RPF_0003_-_Book_Review_and_Commentary_on_Early_Retirement_Extreme_-_A_philosophical_and_practical_guide_to_financial

00:00:00.000 | Welcome to the Radical Personal Finance Podcast, Episode 3. I'm your host Joshua Sheets. Today's

00:00:07.000 | show we are going to do a book review. It's the first time I've ever done a book review

00:00:13.760 | so I hope it's good. I'm going to start with a book that's extremely challenging to do

00:00:18.840 | a book review though. I'm going to challenge myself and hopefully going to challenge you

00:00:23.280 | and give you a broad overview and in-depth review into a book called Early Retirement

00:00:30.280 | Extreme A Philosophical and Practical Guide to Financial Independence by Jacob Lund Fisker.

00:00:38.380 | Warning up front, this book is not a fluffy book. You may not want to listen to this.

00:00:49.860 | You may not be ready for the concepts. We're going to jump right to one of the extreme

00:00:55.080 | aspects of financial planning which is specifically on early retirement. This show and this book

00:01:02.080 | does not contain a list of tips on how to save money on your groceries by shopping at

00:01:11.560 | one store over another or by using coupons. Nothing wrong with that. That's helpful. But

00:01:17.880 | that's not what this book is for. This book is a philosophy book so today's show is going

00:01:22.440 | to be a philosophy show. The author of this book is a physicist so the content goes extremely

00:01:29.440 | deep and very theoretical. Now personally, I love this book. I think that it ought to

00:01:39.600 | be given to students at a young age as a handbook that they have to learn and understand so

00:01:45.800 | that they can be conscious about the choices that they make. And I believe it would be

00:01:49.560 | a worthy focus for people to begin their lives by building in financial freedom. The author

00:01:56.560 | titled this book and his associated blog Early Retirement Extreme but he's actually written

00:02:06.840 | many times that that's probably not a great title. There are probably a lot of other titles

00:02:11.480 | that are a lot better. The words early retirement have a difficult connotation in our society.

00:02:18.480 | Usually when people think of early retirement they think of somebody instead of retiring

00:02:24.160 | at 65 to play golf, they think of somebody retiring at 62 or 55 or 50 years old. That's

00:02:30.040 | not what this book is about. This book is about achieving financial independence in

00:02:37.120 | an extremely short period of time. To give you a preview, the author achieved financial

00:02:44.040 | independence himself in approximately five years on an annual salary that didn't exceed

00:02:51.040 | more than about $40,000 per year. I had to check his blog and check his writings but

00:02:58.160 | those numbers should be fairly accurate. So many people can get themselves to a position

00:03:04.200 | where they're able to earn $40,000 a year and to be able to be financially independent

00:03:08.840 | in five years on that kind of salary might be worth understanding what the author has

00:03:15.840 | said and what the author has done. The other thing I like about this author's story, by

00:03:21.600 | the way again we're talking about Jacob Lund Fisker, you can read his blog at earlyretirementextreme.com.

00:03:27.920 | You can find this book on Amazon. It's available for Kindle and available in paperback. The

00:03:33.240 | book is not, most information you could get for free off of his blog and off of his forums.

00:03:40.120 | The author is no longer actively blogging. He did it for a period of years and then came

00:03:45.480 | to the conclusion that he'd said just about everything he had to say on it and the blog

00:03:49.440 | is still available but it's no longer being actively contributed to. The author's gone

00:03:55.040 | on to do other things with his free time. You can do that when you're retired. And this

00:03:59.720 | book was kind of his seminal work, his ultimate synthesis of all of the ideas and strategies

00:04:06.720 | and philosophies that he has developed. Early Retirement Extreme is a handbook of robust

00:04:24.520 | strategies and philosophies that can help people achieve financial independence in a

00:04:30.320 | very short period of time. Now this may not be your goal. If it's not your goal, no problem.

00:04:37.320 | Remember we've talked in the past that first question of financial planning, what do you

00:04:42.360 | want? So stated right up clearly, if you want a very large boat and that's important to

00:04:49.960 | you, go after it. Go get a very large boat. This book is not about getting a very large

00:04:56.960 | boat. This book is about not having to work ever again so that you can go out on boats

00:05:03.480 | every single day that other people own and enjoy being out on the water. I'm going to

00:05:10.160 | do my best when I record shows or when I do things like a book review, I'm going to do

00:05:15.760 | my best to make the author's case for them in an extremely strong manner. So expect me

00:05:22.280 | to try to take on the author's point of view more so than my own. I think that's one valuable

00:05:29.280 | way to learn is it's extremely valuable to build somebody's case for them in your mind.

00:05:36.000 | Fully embrace it, fully adopt it so that you can be sure that you fully understand it.

00:05:41.680 | And then go back and revisit your own goals, your own life, your own situation and decide

00:05:47.040 | what's appropriate for you which may or may not be something that would be appropriate

00:05:51.040 | for the author. To me that's a fair way of approaching life and so I'm going to do my

00:05:55.520 | best to do that with book reviews. This book is a heavy book. I'm not sure that in one

00:06:07.560 | podcast year I'm going to get through the entire thing. My goal is to provide an exhaustive

00:06:12.680 | audio resource for people who are interested in the topic to refer to. My hope is that

00:06:18.000 | if you find it interesting, go and buy the book, read it and consider the themes that

00:06:25.000 | are held within it. I really would love to interview the author as well and do an in-person

00:06:33.720 | phone interview to be able to understand more details and hear from him. I've heard him

00:06:38.240 | interviewed before and really have enjoyed that so I'm planning to reach out to him to

00:06:41.800 | see if he's willing to come on the show. I'm also going to quote liberally from the book

00:06:48.800 | because I can't add to how well written it is. But even though I'm going to quote heavily,

00:06:56.080 | you're not going to be able to get a sense of what the book contains just by the quotes.

00:07:02.760 | First and foremost in the introduction, quoting from the book, "This book is not a how-to

00:07:07.400 | manual to a specific lifestyle, but a how-to manual for how-to manuals. The intention is

00:07:14.080 | for each person to create his own strategy. In this sense, this book isn't a travel journey,

00:07:20.720 | nor is it a set of map directions. It's a book that teaches you to become a navigator.

00:07:26.480 | I use the principles in this book to reduce my expenses to a quarter of the average person

00:07:31.400 | and become financially independent in five years. While my story may be entertaining

00:07:37.240 | or inspiring, it may not be directly useful towards reaching a similar goal. Similarly,

00:07:43.600 | while initially motivating due to their actionable form, a set of map directions would fail the

00:07:48.140 | first time one reaches a crossroads not on the map. This would end the journey if the

00:07:52.760 | pilot has no navigational skills. I have therefore written the book as a textbook. Learning how

00:07:59.680 | to become financially independent requires study. This requires effort and is not easy.

00:08:05.280 | If it were truly easy, everybody would be doing it. But it's no more difficult than

00:08:09.480 | getting a college education or becoming a skilled tradesman in your respective field.

00:08:14.800 | What I'll describe here is another kind of life, the life of an independently wealthy

00:08:19.840 | and widely skilled person, a modern renaissance man."

00:08:23.120 | The thing I love about this introduction is that, and what I've just read, is that it

00:08:30.440 | states the theme for the entire book. Jacob Fisker is not saying this is what you have

00:08:38.040 | to do, which is one of the things that frustrates me so much about most finance books and authors

00:08:46.240 | who say that this is the way that you should live your life. He says, "Here are some

00:08:50.200 | tools for you, and with these tools, you're free to accept the ones that you want and

00:08:58.200 | free to reject the ones that you don't want. Feel free to take these tools and apply them

00:09:02.880 | to your own life to create your utopia in your life."

00:09:10.760 | Hopefully I can do that same thing with this podcast over the days, weeks, months, years

00:09:17.480 | as time goes on.

00:09:21.800 | This book is not a book for beginners. It's not a book one can pick up, read, and proceed

00:09:27.720 | to become financially independent, just as reading a textbook about physics won't turn

00:09:32.720 | a person into a physicist. This only happens when the concepts are constantly applied and

00:09:38.120 | one starts thinking like a physicist. Things are similar for a person pursuing financial

00:09:43.720 | independence.

00:09:46.040 | This is a book which I think can be read at several different levels. The reason for different

00:09:49.920 | levels is that people change as they learn. Depending on where you are, the book will

00:09:54.020 | relate to you in different ways. This is good, because those who evolve will become different

00:09:59.360 | people eventually. What used to seem like sacrifice will seem natural, and what used

00:10:05.160 | to seem natural will come to be seen as sacrifice. What used to be a collection of techniques

00:10:09.900 | will become a general principle. What used to feel challenging will now feel easy.

00:10:18.400 | This is a concept that's often lost in the financial world. And you can start, I believe,

00:10:24.800 | in personal financial planning at a variety of different layers. For example, if somebody

00:10:29.760 | is deeply in debt and has a spending problem of spending too much money on their credit

00:10:33.720 | cards, they can start by learning to set a budget and diminish their credit card spending.

00:10:42.080 | They can also start by having a radically different philosophy. You can either start

00:10:47.000 | with little changes or you can start with a complete change. To me, I often think about

00:10:51.360 | this in terms of something like diet and exercise. I find diet and exercise to be a useful comparison

00:11:01.520 | tool, because many people know what they should be doing about diet and exercise and health,

00:11:07.600 | and yet sometimes many of us don't do it, just like with financial planning. With diet

00:11:15.800 | and exercise, if someone is sick, unhealthy, overweight, in terrible shape, there are a

00:11:20.600 | couple of ways to approach things. One is you can make gradual changes. So make one

00:11:26.160 | daily choice different. Instead of choosing to eat a donut for breakfast, choose to eat

00:11:32.160 | a piece of fruit or choose to cook some eggs. That one small change over a long period of

00:11:37.640 | time will make a dramatic difference in somebody's life. So in financial planning, this would

00:11:43.240 | be analogous to if somebody doesn't save money, starting to set aside one cent out

00:11:48.620 | of every dollar into an automatic savings account or into some sort of retirement plan.

00:11:56.080 | This is a great place to start. For many people, it will be a really intelligent way to live,

00:12:04.240 | a really intelligent first step. Now on the flip side, someone who is horribly out of

00:12:09.560 | shape and extremely unhealthy, that person could also make all the changes all at once

00:12:20.840 | and completely go to perhaps a three-week or a one-month retreat at a health spa of

00:12:30.640 | some sort where all they do is eat the right foods and exercise and work out. This would

00:12:36.120 | be maybe an example would be a TV show like The Biggest Loser where the contestants completely

00:12:41.520 | change their daily life in pursuit of one goal. Well, they get dramatic results and

00:12:48.200 | this can work as well. Perhaps the people who most effectively follow that type of prescription

00:12:57.120 | are those who are told flat out, "If you don't do this, you will die." Well, with

00:13:02.760 | enough motivation, someone can change everything in their life very quickly. So this can also

00:13:08.360 | be an effective strategy. In financial planning, this could be where somebody gets extremely

00:13:14.200 | bad news and their child is sick and they need to completely change their financial

00:13:18.320 | life to be there for their child's future. Well, under this scenario, they could absolutely

00:13:27.360 | change everything quickly and stick to it. One is not right and one is not wrong. You

00:13:33.400 | can read the research and see about the efficacy rates of gradual changes versus complete changes

00:13:40.720 | and look at your personal experience. In my personal experience, I've done both in various

00:13:44.000 | areas of life and some have stuck. Some gradual changes have stuck and some gradual changes

00:13:49.000 | haven't. Some complete overhauls have stuck and some haven't. You've got to be the judge

00:13:56.040 | for yourself to see what is going to be most effective for you. This book, however, is

00:14:04.000 | going to be a completely comprehensive overhaul if you want it to be. Once you understand

00:14:11.320 | the philosophy of it, you could take this philosophy and apply it radically to your

00:14:16.760 | own life. After all, this is the Radical Personal Finance Podcast. Or you may choose just simply

00:14:22.800 | to make some small adjustments in your own life and it's okay. My goal and I think Jacob

00:14:27.880 | Lund Fisker's goal would be just simply provide you with the tools that you would need for

00:14:32.720 | you to decide what's right for you and your life. The author starts with the allegory

00:14:49.560 | of Plato's Cave. If you're not familiar with Plato's Cave, this is a classic allegory that

00:14:59.320 | tries to explain how we live. My short summary of Plato's Cave, Plato put forth this thought

00:15:06.800 | experiment and said, "What if you were born living inside of a cave, chained to a row

00:15:13.360 | of prisoners with a fire behind your back that reflects the light of the fire up upon

00:15:20.800 | the wall in front of you and there's no other source of light?" Well, if you were born in

00:15:25.280 | that type of scenario and type of circumstance, that would be your pure normal. So your pure

00:15:31.160 | normal would be that you interacted with your fellow prisoners based upon what they look

00:15:37.540 | like on the shadows on the cave wall. You would interact with them through in the dim

00:15:44.880 | murkiness of the firelight. You wouldn't be looking at them, you would be seeing the shadows

00:15:50.560 | on the wall. But if somebody came into the cave, unlocked the shackles, dragged you out

00:15:55.560 | of the cave, first of all, no doubt you would not go or you would go kicking and screaming

00:16:00.580 | or perhaps you're the type of person who would jump up and run out, see a new adventure.

00:16:04.520 | This would tell you a lot about your personality type. If you were taken outside of the cave

00:16:08.760 | where you saw the real world as others would see it, it would take some time to adjust

00:16:16.000 | but once it adjusted, your eyes would adjust to the light and you would see how things

00:16:18.880 | actually were. If you then went back into the cave and tried to explain your world to

00:16:25.880 | people in the cave, it would be very challenging for them to be able to relate to you. You'd

00:16:33.680 | be talking about green and blue and white and brown and yet the only colors that somebody

00:16:41.760 | in the cave can relate to is orange and I guess gray. You would talk about seeing people

00:16:49.800 | as they really are rather than simply seeing their shadows reflected on the cave wall and

00:16:54.680 | yet people in the cave would not likely understand. That person who had gotten out of the cave

00:17:06.200 | would feel the duty to need to go back in and try to release the other prisoners but

00:17:12.080 | most of the time that person would be treated like a danger to the others in the cave. They

00:17:24.040 | might not take off the chains, they might stay in their seats. So you have to be a brave

00:17:31.040 | person to be willing to go outside of the box and to live a life that's different than

00:17:36.200 | most people would live. This is where Jacob's background as a scientist can be useful. Scientists

00:17:45.360 | are taught and trained often to ask why. So reading from the book here, the author says,

00:17:55.120 | "Yet I never learned why the world worked the way it did and in retrospect I think nobody

00:18:00.160 | ever even asked the question. Everybody always only focused on the what and where, no questions

00:18:06.120 | asked. But as I started my career as a research assistant in physics, I started getting interested

00:18:11.400 | in all the why's of life. As I studied and thought about various fundamental questions

00:18:16.240 | such as why do we use money instead of promises or favors? Why do we live in houses and not

00:18:22.640 | boats or cars? Why are there usually 2-4 people in a home and not 10-20? Why do we move away

00:18:29.480 | from home? Why do we work until we're 65? All while getting assaulted with well-intended

00:18:35.600 | encouragements that I should make sure to open a retirement account before I was 30

00:18:39.640 | and put 15% of net income into it, that I should buy a house, that married homeowners

00:18:44.840 | were more prosperous and therefore I better get married too, that I should buy a new car,

00:18:49.600 | that people would like me more if I wore a particular brand of clothing, that I would

00:18:53.680 | enjoy a beverage more if it came from a certain kind of bottle. I was beginning to feel that

00:18:58.400 | something was wrong. Why is the emperor not wearing any clothes? I started getting an

00:19:03.960 | uneasy feeling that something about the world was not quite right. Nobody explained the

00:19:10.240 | why. Sure, they could explain how I should first purchase a starter home so I could upgrade

00:19:15.640 | later, but nobody could or would explain why I should buy a house in the first place. Nobody

00:19:21.600 | could or would explain why I should have a career, only that career development was important.

00:19:27.600 | Interesting questions, huh? Have you ever stopped and asked yourself, "Why? Why am I

00:19:39.400 | supposed to," using his examples, "Why am I supposed to buy a house? Why am I supposed

00:19:44.880 | to build a career where I work until 65? Why?" Again, this takes us right back to yesterday's

00:19:52.920 | episode where I said, "What's your why? What do you really want? Why?" If you want to own

00:20:01.640 | a house, go for it. If you want to work until you're 65, go for it. But have you ever thought

00:20:09.320 | about other options? Have you ever thought about working for five years and then quitting?

00:20:15.920 | Or have you ever thought about working for the rest of your life because you want to,

00:20:19.680 | not because you have to? All three of those options are available to you. You could work

00:20:27.480 | for five years, you could work until 65, and you could work the rest of your life. And

00:20:31.200 | depending on what your why is, each one of those choices might be correct. But there's

00:20:37.480 | value in thinking about it. I love Jacob Lund Fisker's here commentary on society is. I'm

00:20:48.440 | going to read a couple of excerpts here. Read the whole book. It's fascinating. But referencing

00:20:57.240 | Plato's Cave. "In real life, the prisoners of Plato's Cave are those who are prisoners

00:21:01.720 | or slaves to their wages and their culture. A wage slave is a wage earner who is entirely

00:21:06.640 | dependent on their wages. While the wage slave is free to leave the current job, he isn't

00:21:11.540 | free to leave the job market altogether, and he can likely not imagine the possibility

00:21:16.280 | of doing so. He is still entirely focused on the wall. The wall shows other people not

00:21:22.440 | as who they are, but as what they own. There goes a man in his new sports car. What is

00:21:27.320 | not seen is that the car is bought on credit, and that the man is stressed because he is

00:21:31.120 | having trouble making the payments. Wage slaves have jobs where they can go and spend their

00:21:36.040 | most productive hours writing high-powered memos so they can be more productive, while

00:21:40.640 | other people spend their time ignoring memos so they can be more productive too. This is

00:21:45.320 | how it goes. In fact, one of the great inventions of the 20th century, the personal computer,

00:21:50.240 | has made it possible to write even more memos and notices. This is great because it allows

00:21:54.840 | people to do their job while looking busier than ever. Looking busy is important because

00:22:00.160 | in this culture, business is a virtue. Just as being in debt is a virtue, and the most

00:22:04.480 | virtuous are those with the highest credit scores. They're better at being in debt compared

00:22:08.760 | to other people. This endless working and paying is called "making a living." Yet,

00:22:14.600 | people are so busy making a living that they have no time for living.

00:22:19.640 | A wage slave is a person who is not only economically bound by mortgages, loans, and other obligations,

00:22:26.320 | but also mentally bound by the inability to perceive that there are other options available,

00:22:31.040 | like the prisoners in Plato's cave. Their chains are not physical, like those of 150

00:22:36.880 | years ago, though they still are in some parts of the world. The chains are mental, which

00:22:41.600 | in some sense makes them worse because it turns the prisoners into their own prison

00:22:45.840 | wardens. Like the slaves in Plato's cave, the only commonly accepted way for one of

00:22:51.440 | them to leave is to win the "prison game," which means accumulating at least a million

00:22:56.440 | dollars to retire. The disenchanted grumble about "the system"

00:23:01.200 | or "the man." The analogy of "the system" is the people walking around behind the chained

00:23:05.720 | slaves keeping them going. However, it's mainly the slaves themselves who keep themselves

00:23:11.200 | going. We don't realize that we maintain this system by lack of imagination and questioning.

00:23:17.760 | Like birds which never seem to have a flight plan, yet always seem to fly together in a

00:23:22.440 | swarming flock, we don't question. We obediently pick whatever options are handed to us, often

00:23:28.320 | choosing based on what our neighbors have chosen. We make the best of the shadows on

00:23:32.760 | the wall, but we do not question the wall. The best prison is the one with invisible

00:23:38.560 | bars. Perhaps one reason for this complacency is

00:23:43.720 | the large quantity of material goods available to the chain gang. Material goods are often

00:23:48.560 | used as compensation. Frequently, when someone is depressed, the advice is "go out and

00:23:53.240 | spend some money. Buy yourself something nice. Treat yourself. Try a little retail therapy."

00:23:59.480 | People don't seem to realize that this attempt to feel good is exactly what propagates the

00:24:03.680 | problem. Compared to people just 50 years ago, modern

00:24:07.080 | wage slaves live a life of material abundance. They're consumers. They have big screen

00:24:12.240 | TVs, movies on demand, microwave ovens, food processors, and 24-piece flatware. They own

00:24:17.560 | multiple pairs of shoes and enough clothes for more than a week without doing laundry.

00:24:21.920 | They have carpeted floors, matching furniture, and vacuum cleaners. They have expensive toys.

00:24:26.480 | They have car payments, college degrees, 5 bedroom, 3 bathroom mortgages, laptop computers,

00:24:31.560 | cell phone contracts, power tools with 108-piece bitsets, premium cable, air conditioning systems,

00:24:37.160 | blenders, food processors, pool tables, DVD players, and granite countertops. They redecorate,

00:24:42.600 | attend sporting events, go on vacation, and occasionally play with their toys.

00:24:48.000 | Society has made it very easy to spend money. Shopping centers line every street. Many creative

00:24:54.120 | means of spending money have been devised. Instead of spending 30 seconds opening a can

00:24:58.760 | of tomatoes with a traditional can opener, it's now possible to spend 30 minutes working

00:25:03.320 | to pay for an electric can opener that can open the can in the same amount of time. Similarly,

00:25:08.880 | many of the ways we used to do things have been redesigned to ensure that instead of

00:25:13.340 | doing it ourselves, we can buy some gadget or some service to have it done for us. This

00:25:18.520 | is convenient because we're usually too busy working to pay for it to do it ourselves.

00:25:24.040 | This is the gist of the service economy. Presumably, if we didn't create enough problems to spend

00:25:28.680 | time solving them, the economy would collapse. To speed up consumption, it's possible to

00:25:34.040 | obtain loans and spend money that's yet to be earned. All it requires is a promise of

00:25:38.720 | increased amounts of work in the future and a commitment of up to 30 years to pay the

00:25:43.080 | money back, plus twice the amount in interest. Lots of personal finance gurus are willing

00:25:49.020 | to charge you money (some will do it for free) to advise you as to exactly how to distribute

00:25:53.840 | your money into retirement plans, college savings plans, mortgages, credit cards, etc.

00:25:58.880 | to maximize your lifetime consumption. Success and power are equated with spending money.

00:26:05.880 | The author continues, but I obviously can't read the whole work. It's worth reading though.

00:26:17.200 | Interesting thoughts, huh?

00:26:24.200 | This paragraph, I think, sums up other options. Is spending the most productive years of your

00:26:29.480 | life chained to the job market to collect a lot of rarely used stuff that gathers dust

00:26:34.080 | in the closet or takes up space in junkyards a wise choice? Were you really born just to

00:26:38.880 | die, leaving a large pile of discarded consumer goods? Probably not. I realize that not wanting

00:26:46.520 | a house full of things makes me look weird and recently even unpatriotic. After all,

00:26:52.680 | more is better, and who doesn't want to be better? But perhaps conformity is not the

00:26:57.160 | only way to live. In fact, by taking the other end of the bargain, saving as much as other

00:27:03.120 | people are spending on wants, it's possible to retire and live on invested savings after

00:27:08.380 | just five years of full-time work. Rather than increasing the amount of work to acquire

00:27:13.560 | more stuff, reducing this superficial need reduces the amount of necessary work. It's

00:27:19.880 | possible to reduce the amount of work all the way down to zero. Financial independence.

00:27:25.320 | Indeed, playing the shadow game for five years provides a permanent way out of the cave.

00:27:31.480 | Alternatively, it's also possible to return to the cave for a few months every year to

00:27:36.640 | earn money for the next adventure out of the cave. This is living on the economy, so to

00:27:42.320 | speak, rather than living in the economy. Interesting, huh?

00:27:49.320 | One thing that I like also about the author's story is that he didn't start out this way.

00:28:03.280 | He started with, as a consumer, read the book and read his blog too to find out. He started

00:28:13.120 | by picking up in the middle of his consumer story, "As a lifelong consumer used to spending

00:28:18.280 | large amounts of money to obtain food, stuff, and entertainment, it's hard to imagine

00:28:22.400 | how it's possible to spend practically nothing on furniture, a few dollars on clothing, very

00:28:27.440 | little on food, almost nothing on transport, and generally less on rent or mortgage. However,

00:28:32.840 | it's possible to live on a third or even a quarter of the median income, putting one

00:28:36.540 | solidly below the government-defined poverty line, without living on austerity or eating

00:28:41.480 | grits. There is no reason to pay retail. You can enjoy the fun of beating the system that

00:28:47.120 | exists to take your money and live a middle-class lifestyle on a quarter of the usual numbers.

00:28:53.320 | Why aim low? Why not live an upper-class lifestyle and think of yourself as a poor aristocrat?

00:28:59.900 | It requires a somewhat different approach though. And it requires some skill.

00:29:06.080 | It also requires a reprogramming of "the way we've always done it" or rather "the

00:29:11.040 | way we usually do it." In fact, a frequent question I get when I talk about frugality

00:29:15.920 | is what kind of things, like CFLs or pressure cookers, people should buy to become more

00:29:20.800 | frugal. Wrong question, dude.

00:29:25.120 | Leaving the cave takes some effort. It would be easy if the framework or mental models

00:29:29.680 | of thinking outside the cave were similar to the shadows. In that case, I'd write

00:29:33.880 | a list of 25 ways to save money, 25 ways to earn money, and 25 ways to save time. And

00:29:39.240 | you'd just add them to your checklist and squeeze them in during your lunch hour. It's

00:29:42.920 | acceptable to use these lists as inspirations, but don't follow them like recipes. You'd

00:29:48.080 | be missing the point. To paraphrase Einstein, you can't solve your problems with the same

00:29:53.240 | mindset that created them.

00:29:57.000 | To live as a free person, following lists of easy, repetitive things, possibly in return

00:30:01.280 | for some reward, is exactly what should be avoided. Instead, it's necessary to understand

00:30:06.760 | how the world works, and how people have been specialized to the point of general incompetence.

00:30:12.640 | Like ants, which only know how to do one job, but do it very well. This is not human nature.

00:30:19.200 | To live well, one must go beyond lists and start thinking creatively about solving problems.

00:30:25.880 | One must accept a lot more personal responsibility than merely showing up on time, following

00:30:30.400 | orders, checking off boxes, and trying to fit in.

00:30:49.120 | Author goes on, "Is this book for me?" Here are some questions to ask yourself. Are you

00:30:53.320 | completely happy with your life? For instance, why do we still work 8 hours a day, 50 weeks

00:30:59.880 | a year, when we're twice as productive as we were 50 years ago? Why do we have children,

00:31:04.760 | then send them away for most of the day shortly after they're born? Is there more to life

00:31:09.360 | than work, more work and more stuff? Can happiness be bought? Do you want to live on a solid

00:31:17.200 | foundation? Goes on to talk about starting with a solid financial foundation so that

00:31:23.160 | you're free. Interesting thoughts on that one. I find, let me read this paragraph and

00:31:34.280 | then I'll comment. "Many people get married, start a family, or buy a home without a solid

00:31:38.760 | financial foundation based on savings. Instead, they borrow heavily, hoping to make up the

00:31:43.160 | difference later. This can easily turn into a lifetime of struggling to make ends meet,

00:31:48.080 | because such a large fraction of the income goes toward paying interest on past consumption,

00:31:52.560 | when it instead could be used to live better. For example, people could work less and spend

00:31:57.040 | more time with each other. A good financial foundation allows parents to raise their own

00:32:01.680 | children instead of outsourcing the job to daycare centers and babysitters. A good financial

00:32:06.640 | foundation allows people to spend more time working on things they want to work on, instead

00:32:11.400 | of working on things they have to work on to pay the bills. In general, financial independence

00:32:16.240 | creates much more flexibility and allows a greater choice of how one lives." As I record

00:32:24.000 | this, it's early in the morning, about 5am, and last night I had some friends over to

00:32:32.320 | the house and we were talking about the difference between starting a life on a solid financial

00:32:38.160 | foundation versus a shaky one. Imagine just for a moment, if all young people were taught

00:32:44.720 | to be financially independent in perhaps 5 years. Maybe 10. So imagine that, let's call

00:32:53.920 | it your 20s, so imagine that instead of being taught that you should finish high school,

00:33:02.120 | go to college, or learn a career, graduate, start buying stuff, and plan to work until

00:33:07.640 | 65, imagine if people were taught that you should be financially independent by the age

00:33:12.240 | of 30. So your entire job in your 20s is to continue living on a college budget for 5

00:33:18.080 | to 7 years, living well, so that from 30 on you are financially independent. So that when

00:33:23.600 | you started your family, when you had kids and kind of entered that phase of life, you

00:33:30.320 | had total time to spend with them and raise them. Question, would people make different

00:33:37.640 | choices with their lives? Often times in our society we talk about pursuing your passions,

00:33:43.960 | and I love that topic. Would it be easier for people to pursue their passions if they

00:33:49.760 | didn't necessarily have to earn an income? I think what you find when you study wealth

00:33:55.520 | is that people don't often give up incomes just because they're financially independent.

00:34:00.640 | Some of the wealthiest, happiest people in the world don't ever have to work again the

00:34:05.880 | rest of their life, but they choose to because they love it. So there's a couple ways to

00:34:11.560 | achieve that. Number one is find something you would do even if you didn't have to. That's

00:34:15.800 | the short circuit, that's the hack, and I support that. But the other way is get yourself

00:34:20.760 | in a position where you don't have to so you can be sure that you're doing it because you

00:34:23.640 | want to. I think the person who's most famous for this one is Warren Buffet who always says

00:34:29.880 | I tap dance my way into work every day. Interesting thought, huh? Starting on a solid foundation

00:34:38.200 | of financial independence. Question, do you want to start a business? If you want to start

00:34:44.360 | a business, would it be nice to not have to pay yourself a salary right at the beginning?

00:34:49.680 | Do you dream of doing instead of having things? Reading here, the question you need to answer

00:34:55.320 | is what you want to do with your life given that you don't have the time to do everything.

00:34:59.920 | Do you want to spend most of your life paying off the interest of a 30 year mortgage and

00:35:03.560 | working so you can fill increasingly bigger houses with increasingly more stuff while

00:35:08.160 | being stuck in your daily commute in increasingly nice cars? Or are you prepared to give up the

00:35:13.000 | stuff so that you can do whatever you want whenever and wherever within reason? What

00:35:18.120 | will your legacy be? What you owned or who you were? Do you believe life is an adventure?

00:35:29.080 | Many people, particularly young people, are starting to realize that the pursuit of happiness

00:35:33.560 | isn't found through the pursuit of accumulating things. They don't drop out. They opt out

00:35:39.760 | and forge their own path. Starting up internet companies, traveling the world and retiring

00:35:44.360 | early from the rat race so they can spend their lives living rather than just buying

00:35:48.440 | stuff. Which do you prefer? Do you want to make a difference?

00:36:03.160 | Interesting commentary here. The system, which many of us like to blame our problems on and

00:36:09.560 | yet count on for our solutions, is not really governed by a mysterious group referred to

00:36:14.720 | as "them". The world that we live in is the aggregate sum of the individual behavior

00:36:20.800 | of all of us. They are not responsible for our world. We are. You are. Unless you are

00:36:28.200 | a dictator, a rock star, or another person with enough influence to facilitate a top

00:36:33.060 | down approach with decrees or manifestos, the most effective change starts with individuals,

00:36:39.160 | using a "bottom up" approach. You have to become the change you want to see. You

00:36:45.120 | have to set an example for other people to follow. If you are not part of the solution,

00:36:48.920 | you are part of the problem. Unfortunately, many people in our culture are part of the

00:36:53.440 | problem. We are concerned about our dependence on oil imports and the resulting wars, yet

00:36:59.280 | we drive 30 miles to work every day to pay the bills. We are very much locked into an

00:37:04.000 | economic and behavioral model that conflicts with our values. What other choice do we have?

00:37:10.240 | Read on. Society offers you a deal. Get a student loan,

00:37:13.920 | get a college degree, get a mortgage and become a homeowner. Build your life with a deck of

00:37:17.320 | credit cards. Just sign on the dotted line and before you know it, you are on the hook

00:37:20.520 | for a house, a car, the basic "human" needs of cable TV, fancy restaurant visits,

00:37:25.720 | cell phone and gym subscriptions, and a house full of toys. After a few years, it will be

00:37:29.960 | hard to imagine life without all that stuff. You will, therefore, spend all your time,

00:37:35.000 | all your life working in a possibly unfulfilling job to pay the bills for all the things you

00:37:39.240 | have signed up for. If your job brings you down, you buy something on credit as a reward,

00:37:44.120 | dragging you further into the spiral of addiction. You will be living in a virtual "debtor's

00:37:48.720 | prison," except you will only see the bars if you miss a payment. If you have debt, you

00:37:53.040 | are not a free person. You are explicitly owned by your debt and implicitly owned by

00:37:57.920 | the creditor. You put 15% of your income into a retirement account for 40 years, plan to

00:38:04.160 | retire at 65, then try to spend the remainder of your life making up for lost time and health.

00:38:10.300 | Are you willing to take that deal? If not, there is another way. Don't accept the chains.

00:38:16.880 | Leave the cave.

00:38:20.120 | Changing your frame of mind is key to escaping, but change is a challenge. This challenge

00:38:24.400 | can become a struggle if your frame of mind is incompatible with your adopted lifestyle.

00:38:29.760 | In other words, you need to believe in your lifestyle as an end, rather than as a means

00:38:33.720 | to an end. To wit, runners and other athletes sometimes get the reverse "come hoc ergo

00:38:38.960 | propter hoc" comment that they are already fit, so they don't need to exercise. Yet

00:38:44.440 | their diligent exercising is exactly what causes their fitness.

00:38:49.800 | How is doing good, creating wealth, establishing connections, in short, accomplishing anything

00:38:55.760 | any different?

00:38:56.760 | To me, they are good questions.

00:39:06.760 | Author goes on and talks about barriers to change. One of the most valuable sections

00:39:12.960 | in the book, I think. He talks about some of the challenges. But most importantly, he

00:39:20.920 | talks about four variables to change. I think that these four variables could be applied

00:39:28.400 | to anything.

00:39:31.280 | People who want to change thus have the following four variables to play with.

00:39:35.360 | 1. Increase your dissatisfaction with present situation.

00:39:39.800 | 2. Strengthen your vision of future situation.

00:39:44.000 | 3. Build a plan to get from the present to the future.

00:39:48.720 | 4. Lower the perceived cost of the plan.

00:39:54.880 | That's financial planning.

00:39:57.080 | Now obviously that can be applied to everything, every aspect of life. That can be applied

00:40:01.640 | to the strength and quality of a marriage. That can be applied to relationships with

00:40:07.800 | co-workers, friends, children, family members. That can be applied to health and fitness.

00:40:12.760 | That's a formula for change. To me, I think you should go buy the book just simply because

00:40:17.760 | of those four things.

00:40:19.520 | So let's think about how we can manipulate them and let's use financial situations

00:40:23.280 | as a current plan.

00:40:25.880 | 1. Increase your dissatisfaction with present situation.

00:40:30.120 | People don't change until they either have to or they really want to. You can manipulate

00:40:35.040 | this. Are you dissatisfied with where you're at right now?

00:40:40.320 | Increase your dissatisfaction level, at least mentally, until you are ready to do something

00:40:46.280 | about it.

00:40:49.280 | 2. Strengthen your vision of future situation.

00:40:55.080 | Learn about what's possible. Think about the things that can be done.

00:40:58.920 | 3. Build a plan to get from the present to the future.

00:41:03.720 | Build a plan. Make a financial plan, make a health plan, make a marriage plan, make

00:41:09.520 | a finances, I already said that, make a relationship plan, a business plan.

00:41:16.520 | 4. Lower the perceived cost of the plan.

00:41:20.760 | Mentally, internally, lower how difficult that plan is. You can adjust this.

00:41:32.000 | I'm going to read a section. I wonder how much of the books I'm supposed to read or

00:41:38.360 | not supposed to read. But to me, this section of the book, it's going to take a few minutes.

00:41:45.360 | But it's so valuable as far as just seeing things, seeing things differently.

00:41:52.000 | Now you may make the same choices after seeing the world as you do now. But at least you'll

00:41:59.880 | know you're making those choices intentionally.

00:42:05.000 | And Jacob titles this section of his book "The Lock-In". And in this section of the

00:42:11.640 | book, to me, I think this is one of the most valuable, valuable things in the book. And

00:42:18.560 | this is going to challenge assumptions. But look at them, try to step outside of the way

00:42:23.080 | that you currently think and look at your assumptions about life.

00:42:27.920 | The Lock-In. We've come to a point where spending money

00:42:31.040 | is one of the few recognizable signs of success. For instance, spending half an hour in a traffic

00:42:37.560 | jam getting from A to B in an expensive car is considered more successful than spending

00:42:43.520 | half an hour in a traffic jam getting from A to B in a cheap car. I'm not sure why

00:42:48.480 | that is. Even more puzzling, both of these is considered more successful than spending

00:42:53.200 | 25 minutes getting from A to B on a train or spending 20 minutes on a bicycle getting

00:42:58.360 | from A to B while passing cars in a traffic jam. Similarly, it's considered more successful

00:43:03.880 | to sit on a couch in your home if there is an additional unused couch in an additional

00:43:08.880 | unused room, compared to a house with no unused couches or no unused rooms. In the real estate

00:43:16.000 | market, a house with a greater potential for unused rooms generally commands a higher price

00:43:20.600 | than a house with fewer but constantly used rooms. Perhaps there is personal fulfillment

00:43:26.120 | to be had in cleaning and maintaining a larger home. Or perhaps the fulfillment comes from

00:43:30.760 | paying someone else to do it. Many men spend as much time on manicured lawns

00:43:36.120 | as some women do on manicured nails. I'm not sure I completely understand the point

00:43:41.080 | of pouring drinking water on a lush green lawn, not to mention the sidewalks, among

00:43:46.080 | the rolling brown hills where we live, when lawns are inedible and all the birds in the

00:43:51.160 | neighborhood seem to flock to our freely growing flowers, which don't need any watering.

00:43:56.080 | However, the Homeowners Association refers to naturally occurring vegetation as weeds.

00:44:01.480 | They think they know better than the birds. Recently, much attention has been paid to

00:44:05.600 | great kitchens and great kitchen appliances, while less attention is paid to great cooking

00:44:10.000 | and great cooks, except those on TV. Why boil eggs in a pot when there are 350 varieties

00:44:16.920 | of electric egg boilers available? A common misconception is that money is better, or

00:44:22.680 | is that more successfully, spent on granite countertops and restaurant-strength food processors

00:44:28.980 | and burners than on cooking classes and practice. Who has the time anyway?

00:44:34.840 | This behavior is pervasive. People with more money than time buy $3,000 road racing bicycles

00:44:40.440 | with ultralight carbon frames to shave 2 pounds off the bike, regardless of the fact that

00:44:45.600 | they themselves are probably at least 10 pounds overweight, and only take a slow ride once

00:44:50.600 | a week because they lack the leg power to go faster, and the time to go more often.

00:44:56.120 | Compare this to the amateur enthusiast with more time than money, who rides every day

00:45:00.340 | and thus has the power to ride his much less expensive bike much faster. Who enjoys riding

00:45:06.400 | more? For recreation, many believe that saving for

00:45:09.680 | a year to drop a large sum on a hectic one-week vacation in an exotic locale is more recreational

00:45:16.600 | than staying closer to home and taking a month off to relax. A hectic tourist experience

00:45:22.680 | is considered very successful. A prerequisite for this kind of consumer success

00:45:27.400 | is spending money. This money must either be inherited or earned. If that isn't possible,

00:45:33.000 | it will be borrowed. Most are not lucky enough to win the birth lottery and inherit their

00:45:37.560 | money, and so they have to earn their money. Since acquiring the things that demonstrate

00:45:42.480 | success only requires the short time needed to purchase some item, and practically no

00:45:47.040 | time actually using or enjoying said item (that is, unless a 5-bedroom, 3-bathroom house

00:45:53.120 | can be enjoyed remotely from one's cubicle while at work), people can dedicate most of

00:45:57.800 | their time to earning money, rather than using and enjoying the things the money buys.

00:46:04.160 | This results in having little time to develop skills other than spending money, which can

00:46:08.800 | be witnessed by the confused helplessness modern people demonstrate toward solving problems

00:46:14.400 | without spending money or arguing on the phone with a service representative.

00:46:20.020 | Consumers are used to buying or arguing their way out of problems. For $150 you can buy

00:46:24.900 | a propane grill at the supermarket, or you can spend $300 to have a plumber fix a drain,

00:46:30.540 | but a person doing these things has learned nothing. Make a habit out of this and you'll

00:46:34.700 | become helpless and deadly afraid of losing your income, as the "work-spend" method

00:46:40.140 | only works as long as there is sufficient income. Hence, so much effort is expended

00:46:45.020 | on earning money, or finding ways to earn money, that people mostly don't fail to work

00:46:49.780 | 40, 80, or even more than 100 hours each week, leaving little time to question their lives

00:46:55.580 | or otherwise get in trouble. Of course, being overworked comes with its own problems, such

00:47:00.100 | as stress, insomnia, and high blood pressure, but typically these problems can be solved

00:47:05.180 | by spending money to eliminate, or at least cover up the symptoms, money that, ironically,

00:47:11.940 | has to be earned by additional work.

00:47:15.020 | In many ways, modern society seems to be using a slightly more complicated version of a Keynesian

00:47:19.700 | economic stimulus scheme, where the economy is stimulated by having some people dig a

00:47:24.060 | hole, then having others fill it back in the next day. We create problems, spend the next

00:47:29.700 | day solving them, and then claim we have made progress. We're even following Keynes'

00:47:34.900 | suggestion quite literally when we dig resources out of the ground, fashion them into consumer

00:47:40.260 | objects, temporarily store them in our homes, rarely use them, and eventually replace them

00:47:45.260 | with a new and bigger model, while sending the old and likely still functional object

00:47:49.880 | to a landfill back in the ground. Sure, this increases economic growth, which is a measure

00:47:55.220 | of how busy people are turning their money over, but is being busy a good measure of

00:48:02.060 | wealth?

00:48:04.500 | For years I've been wondering whether there is a small group of cynical people who are

00:48:08.620 | pulling our strings and intentionally creating problems so that others may solve them, or

00:48:14.340 | whether we're all pulling each other's strings because we're too busy paying attention

00:48:18.540 | to day-to-day problems like paying bills, going to work, and keeping up with all the

00:48:23.620 | shows on TV. Seen from the outside, the above-mentioned behavior makes no sense. However, when seen

00:48:31.300 | from the inside, everything makes perfect sense, because personal values and personal

00:48:36.740 | behavior eventually become aligned with the interest of the status quo. Having a job so

00:48:42.340 | that the bills get paid and one can go back home every night and pass out in front of

00:48:46.060 | the TV is what the good life is all about, right? Most people would agree, because most

00:48:51.980 | people can't imagine any alternatives. They are, in other words, prisoners, chained to

00:48:57.300 | the floor in Plato's cave. To break away mentally, one needs to be conscious of the

00:49:02.260 | fact that one is chained to the floor in Plato's cave. The best way to understand this is to

00:49:07.140 | see the cave, that is, your current perspective, from a different perspective, namely, looking

00:49:14.060 | into the cave from the outside. Here is what I see. Education and training. Children naturally

00:49:21.840 | try to emulate their parents, at least in the early years, and for the most part a child's

00:49:26.100 | values are a direct reflection of his parents, either conformingly aligned or diametrically

00:49:31.140 | opposed. Traditionally, parents have played a large role in their children's upbringing.

00:49:36.580 | Through watching and emulating, children learn life skills such as respect for others, the

00:49:41.380 | virtue of doing chores or performing a day's work for a day's pay, balancing a checkbook

00:49:46.420 | or keeping track of money, how to judge value, how to get good deals, eat inexpensively,

00:49:51.180 | cook a meal and do dishes, bake, bread, clean, declutter, ride a bicycle, tend a garden,

00:49:56.060 | hang up a shelf or fix a plug drain. However, as people have increased their expenses, households

00:50:01.780 | now require two incomes. And thus, as it so often goes in our time, parents have outsourced

00:50:07.900 | their children's upbringing. And possibly taking a lesson from their own situations

00:50:12.140 | as wage slaves, they now act as managers of their children's lives and careers rather

00:50:17.200 | than as role models, signing them up for the extracurricular activities that are so very

00:50:21.500 | important for their resume to get into their dream college. What happened to spending all

00:50:25.860 | day kicking a rock around or catching frogs in the creek? For that matter, what happened

00:50:30.740 | to the frogs? Fortunately, most of the skills necessary for success as a consumer and wage

00:50:36.100 | slave are taught in the institutions of the public school system. It's not the subjects

00:50:41.140 | that are taught so much as it's the way they're taught. During children's typical 12-year

00:50:45.700 | stint in the public school system, the most successful, read, well-adjusted, learn not

00:50:52.140 | to question authority, not to ask questions which don't pertain to the task at hand,

00:50:56.340 | to follow procedure, that trying is better than doing, to be a team player and not to

00:51:00.900 | stand out. Most importantly, children are trained to sit still for increasingly longer

00:51:05.620 | time spans while doing mentally menial, busy work. During recess, children learn the importance

00:51:11.540 | of being well-liked and fitting in, that is, being unique and special within a certain

00:51:16.580 | restricted range. These are the essentials for later success on the job. If it wasn't

00:51:21.740 | for this behavioral training, the limited subject matter that is actually taught could

00:51:25.740 | be accomplished much more quickly. However, imagine what would happen if 12-year-olds

00:51:30.220 | with the same intellectual power as high school students, but without the acquired discipline

00:51:35.500 | and dulled creativity to sit still and follow boring work procedures for extended periods,

00:51:40.740 | suddenly flooded the job market. Would they even want a job?

00:51:45.820 | The mass education in high schools reflects the mass production of the real world. The

00:51:49.940 | teaching style has one teacher, supervisor, lecturing, leading, 20-25 students, workers,

00:51:58.020 | sitting in rows much like a manager and his employees. Practically all problems that are

00:52:02.740 | presented are closed form problems where there is only one answer that, by construction,

00:52:08.460 | can be found using the methods in the textbook. The subjects taught are selected to be testable,

00:52:14.100 | preferably using standardized exams with predefined answers. This means that most subjects are

00:52:19.220 | mechanical rather than organic in nature, in the sense that they have a well-defined

00:52:23.380 | problem with an easy, step-by-step method of arriving at a solution, rather than an

00:52:28.940 | open-ended problem with non-linear and complex solutions. There is therefore an advantage

00:52:33.820 | to focusing on memorizing the textbook rather than attaining a broader understanding. This

00:52:39.020 | is excellent training for intelligently following procedure, but also a powerful counter-training

00:52:44.980 | against using intelligence creatively. The testing structure is fairly simple. Some

00:52:50.420 | chapter in the book will have a paragraph which reads, "There are three known instances

00:52:54.100 | of" while the test will have a question, "Name the three instances of." This is

00:52:59.300 | not much different from a job where there are three kinds of burgers for sale and the

00:53:03.220 | cash register has three pictures of burgers (press the correct one) or three kinds of

00:53:07.540 | situations with three different forms to fill out one for each. This kind of education doesn't

00:53:12.820 | instill much permanent information and it doesn't require a much deep understanding

00:53:17.420 | of the fundamentals. It doesn't instill knowledge and it certainly doesn't instill

00:53:22.380 | wisdom. In that sense, I guess it's much like the news media. What it mostly does is

00:53:27.740 | to test the student's intelligence and short-term memorization skills and their willingness

00:53:33.300 | to use these talents to maximize their test scores and grades. It's fortunate that most

00:53:38.540 | office jobs don't require much prior knowledge from the job applicant. The procedures for

00:53:43.300 | most jobs can be learned by a sufficiently intelligent person with a sufficiently good

00:53:48.140 | memory and the conditioning to concentrate on the same task for long hours. Most employers,

00:53:53.660 | however, don't hire people without the required proof of achievement and conformity, that

00:53:58.100 | is, a degree. Meanwhile, many subjects that could be taught

00:54:02.620 | in school are not. It's probably safe to say that the adolescent children growing up

00:54:07.660 | in a primitive tribe understand the world around them by the time they reach adulthood.

00:54:12.740 | They know which plants are safe and which are poisonous. They can hunt and cook and

00:54:17.460 | they know the real nutritional value of various foods. They can clothe themselves. They know

00:54:22.580 | how to fix and even build a house. They know about sex and having children. On the other

00:54:27.860 | hand, people in our advanced civilization know practically nothing about our world.

00:54:32.780 | Despite being wholly dependent on technology for all our needs, few understand how technology

00:54:37.460 | provides us with light, heat, food, communication, transportation, etc. All we know is how to

00:54:43.660 | turn on the ignition and press a button so technology magically performs its intended

00:54:48.460 | function. Despite their "education," students are still left to magical thinking and are

00:54:54.700 | thus unable to understand the direct causes in the world around them. Specific functions

00:54:59.740 | are thus associated with specific, brand-name products rather than the operating ingredients

00:55:05.140 | and construction of the product. It would never occur to them that the majority of their

00:55:09.580 | collection of 20 different and highly advertised cleaning products could all be replaced with

00:55:14.620 | the vinegar and baking soda which people used to use. It would never occur to them to chop

00:55:19.780 | garlic with a knife instead of using one of the many different designs of a garlic press.

00:55:25.420 | This product-oriented thinking extends to health. The connection between lifestyle and

00:55:30.980 | health has been lost. The focus has moved from a healthy lifestyle to affordable health

00:55:36.300 | insurance, making health a product rather than a state of being.

00:55:41.820 | Cardiovascular problems resulting from stress and a lack of exercise can be solved by purchasing

00:55:47.060 | triple bypass operations and popping specialized aspirins. People have heart attacks because

00:55:53.180 | they don't see the connection to their stressful, unhealthy lifestyles, and people die from

00:55:58.260 | heart attacks despite being surrounded by bystanders because practically none of them

00:56:02.660 | knows CPR or basic first aid. Critical thinking has been replaced by opinions derived from

00:56:08.740 | pundits and political and religious leaders since people prefer having other people think

00:56:13.300 | for them. World affairs are replaced with celebrity reporting, and satirical news is

00:56:18.500 | often more analytical than real news. In conclusion, after "growing up," the only thing children

00:56:25.500 | know is that problems are solved by buying products. In order to buy something, one needs

00:56:30.940 | a job, and in order to get a job, one needs a college degree, which happens to be considered

00:56:35.760 | a brand name product as well.

00:56:40.260 | The author goes on, talks about college degrees, which is an interesting conversation since

00:56:45.300 | he himself has a PhD, talks about careers, talks about specialization, which is a fascinating

00:56:58.460 | concept. The one thing I'm going to add is I want to read three paragraphs on careers,

00:57:06.100 | and then we'll probably get close to wrapping up this, we'll wrap up this podcast with just

00:57:12.900 | some comments, kind of my interpretation.

00:57:18.180 | Career. Most career people's lives are dominated by schedules and procedures. They get up at

00:57:24.260 | the same time every day. They take the same route to work, and sit at the same desk, and

00:57:29.460 | do the same things day in and day out for many years. At the end of the day, they go

00:57:33.980 | back along the same route. They have various chores and activities scheduled until they

00:57:38.620 | go to bed at the same time. Maybe they occasionally go to a restaurant, the movies, or a sports

00:57:43.820 | event. Weekends are like evenings, structured around chores that didn't get done during

00:57:48.780 | the week, like laundry, cleaning, and sleeping. Vacations are arranged in the same manner.

00:57:54.660 | If not taken between job transitions, vacations are spent a few days here and there as people

00:57:59.300 | spend one day traveling and then frantically go around and try to see everything they want

00:58:03.260 | to see before they head back, exhausted. The reward for running on this treadmill occurs

00:58:08.040 | not through the satisfaction of doing a good job, but from the semi-monthly paycheck.

00:58:18.380 | On top of that, everyone seems to want a cut of your earnings. The harder you work, the

00:58:22.740 | greater the cut. The tax authorities want their cut, and the more you work, the more

00:58:26.660 | they want. People want money to manage the money you don't spend, and money to take

00:58:31.500 | care of the things that you don't have time to take care of yourself. This requires more

00:58:35.540 | work and hence even more costs in terms of daycare, business clothes wear and tear, expensive

00:58:41.260 | haircuts, power lunches and snack bars. People run harder and harder, but somehow don't

00:58:46.740 | seem to get ahead. Continuously bleeding money as luxuries become wants, wants become habits,

00:58:53.060 | and habits become needs. And so they slowly die a financial death by a thousand nibbling

00:58:58.620 | ducks. Living to work and spend, it's not surprising that people derive their main identity

00:59:03.920 | through their job title and their purchases. What do you do for a living, and which brand

00:59:08.120 | names do you buy to express your lifestyle? Despite a doubling of productivity over the

00:59:12.860 | last two generations, our culture has still perpetuated the old ritual of 8 hours of work,

00:59:18.700 | 8 hours of sleep, and 8 hours of spare time, even though this should have been reduced

00:59:22.820 | to 4 hours of work, 8 hours of sleep, and 12 hours of spare time by now.

00:59:33.780 | Decreased wages lead to an employer preference for longer work hours. Also, employers have

00:59:38.300 | fixed costs and thus prefer workers to work the capitalized assets as hard as possible.

00:59:44.540 | By paying higher wages and limiting the number of jobs on high salaries, employers can make

00:59:50.340 | workers compete for these jobs. Advancement doesn't work on the model of a ladder as

00:59:54.880 | much as that of a pyramid. As workers spend more time on the job, it leads to a dependence

00:59:59.240 | on the job since little time can be spent on alternative pursuits. Having several income

01:00:04.200 | streams is in fact highly dangerous to worker motivation. This is why capital income is

01:00:09.060 | generally cordoned off into special retirement accounts with penalties for withdrawal. This

01:00:13.820 | is also why many employers discourage workers from working competing or even non-competing

01:00:19.060 | jobs. In addition, debt plays a major role in locking people into working for most of

01:00:24.240 | their lives. It used to be that marriage was seen as a lock-in. Unlike a bachelor, a husband

01:00:29.360 | would need a job to take care of his dependents. Today, this is no longer the case and being

01:00:33.820 | single is more of a lock-in since the family income isn't diversified by a working spouse.

01:00:46.700 | Our culture was founded on the idea that maximizing production equals maximizing happiness. In

01:00:52.540 | the past, pursuing this goal was admirable since any increase in production resulted

01:00:57.100 | in an increase in well-being. Better food, better medicine, better clothing, better housing,

01:01:01.700 | better work, and better living. At some point, the focus changed from "better" to "more".

01:01:07.920 | More food, more medicine, more clothing, more bedrooms, more bathrooms, and more work. But

01:01:12.780 | can we honestly say this still results in better living and greater well-being? To me,

01:01:24.460 | this is a question that's probably enough. This book is probably one of my most highlighted

01:01:48.580 | three pages. I'll read two more quick pages in the book that I think should help to challenge

01:02:10.940 | our thoughts. For many, status is associated with expensive items thought to be fitting

01:02:22.220 | for someone with a higher salary. Certain jobs are associated with certain levels of

01:02:27.020 | spending. This means that the price itself is often considered a complementary good.

01:02:33.020 | The item is considered desirable simply because it's expensive. This locks one into a spiral

01:02:38.940 | of upgrading. An expensive shirt leads to the purchase of an expensive suit. The car

01:02:44.460 | must match the expensive home. An increase in pay allows one to buy goods which previously

01:02:49.780 | seemed like a luxury. Another increase leads to another upgrade. Soon, these become a normal

01:02:56.100 | part of life, and people start identifying with them. When you identify with an object,

01:03:01.300 | you're defined by the object, then controlled by it, and ultimately owned by it. If you

01:03:06.860 | relate to your possessions, you're owned by your stuff, and it will make many of your

01:03:10.660 | decisions for you. This trap is not only mental, but also physical. When moving into a new

01:03:16.420 | place, there's a tendency to rapidly fill all rooms with furniture and TVs, and perhaps

01:03:21.780 | there's a taboo against empty rooms. Those extra rooms, which are rarely used, the so-called

01:03:29.900 | media rooms, the basement bar, the crafts room, are then used for storage space, and

01:03:35.140 | slowly fill with stuff that people need, yet never use. In fact, in many houses, those

01:03:41.420 | rooms, like attached garages, serve no purpose other than storing unused stuff and furniture.

01:03:47.820 | This of course makes it challenging to move into somewhere smaller. In particular, the

01:03:52.260 | very idea of moving is rejected, because it requires too much effort. So not only are

01:03:57.700 | people attached to their stuff, they're also attached to their homes. Continuously

01:04:02.220 | accruing stuff soon makes any home too small, regardless of its size. Therefore, much effort

01:04:07.340 | has gone into optimizing total square footage, including repurposing the garage and parking

01:04:12.460 | the car on the street. People don't seem to realize that the quest to bring more possessions

01:04:17.460 | in through the front door is a chronic disease, and that the shortage of space is a symptom

01:04:23.020 | rather than an underlying problem. Consequently, modern homes are mostly big, poorly constructed,

01:04:29.020 | poorly located, and financially leveraged. Like the big gas guzzlers used to drive back

01:04:33.780 | and forth to them, they're very energy intensive, and thus, in light of nascent resource constraints,

01:04:42.420 | are also outdated and old-fashioned. Ironically, buying things is often used as a "deserved

01:04:48.820 | reward" for hard work. Why don't you go and buy yourself something nice? The idea

01:04:53.500 | is that work is drudgery, so in order to ease the pain, the money earned working is spent

01:04:58.040 | on some gadget, thus requiring more work. This spiral makes little sense, so either

01:05:04.220 | work isn't so bad, or perhaps there is another reason for this behavior. One reason may be

01:05:09.700 | that many people are salaried full-time employees. They can't choose to work any less, so they

01:05:14.580 | might as well spend the superfluous money they earn. As a result, no matter how much

01:05:19.300 | someone earns, expenses tend to match income. This is called lifestyle inflation. Without

01:05:28.220 | the wisdom to determine when enough is enough, consumption is taken to its extreme, and people

01:05:35.740 | still work as much as ever, if not more, despite doubling their productivity over the last

01:05:41.640 | half century. On the home front, the growing use of time-saving technology doesn't result

01:05:47.520 | in time saved either. Rather, it results in more being done. For instance, thanks to the

01:05:53.360 | washing machine, clothes are now washed more than ever before, and as a result, households

01:05:57.760 | spend as much time doing laundry as they did before washers moved into people's homes.

01:06:02.600 | It seems to be a tragicomic fact that every time-saving invention is immediately cancelled

01:06:08.140 | out by an increase in activity or a change of behavior. When the automobile was made

01:06:13.720 | affordable to the masses, people moved further away from work and further away from the stores.

01:06:19.800 | While transportation speed increased, transportation distance increased proportionally, keeping

01:06:24.500 | transportation time constant. It did, however, result in the creation of the auto industry,

01:06:30.720 | and thus created jobs. On the surface, job creation may look positive, but all it has

01:06:36.480 | accomplished is to replace a previously simple and non-economic activity such as walking

01:06:42.040 | with an entire industry of building cars, highways, and oil rigs to accomplish the same

01:06:46.800 | task of getting between places. Cars can go many places, but most trips can just as easily

01:06:52.800 | be done in an hour of walking by choosing one's home location wisely. If you wish

01:06:58.580 | to go further, there are other means as well. Many other activities which people used to

01:07:03.240 | do themselves have also been turned into products. Consequently, people spend time working to

01:07:08.760 | buy products rather than learning and doing the activity themselves. The result is a downward

01:07:15.000 | spiral of fewer skills. Greater need for technology leads to more work, which leads to less time

01:07:22.620 | to practice the remaining skills, which leads to further loss of competence. The more things

01:07:29.440 | consumers think they need, the more control they relinquish over their lives, and the

01:07:34.720 | more their lives are shaped by the products they own.

01:07:39.560 | Thanks to the focus on technology, many skills have been forgotten. Eggs can't be boiled

01:07:43.920 | without egg boilers, bread can't be toasted without a toaster, and the counter can't

01:07:48.640 | be cleaned without dye-colored chemical products. Walking five miles is now considered an ordeal

01:07:54.040 | to be avoided. Nobody with a conventional frame of mind would spend one hour walking

01:07:58.660 | every day when they could drive. Yet people don't stop to reconsider spending ten weeks

01:08:03.000 | each year working full-time to pay for that car just to avoid the inconveniences of a

01:08:08.480 | daily hour of laborious walking and fresh air.

01:08:15.440 | The idea of economic growth seems to be a very intricate version of digging holes and

01:08:19.680 | filling them up again. It creates economic growth in the traditional sense, but so does

01:08:24.840 | breaking a window and replacing it. What is ignored are wasted effort and natural resources

01:08:29.800 | which should be subtracted from the growth calculation to reveal a more accurate number

01:08:34.080 | of how well people, not the economy, are doing.

01:08:39.080 | I've probably read enough of the book. I hope Mr. Fisker is pleased that I think highly

01:08:59.800 | of him. We're going to talk a lot about tactics. We're going to talk about how to save money

01:09:12.400 | on phone bills, how to save money on internet bills, how to save money on living expenses,

01:09:18.080 | how to save money on taxes. I love tactics, but ultimately you need to know what you're

01:09:24.160 | doing and why. You have to answer the why question first of all. If this entire approach

01:09:31.960 | of the things that I've read about make sense to you, that's fine. It's a free world. It's

01:09:36.760 | a free country. You can do as you like. You can live where you want in the manner that

01:09:40.680 | you want and you're free to do that and I think that's awesome. We live today in a world

01:09:48.080 | that is incalculably better than it ever has been at any time in the past. Incalculably

01:09:56.400 | better. Today people have better, even with everything I've just read, people have better

01:10:01.040 | standards of living, greater abundance, more free time than they've ever had in the past

01:10:08.600 | and that's amazing. The various technologies that have been developed to help people achieve

01:10:14.920 | this are truly incredible. But question, why stop with that? Why not spend time figuring

01:10:25.200 | out exactly what you want and then structuring your life around it? There are always ways

01:10:33.640 | to exploit the system, but in order to exploit the system you have to be willing to step

01:10:37.680 | outside of it. Each and every system can be exploited in our country. I use the word exploit

01:10:44.880 | in a very positive way without any negative connotation. Understand the rules and then

01:10:49.960 | work within them. That's where the great value is. But if you spend the majority of your

01:10:56.160 | life living according to someone else's rules and you get to the end of your life, are you

01:11:04.000 | really going to be pleased that in your eulogy your best friend says that you had the greatest

01:11:10.680 | collection of high quality consumer gadgets? There's a huge difference between the way

01:11:17.640 | that the wealthy think and the way that poor people think. Wealthy people surround themselves

01:11:29.440 | with the luxuries of life. Many wealthy people do. And these luxuries of life enhance their

01:11:36.120 | standard of living. But the true freedom comes from having the wealth, not from having the

01:11:43.800 | luxuries of life. It seems like in so many ways the US American society has worked to

01:11:52.240 | try to get people to spend time putting in, increasing their

01:12:03.200 | standard of living instead of enhancing their quality of life. We're going to talk about

01:12:09.800 | these things. For example, it doesn't make any sense to me why you have to spend hundreds

01:12:14.680 | of thousands of dollars for housing when there are construction methods and techniques that

01:12:19.920 | are extremely robust that use practically free materials to create comfortable, modern,

01:12:27.000 | wonderful homes for merely thousands of dollars or tens of thousands of dollars instead of

01:12:34.560 | hundreds of thousands of dollars. If you could live in a home that was built for $30,000

01:12:39.240 | or $40,000 that's just as comfortable as a home that was built for $300,000, why not?

01:12:47.600 | Why are our homes so energy inefficient? Why not create a home that's energy efficient?

01:12:52.200 | Not because I'm worried about carbon in the atmosphere and global climate change. I'm

01:12:57.800 | really not. I'm worried about a better standard of living and paying too much to heat and

01:13:02.000 | cool my house. Why do we spend 15, 10, 15, 20, 30, 40, 50, 60 minutes a day sitting in

01:13:12.840 | a car on a highway to get someplace that we don't really want to go? Now, if you said,

01:13:20.800 | "Joshua, you can trade your life today with the life of a subsistence farmer 100 years

01:13:26.400 | ago," I'd probably keep my modern lifestyle. I really would. But you know what? That subsistence

01:13:31.720 | farmer could walk outside of his door every day and do his work right there. It used to

01:13:37.040 | be that the storekeeper lived above his store. Why not anymore? I'm not too concerned with

01:13:46.680 | changing society. That's up to society to change and ultimately society will change

01:13:50.680 | when people change. What I do believe is there are better ways that we can do it. There are

01:13:57.120 | better ways to run our personal finances. There are better ways to run our financial

01:14:00.800 | plans. There are better ways to run the economy. And today, the future is brighter than it

01:14:06.160 | ever has been in the history of the world. For, I think it's $8, you can purchase this

01:14:15.800 | book that I've just read heavily out of. I'd encourage you to buy it and read it. And you

01:14:22.040 | can learn how to become financially independent in five years. I've spent most of the time

01:14:27.040 | on philosophies, but the book is chock full of both philosophy and strategy and tactics.

01:14:35.600 | Who knows, maybe in the future we'll come back and talk more about strategy and tactics,

01:14:39.040 | but I really feel bad reading the whole book on the air, but it's just such a wonderful

01:14:43.840 | resource. $9, the price of a meal out? Never in the history of mankind have you ever been

01:14:53.960 | able to, for the cost of one meal out, purchased from someone else, been able to purchase information

01:15:01.040 | that is available to you on a computer or a Kindle or an iPhone or an iPad or a tablet

01:15:05.920 | of some kind that you obviously have because you're hearing my voice, that would teach

01:15:10.520 | you how to become financially independent in five years. Now it's up to you whether

01:15:15.480 | or not you want to do it, and I'm okay if you don't. I personally am not too concerned

01:15:19.240 | about the five year plan. I'm more concerned about making sure the things I enjoy are enjoyable

01:15:27.440 | for the next year, two years, and 25 years, but it's pretty empowering to know that it's

01:15:34.840 | available. The opportunities are there. It's up to us to learn about them, educate them

01:15:44.840 | about them, and exploit them. The opportunities are there. The question is, do we understand

01:15:53.000 | what we really want, and are we willing to go after it? I hope that this has been helpful.

01:16:00.480 | I hope it hasn't been boring for me to read on and on. This book is not a financial Bible.

01:16:09.680 | Reading the one book is not going to solve anything, and that's the problem, is that

01:16:13.240 | a lot of times, you know, interestingly, I think Jacob Lund Fisker talks a lot about

01:16:20.480 | even the problems with the financial world and the problems with financial planning.

01:16:24.160 | You can't buy a product that solves your life. There's no product available in the financial

01:16:30.240 | services world. You can't buy a product from a bank or a brokerage company or an investment

01:16:37.680 | company that is going to solve your problems. There are lots of financial products available,

01:16:42.800 | but that's the problem. They're products. Now you can choose as an individual to use

01:16:49.820 | a product to help you solve what you're doing, but ultimately, you need to understand what

01:16:54.600 | it is and how it's useful and what's going on for it to be helpful. Otherwise, you're

01:17:02.440 | going to stay stuck in the same consumer cycle. Hopefully, this has been helpful. I've enjoyed

01:17:11.600 | reading this book again. Buy it today. I'll put a link in the show notes. Buy it. I promise.

01:17:23.940 | Buying this product, $9 or whatever the Kindle version is, or buy the paperback, it's worth

01:17:28.580 | it. If you don't have the money, don't. Go to earlyretirementextreme.com, read some of

01:17:34.340 | the essays. We're going to feature a lot of other financial writers, but Jacob's one of

01:17:38.660 | my favorites because he gives frameworks that can be applied in every circumstance. Instead

01:17:46.140 | of saying save money in your 401(k), which when you go to Canada, you don't have a 401(k),

01:17:51.940 | or if you go to Ireland, you have something different. He talks about a robust strategy

01:17:58.380 | and framework for life that can be applied. We'll get into more and more techniques and

01:18:03.820 | tools as time goes on, I promise. Consider starting with that. Consider your why. Realize

01:18:14.620 | that for every choice that we make, there's an opportunity cost. The choices that we make

01:18:21.480 | have a cost in that we're not able to do other things because we're making the current choices.

01:18:27.340 | We'll talk about opportunity costs in the future as well. In my example from yesterday,

01:18:36.420 | if you were given the choice, would you choose to visit 100 countries or would you choose

01:18:41.140 | to buy an SUV? Because that's your choice. If you were given the choice, would you choose

01:18:48.780 | to go to work every day, to leave a house that sits empty and chilled or heated while

01:18:54.660 | you're there, and work in a cubicle or work in a job that you love, I'm okay with either

01:19:00.820 | one of them, so that the walls can be pretty and painted accordingly and so that your driveway

01:19:05.600 | and parking lot can have the proper brand of automobile in them? Or would you choose

01:19:09.860 | to have your freedom and to do the things that you love every day? In the founding documents

01:19:18.300 | of the United States of America, it says that man has an inalienable right granted by his

01:19:24.180 | creator to life, liberty, and the pursuit of happiness. So my question to myself and

01:19:33.260 | also to you is this, are you filled with life? Do you have a life? A real life, not just

01:19:43.420 | physically, but also physically. Are you physically alive? Are you healthy? Are you filled with

01:19:50.660 | vibrancy and health and ability? Is your life the life of your choosing and your creation?

01:19:58.700 | Are you free? Do you have liberty? There's a certain amount of liberty that's given to

01:20:03.860 | you as an individual, but here's the question, have you given some of it up? Have you sacrificed

01:20:08.520 | your liberty for stuff? Have you sacrificed your liberty to meet other people's expectations

01:20:16.220 | of you? And are you truly free to pursue happiness in the way that you define happiness? Again,

01:20:26.360 | I'm completely okay if you define happiness in a consumerist way. We're going to talk

01:20:30.980 | about some ways to get a lot of consumer stuff at a really good price. Hopefully that will

01:20:36.380 | help you to be more happy. That's totally cool. But did you make that choice consciously

01:20:42.180 | or did you choose it because that was what society chose for you? With that, I'll wrap

01:20:48.940 | up for the day. Again, this is Joshua Sheets. This has been episode three of the Radical

01:20:54.300 | Personal Finance podcast. Hope this has been helpful. Leave some comments for me. Encourage

01:20:58.900 | me learning how to do this little by little. I'm going to get better. Excuse my roughness,

01:21:07.140 | but give me some insight into what I can say and do that can help you. What questions do

01:21:12.340 | you have? What resources can I bring? I'm still crafting my vision for the show. Still

01:21:17.700 | trying to figure out exactly how it's going to work. So it's very open. I'd love to know

01:21:23.220 | what you would like to, what would be helpful for you. Leave comments in the questions.

01:21:30.220 | RadicalPersonalFinance.com/episode3 if you want to find the show notes. I'll put some

01:21:34.780 | links in here as well to the book, to Jacob's blog, to some of the other resources that

01:21:39.540 | I mentioned. Have a great day.

01:21:41.300 | [CLACKING]

RPF_0003_-_Book_Review_and_Commentary_on_Early_Retirement_Extreme_-_A_philosophical_and_practical_guide_to_financial_independence