Great Life Path

It’s not “the” train, it’s “a” train. This morning I rushed to the station. I looked over the Amtrak board and saw a list of departing trains, all on time, all in blue. One was in yellow. It was delayed. It was the 10 a,m. train I was supposed to be on. I knew that if I waited too long and the train was cancelled, not just late, that there would be a mongol horde of people rushing to the ticket counter to get the 11 a.m. train. At 10:30 I was at the halfway point between departure times and I went to the ticket counter to rebook. I didn’t know when, if ever, the 10:am train would leave, but I knew the 11 am train was on time. There were only 2 people in line ahead of me, but dozens waiting downstairs for “the” train. They were waiting for “their’ train. They waited so long, that if they left now, that wait would’ve been wasted. Why didn’t I wait too? I want “a” train to Philly, not “my” train, and not “the” train. A small shift in thinking makes big difference in an outcome. A big door swings on a small hinge.

Another way to think of it is taking responsibility.  If you switch trains and you’re late, it’s your fault.  If you stay where you are and you are late, you can blame Amtrak.  People like to complain about someone else, but they don’t like to take ownership of their lives. 

Three billionaires have been in the news recently for their attempts to outdo each other to be the first to reach space. A rocket ship is a great metaphor for getting rich. A Saturn V rocket is 85% fuel by weight. Very little of the rocket’s weight is the rocket. It’s all the rocket fuel. Astronauts ride into space on a giant molotov cocktail. When you launch a rocket, most of the fuel is used during takeoff. Once it breaks free of gravity, it doesn’t need a lot of effort to stay up in space. Those satellites in space that beam you your TV signals, they don’t even have an engine. But they needed an incredible amount of energy just to get off that launch pad and start going higher. Once it’s going up, momentum and reduced gravity kick in and the higher you go, the less energy you need to go even further.

When you start to build wealth, it’s incredibly difficult in the beginning. That first $100,000 feels like an impossible feat. But once you get there, you are the rocket that has freed itself from the launchpad. If it took you ten years to get to your first $100,000, it might only take you five for your second, then two for your third, and when you hit a million dollars, you might be getting an extra hundred thousand dollars twice a year. The same goes for how long it takes to get your first million vs how long it takes to get your second million.

The reason it compounds faster is that not only are you earning money and putting it away, but your money is earning money and investing it. Then that money earns money and invests it. Eventually the money will be earning more on it’s own than you do from your job. This is compounding at it’s best.

Minimalism is trend now. It’s no longer a fringe activity like collecting bugs or freeganism (people who eat food that they find in trashcans). You can practice it and not be judged harshly, if that’s what you’re worried about. Minimalism is mentally freeing because as you get rid of possessions, your living space looks less cluttered. That clutter may be causing you mental stress. It also has an effect on your life span.

When you buy something, you are not really buying it with dollars. You have to work a certain amount of time at your job to get those dollars to exchange for the things that are cluttering up your home. You work for the dollars, then you take the dollars and give it to someone for some physical object. So if you take out the middle step–the dollars–you are trading minutes or hours or days of your life for each of those things, no matter how trivial. That expensive sofa that you decided you don’t really like after you’ve owned it for 2 weeks? You exchanged that for part of your life. Those stupid little tourist souvenirs sitting in a drawer somewhere that seemed like a fun idea at the time, that cost you part of your life too.

When you walk into a Walmart or an Ikea (or a Nordstorm, if you’re fancy), everything that you see is mass-produced, there is nothing special about them. But you only have one life, it’s one of a kind and it’s irreplaceable. Do you really want to trade something that is unique and irreplaceable for something that is so common that factories can produce thousands of them a day? Those things that you see ads for when you turn on the TV or surf the internet, are not products, they are parasites. To buy them you are exchanging your life energy.

A lot of our personal identities are interwoven with our jobs. “I am a plumber” or “I am a doctor.” No one says “I do engineering for money, but it’s not my identity. I am a poet, a pirate, a philosopher, I am anything but the mercenary you see before you, working 9 – 5 in exchange for money.” But maybe that should be our attitude. Poet James Dickey used to work at an advertising company writing ads for Coca Cola and Lays. He was incensed that an executive introduced him as one of their writers who does poetry as a hobby. Advertising was his hobby, poetry was his life! He later said “I sold my soul to the devil all day and tried to buy it back at night.”

Maybe we wouldn’t find it so hard to quit toxic jobs or switch from unrewarding careers if we viewed our jobs as just a way to make money and not an extension of our identity.

Money is fungible. Whether you borrow $1,000 from your bank or a credit card or your brother in law, it entitles you to buy the same $1,000 worth of goods or services. So if it’s the same $1,000, don’t overpay for it. It’s not perfume, paying more for it doesn’t make it better. As of this writing, the average credit card has an interest rate of 17.8%. But that’s just the average, some credit cards charge much higher rates than that. The highest rate is 36%! Most states have usury laws that make it illegal to charge a very high rate of interest like this. But credit card companies are allowed to do it because the law allows them to set up shop in places with very anti-consumer laws, like South Dakota. When a South Dakota credit card company mails you a card in your state, the lending laws of South Dakota apply, not the laws of your state. So while your state’s usury laws may make it illegal for a local bank to charge you more than 20% interest, those rules don’t apply to out of state banks. You can thank Congress for that.

For small purchases like groceries and movie tickets, using your credit cards for convenience and paying the complete balance off at the end of the month is a good strategy. Sometimes, paying in full at the end of the month is not realistic. You may have a large expenditure like a medical bill that is unexpected. Before you incur larger charges that you won’t be able to pay in full at the end of the month consider a home equity line of credit (HELOC). A HELOC is like a credit card. The credit is available to you, but you don’t have to use it if you don’t want to. If you do spend from your HELOC, you will be charged interest, but it’s generally much lower than a credit card. As of this writing, the interest rates for someone with good credit are below 5%.

For something like remodeling your home, instead of a HELOC, use a home equity loan. A home equity loan is like your mortgage, it is a fixed amount of money for a fixed amount of time. It is generally a little cheaper than a HELOC. You get more flexibility with a HELOC, but you will save more money on interest payments with a home equity loan.

The person who invented the train, invented the train wreck. In the old days, public transit in New York City was a horse drawn wagon pulling a large cart full of people called an Omnibus. The cobblestone streets made it a bumpy ride. In 1832, a rich banker named John Mason had the idea to place rails under the wheels to smooth out the ride. He had two teams of horses ready to demonstrate his great idea in front of the city’s dignitaries. One was driven by expert teamster, and the other was driven by an average hack, to see if you needed to be an expert to make it work. The first one worked perfectly. The second team of horses crashed into the back of the first team. He invented the train and the train wreck in the same day.

The Wright Brothers invented the airplane. About 5 years later, trying to get a government contract, Orville took an Army lieutenant up with him and invented the plane crash. The plane survived, but the lieutenant didn’t

Whenever a new technology comes along, it’s exciting but it never works perfectly. Eventually, after many setbacks they get it right. In the old days, Airplanes used to be very exciting. You never knew if you were going to look out the window and see a wing fall off. Now they are reliable and uneventful, and that’s a good thing. If you’re on a plane and want some excitement, you can watch Star Wars on the little TV. When someone asks how your flight was, “uneventful” is a good answer, “exciting” isn’t.

When you are going to use a product or service, think about whether the excitement is a feature or a bug. I want excitement when I go to the amusement park and ride the roller coaster, I don’t want it if I’m on the operating table. When thinking about investing in things like flipping houses or crypto, think about whether it’s exciting or not. Cryptocurrencies can double or halve in a matter of months. If your account is hacked, or the exchange is hacked, or you lose access to your digital wallet, all your money is gone. That’s exciting. Do you really want excitement when it comes to your life savings?

I remember the intense dreaded feeling called imposter syndrome when I got my first job after law school. It was hard to convince myself that I belonged there and deserved what they were paying me. A few months earlier I had been working as a research assistant for a law professor and I was making $8 an hour. Much of the work that I was doing was exactly the same, except that they were paying me $90k a year plus bonus for it. I should’ve been happy about it, but I had a nagging feeling that the other shoe would drop any minute. That feeling that I would slip up and say or do something that would reveal that I wasn’t who they thought I was. They had the wool pulled over their eyes by this charlatan, but he slipped up, and it’s curtains for him now. Although we were allowed to dress “business casual”, when I would make a big mistake, I would come in wearing a suit the next day to try to make me feel like a real lawyer. It didn’t work.

I saw a TED talk where the speaker said that if you have imposter syndrome then it’s a good sign, because smart people tend to have it. The dumb people go through life with confidence about everything and worries about nothing . Is being smart enough to have imposter syndrome a good thing if you can’t sleep at night? Charlie Munger said that confident dumb people can surprise you with how much they accomplish because “you should never underestimate someone who overestimates themselves.”