Credit Card Coupons

The credit card arms race is in full swing with many cards rocking $500+ annual fees. It is embarrassing to admit, but my annual fees are over $5,000. In theory I receive more value than that, but let’s break it down to show how it may not be as valuable as we think it is, because it is earmarked money. We’ll take the Amex Platinum as an example since I’m writing this from a Amex Lounge. With the card you can get $400 in Resy credits, two $300 hotel credits, $200 Uber, $200 in airline incidental credits, $300 in Lululemon, $300 in Soulcycle, $300 in digital entertainment credits. Wow, I just listed $2300 of “value” (they claim $3500) for $895, what could go wrong?

Before this Lululemon credit I owned none of their stuff. Airline incidental was tough to use, so I bought a lounge pass I didn’t need. I subscribed to streaming I don’t watch. I did manage to extract the full $600 in value from the hotel credits. But you have to book very expensive hotels through their portal, so I ended up paying $400 a night and getting $300 off. I probably would have spent $150 somewhere else. So in reality it saved me $50, but it was certainly much nicer.

Now with this card I believe I get more value than the cost, but would I get a second or a third with similar benefits? Probably not. At some point you see that just because you can get the value doesn’t mean you actually value it so highly. If I gave you 365 $300 hotel credits which could only be used for stays of $400 of more outside your home city, how valuable is that to you?

Leaving Money On The Table

Now don’t let this “free” money take more control over you than it should. I know someone who worked at a company that offered a $1500 wellness benefit. They said they could only switch to a job that offered such a benefit. While it is great to be forced to spend $1500 on yourself for massages, skiing, and the like, it is very easy to say this benefit is worth at most $1500. So if a job offered significantly more money, but no wellness benefit, you’d be better off financially with the new job. And you can give yourself a wellness allowance.

Don’t let the fear of not maximizing everything steal your time. There are plenty of benefits I have let lapse and credits I didn’t spend the entire amount.

Conclusion

Is there any money in your life that is earmarked? Are you treating it properly or are you going out of your way to try to spend it? As for me, I’ve been taking a tough look at my cards and determining where I have benefits that don’t make sense.

Today I would like to tell you that our assumptions are going to be challenged and likely broken by AI. Things that have been standards for decades are going to be tossed out the window. It is extremely hard to plan for such a shock, but I would recommend thinking about potential implications and how to plan for them.

In the doomer scenario we have no jobs. In that scenario would you like to spend your time watching Netflix now or wait until later when you have a ton of free time? Your opportunity cost changes a lot. Do you want to make a big decision to lock in a jumbo mortgage? Even planning a vacation at the end of the year starts to feel intimidating.

In the abundance scenario we may have all our needs met and diseases cured. In that case do we want to spend all our hours grinding away when it’s going to pan out for everyone? I’m not going to tell you where these changes lead and no one can with certainty, but what I can say is the pace of change will accelerate. Next, let’s look at some examples of assumptions that will be stretched.

Jobs and the 4% Rule

If how we work changes dramatically so will job security. Perhaps we end up with bouts of unemployment between various jobs. It certainly would impact how we think about retirement. Meanwhile, the 4% rule is based on historical stock market returns. If AI slashes costs maybe the stock market goes bonkers and investments are worth a ton. But on the other side, maybe there is no more buying power left and the market tanks.

30 Year Mortgage

We don’t know what the job market will look like in 1 year, but we have mortgages that stretch on for 30. Underwriters make an assumption that you will be able to continue to make payments for the duration of the loan. Those get packaged up as high quality debt and sold. If white-collar is displaced, who would want to hold onto those mortgages? Who would want to issue them? Does having a mortgage become good because it is hard to get or a liability?

Life Expectancy

I think a bright spot is that we may get new medicines and treatments thanks to AI. That could extend our lives meaningfully. Yet there are plenty of financial products tied to current assumptions of when a typical person dies. Pensions, medicare, life insurance. Government entitlements are already a huge cost. If we add even more people to the top of the pyramid it becomes more unsustainable.

Taxes

Last year I did conver

t some retirement to Roth because I was in a low tax bracket. Well, if we aren’t employed, then we’ll be in a really low tax bracket and I should’ve waited to do the conversion. This is always a guessing game though.

Credit Card Points

I am one who loves to collect and redeem points. If demand for travel decreases then maybe your points become more valuable as there should be more award availability. However, you may also not want to travel or spend money, so perhaps cash back works better.

Conclusion

I hope I have taught you skills on how to approach a problem through my many articles. I don’t have a solution for you or myself here, but it seems like we are all entering the unknown together. All the best to you!

When people are looking to buy an experience they are probably thinking of what they would like to do (relax on the beach, feel the thrill of skydiving, see their kids go to Disneyland, fill in the blank). Sometimes you consider creating a memory as part of your desire to have an experience. You may want to take your kids to Yosemite because you went their as a kid and it was majestic.

Over Thanksgiving I made a realization that the value of making new memories decrease over time, while the memories you have increase in value.

How did I come to this conclusion?

For more than 20 years my extended family meets up for a week during Thanksgiving. We do all sort of things like walk along the beach, play soccer, eat dinner, but over the years we have done fewer new experiences. Instead, we spend more time discussing our memories from previous years rather than spending as much time making new ones. However, when you start having children it interrupts this pattern as you begin to want to make memories with them as well to give them memories to look back on.

So What Should You Do?

A new memory will only serve us from now until our demise, so over time a new experience becomes less valuable over the long-term. So are we to spend all our money memory-making-maxxing? I’d say no, but you should stop being so miserly otherwise you may not get to have the experiences you desired. I remember in college I wanted to study abroad in Korea, but figured I could just travel there later after college and spend less money doing so. Well, after college I was focused on finding a job and then life started moving fast. Despite taking three semesters of Korean I now know virtually none.

Your money certainly has an opportunity cost as that money could grow to much more later. Spending $10k on a family Disney vacation could have been invested and turn into $30k when your kid is ready for college. Sadly I don’t have a formula to offer you as to when to spend the money and when to save it. Suze Orman would probably say save it. Others would say YOLO. Good luck finding your balance. Now go make a memory!

Time

Your time is finite, so don’t waste it. People can sink so much time into searching for the right product at a good price. It certainly makes sense for a large purchase like a home, but probably not for something small. Before buying a notebook for back to school, do you shop at ten stores? Do you go on Amazon and read 100 reviews making sure the paper is sourced from the Garden of Eden and has an anti-paper cut technology? Decision paralysis is certainly a thing and can even linger post-purchase. However, the less consequential the decision, I would recommend committing and moving on.

Previously I used the example of optimizing your tooth brushing routine. Honestly, that’s overkill that will save you a few seconds, but there are probably way bigger time sucks that you should tackle first.

Waiting in line. I’m starting to wonder what is so valuable as to make it worth waiting for. I’ve seen boba shops with a line that was nearly an hour. I’m sure it was great, but I couldn’t justify spending so much time. In NYC, there are companies that will wait in line for you and you pay ~$25 an hour while they wait. Perhaps you should think of your time like that. Is that boba worth $30?

Travel

Another area that you should be wary of is credit card points. I love playing the game, but it is a pretty time-intensive hobby. When asking for recommendations I simply tell people to stick with a few that have easy to use points or even cash back. To get outsized value from points you have to learn about all the transfer partners and check seat availability frequently. You are very likely better off simply avoiding.

I recently found a flight to ski for only 5,000 miles (that’s a steal). However, it involved a three hour drive from the airport to the ski town. I came to my senses and paid more to skip the drive and fly straight to the town. Buying the cheapest ticket isn’t always the best. For me, PTO is often my constraint, so if I can leave after work and get more time on vacation it is worth it for me. Having 3 connections and an overnight layover is a great story, but probably not ideal. I say this having indeed done some crazy flights to save hundreds of dollars, but you should really assess what is worth it.

Some people go on vacation and then try to pinch pennies. I don’t go on vacation to save money. You could certainly save a lot of money if you went to Hawaii and only cooked for yourself. I think it is worth eating the food of the location to try new things you may not have had otherwise. However, skiers, myself include are so guilty of spending $150 on a lift ticket only to stuff our pocket with sandwiches and candies.

Money

People can be tightfisted over small amounts, but go crazy with large amounts. I’ve hear plenty of people say they need to buy a costly EV to save money on gas all the way up to “needing” a $100K Hummer EV. Sorry, the depreciation will cost more than gas. People will also shell out for solar panels which may not have a payback period within their period of ownership.

Some people consider moving to simply save taxes. I would say maybe take it into consideration, but making a decision simply for that reason is crazy to me. Imagine you hit it big and are raking in millions a year. You can enjoy life anywhere, so why limit yourself to a low-tax area?

Conclusion

No one gets pregnant to save money on tampons.

I thought of the example above as the epitome of penny wise, pound foolish thinking. For a year or two you’ll save several hundred dollars, but you’ll gain a liability costing hundreds of thousands of dollars and sleepless nights (and lots of joy).

When making decisions consider the costs in both time and money. If it is a low stakes decision then don’t spend too much time on it. If high stakes or expensive, then certainly take your time, do your research, and assess your situation.

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Routine

You have some sort of daily, weekly, and monthly routine. On weekdays that may mean commuting to work and/or school. The time it takes depends on where you live. If you have kids, the shortest commute may be walking across the street to school and then back to your computer for remote work. Then there are others who have to fight through traffic to drop off their kid 30 minutes away, then go in the opposite direction an hour to get to their job. The more frequently you do something the more valuable reducing the time of the commute will be.

Friends and Family

Where you live determines how often you get to see friends and family. Sure, I can see some friends once a year if they don’t live near me, but if they live 30 minutes away I can probably see them twice a month. If they lived a few doors down then daily is possible.

Housing

Do you want a better house? You could pay more or you could move further away. Generally the further you are from the city the cheaper things become. You are trading cost for time. However, you can still make a fine life in plenty of places. Round Rock is 25 minutes from Austin, but you could still do everything in Round Rock without needing to visit Austin. Maybe less so in Bastrop which is 40 minutes and less populated.

Hyper Local

Your routine may be a grocery run several times a week. If you live close to that it could be time saving. Yet, that is something you could outsource. If you have a hobby you can figure out where to do that. I would love to play squash but the only place would be an hour round trip, so I’ll settle for pickleball or tennis nearby.

Near An Airport

One criteria that I hear from many online is that they want to live within an hour of an airport. I’m not sure why people are so fixated on this criteria if they travel 4 times a year. Let’s say you live 2 hours away instead of 1 hour. That means even if you go on 10 trips a year, that costs you an extra 20 hours. Living 4 minutes closer to a school you commute to 160 days a year would save you more time. Or you could choose to fly more directly to save time. There are plenty of choices to save time, I just think the airport angle is a nice to have rather than a hard requirement.

Conclusion

You are trying to minimize the sum of (Frequency of task) * (Time of task) while staying within your constraints. Currently we work remotely and live super close to the grocery store. School is 12 minutes away, so in theory we could move closer, but the cost to do so wouldn’t be worthwhile, so I will pay in time.

Like other topics I write about, I hope you take stock of your situation and find whether it works well or if there may be a better option. In the words of T.I.

YOLO

You only live once and your situation, as with those around you, is constantly changing. As a result, everything you do is in some way a once is a lifetime opportunity. Sure you’ve tried Lucky Charms, but each time you have it is different. Maybe today you found it pairs well with raw goat milk. Or last time you didn’t taste it because you were stressed out from work.

Just because you can’t make something today doesn’t mean it is gone forever. Taylor Swift will tour again. But she might not dress the same or sing the same songs. Maybe she’ll be married. Who knows? It will be different though.

But…

What’s holding you back? I’ve heard a lot of people say,

Well, you heard it here first: covid is over, so you now have permission to go do that thing.

Opportunity Costs

I know it’s not that simple. You have to take into consideration the time and money it takes to do that. Well that’s what this entire newsletter is about. You have to find your own optimal point within your constraints.

As a caution again YOLO I will tell of the story Into Thin Air about the 1996 climbing season at Everest. The mountain was already pretty commercialized at this point and there were lots of people that wanted to get to the top. They spent weeks at the various camps along the mountain preparing for the final push. But for the final one you only get one shot and it could be halted by numerous reasons. The guides set a predetermined turnaround time to stay safe, but didn’t stick to it and ended up trapped by a blizzard and died. This is a case of wanting something so badly at the exclusion of all else, even oxygen was limited, which definitely contributed to lack of clear thinking.

Conclusion

Everything has a cost to it, so you have to strike the right balance. Take this as your notice to assess some things you’ve been wanted to do but have been putting off.

When I was in high school I attended a class at community college and had to do a write up on a Yung Joc’s hit song. Well, there’s a verse that may be relevant, so I’ll leave you with that.

Well, the years start coming and they don't stop coming

Fed to the rules and I hit the ground running

- Smash Mouth

Rules. So many rules. There are laws you have to follow and then there are societal expectations. I think we are loosening expectations and people are more frequently pursuing their own paths which break from the mold, especially when you can not count on a traditional career path to bring you a cushy life anymore. In fact, there are so many people breaking the mold that there are entire communities dedicated around them. There’s van life, FIRE, off the grid people, you name it and you can probably find your people thanks to the internet.

At some point if you don’t change it up, you grow complacent and wear a path deeper and deeper. Some would call it consistency, others may call it a rut. Depending on your point of view it could be comforting or boring. However, if you keep up routines over long periods it is going to seem like your life speeds by. The CEO of Airbnb has an article how unique experiences create memories and make time seem like it isn’t going by quite so fast. If we are to follow his advice and create more memorable experiences what are we to do?

You could certainly book a trip somewhere, which is often what I do, perhaps too often. We are creatures of habit, so sometimes you need a bigger push. I call it blowing up your routine. How do you go about doing that? Anything big will do it: moving, having kids, even getting really good at a new skill.

If you go from having 0 (pets, kids, partners) to more than 0 it will certainly change your life. They will need time and attention and you will have to give up hours of what you used to do and focus on them.

Learning a new skill can be really enjoyable. Maybe you want to learn tennis and you find a great group to play with. Or perhaps something more solitary like learning an instrument on your own is what changes up your routine. One person did a learning challenge where each month they would learn a new skill like a backflip, get good at random memorization, draw good portraits, and more.

Moving is a big one and often will dramatically change your routine. Even within the same city you probably won’t go to the same places as much, may change school districts, and neighbors. However, maybe there’s a medium step that is enough to change your routine and more like a rental experience to try things out. What if you rented out your house or did a house swap? Then you could change things up without committing fully to it.

The pandemic was certainly a jolt that changed all our routines. Many options became banned. People adapted and found new hobbies. Sourdough was in, nobody was out.

Conclusion

If you are living your dream, great. If you think your life could use some new experiences, then start brainstorming of what you could do differently. A lot of times you need a push to get out of your comfort zone. I’m not saying dive into the deep end, but maybe be more open to a change.

At some point all that stuff becomes more of a hinderance than an added comfort. There are many methods to determine whether you should keep or toss something, including if I got poop on this would I clean it or throw it away? Only you can decide, but I imagine most of us have a bias toward keeping too much.

How much is too much?

If your stuff is making it difficult to move around your home, then you probably need to stop buying stuff. Some people may take this as a sign to get a bigger home, but stuff is like a liquid, it will spread out to whatever space you let it in.

If you are using a storage unit with no end date, then you have too much stuff. You are very unlikely to convince me otherwise.

If you can’t afford it, stop buying it. Your stuff is acting as a constraint to the experiences you really want to have.

Exploring examples

Say no to storage units

The sunk cost fallacy makes you think that since you paid for your stuff then it would be better to keep it around. However, you can sell it, give it, or throw it away.

People load up their excess belongings into a storage unit never to be seen again. Maybe they put their furniture and kids clothing that they think they’ll use again. They’ll pay $100 a month to store $1000 worth of goods. For years it sits there, maybe a bike gets pulled out and used. Yet, if they simply threw the items into a dumpster and purchased new items that they actually used they would have saved money. You could have even rented one.

Pets

Pets aren’t necessarily “stuff” but they can certainly weigh you down and restrict what you can do. I know people that can’t be out for more than 4 hours because their pets can’t handle it. So before you get a pet, a house plant, or a sourdough starter, consider the implications on your life. For many this is a joyous addition, but for others it may be a burdensome constraint.

Furniture

There was a person who tried to sell furniture at a yard sale but couldn’t get their asking prices, so they took all the unwanted furniture back to their home. It cluttered their home to the point where they couldn’t use areas of the house. Is holding out for an extra hundred dollars worth losing the use of your home? No way.

Seasonal items

To each their own, but I do not own Christmas decorations or any sort of thing that requires me to put it up for a limited period and then take it down. So much work.

Endowment effect

You may be unwilling to let your stuff because you suffer from the endowment effect. This is the bias that you think your items are more valuable than the same item if it wasn’t yours. You see this all the time on resale marketplaces. Someone bought something for $100 ten years ago and they say it is “gently used” and then attempt to sell it for $90. It’s probably worth less than $30 and if you asked them if they wanted to buy your same item for $80 they’d definitely say no.

So take a look around. What aren’t you using? Personally, I love to think of my house having a scale underneath it and I’m constantly trying to decrease its weight. Being willing to let the item go could be a momentary pain that could pay dividends.

News

The news will never stop. There are billions of people, so there’s plenty going on at any given moment. Do you need to know what’s happening everywhere all the time? No. I don’t think our brains are made to handle taking in our personal lives, our work, the next iPhone features, what’s happening with tariffs, bombings in Yemen, escalations in India and Pakistan, and just so much more. So, how do you escape, or at least filter?

If something is really news worthy, then I think you’ll hear about it through some source. How I avoid consuming news is to stop checking on it and let it come to me. I don’t check any news website, instead, once a week I get a physical newspaper and magazine. That way my news is distilled into the greatest hits and from there I can further filter by choosing what to read.

Social

I read that many teens spend 5 hours a day on social media. If you continued at that pace you’d spend more than 20 years of your life watching other people’s lives. Even knowing this it is still tough to break away from trying to keep up with the endless stream. I used to open up Instagram in any lull and I didn’t watch reels, just friends’ stories. I ended up deleting the app so I would have to deliberately go to the website if I want to see something. Usage metrics are way, way down. Now I’m working on having less Twitter time.

There are certain “hacks” which can help reduce your time. You can set limits on app usage. Someone makes a physical item called a Brick which will lock you out of non-essential apps until you touch your phone to it again. You could set your phone to grayscale which makes it less appealing.

One person is ironically having online success through her mission of living IRL without a smartphone or laptop.

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Sports

Millions of people’s lives revolve around sports. In Portugal there are three newspapers that cover soccer. It is pretty crazy how we can follow a team that may play for a few hours each week and yet manage to speculate and discuss all the remaining hours of the week. I’m not here to stop you, but just remind you to assess whether it’s important to you. Maybe you decide watching the game is important, but following the injuries, trades, and such you can live without.

Stocks

Every weekday stocks go up, stocks go down. Are you richer or poorer than you were 10 minutes ago? With apps like RobinHood you can see in realtime the green and red changes. Unless you are a day trader you can probably forego looking. If you are investing for decades down the road then all this is probably noise.

Hobbies

If you’re really into your hobby that is great, you probably love it and are spending time you enjoy on it. But are there aspects where you are overdoing it? Do you need to spend hours a week researching all the equipment options out there. I’m more of the opinion of just hand me an OK racket and then I’ll enjoy.

Shopping

We are cradle to grave consumers. But maybe we could lay off constantly shopping for stuff we don’t need. Maybe we don’t need to track every launch of a new collection. Somehow a bunch of stuff gets into my inbox, so it can be tough, but I recommend avoiding as much as you can to save your time and money.

Pop culture

Personally, I don’t really care about anything that would be covered in People magazine. I didn’t even know a Jonas brother was married until my wife told me he was getting divorced. Don’t ask me which one, I just learned there are four.

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Ferris Bueller has a great quote, and look, 39 year later I’m sure Matthew Broderick would say that life indeed goes by very fast.

At every stage of life people find themselves to be busy. Too busy. Too busy to get to the things they actually want to do. Busyness is a virtue in America. I’d say it’s a vice. It’s a crutch. It’s the devil on your shoulder that says no to doing what you want.

Stages of Life

If we walk through the stages of life, when did things get so hectic? It certainly wasn’t when we were chilling in a stroller, though there were probably moments when we picked up on our parents throwing everything into the car in a rush to get to daycare, the doctor, or some other errand.

Pretty soon, we are part of the rushed schedule. We need to make it to school drop-off on time. Then before we can catch a breath it is off to piano lessons, swim team, fencing, and dressage. No day is without a scheduled activity. Go to a place with competitive schools like Irvine, where I used to teach SAT math, and you’ll find multiple activities per day for kids who are already stressed out.

Eventually you leave home, maybe for college and you have all this freedom to control your own time. It’s wonderful, but not if you face a demanding school schedule which drains your time and bank account. Then there’s all the other bills to pay so you pick up a part time job which drains even more of your time and energy. You feel like you can’t catch a break and you have no money to do the things you want.

Onto working life. Finally you are earning more money, but you have this 8+ hour chunk of every weekday where you are working. You still have to pay for everything, but if lifestyle inflation wasn’t too high, then you probably feel better about your situation. But it’s still hard to do what you want with your friends because they are busy as well. Maybe you join a pickleball club and that works out well. Maybe you sink a bunch of time into dating. It certainly always feels busy.

Now your a parent. Same responsibilities, but you have to care for a kid on top of that. Maybe your work is nice enough to offer parental leave which helps ease the transition, but there’s always bottles to wash, diapers to change, and rushing to drop-off and pickup on time.

Looking back you realize you weren’t really all that busy before, but it just kept coming.

Sabbath

Sometimes what you need is a reset. Some religions have the idea of a Sabbath. God made the world in six days and rested on the seventh. People likewise need a day to split up their normal rhythms.

Some companies realize the need for a break after many years of work and will provide a sabbatical. At Meta it is 4-weeks after working for 5 years while Microsoft has 8-weeks after 10 years.

If you’ve been at something for awhile consider taking a break. If you stare at a computer for a long time, your eyes need a break. Similarly, you need to have rest from your busyness.

Next Steps

Is there a solution? Well, the answer you probably want to hear is that you can do it all using my easy 3 step process. However, the reality is that you’re human and there is only so much you can do and therefore, you probably need to say no to more things.

Since you are limited by time, make sure that what you’ve filled your schedule is filling you. Don’t go do something week after week if you don’t enjoy it. Certainly there are things you need to do like earn a living, but for leisure if you’re just lukewarm, maybe try a new hobby, and maybe rent first.

Saying you’re busy as a reason for not being able to do something is just a way of saying that thing isn’t important to you. We prioritize what is important within a set of constraints.

Normal profit abounds

I’m convinced that a lot of things operate on a normal profit basis. I used to see a deal on an item and think, wow this is underpriced, maybe I should resell it. However, after the hassle of listing it, shipping it, subtracting eBay fees, maybe I made $40 if the item was a few hundred. Nowadays I value my time much more, so I’m no longer interested. My theory is that there are lots of side hustles which are essentially trading your time for money at a normal profit.

One area where I still put in a lot of time is my points hobby. It is a constantly changing landscape, so there is always more to learn. In fact, there is so much to learn that I have to limit myself. The constraints keep me sane and make it so I can have more depth of knowledge in a few things.

The points game involves earning points, often through credit cards and spending. I choose to leave points on the table by not maximizing every transaction, but remembering which card to use in each situation can be a part time job. As long as I’m making sure to hit the spend for a sign up bonus I think I’ll earn plenty of points. I focus on optimizing, not maximizing.

The other side of the equation is spending the points. I’ve been able to fly business class several times on points alone. Sometimes it costs over 100K points one way, but doing research enabled me to get that flight that may have cost $3000 cash. Yet when you factor in all those hours of learning and searching for a given flight, it may have only amounted to $50 an hour. My normal profit. For now I’ll continue doing it because it is quite the thrill to find the deal and we sure love to travel.

Making more profit

There’s nothing wrong with making a normal profit, but if you are aiming to build some empire then you should probably go for a monopoly. To be a monopoly you have to be unique and have a moat. Some content creators have found a niche that is similar to having a monopoly. There’s only one Mr. Beast, while millions of others are trying to gain enough attention.

So, what am I saying with this article? Maybe your side hustle is something that you are simply get paid for your time. If so, assess whether you are doing something you enjoy or perhaps there could be something out there that is a better fit. You don’t have to sell your time, but if you think the rewards are worth it then go for it.

Experiences and services

Have you ever got a massage? It’s fantastic. You definitely had to pay for their labor, but I don’t think you hired them to be your full-time employee. Instead, you paid for the delivery of a service, maybe a one hour deep tissue massage. In a way you were renting the experience rather than buying it. It wouldn’t make sense to hire a full-time masseuse, driver, or chef for most of us. Those decisions are clear because it would cost a fortune compared to the relatively small price of the service. However, when the price difference is less or you get a tangible item in return people often default to the idea that buying is better a better decision.

Products and real estate

Real estate is a controversial one that is filled with emotion. Everyone needs a place to live the argument goes, so why wouldn’t you buy a home if you could? There are plenty of reasons. If you buy a home it becomes a pretty big constraint as you are responsible for quite a bit. You have not only the financial obligations of mortgage, insurance, HOA, and maintenance, but also you can’t just get up and move without a ton of hassle. Before I bought a house I lived in more than 10 places. It was great to be able to move within a city, out of the country, and on my own schedule. Yet, even when you get a mortgage, if your rate is 7%, then the first payment is only 12% principle. So maybe you are throwing away money.

When you go on a trip you probably rent a car rather than buying because you only need it for a bit. In fact, if a product is really expensive and not used frequently then it is probably better to rent it. I would much rather rent a boat for $600 each time and have it sitting ready for me in the water than own one that I have to tow to the river, pay for storage, make monthly payments, and worry about it breaking down.

A vacation home sounds like more of a constraint than a nice to have to me. It is a lot of work and rarely gets used, sure you could rent it out, but that’s a part time job. Renting a vacation home means you are free to go to a new place every trip.

Hobbies

Perhaps you really think you’ll get into road biking if you spend $4000 on a bike, but you ride a few times and it sits in the garage until years later you sell it for $1500. You didn’t want to rent the bike for $60 a day because that would be throwing away money. Yet, you spent $2500 and rode it less than a dozen times. You would’ve come out ahead if you rented.

You can apply this to any new hobby you’d like to get into. Rent the golf clubs, the scuba equipment, the skis. All those are bulky and it’s nice not to have to travel with it.

My advice

Once you know you are going to stick with something then I think it makes sense to go ahead an buy it. It doesn’t need to be the top of the line item at first though. Occasionally I’ve made purchases which I should have rented. The first pair of kids skis I bought were too big and I had to pay for a bag on flights and they are heavy. On the other hand I’m thankful that I rented kite surfing equipment because I didn’t end up going but twice. At some point I would love to get into it, but until that time I’ll continue to rent.

Over time I think we’ll see even more rental options. In Taiwan I saw umbrellas for rent and my coworker told me that in India furniture rental is popular. So, take a look at your house/garage/storage unit and see if maybe you should get rid of something and rent it when needed. Conversely, look at your credit card. If you are getting charged for renting a scooter 3 times a week, then maybe it is time to buy one. The goal is to allow your money to work for you and not have your finances constrained.

Is Maximization Optimal?

I’m going to argue no, it’s not optimal with several examples.

You go to a buffet and try to only eat the expensive stuff. You may get the highest return if you are simply considering the cost of ingredients, but you may not have the most enjoyable meal. If you stuff yourself to discomfort, again you are “winning” but the hours of discomfort afterwards aren’t worth it. In fact, I know someone who felt so terrible they went to the ER after. That meal ended up costing way more.

You pay for Hulu with no ads and so you decide every minute of free time you will be glued to the screen. It sounds silly when it is $20, but there are plenty of other situations where people act this way.

You go to a fancy hotel in Paris and want to use all the amenities since you are paying so much. You get there right at checkin and have trouble leaving. As a result you don’t get to see much of Paris. Sure, you got plenty of spa treatments and food, but the opportunity cost was so high because you are in Paris! You should have gone to a fancy hotel in your town.

Our schedules are so packed that we have no time to be bored. Kids are driven from activity to activity and have no time to be a kid.

The theme here is there is more to life than squeezing everything out of one facet.

What Can You Maximize?

You can optimize your maximization though. For instance, rather than paying for Netflix, Hulu, Apple TV, and Peacock all the time, you could rotate through them each month. You end up paying 1/4 of the price.

Many people try to maximize their salary. That is pretty understandable, but even this has limits. If you have to work 100 hours a week, then you probably aren’t getting much else out of your life and plan to “live” later. Instead, I would suggest you attempt to maximize how much you make on an hourly basis within your constraints. Perhaps you say 50 hours is as much as you’d work. If you currently work 40 hours and $100k a year, but can get a 10% raise for working 50, you aren’t making more per hour. You are effectively getting $10k for 10 more hours per week which equates to $20 an hour.

Conclusion

Assess your life, are their areas where you are overdoing it? Are you seeking riches in crypto, but the risk doesn’t let you sleep well? Or perhaps you aren’t maximizing anything. Do you have a gym subscription you don’t use? Optimization means taking a look at the entire picture to see what you want, both now and in the future. You have limited time and resources, so use them wisely which also means knowing when to stop.

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Your Time

I’m convinced many of us think we are underpaid. Whatever your hourly rate you probably think it is insufficient because of X, Y, Z. We have insight into how much we are stressed, how much effort we are putting it, the sacrifices we are making, the years of experience we have, the years of schooling required to get to here. All that combines to, yeah, you better pay me a lot.

Others Time

If your time is so valuable, then why don’t you treat other’s time just the same? I think it is because we lack empathy. You are living life from your perspective so you don’t realize just how much training and effort others are putting in as well.

Imagine you want to paint your interior walls and a painter gives you a quote of $70 an hour and says it will take 10 hours. No way you think, maybe for $20 an hour, so I can just do it myself. After a full month of burned weekends and almost falling off a ladder you realize that you should’ve just paid them. They are faster because they are skilled and you could’ve bought your time back at a bargain.

The cost of labor varies all over the world. Globalization has put lots of manufacturing in Asia because labor is cheaper. All those boxes coming to your house are affordable because you aren’t making them. You could carve wooden blocks for your kids, but it’s their comparative advantage. If you are curious about the cost of labor in a country, just check out the price of a massage which is nearly all labor.

Outsourcing is also using other people time. Uber, Instacart, DoorDash. If you use them it is because you find the trade-off worth it. But I bet you still think it is too expensive.

Things that take human labor are expensive. Why do you have to speak to a robot before getting to an agent? Because humans are expensive. I’m still putting off the AI articles.

Conclusion

If I haven’t convinced you previously, hopefully this one shows your time is valuable. And not only your time but everyone’s time. Paid and unpaid activities. Hanging out with a friend is wonderful; you are both lending your time.

Would you play a game where you pay $3 to roll a die and if you get money equal to what you rolled back? Well the expected value of the roll is 1/6 * -$2 + 1/6 * -$1 + 1/6 * $0 + 1/6 * $1 + 1/6 * $2 + 1/6 * $3 = $0.50. A positive value means you’ll make money on average, and indeed if you could play this game as much as you wanted you’d be rich. I’m sure you can guess by now that in a casino the expected value is negative for the customer and that’s why we have the gambler’s ruin.

You don’t need a huge margin to win. If a high frequency trading firm wins 51% of the time, they’ll make loads of money. Even Roger Federer, one of the best tennis players ever, only won 54% of his points.

Our Lives

Now, what’s the application to our lives? You can apply expected value to EVERYTHING. The amount of variables may not be as simple as a die, but you can try. Say you have two job offers, one is a fixed salary of $80k and the other is $60k plus tiered commission. You have to come up with how many units you think you can sell in order to weigh the two options. Should I take the freeway or the local route? Based on your previous experiences you have a sense of the expected time each should take. Maybe one route sometimes gets stopped by a train and that makes the upper bound unacceptable because you’re running late and don’t want to potentially be even latter.

For many decades there was a pretty well-worn path. Go to college, get a good job, collect paychecks and buy a home that would appreciate. Maybe that was the life your parents or grandparents had. With stability it is pretty easy to plan out your life. If you know you are going to get 5% raises every year, inflation will be low, and your cost of housing won’t change much, then it’s pretty easy to plan what you want to do. You know if you can afford a vacation, a nicer car, a third child.

But things aren’t that way anymore, are they?

The New Normal?

Now we have frequent layoffs, you may go to college and have just a large monthly debt payment to show for it, or maybe you were a government worker, once considered the most stable of jobs, who is getting fired by the new administration. How can you sign up to take care of a kid if you aren’t reasonably certain you can stay employed? The number of variables going into the expected value calculation gets so big that there are high levels of uncertainty. You only have one life, so one die to roll, and when there’s a chance of a big loss you may choose to limit yourself to another path. And there are people choosing to do that. Instead of college, they are going to trade school because it’s pretty predictable what your job will be if you go to a plumbing school. A plumber! And the wages are pretty well known.

Home ownership rates have been decreasing each generation. Why buy a house if you might not be able to pay it or have to move for a new job? Instead we focus on experiences and why not YOLO every so often. Marketing tries to tell us we “deserve” everything. It’s the reality, and it’s tough.

So, if you find yourself in a place where it seems like there’s no clear path forward, remember it’s ok to walk away. Calculate the expected value of various options. Find what is acceptable to you. Sometimes doors open and sometimes they close. It sure would be nice to know the chances of each though.

If you’d like to read more about these changes I highly recommend Kyla’s article.

Kyla’s Newsletter

Gen Z and the End of Predictable Progress

Generations are tricky to generalize as individual experiences are very different, especially in a country as big as the US. Still, broad patterns can offer insights into how technology and economic shifts shape generational identity and opportunity…

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a year ago · 478 likes · 54 comments · kyla scanlon

Freedom of Schedule

The first time luxury is having control of your schedule. Ironically, this may not be correlated with wealth. Many CEOs lose control over their schedule as they have many people demanding their time. Imagine your friend won a trip to Fiji for a week, but they tell you it’s happening next week. Could you go? If you have a job it may be tough to get off on such short notice. If you’re retired, run your own business, are a digital nomad maybe you could swing it. Having freedom over your schedule allows you to do more. I went skiing on a Friday when there were fewer people than the weekend. If I went on a Tuesday I’m sure it would’ve been even better. If you have a rigid 9 to 5 job, then regular errands can require using vacation days or finding weekend appointments.

Outsourcing

Going back to Taylor Swift, do you think she personally cleans her homes? No way. She has cleaners to do that. Is she at the Super Bowl waiting in line at concessions for a hot dog? Of course not because she can afford to outsource any task. Driver. Private jet scheduler. Public relations manager. Personal assistant. Lawyer. You name it.

Most of us can’t hire an army of assistants, but we can still outsource. Maybe we pay someone to do our taxes, but there are even smaller ways in which we do. Instead of making a meal we order in. Rather than driving, we call an Uber. I think just about any task now has a marketplace where you can find someone to do it for you.

As your wealth grows, I recommend you begin outsourcing tasks that take lots of your time or are unenjoyable. When I was in college I hired someone to build me an e-commerce website. I probably could have figured it out, but it sure would’ve taken a long time.

We are entering a period where AI will dramatically reduce the cost of outsourcing. Maybe instead of paying a lawyer $5,000 to make a contract it will only cost $500 to have them review what an AI wrote. There are many opportunities, but more on AI in later articles.

Automation and Technology

If you have internet access, you can find answers instantly. What’s the fastest sea animal? Google, ChatGPT, DeepSeek will tell you immediately. What’s the best route to get to the restaurant? The answers are at your fingertips. If my parents wanted to get an answer they’d have to go to the library and find the relevant book. I still remember physical maps in the car to find our way around a new area.

No writing checks or even looking at the bill is needed with autopay. Having a meal subscription removes the burden of making daily meal decisions and shopping for them. There are so many companies out there that want to automate your life:

Soylent wants to replace your meals, Blinkist wants to replace your reading, and Facebook wants to replace your friends.

Having a smart home can automate all your routines. You don’t have to adjust lights, change your thermostat, or find your keys because you have an app with a schedule set up. It saves you time, but have a friend over and they’ll sure be confused how to work anything. Open the microwave with an AirTag you say?

Convenience

Convenience is a huge factor in my life. I would love to spend more time with friends, but many of them live far away. If we lived next door I’d definitely get to play a board game more than once a year. In December, I joined a climbing gym on a two-month promotion. But then a month in I realized that the 12 minute drive each way wasn’t as easy as going to the gym right next to the elementary school I go to drop off my kid. Now I’m a member there, even though it is nowhere near as nice, the time savings is worth it.

I think the ultimate convenience is having things at your property. You don’t have to go to gym if you have a home gym and sauna. Tennis sure is nice to play in your backyard court and your paid hitting partner will come to you. I should start convincing my children to play ping pong so I’ll have some people to play with nearby.

Even things you normally have to go to are available at the right price. Concierge medicine can get you visits at home rather than having to wait in an office with other sick people. Personally, if I had tons of money, I would helicopter everywhere.

Youth

Being young is wonderful. You have health and time, though not much money. When you are young you don’t have as many responsibilities and can get bored. There is so much to do now, I don’t think I could ever get bored. Sadly, youth today is more often getting stolen due to helicopter parenting. Even so, being young means you have the ability to start over, try new paths, and take risks. I’m sure any billionaire over 60 would trade their life for that of someone in their 20s since they have so much more time. They can buy almost anything, but their money is no good to buy time.

Conclusion

Are you short on time? Perhaps you should buy back your time through outsourcing or shuffle things around such that your schedule is more convenient. In fact, you should probably take a step back and reevaluate your priorities and see if you still are living the life you want.

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This problem is where you must choose between sticking with a known option or try something new which could be even better. It happens all the time. What are you going to eat for dinner? Who are you going to spend the weekend with? You are constantly making decisions.

Food

Does a death row inmate request a dish he hasn’t tried for a last meal? If he is rational, no. The choice to try something new, to explore, only makes sense if you think you can get more from it than a sure choice.

If you like a restaurant do you go back? Sure, but how do you decide when to choose a new one? If you think it could yield something good then maybe you do. Doing research like reading Yelp helps you gain more information on what to explore. If you find a good, new restaurant then you have the opportunity to go there again and again. However, if you are moving out of the city next week, then even if you try a great new place you will only get to go once or twice more.

Purchases

When you make a purchase are you going to stick with the reliable or try a new brand?Ever seen Mark Zuckerberg? He’s always wearing a t-shirt. In fact, the same custom one he has many of. By committing to a simple wardrobe he has eliminated the need to think of what he is going to wear. A decision to wear one thing has probably saved him lots of time.

I recently went to Japan and found shampoo that I really enjoyed. Now, I’m not a person who really cares. Pert is great; I’ll take anything from Costco. But this was a head above the rest. So, I ordered 4 bottles, which are pictured. Making a decision is to stick with something ends up saving you time because you don’t have to continue exploring.

Work

If you have a job you probably commit to showing up regularly, but at some point you may want to get a new one. Maybe you want more money, a new challenge, or think you’ll get laid off you may find it better to explore than to continue at the job you have. If you are retiring in a few years, then moving may not be as rewarding.

Conclusion

Hopefully you have learned something. If you have more time, then the exploring is more attractive since you’ll have more opportunities to exploit if you find something good. So many decisions are explore vs. exploit and we make them without realizing.

Relationships

In a traditional marriage you make a commitment to one person. In my wedding vows I said, “I vow…to love you and to forsake all others” which limits me to my wife. That’s a pretty big commitment. However, with it I no longer have to spend time looking for a companion. The search is over, a commitment has been made, and we have built a life together. By making a commitment it has indeed restricted my freedom, but it also removed uncertainty. I know who I will be with today, tomorrow, and in the years to come.

A mutual defense treaty allows nations to have each other’s back in case of an attack. It is a big deal to commit your resources and lives to another nation, but in return you have assurances that they will be there for you as well.

The first two were monumental examples of commitment in relationships, but commitment can take all forms including someone taking your side in a work meeting, a friend willing take care of you when you’re sick, and much more. There is a cost to commitment, but there is a wonderful upside to it as well.

Activities

Having a routine can act as a commitment even if you don’t explicitly sign anything. If you have game night Tuesdays, book club Thursdays, and go to the gym at 7AM four times a week then you have a schedule that keeps you fit and entertained. Such a commitment isn’t lifelong and you have the freedom to change your interests, but it does serve to keep you from being one who sits on the couch for hours and scrolls through content and wonders where all your time went. OK, maybe that person is me.

Housing

When you sign a lease you commit to a duration. You have to pay rent each month, but in return you know where you are going to end each day. You don’t have to worry about finding somewhere to sleep every night. You stay dry when it rains, warm when it’s cold, and in control of a small piece of the world.

Now, I don’t recommend jumping into purchasing a home right away, but if you do feel like you’re ready to settle somewhere for a number of years then a home will throw down big roots. Expect to lose money if you sell within a couple years, but the benefits are even more than a lease. You don’t have to worry about not being able to renew when your lease is up. You don’t have to worry about a rent increase (instead it is worse with property tax, HOA, and insurance increase). There are plenty of other worries though and it is a fair amount of work, but the home is yours moreso than a rented property. However, you do greatly restrict your freedom through taking on a big financial burden of a mortgage and many other payments. Maybe you can’t go on as many vacations or eat out as frequently. Personally, it wasn’t until I have lived in many cities and had several jobs that I was ready to take on home ownership, but 7 years later I’m still in the same cities, so it seems like it was the right time to do so.

When To Break Commitments

In today’s age it seems like people don’t want to commit to anything. Optionality is king. When asked if you want to hang out on a particular day, do you agree to it or play by ear in case something better comes up?

To break a commitment isn’t something to take lightly, but life moves fast and you, your situation, and others are constantly changing. Even the world map has changed since you were born. And even a new country will emerge by the end of this decade. Heard of Bougainville? The point is that sometimes your commitments outlive their usefulness. Maybe you are sick of board games and it’s time to quit rather than drag yourself to the dungeon each week. Maybe you and a friend’s interests have gone off in completely different directions and things fizzle out.

In my life, I’ve broken a lease because our life situation changed. I did thoroughly read through the lease though and realized that if I signed another lease with the same company I could forego the hefty lease breaking fee which worked out wonderfully.

Employment is another relationship that’s been broken many times. I’ve left a job to move onto one that offered more stable employment with better pay. I’ve left a job to go to graduate school. I’ve had an employer leave me behind to thin out the company. Sometimes you don’t get to have the final say, but life goes on.

Conclusion

I didn’t want to end on a sad note, so let me say that commitments are constraints that help guide your life. They come in many forms from self-imposed to governmental mandates. Don’t overcommit to the point where your life is so full of constraints that you’re not doing what you want. But don’t have a fear of commitment just because you want to be free. Personally, I think life’s easier when you have at least some certainty. As for this newsletter, you’ll never know when the next one is coming.

Imagine four quadrants with comfort on one the horizontal axis and freedom on vertical. Up is more freedom, to the right is more comfort.

The bottom right corner would be the CEO who has all the comfort of flying private, eating well, and having access to everything. But her schedule is full and has no time for family or hobbies. Indra Nooyi, the former CEO of Pepsi spoke very openly about how different it was to balance her personal and professional life. Her husband, “Raj always said your list is Pepsico, Pepsico, Pepsico, your two kids, your mom, and then the bottom of the list is me.” Her daughter had to call her assistants who would have to answer questions because her mom was too busy as CEO.

In the bottom left corner would a prisoner. They have no freedom since they are incarcerated and they have no comforts.

The top left corner would be lots of freedom but no comfort. This may be people on an alternative path. Ski bum and van life would probably fit in there.

The final corner, top right, would be lots of freedom as well as comfort. That is probably what most of us strive for. I think of people who do whatever they want because they found a perfect niche that earns them money or they are already financial independent. Mr. Beast lives his dream of producing Youtube videos.

Nearly all of us strike out to have lots of comfort and lots of freedom, however we get tripped up and think our freedom and comfort is right around the corner. Surely a promotion will help me escape the rat race. This massage chair will certainly alleviate my stress. You blink and realize a few years have passed and you’re no closer to freedom. The amount of stuff you have has increased, but you still don’t feel comfortable.

Another Dimension - Contentment

Now, you could layer in more dimensions into this framework, but for this article I will add just one more. In one direction you have contentment and in the other you have the love of money (or other object, but likely money). Are those really in conflict? From what I’ve seen I’d say yes. When someone is in full pursuit of something they have trouble being content until they get it and then once they get it, it is onto the next thing. In careers, in cars, in anything people want, there’s always a next thing in line. I think that’s why the path to a good job is so rigid. Do well in school to get into a good college, do well in college to get a good job. Work hard and get promoted until you die. Even winning NBA stars struggle. Kevin Durant “thought a championship would change everything and found out it doesn’t. He was not fulfilled.”

The Bible has a lot to say about the love of money.

For the love of money is the root of all evil - 1 Timothy 6:10

Keep your life free from love of money, and be content with what you have - Hebrews 13:5

No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money. - Matthew 6:24

But it also has examples of contentment. Paul was a prisoner when he expressed his contentment.

I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. I can do all this through him who gives me strength. - Philippians 4:12-13

If a prisoner is able to find contentment, then I believe it is possible in all four quadrants. If we have a love for money then we will not consider ourselves comfortable nor free.

Still not convinced?

There’s a great story about an American businessman and Mexican fisherman. I recommend reading it here, but I’ll summarize. The fisherman is laid back, just doing enough to get by and enjoy his time with his family. The American suggests it would be better to fish more, turn it into a full operation, IPO and get rich so that in many years he can kick back and live the life he already is.

The story of Heller and Vonnegut at a billionaire’s party puts it starkly. “Joe, how does it make you feel to know that our host only yesterday may have made more money than your novel ‘Catch-22’ has earned in its entire history?” And Joe said, “I’ve got something he can never have.” And I said, “What on earth could that be, Joe?” And Joe said, “The knowledge that I’ve got enough.”

Getting to enough is not an amount of money. When surveyed people will say in order to be comfortable they need twice as much as they currently have whether they had a million or ten.

With a shift toward contentment you’ll also move toward the right on the comfort scale. Not because you are getting more comforts, but because you realize your comfort is already plenty. I live in a climate controlled home with an abundance of food and entertainment; I’d argue we’re very comfortable creatures. Would a king a few hundred years ago lived as well as we do?

Until you have a sense of enough you will be stuck on the hedonic treadmill. There are always better things to buy and experiences to have. Flying business class is better than economy and I’m sure flying private is even better than that. Having a boat is great, but a mega-yacht is even better. In fact, when in New Zealand I met a guy who worked on a billionaire’s mega-yacht. The boat wasn’t utilized very much but required a full-time crew of dozens. He said when the owner was onboard he was always on his phone making calls.

Now, reading this article isn’t going to snap you out of what we’ve been conditioned to desire for our entire lives. But it may make you think. I hope it pushes you to consider your next Black Friday purchase just a little more, ponder whether you really want to race up the corporate ladder, and contemplate whether you need a larger house. If your goal isn’t infinite riches then you might just have a shot of reaching contentment.

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This is what I call the specialness of scarcity. The example was also serendipitous because it was a chance occurrence, but I believe scarcity is the bigger theme here since you caught a limited edition. It’s not anytime that your antenna literally grabs that song from thin air. Spotify provides unlimited options and with that the specialness evaporates. If we think scarcity is special, we can build it into our lives.

We live in an age of abundance. And that’s truly a blessing. Most of the world doesn’t have to deal with hunger. But a billion deal with obesity. We can access any digital content in seconds, but it takes us hours to decide. Abundance is great.

Now there is scarcity. We think limited edition items are special. The extreme end of scarcity is unavailable which is at times is even more desirable. Why do you only want Chick-fil-a on Sundays?

I imagine online dating probably removes the element of scarcity and has caused huge changes in relationships. You are going through an infinite pile of secretaries, so when should you stop?

So, how do incorporate scarcity into your life? It may be as simple as don’t be a glutton. Don’t order Uber Eats regularly, go somewhere special. Don’t watch endless Netflix, go to a movie. Don’t just follow your friends online, go visit them.

Yet, there is irony to this advice. In preaching efficiency I’d say your time is too valuable, so order in, be it food or a movie. Yet, we can’t let efficiency drive our life. We want to be optimal within our constraints. Introducing scarcity is adding a constraint to our life, but I believe it is a positive one.

Your 20s are short. Your time with your children is short. Your life is short. The limited amount makes it special.