Character is destiny

This year is coming to an end as we're writing these lines. 

We've achieved some and missed some when it comes to the New Year's Resolutions from last year. 

The training is where it should be, above 9000 minutes during last year. A secret has been to try to train before lunch, either in the morning or during the lunch hour. That seems to help us to use the higher energy part of the day for training. 

Another thing we've achieved is our savings. We've saved around 44 k€ per person that goes into our pathfinder portfolio. 

Other things where not quite there. My Mandarin is not that much better. Antinous German though is a lot better. I would not aim for Carnegie hall neither with my piano skills.

On the other hand, we've spent more time with family.

Why did some things succeed?

Perhaps because we've made these habits easy to fall into, so the fist step to get them going is easy. 

It's a simple idea that seems to work for us.

Resolutions take habits that constitute character and creates destiny.

Here are some character forming micro habits that we've used this year. 

• Training. If we change to training clothes at 10am or 11am. Then it feels strange not to go training at 11:30 and instead sit and eat lunch in training clothes. 
  
  
• Savings. We've automated everything. We have a side account with what we should spend in a month on food and basics transferred to it. Then the card is refused when we go above that limit. There's a side account with a little more, where all invoices are payed and the salary ends up that we then can refill some with, but it's cumbersome.tp withdraw from it. And there's no other account easily accessible with money beyond our monthly expenses. 

So what to do next year? We should probably think more about the micro habits, because they are the triggers to the habits, and when we've put them in place we seem to be able to live up to what we promise. 

We should probably also give more thought to the social, friend and love department. We're not always overly interested in this area, because we know that the social mirror is dangerous to our financial journey.

Changing the status game is what allows our freedom.

But yet, we're also social animals. And there are interesting things to work with in the social game. What are our emotional responses around other people, and especially people we might dislike? And friends we like and love? How do we react, what of our own shortcomings do we project on others, what do we want of our social surroundings, and why? 

So there are three areas to focus on for 2022 perhaps, summarized as: wealth, health and love.

And all will take habits that create character, which steers us in these three domains,.

And what is wealth, health and love, if not destiny. 

Farewell,

//antinous&lucilius

Who has got the initiative over our life-energy?

Here's a thought.

We're dependent on the paycheck for our livelihood for a considerable time.

We earn that paycheck by giving our life-energy away; our concentration, enthusiasm, wit, skill or labor. 

What guides where we focus our life-energy is the force that gives us the paycheck.

That directing force is ultimately dictated by the needs of society and the market.

What does freedom do?

It brings the control of that force, to decide where we spend our life-energy (concentration, enthusiasm, wit, skill and labor) over to us.

Art wants out

Suddenly, the initiative is in our hands. 

We become true grown-ups, adults, and sovereign in deciding where to spend our energy, without a guiding force to nudge us.

The beauty of early financial indepet is that much of that life-energy still remains in our hands; in our relative youth; it has not yet been spent in the hands of the market and society.

We still have energy to spend.

It's, though, an error to think that freedom means that the life-energy shouldn't be spent on creative, interesting endeavors.

The energy we're granted is far too interesting to squander away, in our opinion, on too simple pleasures.

Hedonism requires complexity.

And mastery of complexity is art, and art wants out.

And with freedom, the initiative to set that art free is ours. 

Farewell,

//antinous&lucilius

The speed and the destination

When we want to go somewhere, is the speed we can arrive at the destination the only factor to consider?

Let's say that we are to go and visit some friends in a remote area in northern Sweden. 

The winter roads through the forests are full of moose, reindeer, bears, polar bears, and what-not.

What kind of driver (and car) would we prefer for the journey?

Let's make a thought experiment with obvious hints to a financial journey.

One driver promises to keep a good, high average speed, with the performance one can expect of a good, new car, let's say around 120 km/h (80 mph).

Another driver wants to arrive as quickly as possible. This driver proposes a new kind of car (untested on arctic winter roads) that he thinks could go really fast, let's say 160 km/h  (100 mph). We will reach the destination in no time, or so he promises us. All other alternatives seem unnecessarily slow to this driver.

The third driver seems, in comparison, dull and boring, but quite stable from a temperamental perspective, and proposes to drive in 80 km/h. Just in case.

There might also be this guy from the local bank who tells us to walk the whole way.

Quick? Or safer but slightly slower?

Speed might not be the only factor to consider when aiming for a given destination (that doesn't include a dead moose in one's lap).

To arrive at all, in an acceptable time, is for many much more important than being the first to arrive.  

Let's end with the analogy there. 

Many seem to focus on optimizing for just one parameter when considering one's financial journey.

• Insane returns. Including untested assets, which could be anything that is new. New is the definition of tech stocks. Or exotic assets that didn't exist 20 or 50 or 100 years ago. Might be quick, yes. Will it always work? Who knows? And what happens at an unexpected turn?
  
  
• Average speed, known car. Buy the index, or pick value stocks and reinvest the dividends. This is less insane and it's far from impossible to reach our destination. Yet, if one is not that familiar with the conditions of winter roads in northern Sweden, then do we really understand what risks we are exposing ourselves to? And what makes the assumption true, that high average speed is the only factor that is interesting for our journey? Is the assumption that average speed automatically also has a decent reward for the risk? Or that the risk matches our journey and appetite to arrive also if conditions or events are less than optimal?

• Slow yet steady. Even a sharp turn becomes much less challenging with slower speed and higher safety. The big swings, so to speak, of the road  becomes less dangerous, and we can both handle sudden ice and even the odd moose on the road. We might get to our goal in a slightly longer time. But in most scenarios we will get there, alive. 

We have given the question which vehicle will bring us to our destination some thought, and for us, slow and steady might not be so bad, as we prefer to arrive in most scenarios rather than being quick in the average scenario. 

You can read our thoughts on portfolios here, and our thoughts on volatility here.

How about you? Are you mostly considering your speed in your portfolio? Or is arriving at the destination even if the unexpected moose shows up behind a curve also in your equations?

Farewell,

antinous&lucilius

Why the Samurai shouldn't study too much Buddhism

There's so much mindfulness in today's world. And to enjoy freedom, the stoics, and quite a lot of thinkers like them, advice a kind of detachment from the material world - at least when it comes to deriving anger from material failures.

Yet - when we are NOT yet free; isn't it better to think of how to be good followers of our clan and company? Is then too much dwelling on the mental virtues for freedom really with what we should consider ourselves?

A Samurai is not overly concerned with a peaceful mind.

(Kusunoki Masashige, 14th century)

In the Hagakure, Tsunemoto writes that the Samurai should not study too much Buddhism. 

Instead, one finds other virtues, quite detrimental to preserving one's peace of mind, in the thinking of the way of the samurai - bushido. 

Act quickly

The philosophers in Their Elevated Elysium like to think and not make haste. 

Yet, the Samurai prefers to to act and act quickly. Only the feeble refrain from acting. 

Use the anger

The stoics stay clear of anger, and comfortably turn their fat necks away.

Yet, for a Samurai, rage can be turned into a force that can be directed at one's enemies or what needs to be done.

Don't be afraid of death

In one translation, Tsunemoto writing goes:

"This is the substance of the Way of the Samurai: if by setting one's heart right every morning and evening, one is able to live as though his body were already dead, he gains freedom in the Way; his whole life will be without blame, and he will succeed in his calling."

Perhaps we don't always have death over us, yet at some point, being attached to personal safety is obviously counter to Tsunemoto's samurai. If we accept that everything will vanish to the point that it has already vanished, we can do the right thing, free of fear. 

If we are afraid of death, we might refrain ourselves from doing the necessary.

Often, the hard way is the right way and can be enjoyed precisely because of its hardships. 

Live by honor

Honor, and the lesser byproduct of reputation, is everything in a clan-based society. 

Hint: much of business life, and beyond that, behaves like a clan based society.

In all action, show respect, stick to your word and never loose face.

Serve your master

Precisely because of honor and reputation, the Samurai cannot have anything but complete loyalty to his master.

A good follower

Most of us spend some time in a clan, nowadays called an "organization" or a "corporation". This existence can be enjoyed for its medieval, clan- and samurai-like attributes.

And being valuable to the clan is a sure way to achieve freedom.

So let's think how we become a good follower for our master, and put the horse before the cart, and consider this and enjoy this before we start to consider freedom.

A samurai shouldn't study too much Buddhism. 

Be a good samurai first, and then, be the monk who dwells on transcendental freedom in his state of higher and higher enlightenment. 

If we set our will to it, our goals will be in our grasp.

Tsunemoto again:

"Nothing is impossible in this world. Firm determination, it is said, can move heaven and earth. Things appear far beyond one's power, because one cannot set his heart on any arduous project due to want of strong will."

Farewell.

//antinous&lucilius

When lightning struck the cow

There was this farmer's tale, of a good ranch. The harvests were plenty, the meadows bountiful. 

Each and every year, everything at the farm got a little better, the barns were filled, the live stock was fat, the children happy.

Then, one summer night, the farmer looked to the skies and saw dark clouds gathering. A storm was building up.

Well, he was probably not sitting on the cow.

His favorite cow grazed on the hill, and the farmer had a tingling sensation. Too late he understood what was about to happen.

Lightning struck his cow.

From that day on, what was slightly better every year became slightly downhill as the years passed by. And just five years later, the farm fell into disarray.

It was a story that ran in the village for generations. 

To have a little bit too much is not a problem. To discover that one has a little bit too little is a big problem. 

Diversification and safety margins are there for the things we do not see coming.  

As when lightning strikes the cow.

Farewell,

//lucilius&antinous.

Only the wise are rich

Cicero was a funny guy. He used an old-school trick to maintain his financial freedom, which was the Roman version of house hacking - to have a lot of property out for rent. 

He was obsessed with how he should furnish his villa and which statues to buy. 

This was a fellow who did not live as he learned. His writings are confusing. Once when war called for duty, he escaped it by calling home sick.

He wrote about the stoics, and about stoic paradoxes, and sometimes he hit close to home. Perhaps because he could draw on personal experience of how paradoxical human behavior can be.

One of his paradoxes are: All Fools Are Mad. Only The Wise Are Rich.

Only The Wise Are Rich

We think that there's something creepy with the Rich Dad, Poor Dad kind'a'guys. Of course, a Poor Dad is doing something wrong with neglecting money all together, and we've been there. 

But someone who just want to amass as much money as possible, to the detriment of one's tranquility of mind or, worse, one's core moral values? 

A man, like Cicero, obsessing about buying the right statues to his villa. Is that person really wise? And if he's not, can one say that he's rich?

This question is tangible for us. 

We start to seriously leave the basic level of lean financial independence. But what after that is enough? 

Well, we add some safety margin. For instance, like Cicero's mad man, only a fool would assume that the highest mountain he has seen is the highest mountain (or financial crash) there is.

But after that safety margin? At a certain point, perhaps for us around USD 2-3 millions, there's a new level, the point where someone that are used with our level of expenses just can't spend the money on a monthly basis (unless we buy something very expensive or give the money away). 

For us, at that point of a few million dollars, we could always do whatever we could imagine; renting whatever car we wanted, travel from Sydney to Bali to a chalet in the Swiss Alps, hang out with the jetsetters, go to our conferences, meet the people we like all over the world - indefinitely, month after month - as long as we are at least reasonably conscious about the price and not paying over-prices. 

All experiences that we could imagine would be financially feasible without end.

This is of course what we want to do anyways, but with moderation. The key difference is the 'without-end'.

By just adding a little extra we could achieve all experiences we've imagined, forever, for as long as we want. 

Is it worth to work 3 more years to get to that point? Or should we use the last years of our relative youth to concentrate on for instance more health? Or can we do both?

Heli-skiing with the jet set bunch
Picture by Zach Dischner

And what comes after that? Are we becoming the Rich Dad, the mad fools? Appetites are insatiable. The financial independence community would agree with Cicero here; all fools are mad.

We are always at risk to become slaves to our appetites, be it the inferiority complex of the buyer of yachts and castles, the fear of having a too small safety margin of the too neurotic, the lack of imagination of the one that is forever stuck at the desk with the paycheck.

There's a point, where it is much more important to work on one's wisdom, rather than one's riches. 

Farewell,

//antinous&lucilius

How we dared to start investing

Our investment journey started with that we both went through crisis at work; where we realized that our financial future shouldn't rely on the paycheck alone.

Yet we had too much fear of the total stock market, and of stocks, to go all in on stocks.

Looking back we had some investments, mostly in mutual funds with corporate bonds that had a return of 4%. So very weak returns for the accumulation phase. And we really didn't pay attention to it. 

At some point, Antinous said that if we put our brains to it, we should be able to get at least a 7% return, still with reasonable risk. 

Sunrise for Antinous & Lucilius Financial Freedom Journey

Enter Asset Allocation

That's when we came across the permanent portfolio. We soaked up and read everything about it, we got the books of which we would especially recommend Craig Rowland's The Permanent Portfolio from 2012 that goes into more depth and answers some of the questions otherwise left unanswered. 

Compared to the advice one would get from one's bank, this is a wildly different approach.

It allocates 25% in four completely different asset classes (cash, long term government bonds, gold and the domestic stock market via a broad index fund).

Why? If we don't know anything about the future, then we bet equally on what's going to happen. And then the asset balance each other out, providing a radically different risk approach than anything one has heard from the old bank's investment advisors.

Why we dared going all-in

We already had a bunch of money when we started to be interested in investing. But it didn't feel good to go all in in the stock market, as many seemed to recommend in the financial independence-sphere.

Basically, it was the table below that made us dare to put our hard-earned money in a portfolio. The data below sums all periods from 1970 to now, with yearly re-balancing. We added US and France below just as a reference, with the US stock market as a benchmark. 

	PP SE	PP US	PP FR	Stocks (US)
Deepest Drawdown	-12%	-14%	-13%	−49%
Longest Drawdown	5y	5y	5y	13y
Average Return*	5.9%	5.2%	4.9%	8.2%
Short Term 3y Bad Case*	1.1%	1.6%	1.6%	-2.3%
Long Term 10y Bad Case*	3.2%	3.9%	3.6%	1.4%
Min Time to FI**	4y	7y	6y	3y
Max Time to FI**	10y	10y	10y	14

* Returns here are per year without inflation. So one needs to add one's expectation on inflation to see the same returns one would see in a brokerage account. The bad case is at the 15% percentile. 

** We assumed a 50% savings rate and 8 years expenses already saved. But this is 

When we started, we didn't really find online numbers for Sweden, so we crunched the numbers ourselves. It would show that the permanent portfolio is even better in Sweden than we first thought. Now there's portfoliocharts that is excellent for getting better ideas about different asset allocation strategies. 

So the higher average return in the stock market has also a very high price of 4 red boxes in our table, where each and one of the red box represent a very unnerving result for us. 

In short: the idea of asset allocation and perhaps the permanent portfolio might be worth checking out. 

So we did go slightly slower, but preferred to avoid the red trapdoors. Can you go more aggressive? Yes. Did we dare go more aggressive? No. So better to have something to start with rather then bring scared into doing nothing at all, or to pretend to be an ideal stoic sage that will be unaffected whatever happens just to discover that it might not be true. 

Farewell,

//antinous&lucilius

Amor fati

Mark Spitznagel of Universa, the guy that did a 2000% return on the start of the pandemic, has an interesting thought experiment, that he attributes to Fredrich Nietzsche. 

It's about a curse (and a lion).

The curse is that we will freeze in a time-loop, being 5 years long (yes, there are a Hollywood clichés on this theme).

And the loop is there forever and contrary to the Hollywood clichés, there's no hope of escape. And we wouldn't know what would happen during those 5 years that would repeat forever.

What would be a wise strategy going into the time-loop, before we know the results?

In Nietsche's writing the answer to that question is represented by a lion, what else. And the lion turns "thou shalt" spend an eternity into "thus I willed it and thus I willed it for eternity".

Because, well, a lion doesn't much care what happens. 

Would we be able to say, whatever fate has in store for us; "thus I willed it"?

Medici lion, reasonably calm about the future.

sammydavisdog CC BY 2.0 

We do plan to live longer than 5 years. But we are also interested in what will happen during the next 5 years. It's a liberating thought-experiment to try to look oneself in the mirror and think about one's own strategy for the next half-decade. 

Is it a strategy that gives the confidence of a lion?

Are we so calm and confident with our strategy so we are able to, like Nietzsche's lion, say "Thus I willed it and this I willed it for eternity", whatever happens?

Or is something meeker looking back at us from the mirror?

Farewell,

//antinous&lucilius

Where to go now?

Try: Ergodicity: Anything that can hit us will, eventually, hit us

What's meant with 'all seasons' in investing?

There is more to what happens in the markets, than what happens in the stock market alone.

And that can be very useful. 

When looking broader than thinking if the stock market will go up and down, one can start try to understand the financial markets in scenarios of what might happen, and how one can profit with different asset classes in these scenarios.

Scenario thinking

Let's move outside of the stock market, and for a few minutes think about what can happen with an economy at large. 

First, let's face it. Some of the things that might very well happen during one's life time, due to ergodicity, will be quite severe. 

The country we're in might cease to exist. Property might be confiscated, which happens in most parts of the world at least a few times per century; remember gold in the US, not to mention Europe after the second world war. New regulation might be introduced that creates havoc with private enterprise, and so on. 

This is why hardcore financial planners recommend having part of one's investments entirely abroad. And the bags packed.

Financial Seasons

But before we start to save up on the tin cans and buy a gun, let's think about what can happen before the tanks come rolling in. 

The proponents (Brown, Dalio and others) that recommend asset allocations often have a model to understand what might happen in the economy, short of war on the streets. 

Such a model can, for instance, break down the investment climate into fundamental dimensions. 

What are those dimensions that can reasonably encompass a whole economy, we hear you ask?

One is what happens to the values produced by the economy. Does the economy fundamentally produce more goods or services that society value? Or is the economy shrinking? So the (local) economy itself is one such dimension that can either grow or shrink.

So what's left when we've considered everything in the economy? What could possibly be left? The other dimension is that which we use to trade these values that the economy produces. 

When I give you something, I trust that you will pay me back, and that token of trust is often expressed as the currency used in the local economy where I have an expectation that the token will work in my next transaction with someone else. So this consists of all kind of short promises, that is, short debt that can be turned into exchangeable tokens in the economy. In broad terms, let's call this dimension the credit available in the local economy.

So now we have two dimensions:

• The Economy consisting of everything we value and we can potentially access, 
• Available Credit, that can trade those values.

With the above said, let's not fool ourselves that the mental model is everything that can happen. It's a model, not the rules of the game. In the real world there are few games that really bend to rules, as the ludic fallacy reminds us.

Economy: increase or decrease

So the economy can both increase or decrease. For instance, if trade increases, or we invent new sweet things that we enjoy, or we proposer and just value new or subtle things more, then the economy increases. 

If we instead screw up trade, we destroy what we value or we get depressed and don't value anything anymore, the economy decreases.  

Credit: increase or decrease

All that we value in the economy, for a monetary civilization, is traded using some kind of credit. 

Credit is multiplied via different mechanisms by the level of trust that currently prevails, through one kind or another of fractional banking; as money itself, or through credit cards, interbank lending, consumer credits and so on, and the basis of that multiplication is that short term promises will be honored. 

When trust is high, a lot of credit can be created, far exceeding what the central banks actually puts out in the shape of money. 

And on the other hand, if trust disappears or the central bank decides to remove money from circulation, the credit in the economy can evaporate rapidly, leaving only true, liquid, accessible hard cash in it's wake, and nothing much else.

Beware of theories

Now, this of course opens up tons of questions. But we are not academics. And we're wary of overly much theory, especially for theory's sake, not to mention what theory is currently in fashion. We try to stay away from that. 

We know that this is a model, and not the rules of the game. And we're not going to use it to predict (don't predict!), or speculate about cause-and-effect. 

It's much more like four different boxes that the economy is likely to end up in, because there are few other scenarios to go to (except war and confiscation, as said above). 

The economy shrinking or growing, credit increasing or decreasing create four "seasons" and the economy will be in one or another of these seasons. 

Winter is coming,

Caspar David Friedrich 1811

Now the important question. If we have these four fundamental seasons in an economy; how can we profit from them?

Well, different assets have different characteristics depending on the season. Let's flesh out a little more what might be going on.

1. Increasing economy, increasing credit. 

This is the way "everybody" wants things to be; what we normally call growth. The stock market chums along, sometimes very impressively, and credit that can trade the values that are being created chums along with the economy. 

Stocks can perform extremely well during the growth season, and long term bonds (25y+) are expected to perform very good as well. 

Cash and gold are both probably at bargain prices. 

A side note on cash in this season, which is a little difficult to observe because we're not used to think about cash in that way, as an investment asset: What does it mean that cash is at a bargain price? Well, price goes both ways. Something is almost always available at a bargain if one knows how to look for it. 

In this season, it's precisely cash that is at a bargain price. And what should we do with an asset that we can obtain at a bargain price? Well, get it, for the bargain price of course. 

2. Increasing economy, decreasing credit. 

Increasing economy and decreasing credit is a season that happens when the economy grows, but a lunatic in the central bank might constrict monetary policy, or a politician might interrupt interbank-trade, or any hick-up in trust might happen, which means that credit evaporates like dry tinder in a wildfire. 

This triggers the onset of a crisis. Flash sales occur. 

We might be in for a quick devaluation of stock and bond values. Anyone with real cash or long term bonds in the local currency might expect to benefit, and gold sometimes also perform.

But often, if the trust evaporates quick enough, it's only cash that will work, and one can suck up tons of stocks, and also gold and bonds with the cash that one got cheaply earlier. Anyone with liquid, real, accessible cash at hand in the immediate has the opportunity to go on a shopping spree and build the fortunes of their lives in 6 or 12 months, when the other asset classes start to bounce back.

Now, the crisis can either bounce back or turn into a full-blown, protracted depression.

3. Decreasing economy, increasing credit. 

Another alternative might be that the economy decreases, but someone in the government might get the good idea to solve the issue of a decreasing economy by printing more money, by calling it modern monetary theory, quantitative easing and what not. It might work if the economy is actually increasing beneath the credit. But if the economy is truly decreasing, we're in for another ride that will trigger inflation and an even worse crisis.

It might also be a a high point in the economy, and the growth has started to flatten out, but this is obscured by the trust that is still there and keeps credit expanding.

Now inflation looms, and when it strikes, then very hard assets will perform well. And the hardest asset of all is what nation states put in their vaults for bad times, the most trusted asset since Seneca's time and well before that.

Gold. 

And when inflation strikes, everyone suddenly rushes after the hardest of assets, and gold prices turn explosive.

Decreasing economy, decreasing credit.

And the last season, the winter, is a protracted depression. Both credits and the economy are decreasing. The sudden fall in trust and credit has now spread and infected the whole economy. 

Anyone that needs cash will be forced to sell inventory and assets at low prices, which will be reflected in the daily prices in the stock market that will spiral downwards. 

The newspapers will call this a crisis and disaster with black headlines, and some bank directors (central or otherwise) will jump from skyscrapers. The newspapers will continue to call it an ongoing crisis, and as usual the news will be blind for the opportunities that now open up for those with the right assets on their books.

Cash will be useful. And perhaps even better, when there's no real trust not even in cash, gold will allow us to do the shopping.

Conclusion

By having different assets in a portfolio, one can always have at hand what the market wants. 

Oh, so you're ready to sell your stocks really cheap to get cash? Lucky you, I've got cash, so just hand over some of those stocks for a really low price. 

Or you value stocks at crazy levels? Sweet, I bought some a few years ago when they were at a bargain. So here you go, I can by some gold or keep some cash instead. 

Oh, so you don't trust anything anymore? Lucky you, I've got some gold saved for a rainy day.

This is the beauty of having an asset allocation and rebalance from time to time, as the gentlemen Mr Dalio and Mr Brown discovered.

And if one mixes the assets in good proportions, one can build a quite powerful portfolio that will sail one's portfolio safely through any storm.

Farewell,

//lucilius&antinous

More: Can this thinking really perform and create reasonable returns? we hear you ask. And how can one mix the assets? Keep on reading about Our Crawling Road: A portfolio for accumulation part 2 or our current portfolio.

What we wish we knew about finance when we were 20

Lucilius recall when he was really young, how he could dream about having a big money bin not unlike Scrooge McDuck and how he was playing around with Excel (or something alike, on his Commodore Amiga 500) and did the 'rich by Excel' exercise. The young Lucilius somehow understood that if one just keep compounding with 10 percent annually, one could get into high numbers quite quickly.

Antinous once won a bunch of money at the age of 12, and he went to buy index funds and stocks for it.

So there was some interests in investing. 

But then we lost all interested in it. 

At 20, none of us had connected the dots of investing and financial freedom yet.

A clueless Antinous
By Ricardo André Frantz, CC BY-SA 3.0

What was it that we didn't understand?

Here are three things we wish we knew back then.

1. Fair investment doesn't require unacceptable risk

One can become financially independent as normal, working people without taking crazy risks (such as starting a company based on a wild idea, hitting gold with a film or book contract, the odd aunt that dies leaving a huge estate, or wild speculation on the moods of the stock market or even riskier schemes). 

In other words, there's a way to become financially independent that is methodical and will get anyone who has the right dedication to the goal. We had no clue about that.

A part from the more crazy ideas, we also looked at the stock market, not to mention, stock picking, as way too risky. 

And not without reason. We're still not convinced that the stock market alone, by default, is the right place to be to get a good return on risk.

The biggest hurdle with investing, and especially with stocks, we felt, was timing issues. Timing would make us always prone to question if it was the right time to buy, or if we should wait. 

We also recall from our youth how stock picking seemed to be some kind of social signalling among middle-brow realtives, and the whole affair just smelled stupid to us.

We were partly right. But we draw the wrong conclusions, and stopped caring about investments all together.

But then, we found that there are ways of investing that has a fair price on risk (around 7% after inflation), and where the historical drawdowns have been much more acceptable (3-5 years until recovery) and faires well in most economic conditions. 

Our solution to getting a fair (and good) price on risk, and to reach financial independence, that met the criteria above was the permanent portfolio. 

There are other strategies, but our portfolio for accumulation was our way to wrestle volatility, and it got us the goal both quickly AND safely.

And it worked.

So there was a way for us to get into investing without feeling that we did something akin to go to the horse track and bet all our earnings on Thunder.

2. Money is worth attention

When we got into our careers, we felt that this money thing was something for people occupied with buying big houses, fancy cars, a new pool to aforementioned house, and so on.

Nothing for us. Both of us where bewildered with work itself at that stage, and we didn't feel like we participated in the social game. 

It might be that being gay helps in questioning the social norms, but we guess that the questioning of norms is not limited to that.

Granted, we were always somewhat frugal, but we didn't know exactly why. It just felt like a reasonable thing to be.

So while we were frugal, we kind of felt that the pursuit of money was somehow beneath us. 

Money flowed in and we put it in a bank account and that was that, and we didn't pay any extra attention to the whole affair. 

We didn't understand that it's worth paying attention to money. Because the bewilderment about work is standing on a more shaky foundation than our 20-25-years selves understood.

That brings us to the last point.

3. Financial Independence Is Achievable Quickly

As many a 25-years-old, we liked our careers. 

We didn't have in our minds that there could be issues with having our careers as our financial security. 

But, we suspect, there is a built-in identity crisis and false security in work-life. Things weren't as rosy and safe as we thought. In a way, we were lucky enough to discover in time that a career was not quite that reliable. Just hope that the paycheck would come rolling in the whole life is not the same thing as financial safety.

Something more was needed. And that 'something' was second-level-stuff. Like a big money-bin, which in a way is the second level thing to a paycheck. And better values and virtues, which are second-level-stuff to a work identity. 

And freedom in early middle age, which is a second level thing to the slavery of work life.

Connecting the dots

And that was when the equation started to make sense.

We were back to where we started, with that Excel sheet and the investments. But this time we had learnt what to do.  

So to our 20-year old selves we would say; 

• invest with a good price on risk, 
• pay attention to money and save up and put them to work,
• and the path to independence will be much shorter than one might think

Farewell,

//antinous&lucilius

What fools these mortals be

Moral letters to Lucilius by Seneca, Letter 1 on Saving Time: "Nothing, Lucilius, is ours, except time. We were entrusted by nature with the ownership of this single thing, so fleeting and slippery that anyone who will can oust us from possession. What fools these mortals be! They allow the cheapest and most useless things, which can easily be replaced, to be charged in the reckoning, after they have acquired them; but they never regard themselves as in debt when they have received some of that precious commodity, – time! And yet time is the one loan which even a grateful recipient cannot repay."

There is no upper limit to our desires; a house, a bigger house, a castle, a boat, a yacht, luxurious travel, food, servants. For all those we pay with our time.

But we don't exist in property, nor style, and those palaces are evanescent and within minutes, hours or months they have lost their allure. 

Instead let us give what is truly ours to grateful recipients; good friends, good causes, the pleasures of existence, that what are beyond simple and becomes sublime. 

Give our time with simple dignity, and then we can live a life that flows in quietly, more alike the existence of the Gods.

Farewell,

//antinous&lucilius

Don't predict

We want to avoid speculation. To avoid speculation, we need to avoid predicting. But how can we earn a good return and not predict?

It's really hard not to make a prediction. News, twitter and much commentary in general are predictions. Prediction creeps into our thinking whatever we seem to do, even if we actively try to avoid it. 

• "Let's hope this will be a good year"
• "Small cap, investment trusts or tech stock are overvalued. The P/E ratio seems high, don't you think?"
• "Inflation will destroy all returns in the next decade!"
• "Interest rates can't go down more"
• "I'm sure this stock is undervalued"

Why shouldn't we predict? Because there is no reliable crystal ball for the future. Predicting has a notorious bad track-record, obscured by winner bias.

The price on the market is the average prediction of all the market's participants. For us, the best model of the market is that it follows an entirely random process - it's perhaps not always true but it's the best approximation for how the market behaves for, we dare say, any small investor, like us.

The Oracle of Delphi, perhaps reading the financial news. 
Delphic Sibyl, fresco painted by Michelangelo, Sistine Chapel Ceiling (1508-1512) 

But what should one do if we don't want to predict?

First, we should refrain from predictive narratives that sound logical. Because that's what narratives do (sound logical) but it doesn't make those narratives into better predictions.

Examples:

• Reached the bottom? Perhaps we, or the 'experts', are sure that we're at the bottom of a stock market cycle - but in reality it's very hard to say when and how fast the recovery will come. And when prices are low, developments can be very quick. One can loose 50% or 90% of one's money in a day going in or out of the market when it moves around the bottom of a boom- and bust cycle. So it's better not to predict and stay the course with a strategy that was thought-through before the stock market cycle went downhill. 
  
  
• Reached the top? Perhaps we are sure that the stock market will stop going up, because any number of good-sounding reasons. Yet - when will that happen? Over time the market goes up, and that means that it beats its all time high again and again. And whatever theory one picks to predict the top, there are nuances that the theory will not encompass. The markets are a learning-machine, that already contains all known theories. For instance, a simple point: there's a denominator in the P/E-equation.
  
  
• Cash and gold. Perhaps we think that "only productive assets" will survive, and discover that market price appreciation for other assets also delivers real money, especially when those productive assets are at bargain prices. Who realizes that cash increased 500% in value between 2001-2003 instead of seeing the other (but same) picture - that the stock market went down 80%?
  
  
• Interests are low or high. Perhaps we think that "interests can't go down more" and discover that long term interest is powerfully controlled by the long-term expectations on inflation and interest rates by the markets. And as the central banks and politicians discover, markets are much more adaptable learning machines that are much more powerful then what a 'sovereign' state wants to admit or can fully control. 

We might hear what we want to hear when we think we should rely on a prediction. The easiest person to fool is ourselves, with our desire to hear what we want, and avoid to hear what we don't want to know. We're prisoners to our own delusions. 

Temet nosce as it was said in Delphi. Know thyself before you try to understand a prediction about the future; and the ancients knew with many a cautionary tale how a prediction tend to fool the listener.

We've tried as well. We've been rock sure that we're at the bottom of a stock cycle. And just as sure that gold can't go up. What we've learned is that we are usually 180 degrees wrong when we try to guess what is going to happen. 

Perhaps you are better than us; which shouldn't be too hard, but to really outperform the market one needs to be better than average, which doesn't mean better than any average Joe, but better than professional investors.

It's a tough game to play.

So what could one do?

A solution to not predicting

Well, build a strategy that doesn't predict. 

One popular way is just to buy the stock market on average, by buying an index fund.

We don't think this gives a good price on the risk one is taking on, but it's a strategy with less prediction. 

Another closely related strategy is to focus on dividends, not stock market prices.

Betting on many futures at once

Our way is to combine assets that performs well for most scenarios of an economic and credit expansion and contraction. 

The idea behind asset allocation is to buy into different likely scenarios and have assets that perform well in different futures and hence not bet on any future in particular.

What we started our journey with, was the hardcore solution of strategies like this and when it comes to erring on the safe side: the permanent portfolio, which has much better returns and performance than most newbie investors think.

Read more here: A-well kept secret: Our portfolio for accumulation.

Not even we are that hardcore as the permanent portfolio anymore. But it's worth knowing that it exists and how it behaves, and also ponder using it. We did so for many years.

The bottom line is: we still pay extreme attention to avoid trying to foresee the future.

Farewell.

//antinous&lucilius

Where to go next? Perhaps some thoughts of why it's not overly wise to rely on an expert. 

Time for rebalancing and avoiding the herd

We rebalance at 6 month intervals now, as we are still in the accumulation phase, so we never have too much cash laying aroundd.

And as it will take some days to move the money around we started today.

It's been a good 6 months. The portfolio is up 6 percent since the beginning of the year, so slightly above expectations, perhaps driven by some inflation also in SEK. Let's remember that any real return will need to have the inflation deducted at the end of the year.

Herd

Swedish small cap and investment companies are up 20+.  US stock market is not quite as impressive with + 13 percent from a SEK vantage point.

Gold is right plus minus zero in SEK.

Long term bonds are down much, around 20 down.

And as usual we bet on every future climate. Except that we don't bet. We behave more like robots.

So most of our money will go into long term bonds and gold. Feels strange to buy into a losing asset. But that's part of our strategy.

That is what it is to have a contrarian strategy and not follow the herd.

Ergodicity: Anything that can hit us will, eventually, hit us.

Ergodicity is an interesting property. 

The idea of ergodicity is that in a stochastic process, a point will eventually visit all parts of the system it moves in.

Another way of phrasing it is that given enough time, everything that can happen will happen, with a probability approaching one.

We're by no means mathematicians, and even less experts in probability theory. 

Yet, what we've understood (or misunderstood) about ergodicity might be interesting for how one looks at the world, and how one looks on investments and an investment strategy in particular.

Let's start with examples.

Two Sides of A Pet Example

And where better to start than with a gun. 

Mikhail Yuryevich Lermontov aged 33, four years before he was shot through the heart during a duel. He was, allegedly, the inventor of the morbid game of Russian Roulette.

Russian roulette is a favorite game of all amateur game theoreticians. 

1 gun, 6 chambers, 1 bullet in one of the chambers. We spin the barrel, and then the game begins.

So, in which of the following game settings of Russian roulette would we like to participate?

Game A: Ensemble probability

6 persons walk into a bar (in Novosibirsk). The first one puts the Russian roulette-gun to his head, and pulls the trigger. If he survives, he hands the gun to the next person, and so on.  

What is the a priori expected return from participating in this game?

Game B: Time probability 

Now a much more, for the individual, deadly version of the game. One person walks into a bar to play Russian roulette. In this version of the game, she puts the gun to her head, probably has an good glas of vodka, and pulls the trigger 6 times.

What is her expected return from participating in Game B?

Let's conclude that whatever the return is for game B, it's not good. 

What does this mean for us?

In life, one might easily believe that one is playing Game A. When a yearly expected return is calculated, it gives the illusion of Game A. 

It's as if we participated in one year only, and, like our six Russian Roulette-players above, we cross our fingers when we pull the trigger and hope that it's a good year.

We hear ourselves say things like 'Let's hope that the portfolio goes up this year'.

In Game A, hope is part of the equation. We can hope that we are on a good run. We can hope that we will pull out of the game before that fatal bullet. 

When we look at expected return, like in Game A - it's ensemble probability we see; an ensemble of years as if they happened at the same time, not as if they where happening one after another. 

Of course, years doesn't work the way Game A does. 

It's not ensemble probability that is a good model for designing a strategy. 

Like our unfortunate player in Game B, we must survive time probability. 

Which means acknowledging that bad events will hit us as well, due to ergodicity. What is unlikely to happen in a year might very well be very likely during a lifetime or over the timespan of our strategy, or for the unfortunate lady playing solitary Russian roulette.  

In investing, we are playing the long game, year after year. So the mechanisms of our strategy and the behavior of the game table we're at, are very important indeed. 

During a life time, a really bad year WILL hit us. Really bad events WILL happen. Then our strategy better be wiser than the one fool hoping about the average outcome of Game A above. 

Our strategy to increase and protect our wealth must be built in such a way that we don't end with a gory mess.

There's no use in having a strategy on the assumption "as long as nothing bad happens", or even worse, a strategy that leads to ruin if a bad event or year hits us. 

Then we might permanently be out of the game, and our strategy doesn't matter much anymore.

Real life examples

What does ergodicity mean for us, practically?

To sum up: if we are to stay in the game, ergodicity means that in the long run, our strategy need to be able to survive anything that can possibly happen.

Application 1. Return.

The diagram above shows the same run for the Pathfinder portfolio.Why does it look so spread out if it's the same run? We've just varied the start date with three year intervals and repeated the same series of returns on the same starting point. 

Look at the diagram again. The green, the red and the blue line all come from the same run of years. The green line sure looks lucky. But even a "lucky strike" as the green line, also has a "bad run" as can be seen around 2031 in this simulation, and what looks like hopeless laggards will overtake the initial good run. Remember that this is the same series, the variation comes from the starting year only.

The same strategy gets hit with every event; with everything that happened, and luck and misfortune even out. 

So this would be as example of a strategy that can do well both if we're lucky or unlucky with a run of years.

A side-note: Ergodicity also puts some lights on the thinking around the FIRE-number itself; the amount of money invested needed, to reliably cover one's expenses. If one hits the fire number early, one should probably be cautious. On the other hand, if one never seems to hit the fire number, one might be on a lower trajectory, with more upside potential. More about that in another article, perhaps.

Application 2. Risks.

When contemplating exiting the work life, we've set up a list of risks, consisting of things that might derail our future freedom. Socialism (this is Europe, after all), large unexpected costs, family members faring bad, our relationship taking a bad turn, and of course death. With risks, it's tempting to assign impact and likelihood and care about the high probability, high impact ones.

But ergodicity introduces something that normal risk-thinking doesn't quite comprehend. The longer a game is played, the more likely all events become. 

In the long run, we need a strategy for everything. Nothing can really be avoided.  

So we must be prepared that we will have to perform all the mitigations for all risks. We will at some point have to pay that unexpected cost. 

There will be a run of socialism with high taxes and a wealth tax during the roughly 50 years we will live from our portfolio. There will be family problems and relationship problems, illness and tragedy. And finally, one of us will die and leave the other one behind. 

Conclusion

If we at any time think it's meaningful for us to "hope" for a certain outcome, then we have probably fooled ourselves into believing that we are playing Game A.

Our strategy needs to be adopted to reality, and the long run. Amor fati; love what fate has in store for us. Or as Mark Spitznagel of Universa fame has it. He makes a parallell to Nietschze for a good investment strategy - being able to exclaim "Thus I willed it" for whatever fate throws at us. 

In real life, hope is not a good strategy.

Farewell,

//antinous&lucilius

Life as a training arena for the stoic virtues

Antinous is the true stoic of us. If anyone would rate the four stoic virtues, Antinous would clearly come out on top.

Antinous wears a better social mask; he's friendly, agreeable, likeable.

If there's something that is going for Lucilius, then that would be that he's got his emotions on close range. Too close, according to himself.

We have come up with all sorts of explanations of the differences that are most of the time quite amusing. Probably genetics, and the role we played in our early teens seems to have colored these parts of our personalities.

A lot of things about personality are on a flip-side scale; on one hand, and on the other hand, and everything can be both good and bad, and there's no real value judgement to a personality trait, or so the common wisdom goes.

But here's something where the stoics, and the ancients before them, knew: that some scales are absolute. More is just better. And that insight is underlying the concept of the stoic virtues: fortitude, prudence, justice and temperance.

Fortitude

Fortitude, strength, the ability to endure the necessary hard times and do what must be done during challenges that life unavoidably entails.

"Are you samurai?"  is a question we ask each other sometimes, after having had a stab at the playstation game "The Ghost of Tsushima" where the phrase gets thrown around a lot.  

We say it like a; "wht the f*ck, how hard can it be?" and a "stop complaining, and get it done!"

Are you samurai?

To some extend it works. And it reminds of that some of the ghosts we face and that are stopping us from showing the strength needed in everyday life is more in our minds than real.

Prudence

Prudence, the ability to step back and think about the course of action and make cold-headed decisions. In latin, the word is prudentia, and this virtue is sometimes just translated as wisdom. 

So the ability to back off, let go of anger, giving up short term wants or silly cravings of recognition, and clearly see what path is best. 

Lucilius, as said above, especially can feel the sting of anger and get carried away by emotions. And it's dangerous. Suddenly he might have said something, let something slip, that gets a life of it's own.

Once upon a time, allegedly, there was a tribe in the arctics, that had the concept that they had a soul that always walked beside them, a kind of mirror-spirit of themselves, that they called the bigger man. 

They themselves were just the little man, consumed and dragged into the petty things of life.

But when something happens, we (and they) can always ask what the bigger man would do. 

Do we feel assaulted? Then we ought to ask ourselves: what would be the little man's response? And what would the bigger man do?

Justice.

Justice is about doing the right choice, of having an adequate sense of right and acting in accordance with the laws and what's right.

So not trying to cut a shorter path that isn't right, doing evil for short term games, and accept the just laws that govern human interactions and act in accordance with one's values.

Do the right thing.

Temperance.

Temperance is knowing what is enough, knowing how to control oneself, one's emotions and one's wants. 

There's more to temperance. As anyone striving to financial freedom knows, moderation is an absolute necessity to walk this path. Someone who cannot temper his appetites will always want more, and thus never becomes truly rich and never reach any kind of significant freedom.

Being In The Arena

The virtues are learned in the arena, with other people, while we are trying to achieve something difficult and of value.

The arena provides the training ground needed for freedom.

We suspect that it's much harder to chisel out the virtues if one is too deep into a propped-up otium. 

The world and its challenges, correctly taken on, train us in fortitude, temperance, prudence and justice.

Venus punishes Psyche with a task (more precisely to get water from a high rock guarded by dragons).

Ca 1692-1702, Luca Giordano

That's why, according to a more hardcore attitude, we should thank the gods for the misfortunes they throw in our way. 

If one should be able to truly enjoy freedom, we suspect that one better be trained, and keep on training, and embrace the training opportunities the arena throws in one's direction.

Farewell,

//antinous&lucilius

Truly not a slave: when the paycheck looses its attraction

What would your boss say if you came in and requested a 40% salary increase for the next year? And a 40% increase the year after that? Would she happily agree? Or would the cadres at your company think that you are more than insane?

A few years ago, we could expect a 40 k€ return from our investments for that year. The year after, this had increased to 60 k€, as it happened to be a good year.  The year after that, it was up at 80 k€.

That's a 100% increase in our income from investments per year over two years, or roughly an increase with 41% per year. All that just because we save and invest conservatively in our pathfinder portfolio. 

This is after-tax, in-our-pocket (or rather, investment account) money. So in many regards, much better than paycheck-money.

Now, compare that to how our salaries increased during the same period. These years were good to both of us, as we had changed job and had some salary progression. In the same time, that increase was hardly above 10% per year, so very, very far from the 40% increases in investment income.

This increase in investment income keeps rolling forward in a pace that is much, much quicker than any salary progression. 

It compounds quicker than one expects

Scientif38, CC-3.0

So, as all proponents of the FIRE-movement knows, there's a point where the investment income can cover for one's basic needs. 

Let's ask for a radical salary increase, shall we?

But there's also a point where the investment income is as big as the salary itself, and then - quite quickly - comes a point where the salary income just can't match the investment income at all under any realistic assumptions.

That's the point when a very substantial increase in salary - which for most people would mean a very drastic increase in responsibility or required skills - doesn't really do a significant change in total income nor wealth.

And then, suddenly, there's no salary that can realistically be paid, in any wage-based profession, that can be economically interesting to us anymore.

Truly not a slave 

This is the point where we loose financial connections the labour market, at least for all kinds of normal, labour-market-based monetary reasons.

We suspect that we have no inherent feeling that such a point in the financial journey exists. It should always be economically useful to work and earn one's living, right? Yet take any billionaire. There is no economic way of employing them with motivation of any normal paycheck.

There's a point like that for you and us as well. In Sweden, the take-home after-tax average salary after 5+ university studies is around 40 k€ (yes, we're in Europe, but the point still holds). That is a number we swooshed by several years ago with our investment income alone, and then continue to go beyond, with a very significant increase in our "investment salary increase" every year.

The progression, as we saw with the numbers, is such  that our bosses would be very surprised if we asked them to please keep up with our investment income increases with matching salary increases.

When most people hits a million euro, and keeps lifestyle inflation at bay, then it starts to get really hard to make significant improvements to one's economy by working for a monthly paycheck. The investment income becomes more than twice as large as what one earns via the paycheck. 

Suddenly, as sudden as how quickly a surprise avalanche builds up, it's no longer possible to employ us anymore, at least not for economic reasons. 

Then truly, we're not slaves any more.

At that point, only our own devotion can buy our time.

Farewell,

//antinous&lucilius

Volatility from a 5 year perspective: Welcome to the 1825 days year

Once upon a time, at the birth of our solar system, the time for the earth to spin around the sun became the 365 1/4 days we are used to.

It was a God given, a necessity, perhaps, and of course entirely out of human control.

Those 365 days has some impacts on our life, and certainly our evolution. For the two of us, the arctic summer and winter are a stark reminder of the solar year, on other places closer to the equator the climate will be more stable year round. 

The Arctic Sun

In the heated, air-conditioned, civilized life of today, the impact of earth's rotation on everyday life is smaller. The time it takes for earth to orbit the sun would seem even more arbitrary if one lived outside our frame of reference, let's say on one of the moons of Jupiter. 

From a more elevated perspective, an earth year is a seemingly randomly set constant.

Yet, we tend to give this period an out-of-proportion importance. We count our age in it, we celebrate the summer and winter solstice and equinoxes with rites and feasts. 

In finance the year has significance as well; as if the returns of our investments where a crop to be harvested every year. The year is the basis for what we understand with returns; if we see the number 7% it's assumed that it's the annual return that is meant. 

What is the impact of this metaphor on our thinking about investments? Investments that might not really care about the arctic sun, the moons of Jupiter or the passing of midsummer? 

What if we measured returns in another constant? 

Let's say that we just as arbitrarily instead measured a new unit that we set at 43 800 earth hours, or 1825 earth days, corresponding to 5 earth years. 

A unit, as if earth was spinning five years slower than we are used to. Or as if one only can be bothered to have a look at the planet every five year and wouldn't notice that it's actually spinning faster. Or as if we saw that grand red dot in the clouds of the gas giant Jupiter from our moon every five years, and measured the passing of time in red-dot-revolutions and not earth years.

What would we think of our investments then? How would volatility look with our new, more relaxed, slower 1825 days year's perspective? What decisions would we make?

Let's plot our pathfinder portfolio's return excluding inflation in a logarithmic diagram, with our normal earth years and our new, 1825-days-years. 

A thin red thread that always strives upwards

And voilà. An almost straight, red line that always marshes on upwards and never ever turns the other way. It's the same return, just with a lower resolution.

Our way of looking at things are bound by conventions that might be out of place. This hints on what volatility looks like for the Gods. 

And perhaps, it could for us too.

Farewell,

//antinous&lucilius

The built-in Identity Crisis of work-life: How Dante's Inferno got it right

A common way to enter the fire community seems to be to go through some kind of mid-life crisis.

Identity, crisis and burn-out

At the core of the fire community (and mid-life crisis, for that matter) seems to be not finance, but identity. 

What do we mean with that? Let's start by looking at identity. Here's an attempt at a two-fold definition. 

For an individual in relation to a group, identity will be any trait that most sets the individual apart from the  group.

For instance, in a small work place being gay will probably set you apart. Are you among gay friends, being the country boy might set you apart, et cetera.

Inversely, for the individual, identity will be the counteracting trait; anything that includes the person to a group and, importantly, also preferably puts that person higher up in the hierarchy, the status ladder, of that identity-creating group. 

During university and our early careers, we suspect they most high- and medium-achievers are so consumed with an identity based on a strive to find a profession, conforming into a role, that the profession becomes the trait that includes us in a group and sets us apart from other groups. 

Hence profession is a strong candidate to create our identity.

And with identity comes a lot more: the feeling of self-worth, feeling of respect in society and by friends and family and so on and so forth.

If it's not profession, other aspects are likely to compensate for identity: the kids, the house, the husband, friends.

These identities are naturally shallow, and early in life they need to be shallow to guide us into taking concrete, tangible (and by necessity, shallow) action. 

But kids grow up. Work changes and evolves and we become obsolete. The apartment or house as an identity creator? Let's not even go there. 

This early identity, as it's shallow - and society seems to need to keep our identities quite shallow - will eventually hit that trigger event that causes the identity to shatter, and a personal identity crisis will evolve. 

There comes a point when the identity and status in regards to one's chosen group is lost.

But with the identity goes one's feeling of self-worth, respect, belonging and recognition. We're probably hard-wired to react very strongly when that is lost, as this is something that was - and still is - potentially truly dangerous.

This loss of identity is so painful that it needs to be masked in other terms; often given an aura of scientism in the miss-normer of burn-out.

There might be some painful truth here. But in the midst of all ideas around burn-out, identity might often be an unfortunately lost concept.

The Evolutionary Advantage of Burn Out

If a sense of loss of identity wasn't involved, a burnout and the related feeling of stress might be easier to brush off. 

But the loss of identity makes it go deep.

A change in identity is intertwined with a feeling of gliding downward on the hierarchy ladder that our shallow identity is attached to.

Unfortunately for us humans, this seems to have a natural defense system that kicks in, to prevent us from doing dangerous attempts on the hierarchy ladder, as we have failed, or so our evolution tells us. 

There's an obvious evolutionary advantage to avoid further group exclusion. The one that survives, even further down in the group hierarchy, might still be lucky and propagate some more genes, compared to the one that challenges the status ladder and gets killed by the new matriarch, or whatever.

The name of that defense mechanism might very well be depression. Depression seems to be designed to keep us at bay, passively, and consider our options.

Let's sum up: the rules of life forces us to create a guiding identity, that through precisely it's concreteness is shallow and easily scattered, and then makes us fall down the status ladder into burnout and depression.

Is this even designed into the fabric if the human condition in society? This seems to be nothing new. 

Dante's Inferno, which, like the tradition of the alchemists, might have been a way to disguise philosophy and life advice in a religious language acceptable of the age, seems to be one large allegory on this theme, as a symbolic master piece about the midlife crisis and how it affects us and how to get throw it.

As we recall the protagonist's decent starts with:

Midway upon the journey of our life

I found myself within a forest dark,

For the straightforward pathway had been lost.

Dante et Virgile en enfer
William-Adolphe Bouguereau,1850

The midlife crisis is not just a theme in literature and art, it is also a core idea in individuation: to cast off the limited potential we have forced to constrain ourselves with to fit in society. Which is really nothing else than our constructed, shallow and fragile identity that we need to shake off through the nadir of our life. 

Our ambitions lead us exactly to the point where we do not want to be.

At some point in life, one will discover that what builds our identity isn't as stable and reliable as we hoped, and well, then our identities weren't as reliable and stable as we thought.

And that, not surprisingly as Dante saw, leads to a journey though hell that we must endure to reach heaven.

Conclusion

Here lies part of the beauty with the FIRE-movement. We need to build something more reliable to lean against than an all-too strong identification with things that will be taken away from us. 

Financial independence is a good and important step on that journey.

As long as we needed the paycheck, we are in a sense doomed to struggle with our identity and how it collides with the demands of our profession. 

This kind of identity struggle is not a good foundation to build a new, more free and robust identity upon.

At some point, though, one can become more free, perhaps supported by financial freedom, and start to reinvent the potential one has in life.

As long as that doesn't happen too late.

Farewell.

//antinous&lucilius