Financial Independence: What If Passive Income Isn't Necessary? | Hacker News Reader

Financial Independence: What If Passive Income Isn't Necessary?

danielvassallo.com

39 pointsDVassallo25 comments

Well, the author has one opinion, I have another: acquiring deep assets (income property, stock market, investment in businesses, farms, etc.) should be a natural thing that people do. You never know what might happen in life and building deep assets is a hedge. A wonderful result of conservatively building assets is that assuming things go well and you don’t need them, assets can be passed on to younger generations.

What the author of the article is promoting is not financial independence, it is simply finding a pleasant job and then enjoy life. Good advice but no reason to not also build up assets.

The author makes two assumptions which are either wrong, or at least I don't think they apply to me.

- "it would be quite unpleasant if I had to regress on my standard of living", this makes the assumption that how great your life is is dependent on how much money you spend. That assumption sounds obvious, and I made it for decades. I realize now it just isn't true. I can meet my friends somewhere cheaper and have just as much fun. I can cook at home and, although it's more effort, it can be just as good if not better than the takeouts I used to get every day. Making the effort to have relationships with people in the city I live in, as opposed to finding people on the internet on the other side of the planet. At least for me, I was able to cut down on my expenditure significantly without cutting down on the pleasure I had in life.

- "Work gives me satisfaction, and I intend to continue working for as long as I’m able to.". When I was in my 20s, my girlfriend's father was near retirement, also a software developer, and he seemed to try and do as little work as possible. I didn't understand, I was building great stuff (my first job was at a social network in Europe, with 6m users and about 50 servers), I loved it. I assumed I'd always want to work and would never be like him. Now I'm in my 40s, that social network has long been taken offline, most of the work I've done for startups is no longer online, my one stint at a large company involved politics making me write worse code (e.g. 1y with a team of 15 developing basically a static website, we wrote our own CMS because it meant the company could bill its customer more hours). What I mean is, just because you are enjoying work now, doesn't mean you'll enjoy work forever.

The author builds their argument on these two assumptions, which (at least for me, but I'd say for everyone) aren't valid.

Author here. I addressed those 2 points in another blog post: https://danielvassallo.com/only-intrinsic-motivation-lasts/

In short, no I'm fully cognizant that satisfaction is not dependent on how much I spend or earn. And I did my best to keep my standard of living abundantly within my means, even when my income grew 10X over the last 9 years. However, when you have other people living with you, it's not as simple to disrupt their life by moving somewhere else, or making drastic changes. We never eat out, we don't go on expensive vacations, kids will go to public school (in preshool now), and we have no extravagant hobbies. Nevertheless, just our housing and insurance costs are $84K/year in Seattle. That's before food, utilities, etc.

The author is inflexible in his conviction that he has no intention of retiring. (and never will!) In 10, 20, or 30 years he may change his mind, what then?

He points out that he's willing to make the trade off of working in exchange for money (even if he doesn't need it) -- but what about working for other reasons? Taking a job at a non-profit that can't possibly pay what you're "worth".

I know dozens of people that are able to retire, but don't. Or they chose to retire, but then very quickly started doing some other work that gave them satisfaction. I just don't believe in the myth that if you retire early you're going to spend the rest of your life sipping pina coladas on the beach. My argument is that if I can be doing the work that I would be doing if I "retired", and it paid me enough money to make ends meet, then I won't need to retire. Sure, if the work you want to do can never pay you enough to live off it, then you have to find another income stream; maybe passive income. But it's not the only option if what you seek is satisfaction.

Because of $bad_life_decisions I made in my late 20s to mid 30s, recovering from those bad decisions for the last few years and getting married, (gladly) taking responsibility for two step children, “retirement” is not in the cards for me anytime soon.

But, I’m okay with that. I’ve been a software developer for 20+ years and I’ve never hated my career. I have hated my job at various points but as long as I kept my skills marketable, I could always get another job. The only burnt out I’ve ever felt was the politics of corporate America. I’ve learned sticking with small companies was the best way for me to avoid that or being a contractor/consultant where I don’t care about the politics.

That being said, my wife did choose a low stress, relatively low pay job with the school system that guarantees us lifetime access to health insurance after 10 years to allow me to just jump back and forth between being a salaried employee, contractor, consultant or not having to work for a few months.

Living off interest and investments seems to be a recent phenomenon (FIRE). My grandmother ensured that all her well-off children never sat on their laurels and depended solely on passive income even though it could be considerable.

The goal was to keep the mind fresh and running, and to be a productive member of society even if you didn’t exactly need to work. If you had more, you could give back more, but stopping work was always heavily discouraged.

Works fine if you have a safety net. Doesn’t if you can’t work for whatever reason. Plenty of people in their 50s who have been out of work for months or a year and can’t get a job because no one will hire them.

So you hustle to hopefully crate your own safety net (passive income).

Agreed; I'm not talking about people who don't have a safety net. I'm talking about folk wisdom discouraging people who already have a rather substantial one where they definitely do not need to work. The idea is that sloth is addictive, and often sends the wrong message to the children.

I mean, most early retirees don't aspire to live a life of sloth...

What do you mean by recent? There's been a whole society of rentiers living solely off investment income in most countries for at least the last 300 years, if not several thousand years. It's extremely well documented, especially in Britain and France since the early 1800's (see Thomas Piketty's work on wealth distribution). The more capital one owns, in general, more income is earned from capital rather than wages. This ratio increases sharply when you look at the top 1% and 0.1% of owners.

> What do you mean by recent?

I think the recent phenomenon is that many folks with moderate levels of income and initial capital have become convinced that they can attain financial freedom. Pickety's research does not support that, in fact, it supports the opposite conclusion: the only way to get wealthy, is to start wealthy.

It's like that quote attributed to Steinbeck - "Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires."

Temporarily embarrassed millionaire American here. I can't make universal health care and UBI happen. The next best thing is to acquire wealth so I can some day avoid the drudgery of working life. Maybe.

That's an ironic claim on this platform. If you make $200k/year (normal high tech comp, probably not far from the average person here), save $100k/year and average 6.5% returns over 10 years, you have $1.4M.

You can then on average draw down $63k/year assuming 2% inflation to retain your purchasing power until the end of time. That's very comfortable if you're just willing to not live in the bay area or NYC.

Yet another example of HN bubble thinking that the “normal high tech comp” is anywhere close to $200K a year.

https://money.usnews.com/careers/best-jobs/software-develope...

I'm drawing a line between "software developer" and "high tech"

By high tech I ideally mean a company building novel and innovative software using new ideas and techniques, but implicitly I pretty much mean FAANG/well resourced startup in a tech hub.

And of course it reflects the "HN bubble", that's literally what I was referencing.

HN ranks in the top 1000 most popular sites in the US. How many of those visitors do you think are building “new and innovative” software?

How many of those who are building software at all do you think are not just building yet another software as a service CRUD app where the founder thinks they need “rockstar ninja” employees who can do leetCode in their sleep?

It sounds like what you're describing is financial comfort/stability more than true "independence." That being said, those that seek traditional financial independence aren't exactly free from bad beats that might destroy their nest egg and force them to become financially dependent on their labor again.

The idea that the amount of money you make working is in any way a 'measure of the benefit you provide society' is pathological. Many of those who provide the most benefit are paid a suppance.

Author here. I didn't mean it's the only measure. Or that it's a perfect measure. But if you were to give me your hard earned money for something I do to you, it's very likely that I provided something useful to you.

The daily structure of work life allows one to avoid facing some questions that otherwise arise. Financial independence forces one to explore how one wishes to spend one's time when the work constraints are eliminated. This can be a very exciting, fruitful and rewarding endeavour. I highly recommend it.

Well, really, there is no binary choice "work for money" and "don't work at all", but rather a huge spectrum: "work at a shitty job", "work at an awesome job", "be a contractor and take sabbaticals every half of a year", "have a small stream of passive income and cool freelance gigs",... Therefore limiting your attention to the final stage which is quite hard to achieve, it's quite unoptimal.

Why would you not want passive income if you had the means to attempt to or outright realize these kinds of income sources?

This article wreaks of a bizarre misdirected form of moral superiority and relativism....

Financial independence is important if you have better things to do with your time than work. And if that’s not the case - keep on workin! :)

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