It's not 100% of the green bucket that doesn't matter

October 12, 2024 1:13 AM

It takes quite a lot to re-wire the brain from a scarcity mindset to an abundance mindset. You're basically biologically wired to be afraid of running out of resources (and for good historical reason) - so it's pretty hard to recognize the massive abundance you live in, were you to be fortunate enough to be in the spot I illustrated. from Net Worth Order Book

See also: Capital; Desire is a Bad Contract; Real Wealth; Return on Time; The Value of Money; and Time Billionaire

from Stanislav Kozlovski's digital forest

posted by chavenet (20 comments total)

I didn't have to read very far before an obviously false example occurred:

If you have a net worth of $2M, but throughout your life never go below $1.5M of net worth (i.e your assets never drop that much in value, and you never spend the money) - then it literally does not matter that you had $1.5M.

That is, it doesn't matter until that hypothetical $2M is in a fund that produces the interest you live on. Then that supposedly excess $1.5M matters all the more.

The value of money is more than what it could be spent on. The value of money is more often determined by when it is not spent.
posted by 3.2.3 at 3:39 AM on October 12 [17 favorites]

>That is, it doesn't matter until that hypothetical $2M is in a fund that produces the interest you live on. Then that supposedly excess $1.5M matters all the more.

And the form of this that is familiar to everyone is housing. A $1.5 million dollar house produces a stream of benefits that we call "living in the house", and though you might never draw on the underlying asset financially, home owners sure benefit from the stability that comes from owning the house instead of renting.
posted by Ktm1 at 4:14 AM on October 12 [17 favorites]

The article's point I suppose is that home owners should all just be 'tougher' and dispense with the mere 'psychological aid' and leverage their houses to the hilt and use 'trickery' to think they're safe despite that. Which to anyone who has experienced the stress from housing precarity and meeting mortgage payments, seem perverse - psychological aids are needed!


Also: it is not advice we can take as a group. For one party to leverage their assets, another party has to be buying now-risk-protected underlying.
posted by Ktm1 at 4:23 AM on October 12 [4 favorites]

These pages are mostly ideas copied from other people, sprinkled with ageism and faulty assumptions. From the Time Billionaire post:

"A billionaire who is 60 has no value - you (young reader) wouldn't trade lives with them. But they would give out $1B to trade lives with you."

The idea of trading lives is copied from other Internet forums, which used 90 as the billionaire's age. That makes more sense, since life expectancy is below 90. A 60yo who can afford good nutrition, exercise, and doctors can expect on average many years of enjoyable and healthy living.

All humans have value, intrinsically. One could argue that billionaires have no value to society, but the author is saying that young billionaires are valuable but older billionaires are not.

I'm amazed at the number of strange assumptions packed into "A billionaire who is 60 has no value".
posted by sandwich at 5:05 AM on October 12 [16 favorites]

sprinkled with ageism

Ageism is not the only thing sprinkled. Check this out:

Lower class: wife doesn't work
Middle class: wife works
Upper middle class: wife doesn't work
Upper class: wife runs a small business that loses $10k/month
posted by 3.2.3 at 5:12 AM on October 12 [8 favorites]

The author even admits that this argument is wrong:

A lot of the returns that are generated are based on the invested capital - hence the upswings you see in the chart are only there because of the green bucket. So let's simplify:

* imagine no market volatility - everything is constant (e.g you've bought bounds)
* imagine no downside - e.g there is no inflation (or more realistically - you're pacing perfectly in line with inflation)

Yes, in an imaginary world where everything is perfectly stable, you should earn just enough to get by, and no more.

A lot of the reason people work to build capital is so that they don't need to keep working. We call this "retirement".
posted by aneel at 7:32 AM on October 12 [6 favorites]

A large part of the world's (non-Western) population is living proof of that - living with nothing, but no real anxiety.

Ah yes, the merry folk of the third world, without a care in the world!

There are some topics here that would be fun to explore with an another author. It’s actually quite remarkable how this guy manages to demonstrate naivety and shallowness of thought on so many topics such a short space.

(If I were to plot such a net worth graph for myself, the “literally useless” green area that doesn’t get spent would be my house.)
posted by qxntpqbbbqxl at 7:37 AM on October 12 [8 favorites]

> If you have a net worth of $2M, but throughout your life never go below $1.5M of net worth (i.e your assets never drop that much in value, and you never spend the money) - then it literally does not matter that you had $1.5M.

You walk into a bank and ask to borrow half a million for your business idea.

If you have a net worth of $1.5M, then the bank is pretty sure you can pay it off even if your business fails.

If you have a net worth of $1500, you're probably not gonna be getting that loan.

You can certainly be comfortable with less. But that $1.5M of assets you never sell off matters.
posted by egypturnash at 8:02 AM on October 12 [7 favorites]

I'm amazed at the number of strange assumptions packed into "A billionaire who is 60 has no value".

Yeah, Elon is in his early 50s, and he's long since achieved net-negative value to society and every company he owns.
posted by tclark at 8:27 AM on October 12 [7 favorites]

>sprinkled with ageism

I don't quite read it that way (taking 'value' in the abstract not value to society) . . . . comes down to the question of what's preferable, having a future of hopes and dreams in front of you or a past full of memories and accomplishments.

I'm kinda weird tho since I'm the exact same adult-person I was 40 years ago so I don't feel any great need to do a replay of my youth. (BTDT got the T Shirt)
posted by torokunai at 9:01 AM on October 12 [1 favorite]

I am genuinely curious about what people mean when they say "abundance mindset" because, on first blush, it kind feels like an anecdote to the hoarding, anti-community, survivalist ethos.

But in my personal life, I've mostly heard about "abundance mindest" from people I know who also attend one of the local prosperity gospel mega-churches, so I am reluctant to approach anything they espouse with anything less than a 10 foot pole.

The linked blog post seems to be arguing against building a retirement next egg? Which... is objectively a bad idea? Like we all need to be more generous with our resources and be more open to our local communities... but if you're retiring in the US, starting off with the equivalent of 1-2 million in net assets is not excessive? I feel like I hear 10x your salary at age or retirement or 600k-1M for most people these days?
posted by midmarch snowman at 9:41 AM on October 12 [3 favorites]

"People like to argue using numbers and math because counting is easier than thinking," certainly seems to apply to this article.
posted by AlSweigart at 10:01 AM on October 12 [5 favorites]

I can't get past the notion that the same malignant ideology that made Who Moved My Cheese* a best seller is motivating this.

An ideology that sees middle class savings accounts and nest eggs and unleveraged assets and hobbies (!) as economic inefficiency and "waste".

The ideology that turned Russia into the lovely place we know today.

"You, a downwardly mobile middle class person, don't actually need all that money. Having money for an emergency is actually wasteful. You'll be fine with less. A billionaire would totally swap places with you, trust me."

It's a total coincidence that precarity does a lovely job of keeping wages low.

*A book who's message is literally "living in our maze is non-negotiable so you'd be happier, and more useful, if you just thought and acted like a rat."
posted by Reyturner at 10:08 AM on October 12 [3 favorites]

This is a very strange and dubious essay
posted by rossmeissl at 10:59 AM on October 12 [5 favorites]

the key line in it though was:

if you've got a big enough green bucket, "then any time spent on making more money is literally wasted"

This resonates with me. No point being the richest person in the graveyard.
posted by torokunai at 11:13 AM on October 12 [2 favorites]

That makes more sense, since life expectancy is below 90. A 60yo who can afford good nutrition, exercise, and doctors can expect on average many years of enjoyable and healthy living.

“No value” is a terrible way to put it, but I don’t think “most 60 year olds would spend an incredible amount of money to get back to 30 if it were possible” is incorrect, or ageism. That’s one of the oldest fantasies on earth.
posted by atoxyl at 11:30 AM on October 12 [2 favorites]

you'd be happier, and more useful, if you just thought and acted like a rat.

Love sleeping in a cuddle pile of friends, eating, grooming yourself and everyone else, and giggling when tickled?

Sounds good to me!
posted by Zumbador at 11:33 AM on October 12 [3 favorites]

I am early 50s and “well off” by North American standards. I live in a modestly sized suburban house and drive a Honda. I can afford to put my kids through college. I estimate I will need to grow my net worth by another 50% and my liquid savings by 100% to retire around 60 and maintain my same or slightly lower standard of living into my 80s. This is assuming I die with no liquid assets left, just the roof over my head. So yeah this whole argument is bollocks.
posted by simra at 11:49 AM on October 12 [1 favorite]

This is very clearly not addressing future richest guys in the graveyard.

It's directed at people "wastefully" living 5-6 missed paychecks from poverty instead of the average 1-2.

They're not saying "you could be doing more with this", they're saying "you (not I) could stand to have less."

All that equity and savings should be getting put to better use as stock buybacks and real estate speculation and yacht payments.

Love sleeping in a cuddle pile of friends, eating, grooming yourself and everyone else, and giggling when tickled?

Predictably, the rats in Who Moved My Cheese are characterized as rugged, self sufficient libertarians who immediately abandon their feeble and entitled human comrades the moment times are tough.
posted by Reyturner at 12:05 PM on October 12 [2 favorites]

you'd be happier, and more useful, if you just thought and acted like a rat.

It's true.
posted by AlSweigart at 2:20 PM on October 12 [3 favorites]