if I are asked some questions about
personal finance I don't have a ton I
want to say about it but I have some
other things to say
you can read mainstream books on
personal finance and read Reddit and
it's okay you can find decent advice
I'm not driven by money I've never been
and I don't think you should be
in our society
been making a lot of money
does not correspond well with productive
achievement
the attitude you find to money in Atlas
Shrugged
has some reasonable points to it but it
is not very applicable in our world
today
most rich people did not become rich by
doing something very productive or
valuable
I'm in short anti-consumerism
I think people buy a lot of junk that
clutters up their home and then they
throw too much away and generate too
much trash and that whole thing is bad
and they shouldn't be wasting their
money like that
and then a bunch of businessmen
spend their time supporting that bad
lifestyle
or not just the party but frequently
encouraging at trying to cause it
um purchasing propaganda ads
to get people to do it trying to
manipulate people into doing more of it
than they want to
rather than helping people have better
lives
or if not helping people have better
lives directly at least only selling
things that are actually good
just don't participate in the bad things
in Atlas struct Lily and Reardon said
she didn't care about money but later
when she faces the possibility of actual
poverty and having to worry about paying
for groceries and rent
it turns out she does care about money
when I say I'm not driven by money I'm
not pretending that I don't care about
money at all having enough money to pay
your rent and buy groceries without
being stressed about it is really nice
that is a good thing that's valuable it
makes your life better being poor is bad
I don't mean it makes you a bad person
it's just a hassle it's worse for you
but I don't think being rich is
significantly better than being middle
class
if you have an average income you can
buy mass-produced and Mass available
things so mass-produced is like they
make in a factory really efficiently
they turn out tons of them so it is
Affordable to
people with below average incomes
and Mass available
is not manufacturing but is available to
many many many people an example it
would be Medical Services when you see a
doctor he gives you individual personal
attention that's not mass-produced like
a factory with an assembly line but it
is Mass available
so I think that the things rich people
can buy
that the masses cannot are not very good
apple does not make better computers for
rich people Coca-Cola does not make
better drinks for rich people
I think Coke is bad by the way
but even if Coke were good rich people
don't get a better version
Ikea and Costco and Craigslist for used
furniture sell perfectly good furniture
you don't need to spend five thousand
dollars on a desk like some rich people
do
that will not make your life better even
if you have the five thousand dollars I
would not recommend buying that desk
wanting your stuff to look nice
um and impress people is one of the main
reasons for spending five thousand
dollars on a desk
is not done primarily for utility
and I think having those kind of
expensive tastes either for yourself or
to impress others either way is bad
huge waste of money not productive
an atlas frog Jon gold has offered a big
pile of money near the end and he says
what good will it do him what can he buy
with that
if he's if he's going to buy anything
with it he would have to produce it
first he'd have to run the economy Get
It produced and then he'd get some of
the stuff he just produced but it
wouldn't be able to buy anything else
because there's nothing to buy that he
wants he already has the things he wants
in other words I do not envy the
luxuries of the wretch I don't think
they're all that nice
and you hear a lot of stories about how
the rich aren't actually happier
I think that's partly because all that
money doesn't actually buy them very
nice things if the things were actually
really all that awesome then more money
would to some extent bring happiness
because having much better stuff would
make you happier
it would make your life better
but money doesn't buy them happiness
because of the stuff they buy is not
especially better than middle class
people have
or at least have access to there are
middle class people who buy low quality
things
and make poor purchasing decisions
but
if they were Frugal and prudent and did
reasonable product research than middle
class people could have nice things
I don't think you should be ultra
minimalist but I think clutter actually
gets in your way and it makes your life
subtly worse
it's harder to do things when there's
clutter in the way in your home
I think the quiet quitting movement has
some good points that you should not do
extra work and take on extra
responsibility and pour your creativity
into helping a company
that does not respect you does not pay
you for extra work will not treat you
honorably we'll just let you off for no
particular reason because their
management are idiots who don't really
plan ahead like that could be why you
got fired
after you put in a bunch of extra work
that no one bothered to notice or care
about
so quiet quitting is about just doing
the minimum without actually quitting
and that is just what you should do as
your default at a job in general
do the actual job description don't do
extra work without being paid extra
I'm semi on strike like John gold I
think that
doing unique creative differentiated
work that they couldn't easily get from
someone else which helps power
structures or Elites is actually bad
that you shouldn't tell your unique
brain morality Integrity creativity Etc
if you're actually really good at that
stuff
to help Society
meaning current power structures
I think you should avoid helping evil
corporations like Google Amazon Coke
Nestle big Pharma big Banks Big Oil
tangentially
Alex Epstein gets accused of being a
shill for Big Oil and he thinks that's
ridiculous but he does in fact get paid
by the industry he has lots of access
and he never talks about how bad they
are he only says how good they are he
only says things they like to hear he
never says oh I know a ton of negative
stories about them let me share some I
will share both sides of this picture
and give a complete picture with
everything good and everything bad I
know about them he never researches and
then shares results about what is wrong
with those companies and what flaws they
have
maybe he's done a little of it somewhere
but like as far as major themes go I am
quite confident without even doing the
research that big oil companies have
huge flaws just like all other big
companies in our society
and Alex Epstein never talks about that
so he kind of is a show
and I think that what he's doing is
actually really bad and dangerous and
anti-objectivism because he has some
brains that most of them don't have he's
actually providing some unique value to
oil companies that they could not get
elsewhere he's telling them how to make
certain arguments that they didn't know
how to present themselves as more moral
than they even thought they were in
their own opinion
and he has some good points to that he's
put some some decent thinking into that
and then he's selling out to these bad
people and helping them
and he thinks he's um helping a good
cause because energy itself is good
electricity is good gasoline for our
cars is good I agree with that
industrial societies
definitely better than primitive Society
having
energy to replace muscle power
with machine power as a good thing
manual labor sucks so I agree with him
on that
but I think helping the big oil
companies when they're pretty damn evil
and doing it in a very one-sided way
is really bad I don't think that they're
particularly worse than other parts of
our society like
probably big Pharma and big banking are
worse than big oil if I had to wager a
guess without really looking into it
but I don't think that's much of a
defensive Big Oil
so I think most people it doesn't matter
that much they don't do work that's very
special or creative or whatever
but Alex Epstein had enough Merit that
him helping
current bad power structures is actually
harmful
and that he ought to be more on strike
more like John gold
he has enough virtues that it makes a
difference
in using it in service
of evil is evil
some types of work are safer than others
so science is an example of something
that's particularly dangerous if you
make scientific breakthroughs
the powers that be can use those for
their agenda
the worst example probably in general is
weapons research if you help them build
new weapons
they can use that to oppress people
and getting paid a lot of money does not
solve this problem
if the people who made nuclear bombs had
gotten paid millions of dollars each
which they weren't and that's kind of
lame
but even if they had been paid millions
of dollars of each it wouldn't really
make much difference it wouldn't solve
the problem
that now governments have nuclear
weapons and governments cannot be
trusted
On a related note
um I used to just be in favor of nuclear
power but now I think governments are so
irresponsible
that nuclear power might be kind of
unsafe and maybe we shouldn't have it
I'm not sure
I I think that a well-run nuclear plant
is fine and safe enough
but that governments do not maintain
power lines and infrastructure and Roads
very well and cannot be trusted with
nuclear plants and cannot be trusted to
regulate nuclear plants run by the same
kinds of CEOs that run Facebook
or Johnson and Johnson
nuclear plants are only safe if the
workers who run them have a significant
amount of morality of Integrity of work
ethic of being responsible reasonable
people who will be careful
and I'm not sure that our society our
government our big companies can be
trusted with that kind of thing and to
maintain that over time for decades and
for it to just be safe day after day
after day
I think it is bad that Alex Epstein has
a large monetary incentive not to think
that way not to say that not to come up
with that idea not to recognize that
risk
not to listen if I told him about that
idea
anyway so science
especially like hard Sciences
can help current Elites and people in
power
and there's a significant risk there but
if you're doing some kind of science
that doesn't matter much or social
sciences then it's a lot less helpful to
them
social sciences is a bit more like my
next example art which can help them
with propaganda but doesn't help them in
very practical ways other than
propaganda purposes
there's less of a danger of being an
artist
there is a danger I think artists do
frequently propagandize in favor of the
status quo the establishment of people
and power often without realizing it and
there are subtle incentives like they're
trying to figure out how to sell work
and it turns out
that um pro-society work sells better
than anti-society work
and sometimes they fool themselves or
they're like anti some like specific
little bit of society so they think it's
like a counterculture thing however
it also implicitly endorses some other
part of society so they think they're
making like anti-society work and
standing up to the man but they're
actually endorsing some other aspect of
the man
philosophy is an interesting case
because it's potentially very powerful
kind of like science
but
abstract philosophy is hard to use
without actually learning a lot of stuff
yourself in other words basically being
a good person it's hard for the bad
people to actually learn and use
abstract philosophy the more you turn it
into practical tips
then the more they might be able to use
it the more you break it down into like
flow charts they might be able to use it
and get value out of it there's a danger
there and also it can be used for
propaganda
a lot of bad philosophers
uh definitely along with other artists
and intellectuals and stuff
are in the propaganda Realm
another example I wanted to talk about
is a hair stylist or just any kind of
person working in fashion like say that
you do hair or makeup or clothing for
mainstream celebrities
of course if you do undifferentiated
normal work it doesn't particularly
matter someone else could do the same
thing but suppose that you're really
creative and you're passionate about
your work and you do a really great job
and so you help these celebrities better
Dazzle the masses they are more
effective at looking really cool and
impressing people that
helps with propaganda it helps make them
more effective as icons
and does that matter very much is that
actually a thing you need to avoid or is
it not really a big deal because
they're just promoting I don't know
being pretty and being sexy and I don't
know they do some like TV ads for some
consumers and stuff
um
I don't know what else they do you know
is that actually important and something
you need to avoid or is it not that big
a deal
compare whereas like helping them build
new weapons would be really bad
it's hard to say like I don't have a
strong clear
line of delineation I just think there
are concerns here
fortunately
I don't think you need to get really
rich so
the dangers that a lot of the ways of
getting really rich would support
existing power structures
it's not like you have to sacrifice
getting rich in order to avoid
supporting power structures because you
didn't need to be rich anyways
also most of you weren't going to end up
rich even if you tried your very best to
suck up to existing power structures
a few more thoughts on financial
Independence which was part of the
original question
so money ownership of things passive
income other wealth are not safe over
time The Government Can conscious data
they can inflate the currency you can
make the wrong investment stocks or
bonds can crash
there are scams fraud phishing theft
you can be the victim of a lawsuit of a
natural disaster of medical bills there
are a lot of ways to lose your money or
have your plans for the future not work
out how you wanted them to
capability to earn as broadly safer not
entirely
that's a lot harder to be confiscated or
inflated away because if you do work
in the future you're going to get paid
future Market rates if they inflate the
currency a bunch
and then you do work after the inflation
you'll get paid
wages that are going to buy you food at
current market prices
I think it's bad to try to work really
hard now in order to not need to work
later
I think you shouldn't try to plan ahead
quite that much it's not safe and
you should try to have a nice life now
don't sacrifice your life now work a
reasonable amount now and also do some
things you like
and then plan to work a reasonable
amount later and do things you like
rather than trying to put all the work
now and all the like fun or benefit or
Hobbies or whatever it is you care about
later
don't try to skew things and try to have
the good things in the future try to
have a good life now try to learn about
rationality now if that's something you
want to do fit it into your life today
anyway I'm not sure if I ever stated
before that advertising tries to
manipulate people into buying a bunch of
junk they don't need and that kind of
consumerism and rat race stuff is bad
and I think you should opt out
my lifestyle in many ways looks more
like a leftist anti-capitalist
than some pro-capitalist pro-business
person even though as far as economic
theory goes I agree with capitalism
hi guys I'm back the next day to add two
more points first of all the government
encourages consumerism it's not just
companies and advertising
it's also their keynesianism and
stimulus stuff like that
the government thinks it's important
that there is high consumer spending and
an active economy and stuff like that
the government is not encouraging the
capitalist approach of accumulating
capital of saving
in order to have more capital
accumulation in order to increase the
productivity of Labor
they actually have anti-savings policies
including intentional inflation they
have a goal rate for inflation
that's maybe two percent per year we'll
look it up if you actually care
so having an inflation rate on purpose
discourages savings and courageous
spending not a ton because it's
reasonably small but it is some
incentive
and it is just one policy of many
all right and then point number two that
I wanted to add was to talk about
passive income which is overrated
so there are a few errors people make
about passive income
and there's also two comparisons I want
to make so the first one is passive
income versus active income
this is the main point of it and active
income means income where basically
you're trading time for money you're
working like a regular job and you get
paid for the work you do
it doesn't necessarily have to be paid
in terms of time but you have to keep
doing new work to get new money
so passive income is nice
because you just get money without
having to do more work you're not always
stuck whenever you need money you have
to do more work
so there is a benefit to passive income
there's a reason people like the idea of
it however
the error here
is people overestimate how passive a lot
of income is most things they call
passive income are partially passive
income or less active income or easier
income
so there's something positive to it but
it's not as Extreme as they make it out
it'd be better to conceptualize it as
lower effort income rather than passive
income
so I'll give some examples if you own a
rental property it takes work to
find people to rent it and to get their
check every month and then to bug them
if they don't pay and then to deal with
repairs and maintenance and property
taxes
all of those things are work and if you
Outsource it it's still work to find a
management company and a repair guy and
so on
but less work but you also get less
passive income because you're
Outsourcing you have to pay for a bunch
of those services and if you're a very
small landlord it can often cost a lot
of your profit to pay for that stuff
instead of doing it yourself it's common
for really small landlords to do those
things themselves and not have the
overhead of trying to deal with some
Rental Management agency
so if you're trying to like rent your
spare room on Airbnb
that is more passive income than working
at McDonald's but it is not passive
income it takes effort
you're going to have to deal with stuff
it's going to be some work
so other examples include Investments
these take some work you have to decide
what to invest and you have to monitor
your investment some what if the market
crashes what if there's a lot of
inflation
what if you have the wrong ratio of
stocks to bonds
if you put absolutely no thought and
effort into these things
things could go wrong
if you have a digital product an ebook
that you sell
your sales will probably go down over
time if you do nothing if you do no
additional marketing ever
so it's somewhat passive income but if
you don't keep up some level of
marketing it's probably going to decline
a lot of ebooks have to be updated every
few years to stay relevant
the thing you're writing about changes
in some way and you have to keep your
book up to date
there can be new trends or new
scientific research that is relevant or
if it's software related there can be
software updates
that you have to cover new features and
stuff
okay then there's another distinction
related to passive income which is
passive income versus wealth or cash so
a lot of people think passive income is
better than cash
and that is basically wrong
I think the conceptual idea is that it's
like a renewable resource and you just
keep getting cash infinitely into the
future
which you usually don't actually if you
put no work in passive income streams
tend not to last forever
but even if hypothetically they did
it's still not better than cash
can be used to bypassive income streams
you can buy a bond you can put in a bank
account that pays interest
you can buy stocks that pay dividends or
grow
you can buy a small business with a
passive income stream
cash can be converted into income
streams and income streams can be
converted into cash you can sell
a passive income stream you can sell the
rights to an ebook you can sell a small
business with a website that mostly runs
itself
in general cash is more liquid more
flexible so if you had to pick one or
the other cash tends to be better
on average in general
income streams have a net present value
of how much cash they're worth today the
reason is that money in the future is
worth less than money today
so suppose hypothetically but
the value of money went down every year
into the future by 10 percent
so a hundred dollars today
is worth around the same amount as
getting a hundred and ten dollars
a year from today
and it's around the same amount as 121
dollars two years from today and so on
so we have a discount rate of ten
percent per year of how much money is
losing value
the real discount rate allegedly is
lower more like three percent or five
percent or something people debate what
it actually is
anyway so if you have an income stream a
passive income stream of 100 per year
how much is that worth
well you can add it up it is a hundred
dollars this year's worth a hundred
dollars and then next year the hundred
dollars was worth ninety dollars in
today's money then the year after that
it's worth around eighty one dollars in
today's money and the year after that
it's worth around seventy two dollars
and you can keep going year by year and
if you got to say a million years in the
future it's gonna be worth less than a
penny in today's dollars
and you can either use math to compute
the actual sum of this infinite series
or you can just say you know what I
don't care about a million years in the
future getting less than a penny so I'm
just going to round the rest of it down
to zero and you just add up the value
for the first million years and then you
just stop and you find out that it's
worth some amount of money today which
might be say a million dollars
and so you would have this income stream
is worth the same as a pile of cash with
a certain size
[Music]
a million dollars is unrealistic for the
value of a hundred dollars a year
it is way too high
actual values on these things are more
like times 25 like if you're getting a
hundred dollars per year of pure profit
that might be worth like twenty five
hundred dollars today
it was a very rough estimate
if you invest twenty five hundred
dollars today and you're getting a one
percent return that would be twenty five
dollars per year if you got a four
percent return that would be a hundred
dollars per year
so if you could get a four percent
return
it would give you that hundred dollars
per year and be equal to the hundred
dollars per year
so cash or wealth should be looked at as
somewhat equivalent to passive income a
certain amount of passive income is
worth a certain amount of cash
this comes up with the lottery lotteries
are actually advertised and basically a
fraudulent way they say 100 million
dollar jackpot and then you win the
lottery and they will not hand you a
check for 100 million dollars instead
what they do is they say we'll give you
payments over the next 30 Years that
total 100 million dollars or you can
take a lump sum of 60 million dollars
today
the net present value of the payments is
about the same as the lump sum and so
the real jackpot is 60 million but it's
advertised at 100 million
those are just made up numbers
but that is my understanding of how a
lot of water is work probably not all of
them
so related to this there's a common bias
towards interest and dividends over
growth stocks
suppose that you had a stock that pays
no dividends you've got no cash returned
from it but it grew two percent every
year just reliably consistently which is
not very realistic but we'll just
pretend it's an average or whatever
a lot of people would say well this
gives me no income I get no passive
income from this growth stock so what am
I going to do with it I would rather
have a stock that pays two percent
dividends every year but doesn't grow or
a bond that pays two percent interest
every year but doesn't grow
however these things are actually equal
you can convert either one into the
other pretty trivially if you have a
stock that pays two percent dividends
every year you can turn it into a growth
stock by reinvesting the dividends every
year you buy two percent more of it
using the dividend money
and you can do it in reverse if it is a
growth stock that grows two percent
every year then you sell two percent of
it
and now you have a two percent dividend
effectively
and people get the math wrong they think
well if I sold two percent of it every
year then in 50 years I would have none
left that is incorrect if it's growing
at two percent per year and you sell two
percent per year you're actually gonna
have the same amount in 50 years as you
do now you sell you sold off the same
amount that it grew by
the growth can counteract the sales
this is in terms of the value of the
stock so your number of shares will go
down although never to zero but the
value of those shares will stay constant
and we're ignoring inflation at the
moment
if you want to look at things more
accurately you have to look at how much
do they grow above inflation so if
inflation is two percent per year then
to make an actual two percent return it
has to grow four percent per year two
percent just to keep up with inflation
and then two more percent for your
actual profit
so if you sell two percent per year if
you started with 100 shares
then after the first year you'll have 98
shares however their value went up two
percent so you come out the same
and then after
a bunch more years
the amount you sell will be less than
two shares per year because you're
selling selling not two percent of the
original shares but two percent of the
current shares so when you get down to
50 shares and you sell two percent
you're only going to show sell one share
that year not two shares
when you get down to 10 shares and you
sell two percent you're going to be
selling 0.2 shares that year so you will
never hit zero shares
it would keep going down but only over a
very long time period in which case the
value of a single share would have gone
way way up so it makes up for it
so you should not be biased towards
dividend stocks or interest over growth
stocks it doesn't particularly matter
they're equally good
according to First principles or math
so the point about passive income
overall is that it is overrated it's
generally not as passive as people
really think it is it's more work more
risk it's not just
you got plenty of money forever don't
have to think about it anymore
there's generally some sort of risk or
downside or ongoing work some way things
could go wrong
so it's nice there are definitely
advantages
but you should think of it as like
better income or easier income or
something compared to a job
but not just passive automatic risk-free
guaranteed anything like that
and you should not be biased in favor of
income streams over wealth or interest
in dividends over stock growth
anything that raises your net worth
is to a first approximation equally good
and income streams have a net present
value
okay that's the end bye-bye