Get rich or die tryin’ (to spend it)

My boss pulled up in his brand new BMW today and I couldn’t help but admire it.

“Nice car,” I said as he got out.

“Well,” he said, noticing my admiring looks, “Work hard, put the hours in, and I’ll have an even better one next year.”

Paraphrasing from a good article by Paul Graham:

Someone graduating from college thinks, and is told, that he needs to get a job. A more direct way to put it: you need to start doing something people want. You don’t need to join a company to do that but for many people the best plan probably is to go to work for some existing company. This means doing something people want, averaged together with everyone else in that company.

However, is that averaging disadvantageous for you? In a big company you get paid a fairly predictable salary for working fairly predictable hours. You can’t go to your boss and say, I’d like to start working ten times as hard, so will you please pay me ten times as much? For one thing, the official fiction is that you are already working as hard as you can.

Economically, you can think of a startup/working independently as a way to compress your whole working life into a few years. Instead of working at a low intensity for forty years, you work as hard as you possibly can for four.

You could probably work twice as many hours as a corporate employee, and if you focus you can probably get three times as much done in an hour. You should get another multiple of two, at least, by eliminating the drag of the middle manager who would be your boss in a big company. Then there is one more multiple: how much smarter are you than your job description expects you to be? Suppose another multiple of three.  If a fairly good hacker is worth $80,000 a year at a big company, then a smart hacker working very hard without any corporate bullshit to slow him down should be able to do work worth about $3 million a year.

Like all back-of-the-envelope calculations, this one has a lot of wiggle room. I wouldn’t try to defend the actual numbers. But I stand by the structure of the calculation. I’m not claiming the multiplier is precisely 36, but it is certainly more than 10.

And once you have all that money, then paraphrasing from an article at messymatters.com on savings:

The risk of dying with too much money should be taken just as seriously as the risk of dying poor. After all, that excess money in old age represents forgone opportunities earlier in life.

Spend money on anything that shifts your focus from the mundane to things that give your life meaning. Donating to charities that are meaningful to you is a great way to do that. Traveling to visit friends and family should rank highly for the same reason. Improving the world, having fun adventures, relationships with friends and family, satisfying intellectual curiosity…

Certain kinds of adventures you may not be physically capable of at retirement age. And don’t forget the possibility that you’ll die young. Or there could be a financial collapse that sparks hyperinflation, destroying your hard-earned savings. Or there could be technological explosions that change everyone’s level of wealth.

Have a bias for enjoying things now; it’s worth some amount of risk of being poorer than you’d like to be in retirement. Consider the strategy of throughout your life, taking, say, a month of unpaid leave every time you accumulate several thousand dollars in excess savings. If you keep obsessively saving past a reasonable target then you are, in a very literal sense, wasting money, by letting it sit as excess savings instead of doing something with it that makes your life better.

Improve your life by outsourcing tasks you do not enjoy. For example, don’t do your own taxes or change your own oil or clean your own house if you don’t enjoy those things, especially if you enjoy your job more than those tasks and your effective hourly rate is not much lower than (or is higher than) the hourly cost of the outsourcing.

Also, consider getting your retirement setup in place sometime before you retire.