Wednesday, December 16, 2020

Happiness and FIRE


When I made my first $100,000 and published my first book over a decade ago, the level of sophistication in self-help was not too high and I have to deal with this retort about why someone should accumulate so much money if he/she just wants to be happy in life. 

Now back then, I did not have Adlerian psychology or the DISC personality framework to break down the point raised, so I ended up reading a lot of self-help literature of happiness.  The problem with doing that in the 2000s is that there is little data on happiness and some authors thrive on writing useless drivel based on generalities derived from personal experience. 

We're now in the 2020s and I am happy to report that a team of academics have written The Origins of Happiness. This is not a book for the intellectually light-weight who thrive on the works of Deepak Chopra. You are more likely to enjoy this piece of work if you are mildly autistic because it is almost written in the same style as a book on factor investing. Instead of breaking down investment returns, it tries to ask the question of what makes us happy and even makes a case for policy changes. 

I leave the details to you guys to read the book. I want to focus on how I might change my approach to FIRE with insights on happiness.

a) Singles who FIRE may want to get married and then restart the FIRE journey as a couple

A significant number of FIRE aspirants are single, anime-loving guys, who do IT. As the study shows a significant shift in levels of life satisfaction when they become partnered. It may not be wise for a single person to try to maintain FIRE by staying single and keeping expenses low. The study even extends to old age and shows that loneliness is not just damaging to personal happiness but a major cause of death in modern societies.

Financially stable people make generally good matches, but I've been seeing a lot of single guys think that they are not financially stable enough. I think a guy who FIREs may be single for reasons beyond money. Like a friend said," Your fuck you money may just be a big FUCK YOU from the women who meet you. Got this amount of money also nobody want!"

It's harsh but can be true. 

b) FIRE should never be a reason to quit employment, although you are now free to change employer

What surprises me in the study is the effect of unemployment on life satisfaction that is disentangled from income. Unemployment can really your self-esteem and levels of life satisfaction. The effect is so high, rather than suggest minimum wages or Universal Basic Income, society may be better off creating jobs of last resort and making employment a basic human right. Another aspect that makes unemployment special is that it has a scarring effect. If someone is unemployed for a while, the unhappiness lingers even if he gets employed later.

I think the major takeaway is not to flip-table with your boss the moment you FIRE. A lot of unhappiness at work can be swapped away with a job shift may be at lower pay. If there is no dissatisfaction at work, maybe you should keep plugging to grow your investment income instead. More money does not hurt. 

c) Higher income makes you happier, but not significantly so

This aspect of the study is the most interesting. Income has a positive effect on life satisfaction, but it is so low that we're better off dealing with unemployment as a society instead. The regression models employ the logarithm of annual income and still, the effect on life satisfaction is small. Policy-wise, throwing money at hippies to make society less unequal does not do much for the happiness levels of the population. Better to give these hippies decent jobs. 

As such, I believe that the multiple degrees of FIRE like Barista FIRE or FATFIRE may not move the needle compared to the simple fact of being able to live on investment income to insure against an unemployment event. The additional boost to annual income hardly makes a dent on life satisfaction.

All in all, when it comes to everything about Life and Happiness, one simple rule to follow.

People are happy when they feel useful and needed by society. 

Don't lose track of this track in your FIRE journey. 



1 comment:

  1. Agreed. FIRE can't give purpose to life. I guess Fire prevents you from being stuck in life force sucking jobs. And gives you the guts and security to pursue things that have higher personal utility.

    FIRE basically grows you a pair