The ethical investment conundrum

As an example of living the FI principle, every so often people ask me “what is this investing thing you speak of – isn’t it all just a grand casino”. And I point ’em right over to that Monevator fellow who has done most of the hard work, specifically to the passive investing section. Although for a few pints I will talk the specifics of their situations I try and emphasise it’s all ideas and DYOR and all that – everybody is different ,in philosophy, temperament, risk tolerance and lifestyle. However, there are some things people often miss – a few people at The Firm were pointed at investigating AVCs and some others to consider a SIPP. Pointing people at passive investing is pretty much like buying IBM was in the old days – nobody gets fired for it, though it’s curiously passionless at times.

And then every so often somebody comes along and throws you a curve-ball – in this case it is Mrs Ermine, who is looking at pension investing, and to date the general answer has been something like Vanguard Lifestrategy 100 – do so for 20 years and you’d expect to get about the amount you put in monthly back. This is because of the 5% SWR limit and ignoring compounding, as a rule of thumb it’ll do. This is part of her pension savings, Mrs Ermine is far more entrepreneurial that I am so some of the assumptions one makes for wage slaves don’t really apply.

Unlike myself, Mrs Ermine thinks about the wider issues and comes to the conclusion that she wants to invest ethically. This is totally outside my ken. First thoughts are that it obviously reduces the action space somewhat and therefore will intuitively underperform. It also immediately debars you from index funds; you’re becoming an active investor if you decide that fossil fuels are a no-go area, f’rinstance, along with the whole Guardian thing. I know some other PF bloggers have given this some thought – Keeper of the Cauldron on fossil fuels and on wider ethical considerations here. The search for ethical solutions seems to take Cerridwen into racy territory – Abundance crowdfunding strikes me as having a risk profile way ahead of publicly quoted equities and terribly difficult for members of the public to qualify the risk balances.

A last look at our unscarred friendly skies before flight resume

A last look at our unscarred friendly skies in April 2010 before flight resume

Now I have to admit that the cynical me doesn’t see a world of people deciding to leave fossil fuels in the ground unless something cheaper and hopefully less polluting comes along. I only have to see the 4x4s on the school run, listen to the increasing racket of jets in the sky and look at the concomitant scarring of our evenings with vapour trails and how quickly no third Heathrow runway at the start of the Coalition became a firm proposal for one to think that this is the wrong side of the bet, and that’s without the increasing power drain of IT since you’ll only prise smartphones from the cold, dead hands of the addicted consumers. I’d be surprised if this happens in my lifetime, and to be honest, if it does, I think all our investments are going to be written off in such a zero-growth or negative growth world. Capitalism needs growth like a vampire needs fresh virgin blood. It’s perfectly possible to postulate successful zero or low-growth economies, and indeed we seem to be going ex-growth as it is, but they don’t look like industrial consumerism, and they don’t have endless smartphones, city breaks and foreign holidays in them for most people.

But this isn’t my fight. To invest ethically you have to decide either what is ethical, or conversely what isn’t. At the moment Mrs Ermine is in the latter camp – fossil fuels and industrial agriculture are what she wishes to avoid. It’s probably not exhaustive – indeed one of the issues of ethical anything is that it’s fundamentally difficult to be a blameless consumer if you chase anything to its logical conclusion. One should probably add CAFOs to the list, so Smithfield Foods probably fall into the beyond the pale category as well.

An Ethical Investor is an Active Investor?

To my eyes the two go together, although I’d like to hear different. By definition you’re selecting a subset of the investable universe. Now one option would be to be a stock picker, but that’s probably not how Mrs Ermine wants to spend her time, so it’s probably along the lines of this list of ethical funds. Now I don’t do funds unless they’re index funds and the history of non-index funds isn’t illustrious. I observe that Vanguard do offer a couple of socially responsible index screened funds in this list but again, what does that mean? Are there options for ethical investment trusts?

The investment return is low enough as it is – that 4-5% real return hasn’t got much fat in it. To combine active investment and artificially reducing the investment universe seems to be a tough headwind to fly into. Even in the ITs – take Impax Environmental f’rinstance – over the last 5 years the improvement in NAV seems to have been buried in the -12% discount to NAV.

The whole thing does my head in and I have no idea where one would start. The Ermine, with the libertarian social bias is not going to be an expert in this sort of thing but hopefully some readers have given this some thought. Am I missing any rich seams of knowledge or obvious goto places for ethical investment at low cost?

Caledonian Contemplations and an encounter with the Weasel of the Trees

An Ermine has been touring Scotland for the last couple of weeks, seeking out wild places and fellow mustelids. It’s been a time of reflection and inqusitiveness – up in the wilds of the north it has been good to get away from the virtual and into the real. I did have a computer to transfer pictures and sounds but connectivity was ratty and very low speed – even the weather forecast was iffy at times. But I got to stay by the side of lovely lakes and see hawks circling over mountainsides.

Loch Garten, Abernethy forest

Loch Garten, Abernethy forest

It surprised me how remote some parts of Scotland still are – I had somehow expected the tentacles of the mobile phone networks and suchlike to have penetrated far more than they did. Because of its open spaces Scotland shares an enlightened approach to wild camping with places like Scandinavia. Most of the interesting places and creatures are in the remoter unenclosed regions, though I am a slack bastard and use a camper van. Campsites often don’t work for me, because they cost more than I typically use in fuel in a day, they cluster around ‘attractions’ and they also often discourage movement between 7pm and 7am – some of the best light and interesting sounds are to be heard in that period.

Shin falls

Shin falls

 

There seems to be an election going on and everyone is talking tactical details and nobody is talking strategy…

It’s odd hearing the odd snippets after the weather forecast on the radio – with time to reflect it seems increasingly bizarre. The airwaves are full of micromanagement and pork-barrel politics. A lot of energy is being wasted on the micro and not enough focused on the macro. So here’s some of the big picture things an Ermine would like to see getting attention. Most of them seem to theme around a rapid loss of diversity in may ways of organising human affairs:

Improved communications and lower cost of transportation is decreasing homogeneity and leading to concentrations of people and job opportunities. It’s not what we expected to happen – the idea of the freelancer able to access the world from a laptop in one of those wild places (or even a market town in the north of the country) was part of the early promise. Didn’t work out that way, so we have London with shitloads of jobs and sky-high prices of housing and other cost of living bits, and a lot of the rest of the country bombed out. Is this a problem, and if so is there anything that can be done to alleviate the human suffering?

Along with the geographic inhomogeneity the improved communications are creating winner-takes-all effects in big parts of life. Internet services – for many people Facebook/twitter ≡ the Internet, and we are losing diversity in many network services not through standardisation but through de-facto sole suppliers and network effects.

The distribution of money/resources is also becoming more unequal – capital is winning the fight against labour, a little because of globalisation but more largely automation seems to be developing apace. There’s nothing wrong with humans doing less work – it’s a trend that has been going on since the Industrial Revolution. But if fewer and fewer people are getting to keep the spoils of war then it seems a tough deal – what makes them so special apart from being in the right place at the right time.

Why do we have this Calvinist fetishisation of work as being noble? It’s being used to spoil a lot of little people’s days, because They Must Work It is Good For Their Soul. I can see the problems of money for nothing, but benefit scroungers pale into insignificance compared to welfare for well-funded lobby groups. That seems to be an odd perversion of free market principles in industries like farming and banking. George Monbiot took the battle to the enemy in terms of farming subsidies of £3bn p.a.

Why do we permit lobbyists at all? Why do we not debar any minister in an department connected with an industry from working in or having worked in that industry for two years either side of their term of office. I get the argument that it’s good to have domain knowledge, but I am reminded of Adam Smith’s observation

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.

Never mind the assemblies, let’s keep these dudes out of assembling within the flippin’ government where they get to make the rules to featherbed their conspiracies… Caroline Spelman, she of ex GM lobbyists Cormack Spelman and associates was Environment Minister for a couple of years, obviously there was no conflict of interests.

The game of tag ‘twixt Greeks and Germans is still going on

I guess if you’ve been doing something for two years now then why change a winning formula, strange how little seems to have changed over a few weeks, still the same people calling each other names. Oh well. Despite this

the markets are in serious nose-bleed territory

UTMT observed this a while back and it’s still going on – indeed having come back I need to get in and sell my CGT limit of The Firm. But what to buy in it’s place. In general WTF is going on, everybody seems to be having a touch of the vapours, even the Russkies aren’t as much down shit street as they used to be. This ain’t real, guys. Has that ugly sucker Putin stopped being nasty to people? Surely not – the twisted wreckage of his psyche would take more than the collected shrinks of New York and California to iron out into something approaching normally convoluted grey matter. This really can’t carry on like this.

Of legacy, and an odd glimpse of the bizarre inequity of children inheriting wealth…

 

Loch an Eilein with its castle

Loch an Eilein with its castle

Forty years ago I came here as a teenager and took a similar picture of this lovely lake with its enigmatic island topped by a castle, though the teenage Ermine took that picture in the light of the noonday sun because that’s when we were there. It’s in the relict part of the ancient Caledonian forest, and part of the Rothiemurchus Estate. It so happens that the current head honcho, Johnnie Grant, happens to be a decent sort of egg, but I kinda took a double-take with this part of the guidemap.

Shouldn't that be owned by us for generations, paid for my you?

Shouldn’t that be owned for generations, paid for by you?

There’s a teeny bit of sense of entitlement here, Johnnie. Now Britain does have an extensive history of aristocratic ownership of land, and indeed the aristocracy did do a lot to advance knowledge, particularly from the Enlightenment onwards. Charles Darwin was an aristocrat – like an Ermine after 30 years of work, Darwin could afford to pursue his own interests, but he didn’t need the 30 years of work. The British aristocracy were the main body of people who had the time to pursue non-pecuniary interests in those times.

The conjunction of a lot of this with Britain holding a large empire did throw up some valuable additions to the body of knowledge – the Victorian expeditions around the Empire bringing back specimens are one of the reasons the Natural History Museum is one of the key plant archives of the world and there is such a vibrant gardening and plant-breeding tradition in the UK. Britain also has more veteran trees than typical for this part of Europe, partly because of that tradition. Just as well all this plant collecting came back to an established and fairly robust natural environment and not too many of the alien species caused trouble here, eh 😉 We could have done without Japanese knotweed and grey squirrels, but it didn’t turn out too terribly.

 

the enigmatci catle on the lake

the enigmatic castle on the lake

However, in a different universe, Johnnie could be a hedonistic twat keen on yachts and fine living, in which case the stewardship of the estate could be a very different matter. One of the things that an Ermine occasionally gives thought to is that perhaps I may not run down all my capital – it depends on the kindness with which Fate graces the older Ermine, and to that effect I reflect on where I would want to aim the residue of my estate. One of the things that did concern me in some of the obvious diretcions is that I am not sure that having large tracts of Britain in the hands to the likes of the RSPB and the National Trust would necessarily be kind to future generations of Britons. These would not be my children because I am child-free but despite a common stereotype I do have compassion for the future population of this country, and concentration of ownership is one thing that seems universally bad in human affairs. Until I read Johnnie Grant’s little missive – which brought home to me that I’ve grown up in a Britain where huge parts of the land have been in the ownership of individual families for years – and to be honest I’d rather than conservation charities in charge of these now, because any one of Johnnie’s three kids could be a spendthrift wastrel. There is a lot wrong with charities – in particular how much of the money seems to walk out of the door in executive ‘cos we’re worth it‘ salaries, but there’s even more wrong with ancestral wealth.

Even Johnnie agreed, when he sold a lot of forest to the Forestry Commission, although that’s not exactly a safe home either. Not only did that incompetent nincompoop Caroline Spelman try and flog this off to the highest bidder until it was halted by the outrage of half a million of the UK’s good men and true.

a forestry comission landscape

a forestry commission landscape

As well as being sell-offable by newbies the Forestry Commission also gives us harsh and blasted moonscapes like this, with their homogeneous monocultures suitable for 25-year clear-felling, compared with the antiquity of some of that ancient Caledonian forest

Abernethy forest

Abernethy forest

So all in all I feel better about the RSPB owning big chunks of the land than the laird. Mind you, the long arm of the aristocracy did make sure that embedded into the Constitution of the RSPB was the following, hamstringing the nascent society from taking a general view of the welfare of birds:

The Society shall take no part in the question of the killing of game birds and legitimate sport of that character except when such practices have an impact on the Objects.

Obviously game birds aren’t birds, ‘cos the toffs wanted to carry on blowing the suckers out of the sky when this was enacted in 1957 1. It was okay for the little ladies to set things up to prevent egrets being killed for their white feathers used in the millinery trade, when when it comes to the man’s business of massively breeding game birds and getting your serfs to beat the suckers in the air and shoot one of the many young birds driven into the sky to show what a hard man you are and how skilled a shot you are by aiming somewhere into the air then that’s a different matter and Must Not Be Touched. Thus the RSPB is officially neutral on shooting game birds.

The aristocracy did historically do some good stuff, but they did also have it in them to treat people like shit. They came to the conclusion it was cheaper to raise sheep in the Highlands. There was one small problem – there were too many people on the land to make this work. One Sheep farmer, Patrick Sellar, delivered himself thusly

“Lord and Lady Stafford were pleased humanely to order the new arrangement of this country. That the interior should be possessed by Cheviot shepherds, and the people brought down to the coast and placed in lots of less than three acres, sufficient for the maintenance of an industrious family, pinched enough to cause them to turn their attention to the fishing.

A most benevolent action, to put these barbarous Highlanders into a position where they could better associate together, apply themselves to industry, educate their children, and advance in civilisation.”

He hard a charming habit of roasting people alive in their houses if they wouldn’t move first. Which is why you see so many abandoned cottages in Sutherland. The time of ancestral wealth and using agricultural land a a store of dynastic capital  is for the chop in the modern world IMO. Indeed, the whole inheritance thang and the way people get het up about it is bizarre. For starters, if you truly love your children and have raised them right then you can give your entire estate to them free of tax – just do it while you are alive and survive seven years – stand by your principles. If you don’t trust the blighters not to turn you out of your ancestral pile when you go ga-ga then a) you should have dragged them up properly and b) why should future generations of Britons be subject the the boot of these ne’er-do-wells just because they were related to you. If you can’t trust them with power why should the rest of us have to deal with them empowered by capital they didn’t earn?

The current threshold of IHT is also unreasonably and recent-historically high. The aristocracy held a stranglehold on land capital until the wars, when the reforming governments saw that the little people who had been slaughtered in their millions for King and Country did deserve a little bit more of this green and pleasant land than they used to have – for instance the plot of land their small hovels stood on. It still took time – in 1969 my parents bought a house in London. A house, mind you, a suburban semi, not a caravan on wheels, but they didn’t get to buy the land it stood on (freehold possession, in modern parlance). They had to buy it leasehold, because if there’s one thing that old money doesn’t do – it doesn’t sell off the capital, and so many of the houses built in the post war era were sold on long leases of 99 years. Ten years later they took up the opportunity to buy the freehold for about 5k in today’s money, presumably the estate that wanted to hold onto the land was skint due to paying IHT. Inheritance tax was an equitable way of breaking up these historical accumulations of wealth – in the end we all inherit the earth from previous generations and yield it to future ones. Of course what you accumulate through a working life should be inalienably yours 2, but if you believe that you have a problem with Taxes after you’ve succumbed to Death then you’ve not used your time on earth well to familiarise yourself with its ways… The dead really do pay no taxes. It’s your grasping children who will pay the taxes. Since it’s a windfall for them anyway, easy come easy go…

If you own your house freehold you have IHT to thank for it prising the land rights out of the cold dead hands of the aristocracy gifted it by William the Conqueror 3. What goes around comes around  – what makes your progeny so damned entitled to free money so they can stamp all over their peer group who aren’t so fortunately endowed? If you want to give them your money, show ’em the love – do it when you’re alive and trust to the upstanding personal character you have instilled in them to look after you. You should at least share some of the risk with the rest of us if you want to disadvantage others and featherbed the fruit of your loins beyond the grave.

 An encounter with the Weasel of the Trees and other mustelids

Not only did I see a fine male Stoat crossing the road on my travels, but thanks to Johnnie Grant’s tree-hugging tendencies I got to say hello to the Tree-Weasel of old – the noble pine marten, once persecuted by gamekeepers (a lot to answer for, these grouse estates!). I can’t claim talented fieldcraft and stalking skills here, I took the easy way out and paid Speyside Wildlife £25 to sit in their pine marten lodge and look for one taking the peanuts laid out for them

Pine Marten

Pine Marten

The trouble with mammals is that many of them are nocturnal, and they have way better senses that we do. I could actually still see in colour to take this picture because they have low floodlighting. It was a tough picture, throwing everything I had – f5.6, ISO 1600 this was still a 1 sec exposure, which is why the picture is so bad. The marten could probably still see the hairs in her fur clearly. So you need edge to see nocturnal mammals, £25 in this case. With badgers thrown in too.

1504_badge_IMG_3061_lznThe pine marten has an interesting  service to offer us, too. They have a penchant for eating squirrels, but in a curious twist of fate they are a friend of the smaller red squirrel. Pine martens chase squirrels into the trees and follow them along the branches, but the red squirrel can go further out on the branches that can support its lighter weight but not that of the marten. Not so the grey squirrel. As Monbiot describes, once the Irish stopped killing pine martens, the martens have been driving grey squirrels out of the west of Ireland – and now they have hemmed them in east of the Shannon river, and presumably as the martens build their ranks they will eventually drive the greys into the Irish Sea.

The eternal sunshine of the spotless mind of Owen Paterson

Owen Paterson, a Tory gent with a penchant for the politics of Enoch Powell, believes shooting greys will be effective. Even allowing for the fact that Owen seems to be a bit on the dim side with an antipathy for science unless it suits his ends (Climate change bad, well, simply non-existent in that spotless mind, culling and shooting good even if it doesn’t work and blame the bloody badgers for moving the goalposts) he’s clearly not been familiarised with r/K selection.

1504_badger_owenYou have a decent chance of killing off a species that reproduces slowly but occupies its ecological niche at carrying capacity by culling. Pine martens, humans, African big game, yup, you could clear an area of these species that way. Grey squirrels breed twice a year so fall into a r-selection pattern- you need to carpet-bomb the place and then secure the perimeter to be sure of killing off enough of them that they don’t simply renew their ranks. Or set the pine martens on them 😉 The difference between the pine martens and the shooters is that the pine martens keep on coming, whereas the shooting stops when the Government sponsorship runs out, whereupon the skwerls repopulate the joint. Quickly – and you’re back to square one.

Paterson is a odd fellow, aristocrat by marriage, a chap who when faced with the right answer to something and the wrong answer to it, unflinchingly chooses the wrong answer particularly if it benefits his rich countryside buddies.  For example, this Soviet-style special interest pleading:

Andrew George (St Ives) (LD): It is, of course, right that public money should be spent on public goods. At a time of severe austerity, what public good is there in spending hundreds of thousands of pounds—indeed, £1 million cheques—on large landowners who do not need the money?

Mr Paterson: I thank my hon. Friend for that question. The fact is that we are going from 7 billion to 9 billion people. There has been complacency in this country over recent years, because there was unlimited, safe and easily accessible food to be bought abroad. We want to make sure that we have an extremely efficient, high-tech agricultural sector producing food. I take food security extremely seriously and welcome large, efficient farmers.

Dear Owen, you are so full of shit. Food security may be an issue one day, but the security bit comes to play when the global system is stressed, and in that case we want a resilient and lower-tech system that isn’t all interlinked with just-in-time connections. High-tech food production has massive sprawling inter-country supply chains as evidenced in the horse for beef scandal.

Alternatively, if we want cheap food then here’s a radical idea. You know that thing called the free market? Howsabout it – get your damned Government pork out of our food system, stop picking bloody winners  like your aristocratic buddies in their huge estates leased out to contract farmers to whom you piss in huge amounts of the proletariat’s VAT taxpayer money as subsides. While proles claiming benefits are of course labelled lowlife scum, the rich storing their ancestral wealth while sucking loudly at the Government teat of ag subsidies is noble policy and an essential bulwark against Britain being starved out of the future, because of course the history of central planning in food production has such an illustrious history, eh?

Let’s take a look and what this highly complex subsidised high-tech system has brought us in recent years. There’s the whole GM thing which seems to be forced upon us despite European customers being rich enough to say we don’t like the idea of that – a free market without Monsanto and Syngenta etc pulling the strings  would give us the choice in the same way as if you want something without nuts or organic you can go get that, clearly labelled.

We have horse in our beef, we are all becoming fat bastards and now the WHO tells us that the magic Roundup which is what this whole GM stuff is designed to promote isn’t good for us either. Maybe the place for Government in this area is regulation and monitoring (like when it sez beef it is beef) rather than spraying taxpayer’s cash around to rich people and their buddies to maximise profits, minimise resilience and charge every UK household about £250 p.a. to keep them in the style they’re accustomed to.

If GM really is more profitable without subsidy, then drop the objections to labelling the stuff as such, FFS, and let the market decide. In the battle between cheap and good, the evidence is overwhelmingly that the punters will go for the cheap.

 

Notes:

  1. I have never, ever, seen grouse on sale to eat, which would at least be less wasteful of life. I don’t even know if you can eat grouse. The market value of pheasant is low, basically because too much is shot as sport for the demand as food, so a lot of this is wantonly buried
  2. subject to the usual rules of the land and taxation
  3. history buffs will gripe over running roughshod over the details

Congratulations to Patrick Pichette of Google, 52 (ret)

The CFO of Google has achieved something that few high earners seem to do. In amongst all the Sturm und Drang of earning shitloads of money as CFO of Google, he heard the faintest sounds of the distant drum at 52, having climbed Kili. In itself that’s not particularly remarkable. What was remarkable, however, is that he took action. He switched the engine into neutral, and planned his glide path out.

say cheese, guys

say cheese, guys

Now the cynical Ermine observes a massive helping of cheese in this pic. Hopefully that photo is a mock-up – it would really, really piss me off to pay all that money and go to all that trouble to find such a ghastly contraption bringing unauthentic consumerism with a Capital C to a natural place. Las Vegas is fine where it is 😉 But if it’s really there, well, it takes all sorts, eh.

Be that as it may, and even if it’s a publicity stunt to promote the ailing Google Plus system, he’s outlined the fundamental problem. You’ve only got so much time in your life, and it’s running out 24 hours every day.

His valedictory post has all the usual things the rich retiree wants to do – travel the world, blah blah blah blah. It’s great- each to their own. It reminds me of the things I thought I would do lots of once I had control of my own money and time. And indeed I may still do. All these things are projected outwards, but retiring well is also an inner journey. I am reminded of the words of the Swiss psychologist Carl Jung

It seems to me that the basic facts of the psyche undergo a very marked alteration in the course of life, so much so that we could almost speak of a psychology of life’s morning and a psychology of its afternoon. As a rule, the life of a young person is characterized by  a general expansion and a striving towards concrete ends; and his neurosis seems mainly to rest on his hesitation or shrinking back from this necessity. But the life of an older person is characterized by a contraction of forces, by the affirmation of what has been achieved, and by the curtailment of further growth. His neurosis comes mainly from his clinging to a youthful attitude which is now out of season….

Carl Jung, 1929 CW 16, para 75

Translated into our times, in youth the ego is expands in strength and influence. Although the West has few rites of passage, the ego follows a well-signposted path, projecting and gradually gaining force and influence – job, career, relationships/marriage/kids. All this is promoted and is in the symbols all around us.

We don’t have many symbols for success after the turning point – look at the ads around you, they are to hang on to youth, to beauty, most commercial symbols of ageing are negative. The ads assume we want to look like we are between 25 and 29.

I lived some of Carl Jung’s neuroses in my 20s  – the young Ermine lived in a rented room in London, putting salt around the room to keep out the black slugs. I was in a decent job, 25, but I couldn’t buy a house and seemed stuck in all aspects of life other than work. I did finally sort my shit out and make changes. It wasn’t just me – the mid twenties seemed a really tough time for several of my peers too. Maybe it’s a London thing, or Imperial graduates. Maybe it’s birds of a feather sample bias. I have experienced worse lows in life since, but none as protracted. Bollocks to all the ads, I never, ever, want to be mentally again in the place I was in my mid to late 20s. For all the lows and the fortunately modest losses I have so far had since, the highs deepen and colour in with experience. That runs against the narrative of the Western Myth, and it is important to be prepared to surrender some of what was valuable in youth in order to deepen and grow. So far I have found Carl Jung’s map to be more true that that held up to me by the consumer society around me.

I did not dodge the midlife crisis 1 – arguably the forces that pinged me out of The Firm were stronger because my inner values began to diverge more an more from the values of my younger life. In particular I found it harder and harder to suck it up to The Man’s stupid metrics and bullshit ways – little empires of small desperate people doing what their immediate higher-ups said despite it being often wrong (in engineering terms) or simply against common-sense, nature and experience. The misery of mendacious measurement and metrics enforcing mediocrity and digital Taylorism continues unabated, but at least it isn’t my problem any more. There are some who simply carried on turning the handle, and good luck to ’em. I wanted to determine how I spend my days. And while I probably have the edge on Patrick on some of the inner changes, he has lived more intentionally, choosing to throw the switches of his life in a controlled manner, unlike my uncontrolled derailment from the Work strand of life. So hat tip to Patrick – a great exposition in how to retire well.

But a word in your shell-like Patrick, from someone else who retired at 52. Remember the question posited by Erich Fromm in To Have or To Be. What you do may matter less than what you become. Much heartache and angst waits for those who listen to the messages from their inner world with the coarse equipment that listened well to the messages from the outer world. We don’t help ourselves with that second half of life by trying to hold on to outdated forms. I liked this article on the adventure inward  – this passage speaks to me

In youth the ego is expanding in strength and influence. Typically, it follows the well-posted paths of society, perhaps gathering accolades along the way. But at midlife the ego is challenged to become a servant of the larger personality and soul. This is why men often encounter a feminine guide–and women, a masculine guide–in their dreams towards midlife. These figures are manifestations, or symbols, of the soul 2. They invite and would guide us to an understanding of our deeper nature and a more personal spirituality. Thus, we could say that in youth the ego is educated mostly by family and society, at midlife and beyond, by the soul.

One of the characteristics of the last two and a bit years is that I see that I made far too many simplifications in my model of the world and how it worked, they had served me okay in work and career. But they blinded me to faint signals from within, and also faint signals from the future too. I come to know much more how much I don’t know, and learning from others becomes easier to do but more daunting as I see the further mountains to climb in the search for wisdom.

To take one example – writing this blog has helped me, both in the obvious way that articulating something makes it clearer and throws light on inconsistencies, but also I have learned from many of readers in the comments – sometimes I have been plain wrong, but all too often there are nuances I may have missed, things I’ve been unaware of and it is always good to refine my mental models closer to the territory.

In this time I have perhaps focused on the inner journey. Maybe the time will come that I balance this outwards, though I’ll probably pass on Kilimanjaro, a quick google search still gives me the feeling of pumped up consumerism

If you’ve ever wanted to do something truly amazing, something that’s as far removed from a lazy beach holiday as possible, then Mount Kilimanjaro is calling you! Join the great explorers and mountaineers in scaling Africa’s highest peak, hiking through lush rainforests, alpine deserts and glaciers that have been there forever. With our Kilimanjaro treks, you can take on a challenge and do something awesome in Africa.

STA travel

It seems a fave for mid-life crises – a fifty-something I know did it to make himself feel better after a divorce. Good luck to y’all, whatever floats your boat.

For some reason I’ve focused on the inner journey in the first couple of years, but life has an ebb and flow. Maybe the time for travel and looking outwards is soon to come, to integrate some of the changed perspectives, to play across the strands of life. Patrick’s message is cheering, because it runs against the Calvinist Work is Good for you meme. Work is a means to an end, but it’s also good to know what enough looks like – when to consider a switch from having more to being more. Happy retirement!

Notes:

  1. I don’t really understand Jung’s chronology he termed the years from c. age 56 to c. 83 the “afternoon of life,” using the analogy of the passage of the sun through the sky from morning to night. This kind of sits ill with the typical allotment of three-score years and ten.
  2. The translation of soul from German into English is hard. It has religious connotations in English which I don’t believe are in the German original

George Osborne may help me to live intentionally and spend more

By his pension changes, that is. Sadly the exact mechanics wont be of much use to young’uns but for for some modestly old gits (45 plus) who have accrued a defined-benefit (DB) pension where you can buy  additional voluntary contributions (AVCs). Since there are a number of readers who work(ed) for The Firm that employed me for many years I’m throwing it out there.

The philosophy of how difficult it is to qualify living off savings may be of more general interest. It’s heavy on pensions, which seem to be the Cinderella of the PF world, because most PF bloggers are younger than me and Monevator’s Greybeard seems to be off on a cruise. However, hopefully you’ll all get old enough to be interested in pensions one day, and if you can learn from my mortgage screw-up then so be it 😉

Some pension and early retirement orientation

One of the big challenges facing early retirees is how to fund the pre 55 early part of their early retirement. The part before 55 has to be something other than pensions because you can’t get hold of pensions before getting to 55. The goto place for this is ISA income and cash savings, though not paying your mortgage off early is a great way to have more cash savings in the pre-55 period, because you can use the pension commencement lump sum to save to pay off your mortgage from pre-tax income.

don't automatically pay off your mortgage early if you are retiring before 55

don’t automatically pay off your mortgage early if you are retiring before 55

I didn’t get the mortgage wheeze right. In threading your way through the myriad paths to early retirement you are always going to get something or other wrong, that was my big mistake. I don’t have housing costs other than council tax and the 1% or so house purchase price depreciation fund, but having the borrowed capital to run down now would be useful. I could then use my AVC fund to pay off the mortgage tax-free at 60. Pretty much any time I go anywhere near anything to do with housing I screw it up royally. Why break the habit, eh?

Because I drove my spending down to be able to quit early I have been able to string out my savings for twice the amount of time I anticipated. But it’s probably fair to say I haven’t lived large like like mistersquirrel and theFIREstarter 😉 I don’t have any complaints – freedom from The Man and being able to pursue my own interests is more than adequate compensation. For much of the first couple of years it was a process of recovery from the experience – and it’s respite that matters, not consumer goods and services. But I am also mindful that time is also ticking away, so if I could smooth my income I could do more in the near future rather than back-loading it. I’ve noticed the birds are starting to sing and maybe they call to me, get out there, travel more.

I have no income – one of the primary navigational aids of personal finance spins and knows no North

Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Wilkins Micawber

I never understood how to manage finances without having a number I could allocate on the Annual Income side. Without a figure for income, I could never qualify the Micawber question. It has made me fearful and over-conservative in spending. This has worked out okay for me till now – it is how I got to this point and having the choice to take Osborne up on his alternative offer of getting my AVC out tax-free but earlier. If I had favoured spending I would have drawn my pension short by now.

or, as da yoof sez, YOLO

or, as da yoof sez, YOLO

Some readers will wonder WTF? The income computation is easy. Take current age of Ermine, subtract from 60 which is how long it needs to last till a good alternative, then divide total amount of cash savings by years and you have the income level. Maybe knock off about a year’s savings to cover emergencies then run the calculation.

Not so fast. If you have no income, you will find it the devil’s own job to borrow money which is a perfectly reasonable way of leveraging your emergency fund. A year’s worth of low-ish running costs as  savings is not enough to hedge some kinds of risks. Lucy Mangan charges us that If you don’t understand how people fall into poverty, you’re probably a sociopath  – probably correctly. I didn’t want that to happen to me, so I have used a much smaller percentage of my non-pension cash savings than that cash÷(60+1-current age) calculation would give. At least half of them are with those NS&I people so they aren’t being killed by inflation, unlike my cash ISA and cash balances. I really, really hate cash as an asset class, and never expect a return on it. At least inflation is surprisingly low given all the QE money that has been  pumped out – it seems to have gone in inflating the stock market and the housing market.

The logical thing to to with a cash ISA these days is to switch the damn thing into S&S ISA but I can’t bring myself to do that, because of the fears of some of Lucy Mangan’s demons catching up with me, or needing to pay for an operation 1, or something like that. And as a result, the fearful me jams my spending. I err in the opposite way to mistersquirrel and theFIREstarter but error it still is.

TEA calls this out well in The Pyramid and the Oxygen Mask – to wit

If you are one of those people and you carry on working in your all consuming City or Corporate job, then you are wasting your life.

This is more frequent than you might think. The most common motivation for this behaviour is fear  – fear of change, (irrational) fear of poverty, fear of loss of status, fear of their spouse’s reaction etc.  Its not enough just to make a life-changing amount of money, you still have to change your life.  Don’t just load the gun, pull the trigger.

Apply own mask first…
We owe it to ourselves and our families and friends to start by getting our own shit together.  Think about the airline safety briefing : always apply your own oxygen mask before helping others.  This initially sounds a bit counter-intuitive and even selfish to some people. 

I have overcome most of that. I changed my life, and I qualified what Enough looked like to me. But I am still on his Level 2.

These people understand the power of money and have mastered some of their emotional weaknesses re money. Paradoxically, they are seeking to get to a point (see level 1 below) where they think much less about money.

I am not sure I can do that until Mr Micawber’s compass begins to respond and the questing needle shows which way is North. After a certain level personal finance is much more about the personal than it is about the finance. My fears of Lucy Mangan’s demons are part of the emotional weaknesses re money. Possibly I have some of the elements of her sociopath. I just didn’t want to depend on other people’s grace for dealing with the demons and so I spent less so I could buy my way out of certain kinds of misfortune. But I take TEA’s point. This is a question of balance and I haven’t got that right. A clawed hand remains frozen on the controls set to dead slow because the broken compass shows no signal I feel I can trust. There is still work to do on that intentional living thing.

It has been five, getting on for six years since that fateful day in February 2009 when a jumped up punk of a manager squeezed an Ermine, intimated TINA and I realised I was all out of options and didn’t want to kiss The Man’s ass, and I locked down spending and took a three-year holiday from the middle class in the name of Freedom. I would do the same again. I have become even more ornery, awkward and unemployable since then. Work is not the point of Life 2. This much I know.

I would soon have access to a DC pension

Now if I had a DC pension I would soon be able to draw it. As a brutal simplification that everyone should qualify for their own circumstances, it makes sense to draw a DC pension as soon as possible, all other things being equal. By drawing it early, you stretch out the time over which the money is extracted, and you get a personal allowance for each of the years over which you take it. If you don’t need all the money that year , reinvest it in an ISA in the same sort of thing the pension was invested, and you shift the pension capital from being taxable to being sheltered from tax. If you still have more than 15k left over each year I suggest you need to spend more, unless you are looking to mollycoddle your kids in which case leave it in the pension since they can inherit that at their marginal tax rate it seems. The converse is that if you are so bloody stupid as to take your DC pension out in one lump then you deserve to pay a shitload of tax because such arrant stupidity should be taxed out of existence.

But I don’t have a DC pension. So I can’t do that. Don’t get me wrong – I am deeply grateful that I started work at a time when there was a better balance between labour and capital and The Firm actually wanted people to work for them so they offered good benefits, the original DB pension being one of them. However, a DB pension is less flexible than a DC about the retirement date – draw it earlier than normal retirement age (60 in my case) and it is reduced by roughly 5% per year drawn short. If you are in decent health you really don’t want to do that. The actuarial reductions usually favour those who follow the norm rather than the early retirees. In itself that’s not a big deal, because I saved a quarter of my DB pension capital 3 in AVCs.

the original plan – invest the 25% tax-free PCLS in the market in a couple of years time

The original plan was to run off the SIPP I took out earlier this year when Osborne changed things, after another two years worth of contributions which I can get in by May 2015 (this year and next tax year), and then to draw my main pension a bit early and eat the actuarial reduction. I would then get the AVC tax free, which I would then shovel into ISAs over a few years, getting more ISA income to top up the actuarially reduced pension.

Note the correct way to have done this job would have been to keep my mortgage at the level of the PCLS and live off the money I paid my mortgage off with until at 60 I take the PCLS tax-free and pay off the mortgage. The general cocked up the tactics there, even before the battle plan made contact with the enemy.

the new plan – invest the AVC in deferring my main pension

It appears I can shift the AVC into a SIPP without taking the main pension, as it is considered a DC independent saving. All of a sudden I lose the whole point of the AVC, which is to get 25% of my DB pension capital free of tax. I now only get 25% of 25% or a sixteenth of the capital tax free. However, I have discharged my mortgage and don’t have a particular need for a shedload of cash, other than as investment capital to make up for the actuarial reduction.

From some time after this April, I can draw down the SIPP tax-free, as long as I stay below the income tax threshold. There is also some hazard of work income over the coming years 4. Indeed, it seems I can contribute to a SIPP up to £10k p.a. while drawing from it, so I can lose any earned income into the SIPP, which is a good way of spreading out earnings to minimise tax – I don’t aim to give up much time to the filthy W word, so 10k will probably do :)

Each year I live off the AVC fuelled SIPP and the dividend income of my ISA, my deferred DB pension increases by roughly 5%. Effectively I get a return on my AVC funds in terms of that permanently increased DB pension, and at current stock market valuations that looks a higher return and lower risk than I could win from adding to my ISA. Of course that is a return on capital, the return of capital is consumed as income. Normally if you want a return on capital you need to retain the capital and not spend it, this is one of the few exceptions 5. When I get to 60 I will probably stop drawing down the divi from my ISA unless I think of something to spend it on. Running down the AVC + ISA income is roughly equal to the value of the DB pension at NRA, so I smooth my income. I will get two smaller bump-ups, one at 60 when the ISA dividend income becomes superfluous to requirements, and one in the distant time at 67 when and if I get the State pension.

I get the same general effect as if I hadn’t made a cod’s of the mortgage/PCLS thing, subject to the limitation of being limited to the tax threshold + the income from my ISA each year. I’m easy with that, big spenders may not be.

An annual income, and an answer to the Micawber question

Obviously there’s the benefit of getting this AVC cash into use rather than depreciating for another six years. More importantly, however, I get an income for the first time in about three years. So I could return to that middle-class sort of spending if I wanted to. They say that it takes a month to break a habit, so six years should be plenty. I can’t unsee the wanton waste I discovered in some of the empty dreams of the middle class cubicle slave I was. I am no longer a cubicle slave, but some of the dreams still seem empty. I found freedom in the open spaces, in the sound of birdsong, in places like this

1501_wolves_P1000135rather than places like this

Westfield, London

Westfield, London

I am in no hurry to spend more, but I do need to release the dead hand of the fearful non-spender who felt adrift in a pathless land without the compass of Wilkins Micawber to guide the way. Unusually among consumers, possibly I am consuming at too low a rate. I can easily live well on the personal allowance plus £5000 tax-free from my ISA, maybe I will have to consult with good people like mistersquirrel and theFIREstarter as to how to inflate my outgoings on fine living. On the other hand I don’t have to spend all of it every year. My ISA will thank me for continued reinvestment. I now have a high-water-mark for annual spending, which I can exchange for the dead-hand’s ‘as little as possible’. The tide is a long, long, way out.

the tide is out there somewhere

the Wash – the tide is out there somewhere

There’s no rush – one of the arts of pension planning seems to be keep as many options open, and then opportunistically close them off at the eleventh hour in whatever way is most advantageous at the time.

Ed Miliband could destroy this plan

…in May. In which case it’s back to plan A. There’s nothing I can do about that, it’s the usual mantra – coffee for the things I can do something about, red wine for what I can’t change. It’s the problem with pension savings all round – government meddling can screw up the best laid plans. In fairness to governments, it is only government meddling that has made this alternative a possibility. It wasn’t a possibility when I left work in 2012.

of market crashes, and excitement, and foolishness

All this will take a few years, should there be a market crash I can rethink, draw my DB pension a little earlier, eat some actuarial reduction and seize the opportunity to invest the SIPP. Assuming, that is, I have the cojones to do that – such a market crash could be the trumpet at dawn of the great unwinding. Or maybe I lack the taste for the ride. Finding myself unable to to determine a reasonable spending rate without having an annual income shows that perhaps I am not the Wolf of Wall Street. I should heed the words of Warren Buffett…

To make the money they didn’t have and they didn’t need, they risked what they did have and did need–that’s foolish, that’s just plain foolish.

…and at most half-split this if the denouement comes this year. At the moment an increase in DB pension looks lower risk than the known risk of the market 6. It’s taken me a long time to realise that I had this opportunity, because my original plan was built when Osborne’s changes hadn’t happened. However, the job of any chief executive is to adapt to changing circumstances

no plan survives contact with the enemy

von Moltke

Pension planning is a bastard for complexity and counterintuitive wrinkles and changing rules. I’m generally of Monevator’s opinion when it comes to financial advisers, but I wonder if pension planning might not be an exception. Certainly for those working at The Firm, take up the offer of the Wealth at Work seminars, since you don’t pay for the advice and they have knowledge of your specific environment. Just don’t hire W@W to run your investment portfolio, which is what they’d like you to do afterwards 😉

My pension will eventually be a combination of the DB pension with about 2/3 of the target time accrued, and my ISA to make up the difference, tax-free. But as an early retiree I could have 30 years ahead – possibly more. It would be unwise to ignore the tail risks that affect both types of pension, though differently. The world will change over that sort of timescale. Just to remind ourselves of the scale of those sorts of changes, we were listening to this on the radio 30 years ago

Only one guy in Britain had a mobile phone, though the first had been demonstrated in 1973 in the US. Those 1970s analogue devices were not cellular like TACS was, so the number of channels was very low and prices were astronomical.

Motorola's Martin Cooper, April 1973

Motorola’s Martin Cooper, handset first used in April 1973

Nobody much had the Internet. I was using a VAX with green-screen text terminal and 9600 baud serial connectors to do circuit simulation. 30 years is one hell of a long time for things to change. It’s plenty of time for tail risks to show up. But it’s also plenty of time for nimbler, younger minds to invent good stuff that people want to pay for. Assuming, of course, that the work of humans is not done here – in which case the spoils will accrue to patrimonial capital as Piketty told us it would.

Notes:

  1. the NHS does fine with big stuff and with chronic stuff, but elective quality of life interventions it does poorly now the Tories have been at it.
  2. with the obvious rider ‘for me’. If Work is the point of Life for you then knock yourself out
  3. computed by taking the gross paid at NRA and multiplying by 20
  4. there is some research work I want to do. In the end even an ermine can’t outrun the W word forever…
  5. it isn’t a true exception, it is the interaction with life-expectancy figures that gives an appearance of a return on capital.
  6. I am casually interchanging risk and volatility of the short-term price levels which I really shouldn’t do

The case for a Universal Income

Those clever fellows at Oxford University have identified a problem with social mobility – it’s increasingly downwards. I have to run with the Guardian’s description of this because it looks like the paper is published by Wiley and is therefore going to be £££££ to get.

The Grauniad will bring to the party their own biases, and yet their summary of the problem seems pretty clear and gels well with Humans Need Not Apply  – a storm of globalisation, automation and the shift of power from labour to capital is stripping out premium jobs – to wit

The UK’s boom in managerial and professional level public services and industrial jobs during the 1950s, 1960s and 1970s saw an increase in the proportion of children born into professional and managerial families. The decline in these jobs meant that the number of individuals at risk of downward mobility were higher.

Goldthorpe added: “Politicians are saying that a new generation of young people don’t have the same opportunities for social advancement as their parents, and these results seem to bear that out. The trend shows that, while social mobility has not stalled, more mobility is going in a downward direction than in the past.

“ The emerging situation is one for which there is little historical precedent and that carries potentially far-reaching political and wider social implications.”

I’m not totally sure there’s no historical precedent – the story of humanity is not a monotonic increase in wealth from generation to generation, but it is a problem. The issues boil down to that Britain’s GDP is being produced with fewer people. In itself that shouldn’t be a surprise – after all if you look at how many people it took to make anything a generation ago it’s obvious that you need far fewer people to make it now. There was a programme called The Secret Life of the National Grid that showed how the old CEGB used to erect pylons – basically about a hundred men and a lot of rope! According to the ONS, the real value of Britain’s manufacturing output is much higher now than in what we think of its heyday. When I entered the workforce over a quarter of the UK workforce was involved in making stuff, whereas now we make more stuff, but with  fewer than 1 in 10 of us compared to more than 1 in four. As the ONS succinctly says

productivity in the manufacturing industry has risen by around 2.8% a year since 1948, compared with 1.5% in the service industry. While only 8% of UK jobs are now in manufacturing, compared with 25% in 1978, today’s workers are significantly better skilled and more experienced.

We booted those humans out, and manufacturing does this quicker than services. Now whenever you say this might not be an unalloyed good loads of people come down on you like a ton of bricks and holler Lump Of Labour Fallacy until you can’t hear anything any more. The Economist gives a good summary too. The LoLF is predicated on the assumption that it is always possible to improve things for people in the world by putting more people to work, so Schumpeterian creative destruction is all to the good, as it can reallocate capital and work to where it can do most good.

This assumes people are always as flexible as they were in their 20s. So they had better not get old, have children or otherwise tie themselves down to any one place or way of doing things. If you want to see the counterfactual, take a drive to some of the Welsh valleys – the Ermine started work and got to retire all in the space of time since these areas were nuked by Mrs T in the early 1980s and they still haven’t recovered by the looks of it.

The other trouble is the modern economy produces great jobs and crap jobs, with nothing in between. And it’s producing fewer and fewer great jobs, though these seem to be higher and higher paid. At the moment we fight that – but the battle is being lost. At the moment we tell people work is the way out of poverty, which is bullshit.Let’s have a bit of fun with Google, shall we, on the theme of work is the way out of poverty. Let’s start with the dude who ought to know

Bloomin' eck, I thought we've already done Halloween. Oh, wait. That was the other guy...

Bloomin’ eck, I thought we’ve already done Halloween. Oh, wait. That was the other guy

Iain Duncan Smith: ‘My mission is to lift people out of poverty and I will not give up’ there’s a hint of the Terminator in there, Iain. Always pays to investigate whether the thing you’re trying to do can actually be done, if only to find out which impediments to take on first…

Sweatshops: A Way out of Poverty – Ludwig von Mises institute. Loosely paraphrased to  ‘get ’em by the balls and their hearts and minds will follow’ 1

For millions of people, work is no longer a way out of poverty – Archbishop of York/George Osborne

Seven ways UK wages have changed over the past four decades – the proletariat has been losing this fight for the last 20 years

Is Social Mobility Really Going into Reverse – only if you think about the money, according to the Telegraph

We now have to subsidise crap jobs with tax credits for people to survive on them. I don’t think work is the way out of poverty unless you are unusually skilled. It’s time to strike a new bargain with the 1%. Along the general lines of

Dear 1% – Britain provides opportunities for you to sell us stuff, move money around in complex ways and get rich on that, and hell, invest in London property. We the people of Britain are easy with that. In return, we require that you give us something in return, and that is a tax on economic activity in terms of corporation tax, CGT and income tax. And we also require that you obey the law of the land as far a polluting the environment etc. Let’s cut a deal. Make as much money as you want, within the rules. If you don’t like that, piss off to Monaco or wherever.

The standard riposte to that is the wealth creators and owners of capital will up sticks and take their toys with them. Atlas Shrugged by Ayn Rand is the long-form version of that. In balance  there should also be a call to the rest of the 99%, along the general lines of a fantastic rant I overheard from someone describing why the 99% were moaning about the cost of living so much

People go through life picking up unnecessary accessories like dogs and children without thinking how much it all costs. No wonder they get themselves into trouble.

It’s hard to argue with her observation, and this is from one of the 99% 😉 Mr Squirrel takes a slightly softer line.

It appears that that august organ, the OECD takes issue with the claim that all the wealth creators will cram into Monaco or a seastead with their capital leaving the remaining starving hordes to eat each other. Unlike  Wiley who act as Gollum to knowledge the OECD publishes their stuff – short form here and full monty to be had from here. It’s worth a read – basically in contrast to Ayn Rand they take the view that we are our brother’s keeper in terms of the maximum aggregate human societal benefits:

The most direct policy tool to reduce inequality is redistribution through taxes and benefits. The analysis shows that redistribution per se does not lower economic growth. Of course, this does not mean that all redistribution measures are equally good for growth. Redistribution policies that are poorly targeted and do not focus on the most effective tools can lead to a waste of resources and generate inefficiencies.

Now before we all become communists it is possible for this to be true and yet nevertheless some people’s end of the boat may end up going down, even if most of the boat and inhabitants rise. Somewhere the John Galt in me does and did object for paying for other people’s lifestyle choices, for most of my working life I was paying towards my colleagues’ child benefit, though I am very happy that this has been stopped now. They are/were rich enough to pay for their own choices in life 😉

The OECD’s stats are also backward-looking, over a period where the assumption that it is always possible to improve things by putting more people to work probably held. I have a lot of time for the thinking that we are in the middle of a third industrial revolution, and I will probably not live to see the full effects of this one. It takes far longer than a human lifetime for the rubble to stop bouncing in an industrial revolution, and the transformational effect of the improvement in communications, data handling and processing on economic activity is probably not complete. Unlike Roger Bootle, however, I wouldn’t necessarily bet on human ingenuity this time.

We have a lot more humans to draw on, and capital can be more picky about which humans it uses. When I graduated, I was bright enough to be able to work in research and development. The twenty-something me was 2 nowhere near bright enough to work for Google. So we could have a lot more economic activity and vast increases in GDP with fewer humans aided by machine ingenuity, but the spoils of war would increasingly accrete to those that own the means of production, otherwise known as Capital.

As a result the idea that we can improve economic efficiency by educating people better is not a given for the future in my view. It may be a good thing for their quality of life – after all having reached the end of my working life the economic value of my education is now entirely spent. There is still some intangible value in terms of being able to read, write and have a basic grasp of how things work, infer conclusions from experimental data and have a cultural reference to the world around me – the value of education is not purely as a way to amplify earning power. It’s possible that the OECD’s narrative is accurate for the past – the historical economy had the capacity to employ more human capital and ran below full bore because it was starved of skills and boots on the ground. The global economy has got access to a hell of a lot more people now than it did when I started work, and this seems to be at the same time as it needs fewer people per unit economic activity as a result of the various issues in Humans Need Not Apply.

Which then brings us to the point of what the hell is the economy for? Is it to make as much stuff as possible and get as many people to buy this as possible, even if they can’t add enough economic value to pay for their consumption? Is it to maximise the sum total of human experience? These are political issues, but we don’t really seem to be tackling those issues as to what all this economic activity means and whether it is serving us well, we just know that we want ‘growth’ because it sprinkles some fairy-dust and seems to have made people feel better over time. Charging around telling people work is the way out of poverty seems to be pissing more and more people off, because it’s just not true. Eighty years after Keynes observed

The decadent international but individualistic capitalism in the hands of which we found ourselves after the war is not a success. It is not intelligent. It is not beautiful. It is not just. It is not virtuous. And it doesn’t deliver the goods. In short we dislike it, and we are beginning to despise it. But when we wonder what to put in its place, we are extremely perplexed.

he could still make the same observation.

The Citizen’s Wage/ Universal Income – an alternative to the Occupy movement

The Occupy movement is one response to the rise of the 1%, which is basically to try and tear them down. But it isn’t the only one. There’s another one. Let the 1% (and the 20% below) earn shedloads of money. After all, take a look at the Grauniad’s excellent analysis from Mona Chalabi  – people paying higher-rate tax and above make most of the running in tax revenue – about 2/3 of the tax take comes from them.

Then set a flat rate of tax, at 40%. Abolish the personal allowance. But give everybody a universal income of about the National Minimum wage once they reach 18.  At the old higher rate tax threshold of ~ £40k you will have paid 32% of £30k which is about £10k in tax leaving you with £30k, under the new regime I guess you’re paying £24k in tax leaving you with £16k to which is added £13k resulting in ~ £30k in total

Abolish all special interest pleading – nearly all of the Welfare state goes away, we presume that the NMW is enough to basically live on, be you pensioner or 19 year-old. No special case for having children – a couple on the NMW is a little under the average household income. Now, without the requirement to work, you can enjoy your children, see them grow up, walk them to school. You can now live anywhere in Britain we don’t all need to pack ourselves into the SE because that’s where all the jobs are – maybe even repopulate the North of the country – fabulous countryside.

If you don’t have kids, well, you have a bit more money then, follow your interests. Have a better house or car, or go on holiday more. If you want more than the NMW, then by all means, if you are talented enough, go get a job. Your universal income won’t be taken away or taxed, but everything you earn would be taxed.

The uber rich will now have to pay decently for their shit to be cleared, their houses to be cleaned and for fire service in London. But they can afford it, so the wages of shit-shovelling service industries will go up to whatever is needed that people will sell their time to do that sort of thing electively. But both parties will have a choice, and it’s up to the market to set the right price.

This isn’t a fully formed idea – there’s no doubt endless problem with it. For starters until globalisation makes everybody in the world equally well off and we have ended war, entitlement needs to managed. Britain allocates citizenship/residency largely by jus soli as far as I can see, and some steps will need to be taken such as requiring you to be born in Britain by people here legally to get the entitlement. Before I get charged with being a card-carrying nut-job – immigration is no problem but the parents will have to be here legally and presumably work of be of independent means. And it seems fair enough that if you aren’t entitled to the citizen’s wage you at least get a personal allowance re your earnings of the same amount :) The devil would be greatly in the details.

The problem we have at the moment is that we seem to be trying to micromanage our way out of macro sociological changes. The disenfranchising of a large part of the human population of a First World country isn’t necessarily a problem if it is caused by improvements in productivity caused by technology 3, but the way we allocate resources is going to drift out of track with the assumptions that underlie our societies.

With the industrial revolution we managed to dramatically reduce our use for human physical labour, but increased our capacity to use intellectual human labour. With the Information and computing revolution we are reducing our need for intellectual human labour, because we can solve many of these problems using IT (and outsource a lot that doesn’t). It’s not absolutely clear to me where we are going to put these now idle hands to work, though I don’t have the Protestant Work Ethic that always assumes the Devil is going to be the employer of last resort. There are many things that would be nice that more human effort could do, but in general we don’t seem to be prepared to pay hard cash for them.

That which we can’t do automatically demands much more cognitively of the humans 4, and it is beyond what many can do, we are way beyond the central bump in The Bell Curve and out there in the tail. I’m not really sure I’m bright enough to get ahead in this economy if I were starting now, the leading edge is way out there. We aren’t doing less, but the fruits of the productivity enhancements are accruing to people with capital and to people with power. CEOs and the 1% are skimming off a fair amount of the capital, but it is interesting that they have streaked ahead particularly through the use of equity allocations as well as higher pay.

 

Notes:

  1. Charles Colson, possibly
  2. I am making the slightly ageist common assumption that this fades with time – accumulated experience has much less value now in technical fields than it did when I started work
  3. if the improvements are caused by globalisation then it is a problem, because living standards must fall to equalisation otherwise there will be balance of payments problems with the countries doing the work
  4. Not all future work is cognitive. There will still be work for some other types of skills – being a footballer, or a Kardashian doesn’t require smarts, and artistic creativity requires a different type of smarts

Today is the official spendy frenzy of Black Friday and it’s time to

… ask yourself some searching questions in the vein of Oscar Wilde discoursing about the cynic

A man who knows the price of everything and the value of nothing.

because apparently you must go out and bag yourself a bargain this weekend. So what are these bargains they tell me of, then? I may as well start with what I know :)

Bargains I tell ya

Bargains I tell ya

So what do we have here? Top left, a shaver, which apparently was ‘worth’ £300 and is now half that. Now the Mail is not targeted at Russian oligarchs, or the sort of bullshit you get in the seat-back in business class, or even the Torygraph’s look-but-don’t-touch Luxury section. So it wouldn’t be unreasonable to imagine the typical Daily Mail Reader on the median UK wage, apparently £517 per week last year. From all the wittering about stagnating wages, automation and damned furreners I don’t imagine it’s gone up that much in the last year. These are apparently gross earnings, so a quick spin on ListenToTaxman tells me

Listen to Taxman gives it you straight

Listen to Taxman gives it you straight

that this fellow gets a gnat’s over £400 per week. So let’s say he runs a 40 hour week then he’s earning £10 per hour. Sadly his commute costs him more time and to add insult to injury the train companies seem to take a dim view of not paying. The FIrestarter did the maths, I’ll assume my punter eats a 25% hit rather than TFS’s 1/3 hit. So our Daily Mail Reader needs to spend an hour working/going to work for every £7.50 he earns.

Righty-ho, so he wants a shaver, call it £150. That’s 20 hours of not seeing his wife and kids… The Ermine is clearly behind the times, I didn’t realise you can spend that much on a shaver. So be it. We have the Nespresso Lattissima coffee machine, yours for £125, that’s 15 hours at work. I’ve already had the rant about how a Nespresso anything is a way to electively pay more for a restricted range of coffee, and produce more needless waste compared to the gonzo filter cone. But here you have to add the extra time to decoke this darned thing, because the combination of milk and heat is a cleaning nightmare, so you have to factor in the extra cost of the cleaning help. Or be prepared to take half an hour over an espresso, half of which is to clean out the milk section. The advantage Starbucks has is they amortize the cleaning over lots of coffee drinkers, whereas drinking 50 cups of espresso a day is going some at home.

So let’s move on to the pretty lady then. mail6Somebody really ought to tell her that winter’s coming, but what the hell. The trusty Ermine calculator tells me that is about 634 of your Great British Pounds for four items of clothing, so she’ll be working a month and a half 1a shade over two weeks  to pay for that little lot.

Black Friday is For Fripperies, not Fundamentals

Not so fast –  the time calculation gets worse. All these good people have to live somewhere and presumably eat something, so we really ought to run these calculations using disposable income. The Money Advice Service tells us that the average monthly disposable income is £224 2. Mind you, these are the same fellows who tell us that  it’s news to 1 in 100 of our fellow countrymen that you are supposed to pay a loan back, so maybe they fish in murky pools for their punters.

All of a sudden our shaver purchaser is looking at working for three weeks to get his whiskers trimmed, and our summery lady is looking at the wrong side of three months to buy that outfit.

Personally I’m on the other side of Oscar’s cynic.  There are a lot of very clever people out there. They go to work every day to make you screw up your finances by buying shit you don’t need. And Q4 of every year they go into overdrive.

‘just think of your children – buy these loom band kits’

Reminds me of Charlotte Metcalf buying Silly Bandz for Christmas because she couldn’t bear to tell her daughter that she didn’t have any money left. WTF is it with selling overpriced rubber bands to children?

Where’s Tyler Durden when you need him, eh?

God damn it, an entire generation pumping gas, waiting tables – slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don’t need.

Happy Black Friday, all, and Cyber Monday, two inventions designed to put the consumers of the UK further away from financial independence. We can’t have the people giving The Man the middle finger, eh, so run along and form an orderly queue to buy shit you don’t need. No fighting on the shop floor, okay?

Notes:

  1. Clive is absolutely right, it’s not as bad as that
  2. lies, damned lies and statistics, eh, note the shocking sleight of hand switching from median to average. When it comes to income, it seems the stinking rich lift the average with respect to the median so that £224 is probably an overestimate

Work is but a stage of Life

A human life has seasons – it is written in the cycle of life, we aren’t Immortals, dying through accident alone. The gateways between these seasons was often marked by rites of passage in earlier generations, but the modern First World has few rites of passage.

But life is still a journey. You can close your eyes and pretend it isn’t, but like all parody the Trainspotting song gets its edge because it does contain a kernel of truth. Many of our life choices are taken on autopilot. Some of this lack of deliberation is necessary – there simply are some important stages that the newborn has to master in the difficult progress from mewling and puking infant to the arbitrary stage of 18 we call adult. There is a dynamic tension in all of us that balances preserving the comfortable status quo against the effort necessary to challenge old forms, to break free of constraints, challenge habits and develop as human beings.

Consumerism can help you with all of these bar one

Consumerism can help you with all of these bar one

Consumerism doesn’t do meaning well, and if you look at Maslow’s Hierarchy of needs, the one at the very top, self-actualisation, is the one element that you can’t buy or outsource, by definition. Consumerism becomes increasingly ersatz the higher up the pyramid you go, but it doesn’t run out of road until the apex.

Sorry, Paris, but Daddy's billions still ain't gonna buy you to the top of that pyramid. Some jobs you have to do yourself. Time is on you side, so you can get away with 'Dress cute' for now...

Sorry, Paris, but Daddy’s billions still ain’t gonna buy you to the top of that pyramid. Some jobs you have to do yourself. Time is on you side, so you can get away with ‘Dress cute‘ for now…

In this journey through the stages of life, often you cannot progress until you surrender old forms. Thus it is that the parents of a newborn must surrender some of the hedonism of the DINKY lifestyle. Many years later tears well up in the mother’s eyes as she waves her son goodbye as he steps into the world to become his own man. It is a transition for him, but also for her too, we have no shared Western narrative for maiden/mother/crone 1 or the masculine equivalent boy/man/sage or wizard 2.

Consumerism doesn’t favour introspection and a search of meaning, and it actively discourages personal growth, because it always needs you to look outwards for satisfaction of your wants. There’s nothing to sell, otherwise :) MMM summed this up well as the Poisonous Pitfall of Piss-Poor Lifestyle Planning. Look at how much is sold to young and middle aged men to encourage the puer aeternus who “covets independence and freedom, chafes at boundaries and limits, and tends to find any restriction intolerable”.

look - no other cars get in your way if you are in one of these

look – no other cars get in your way if you are in one of these

Indeed, an awful lot of ultra-luxury seems to be marketed towards these ideals of independence and freedom as expressed in Stuff. The irony doesn’t escape me that some of the aims of Financial Independence are seeking to live life without boundaries and limits, finding restrictions (on one’s time) intolerable 😉

In many of the myths of Europe, there is the story of the hero starting his journey as a young man, going out in the world to earn his fortune. Precisely how we have turned this, in an age of relative richness, into working for The Man until you drop is a puzzle. Some of this is because  because of the endless aspiration to Stuff and Experiences. Some of it is because we have engineered certain kinds of inequality into our economy such that an increasing number of people will never have the opportunity to decide what Enough looks like because their lifetime earnings won’t be enough to compete with the credit-inflated value of some necessities.

And so I offer to the FI community that making your fortune is good, as a first step, but the hero of our myths of old does not simply make his fortune and then sit on it, or play cards into his dotage, In the modern world work is often the way to making your fortune, but once you have this, then its work is done. To progress the  traveller on the journey of life must release old forms. For most people working for The Man, their legacy as a human being will not be their work 3. People who retire often believe they will be sorely missed but most organisations self-heal rapidly.

Thoroughly unprepared we take the step into the afternoon of life; worse still we take this step with the false presupposition that our truths and ideals will serve us as hitherto. But we cannot live the afternoon of life according to the programme of life’s morning; for what was great in the morning will be little at evening, and what in the morning was true will at evening be a lie.

Carl Jung, Modern Man in Search of a Soul

As the slave grows accustomed to his chains, so it seems the wheel grows accustomed to the shape of the rail for thirty of forty years, perhaps even fifty if we count the guided track of the education system in childhood. For long a path is trodden, but as Jung indicated, it slowly begins to lose validity.

The Queen's Tower at Imperial College

The Queen’s Tower at Imperial College

The seeker of financial independence speeds up the process. Recently I passed through Imperial College where I did my first degree in Physics many years ago. The alumnus office provided me and Mrs Ermine with a fine cup of coffee gratis and a place to rest a little. It’s  strange to think that when I last passed this way here I had maximum human capital and zero financial capital. Over the ensuing thirty years I exchanged that human capital for financial capital – in the words of our fairy tales, I made my fortune.

Now the value of my human capital is zero – nobody is going to pay me more or less because I have a Physics degree. It has become worthless, but it has done its job. Surrender and redemption are part of the cycle of life. Work is now an old form for me. In many of the earlier posts on here I ascribe leaving work early to the world of work changing. It did, but now I also see that I changed – things and ways of doing things that used to be acceptable to me became less acceptable. I resisted the change, because I had a conventional viewpoint that I would make this change at 60 (which was the normal retirement age for The Firm). Resisting change in personal development always causes pain, but here I took the pain up front. Exchanging my human capital for financial capital doesn’t trouble me, I don’t hanker after the ‘meaning’ of work. It was a phase of life, it is done, and I’m with Carl Jung there. I want to deepen, to develop, to understand more. I will probably affect other people, and share some of the journey. It’s more open-ended than the world of work, and that is a good thing.

If they are successful, and if they know how to know that they are successful, every striver for financial independence must one day ask themselves

What do you want now?

If the answer is ‘more of the same’ then you may have to tarry awhile at this waystation of Life. Retiring is a change, and to do it well you must change. The change is hard, because you have followed the track of ‘work’ and the meaning and setting that gave you. Change comes easier to the young – your change into work was easier than perhaps your change out of it. Little wonder, then, that so often the new retiree seeks to replicate the comforting rituals of work.

I see it a lot, and it puzzles me. Mistersquirrel calls some of it out with

Have viable alternative pursuits. One of the side-effects of working in a regular job is that there isn’t actually much time left over to do things.

Now self-development is a strange thing – everybody comes to it by the shortest distance they can manage, even if that path is messy and indirect. Many get stuck somewhere, because the process of knowing who you are, what you stand for and what you value is not easy. M Scott Peck said

The truth is that our finest moments are most likely to occur when we are feeling deeply uncomfortable, unhappy, or unfulfilled. For it is only in such moments, propelled by our discomfort, that we are likely to step out of our ruts and start searching for different ways or truer answers.

Work is a stage of life for some people. Retiring is a challenge, and I would estimate that of the people I’ve observed 4 more than half get stuck because they cannot surrender the work-self that they built up over decades. They still value themselves by what they did. Even the Ermine retains Chartered Engineer status at a modest cost, because I haven’t yet come to the conclusion that I will never do engineering professionally 5 again.

Only once you surrender the old truths and ideals can you further the process of individuation and enter the next phase of life as Carl Jung intimated. People’s paths are many, and there is no one True Way, but I choose to go forwards, to surrender the old to gain new insights in the game of Life.

 

Notes:

  1. Crone is terribly perjorative in a youth-obsessed world, I mean it in the way referred to in Wikipedia as  “a Croning is a ritual rite of passage era of wisdom, freedom, and personal power”
  2. I’m sad to observe that fewer of my gender seem to pass into the wizard stage, though it is hardly as if the mythic landscape of Western culture lacks the Gandalf/Luke Skywalker role model, and RPGs seem full of it. We aren’t getting lost because we’re in a pathless land
  3. If you’re a Nobel prizewinner or otherwise advance human knowledge or art in your work, maybe. Tim Berners-Lee was working for the Man, part of his legacy is you can read this
  4. most of these are from my parents generation, being an early retiree myself, I don’t have much data from my own peer group
  5. I use professionally in the sense of ‘for money’ as opposed to looking for a job in it, which I view as extremely unlikely

the season of mellow fruitfulness is on us

Nutscape

and it’s time to look at the non-financial investments. In this case, indeed, the non-financial investments of the local Squire, the Fonnereaus. Not only did they build this gaff

Christchurch Mansion

Christchurch Mansion

but they planted some chestnut trees, and the chestnut harvest is awesome this Autumn. The recent winds have brought down a fine crop, and it’s before the weekend when World + Dog will have got to these. The trick is to win your chestnut harvest from the spiky hulls

Herein dwells a fine nut

Herein dwells a fine nut

Sweet chestnut

Sweet chestnut

with the minimum of cursing.

a fine  nut harvest

a fine nut harvest

and win a fine harvest of fresh, sweet chestnut from veterans like this tree

one of the chestnut trees

one of the chestnut trees

 

Now there may be some of you reading this that think to yourselves

goddamnit I earn £200,000 p.a which boils down to £125 an hour and I can get loose chestnuts from Tesco delivered to me for £7/kg so all round so WTF? Why would I be pissing about scavenging nuts in the park

And I would respect your opinions. But I would venture you’re missing out of some little piece of being human as you sit behind your  screens oblivious to the passage of the seasons. Being a flâneur is one of the good things about owning my own time and if I want to go pick nuts then I damn well can 😉 It’s the sheer optionality of it that adds to the sweetness. As summed up delightfully by The Escape Artist – the Ermine tips his hat and welcomes yet another soul across the event horizon of FI.

Financial Independence is about more than money

In Blighty there’s a raging debate about the subject of independence going on – Scottish independence that is. I’m not going to add to the verbiage about Scottish independence because this is a matter for the Scottish people themselves on Thursday, but I am struck by the paucity of the thinking of the No/Better together campaign.

Independence is about self-determination, not about money. When I chose to shoot for financial independence, the reason for doing it wasn’t financial. In purely financial terms it was a disaster – dropping my income to a prospected 20% of the high-water mark 1

The No campaign seems to have taken Bill Clinton’s adage that it’s the economy, stupid to the extreme, and focus on the alleged economic Götterdämmerung that will come to pass as a result of independence. Now there are inconsistencies in Salmond’s campaign 2 exactly what the point of independence is if Scotland continues to use the pound and retain the queen as a figurehead is hard for me to understand, but the No campaign seems to have missed the point entirely.

It’s about more than money. It’s about time, and about self-determination

Independence is about freedom of action and of self-determination. I was prepared to eat a 80% fall in income to win my freedom – to choose how I use my days. We often get too hung up on the how of financial independence because it is a big, challenging ask. Don’t get me wrong – if you want to get there, you need to understand the how, and some of the UK bloggers are doing a great job in doing what ERE did for the US scene with his book. Mistersquirrel has written an excellent condensed summary of how to achieve financial independence with his ebook, Monevator will set you right on the hows and whys of investing.

The reason financial independence(FI) is a hard sell is because of the No campaign thinking – the focus is all on what you can’t do.The focus is clear and sharp, because money is measurable. The hours and years of your life aren’t so quantifiable, because unlike the Cyclops you don’t have a clear measure of the end-date. But as Gretchen Rubin highlighted 3, the days are long but the years are short.

The Escape Artist does a good job of summarising the issues

The flipside of this is that once you have met your reasonable financial needs, you owe it to yourself and to others to raise your sights and stop just focussing on money. In my time in the City, I used to meet plenty of people that (I’m guessing) had a net worth of £2m+, who were good at their jobs but would have been happier being a writer, tree surgeon or a school teacher. Why behave as if this one life we get is just a dress rehearsal? If you are one of those people and you carry on working in your all consuming City or Corporate job, then you are wasting your life.

Now I didn’t work in his field, my networth is far less than £2m+, but I do have other advantages – not living in London, being a bit older for instance. So relatively I am in a similar position. And I didn’t get that wasting your life bit  – I assumed I’d carry on working to 60 (the normal retirement age at The Firm) because  er, well somewhere along the way between starting my first job and getting to my late 40s the clutch must have slipped in the why am I doing all this department. Now to be honest my job wasn’t all consuming for a long time and gave some intellectual challenge, it served me well up until the early 2000s, But then it started to go wrong, and demand too much for too little, in particular micromanagement and Digital Taylorism started to creep in and the erstwhile research facility was driven down the value chain into a jobbing shop.

And although it took me far too long to jump to it, in the end I came to the conclusion I didn’t want to live like this, and I wanted out. That is the time when the how of financial independence matters, and I took the resources available to me and focused them with extreme prejudice on getting out. The Escape Artist was exactly right

[…and you carry on working…, then you are wasting your life.] This is more frequent than you might think. The most common motivation for this behaviour is fear – fear of change, (irrational) fear of poverty, fear of loss of status, fear of their spouse’s reaction etc. Its not enough just to make a life-changing amount of money, you still have to change your life. Don’t just load the gun, pull the trigger.

It’s easy to get lost in the money side and paralysed by fear. It’s where the No campaign is going wrong, IMO. Independence is about more than money. Yes, having enough money is necessary, but sufficient. There are cultural differences in Scotland that have not been answered, and there is more of a feeling for the collective good. Because I personally am somewhere to the right of the Scots 4 I think they will be sorely disappointed in the promises of milk and honey offered by Salmond, but I have enough faith in their savvy that they probably suspect this too. The nation of Scotland has achieved far too much for far too long to be made up of people universally daft enough to believe him.

It’s a perfectly reasonable call to accept some degree of economic poverty for greater freedom of action. In the big picture, it isn’t all the economy, stupid. Money is crystallised power, it is a claim on future human work or resources that displace the same. It is an enabling component of a life well lived, in the same way as your car needs four wheels to run, three won’t do. But five, six or three hundred aren’t needed. When success starts to look to you like a yacht then it may be worth asking yourself if you haven’t strayed onto the motorway to consumerism hell. In general, if success starts to look to you like Things and Wants then you may want to consider that Maslow’s hierarchy of needs has at its pinnacle

“morality, creativity, spontaneity, problem-solving, lack of prejudice, acceptance of facts”

Not so much Stuff in there, eh? I don’t know about morality and lack of prejudice, but I would go along with that getting better at being myself, expressing myself, and individuation are the primary wins of early retirement, and the main enabler is that I own my own time. It really doesn’t matter how rich your are or how many of your yachts are in the harbour if you are still owned by The Man and have to be somewhere and do something for a lot of your day to keep things that way. Obviously if you are truly of independent means then more is better, but there is a long sliding scale between the amount of your life that you give to The Man and the amount of wealth that you accumulate.

I am poorer, but I have far more self-determination than when I was working

Let me take an example. The Ermine household was out in Wales this last week – Mrs Ermine was attending a community-supported agriculture shindig, and I went along for the ride to go look at things like this

prehistoric site in Wales

easy to get to prehistoric site in Wales

as well as searching for less easy to find sites, going round in circles because Cadw are poor at signage and rights of way are also poorly maintained in Wales I am a  crap hiker because I only do it to get to interesting stuff, rather than the the whole personal challenge/because it’s there thing. Cadw are erratic at signage and I did find one place where some toe-rag had extended his front lawn over the erstwhile footpath and removed all signage to the stone stile, but it’s still no excuse for wandering aimlessly on a rocky outcrop, and I could learn to get that right, and have learned that blaming others for stuff I could fix isn’t a way to long-term success. I am a unreconstructed map and handheld GPS 5 when it comes to hiking, but it struck me that what I want is a GPS that shows a moving OS map. It’s been a long time coming because of the technical challenges and ridiculous Gollum-esque licensing restrictions of the Ordnance Survey, but I can go out and buy such a thing now.

Oy vey – £350. Now when I was working I would have dropped the £350 on this just like that. Because this was going to change my life and make it easier to find things in the open.

Err, no. For starters, all but five weeks of my time was sold to The Man, and much interesting stuff like this is left lying around in places far away from people. It takes time and effort to get to. I now take some time in places, to look and to listen, be it some urban nexus or a prehistoric site or something else.

A colleague at work did me a great favour in highlighting the contradictions and lack of intentional living of those expensive, fast and furious holidays while working. It was when he told me that his wife got on the internet as soon as they came back from their summer holiday to book the next year’s one. And I thought to myself  “I do not want to live in the future like that, flushing away 50 weeks of my time like that for two weeks of respite”

I stopped going on holidays then, for three years, so that I could maximise my savings rate. Yes, I was living in the future for those three years. But my future is now. And I have far more freedom of action. If I wanted to I could spend more time looking at prehistoric stones, indeed I considered a period as a peripatetic photographer. You can never travel with anybody else if you want to make money take decent pictures outdoors, because you need to be out at the times of day when most people are eating or sleeping because the light is better then, rather than the harsh light of the middle of the day. It’s just too antisocial. I can consider that – because I own my own time, so it wouldn’t be robbed from our collective couple of weeks of freedom. Three or four weeks a year just wouldn’t cut it. But then I wouldn’t want to try and be creative or make the money because The Man would be paying to own the remaining time, and time away from The Man is more about recovery than about creativity, spontaneity, problem-solving 6.

Consumerism attacks you at the third and fourth levels particularly

In particular the need for respect… It’s all the buy this to make yourself look better, set you above the Jones, etc. The Joneses don’t give a shit about what you have, they are bothered about what they don’t have. They don’t respect the people that have what they don’t, indeed they hardly think about the people, it’s the stuff – it is the feeling of the missing eyes from their own peacock tail that exercises them. I know because I’ve been there – consumerism gets you to project part of your self image on stuff and lifestyles – can you even remember much about the beautiful people who were the clothes-horses for the lifestyle in the ads?

If you want out of this rat race then refuse to run with rats. Focus on what you think about your stuff, not what other people do. If your stuff displeases you, then change it. If it serves you okay but isn’t the latest smartphone/gizmo/whatever then so what?

Another thing that helps you with consumerism is that when you own your own time you can work out what you want of your stuff and how to use it right. F’rinstance, I discovered  that I could use the existing iPod I have with a CoPilot bluetooth GPS I got from ebay ages ago for a project, and then make it work with Viewranger which can download individual tiles of OS maps for a price. Smartphone aficionados will of course say they can do all this but one thing the last week did teach me is that mobile data coverage is non-existent in the parts of the UK where interesting stuff is often to be found – I had thought it would be a useful fallback data network for researching but it’s useless – run and gun WiFi is far more reliable because at least you know where to find it  at centre of habitation. With a bit of experimentation I can find out if a GPS showing OS maps is useful to me for about £20 using gear I already have. If it is I may consider the Garmin product – but I will do so knowing what questions to ask and how I use this in the field, rather than having to sport the £350 up-front just to find out if it works for me and take the risk of there being some subtle gotcha or yet another gadget that promises much but fails to deliver on the essentials – let’s hear it for the smart watch with less than 24 hours of battery life and which doesn’t tell the time at a glance as a case in point of getting the 20% gimmickry right and losing the 80% essentials.

The Scottish referendum highlights that it isn’t all about the money, and it’s the same with financial independence.

To paraphrase Bill Clinton, It’s the freedom, stupid. Financial independence isn’t a notch on the bedpost, it has no meaning in and of itself. Even in the midst of trying to find a way out, I understood this, because I was driven by wanting options, to win a way out from having other people be able to tell me what to do with my time. It’s important to first answer the question why, before addressing the how.

Savings. Yes, there’s a lot to be said for them. Most people save in order to buy something. That’s good, particularly is the alternative is to use credit. Though the most common reason for saving, it isn’t the only one.

I save to buy power and freedom – the freedom to walk tall […] – modern ads for savings accounts emphasise saving up for something like a house, or the advantageous interest rate. I have never seen a modern ad advocating saving to buy yourself independence of thought and action. Wage slavery is too ingrained in our culture, and we have surrendered to Illich’s modernized poverty.

What’s your reason for wanting to be financially independent? After all, many, many people in Britain live happy and fulfilling lives enjoying the fruits of consumerism and living paycheque to paycheque, and good for them. I have no quarrel either with the YOLO set who ram themselves up the eyeballs in debt, as long as they don’t then turn round and demand I pay to bail them out without getting a slice of the YOLO fun 😉 There are choices to be made in life, in general you can do anything you want 7 if you want it hard enough, but not everything you want.

So it is for Scotland on Thursday. It is freedom to live in the way they want, albeit in probably straitened circumstances 8. It’s not about the money. It’s about freedom and self-determination. These are things that it’s sometime worth making sacrifices for.

Notes:

  1. There are many, many distorting factors that make this a lowball estimate and it being less of a hit than the headline fall, but 80% was the drop I was prepared to eat
  2. Alex Salmond worked as an economist in MAFF in the late 1970s – I presume he is fully aware of the consequences of being in a currency area with a bunch of guys who are carrying on in a way so opposed to the way your area wants to live that you want to get shot of them, but if he has forgotten that, the Euro area is a good object lesson in why you don’t want to be the 60lb gorilla next to the 600lb one in a currency union
  3. warning – extremely cheesy child-centric crap, but says a truth all the same. You may or may not need a sick bucket and/or end up in hyperglycaemia shock due to the saccharine schmaltziness
  4. more from the point of view that “if you aren’t a socialist when you are young you have no heart and if you are when you are older you have no head” rather than a deep Ayn-Randian philosophy or being a dedicated follower of Hayek’s Austrian school
  5. with a mechanical compass to back it up, but I don’t normally use this
  6. Not everyone working for The Man needs the recovery time – I know a few people who choose to work some jobs that pay modestly but aren’t particularly consuming precisely to have a better lifestyle. They do enjoy their time off much better, and it’s a perfectly reasonable alternative the the financial independence/retire early approach, albeit with the inherent risks of depending on the availability of that type of job, which seems to be falling over time, or at least paying less well
  7. bearing in mind you are in a rich first-world economy, assuming you are of above average aptitude in something that can enhance the lives of your fellow men and that you are capable of understanding that your actions have consequences
  8. I don’t believe the milk and honey promises, though I don’t believe the hell on earth the No campaign are selling. And I find it more admirable when someone chooses freedom over the chimera of economic comfort through slavery anyway, it’s what this blog is about :)

Fight consumerism – get time on your side

mistersquirrel  has been watching TV, in particular an excellent three-part series about consumerism. The third programme was the one I found most insightful, which develops the theory that adults are being infantilised by systems that give micro-rewards to urge them into purchases, and the process of buying is being made as frictionless as possible.

Tesco really loves football. Look at all the things Euro 2012 realted you can buy

Stuff. Shopping. Special Offers. Buy it Now! Won’t it be easier when you simply pay for the item as you put it in your trolley with contactless payments?

It goes along with the general gamification of the world – people being herded along desired paths of action using sophisticated micro-reward systems. This sort of thing started to really piss me off at work, stupid metrics on irrelevant areas being used to herd and control people, and it appears to be going on in the consumer space too. Unlike work, however, in theory as a consumer you are in control of the money so you are in charge. One of the key techniques, however, is easy to fight. Trying to get you to buy quickly. Don’t do that. Buy slowly.

First, check out the enemy

the credit problem

It’s in Episode 3 at 45mins into the programme

“Every other company on Earth is trying to get you to spend money, and they’re putting all their effort into getting you to spend your money on Stuff all the time. […] Make no mistake, the house always wins. […]Business had learnt from children how the adult market could be turned into a game.!”

“The trouble with adult consumers is they think too much”

Benjamin Barber, Rutgers University

I hear there’s a fellow who’s saved loads of money doing just that – thinking. Don’t give it up, adults. That’s why you’re adults – so you get a hold of the steering wheel of Life…

“The last 30 years of selling has been about getting us to give in to this instant gratification”

Now I have to admit, at first the Ermine thought to himself “bollocks”, but the programme developed its thesis well. In particular, the process of handing over your money has been transformed. There has been a progression –

cash -> credit cards -> stored card details like Paypal, 1-click, mobile purchasing, contactless wristbands,

The consumer merchandisers came up with a magic bullet, the credit card. The credit card becomes the facilitator of impetuous, narcissistic buy now consumerism, because you don’t have to wait a second.

Benjamin Barber, Rutgers University

Now I got my first Access credit card in 1979, as a freshman student. And yet I never got into huge trouble with it, indeed I was in my mid-twenties when I came to the conclusion that my parents were right

Don’t spend more than you earn, son

So I have generally paid them off within the interest-free period. Yes, I cocked up a few times and had reason to be grateful for the minimum payment direct debit feature all suppliers offer. I have sometimes carried a rolling balance, if some card company is going to be so dim as to offer me interest-free credit. On occasion I’ve been prepared to pay interest – when the Nationwide building society was prepared to pay me more interest on the borrowed money. So I don’t viscerally understand this part of how Big Consumerism is suckering the proletariat. Despite what one woman in the programme claimed, credit cards can be used properly. Just always remember you’re not borrowing money from the bank, you are borrowing from your future self. Make that your one month future self and you’ll be fine, because you’re close to him and he’s real to you. And the card won’t charge you interest!

the Buy It Now problem

However, I am susceptible to the buy it now problem.It’s across the modern consumerism estate – they are trying to shorten the gap between want it and buy it. Credit cards help you buy it now if you don’t have the money, but things like Amazon 1-click and Paypal make the process of paying quicker and less onerous. There’s a simple way to fix this, however. Remember the good Prof Barber. The solution I use is simple

Put the stuff in your virtual shopping cart. Then wait 24 hours before making the purchase

You don’t have to do too much thinking. If you’ve been suckered by gamification you will come back to the purchase the next day and think ‘how dumb is that’ and move on. Though with Amazon remember to empty the cart – else you’ll end up buying it with the next thing you get there, although there’s enough of a grace period to cancel the order. I used to think that the cooling off period needed to be seven days, and indeed in my hardest saving period at work I used a month. But I’m not so frazzled now, I can recognise dumb consumerism within a few hours now. 1 That inserts a great big monkey-wrench into the ad-men’s ability to tap into your ‘I want it now’ state of mind. It’s future-proof too – even if in ten years time they have a thought-swipe method of instant purchase you can still split the ‘I want it’ from now. Live intentionally. There’s nothing fundamentally wrong with consumerism – as long as it suits your wants and needs rather than theirs.

Think like an adult. Think too much for marketers of consumerism. Ice the “I want it Now” mentality. And don’t spend money you haven’t got, which is a different take on the same problem

But – but- what if it’s a unrepeatable sale, or a Black Friday or a Everything Must Go?

Leave it be. Remember the fellow above. The house always wins. They’re trying to deny you the space to think. There’s only one way to beat the house, and that’s not to play their game. You don’t have to be nutty about it – for regular consumables it doesn’t really apply. If you always buy organic butter, know the price and it really is on offer at 10% less then knock yourself out and load up on it (you can freeze butter). It the purchase of something new to you, or being stampeded into an upgrade, where I’d say just ignore the special offers if they can’t match the 24 hour rule.

increasingly things are being sold in a dishonest and gamified way

Take the concept of apps – where you get something that appears to do a job for free, but to make it work you need to make an in-app purchase, for some individually small amount. Now I despise apps and the concept of paying for software in general. I wouldn’t mind paying if you had some comeback on the supplier, but licensing has generally been on a ‘sold as seen’ basis for the last 20 years or so. Open source has largely fixed that problem – by dealing with the ‘sold’ part of the deal :)

The great thing about in-app purchases for the seller is that the app promises, fails to deliver but says you can make it work if you pay the ransom money. In other areas of life this is considered nefarious activity. It isn’t actually new – PC software used to be sold this way in the late 1980s – it was dearer to start with but often many layers of functionality that you’d pay more for. The piss-taking toerags at Novell Netware used to sell you per seat network connection licences 2, and the DOS version of MS Word had varying levels of functionality. Electronics schematic layout software would sometimes only let you lay out so many components before you’d have to pay. So this sort of incremental sales strategy isn’t new, but it was usually confined to the B2B sector back then. Businesses are usually much better at qualifying the ROI they will get on a piece of production equipment than consumers are at evaluating the enhancement of quality of life they will get for spending money on some consumer goods.

case study:  buying an app to play a mixtape

A mixtape is a long continuous gapless track – my application is for parties, where I use foobar and continuator to intelligently crossfade a sequence that I’ve manually scheduled and mixed in key. Some time a go I bought an iPod to develop some mobile web HTML. It did the job admirably and cost-effectively, and to be honest doesn’t owe me anything now. But I have never got it to work properly for playing music, because I despise iTunes,  which failed me dismally. Given I am playing this out on a field with no power or Internet access I had one primary CD player and two failover solutions – a second copy of the 7 hour mixtape CD on a cheap backup player and the iPod as third-line.

As the weather deteriorated and the humidity rose 3 the main player started to skip, so I wanted to crossfade to the iPod, with no moving parts it should be best able to run through the dew point.

iTunes lied to me when it said it uploaded the file

You really don’t want to see this if you’re going to crossfade to it. iTunes lied to me when it said it uploaded the file

So I had to crossfade to the crappy CD player and a regular album, and start to cue the backup CD four hours in. For technical reasons that sort of track fast forwards glacially slowly, I just got there by the time the regular album was about four tracks in, ready to crossfade back.

Now I should have tested everything including the third-level failover, so it’s my bad. However, in seeking a solution to this, I find the music app on the iPod can’t play a mixtape and index the songs. Most people play pop songs on their iPods with a gap or an auto-crossfade, which sound poor to me 4, and is what I’m trying to improve on. Presumably nobody listens to classical music or live albums on an iPod which are also long gapless tracks. The correct solution to indexing a continuous track without gaps is to use a cuesheet and FLAC, because another thing I realised when playing the regular CD is although I can’t hear the difference between MP3 and CD audio at modest listening levels the difference is all too apparent at high levels .

So what I need is an app. I now know what I need is an app that will play a cue-indexed single track file, but initially I thought I could mix the tracks automatically on the fly. I don’t want to manually DJ it because I don’t have the skill, I don’t get to  talk to anyone and the results will get worse as the evening goes on due to the power of drinking :)

Enter the world of hurt that is apps – gamified consumerism in action

I really hate apps. They’re vile, because they do so little, and the nickel-and-diming to coax even the slightest bit of usefulness out of them is hard to track. I got Algoriddms djay LE for free. but to load my own tracks would mean an in app purchase. So I did that, for £1.50, only to find that once I’d downloaded into itunes it wouldn’t let me load it on anything less than iOS7, which is Apple’s way of deliberately deprecating old gear – they just stop updating iOS for it, and 6 is as far as they will go for mine. Would it really be too much to ask that they check first before letting you buy an upgrade that won’t work on your kit, given they use such corrupt business practices? The ermine is down £1.50 with a fail on caveat emptor – I was unaware that an upgrade to a working program could be non-compatible. As I observed before, everything Apple is easy but hard at the same time.

So I look for an app that does work. Ah DJ mixer 3 does work, but you need to pay £7 to be able to use your own tracks. Now I can’t say I didn’t have fun with that app scratch mixing and finding sixty seven ways to make things sound crap. But the automix sounds poor with pop and rock, though it’s okay with dance. I still don’t think most  of the adults at the Oak Tree farm parties are ready for EDM/dance, though I got some of the kids out in the middle dancing with the odd dance track.  I have no complaint about that app, it works for what it’s designed to do, but not well enough for me.

So I still need an app to play a long wav or FLAC track with a cue sheet, so that’ll be Golden Ear then. I now have a bit of trepidation about dropping £6 on something that promises it’ll do the job after the frustrating experience with apps so far. You can’t trust apps to do what it says on the tin, it appears, even down to basic things like installing…

I’ll be down £15 just to get this to play music in a way that fits my requirements. Now I can’t say that’s a huge outlay, but I only wrangle apps every six months or so, and I’ve had rotten value so far because I wasn’t allowed to test with my material before shelling out. Not only that, but there’s the incremental way these are sold. If you have a smartphone and are buying apps every other week your app costs could easily exceed your mobile subscription, but it’ll happen in random itty bitty pieces so you won’t clock it. Plus the way individual functions are chargeable means they can avoid sticker shock – you wouldn’t pay £20 for an app in one go but you might to get different levels of functionality enabled as the crippleware gets in your way.

This experience has left me much less likely to get a smartphone in future. I hate working this way, I’d much rather pay for something that does the job upfront 5 than be nickel-and-dimed like that. I do want to be able to test things out properly, and this is something that is craftily prevented by crippling specific features.

The other thing that is nasty about iOS is I can’t code for it without high up-front costs. Even if I had a Mac, I’d have to pay $99 a year for the privilege of getting my own programs onto my own machine, WTF is up with that?

Low capital costs and high running or replacement/upgrade costs is the way things are going

Unfortunately an increasing amount of things are sold this way, at a low upfront cost and you get sliced and diced on the consumables. You rent your music with Spotify, you rent your printer with shockingly expensive ink cartridges though the machine is virtually a freebie, any Apple hardware is on borrowed time because it will become orphaned as iOS leaves it behind in a few years. You as a good little consumer will simply funnel part of your paycheque into the consumerism machine to keep the world turning.

It’s not how I want to buy Stuff, I don’t expect to keep on changing it. For instance, I have only ever had one scanner, an Epson Perfection 1200S SCSI scanner, it is now about 15 years old, and I recently got this working with my Windows 7 machine. It would have been easier to buy a new USB scanner, but I like this, it’s served me well and I want to keep it going. Back then I used it a lot, now I just want to scan the odd thing here or there. My computers are about seven years old. I can’t use a tablet because I am also a creator of content as well as a consumer. I’d punch the screen out if I had to tap tap tappity tap on a touch screen.There hasn’t been that much development in computers over the last few years that makes a difference for writing, browsing and running design software or editiong audio 6. Obviously if you play games to push the graphics then you’ll disagree, but I don’t have those sorts of requirements.

I purchased my hi-fi preamplifier secondhand thirty years ago, and my power amplifier is a secondhand Naim 250 which has probably been in service for 20 years. I have had to service the preamp and had the power amplifier serviced a few years back. Decent gear lasts if you look after it. But more and more there just isn’t decent gear to be had, or it is made deliberately obsolescent. And I’m tired of it.

This low service life and deliberate obsolescence is one of the reasons that I find Stuff much less rewarding now. I don’t want to have to  buy a new phone, or music player, or camera every year. I don’t give a toss about being with it, I’d just like to be able to do what I used to be able to do with it, and if apps are part of the way to make it do stuff then not get locked out of the app ecosystem after a couple of years.

update 9 July 15:00 –

Another great example of this came through my door

1407-tesco-140709Loads of savings on offer from Tesco, What do I have to do to get my £45 off –

you want me to trot along once a week like a good li'l consumer? On yer bike...

you want me to trot along once a week like a good li’l consumer? On yer bike…

I have to spend £375 with them, over six successive weeks. No Mr Tesco, I am not a lab rat in your maze, so I’ll pass on this. In the event that I really do want something worth £70+ from you I’ll consider it, but the existence or otherwise of your promotion will not change what I do.

Fight impetuous, narcissistic buy now consumerism. 24 hours at a time. Time is on your side…

Notes:

  1. This is probably the same sort of thing as your mother used to tell you to sleep on something before doing something crazy – I think most people’s emotional states vary across the diurnal cycle, it’s a way of getting a ‘different you’ to look at the purchase.
  2. it was sweet when MS, and then TCP/IP destroyed Novell’s business case and ate their lunch. I still detest this company for that egregious policy a quarter of a century after it got in my way at work
  3. everybody thinks dew is a thing of the morning, but it happens in the evening as soon as the sun goes down. Humidity rises and condensation often happens by twilight
  4. the crossfade is fixed in the iPod which works fine most of the time but sounds rotten when it doesn’t and the iTunes soundcheck level matching sucks compared to foobar’s replaygain
  5. although I don’t like paying for software I’m not religiously opposed to it. I try and find a free way of doing things but I do have a  folder of shareware registration details and I still use some of these programs
  6. I do feel the lack of performance when editing video, but I don’t do enough of that to be worth changing
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