Net Worth

An email conversation between a few friends and myself on net worth. My thoughts follow.

Began with two of us stating we didn’t really like this article

And then somewhere I noted that my goal was 10 million in net worth for financial security and independence and concluded a long rant (included at the end) with this paragraph:

Ultimately, perhaps: Do what makes you happy. It’s fine if it makes you happy for the standard reasons - as long as you’ve thought it through and are sure it will truly make you happy, do it. Try to maximize happiness both now and in the future. Maximizing happiness in the future gives the greatest returns since there is more of the future than there is of the now…but then again, we are young now and won’t be in the distant future, so there is a strange thing to be said of the particular quality of life and the variant opportunities afforded only in certain stages, and perhaps that should be taken into account.

A reply:

I would extend your ultimate conclusion (and Michael will like this): Do what makes you happy, and do it well. Doesn’t matter what it is – you’ll likely be contributing to society and affecting lives in some way (okay fine maybe not for high frequency trading or something).

Ben: Why 10mm in particular (as opposed to 5mm)? Why net worth (as opposed to income)? When do you need to reach this by (i.e., at what point, if you haven’t reached it yet, would you consider yourself to have “failed”?) And what is your planned strategy for this? There are many ways to achieve wealth: Tech entrepreneurship, finance/management consulting, trading, etc…

My response, explaining my 10 million reasoning:

Great addendum. I’m a huge fan of doing shit well, and I really like the title of Cal Newport’s book on its own: so good they can’t ignore you. I think the world would definitely be a better place if everyone tried to focus on getting really good at something, or even somethings.

As for why 10mm as opposed to 5mm, 10mm (totally irrelevant aside, but I was so proud when I finally learned why mm stands for millions - because it’s a thousand thousand) gives an interest of $500,000 at 5%. Ideally I’d want to reinvest like half of this back into the lump sum to partially offset inflation, which is a reasonable offset given recent historical inflation rates, and then live off the other half.

This is a really good article on net worth my cofounder posted a while back

So essentially, I’ve decided to myself that ~250k a year at the current value of money (hopefully things don’t change too much by the time I actually get this money) is enough for me to comfortably live like I want. This is taking in account the possibility of having a family and needing to at least partially support that family and wanting to do things like travel around the world and skydive and sailplane and take occasional tourists shuttles to outer space and random shit like that that will add up over time. I place very little value in personal possessions like cars, watches, and paintings and shit like that so those are not really concerns of mine.

An interesting counterpoint to this is Tynan’s Polarizing Purchases article

Anyway, so like the BI article notes, the ideal is to be able to live off passive income. If your net worth isn’t decreasing and you can sustain yourself pending global collapse (which is why you also save money on the side for an apocalypse shelter), that’s the golden benchmark of financial security. The second best thing is to have enough money to support yourself until you’re dead. But for someone like me who puts faith in the notion that immortality is somewhere around the corner, this essentially approaches a limit equivalent to a non-decreasing net worth.

As for why I want this to be net worth as opposed to income, the answer is in my underlying desire for financial security. Income isn’t secure - if the stream of income is lost, I’m fucked until I get another stream of income. Having enough income for me to do what I want gives me financial independence in the present term, but not necessarily in the long term. And since I like to take into account worst case scenarios to a fairly strong degree (see: apocalypse shelter), in the remote chance that we do not in fact attain immortality and I do in fact age to decrepitcity, if I don’t have enough net worth accumulated then to live off my passive income, I’m fucked unless my kids are able to support me. And since we’re talking worst case scenario here, my kids hate me (long story) and would rather see me dead.

So yeah, it all comes down to ‘what do I need to be as self-sufficient as possible in as many situations as possible for as long as possible’? 10 million is my answer to that question.

Failure? Comes in degrees. 1st tier of failure would be age 30, since my youth would be gone by then and I wouldn’t be able to enjoy the fruits of my labor in the peak of my life/health. 2nd tier of failure would be age 40, since I’d be rapidly approaching active deterioration of health by this point. Then 50, since I’m now officially old by my standards and have exceeded the average life expectancy at the turn of the 20th century, and there are many things I can no longer appreciate to full extent with my financial independence, such as active/extreme sports. And progressively onwards - obviously 10 year benchmarks are arbitrary, and in practice this is really experienced as a steady linear progression with regard to time. So 35 is halfway in between 30 and 40 in terms of perceived failure.

This is because I don’t necessarily plan on stopping my pursuit at any given point just because I didn’t hit certain benchmarks. Though I imagine perhaps by the time I’m 60 or so at current rates of physical aging I might just be like fuck it, it’s not worthwhile to keep pursuing financial freedom for the future at the expense of the present since there’s so little of it left, and just enjoy life as I’d like to with whatever net worth I’ve managed to accumulate and then when I run out go out on a good note and go for a final skydive without a parachute (this is why I eat the best food on a plate last - it’s the last bite that lingers…all’s well that ends well…and vice versa)

Planned strategy for doing this? Do what makes me happy, and do it well.

PS: I wanted to end on that note dramatically, but I feel it needs further clarification :p. The reason I don’t just do what’s most likely to net me my ‘number’ even if I’ll hate it (say, investment banking) is because money is ultimately a means to an end, and I’m aware of that. The end is satisfaction by achieving and experiencing the things I want to achieve and experience. Not only is doing something purely for the money not satisfying to me, but also one of the things that is satisfying to me is achieving my money through building/inventing something. Creation - that’s deeply satisfying to me.

Also, satisfaction in the present does count for something. So overall, I’d like to maximize my satisfaction (I prefer the term satisfaction over happiness) over the entirety of my life, and throwing away a good chunk of it for the chance of making my ‘number’ does not seem like the best way to achieve that goal.

The other option, however, of doing something that is deeply satisfying in and of itself (such as building a company) for the chance of making the number does seem like the best way of maximizing my satisfaction. Even if I fail to hit my number, I probably won’t regret it that much and it’ll still be far more of a satisfying experience than the alternative ‘what if’? Like Bezos says, Regret Minimization Framework:

And my original reply, which isn’t that coherent but hopefully gets the point across:

Thanks for adding me Brandon!

Just read the article. Didn’t like it much. Essentially it seems this guy has made a career out of calling people sheeple and saying that they should think for themselves:

I have a problem with his statements like:

It means figuring out what you want for yourself, not what your parents want, or your peers want, or your school wants, or your society wants. Originating your own values. Thinking your way toward your own definition of success.

At some point, none of our values are or ever will be really our own. I love science and tech because my dad is a chemist and I pretty much grew up in a household that only valued science/tech. I have absolutely 0 appreciation for paintings. I slightly like The Scream and The Starry Night, and that’s about it. I can’t appreciate classical music, I have no regard for fine food and consider spending money on luxurious food to be a complete waste. Can’t appreciate dance. Some sports I’m kind of into, but the ones I really respect are primarily for their pragmatic functions - running and parkour for running the fuck away when necessary and martial arts for kicking the shit out of other people when necessary.

So yeah, I’m aware I’m definitely a product of my environment and that I am the way I am because of how I’ve been raised and what I’ve been exposed to, but the thing is because this is the way I’ve been raised it makes perfect sense to me. I can’t appreciate what Deresiewicz has chosen to do with his life at all, and that’s not because I haven’t thought of it (I have), but because I think of it through the tinted perspective that I hold which values pragmatism above most things.

Consequently, ‘What are you going to do with that’ is a very valid consideration. There’s a reason why people want to make money. It enables you to do a shitton of stuff. It gives you security, which in turns allows you freedom to truly do whatever the hell you want with your life, as your responsibilities to yourself and those dear to you will be reassuringly fulfilled. I’ve thought pretty carefully about it, and I’m pretty damn confident I’ll be much happier with about ten million dollars at my disposal than with only about fifty thousand. The marginal benefit will likely plateau from there, and I like this guy’s graphic a lot (scroll down about 20%):

Hence, if I choose to ‘fuck it’ and ‘self-indulge’ now in something like ancient history, and I also have desires like traveling the breadth of the world, taking up hobbies like skydiving/mountaineering/scuba-diving/space travel/deep-sea travel/flying, building an apocalypse shelter, and contributing to the expansion of scientific knowledge, I’m pretty much choosing not to indulge in those desires ever, since all those things require significant capital.

For me, a lot of the things I want to do most are things that I need a lot of money to comfortably do. So when I have the option to choose between pursuing something that I enjoy doing that will have the potential of netting me a lot of money and something that I enjoy doing but won’t, I choose to indulge in the former so that I’ll be able to self-indulge in the future as well.

Anyway. So I suppose how I feel about his point is that while it is of value, there was nothing really of novelty there and it is pretty much summed up literally as “Think for yourself”.

He also blasts every example he comes across as not being innovative but doesn’t give any counterexamples. I’m hard pressed to think of any examples that wouldn’t fall into the category of not being innovative as he puts it. Ah, don’t go to law school, drop out and create your own life, make a company or write a book or travel the world or make paintings or dance? Tons of people have already done that. Not innovative.

It’s not about being creative or different for the sake of being creative or different, it’s about doing what makes the most sense to get to where we want to be. Figuring out what our goals are, deciding if those goals are worthy, and then doing what logically seems like the best path to getting there.

All that aside, I have as many problems with needing external validation as anyone else, so some of my issues:
Constantly comparing myself to others (getting much, much better at this) and feeling like I’m not doing enough/I’m not doing the right thing/I’m screwing up my life forever
Feeling like I have to prove myself before I can be worthy of doing things like giving other people advice
Feeling like I have to get things right the first time around and if I don’t I’m a terrible failure because someone else out there did it beter than me
Specifically, feeling like a part of my self-worth is dictated by my ability to reach my goal of a net worth of 10mm+. If I try for it and I can’t do it, then I have failed, and I’m not as good or as capable as the other people who have succeeded. And also all my advice was wrong.

So yes, a lot of my personal happiness, satisfaction, and self-worth is results oriented, because I’m a pretty pragmatic person. If there’s no tangible output, what good is it? I’m uncertain that this is per-se unhealthy - the dangerous part is in defining these results and knowing when to be satisfied/accept success when it comes. Delusion is a concern of mine.

Ultimately, perhaps: Do what makes you happy. It’s fine if it makes you happy for the standard reasons - as long as you’ve thought it through and are sure it will truly make you happy, do it. Try to maximize happiness both now and in the future. Maximizing happiness in the future gives the greatest returns since there is more of the future than there is of the now…but then again, we are young now and won’t be in the distant future, so there is a strange thing to be said of the particular quality of life and the variant opportunities afforded only in certain stages, and perhaps that should be taken into account.