Monday, October 25, 2021

Motivations matter in Personal Finance


F.I.R.E.... F.I.R.E. never changes...

One denizen of Financial Independence Telegram decided that my CNA article yesterday was "ridiculous". This would have been flattering if the other folks had not proceeded to interrogate him on what he meant by that statement. He hemmed and hawed, then retreated by arguing that saving more money is not as optimal as earning more money.

Every now and then, an argument would erupt between the folks who prefer to save more against the folks who prefer to spend less. Even though an added dollar into an investment is the same no matter where they come from, these battles are neverending. 

There is probably something we are not really getting right about Financial Independence that the bloggers and gurus are also missing out. Earning and Saving are false dichotomies, whichever you do better, the outcome is the same. You can easily pursue both.

But I still want to get to the root cause of the conflict. 

One possibility is to understand the concept of mimetic desire. In the book Wanting by Luke Burgis,  Luke distils the idea of mimetic desire, a philosophical framework by Rene Girard into a useful practical idea. 

Mimetic desire is easy to understand. The idea is that we don't spontaneously desire things, we desire them because other people desire them. A lot of what we want in life, from the Patek Philip watches to the Apple iPad Pros arise because owning them gives us identity and makes us more similar to the others who own them. 

The author then goes on to say that mimetic desire creates conflict and suffering. Imagine two executives playing each other out to get that promotion they desire. The competition makes them anxious not because they are too different but because they are too much like each other. Similarly wanting that European car can lead to getting another loan and increasing your personal liabilities.

One way to break this chain of mimetic desire after understanding how it works is to divide our desires into two categories. 

Thin desires don't survive the test of time and can be somewhat shallow. Material desires like iPhones and sports cars last as long as the models are the latest ones in the market. We should expel our thin desires.

Thick desires are longer lasting and can sustain themselves. Examples include having a happy family, creating a successful product that evokes pride, or building a company that can withstand the test of time. We should embrace our thick desires and focus deeply on one of them. 

To bring some light to what your thick desires are, you need to understand your personal motivation. That requires first crafting a narrative about your own life and then figuring out what really drives you.

One element that possibly led to people concluding that my story was ridiculous is one of my favourite tales about using a rubber band to keep my Nokia phone battery attached when I was in IT so that I can squeeze a few more months of usage out of it. The Nokia phone was a one-time company issue and I don't want to buy another phone with my own money so that some idiot helpdesk can repeatedly call me when a server goes down.  

If you understand FIRE, you will be able to figure out that money in my hand gets to stay invested which leads to more investment income. But you may not understand my thick desire or core motivation.

My final motivation is to "Bring control" to my life. IT engineers are forever at the mercy of failing servers. If they get to become project managers, a single bad boss can ruin their day. 

F.I.R.E. allows me to have control over my life - first to choose my bosses, the company cultures I can work for, then I can let go of my bosses and FIRE them as and when I want to provide my dividends exceed take-home pay. 

As I've had pretty legendarily bad bosses, almost every savings trick I propose is tame compared to what I've experienced at work. I can eat vegetarian and even skip a meal and do intermittent fasting for the day. I can wear head to toe in Decathlon and refuse to shave on weekends. 

The lousier my experience at work, the more fanatical I become at getting overtime and saving money. 

But there are folks out there who FIRE for different reasons. 

Some folks in sales have a different philosophy about money. They earn more to signal greater wealth and competence, then they can earn even more as they obtain better and more prestigious clientele, maybe by infiltrating into JCI or some Rotary Club. 

Their motivation is unlikely to be to "Bring Control" into their lives. 

Instead, it may be to "Evoke Recognition - they want to capture the interest and attention of others.

In all the battles over earning more or spending less, this is fundamentally a battle of folks with different motivations. The folks who are monks and ascetics really want to tame the external chaos around them and saving more is something that they can do quite well. The folks who are bards and salesmen can monetise the attention they can get, saving money is ridiculous when earning more takes lower incremental effort. 

Of course, the conflict gets worse because one side tends to be more anal and introverted, the other side tends towards flamboyance and extroversion.  

If you agree with my points to deconstruct our community then realise that the rabbit hole gets deeper. 

In the System for Identifying Motivated Abilities (SIMA) , there are close to 30 different kinds of motivations and you might even need to pay a small fee to figure out what they truly are. 

Depending on your feedback, I think I can do a more serious article on Dr Wealth blog soon.



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