There is a small but growing social movement spreading around the world these days. It started long ago but has been accelerating recently. Although this revolution is tiny when measured as a percentage of the population, it has the Fiery Heart of a Golden Lion and thus it gets an unusual amount of shock, admiration, respect, and jealous complainypants scorn when it comes into contact with the rest of our society.
I’m talking, of course, about the Early Retirement movement – (also known as “financial independence” for those who still subscribe to the old-fashioned definition of “retirement” as never doing any form of paid work again).
It’s difficult to define the starting date of the revolution, because there have probably always been oddballs who realized early on that they could save and invest their money and then live off of the resulting income. But some mark 1992 as an important date in starting the modern trend, because that is the year that the book Your Money or Your Life came out. That book started spreading the idea that money isn’t just for spending – it is really a form of life energy that you can keep for yourself in order to free up time.
Another big step in the Early Retirement movement was when Jacob Fisker, a fellow thirtysomething retiree, started writing his blog called Early Retirement Extreme back in 2007. By creating his series of highly detailed and analytical articles on the subject, I think Jacob was giving a clear voice to the financial independence scene that was not readily available on the Internet before that point.
Common financial wisdom, then as well as now, has been something like this:
“Obviously, modern life is very expensive, so you’ll have to spend aaaalmost everything that you earn, no matter how much that might be. With the tiny sliver that you do manage to save, you must invest carefully for 30 years or more, until you get to a ripe old age and you have several million dollars of investments that allow you to continue spending just as much for the rest of your life! Cruise ships, wheelchairs, Cadillacs, and a $50,000 wedding for each of your twenty-seven grandchildren”.
Jacob’s more logical voice of the Early Retirement movement instead said this:
“Obviously, we are all spending way the fuck more than we need to in the Western World and it is a complete waste of all of our time, energy, happiness, and the entire planet. So let’s analyze our true needs as humans and figure out efficient ways to meet all of those needs. Then we’ll enjoy our new more natural life while continuing to earn a rich-world wage for a few years. Since the earnings will be far more than our spending, we will save and invest it, and the work portion will quickly become optional”
I am of course paraphrasing a little bit, since Jacob doesn’t swear as often as Mr. Money Mustache does, but I added the f-bomb to make sure you knew that the idea was very important.
The interesting thing about the Early Retirement Extreme blog, (know as “ERE” by its followers in The Movement), is that it grew into an entire book by the same name. Mr. Fisker worked on his book on the side even while he continued blogging, collecting and refining his fanciest and most detailed writing on the subject, eventually publishing it in both paperback and electronic (kindle/pc/smartphone/whatever) forms.
And being both a follower and fellow preacher, Mr. Money Mustache realized it was essential to read this book in detail and report back with this Book Review for you.
If I had to sum up the Early Retirement Extreme book by inventing my own title for it, I would call it, “The entirety of human civilization and thought, expressed as a series of equations and graphs”. It really is that broad-reaching, and densely packed. I had to read it carefully over a period of several weeks, because I found that individual sentences sometimes packed in multiple entire concepts, each one being the type of thing that I’d normally spend a whole Mr. Money Mustache article explaining.
Let’s just take one random passage from early in the book:
The Cost of Specialization
It’s obviously more expensive, both in time and money, for Person A and Person B to gain the required amount of knowledge in both fields X and Y than it is if A were to concentrate on X while B were to concentrate on Y. In this way, both can gain the same depth of knowledge in half of the fields, in half the time. Alternatively, they can get twice as much knowledge in the same field in the same time. It follows that the more a field is further split up into subfields, the less expensive this knowledge gets. These cost savings can be used to reach even deeper levels of competence (see this figure).
That’s a complete explanation for why we all have such boring and unsatisfying jobs and lives in general, yet Fisker just brushes through the material as a quick background on his way to teaching you how to design your wardrobe (“Now create one outfit by drawing lines, for example, “black jeans #1”, “Black socks #1”, “Red sweater”, etc.), and everything else, with scientific precision.
There is also plenty of philosophy. In the Kindle edition of the book, you get to see which passages other readers have highlighted. The most popular one is this:
When you identify with an object, you’re defined by the object, then controlled by it, and ultimately owned by it. If you relate to your possessions, you’re owned by your stuff, and it will make many of your decisions for you. This trap is not only mental, but also physical.
Looking through all of the top highlighted passages, I see that the more emotional ones related to the thought that our society is crazy and we’re defined by pointless materialism are the winners.
And indeed, those things are true even while they are very rarely acknowledged in the news or in conversations held between people who are not part of The Movement.
But my own favorite part of the book was in the description of the “Renaissance Man ideal”. This is the idea that you will have the most enjoyable life, AND the best chance at very early financial independence, by developing a whole load of interesting skills. The amazing part is that these skills don’t just sit independently in your mind like a bunch of unused kitchen appliances in a pantry. They start to reach out and connect to each other in unexpected ways, and start solving all of your problems for you. They build your curiosity and start sucking in still more skills that you can’t help acquiring. And before you know it, you are able to live a superb life on only a tiny fraction of the spending that a normal person does, even while you might end up accidentally earning money even more easily than before you embraced the Renaissance Ideal.
This section of the book put into more advanced words the same thing I have been raving about on this blog, which is the idea that you should insource rather than outsourcing whenever possible. I stumbled only accidentally across this idea when I quit my specialized software job and started the house building company. The range of activities and people I became exposed to, when going from a lonesome cubicle software developer to a small company owner, changed everything. Since then, a chain reaction of useful new experiences continues to this day. And I have at last learned to appreciate the chance to learn new skills instead of dreading them (because these opportunities often come disguised as big hassles that you have to deal with unexpectedly at various points in your life, and you have to saw your way through the big smelly log of Dung to get to the golden nugget of opportunity hidden deep within).
So it’s a valuable book and if you read it carefully, it will definitely teach you new things. I will, however, throw in a critical side to this review. And that is just that the book is a little bit serious for my tastes. The engineer side of me appreciates having things laid out with the utmost in logic, just as I loved pretty much everything that Spock and Data ever said on the Star Trek shows. But the rest of me thinks that we need to have heart-touching personal stories, satire, mocking, and plenty of foul language if we are going to make a point. (On the other hand, it is nice that this particular market niche has been left open for Mr. Money Mustache to fill!)
Therefore, the ideal reader is probably a well-educated person (i.e., not a Dave Ramsey or Mister Money customer). Perhaps a Silicon Valley worker who is currently spending most of his enormous salary and needs to hear a well-thought-out counterargument to his current assumptions about life. Or maybe even some of my own friends and former coworkers.
Regardless of the style, this is a book like no other, and that alone may make it worthwhile checking out. And the author is a good guy, making an outsized contribution to the rich world by challenging its very foundation. So he maintains his status as a Grandfather of the Mustachians.
You can pick up electronic or paper versions of the book at Amazon.com if you want to dig deeper into the Early Retirement movement, even while you support a valuable piece of work.
Curiously, I’m reading ERE on Kindle right now and was about to bug you to review it. Somehow you read my mind and beat me to it! Anyways, I’m trying to absorb all these different views and I found one big difference between you and Jacob. In ERE, Jacob claims the cult of index funds don’t work and relies on continued GDP and population growth. Instead he keeps a hand picked portfolio of 20 or so stocks and it seems to be working for him. I was wondering what you thought of your conflicting investment strategies.