There Are No Guarantees

mydoorYou know what I have come to realize is almost always ridiculous? Contracts.

Contracts, paperwork, and bureaucracy. Guarantees, warranties, and excessive caution in an attempt to ensure a trouble-free future. Not all of it is bullshit, but the older I get, the more I realize that a surprising portion of it is.

I mean sure, if I’m Tesla and you are Panasonic, and we’re partnering to build the world’s largest structure and produce the majority of the world’s energy storage products, and we each have thousands of employees involved in the process, we can write up a contract and sign it.

But if I invite you over to my house for one of our customary Sunset Beers in the Park events tonight, how appropriate would it be for me to send along a little PDF contract with five places for you to sign?

I, Jane Mustachian, agree to arrive at the Mustache residence between 5 and 6PM, and consume between 1 and 5 servings of beer and/or wine, over a period not to exceed six (6) hours, to convey myself to and from the event using only muscle-powered transportation…

….blah blah any food served may or may not contain nuts or gluten…

…agree to not to hold Mustache family liable for any injuries..  and so on.

You’d think I was crazy, and find another place to have your beer tonight.

We understand this at the social level, and even at the small business level, if we feel a high level of trust. But as soon as we lose our trust and get overly fearful, we start breaking out the lawyers and the contracts and the stifling formality.

It is at this point, I argue, that life starts to suck.

It’s also the point at which a company starts to suck – that moment when it loses its soul and its freewheeling joy, and starts pushing for profits above ethics, and the lower level employees are not empowered to do what they know is right because their boss would have to ask the next level boss and the request would die before it reached someone with enough authority.

This is also the point at which I try to avoid doing business with a company if at all practical, and find a smaller one who could use a new customer.

And therefore I think we can make our lives better if we raise that threshold of fear a little bit, and start running our businesses and our lives as if we were big boys and girls.

Here’s another story which illustrates this point:

On the “contact” section of this website, I have a little note that says people should not email me with requests for marketing partnerships, TV shows, book publishing, etc. Through experience I learned that those activities not nearly as fun as they sound.

But one guy snuck through the gates – “Hey man, I work for Sony Entertainment which is a big company but don’t worry, I’m cool – I just have some ideas for a TV show about Mustachian lifestyles and wondered if you want to talk about them.”

So we talked on the phone, and he was indeed cool. It was a nice concept and a respectable company and they had done other successful stuff. So I said I might help out with the project occasionally, as time permitted.

Suddenly, a completely unrelated person from their legal department started emailing me contracts and agreements and such – pages and pages of them! The contracts contained obligations, promises, and bullshit galore.

And here I was just naively thinking I’d have a beer with this creative writer and laugh about some ideas for a TV show. We had already agreed on the phone, that if the project ever ceased to be completely fun – for either of us – then we’d just drop it. Retirement is is too short to engage in non-fun projects, because there is already an enormous queue of extremely fun projects that I haven’t even had time to start yet!

So I told the lawyers thanks, but I wasn’t interested in contracts. But I’d still be happy to help out just as I had originally offered.

And I never heard from anyone at the company, or the creative guy, ever again.

I felt like I had been stood up – the whole thing had been a small waste of time. But I was grateful that I hadn’t actually dug in on a big project with an organization that works this way – for that would have been a much bigger waste of time.

Let’s contrast this with a a few other business arrangements.

Figure 1 - Camp Mustache

Figure 1 – Camp Mustache

I have fixed up plenty of houses with local friends, with many thousands of dollars at stake. Sometimes even lives or limbs, as we scrambled around like monkeys to cut down tall dead trees.  No contracts, just plenty of dirt, scrapes, laughs and good times – and profits, too.

I’ve done several interviews and trips with Jesse Mecham, founder of You Need a Budget. Significant value accrued to both of our businesses from these collaborations as thousands of YNAB customers became Mustachians and vice versa, and yet somehow it never occurred to us to make up a contract.

Next month I’m traveling to Portland – first to visit Treehouse founder Ryan Carson and do some social stuff that might also have promotional value for his business. Maybe record a video and a podcast, and even host a gathering of Mustachians right in the courtyard of their central Portland building. With beer!

No contracts, of course.

Then on to Seattle to attend Camp Mustache – something that is now a popular recurring event. Although there are tens of thousands of dollars involved in putting it on, it’s an informal not-for-profit arrangement and the organizers and I have never signed a contract.

But What if the Other Person Breaks their Promise and I Get Screwed?

You may think I’m painting an unrealistically rosy picture here. Not everything always turns out for the better, right? Business partners sometimes turn evil, tenants stop paying rent, girlfriends or boyfriends dump you, products break,  stock markets crash, bones break, and fatal diseases strike your loved ones.

I agree – life has been known to serve up the odd Platter of Shit from time to time. Every one of those things above has happened to me. And yet in zero of the cases could I have protected myself with a contract or warranty and come out ahead.

I’ve been to court a few times. In some cases, I was the landlord and the tenant wasn’t paying rent even though we had a contract. The judge ordered the tenant to pay. The tenant, who had long since left town, didn’t even know there had been a court case. And yet life went on, and the inconvenience was soon forgotten.

I retired early, invested too much in a house building business, then lost a bunch of money in the ensuing great financial and housing crisis. No contract could have protected me from these market realities, and yet somehow I survived again and life continued to get even better.

I’ve had products malfunction while under warranty, and in most cases the warranty department was so clumsy and incompetent (ahem, Samsung, Nissan) that I just gave up and fixed the product myself.

The point is that in almost all life decisions, the stakes are actually very low. Here in the rich world, the majority of our catastrophes have the following consequences:

  • You might feel “inconvenienced” and experience a frowning face for a short period of time.
  • Some numbers stored in a computer, which represent your wealth, might temporarily decrease.
  • You might have to move your body around – and possibly even experience mild heat, cold, or muscular exertion.
  • You might have to speak some words into a telephone or press some buttons on a computer keyboard to resolve a problem.
  • In more extreme situations, you might even have to speak to one or more humans in person.

Are these consequences really worth worrying about – or potentially even missing out on the chance to do something great?

What does This Have to do with Early Retirement?

Every week, I get at least a few emails from people who have more than put in their time. People in their late 30s and beyond who have worked multi-decade careers, paid off the house, given their kids a good start in life, stashed seven figures into retirement accounts, and long since grown bored of the big-company life.

But they are still working one more year, to add that last bit of safety margin padding, fill up that last college fund for the last kid, max out that health savings account just in case. Some of them have more savings than my family has even now, even though we’ve been retired (and continuing to accumulate wealth) for more than ten years.

And they’re still afraid to retire.

You Become Free Only when you Acknowledge That You Cannot Control Life

You can’t control the random bits of misfortune which may strike you. You can only control your responses.

If you are following the Principles of Mustachianism, you’ve already taken all the preventative work that you need to take: optimizing your habits to maintain a healthy body, mind, and bank account.

These are not a formal insurance policy, because formal insurance is nonsense.

They are a statistical prevention policy, a way of tilting the odds in our favor. And even more important, a response policy – a recipe that ensures that even when shit does hit the fan, you can clean it up, resume your prosperous life, and learn something in the process.

The lesson? Instead of working endlessly to build a glass shield around yourself, start enjoying life right now and just keep a mop handy.

Further Reading: In his joyful short book “Anything you Want” on founding a really successful business, Derek Sivers argues the same thing about contracts – just skip them if you can possibly do so, because people will either keep their word, or they won’t. If you bring it to court, everybody loses, and all a contract does is give you something to show in court.

  • Frugal-Investor May 7, 2017, 8:12 pm

    This really happened to me two days ago and made me quite happy with a company from which I made a purchase a bunch of years ago.

    When I travel by air, I take along a back-pack computer bag that goes under the seat in front of me and a smallish but sturdy, 15-18 year old rolling case made by Briggs & Riley that fits in the overhead of most US commercial jet (not all regional jets, but that’s beside the point). Getting packed for a trip, I noticed that I couldn’t find the strap and clippy thing that attaches my computer bag to my rollerboard. I looked at their web site, couldn’t find the clippy strap thing amongst their accessories. I did find their email contact form. I sent a photo of my bag and a note asking where I could buy the clippy strap thing. Which took me a few minutes, but only because I was picky about the lighting in the photo.

    Pat, the kind and efficient Customer Service rep who answered my email within about 1/2 a business day, indicated that the clippy strappy part was ordered and on the way to me. The whole interaction was stunningly simple. I got no request to produce a receipt from over a decade ago. So, I’m proud of my luggage company.

  • SMM May 9, 2017, 8:24 am

    I like the old-school contract: handshake and a head nod. The more stuff involved in a contract, the more vague and off-topic it is. BUT there is always a way to get out of a contract; whether the company will allow you or not or will charge a reduced fee (E.G., my phone and internet provider I plan to deal with soon), that’s another story.

  • saveinvestbecomefree May 9, 2017, 10:44 am

    Another OMY syndrome commenter here. MMM would probably face-punch me but I don’t feel urgency to take the plunge into early retirement just yet. Now that I’m FI, I’m actually appreciating the good parts of my work more and I already feel a lot more free. I am in a pretty good job and admit that the high income is nice since saving and investing has become a fun hobby over the years.

    As my wife and I form a clearer, exciting picture of the next phase of our life, I’m sure I’ll get anxious to get started and the time commitment of work will become too much of a burden. But I’m not there yet and I’m generally enjoying the last year(s) of working while getting to ultra-low levels of financial concern. I don’t see how I can complain much.

  • ST May 9, 2017, 1:41 pm

    Hi Mr. MM,

    Your blog has been very inspirational to me! My family immigrated from another country when I was young and I despised their frugal spending during my childhood years. I have kept their sensibility but I am not nearly as frugal as my parents were growing up. Until I read your blog, I had created my balance of frugal meets convenience. As an example, we do own 2 cars but we paid cash for them. We don’t have any credit card debt – we pay it off monthly and use it only for the points. We shop at costco and don’t have any crazy expensive tastes/hobbies (who has time when you have little kids??) Outside of our mortgage and taxes, our largest expense are food and childcare because we both work. After reading your blog, I am realizing the importance of frugality once again and have already implemented ways to cut down our spending. This shift in mindset is going to take some time to absorb.

    In the meantime, I wanted to get your thoughts on something – I am in my early 30s and we recently purchased a home. We took out a jumbo mortgage and have the ability to pay down a significant chunk of it (we have over 2/3 of the cost of our mortgage just sitting in my bank account!). I have been too worried about losing the money in the market to do anything with it. I am debating what to do – do we pay down a bulk of our mortgage or do I invest in Vanguard funds? I find it a tough choice because theoretically the market returns will outweigh our 3.4% interest on our mortgage. I realize I am throwing money away by just letting it sit in the bank account and that is why I am looking for your thoughts. I also have a lot of heart burn that the house we bought just 2 years ago is already down in value anywhere from $20K-$40K. I have a lot of heart burn over not applying a lot of smart principles when I bought this home but I am where I am. I am trying to adapt your positive attitude and use this as a lesson learned on so many things…this is actually what led me to your blog. I really appreciate your advice!!

    • Mr. Money Mustache May 13, 2017, 7:26 pm

      I think in this case you should drain your bank account and pay down the mortgage. It’s a good baby step and as risk-free a return as you could ever find. Then, with this peace of mind, put your future cashflow surplus into index funds. So you get the best of both investing worlds.

  • Matt May 9, 2017, 4:40 pm

    I’ve been struggling with overcoming my perfectionist mentality for awhile, and this post really helped open my mind to the idea of just letting go. When it comes down to it, we just need to focus on the big things that will actually get us closer to our goals and just let the small things go. If something bad happens, I think a true “mustachian” would fight the temptation to complain, think about the best way to handle the situation, and then handle it. Easier said than done, but true nonetheless.

  • dathan May 10, 2017, 8:06 am

    Kind of reminds me of my first job (small IT retail shop, less than 100 employees), vs my recent job at a fortune 100 company (30k employees).

    In your further reading section, Derek Sivers, I highly recommend not only the book, but his blog, and he did a great podcast with Tim Ferriss.

  • lurker May 10, 2017, 4:54 pm

    indeed an important post….my best friend at work retired a year ago and just died of a heart attack….no guarantees all right…..one year free of the corporate yoke for a wonderful person seems too short.
    early retirement may not be early enough!!!!

  • ZJ Thorne May 10, 2017, 10:04 pm

    I agree that most of the contracts we can’t avoid seem unnecessary and just a way to pad the drafter’s balance sheet, but I am not entirely anti-contract. I use them with my clients. Before they hire me I sit with them and explain what it means and what our rights and obligations are. Laymen often get confused with my profession and I don’t want them expecting work that they did not pay for.

    I’ve only invoked my contract terms once, when a client was telling me to lie to a third party. I returned their money and utilized the No Lying clause to fire them as a client. It was frustrating that I had to underline this clause because they believed they could force me to go against my morals, but the contract protected me from lawsuit.

  • Blackeagle May 11, 2017, 5:51 am

    “If someone is without honor, no trust is possible. If they are honorable, no trust is necessary.”

  • Curtis Nash May 11, 2017, 1:53 pm

    Thanks for all the positive messages and advice. Applying your core principals has helped me get my life in order and start my own blog just for the fun of it. Now I’m working on paying off wedding debt and starting my own small business.

  • Mighty Investor May 11, 2017, 2:45 pm


    This is a great post. Most people are overly risk averse and this holds them back so much in life. The uncertainty of something not working out means they don’t even try. The girl/guy you like might say no, best not to ask her/him out….. Marriage might end in divorce? Well, best not make a commitment…. Stocks might go down? Keep the money in cash…. Real estate goes up and down? Never buy a home to rent out–or even a home at all….

    I used to be a diplomat, and my very first Ambassador, who was a self-made serial entrepreneur worth hundreds of millions of dollars once told me, “People are just too risk averse, and this holds them back.” I’ve tried to incorporate her advice, but haven’t always succeeded.

    But the great thing is that learning to deal with and tolerate uncertainty is very much a learned skill. We can get better at this. One thing that helps is to shift towards risk/reward thinking rather than hoping for absolutes.

    Good stuff, MMM.

  • Elena May 13, 2017, 4:32 pm

    MMM! I love this post – it made me want to open my window and do a huge HUZZAH! scream out to my empty street.
    But here’s why I’m writing: I have long shared the feelings that you map out in the beginning of this post. I often reference a transportation/psychological effect that I learned about when I was working as a sustainable transportation advocate: the 40mph effect. I think you’d like it, since you also see what I’ve seen – that there is this invisible line between systems that are reasonable and human and good and systems that suddenly become out of control and ruin our world.
    Back to the 40mph effect. It starts with this: there’s a huge difference in the behavior of car drivers when they’re going at speeds less than 40mph and when they’re going at speeds over 40mph. At less than 40mph drivers tend to be law-abiding, accommodating and safe. Over 40mph and suddenly the same driver is breaking the law, putting lives at risk and driving with a completely different – much more reckless – style. So what’s the deal? …eye contact! 40mph is the speed at which a driver can no longer make eye contact with another passing human. It’s like a switch is flipped, and suddenly those blobs moving on the sidewalk aren’t people, they’re just blobs and if they get hit then…oh well.

    Anyway, you get it. Isn’t that interesting?! I’m sure you don’t read every comment on your blog at this point but I do hope you get to this one. Once I learned about the 40mph effect I felt like I saw it everywhere – in government, in business, in all facets of life. Once we can’t make eye contact anymore, everything gets crummy. Keep it small, keep it reasonable, keep it human. Now that I’m writing this I’m thinking I should get a <40mph tattoo or something… (but I won't because I am saving that money for my badass retirement years!).

    Thanks for sharing your perspective on everything!

  • Mark May 16, 2017, 9:06 am

    I don’t think there is such a thing as true security – but many people spend a big portion of their life trying to create it. This doesn’t mean you should sacrifice your future for hedonistic short term living, but there needs to be a balance.

    Eckard Toole talks a lot about this concept in his book Power of Now. Being present in the moment and turning off negative, insecure compulsive thinking is one of the first steps to finding gratitude for the life you have now – even if it doesn’t meet the ideals society has created. By simply observing your thoughts and being aware of how they influence your self image, you can be more present to the environment and the people in your life.

  • D. A. May 17, 2017, 1:20 pm

    “…all a contract does is give you something to show in court.” –Sometimes that is enough. I had tenants I trusted living in the only home we owned a mortgage on and when the Property Management company I’d hired wasn’t taking as great care of them as I would have, I took over. We agreed via email that everything in the contract they signed with the PM would remain, only now I was the PM. I granted them every thing they asked for (i.e.: a second door bell that their guests could hear from the downstairs) and when they left their 1 year agreement 4 months in to buy a 2 million dollar home, I told them I wouldn’t ask for the remaining 8 months of rent, but that they wouldn’t be getting their 1 month deposit back. They sued me for their deposit. I countered for the 8 months of rent. The Judge believed them when they claimed they didn’t know who the landlord was since I had no updated contract. She was not interested in viewing any of my evidence to the contrary and threw the case out.
    Do you do your rental agreements without a contract?

  • Chuck July 17, 2017, 9:08 pm

    Contracts are bullshit, either your word is good or it isn’t.

    Had a nearly $5k septic drain field installed last month.

    We didn’t have so much as a written estimate. He said the price I asked when they could start, paid them in full when they finished.

    Same deal for contractors, talked on the phone, came out and looked at the site quoted a price, shook on it and that’s that.

    contracts are only worth anything when people are shitty, and even then it’s a pain in the ass.

    Better to just keep your word.

    It’ll work out or it won’t. Paper won’t change that.

  • Contracts Man July 21, 2017, 12:16 am

    I speak from a position of having spent about 15 years negotiating, drafting and managing contracts for a living. I was a partner in a large law firm when I ‘retired’ at 38.

    There are some circumstances in which having a written contract is a very good idea. Essentially it is a risk allocation tool, and the best way to determine if you would like one is to work backwards from different outcomes and see if a written contract would make a difference.

    For example, consider if you make a software product and sell it for 10 bucks. If it doesn’t work it could cause someone a lot of pain/cost them a lot of cash. The default position at law in a broad sense is that you have to compensate them for that loss, yes, even if it is in the billions. Don’t think you have priced this risk into your 10 bucks? Then limit your liability in a contract.

    Another example, you’re a freelancer and want to own the IP in stuff you produce so you can use it again. Depending on the law in your area, you might have to write that down (America, as I understand it). In other parts of the world, if you pay someone to do work for you and you want to own the IP, you have to agree that as well (ie the default position is reversed). Again, handy in your engagement contract.

    Sometimes the ability to get out of a contract, or not, is useful. For example, if you invest a lot of cash getting ready to provide someone with a service (or even if you don’t), and then they try and leave after 1 week, it might have been helpful to clarify that is a three year commitment, or that 6 months notice is to be given to get out for no reason. As a business you can borrow off contracts that offer ongoing supporting revenue. That can be important. Similarly if you always want the right to walk away, then write that down – the default position at law will be reasonable notice has to be given (and what’s that?).

    Although not common, third party claims are something to think about as well. You carry insurance when you drive don’t you, in case you get sued? Ah we’re all friends on the road aren’t we? Nobody thinks that. What happens say if you spend 500k on a software package and then get sued by a patent holder for IP infringement. Preferably it would be the supplier’s problem. That can be specified in a contract as well by way of an intellectual property warranty (saying it will all be ok) and indemnity (we are on the hook if a claim is made). Sure you can ignore this, as you could ignore the risk of your house burning down, but sometimes it is worth thinking about it and making sure you’ve taken prudent steps to pass on this risk as best you can.

    This doesn’t mean I think that contracts are always needed, but a head in the sand approach isn’t always optimal. If you want to not have a written contract (and just because it’s not written doesn’t mean there is no contract), then you would ideally know the default position and be comfortable with that.As I’ve noted above, sometimes the default position is good for you, and in other circumstances you can have a bad outcome (lose your IP, or take on the risk of going broke if something goes wrong.

    Often as the purchaser of products or services the default position is a good one. And, if you think to yourself I would never sue if it doesn’t work – even if I’ve paid a fortune, then fine (but you had a written contract when you bought your house, right?). Most people would never sue, and so assertions of quality and outcomes in a contract aren’t really that important as a customer.

    But as a supplier it might be worth thinking about risk a bit more. You don’t want to end up effectively being an insurer should something go wrong.

  • Rebecca K. November 13, 2018, 9:05 am

    Thank you for this article. MMM! I am being sued and it has been another opportunity for me to explore and develop healthy coping skills without losing my shit, as well as another lesson in how much control I don’t have, except for my attitude. I definitely want to live in a world where I’m not afraid people are just waiting to screw me over. Along with the butter and farm to table meals, the Amish lifestyle is becoming more appealing.

  • MagniFIMoney September 17, 2019, 2:15 pm

    Well said Mr. Money Mustache!

    I have spent a whole heap of time in the slow moving contractual paperwork bureaucracy of the government. I whole heartedly agree that the contract will really not help that much in the end anyway.

    Pretty much any lawyer will find a loophole in the contract, and by then everyone is knee-deep in losing money – money that could be spent on building trust with each other!

    I think that fear – of getting ripped off, of getting backed out on, or losing money – is the catalyst for our general unhappiness as a populace.

    Not there yet, but I hope I can go forth as boldly as the veteran Mustachians when my FI time comes!


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