One of the key assumptions of this blog is that we should prepare for the worse case scenario when planning for our careers, and a worse case scenario that smart people seem to agree on is a coming bifurcation of the job market. I’ve spent some time exploring the truth of this claim, and while I’m not entirely convinced (can anyone ever be truly certain of the future?) too many believable people are making similar arguments about the future of jobs for me to ignore them.
In simpler terms: let’s just assume that there will be winners and losers in tomorrow’s economy, thanks to our good friends globalisation, automation and machine intelligence. My current approach to this threat is to look for career moats — that is, defendable niches in job markets that demand rare and valuable skills. If you have rare and valuable skills, you shouldn’t need to worry about ever being out of a job for long.
But there are alternative approaches to one’s career. I read with some interest a recent New York Times article on the FIRE movement, where millennials are quitting their jobs in order to achieve financial independence early in life. FIRE, if you don’t already know it, stands for ‘financial independence, retire early’. I’ve been aware of the movement for about three years; as I understand it, the movement revolves around the two-prong approach of reducing wasteful personal expenses and increasing the percentage of income that goes into investments.
As the NYT reports:
Followers of FIRE tend to be male and work in the tech industry, left-brained engineer-types who geek out on calculating compound interest over 40 years, or the return on investment (R.O.I.) on low-fee index funds versus real estate rentals.
Indeed, much of the conversation around FIRE, on Reddit message boards or blogs like Mr. Money Mustache, revolves around hacking one’s finances: strategies for increasing your savings rate to the hallowed 70 percent, tips for cheap travel through airline rewards cards, ways to save nickels and dimes at the grocery store.
Contrast this approach to the mindset that my friends in Singapore have adopted. As one of them puts it: “I don’t believe our generation can ever retire from wage work. We just have to accept that as a fact of life.”
Depressing as it sounds, the very fact that this blog exists is a testament to our dim view of the future. In the About page for Commonplace, for instance, I wrote:
The world you and I work in is confusing and scary, and the changes come quick — some argue that the rate of technological change has been increasing for the past couple of decades. Where our parents might face one large technological change in their post-WW2 careers, our lives might face two or three. My biggest fear is that a technological change renders my current skills useless.
For context: my father was laid off in the 1997 Asian financial crisis. I remember how he struggled to find work in the subsequent years, eventually (and fortunately!) going back to an old company he had left earlier in his career. There he remained until his retirement, a few years ago.
My dad was financially prudent and remains one of the most responsible people I know. But he didn’t have a career moat. I fear being forced into the same position he was — that is, stressed and worried for the future of his career, and with a family to support. This is a fear that I think some of my friends find unfounded, as we live in one of the great golden periods for software jobs in the history of the industry.
But I don’t think my anxiety is rare. It’s come as no great surprise to me that great swathes of the millennial generation have ‘lost faith in capitalism’. It’s also not a big surprise that younger generations have been leaving the humanities in droves for more marketable skills. I think both anxieties are linked. It pays to take a serious look at the approaches available for dealing with such uncertainty.
FIRE and the Long Term
FIRE interests me because it takes two accepted truths of my generation: that is, a disillusionment with capitalism and consumerism, and the idea that gains from investments outpace increases in salaries (or, as the economist Thomas Piketty puts it, ‘returns on capital are greater than returns on labour’) — and combines these two views as an approach to life.
The Times piece profiles Kristy Shen and Bryce Leung, a couple who worked in Toronto’s tech industry before retiring in their early 30s to travel the world full time. They did so in response to the looming threats of outsourcing and artificial intelligence. As Leung puts it on the core challenge of our generation: “We don’t have jobs that will take care of us. We have to take care of ourselves.”
But here’s my worry: if FIRE depends on the current lengthy bull run in the stock market, is this strategy doable in the long term? My worse case scenario with regard to FIRE-ism goes something like this: you retire early, with a million dollar investment portfolio thanks to the earnings off your high-paying knowledge work job. You live off the returns on your capital. But then something catastrophic happens as a result of the great bifurcation: social upheaval, say, due to a widespread loss of jobs from automation and machine intelligence. Your investments won’t cut it.
Now you’re stuck in a hard place, for you have no rare and valuable skills to re-enter the drastically different labour market you’ve left.
I will note that my long-term outlook is perhaps a little too paranoid. Mr Money Mustache, a prominent blogger in the FIRE movement, argues that FIRE-ism is doable even in a downturn, because the core of the movement is frugality. In a 2017 blog post, he writes:
So, as long as you aren’t a Consumer Sucka, commuting to work in a bank-financed gas-powered racing sofa and/or borrowing money for furniture and appliances to outfit that last spare room in your suburban mansion, recessions are a great thing. Housing and profitable investments become cheaper, insanity and speculation is reset, and people actually start living more frugally again, getting back to the roots of what living a good life really means.(…)
One of the joys of Mustachianism is that it makes you immune to the business cycle. You immediately stop living beyond your means, so you have stepped back from the cliff. Then you start to build a resilient mesh of skills, health, money, friendships, and peaceful personal badassity which further protect you from trouble.
After all: who cares about the price of gasoline, or affording cholesterol pills, or how to make the next truck payment, when you’re a wiry and muscular Mustachian, riding your swift and sensible bike a few miles to work and banking almost all of your enormous paycheck every two weeks?
Then as you live this joyful existence for however many years it takes, the final stage of complete financial independence arrives automatically, and you are absolutely invincible.
One problem with this approach is that frugality isn’t as simple of an option if you live outside countries like the United States — that is, outside a country with a vast hinterland (and a hinterland with an acceptable standard of living). My friends in Singapore, Malaysia and Vietnam, for instance, don’t have that much of a choice — my Singaporean friends live in a city-state with no hinterland; my Malaysian friends can’t move to rural towns if they have older family or medical needs they need to take care of.
That said, the ideas of the FIRE movement are probably worth considering seriously. I’ve talked a lot about career moats on this blog, with the assumption that wage work is something most of us would be forced to do for the rest of our lives. This is still prudent, I think — rare and valuable skills in lucrative, high demand niches are safe investments in the grand scheme of things.
But living frugally, adopting the ideas of the FIRE movement with regard to early investment in index funds or ETFs, and remaining financially prudent throughout one’s career — these ideas are definitely a prerequisite to building career moats.
This is pretty obvious, after all: you can’t be strategic about your career if you’re worrying where your next meal is coming from. And you can't build career moats without money.