New York Magazine: Spotlight on MMM

[brooklynguy]

In the latest example of MMM's appearance in the mainstream media, here's an article about MMM in New York Magazine:

http://nymag.com/daily/intelligencer/2014/11/mr-money-mustache-spend-like-youre-poor.html

[Jon_Snow]

Awesome.

[DMoney]

whoops, looks like the author doesn't really "get" Mustachianism

"Growth has picked up this year in part because Americans have started to open their wallets, and retailers anticipate a frenzied holiday season. Were we to suddenly start living like Mr. Money Mustache suggests, the implications for the economy would be dire; were we to start spending like we did in the 1990s, things would feel great. Mustachism may save us from our worst excesses, but saving, ultimately, isn’t the only point. A better economy requires more income growth, not just more personal thrift."

[frugalnacho]

The last paragraph seems especially off.

[Eric]

Strange article.  It seemed to have a negative tone throughout, and then concluded that everyone should go spend all of your money and then some in the name of helping the economy.

Too bad the author didn't actually talk to MMM.  His refreshing perspective of how $25K/yr is abundant, luxurious, and completely fulfilling could've added some needed positivity to the article.

[brooklynguy]

I don't think there's necessarily a negative undertone -- I think it's just that the article is written from the author's perspective as an unconverted Consumerist Sucka struggling to be an objective outside observer of this strange phenomenon known as Mustachianism.

[Jon_Snow]

If it manages to direct a few lost souls towards the warm embrace of Mustachianism, then the article is a positive, despite the author "not getting it".

[Emilyngh]

Yeah, I'm just happy to see MMM get more exposure.   I'm guessing the article's author has her head buried a little too deeply in her McMansion/fancy pants apartment's mortgage, car payment, and takeout to see the gigantic potential advantages of adopting a MMM lifestyle, but these are hard things to shake.

[Franklin]

The author kept feigning enlightenment only to fall back into skepticism and cynicism in order to please the masses.  Typical community college writing technique.

[MrsK]

Great article except for the last paragraph.  This idea that we need to spend our way to a better America is so bizarre.  If everyone became mustachian the economy would change, but I think it would be for the better.  Less consuming ultimately means less fat cats at the top--they are the ones who panic that the rest of is might get wise and stop feeding their pyramid scheme of an economy. 

I have had people mention to me that my portfolio will suffer if too many people follow MMM.  Who cares, I will change my strategy if that ever happens and enjoy living in a better world. 

[jprince7827]

The essence of Keynesian economics is the idea that we all must spend to save the economy from itself. Hayek favored the alternate approach, that time + savings = win.

This is why I'm not an economic liberal - clearly that guy is.

[Cromacster]

He did a good job of linking relevant MMM articles throughout his post......except for his main argument in which MMM has already addressed.  He seemed to have conveniently not read that.....

All in all, just more good exposure for MMM.

[Eric]

The essence of Keynesian economics is the idea that we all must spend to save the economy from itself.

It is?  I would boil it down to increased government spending in bad times, decreased government spending in good times.  This is linked to variable individual spending, but I'd be surprised if Keynes actually stated that individuals must spend.

[opnfld]

I found the tone to be positive, and the final paragraph a weak gesture towards objective journalism.  I really like the author's distillation that "the idea that radically cutting back is its own sort of luxury".  This is how I feel.  This was the best article on MMM I've read.

[skyrefuge]

I found the tone to be positive, and the final paragraph a weak gesture towards objective journalism.

Yep, that was precisely my interpretation too.

Also, given the author's name is "Annie", I'm going to go out on a limb and say she's a "she" rather than a "he". For what was essentially an arms-length "website review", she seemed to have a pretty deep and accurate knowledge of the Mustachian message (maybe informed via her reference Mustachian friend, if not her own Mustachian attraction).

[brooklynguy]

The Mustachian contingent seems to be surprisingly well represented in the comments to the article, which is perhaps stronger evidence of MMM's growing influence in mainstream circles than the article itself.

[Johnez]

Pretty decent article till the end. Last paragraph felt like the beginning of the second half. Unfortunately it just ends there, concluding that MMM style is bad for the economy. Kind of confusing.

[brizna]

Well considering the US GDP is 70% consumption, I think it's fair to say that it would be a disaster if everyone started consuming significantly less. I like to think of that consumerism is part of what allows us to get paid enough to be financially independent.

[Chuck]

I'm going to rub against the grain here and say that I really appreciate the point in the last paragraph. One of the weakest articles MMM ever wrote was when he tried to explain away the Paradox of Thrift. I have not heard anyone here explain it to my satisfaction either:

ER is enabled by both frugality and compounding returns. Those compounding returns rely upon equity growth. Equity growth is tied to our majority-consumer driven economy. If consumers ceased to consume, economic growth- and with it equity growth, would cease. While those who practiced frugality would still be better off financially, and the planet better off for them, there would be no early retirement because there would be no compounding growth of assets.

The Paradox of Thrift is that everyone can't be thrifty, and if we tried many of the benefits would vanish.

[aspiringnomad]

I'm going to rub against the grain here and say that I really appreciate the point in the last paragraph. One of the weakest articles MMM ever wrote was when he tried to explain away the Paradox of Thrift. I have not heard anyone here explain it to my satisfaction either:

ER is enabled by both frugality and compounding returns. Those compounding returns rely upon equity growth. Equity growth is tied to our majority-consumer driven economy. If consumers ceased to consume, economic growth- and with it equity growth, would cease. While those who practiced frugality would still be better off financially, and the planet better off for them, there would be no early retirement because there would be no compounding growth of assets.

The Paradox of Thrift is that everyone can't be thrifty, and if we tried many of the benefits would vanish.

Yep. Given the structure of the world's largest economy, nearly everyone on this forum would have to throw out the safe withdrawal rate if all Americans embraced Mustachianism. Consequences for many others would be more dire as the contraction led to layoffs. I have no idea if the new paradigm would eventually mean happier people overall, but it's Pollyanna to believe the transition wouldn't be incredibly painful. I'm an optimist, but it's clear as day to me that the global economy would severely contract if America and other developed economies moved to a savings rate of 50 plus percent.

[Primm]

He’s popular with the Reddit set; in a survey of his readers, engineers are heavily over­represented, as are all desk-jockey types. So are the wealthy: According to a separate poll, most of the blog’s visitors have a net worth of over $100,000, and about 10 percent are worth more than a million.

She states this as if only wealthy people (not that I class a net worth of >$100k necessarily wealthy!) can live like this. Could it be that she has cause and effect reversed, that the majority of readers of MMM's blog are "wealthy" precisely BECAUSE they live like this?

[Notch]

If everyone saved half of their income, then banks would hold excess capital, interest rates would be suppressed and loans would become very, very cheap. Getting funds to do something would become much easier. But demand for goods would collapse and consequently so would prices and wages. A world where people would be offered credit at every turn and goods are cheap but jobs are hard to find.

Essentially the paradox of thrift.

But..

If everyone invested half of their income, demand for consumer goods would still collapse but would be offset by a demand for real assets. Things like stocks, commodities and real estate would see massive asset price growth, which would spurn a subsequent boom in things like new business development and house construction. I imagine wages and employment would rise. I have no idea what would happen to prices in general.

I just think that the difference between the two hypothetical scenarios - "50% saving" vs "50% investing" - is important to reflect on.

[dude]

I'm going to rub against the grain here and say that I really appreciate the point in the last paragraph. One of the weakest articles MMM ever wrote was when he tried to explain away the Paradox of Thrift. I have not heard anyone here explain it to my satisfaction either:

ER is enabled by both frugality and compounding returns. Those compounding returns rely upon equity growth. Equity growth is tied to our majority-consumer driven economy. If consumers ceased to consume, economic growth- and with it equity growth, would cease. While those who practiced frugality would still be better off financially, and the planet better off for them, there would be no early retirement because there would be no compounding growth of assets.

The Paradox of Thrift is that everyone can't be thrifty, and if we tried many of the benefits would vanish.

Yep. Given the structure of the world's largest economy, nearly everyone on this forum would have to throw out the safe withdrawal rate if all Americans embraced Mustachianism. Consequences for many others would be more dire as the contraction led to layoffs. I have no idea if the new paradigm would eventually mean happier people overall, but it's Pollyanna to believe the transition wouldn't be incredibly painful. I'm an optimist, but it's clear as day to me that the global economy would severely contract if America and other developed economies moved to a savings rate of 50 plus percent.

+1  I value MMM's optimism, but don't think he could have enabled his lifestyle without the current capitalist growth model.  I think the frugal/savers/ER wannabes among us need the unwashed masses to buy their frivolous shit for us to FIRE. I wish it weren't so, but that's just the way I see it.  I'm basically hoping I'm among the early entrants into the pyramid scheme that eventually fails, because the early entrants win -- it's the latecomers who come up empty handed.

[dude]

If everyone saved half of their income, then banks would hold excess capital, interest rates would be suppressed and loans would become very, very cheap. Getting funds to do something would become much easier. But demand for goods would collapse and consequently so would prices and wages. A world where people would be offered credit at every turn and goods are cheap but jobs are hard to find.

Essentially the paradox of thrift.

But..

If everyone invested half of their income, demand for consumer goods would still collapse but would be offset by a demand for real assets. Things like stocks, commodities and real estate would see massive asset price growth, which would spurn a subsequent boom in things like new business development and house construction. I imagine wages and employment would rise. I have no idea what would happen to prices in general.

I just think that the difference between the two hypothetical scenarios - "50% saving" vs "50% investing" - is important to reflect on.

This makes no sense to me.  I either case, 50% of income is being taken out of the stream of consumption spending.  And in both cases, the money is being invested -- savings are loaned out to businesses and individuals and has the same direct effect on the economy as buying shares in a company.  In both cases, the money is NOT being spent on buying the goods and services those businesses are producing.

[arebelspy]

Good article, except for the last paragraph.  Nice that it mentioned the forums, many articles don't do that.

I laughed at this comment:

So the point of living like you are poor is to have enough money to retire in your 30's and live like you're poor... perpetually?  No thank you.

If only he could see the happiness that comes from wanting less.

This makes no sense to me.  I either case, 50% of income is being taken out of the stream of consumption spending.  And in both cases, the money is being invested -- savings are loaned out to businesses and individuals and has the same direct effect on the economy as buying shares in a company.  In both cases, the money is NOT being spent on buying the goods and services those businesses are producing.

Right, so lack of demand for those things means the companies produce less of them, and more of things people want. The market self corrects to put out things people value.

Better things are made with that money, instead of junk people don't need.  People aren't going to stop creating and inventing.  That invested money won't go to make products that just sit on shelves.  They'll just shift the focus of what is produced, the quality of it, etc.  It will, in essence, eliminate waste.  But it won't mean the gears of society stop because people are't buying stupid crap they don't need.

[James]

Article written by an "outsider", he just doesn't get it, but at least those reading it will hopefully check out the blog and forum and find out more that way.

[dios.del.sol]

I'm going to rub against the grain here and say that I really appreciate the point in the last paragraph. One of the weakest articles MMM ever wrote was when he tried to explain away the Paradox of Thrift. I have not heard anyone here explain it to my satisfaction either:

ER is enabled by both frugality and compounding returns. Those compounding returns rely upon equity growth. Equity growth is tied to our majority-consumer driven economy. If consumers ceased to consume, economic growth- and with it equity growth, would cease. While those who practiced frugality would still be better off financially, and the planet better off for them, there would be no early retirement because there would be no compounding growth of assets.

The Paradox of Thrift is that everyone can't be thrifty, and if we tried many of the benefits would vanish.

Yep. Given the structure of the world's largest economy, nearly everyone on this forum would have to throw out the safe withdrawal rate if all Americans embraced Mustachianism. Consequences for many others would be more dire as the contraction led to layoffs. I have no idea if the new paradigm would eventually mean happier people overall, but it's Pollyanna to believe the transition wouldn't be incredibly painful. I'm an optimist, but it's clear as day to me that the global economy would severely contract if America and other developed economies moved to a savings rate of 50 plus percent.

+1  I value MMM's optimism, but don't think he could have enabled his lifestyle without the current capitalist growth model.  I think the frugal/savers/ER wannabes among us need the unwashed masses to buy their frivolous shit for us to FIRE. I wish it weren't so, but that's just the way I see it.  I'm basically hoping I'm among the early entrants into the pyramid scheme that eventually fails, because the early entrants win -- it's the latecomers who come up empty handed.

Agreed. This is where some of Jacob's (ERE) ideas are important. He emphasizes developing productive abilities both to take care of our own business and to provide useful services to others. What if this aspect the more resilient we become to changes in the financial system. In a sense this is true financial independence - being independent of the financial system.

[kendallf]

Those of you who feel we'd have horrible economic consequences if Americans adopted frugality are theorizing the effects from a sudden drop off.  Realistically, that will never happen.  Cultural norms shift, and I hope slowly as a society we'll move away from consumerism toward a more sustainable, balanced lifestyle.  Companies and government will adapt as we do. 

People arguing we need to keep spending to keep the economy afloat are like people saying I need to keep eating a box of Krispy Kreme donuts every day because if I don't, fast food restaurants as a group will fail. 

Trying to link individually favorable choices to bad macro effects is generally useless hand waving. 

[hybrid]

The essence of Keynesian economics is the idea that we all must spend to save the economy from itself.

It is?  I would boil it down to increased government spending in bad times, decreased government spending in good times.  This is linked to variable individual spending, but I'd be surprised if Keynes actually stated that individuals must spend.

Exactly. The notion that Keynes embraced all spend all the time is convenient for the small government and/or anti-Democratic set, but it is not accurate. Windows exist to pay down debt (from about 2003-2008, for example, and note much of that time the GOP, not the Dems, held the purse strings) and Keynes would have argued that would have been a perfect time to repay debt that started flaring back up again following the dot.com recession. In another year or so, barring recession, we'll enter another one of those windows and the GOP will get a mulligan. Crossing my fingers they learned their lessons from their last reign of error.   

[PathtoFIRE]

While I don't necessarily disagree with the above comments that suggest that in a more Mustachian world, the path to ER might be a little different than it is now (and maybe harder?), I did want to point out one thing from my armchair economist position. Most here would agree that for most early retirees, achieving FI is much more dependent on the actual dollars saved and invested than the growth during that (hopefully short) accumulation phase, so the early retiree even in today's world isn't really depending all that much on asset growth to reach his/her FI number. Instead, stock/bond growth is much more important during the decumulation phase after FI, and the main reason that early retirees need to keep a large degree of exposure to equities/bonds is in order to combat inflation. So the real question is, would a more Mustachian world necessarily have the same degree or risk of inflation that we see in today's world. If the answer is no, then maybe an early retiree in a Mustachian world wouldn't need 8% annual returns in order to preserve a 4% withdrawal rate. In other words, widespread Mustachianism wouldn't just change one variable (consumption), but would have a host of changes in relation to today's world, both "positive" and "negative", and I don't think you can necessarily say that there still wouldn't be a balance in there that was suitable to FIRE.

[BPA]

Good article, except for the last paragraph.  Nice that it mentioned the forums, many articles don't do that.

I laughed at this comment:

So the point of living like you are poor is to have enough money to retire in your 30's and live like you're poor... perpetually?  No thank you.

If only he could see the happiness that comes from wanting less.

It amazes me that this is such a simple concept and yet so many people just don't get it.

I hope RoG sees it since he is quoted. 

[frugalnacho]

Good article, except for the last paragraph.  Nice that it mentioned the forums, many articles don't do that.

I laughed at this comment:

So the point of living like you are poor is to have enough money to retire in your 30's and live like you're poor... perpetually?  No thank you.

If only he could see the happiness that comes from wanting less.

This makes no sense to me.  I either case, 50% of income is being taken out of the stream of consumption spending.  And in both cases, the money is being invested -- savings are loaned out to businesses and individuals and has the same direct effect on the economy as buying shares in a company.  In both cases, the money is NOT being spent on buying the goods and services those businesses are producing.

Right, so lack of demand for those things means the companies produce less of them, and more of things people want. The market self corrects to put out things people value.

Better things are made with that money, instead of junk people don't need.  People aren't going to stop creating and inventing.  That invested money won't go to make products that just sit on shelves.  They'll just shift the focus of what is produced, the quality of it, etc.  It will, in essence, eliminate waste.  But it won't mean the gears of society stop because people are't buying stupid crap they don't need.

exactly.  MMM already addressed this.  The economy would suffer short term, but then eventually recover.  Instead of producing useless widgets just for the sake of cranking out useless widgets that no one needs, we would shift those resources to producing things we actually do need and that are useful and improve our quality of life.

[Breaker]

I laughed at this comment:

So the point of living like you are poor is to have enough money to retire in your 30's and live like you're poor... perpetually?  No thank you.

If only he could see the happiness that comes from wanting less.

This makes no sense to me.  I either case, 50% of income is being taken out of the stream of consumption spending.  And in both cases, the money is being invested -- savings are loaned out to businesses and individuals and has the same direct effect on the economy as buying shares in a company.  In both cases, the money is NOT being spent on buying the goods and services those businesses are producing.

Better things are made with that money, instead of junk people don't need.  People aren't going to stop creating and inventing.  That invested money won't go to make products that just sit on shelves.  They'll just shift the focus of what is produced, the quality of it, etc.  It will, in essence, eliminate waste.  But it won't mean the gears of society stop because people are't buying stupid crap they don't need.

+1 for this post.  People will learn that "things" won't make them happy and when we do buy "things", they will be better made.  Also all of the mental energy that goes toward making unnecessary items will be focused toward better objectives.

[aspiringnomad]

Good article, except for the last paragraph.  Nice that it mentioned the forums, many articles don't do that.

I laughed at this comment:

So the point of living like you are poor is to have enough money to retire in your 30's and live like you're poor... perpetually?  No thank you.

If only he could see the happiness that comes from wanting less.

This makes no sense to me.  I either case, 50% of income is being taken out of the stream of consumption spending.  And in both cases, the money is being invested -- savings are loaned out to businesses and individuals and has the same direct effect on the economy as buying shares in a company.  In both cases, the money is NOT being spent on buying the goods and services those businesses are producing.

Right, so lack of demand for those things means the companies produce less of them, and more of things people want. The market self corrects to put out things people value.

Better things are made with that money, instead of junk people don't need.  People aren't going to stop creating and inventing.  That invested money won't go to make products that just sit on shelves.  They'll just shift the focus of what is produced, the quality of it, etc.  It will, in essence, eliminate waste.  But it won't mean the gears of society stop because people are't buying stupid crap they don't need.

exactly.  MMM already addressed this.  The economy would suffer short term, but then eventually recover.  Instead of producing useless widgets just for the sake of cranking out useless widgets that no one needs, we would shift those resources to producing things we actually do need and that are useful and improve our quality of life.

That argument doesn't hold water in my view. What's a "useless widget" is in the eye of the beholder. Think about the vast differences in how us Mustachians spend the  money we don't save. To me, any personal vehicle - a Honda Fit even - is useless and wasteful. So is any home bigger than 1,000 square feet. But I bet there are a few on this board who would take issue with that. It's pointless to focus on what we buy, the point is the rate at which we save. And if Americans were to sustain a 50 percent savings rate, life would look very different and I'm confident it would mean no FIRE for those dependent on equity market returns/dividends to grow their 'stache and fund their retirement.

[Inkedup]

He’s popular with the Reddit set; in a survey of his readers, engineers are heavily over­represented, as are all desk-jockey types. So are the wealthy: According to a separate poll, most of the blog’s visitors have a net worth of over $100,000, and about 10 percent are worth more than a million.

She states this as if only wealthy people (not that I class a net worth of >$100k necessarily wealthy!) can live like this. Could it be that she has cause and effect reversed, that the majority of readers of MMM's blog are "wealthy" precisely BECAUSE they live like this?

I would agree. A lot of high earners seem to own a lot of stuff, but have very few assets. 

[thenextguy]

I found the tone to be positive, and the final paragraph a weak gesture towards objective journalism.

Yep, that was precisely my interpretation too.

Also, given the author's name is "Annie", I'm going to go out on a limb and say she's a "she" rather than a "he". For what was essentially an arms-length "website review", she seemed to have a pretty deep and accurate knowledge of the Mustachian message (maybe informed via her reference Mustachian friend, if not her own Mustachian attraction).

Annie Lowrey is an economics writer. That is why her article had more of an economic slant on mustachianism.

And not that it's relevant to the topic (more of a fun fact), but she is married to Ezra Klein.

[JoshuaSpodek]

For me, it's not about depriving myself of spending, but understanding and living my values. Money isn't the point, it's just a medium.

People who think not buying something you don't want or need is deprivation are missing the main point -- about values, knowing them, and living consistently with them.

Understanding you don't want or need something and then living consistently with that understanding fits more with "Know thyself" and "The unexamined life is not worth living" than the view of deprivation the author cynically and misunderstandingly put.

Case in point: I just happened to find tickets to the Daily Show tomorrow. The show is free but they tape during the afternoon. Two people I know who love the show can't join me because they are bound to their offices because they are bound to lifestyles they feel compelled to support. For them to see live performances, they have to spend hundreds of dollars for Broadway shows they like less. I have work, but I have the freedom to spend my time how I like. In any case, the point isn't saving a couple hundred bucks anyway, it's the freedom and choice to do what I want.

On a small scale it illustrates the differences in our lives that happens on other scales too. Check out the pictures from the two-week trip to some friends' wedding I had the freedom to go to -- http://joshuaspodek.com/natural-beauty-brazils-fernando-de-noronha-island-pictures-videos-dolphins (yes, I'm showing off). I'd prefer not to travel so far, but for some friends you do it.

[JoshuaSpodek]

The last paragraph people keep mentioning:

> "But Keynes’s famous paradox of thrift still holds: Six years after the crash, the American economy could use more consumer spending, especially among those who can afford it. Growth has picked up this year in part because Americans have started to open their wallets, and retailers anticipate a frenzied holiday season. Were we to suddenly start living like Mr. Money Mustache suggests, the implications for the economy would be dire; were we to start spending like we did in the 1990s, things would feel great. Mustachism may save us from our worst excesses, but saving, ultimately, isn’t the only point. A better economy requires more income growth, not just more personal thrift."

This is a statement about economic theory, which is notoriously imprecise and contradictory to other economic theory.

If we all started living more according to our values, the businesses that responded would flourish. Those that didn't wouldn't. There would probably be less pollution, healthier diets, more happiness, and less craving. Economists would go back to the drawing boards and figure out how to explain that supplying the necessities of life turns out not to require everything we're doing now. They've been wrong before, they'll be wrong again, and many of them are wrong now.

[frugalnacho]

That argument doesn't hold water in my view. What's a "useless widget" is in the eye of the beholder. Think about the vast differences in how us Mustachians spend the  money we don't save. To me, any personal vehicle - a Honda Fit even - is useless and wasteful. So is any home bigger than 1,000 square feet. But I bet there are a few on this board who would take issue with that. It's pointless to focus on what we buy, the point is the rate at which we save. And if Americans were to sustain a 50 percent savings rate, life would look very different and I'm confident it would mean no FIRE for those dependent on equity market returns/dividends to grow their 'stache and fund their retirement.

The market will become more efficient.  Converting raw resources into useless widgets will stop (or be greatly reduced), and people will figure out how to convert raw resources into useful widgets or services that bring real value to people (instead of simply converting raw resources into a financial gain without providing any actual value to anybody).  If they don't then they go out of business and someone that will will replace them.

By your logic it's needless spending that is keeping the economy afloat and providing returns to mustachians and savers.  While partly true, there is also a whole market of useful spending that drives that.  100% of your returns are not simply from people wasting their money to buy things they don't need.  Some of them are people buying products they do need, and are provided to them by an efficient business.  In the absence of needless and useless consumption I think the economy would shift.

[NoraLenderbee]

If everyone suddenly lived frugally, the economy could collapse. If everyone suddenly joined the Navy, the Army would be desperate for soldiers. If everyone decided not to have children. the population could collapse. If everyone decided to become a plumber, there'd be a terrible shortage of carpenters, teachers, and doctors. If everyone  went vegan . . .

Not everyone *wants* to live MMM style, or ever will. There will always be people who want to live more luxuriously, who want to make more money than they need, who want to build businesses and wealth. There will always be people who are OK with working until 65.  That doesn't necessarily mean becoming debt slaves forever. There is a lot of space between extreme frugality for the purpose of FI, and blowing all your money on the capitalist lifestyle so you never save a penny.

[brooklynguy]

If everyone suddenly lived frugally, the economy could collapse. If everyone suddenly joined the Navy, the Army would be desperate for soldiers. If everyone decided not to have children. the population could collapse. If everyone decided to become a plumber, there'd be a terrible shortage of carpenters, teachers, and doctors. If everyone  went vegan . . .

Not everyone *wants* to live MMM style, or ever will. There will always be people who want to live more luxuriously, who want to make more money than they need, who want to build businesses and wealth. There will always be people who are OK with working until 65.  That doesn't necessarily mean becoming debt slaves forever. There is a lot of space between extreme frugality for the purpose of FI, and blowing all your money on the capitalist lifestyle so you never save a penny.

I agree that, while it's fun to armchair theorize (and I'm in the camp that thinks it would be a good thing if everyone were to become mustachian), the best real world answer to this theoretical question is to recognize that in practice it just won't happen.

However, I once posted (in this thread) the following extension of the "what if everyone became mustachian?" thought experiment:

This thread has got me thinking about a variation on the theme of "what if everyone became mustachian?" that is often discussed.  I think there are good arguments for why that would be a good thing, some of them advanced by MMM in this post:

http://www.mrmoneymustache.com/2012/04/09/what-if-everyone-became-frugal/

But what if everyone established a mustachian dynasty?  Today it is possible to amass a large stash in a relatively short time period, live a frugal existence off that stash, and pass it on to the next generation.  As long as each generation keeps up the "frugal existence" end of the bargain, then starting with the second generation, no one in the dynasty would ever have to work a day in his or her life.  But obviously it would not be sustainable if the entire population ceases to work.

Although, from a practical perspective, the answer remains that this will never happen, I think carrying the thought experiment to this logical extreme does demonstrate that there is a kernel of truth in the idea of the paradox of thrift.

[bacchi]

Exactly. The notion that Keynes embraced all spend all the time is convenient for the small government and/or anti-Democratic set, but it is not accurate.

Yep. In fact, Keynes suggested and hoped that we would work less and avoid buying useless shit.

Thus for the first time since his creation man will be faced with his real, his permanent problem-how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.

Of course, we chose the other path and work as long or longer so that we can stream movies on the latest iPhone.

[arebelspy]

That argument doesn't hold water in my view. What's a "useless widget" is in the eye of the beholder. Think about the vast differences in how us Mustachians spend the  money we don't save. To me, any personal vehicle - a Honda Fit even - is useless and wasteful. So is any home bigger than 1,000 square feet. But I bet there are a few on this board who would take issue with that. It's pointless to focus on what we buy, the point is the rate at which we save. And if Americans were to sustain a 50 percent savings rate, life would look very different and I'm confident it would mean no FIRE for those dependent on equity market returns/dividends to grow their 'stache and fund their retirement.

Right.  So whatever was a useless widget in most people's view would be produced less of.  The economy would adjust to whatever people valued.  Those investing would still invest in businesses selling things, but they'd be selling things that people who saved/invested 50% of their money would want to buy.  Higher quality items, more useful/practical items.  Demand for those would go up, and prices would rise.  Those companies would flourish, and those investing in them would do well.  Everything doesn't come to a grinding halt, just other things sell rather than what is selling currently.

[NoraLenderbee]

Yep. In fact, Keynes suggested and hoped that we would work less and avoid buying useless shit.

Thus for the first time since his creation man will be faced with his real, his permanent problem-how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.

Based on what we've seen so far, the real problem is not how to use your leisure. The problem is how to earn a living when there is no need for your work. People displaced by automation, etc., don't enjoy freedom from economic cares; their economic cares are bigger than ever because they have fewer ways than ever to support themselves. They have the "freedom" to sleep under bridges.

I wish the futurists would talk about this problem more, instead of just saying that we'll all have more leisure.

[Cheddar Stacker]

If everyone suddenly lived frugally, the economy could collapse. If everyone suddenly joined the Navy, the Army would be desperate for soldiers. If everyone decided not to have children. the population could collapse. If everyone decided to become a plumber, there'd be a terrible shortage of carpenters, teachers, and doctors. If everyone  went vegan . . .

Not everyone *wants* to live MMM style, or ever will. There will always be people who want to live more luxuriously, who want to make more money than they need, who want to build businesses and wealth. There will always be people who are OK with working until 65.  That doesn't necessarily mean becoming debt slaves forever. There is a lot of space between extreme frugality for the purpose of FI, and blowing all your money on the capitalist lifestyle so you never save a penny.

I'm surprised it took someone this long to post this sentiment. +1.

I guess it's fun to theorize, but this will never happen. Never. And I don't like to use that word.

We here have all learned how to become rich. How many of us have shared this revelation with others in our lives? How many of those have changed their ways? We can give people the knowledge, but taking the appropriate steps is not easy for everyone.

Everyone knows cigarettes, alcohol, drugs, fast food, and soda are bad for their health, yet we have millions dying from lung cancer, liver disease, overdoses, obesity/diabetes. Why? Many people will always consume more than they should. I believe it's our default setting to want more, and few realize the key is to want less.

In regards to the article, I thought the spotlight was good, but the overall message was negative. And the comments were typical.

[bacchi]

Based on what we've seen so far, the real problem is not how to use your leisure. The problem is how to earn a living when there is no need for your work. People displaced by automation, etc., don't enjoy freedom from economic cares; their economic cares are bigger than ever because they have fewer ways than ever to support themselves. They have the "freedom" to sleep under bridges.

I wish the futurists would talk about this problem more, instead of just saying that we'll all have more leisure.

Yeah, I see your point. Keynes and others discuss it on a macro level and not a micro level. Not very helpful to those in the path of progress.

Edit: Reading comprehension

[aspiringnomad]

That argument doesn't hold water in my view. What's a "useless widget" is in the eye of the beholder. Think about the vast differences in how us Mustachians spend the  money we don't save. To me, any personal vehicle - a Honda Fit even - is useless and wasteful. So is any home bigger than 1,000 square feet. But I bet there are a few on this board who would take issue with that. It's pointless to focus on what we buy, the point is the rate at which we save. And if Americans were to sustain a 50 percent savings rate, life would look very different and I'm confident it would mean no FIRE for those dependent on equity market returns/dividends to grow their 'stache and fund their retirement.

Right.  So whatever was a useless widget in most people's view would be produced less of.  The economy would adjust to whatever people valued.  Those investing would still invest in businesses selling things, but they'd be selling things that people who saved/invested 50% of their money would want to buy.  Higher quality items, more useful/practical items.  Demand for those would go up, and prices would rise.  Those companies would flourish, and those investing in them would do well.  Everything doesn't come to a grinding halt, just other things sell rather than what is selling currently.

I still think you miss the key point. Consumption drops by about 50% while investment rises dramatically (or at least investable money supply does). What do you think happens for the passive index investor's returns under this scenario? Or do our FIRE plans become "be like Warren Buffet and only invest in companies that will flourish?"

In any case, I agree with those who've said this is a purely academic exercise.

[frugalnacho]

That argument doesn't hold water in my view. What's a "useless widget" is in the eye of the beholder. Think about the vast differences in how us Mustachians spend the  money we don't save. To me, any personal vehicle - a Honda Fit even - is useless and wasteful. So is any home bigger than 1,000 square feet. But I bet there are a few on this board who would take issue with that. It's pointless to focus on what we buy, the point is the rate at which we save. And if Americans were to sustain a 50 percent savings rate, life would look very different and I'm confident it would mean no FIRE for those dependent on equity market returns/dividends to grow their 'stache and fund their retirement.

Right.  So whatever was a useless widget in most people's view would be produced less of.  The economy would adjust to whatever people valued.  Those investing would still invest in businesses selling things, but they'd be selling things that people who saved/invested 50% of their money would want to buy.  Higher quality items, more useful/practical items.  Demand for those would go up, and prices would rise.  Those companies would flourish, and those investing in them would do well.  Everything doesn't come to a grinding halt, just other things sell rather than what is selling currently.

I still think you miss the key point. Consumption drops by about 50% while investment rises dramatically (or at least investable money supply does). What do you think happens for the passive index investor's returns under this scenario? Or do our FIRE plans become "be like Warren Buffet and only invest in companies that will flourish?"

In any case, I agree with those who've said this is a purely academic exercise.

Short term they crash.  Long term they return

[mlejw6]

Those of you who feel we'd have horrible economic consequences if Americans adopted frugality are theorizing the effects from a sudden drop off.  Realistically, that will never happen.  Cultural norms shift, and I hope slowly as a society we'll move away from consumerism toward a more sustainable, balanced lifestyle.  Companies and government will adapt as we do. 

People arguing we need to keep spending to keep the economy afloat are like people saying I need to keep eating a box of Krispy Kreme donuts every day because if I don't, fast food restaurants as a group will fail. 

Trying to link individually favorable choices to bad macro effects is generally useless hand waving.

+1

The idea that 90%, or even 60% of Americans will become frugal and follow mustachianism suddenly and crash the economy is ridiculous.

[Beric01]

Good article, except for the last paragraph.  Nice that it mentioned the forums, many articles don't do that.

I laughed at this comment:

So the point of living like you are poor is to have enough money to retire in your 30's and live like you're poor... perpetually?  No thank you.

If only he could see the happiness that comes from wanting less.

It amazes me that this is such a simple concept and yet so many people just don't get it.

I hope RoG sees it since he is quoted.

People "don't get it" because everything about our society is structured to obscure this simple fact. It takes a very concentrated effort (like MMM) to reveal the truth, and as this article shows, even MMM may not be enough for some people who have bought the myth hook, line, and sinker. It takes a very open mind.