The Mustachian Paradox

[Ricky]

I was thinking - doesn't being Mustachian imply a certain amount of pessimism about future consumption? Doesn't this in turn say something about the investments we make that support our FI?

You woild invest in an index fund if you believed that the earnings within the companies you are investing in will either stay the same relative to inflation so you can enjoy a return on your money for your lifetime or that the company will grow earnings so there are capital gains.

This is why I don't think there will ever be too many "hardcore" Mustachians. There has to be balance.

Yes, I've read the article on "what if everyone were frugal?" It still doesn't explain this paradox. We'd be working more if everyone were frugal, because we'd work only when we needed things, which would be efficient. Things are wildly inefficient right now hence our outrageous amounts of discretionary income.

[DCJrMustachian]

If everyone were to quickly jump on board with minimal consumption it would certainly disrupt the market and cause a lot of companies to lose business... but there would also be some winners.  Home Depots, thrift shops and Trader Joes/Costco/bike shops would expand, replacing all the Starbucks. 

You'll find that the economies in 2nd world countries more reflect the "mustachian" way of life, although there would also be a lot more capital floating around for business investments.  Corporations will still be profitable, and still control the means of production, so you might see them invest the capital to reduce production costs even more.  Thinking robots that churn out affordable products in low volumes, or perhaps on demand.  Things would be designed so that they could be re-used and repaired and replacement parts for common items would proliferate.  New companies would rise up to cater to a more frugal and changing market.

The upheaval would make it wise to change our standard "whole market index" investment strategy since with the assumption of less consumption you could predict certain market winners and losers.

[J Boogie]

We'd be working more if everyone were frugal, because we'd work only when we needed things, which would be efficient.

This doesn't make sense to me.  The US would work less if everyone were frugal.  We're a consumer economy - I think it's safe to say a good 15-25% of the goods and services we produce are superfluous aka unneeded.  That means we'd have 25% less stuff to make, meaning we'd work 25% less.