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Comment by lev99 | Hacker News Reader

Thoughts on "thinking long term".

I always translate monthly expenses as 2055 dollars, because that is my target retirement date.

If something in 2018 costs $100/month that means it costs $1,200/yr. You can expect to see about 8% returns in the stock market over the long term. By saving $100/month for a year instead of spending it I will have ~$20,000 in 2055 money. If I continue to save the $100/month instead of spend it I will have ~$275,000 in 2055 money.

Edit: Translating to your target retirement date dollars also works for one time purchases.

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Have you accounted for inflation and the fact that your assumption about stock market returns may very well be completely false since past results do not imply future returns?

The best way to get rich is to generate a large amount of value for a lot of people as fast as possible in a way that you will directly benefit on the upside (imho.) Not pinch pennies and put your fate in the hands of returns on a specific asset class.

1) I am aware of inflation, but my calculations shown don't consider them. A dollar today has slightly more then half the value it will have in 2055 if you assume yearly 2% inflation. I suspect we will have a few years with much more than 2% inflation between now and 2055 and we might be finished with years with very low inflation for awhile.

2) 8% returns at 2055 is a bit optimistic, but not unrealistic. I won't mind if I have to adjust the date +- 10 years to time the market. I feel comfortable putting the majority of my assets in the US stock market, but I do have some assets independent of it. The last the stock market crashed substance farming was popular.

You have to account for the expected value of those two approaches.

The payout on your strategy (generate a lot of value for a lot of people) is high, but the probability of success is very low. (And the payout is usually tied to the stock market, if you're talking about generating corporate equity value, private or public.)

Conversely, a dollar saved is just a dollar plus it's return over time, but the probability of saving that dollar is essentially 100%.

The probability may be low but the number of attempts allowed is unlimited (barring time / energy / other obligations). So one can keep trying until something sticks. The important part is to keep trying.

Even over a lifetime of trying, the probability remains pretty low. This is why articles like this emphasize that the more realistic was is via savings; lots of folks fail to save because they believe they're going to "hit it big" on the next deal / job / inheritance / lottery ticket, but it's usually just going to result in failing to save enough because you've over-estimated your future income.

It's also a convenient way to justify not saving enough.

I've watched fairly successful business owners make this mistake many times - they were making 400K or 500K (in some cases, millions) a year off a business, but not saving anything because they still expected it to grow a lot larger. If it fails to grow, then end up either broke or in debt.

It's inherent to entrepreneurs that they believe in the big future payoff more than average, but that's also a big blind spot for financial planning.

Probability of making onto the Forbes 400, very low for sure. Probability of building an income or capital base whose returns can match a typical salary, over a lifetime of attempts is very high.

Your examples showcase the pitfalls of bad planning and not the probability of business success. Success doesn't absolve one of the responsibility to plan, but being someone who did succeed can open up additional doors and options for the said plan.

I'd love to see your stats you're using to set that outcome's likelihood at "very high", relative to the probability of being able to save enough for retirement based on simply being a saver.

The entire problem is that most folks grossly overestimate their probability of future success, even over a lifetime.

(Not to mention likely done a lot of damage to your health and relationships, if you spend a career trying to finally achieve a big outcome... there are non-financial costs to taking bigger risks that we often fail to assess.)

Bigger risk wrt what exactly? Time? Working 60-80 hour weeks on entrepreneurial pursuits may boost your chances, but isn't required, except on a rare, brief inflection point occasions, IMO.

As for probabilities, spending 10 hours per week, thinking, and iterating on side projects, over the course of 10-15 years can bring a sustainable $10-15k monthly pre-tax income if done well. (I define well to be build stuff people want, focus on your customer, etc) If one's time horizon is smaller or income needs are larger, then there are other leverage points that can be used.

But the example in the post is just utterly stupid. What's the benefit of finding a cheap cellphone contract when it results in a crappy connections/coverage/dopped calls. Don't save money on things that make you unprofessional. Invest in quality for things that are important.

> What's the benefit of finding a cheap cellphone contract when it results in a crappy connections/coverage/dopped calls. Don't save money on things that make you unprofessional. Invest in quality for things that are important.

Adding to this point: Don't make your life suck today so 2050 you can live. What happens if you die tomorrow?

Strike a balance between making it rain and being a miser.

Thinking about costs as they apply to my finical situation in 2055 doesn't mean that I don't spend money in 2018 for enjoyment. I just look at the cost from a different point of view.

Your scaling is linear. It's not really different at all, the numbers are just larger. At the end of the day, lower cost = better.

I agree that connectivity is a great investment. I pay extra for more bandwidth in my home office and I would buy more if it was available.

You could also die and have zero spending dollars. Or less fatalistically see high inflation eat away your lower than expected returns

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