Early Retirement Extreme

I just finished reading Jacob’s book from over at EarlyRetirementExtreme.com. Frankly, I wasn’t prepared for its length. When I first held the 200+ page book in my hands, it felt about right. But then I opened and saw the tiny, tiny print stretching to the edge of each page. Jacob mentioned he did this to keep the price down and, since my eyes are still young, I don’t really mind. [[UPDATE:: Jacob has informed me that the font and layout is the normal size and that he never mentioned keeping the pages down out of concern for printing prices. Not sure how that notion got into my head.]] But it does make for a LOT of material, all of it worthy of your time.

Jacob’s academic background definitely comes through in the writing. It is almost as if he has tried to create a cite-able, first work to establish a new discipline and set a foundation for future conversations on consumerism, economic specialization and accruing assets to live off of. While people clearly have been rejecting consumerism, embracing frugality and striving for and attaining financial independence throughout history, the books we have so far are really just one off, autobiographies with a little bit of advice thrown in. I think Jacob is trying to change that with this book, trying to put down some first principles on which we ERE types can agree and build our conversation out of. Or perhaps he was being less ambitious, either way, it is nice to have things laid out in front of you in an organized, logical fashion. Even as someone who is immersed in the early retirement community we have strung together here on various blogs and message boards, it is nice to read through the methodical, logical argument of the things that I already somehow know intuitively just from thinking on the topic for years.

I found one of Jacob’s remarks on loans and interest particularly salient. He brings out that the entire idea of loaning out money at a given interest rate came about so that people could buy items which would create a profit for them greater than the interest rate they borrowed at (Such as borrowing money to buy a milk cow or a factory, etc.). And so, the entrepreneurial in the society could then pay back the loan and still have a profit. But at some point, quite recently, people in the US began taking out loans, not to buy something that they hoped would make them a profit, but rather to simply buy disposable consumer goods. Just about every retail item can be financed today. But now financing isn’t done to entrepreneurs hoping to make a profit, but rather to consumers who are simply spending money they don’t have but hope to make in the future.

While the practice of financing consumer goods is all around us, by Jacob putting it in its historical context it really brings out how crazy the idea of taking out a loan to buy a television really is. It’s not simply unwise, imprudent or something to be written off as the foolishness of the impatient, it actually represents a fundamental shift in what the economic system is willing to finance. And it creates an opportunity for people who are willing to save to make their living by simply loaning impatient people money to buy televisions.

Anyway, I have been following Jacob on his blog for quite some time now and have been looking forward to the book. I congratulate him on it. It is a remarkable accomplishment and I think the book will be a resource for people like us for quite some time.

I gave the book 4-stars on amazon and include my review below. Jacob admits in his first footnote that he is prone to over-complicating things and I do think that happened with some parts of the book. Some pages can be a bit of a slog. For people familiar with personal finance and early retirement concepts it is easy enough to follow along, but for someone unfamiliar or just coming to the topic I could see them getting frustrated trying to get through some sections. Never the less, the book is logical, clarifying, informative, interesting and Jacob’s humor comes through successfully throughout its pages. It is a needed and welcomed addition to the library of available early retirement books.

My amazon.com review of the book:

This book is an analysis of the modern consumer mindset, our culture of debtors, an economy of specialists all dependent upon one another for their expertise, and it presents an alternative option for the lucky few who have the drive, mindset and courage to go about life a little differently. The author presents an alternative to devoting your life to a career, financing an appropriately luxurious vehicle depending upon your income, mortgaging an over-sized house, filling it with ‘stuff’ and then working 40 years to pay it all off.

The book analyzes where the consumer culture came from and picks apart the details of what it means to live in a consumer culture. The book has great moments. The author compares a working man, who makes his living by selling his time, to a farmer. And he compares a man who lives off managing his assets to a hunter. A farmer always has something that can be done, and so hard work and busy-ness are his virtues. “The more he does, the greater his reward.” But a hunter must wait quietly for his opportunity to strike; patience is his virtue. And so it can be hard for a farmer, who has accumulated enough wealth to live off his assets, to suddenly become, or to even understand, the patient inaction of the hunter. A life sitting around patiently collecting interest on investments might look like no life at all to the habitually “busy”.

The author makes a compelling argument around savings rates and compounding interest to show the tremendous worth of quickly saving up your assets rather than putting away 10% for 40 years. I also appreciate that the book is written without particular investing or career advice. As the author notes, any investment advice he could offer would be quickly outdated, and how one invests one’s assets isn’t nearly as important as developing the mindset that one ought to be an asset holder at all.

So many people live unexamined lives that lead to risky financial decisions, the wasting of thousands of dollars of resources, and ultimately pointless toil. For the few who have the curiosity to even read a book like this, they will be empowered with the knowledge that there are viable alternatives.

The book includes a detailed table of contents, index and extensive recommended reading list. It is all well laid-out and put together.

I will say this book could turn off people who are new to the idea of early financial independence simply to due to its depth and complexity. If you’re looking for an overview of what the early retirement life is about or are just beginning to flirt with the idea yourself, well, this ought to be the 2nd or 3rd book you read on the topic. If it’s the first I’m afraid you might get intimidated, even though it is all spot-on, by the hyper-logical and analytical narrative style.

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