy

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Re: Doomed Article
« Reply #43 on: March 07, 2014, 12:25:37 PM »
Arebelspy, that kind of discussion is exactly what MMM completely ignored.  Thanks for the link

No problem.

I'm of the opinion he didn't ignore that.  It just wasn't relevant to his point.

He's not saying everything will always be perfect.  He's saying you should prepare for if it's not, but have the attitude that it will.

Be optimistic, whether bad or good stuff happens.
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LalsConstant

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Re: Doomed Article
« Reply #44 on: March 07, 2014, 12:39:37 PM »
Huh, what an interesting way of looking at the problem Bernstein suggests.

I think if I understood that correctly, that particular section is stating a practical way of dealing with the problem is to not shoot for a portfolio with a very small failure rate, because if the expected events of political disruption are taken into account, there's no benefit to having more money or reducing spending simply for the same of greater assurance.

Or in more concrete terms, if the proverbial fecal matter impacts the oscillating air circulation blades forcefully, what was the point of saving so much money you didn't need, while simultaneously one can determine a reasonable nestegg to strive for should such a thing not occur.

This approach basically lets you hedge somewhat against black swans imprecisely.  That's not perfect, obviously, but it's elegant, given a lack of anything more precise or robust.

It's certainly contrarian to conventional planning assumptions, which typically demand a 95% success rate, which makes me like it.  XD

I find it interesting it backs into the the 4% rule of thumb.

I'd give you a gold star if I could arebelspy.  I'm going to go home and save that link.

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Re: Doomed Article
« Reply #45 on: March 07, 2014, 12:57:41 PM »
I view what Bernstein is saying as the act upon what you do know and what you can control. Given that all the unknowns, or rather what you don't know, overwhelmingly out weighs what you do know the only reasonable course of action is to act upon things that happen. Prepare as much as you can and react accordingly. I've mentioned before that if you're going to start worrying and trying to account for the changes that will happen to the tax code or social support system or retirement infrastructure without know what may happen you might as well prep for anything, and that's impossible.

It's analogous to the saying, "you can do anything but not everything."

I'd still shoot for a portfolio with a small failure rate given what historical data we have. That historical data takes into account massive financial upheavals and wars. It still isn't good enough to predict the future. Anyone who thinks so is blinding themselves. Be flexible and adjust accordingly.

tipster350

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Re: Doomed Article
« Reply #46 on: March 07, 2014, 03:09:36 PM »
I love that article and that captures elegantly some points that I feel were missing from MMM. We can disagree if MMM does or does not consider those points, but the article rounds out the thinking for me.

I can think of numerous examples from my lifetime in which friends and family members got the crappy end of the stick even though they did everything within their power to make the right decisions. For example, I know some from Argentina who were very comfortably off with lots of savings, and their assets were wiped out with hyperinflation. Years later after rebuilding, they got caught in another issue with the government freezing personal assets. No matter what your skills are, no matter what your decisions are, sometimes circumstances beyond your control will impact your life and sometimes it won't get better no matter how many great tools and skills you have.

One has to be realistic that things can happen and that no matter what you do you may get caught in the whirring blades. That does not mean we should focus on that possibility and I agree that realistic optimism is the best approach for general hapiness, success, and coping with the usual bumps.

Jamesqf

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Re: Doomed Article
« Reply #47 on: March 07, 2014, 10:22:14 PM »
He's not saying everything will always be perfect.  He's saying you should prepare for if it's not, but have the attitude that it will.

Be optimistic, whether bad or good stuff happens.

Maybe I read something different into his article, but I see almost a Panglossian* attitude in spots.  Not optimism in the sense of believing that you can overcome bad stuff, but a pretense that the bad stuff is really good.


* http://en.wikipedia.org/wiki/Candide

talltexan

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Re: Doomed Article
« Reply #48 on: January 30, 2017, 02:03:09 PM »
I noticed that MMM re-posted this recently, probably because of the remarkable churning of outrage surrounding our new President's many executive actions. Anyone care to weigh in on how their perspectives have changed?

arebelspy

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Re: Doomed Article
« Reply #49 on: January 30, 2017, 03:21:57 PM »
I noticed that MMM re-posted this recently, probably because of the remarkable churning of outrage surrounding our new President's many executive actions. Anyone care to weigh in on how their perspectives have changed?

What do you mean "reposted"?  It's not at the top of the blog. 

Do you mean he tweeted a link to it or semething?
We are two former teachers who accumulated a bunch of real estate, retired at 29, and now travel the world full time with a kid.
If you want to know more about me, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
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