New York Magazine: Spotlight on MMM

[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.

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.

I grew up poor.  What I have now, which might be viewed as deprivation by some, seems like luxury to me.  I guess growing up poor was an advantage. 

[Enphuego]

If everyone became frugal it wouldn't crash the economy, provided it didn't happen all at once.  The 4% rule might become the 2% rule eventually, but if it goes too far it will push people back towards spending and the labor market and resolve the problem.

You'd see a gradually lowered consumption rate that would be a headwind for profits at most companies.

The influx of investment dollars would likewise increase the price of current investments and lower their profitability.  Since capital investment isn't really a limited field, you'd see investment dollars start to chase ideas that are less profitable or more risky.  It might mean increased automation or investing in Africa.

The job market would start to get a little different.  As early retirees filter out of the market, you can expect better advancement opportunities.  As people transition from 45 year careers to 10 year careers, that basically cuts the supply of labor into a fourth (which handily takes care of the job loss due to automation problems).  A lower supply of

All the free time and self-sufficiency ideas would produce wealth not measured by GDP, but probably not with the same efficiency as a mass production.  Others might continue their careers beyond FI and either buy luxuries or do some sort of charity.

We live in a global economy, so it's likely that the capital and goods will flow into developing countries where people aren't investors yet.  An influx of capital and material goods to developing countries would likely keep the world economy churning at a reasonable pace for quite a while.

Also, it might never spread to other cultures, so the US might become the world's supplier of capital in the same way that China provides the world's cheap goods. 

In the end, you'd end up with a relatively smaller economy that produces more necessary goods and less luxuries with tons of infrastructure to keep those things provided without tons of human labor. 

[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.

I grew up poor.  What I have now, which might be viewed as deprivation by some, seems like luxury to me.  I guess growing up poor was an advantage.

Good for you! Even many of the poor view pursuit of luxury as an end. My parents were very frugal and I admit at times it was hard seeing the luxuries of others around me, so at first I thought pursuit of those luxuries (i.e. trying to make more than my parents such that I could afford them) would make me happier. It took me a little bit to realize this was not the case.

[One Noisy Cat]

    Maybe I am misremembering Economics 101 but I thought GNP=C+I+G + (Export-Import).  Meaning if we shift some of our C (consumption) to I (Investment), things would be about the same, after a period of adjustment.
   Maybe there our other factors but I think people who knew how to save (my parents, born in 1920s) or grandparents (1880s) who really knew how to save, had higher annual growth.  Perhaps C the equivalent  is a sugar based junk meal while I is a low fat meat and vegetables meal.  Not as immediate but a longer lasting energy boost.

[market timer]

    Maybe I am misremembering Economics 101 but I thought GNP=C+I+G + (Export-Import).  Meaning if we shift some of our C (consumption) to I (Investment), things would be about the same, after a period of adjustment.
   Maybe there our other factors but I think people who knew how to save (my parents, born in 1920s) or grandparents (1880s) who really knew how to save, had higher annual growth.  Perhaps C the equivalent  is a sugar based junk meal while I is a low fat meat and vegetables meal.  Not as immediate but a longer lasting energy boost.

The dominant model of how savings translates into growth is the Solow model. That's usually taught in the second macroeconomics course undergraduates take. A good explanation is here: http://www.pitt.edu/~mgahagan/Solow.htm

[Daisy]

I see FIRE as an arbitrage opportunity. Frugal-by-choice people arbitrage the soaring stock market that is supported with mindless consumers, coupled with their small expenses and get to “live large” on free time.

I do believe that if everyone became frugal, we wouldn’t have such soaring stock market prices and such. So what would happen is everything would come into equilibrium and we would probably all have to abandon our FIRE life and work a little more than we would as lazy FIRE-ers. However, in that type of society we probably wouldn’t need to work as much as people do now to support their extravagant lifestyles. It would be a more moderate life, and moderate work hours.

I also tend to think that there would be limited innovation in that type of society. Really, the profit motive and greed is what inspires a lot of people to work harder and risk their time and capital to innovate new things. We would probably all end up as the Amish (no offense to Amish) and technological advancements would almost stand still. This is what happens in less market oriented economies such as communist systems. If there’s no incentive or money to be made, innovation wanes on the vine.

Without innovation, we’d be living like the Amish. Now, the Amish way of life seems wonderful too, don’t get me wrong. But I think most here appreciate and rely on technological innovation. I have a feeling if we were all a bunch of lazy FIRE-wanna-bes, current FIRE-ers, etc., that we wouldn’t even have the technology to communicate with each other on this forum right now. Or maybe I’m just the laziest person around these parts, but the only thing that would motivate me to resuscitate from my lazy state is the ability to help those in need (by volunteering), or making a bunch of money. I guess I have no middle ground where I would just putter around and not expect to get paid for it.

Stock market returns don’t just magically happen. They are the result of people putting in hard work, innovating, providing services. Some things which seem like frivolous products now end up being quite essential in our lives. For example, cell phones. I’m sure when they were first invented, people looked at those that purchased them and ridiculed them for buying something that wasn’t too useful…especially when we didn’t have these large national networks. Well now people “can’t live without them” and they have replaced regular phones. Or putting a camera on a cell phone. My first thought when this was being introduced to cell phones was that it was a ridiculous idea…who would pay to put a camera on a phone? So we can make fun of people that make these frivolous purchases or manufacture these unimportant things, but without the innovators or the mindless consumers, we probably wouldn’t have advanced the cell phone industry as it has.

So yes, I do think we need workaholics in our society to keep advancing technically. I just don’t want to be one of them or be married to one of them. ;-) I’d rather arbitrage and be a lazy FIRE’er. A world full of lazy people just like me is a world I wouldn’t want to live in. Someone, after all, does have to wake up early to “make the doughnuts”. That person better not be me. ;-)

[Beric01]

I see FIRE as an arbitrage opportunity. Frugal-by-choice people arbitrage the soaring stock market that is supported with mindless consumers, coupled with their small expenses and get to “live large” on free time.

I do believe that if everyone became frugal, we wouldn’t have such soaring stock market prices and such. So what would happen is everything would come into equilibrium and we would probably all have to abandon our FIRE life and work a little more than we would as lazy FIRE-ers. However, in that type of society we probably wouldn’t need to work as much as people do now to support their extravagant lifestyles. It would be a more moderate life, and moderate work hours.

I also tend to think that there would be limited innovation in that type of society. Really, the profit motive and greed is what inspires a lot of people to work harder and risk their time and capital to innovate new things. We would probably all end up as the Amish (no offense to Amish) and technological advancements would almost stand still. This is what happens in less market oriented economies such as communist systems. If there’s no incentive or money to be made, innovation wanes on the vine.

Without innovation, we’d be living like the Amish. Now, the Amish way of life seems wonderful too, don’t get me wrong. But I think most here appreciate and rely on technological innovation. I have a feeling if we were all a bunch of lazy FIRE-wanna-bes, current FIRE-ers, etc., that we wouldn’t even have the technology to communicate with each other on this forum right now. Or maybe I’m just the laziest person around these parts, but the only thing that would motivate me to resuscitate from my lazy state is the ability to help those in need (by volunteering), or making a bunch of money. I guess I have no middle ground where I would just putter around and not expect to get paid for it.

Stock market returns don’t just magically happen. They are the result of people putting in hard work, innovating, providing services. Some things which seem like frivolous products now end up being quite essential in our lives. For example, cell phones. I’m sure when they were first invented, people looked at those that purchased them and ridiculed them for buying something that wasn’t too useful…especially when we didn’t have these large national networks. Well now people “can’t live without them” and they have replaced regular phones. Or putting a camera on a cell phone. My first thought when this was being introduced to cell phones was that it was a ridiculous idea…who would pay to put a camera on a phone? So we can make fun of people that make these frivolous purchases or manufacture these unimportant things, but without the innovators or the mindless consumers, we probably wouldn’t have advanced the cell phone industry as it has.

So yes, I do think we need workaholics in our society to keep advancing technically. I just don’t want to be one of them or be married to one of them. ;-) I’d rather arbitrage and be a lazy FIRE’er. A world full of lazy people just like me is a world I wouldn’t want to live in. Someone, after all, does have to wake up early to “make the doughnuts”. That person better not be me. ;-)

This is a very good post. I guess the question is if there is some motivation that can replace human consumerism and greed.

What about human ambition to accomplish things (regardless of the money involved)? Or simply doing what you love? What if what you love is to invent cool new technology?

[frugalnacho]

There will still be motivation to make money or strike it rich.  Most of the people on here seem to be shooting for $600k minimum, and many a lot higher.  We all start with nothing.  Still plenty of motivation to innovate.

[Beric01]

There will still be motivation to make money or strike it rich.  Most of the people on here seem to be shooting for $600k minimum, and many a lot higher.  We all start with nothing.  Still plenty of motivation to innovate.

But with $600K, if you can save for it in 10 years, why would you start your own business and work for 3-5 years, when you could end up with nothing? All my motivations to ever start my own business went out the window when I saw the easy and safe path to FIRE, after which if I really still wanted to start my own business I could do so without worrying about ending up living in a cardboard box.

[arebelspy]

There will still be motivation to make money or strike it rich.  Most of the people on here seem to be shooting for $600k minimum, and many a lot higher.  We all start with nothing.  Still plenty of motivation to innovate.

But with $600K, if you can save for it in 10 years, why would you start your own business and work for 3-5 years, when you could end up with nothing? All my motivations to ever start my own business went out the window when I saw the easy and safe path to FIRE, after which if I really still wanted to start my own business I could do so without worrying about ending up living in a cardboard box.

For you. Plenty of others will start it due to passion, wanting to be rich with more, etc. 

[frugalnacho]

There will still be motivation to make money or strike it rich.  Most of the people on here seem to be shooting for $600k minimum, and many a lot higher.  We all start with nothing.  Still plenty of motivation to innovate.

But with $600K, if you can save for it in 10 years, why would you start your own business and work for 3-5 years, when you could end up with nothing? All my motivations to ever start my own business went out the window when I saw the easy and safe path to FIRE, after which if I really still wanted to start my own business I could do so without worrying about ending up living in a cardboard box.

Not everyone can save up 600k in 10 years, and 600k isn't enough for a lot of people.