Why buy the whole cow when you only need the milk ?

The idea of why a person would want to buy a whole cow when he only needs to drink some milk is quite an ancient one. My dad always had a bunch of friends, which I did not respect very much, they said this very often to my dad and me when we hung out over weekends. The idea is mostly applied to their views on marriage. And my dad’s single pals were asking why bother getting married when they could visit prostitutes. Now I want to point out that I had a fairly liberal upbringing, my parents would visit lounges over weekends and I take along as a secondary school and JC kid, so I was familiar with the smoke, alcohol and prostitution way before NS.

I thought it would be fun to revisit this idea in the financial realm. If you adopt the mindset of my dad’s single pals, then the same argument can be made for making a living in Singapore.

It does not take a lot to survive as a bachelor in Singapore. The ballpark is not too far from LKYSPP’s 55-year old imaginary single who needs $1,768 a month. While this is not high living, it enables a basic standard of living with some amounts of entertainment thrown into the mix. 

Now, it does not take a lot to earn $1,800 a month. You can earn his amount doing food delivery. Recently, you can even earn $3,500 washing dishes. You might be able to wash dishes part time to earn that bare minimum of $1,800 to sustain your lifestyle. You can play Diablo Immortal the rest of the time and still have some money leftover to visit prostitutes.

Now my father’s single friends are probably the very kind of people who will scoff at the FIRE movement. If you want to FIRE, then you need to aim well above the median income of $4,500 and save more than 50% of your take home pay. You will need about $530,400 at the safe rate of return of 4% to credible generate about $1,768 a month. They would then find the idea of earning $530,400 within a decade even more ridiculous, with folks paying me good money to raise the probability of success of doing that. 

So the same mental model applies in finance. Why buy the whole cow ( raise $530,400 ) when you only need some milk ( $1,768 a month ).

If you follow this train of thought, you’d come back to that story of the MBA who tried to advise a fishermen. The idea was go through one full circle of levelling up, starting a business, scaling, so that the fisherman can relax like what he used to do in his youth. 

Whats hidden in the story is that the fisherman can probably fish for a living over the short term, but he has to contend with illness and old age over the long term, so saving up and scaling up a business is just another way to sustain his lifestyle, and possibly grow a family in the meantime. It’s also ridiculous if the fisherman is single and contend with other fishermen for mates, so he has to struggle to signal his economic resourcefulness to women as well. 

But I think there’s no better no way to understand the consequences of choosing this philosophy of life. 

And I should explain why my philosophy is the opposite - to own as many cows as legally possible. If things work out, folks will be paying good money to buy my milk. 

My dad’s friend, did remain single his whole life, he partied hard with prostitutes and drank lots of beer. At an older age, he got lonely, and eventually settled down with an old prostitute in a HDB. The old prostitute had some kids from an earlier dalliance, but he provided some financial assistance for them as they grew up. 

He did buy an old cow in the end, the calves were not even his but he had to raise them too.