The two previous posts considered the question of whether FIRE – financial independence, retire early – is an ethically defensible life choice. Full disclosure: If I’m beating up on FIRE, it’s because I’m flirting with it, soul-searching not moralizing.
In Part 2 I wondered whether FIRE-people benefit from hierarchically organized activity – living as they do off of investment income – while leaving to others the responsibility for maintaining cooperative behavior in the workplaces from which they’ve retired. In other words, FIRE is a form of shirking, shirking from a political responsibility to maintain the economic cooperation that sustains everyone, including especially those who live off the surpluses generated by the division of labor. This post investigates whether FIRE is a form of shirking or hoarding in an economic sense as well.
Part of the appeal of FIRE – to me at least – its emphasis on frugality. You don’t win at FIRE by working yourself to death and/or placing highly risky bets. Instead, you cut consumption to the bone, and in doing so rediscover that less is often far, far more. It’s a topic for another Ruminathan, but I deeply believe that we don’t just get marginally less utility out of each additional unit of consumption, we actively destroy utility when we take “more” too far. So when it comes to the good life, FIRE attracts me from the get-go. What’s more, frugality is morally seductive. It takes discipline and tough-mindedness. Maybe it’s a self-rewarding virtue in the long run, but in the meantime, it requires a strong will to confront inner demons and the external pressure to keep up with the Joneses.
And that’s precisely why it needs special scrutiny, as do all self-flattering stories. How do you know if you’re living frugally? On the one hand, you drive a wide wedge between what you earn and what you spend. But you also benchmark your consumption against peers. Do you spend at the equivalent of the poverty line even as you earn three times more? You must be living frugally. Do your neighbors have tchotchkes and toys that you do not? Do you do without – gasp! – a car? You’re practically a modern-day Stylite, at least in parts of the US.
The trouble is that the frugal lifestyle is only possible because the “essentials” you cut your consumption down to are so cheap relative to the income you can generate. And the only reason that is possible is our societal Grand Bargain of increased labor specialization and global trade. A family of three or four can survive, even thrive, on $30,000 per year as does prominent FIRE advocate Mr. Money Mustache’s because the basics are so damn cheap. Would they still be in a world in which large numbers of people followed MMM’s example? My fear is that frugality depends on work performed by people who do not become financially independent and retire early. That includes both those for whom FIRE is not even a remote option – particularly in resource extraction in the developing world – and those who could consider it individually, but if they did it collectively, would cause a collapse in the supply of basic goods.
One of the few areas of the global economy in which I have a sliver of expertise is in telecommunications. We have organized much of our sharing of resources via markets, with freely ranging prices. An important reason that works at all is that we can quickly – at this point instantly – communicate local prices to each other, so that people not only have the motivation but the information to move goods from one place to another for profit. Maybe the world’s telecommunications infrastructure is so powerful that huge amounts of it can be devoted to “frivolous” consumption a FIRE-devotee would live without (Netflix). But that same infrastructure guarantees that solar panels, heat pumps, propane tanks, and power tools get to the corners of the world where real estate is cheap enough to make a go of FIRE, at prices affordable at $30,000 a year. And it also enables streaming the DIY videos you need to learn how to install your solar panels and heat pumps yourself. So what happens when all the telecoms engineers – who make good money and could afford to– catch FIRE?
We might already be learning how far FIRE can be pushed, and it might not be very far. The inflation we’re experiencing now has been kick-started by specific events: pandemic and war. But demographic trends – as described for example by Peter Zeihan – were set to hit a tipping point this decade without those events, with mass (but not necessarily early!) retirements hitting wide swaths of the world. Retirees may reduce their consumption, but only in the discretionary areas. Global consumption of the basics – food, water, heat, shelter, healthcare – will not drop off (in fact will rise for the last item in the list), even as the available labor pool shrinks.
I won’t pretend to know how this will end. Zeihan’s forecast is bleak for much of the world. But I worry that FIRE – as virtuous as its frugality dimension may seem – will turn out to be nothing more than a self-flattering form of free-riding. Sure, you may devote your time to carpentry and permaculture gardening, but as long as any of the inputs you use come from the network of reciprocity we call the global economy, your lifestyle may only be possible because others are not living it, because they cannot individually, or because they do not collectively. Retiring early may be no more than ostentatiously hoarding your human capital, which you can afford only insofar as others don’t.
We may know for certain sooner than we’d like.
The Ruminathans 