This weekend, the Business Times launched a new column entitled Switching Lanes. This column is after the hearts of many folks who read this blog because it focuses on the realities of life after a full-time career. I encourage blog readers to support this column, as I expect my own blog to issue rebuttals and support for such articles in the future.
And this is why I enjoyed Kenneth Goh's article, titled "The best investment in your 20s isn't your portfolio." This article, in my opinion, is rife with logical fallacies, and even though the author has disclaimed that his opinions are his own, I can't help but feel that the views expressed also coincidentally align with those of financial institutions.
First of all, the article proposes that the best investment in your 20s isn't your portfolio. That's hard to disagree with even for the stanchest FIRE advocate. Health is probably a much better investment of your time. Even some relationships are worth investing in.
But the author does not mention health and relationships at all.
Instead, the authors begin by discussing the FIRE movement, and credit goes to him for referring to Jacob Lund Fisker, whom I consider a real father of the FIRE movement, rather than to Vicki Robins, who is very much a free spirit and an inheritor of wealth.
At this point in the article, the logical flaws begin to surface as the author constructs a strawman of the FIRE movement. A strawman is an exaggerated illustration that can be easily toppled by a simple argument. This strawman is a troglodyte, a caricature that saves so much money that he forgets to network with other people and build up his human capital, which the author deftly channels by invoking Nobel prize-winning economist Gary Becker.
I've been into FIRE for 25+ years, and if you follow my blog and observe my LinkedIn, I suspect I've been building my human capital way longer than the author. I've also had personal correspondence with Jacob Lund Fisker, who is a very friendly guy and a brilliant Renaissance man, a Physics PhD and a handyman. In our private conversation, I remember admiring Jacob for his handyman skills, but told him that in Singapore, these skills can be outsourced for a low fee, and I can afford to build other competencies.
Therefore, I don't think you can position people in the FIRE movement as antisocial troglodytes who sacrifice career networking for their investment portfolios.
This is a false dichotomy. There is no tradeoff.
I can be frugal and also have coffee sessions with businessmen I admire (many as frugal as me!) .
However, this article does have the benefit of prompting us to reflect on why people think financial capital comes at the expense of human capital.
A majority of the FIRE movement are INTJs; they are naturally introverted. So I can argue that even if they do not engage in portfolio building, INTJs can do many other things to keep themselves intellectually satisfied, like watch anime endlessly and argue with people on Reddit, learn Klingon, build AI bots, play Dungeons and Dragons, or anything but build their human capital through relentless networking.
Finally, the author and the financial institutions need to really do some soul searching on the people in their 50s today who CAN NOT RETIRE.
There are plenty of Singaporeans who spend their 20s building networks, playing office politics, and getting ahead. Not all of them succeed; some gain minor advantages and become addicted to a high-status lifestyle, but all of us eventually get older, and at 45, many Singaporeans see their salaries plateau. Soon enough, how can the author explain the many pre-sales consultant types retrenched in their 50s and forced to draw down on their assets?
At this stage, someone who read Gary Becker can argue that a significant amount of human capital has already been transformed into financial capital.
So does it make sense to continue the endless circle jerk of professional networking and looking for a Patron in the office?
Beyond a particular point, you need real skills to manage your financial capital.
It starts with a small VWRA or IWDA position with a custodian broker limiting your expense ratio to less than 0.5% a year. Then it evolves into a full-fledged portfolio spanning real estate, dividend stocks, and, yes, algorithmic advisors in Python to get sky-high Sharpe ratios. The human capital required to code, invest and reap your rewards is, in fact, quite immense.
But we need to ask ourselves this: Why do financial institutions genuinely hate the FIRE movement?
It is because we are so good that we prefer to invest our money ourselves. Wrap fees and expensive commissions are something for other people.
So, why park my funds with you when I can buy shares in your bank?
( Apologies, I gave a nice title to this article, but actually did not answer the question. LOL ! )
