Good Luck or Bad Luck? Maybe, It’s Hard To Tell

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Reading children’s books to my kids has become a regular source of new wisdom. I guess that’s not surprising, if the goal is to teach kids about life. Here’s one that came across recently and keeps popping back in my head.

I first read it in the children’s book Zen Shorts by Jon J. Muth (Caldecott Honor book). There are many variations of it online, and it may be credited as a Chinese, Buddhist, Taoist, or Zen parable. Here’s a brief version from Daily Zen:

There is a Taoist story of an old farmer who had worked his crops for many years. One day his horse ran away. Upon hearing the news, his neighbors came to visit. “Such bad luck,” they said sympathetically. “Maybe,” the farmer replied.

The next morning the horse returned, bringing with it three other wild horses. “How wonderful,” the neighbors exclaimed. “Maybe,” replied the old man.

The following day, his son tried to ride one of the untamed horses, was thrown, and broke his leg. The neighbors again came to offer their sympathy on his misfortune. “Maybe,” answered the farmer.

The day after, military officials came to the village to draft young men into the army. Seeing that the son’s leg was broken, they passed him by. The neighbors congratulated the farmer on how well things had turned out. “Maybe,” said the farmer.

I enjoy the sound of Alan Watts’ voice, so I am also embedding this YouTube version:

I still have a hard time applying this parable in real-time, but it does help me after some time passes. This parable is also tricky because you have to remember both when life puts up a roadblock and when you receive an unexpected windfall.

NYT Financial Tuneup Day 4: Retirement

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nyt_ftuDay 4 of the NY Times 7-Day Financial Tuneup is about retirement. (Sign up for your own personalized tune-up here.) This assumes you are eligible for a 401(k) or similar retirement plan. The key action point is bumping up your retirement contribution rate by 1% and perhaps adjusting your asset allocation if necessary. Here’s a simple chart showing you why:

nyt_tuneup_ret1

If you’re making $50,000 annually and contributing 5 percent of your salary to your retirement account, assuming an annual return of 6 percent and a 3 percent annual salary increase, in 25 years, you will have about $198,000 in your retirement account. If you start to increase that percentage by 1 percentage point annually however, you will have over $550,000 in that same account in 25 years. By increasing the amount you save by 1 percentage point each year, you’ll save an extra $354,940 for retirement.

Increase Your Savings

  • Log into your retirement savings account. (Baby steps…)
  • Increase the amount of money taken out of your paycheck by 1 percentage point annually. Also check to see if you are taking full advantage of any company match.
  • Make it automatic. If you have the option, set it to automatically escalate in the future.

Rebalance Your Account

  • Log into your retirement savings account.
  • Determine how you should rebalance your account. What is your target asset allocation? Here’s mine but it’s probably more complicated than most people need. Consider a target-date fund, especially if it is a low-cost, passive version. Fidelity, Vanguard, and Schwab all have solid versions. I put my own mom in the Vanguard one.
  • Make it automatic. If you have the option, set it to automatically escalate in the future. My provider calls it “Auto-Increase”.
  • Rebalance your account. Basically, make sure your portfolio is still what you want it to be, as it may have shifted over time. You only need to do this once or twice a year, or you can set “bands” to rebalance when things get too out of whack.

Action, action, action. This move won’t make you save enough for retirement by itself, but it’s something tangible. If you are really going for financial freedom, you should use this as a platform to do even more. We have our 401k savings rate already set at 60% (max allowed by one provider) since we are working part-time (“semi-retired” sounds better!) with a lower income but still want get as close to the annual 401k limits as possible.

Financial Tuneup Recap (still in progress)

Ikigai – Finding Your “Reason For Being”

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ikigai

I stumbled across the concept of ikigai in Japanese culture – loosely translated as “reason for being” – in this Medium post. The Venn diagram above appears to be taken from this Toronto Star article (which is based on another work, and so on…). The graphic suggests that we asks ourselves these questions to find our ikigai:

  • What do you love?
  • What are you good at?
  • What does the world need from you?
  • What can you get paid for?

In other words, Ikagai is not just your passion or something that makes you happy. I searched for deeper explanations and found this BBC article with the most satisfying one:

Ikigai is what allows you to look forward to the future even if you’re miserable right now.

I was reminded of this previously-mentioned Venn diagram by Bud Caddell regarding finding the right job:

caddell620

In essence, the question “What does the world need from you?” is collapsed into “What can you get paid for?” above. If you’re looking for the ideal job, then I suppose that is a good shortcut.

However, not everyone’s reason for waking up every morning involves money. The BBC article cites a 2010 survey of 2,000 Japanese men and women where just 31% of participants cited work as their ikigai. That means for 69% of Japanese people, their ikigai is something else. Family, friends, community, a hobby, a volunteer position.

Food for thought.

NYT Financial Tuneup Day 2: Trim Your Budget

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nyt_ftuDay 2 of my NY Times 7-Day Financial Tuneup is called Trim Your Budget. The key here is to take action, not just do research and then put it off again. (If you just want to daydream, Day 1 was Optimize Your Thinking.) Again, the NYT doesn’t have direct links, but anyone with a (free) NYT account can get their own personalized list of tasks.

Reviewing your monthly budget annually is a simple way to keep your spending in check. Don’t worry, we’re not going to ask you to cut anything you love, just to trim your spending in places you may not even notice. After all, if you benefit from your weekly yoga class or truly enjoy your restaurant night, have at it. Just be honest with yourself about the services that you truly use and enjoy. In comparison, if you have a languishing gym membership you never use, it may be time to cut that $50-a-month membership fee.

Round 1: Find an Easy Item to Cut

  1. Gather your credit card and checking account statements from the last month.
  2. List your spending. “…list any expense from the last month that occurs routinely: daily, weekly, monthly. From the cup of coffee you buy every morning, to your weekly manicure, to your monthly gym membership or magazine subscription.”
  3. Find an easy place to trim. “…most commonly-cut expenses are subscriptions to gyms, credit bureaus, newspapers and audio services.”

Here is rundown of recurring expenses with some commentary.

  • Mortgage – thankfully paid off a few years ago.
  • Property tax – yes, but not really negotiable. I suppose I could contest the assessed value of my house, but it seems pretty reasonable.
  • Car loan – none. My measure of car affordability is whether I can pay for it with cash. I’ve paid cash on every car, from $2,000 on up to 20x that.
  • Student loan – thankfully paid off that $30,000 a while ago.
  • Insurance – feels like we have so much insurance, but they have high deductibles to protect against catastrophic events. Car, homeowners, life, long-term disability, and umbrella insurance.
  • Food/grocery/take-out/restaurants – I’m sure we could trim something, but not in a clear-cut way. No coffee shop habit.
  • TV/internet – yes, this is a target for trimming.
  • Cellular phone – Still at $6 a month with Sprint for two lines.
  • Gym – yes, just barely worth the cost.
  • Gas
  • Medical
  • Clothing, gifts, etc – yes, again I’m sure we could trim something but we are okay with it overall.
  • Charitable giving – yes, but already thoughtfully budgeted for.
  • Credit monitoring, Netflix, magazines, music streaming, etc. – I pay for Amazon Prime and feel it is worth the money. No to Netflix, Spotify, HBO, Lifelock, paid credit monitoring, etc. A few magazines at $5 or less per year.

Round 2: Lower Your Bills

  1. Pick a bill to start with
  2. Find and review your latest bill
  3. Call your service provider
  4. Ask for a reduction in your bill

The hard part: Pick up the phone and call my cable provider. I’ve done it before, but it’s never fun. This tune-up did motivate me to do it, so I suppose that’s something. I called my cable provider and after 26 minutes, I was only able to squeeze about $5 a month in concessions by having them re-arrange my bill around to a “new plan” from my “old plan”. Even that required me to get past the initial lie that my “old plan” was “already a great deal”. ($60 a year in savings is not bad for 30 minutes of time, I suppose.)

I did not go all the way to setting a cancel date, as I wanted to avoid interruption in internet service. If you are ready to cancel, see Tips on Reducing Cable and Phone Bills From Ethically Ambiguous Experts.

In the end, I called up the duopoly DSL provider to get the new customer promotion for TV and internet. I confirmed that their was no credit check required. If it all works out, switching should save me around $50 a month ($600 a year). Switching back and forth isn’t fun, but it does save money!

Financial Tuneup Recap (still in progress)

NYT Financial Tuneup Day 1: Optimize Your Thinking

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nyt_ftuI’ve been in a “Back to Basics” mood and decided to work through the NY Times 7-Day Financial Tuneup. I don’t have direct links to each day as you need a (free) NYT account to view your personalized list of tasks. Instead, I’m quoting selected portions to illustrate the general idea. These are my answers and not a statement of what is best – each person’s situation is different but equally valid.

Day 1: Optimize Your Thinking

nyt_tuneup1

What do I value?

Try to figure out why you are working so hard and worrying about your finances. After that, setting financial priorities may be simpler.

  • Spending quality time with family and friends. Being able to spend time with my children while they are still young (and want to spend time with me too). Having the opportunity to teach them things and build a good lifelong relationship. I hope to avoid the cycle where young children spend all day cared for by paid professionals, and in return the elderly are also cared for all day by paid professionals. (Selfish, I know…) I’m not against school or babysitters – I also enjoy spending one-on-one time with my spouse.
  • Having personal time to pursue my own educational goals. I also want time all to myself. I want to try things that I’m not very talented at but I still enjoy. (This means dropping work, which often means getting paid for one specialized task.) I’d like to work on residential solar PV + battery storage + water catchment systems. I still have a plenty of room to improve my cooking skills. I want to smoke my own Texas-style briskets. I took this Vanguard retirement quiz and scored mostly as a “learner”.
  • Find a way to give back. I also answered some questions as a “teacher” and “volunteer” role. I’d like to figure a way to give back to my community where I feel like I am making a tangible difference (as opposed to my current cash contribution with unknown impact). I still haven’t figured this one out.

What brings me the most joy?

Figure out the two or three things you spend money on in your life that bring you the most joy. Is it your annual vacation? Your fancy gym membership? The great apartment close to work?

  • Our house. Location was our top priority, and it is close to both work, school, and most extracurricular activities. We chose less square footage in exchange for 30-minutes less (each way) in commute time. While we managed to pay off the mortgage, it did take up a big chunk of our income for a long time. The house is older and also has higher maintenance needs.
  • Extended annual trip every summer. We chose a school schedule with traditional summer breaks (no homeschooling, no year-round school). As a result, I would like to be able to plan a longer 4-week vacation each year in a different destination. This would help to better immerse ourselves in a different world. For example, one year might be studying national parks and then going on a cross-country USA road trip in an RV. The next might be Japan and having the kids prepare by learning about Japanese culture in the months leading up.
  • Home-based DIY fun. I like DIY culture (even though I’m not especially good at anything) and simple rules like “Eat anything you want, just cook it yourself“. We don’t eat out at restaurants often, but we do cook a lot at home and sometimes buy more expensive ingredients like good cheese, vegetables, and random things that aren’t on sale. We buy nice kitchen hardware. Another similar thing we are going to try is home-based birthday parties (with 3 kids the $$$ adds up), which means we can “invest” in things like a playground/swing set, vegetable garden, and backyard movie screen. (Tree house would be a stretch goal.)

Financial Tuneup Recap (still in progress)

401k Millionaire By Age 45: How Was It Possible?

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millWith the ongoing bull stock market, more people are reaching $1,000,000 balances in their 401k every day. However, a more extreme claim is that someone reached this mark at age 45 with total employee contributions of only $300,000. Is that really possible? Let’s take a look at what would need to fall into place for that to happen…

Consistently high contributions from salary. If you divide $300,000 by a theoretical 25 years of savings, that works out to $12,000 per year. That is within 401k historical contribution limits, but even with 25 working years, that means nearly maxing out your 401k contributions every single year. (Employer company matches don’t count and can push you above that limit.) According to Redditor Subject_Beef, s/he indeed saved regularly in 1995 with contributions close to the max most years. Consider that only about 10% of participants max out their 401ks each year, and most of those people were over the age of 45.

401kmill

High investment gains. Next, you must have the growth of $300,000 to $1,000,000, which would require a high stock allocation, avoidance of a prolonged bear market, and not panicking during market losses. Even with a lump-sum invested 25 years ago, going from $300k to $1000k would require a compound annual growth rate of 6.2%. However, with a 401(k), you have to do this through regular contributions and dollar-cost-averaging over time. Therefore, the actual growth rate would have to be significantly higher than that. By my rough calculations, the average would have to have been around 9% annually. The current asset allocation was shown to be roughly 37% S&P 500 Index fund, 33% US Small Cap Stock Index fund, and 30% International Stock Index fund. The annualized return of the S&P 500 has been about 10% over the last 23 years, so the numbers are quite possible.

No IRA rollovers. Finally, you’d need a steady career as most people who change companies either cash out or roll their 401(k) funds into an IRA with more flexibility. It is possible to do repeated 401k-to-401k rollovers, which is apparently the case here. I can’t think of too many compelling reasons to do so besides enabling the Backdoor Roth IRA. This is also why I don’t think tracking aggregate 401k balances is a good way to measure savings or wealth. People move funds out of 401ks into IRAs all the time.

Altogether, I believe this story and the numbers do check out. However, this is not a common occurrence given the factors above that have to align. The poster does mention a significant employer match that would have help increase the effective contributions above $300,000 and make it a bit more realistic for an average worker. In any case, becoming a 401(k) millionaire by age 45 is an impressive accomplishment.

Anthony Bourdain: Taking One More Risk Changed Everything

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Anthony Bourdain gets to travel around the world, eat great food, and hang out with interesting people. I have read a few of his books and enjoy his TV shows, but this YouTube video from 1 Step Away revealed some new details about how it all started.

Bourdain loved writing but spent long days working as a chef. At age 44, having already made a few attempts at literary success, he decided to write up a short piece about restaurants. Finally, despite already having been rejected, he decided to send it over to The New Yorker (after a nudge from his mother). It ended up being printed in 1999. After taking that risk and that initial “yes”, he went on to write the bestseller Kitchen Confidential in 2000.

Having a day job but working for yourself as well definitely sounds familiar. You don’t need to quit everything and chase your dreams into bankruptcy. There is honor in taking a job that puts a roof over your head and supports your family. However, that doesn’t mean you shouldn’t keep taking some calculated risks. Look for upside potential without taking a lot of downside risk. What if Bourdain had given up after the first round of rejections? It only takes one “yes”.

Previous mentions of Anthony Bourdain:

Charlie Munger’s Life as a Financial Independence Blueprint

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blueprintCharles Munger is probably best known as the Vice Chairman of Berkshire Hathaway and partner of Warren Buffett. The University of Michigan Ross School of Business recently shared a hour-long talk with Munger on YouTube (embedded below). Munger has plenty of mentions on this site already, but my main takeaway from this talk was a more nuanced overview of his early years and how he personally achieved financial independence before really getting involved with Warren Buffett.

Here is a summary of my notes from the talk:

  • He was not born poor, but he was also not born into exceptional wealth. Munger wanted to go to Stanford for undergrad, but his father encouraged him to go to the University of Michigan as it was still an excellent school but more affordable. He ended up dropping out after only one year in 1943 to serve in the US Army Air Corps.
  • Military service, then law school. After World War II, he took college courses with the GI Bill and eventually went to Harvard Law School (getting accepted even though he never earned an undergraduate degree).
  • Successful law career. He practiced as a successful real estate lawyer until he achieved about $300,000 in assets. This was 10 years of living expenses for his family at the time (he now had a wife and multiple kids). At this point, he started doing real estate development at the same time. When this took off, he stopped practicing law.
  • Successful real estate development. When he achieved about $3 to $4 million in assets, he also wound down his real estate development firm. He was now “financially independent” but still mostly anonymous.
  • At this point, he decided to become a “full-time capitalist”. This last stage is what led him to his current status as a billionaire philanthropist. Along with his work with Warren Buffett and Berkshire Hathaway, he was also the chairman of Wesco Financial, which also grew to be a conglomerate of different wholly-owned businesses along with a carefully-run stock portfolio. Wesco Financial eventually became a wholly-owned subsidiary of Berkshire Hathaway.

Using Charlie Munger’s life as a blueprint, here’s a pathway towards financial independence.

  • Work hard, get an education, develop a valuable skill. Munger didn’t start Facebook from his dorm room or trade penny stocks in high school. He served in the military, earned a law degree, and went to work everyday for years. At this point, work means exchanging your time for money, but hopefully at a good hourly rate.
  • Use that work career and save up 10x living expenses. Munger called himself a “cautious little squirrel” saving up a pile of nuts. He dutifully saved his salary while supporting a family and kids (and some other personal family drama that a luckier person wouldn’t have to deal with). I don’t think you’ll need 10x if you don’t have a family to support.
  • To accelerate wealth accumulation, you can now take some more risk and start some sort of business. You need something that scales, something that’s not paid per hour. Munger did real estate development. If you look at people who got wealthy quickly, nearly all of them are business owners of some type.
  • At some point, your investments will enough money to support your living expenses. This is financial independence. It doesn’t matter what you do during the day, as you earn enough money while you’re sleeping. However, many people choose to continue doing one of the paths above: (1) employee-based career, (2) active business management, or (3) actively managing their investments.

Bottom line. Charlie Munger offers up great words of wisdom in this talk. He reminds us that our choice in marriage is much more important than our choice in career. He reminds us that just showing up every day and plugging away will yield great dividends over time. He reminds us that easy wealth without work is not a good thing for society. (He also says to give Bitcoin a wide berth.)

However, you can also learn a lot by noting and observing his actions. Munger was not a huge risk-taker. He grew his wealth in steps and never exposed his family to possible ruin. He worked hard for a long time and only became extraordinarily rich and famous later in his life. He primarily wanted to be independent “and just overshot”.

Good News: Here’s How the World Has Improved Over the Past 25 and 50 Years

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Bad news seems to come at us from all angles, but sometimes we need to step back and point out the good news. Here is a chart of how the the worldwide level of hunger, poverty, illiteracy, child poverty, and pollution has fallen over the last 25 years. Via @dinapomeranz and @johanknorberg.

progress

Here are some specific stats comparing changes in the last 50 years (1966 to 2016). Via HumanProgress.org. These are worldwide numbers. See specific numbers for your own country and age at Your Life in Numbers.

  • In 1966, average life expectancy was only 56 years. Today it’s 72. That’s an increase of 29 percent.
  • Out of every 1,000 infants born, 113 died before their first birthday. Today, only 32 die. That’s a reduction of 72 percent.
  • Median income per person rose from around $6,000 to around $16,000, or by 167 percent – and that’s adjusted for inflation and purchasing power.
  • The food supply rose from about 2,300 calories per person per day to over 2,800 calories, an increase of 22 percent, thus reducing hunger.
  • The length of schooling that a person could typically expect to receive was 3.9 years. Today, it’s 8.4 years – a 115 percent increase.
  • The world has become less authoritarian, with the level of democracy rising from -0.97 to 4.23 on a scale from -10 to 10. That’s an improvement of 5.2 points.

There are many forces behind these trends, but perhaps it will inspire people to keep trying to improve their world or to support others financially who are dedicating their lives to improve the world.

progressbookJohan Norberg wrote Progress: Ten Reasons to Look Forward to the Future, which was a 2017 Book of the Year for The Economist and the Observer. I haven’t read it, but it seems like a well-researched book with hard evidence on why we should be more optimistic.

Our world seems to be collapsing. The daily news cycle reports the deterioration: divisive politics across the Western world, racism, poverty, war, inequality, hunger. While politicians, journalists and activists from all sides talk about the damage done, Johan Norberg offers an illuminating and heartening analysis of just how far we have come in tackling the greatest problems facing humanity. In the face of fear-mongering, darkness and division, the facts are unequivocal: the golden age is now.

Barking Up The Wrong Tree: The Benefits of Being Mostly Optimistic

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

barkingEric Barker writes at Bakadesuyo.com and his talent/skill is synthesizing hundreds of different sources of academic research and historical anecdotes into actionable ways to improve your life. That’s kind of a crowded field these days, but I enjoyed reading his book which combines a lot of his past work: Barking Up the Wrong Tree: The Surprising Science Behind Why Everything You Know About Success Is (Mostly) Wrong.

If I had to sum up this book in one word, it would be “nuanced”. Be nice but not too nice. Work hard but not too hard, especially on one single area of your life. Grit is good, but time is finite. Thus, quitting and working on a better thing instead can also be good. Is it better to be an extrovert or introvert? It depends. (The book details why.) With so many tips and examples, this was one those books that kept my attention when reading it, but after I finish I had trouble remembering something specific to carry with me.

After looking back on my notes, I decided to make this my takeaway: Be mostly optimistic. For the most part, being optimistic opens you up to more opportunities that more than offset any failures. If I had to use a number, be 80% trusting, 80% optimistic. However, don’t be 100% trusting as that opens you up to abuse. Here are some examples.

Your great weakness may also be your greatest advantage. Consider what makes you unique, and look at it optimistically. You might not make a lucrative career out of your quirks, but it’s still your best shot. You have to align your life and environment to maximize your differences. If you love working within structure, use that. If you need to blaze your own path and can’t stand structure, use that. If you happen to love one thing 1,000x more than anything else, well you better get on that.

Prisoner’s dilemma. This game theory experiment involves two individuals faced with the decision of whether to trust or betray the other person (from Wikipedia):

Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of communicating with the other. The prosecutors lack sufficient evidence to convict the pair on the principal charge. They hope to get both sentenced to a year in prison on a lesser charge. Simultaneously, the prosecutors offer each prisoner a bargain. Each prisoner is given the opportunity either to: betray the other by testifying that the other committed the crime, or to cooperate with the other by remaining silent. The offer is:

If A and B each betray the other, each of them serves 2 years in prison
If A betrays B but B remains silent, A will be set free and B will serve 3 years in prison (and vice versa)
If A and B both remain silent, both of them will only serve 1 year in prison (on the lesser charge)

As one of these prisoners, what would you do? What if you had to do it 20 times in a row? You could always trust. You could always betray. You could do something in between. It turns out that a really simple algorithm does nearly best overall: tit-for-tat. The strategy is simply to cooperate on the first iteration of the game; after that, do what your opponent did on the previous move. If they trust, then you trust. If they betray, then you betray.

You know what is a even a little bit better? Tit-for-tat occasional forgiveness. Once in a while, you should trust again even if they betrayed last time. This stops a negative feedback loop of repeated betrayals.

The lessons: Start out nice (be optimistic!) and hope to stay nice, but don’t be a doormat if abused in return. Be consistent. Forgive once in a while.

Optimist vs. Pessimist explanatory style. The book includes an interesting contrast as to how each would react to a setback. Pessimists tell themselves that bad events:

  • will last a long time (I’ll never get this done)
  • are universal (I can’t trust any of these people)
  • are their own fault (I’m terrible at this)

Meanwhile, optimists tell themselves that bad events:

  • are temporary (This happens occasionally, tomorrow will be better)
  • have a specific cause (It is just because the weather is bad today)
  • are not their own fault (I’m good at this, but today wasn’t my lucky day)

It is suggested that you can indeed change your natural optimism/pessimism levels by altering your explanatory style.

This is not to say that you should be only optimistic. Here’s a good post exploring the pros and cons of both sides. The overall conclusion:

The majority of the time, think positive. Happiness and health trump pretty much everything else. There are situations where negativity can help, like when we’re making high-stakes plans or trying to improve skills.

Be optimistic socially. Even if you aren’t a natural extrovert, you can still build your network in a positive way without being sleazy. Meet new people by finding shared interests and/or shared challenges. Help others first when you can, without expecting anything in return. Most people are good and will look to reciprocate. Join groups. Try to maintain .

Luck school = try new things. Dr. Richard Wiseman studied “lucky” people and found that the most important characteristic of lucky people is that they are much more likely to just try new stuff, which opens them up to opportunity. In other words, luck wasn’t random; it was due to choices. So he started a “Luck School”, teaching a group of people to act more like lucky people. It worked. Yes, trying more being failing more too, but people tend to regret a failure to act, while the failures didn’t really do any damage. You can often learn from failure, anyway. Finally, we tend to remember the good things and forget the bad. (This selective memory is probably why I have three kids.)

Bottom line. Being mostly optimistic appears to be the best available strategy for many things in life. Try a lot of new things. Meet new people. Optimists are more likely to create opportunities for career success and personal happiness. You will also fail more, but those failures don’t tend to cause permanent damage. Optimism is even associated with better health and longer lifespans. Don’t go overboard. Don’t be a overly-trusting doormat, and don’t be dangerously overconfident. Think 8/10 optimistic. (I’m not naturally this optimistic, so I’ll have to consciously try and change my attitude and explanatory style.)

Surprise! A Few Reasons for Hope and Optimism

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

optimism_keller

The amount of negative information that surrounds us can sometimes feel overwhelming. To be sure, there is plenty to be concerned about. However, here are some reasons to be hopeful. You probably won’t find them on the front page of any major media site, or even homegrown conspiracy site.

The Energy Problem. I found positivity in an unexpected source: the reputed curmudgeon Charlie Munger during a Berkshire shareholder meeting in the University of Berkshire Hathaway book (emphasis mine):

However, Munger beamed that Berkshire’s best days of contributing to civilization are ahead. He noted that mankind is getting close to solving the technical problem of our time -solar power. Cheap, clean, storable power will change the world. Munger said, “As I get closer and closer to my death, I get more cheerful about the future I won’t see.”

Munger may have surprised the crowd with a list of things he is quite optimistic about: The main problems of civilization are technical and solvable, all with energy, with huge benefits for civilization. Berkshire’s culture will continue to work for years to come. He likes to see people rising rapidly from poverty, and that is happening in China and India.

The Population Problem. I ran across this chart in The Economist that tracks the relationship between fertility and per-capita GDP. Keep in mind the replacement rate is 2.1 births (where the population just stays constant).

fertility1

This reminded me of an older Economist article that explores some of the reasons that birth rate drops with relative wealth. As the world population continues to develop out of poverty, the overall birth rate will fall.

The Food Problem. The population will still go up for a while before it goes down. So read this NatGeo article about how the Netherlands became the second biggest exporter of food in the world despite being small and overcrowded. They have made great strides in sustainable farming technology.

While progress may turn out to be slow and hesitant, in the meantime I will feel inspired knowing that there are folks out there working hard on solving these problems.

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How To Make Your Life Completely Miserable

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miserable

If you are a fan of Charlie Munger and his principle of inversion, you will enjoy this video by CGP Grey* about the 7 Ways to Maximize Misery. Sometimes the best solution to a problem comes by approaching it backwards. Found via Abnormal Returns. Briefly, here are the 7 ways:

  • Stay still.
  • Screw with your sleep.
  • Maximize your screen time.
  • Use your screen to stoke your negative emotions.
  • Set V.A.P.I.D. goals – Vague, Amorphous, Pie in the Sky, Irrelevant, and Delayed.
  • Pursue happiness directly.
  • Follow your instincts.

Charlie Munger himself might add two more things:

  • Be unreliable.
  • Be lazy.

This is according to his 2007 USC Law School Commencement speech:

Let me use a little inversion now. What will really fail in life? What do you want to avoid? Such an easy answer: sloth and unreliability. If you’re unreliable it doesn’t matter what your virtues are. Doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.

It can be surprisingly instructive to know that we can become happier by simply avoiding these common behaviors. There are even more – the video is based on the book How to Be Miserable: 40 Strategies You Already Use by Randy J. Paterson. Added to my long to-read list.

* I referenced another CGP Grey video in my post Why Didn’t Technology Create a 4-Hour Workday? and why the solution is to accumulate assets towards financial freedom.

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