# You Need More Money

Part 1 of the _Inefficient Markets_ Sequence.

[Epistemic Disclaimer:
I am not rich yet.
I feel like I'm just barely starting to understand this stuff
and perhaps that is the best time to teach it:
while I still remember what wasn't obvious,
both to cultivate my comprehension,
and to enrich the rationalists.

For educational purposes only!
Double-check anything I say.
Read the comments.
_You have been warned!_

You are responsible for your own money.
Do your due diligence and don't rely too much on random internet bloggers :)
I do not know your financial situation.
I am not your financial advisor.]

## Convergent Instrumental Rationality

Sufficiently advanced intelligent agents,
almost no matter their ultimate ends,
will tend to pursue [instrumental means](https://www.lesswrong.com/tag/instrumental-convergence?showPostCount=true) such as self-preservation and resource acquisition.

What of sufficiently advanced humans?

## The Outside Perspective

Can you imagine a world you'd rather live in?
Perhaps your life is comfortable, for the moment.
But the world is truly awful right now.
Children are dying as we speak, of hunger, or war, or disease.
A cheap shot, but I'm sure you could come up with many other ills.
The world was even worse, in many ways, in the recent past.
It could become worse again, or better.
[Perhaps a lot better.](https://intelligenceexplosion.com/2012/engineering-utopia/)

If you truly have [something to protect](https://www.lesswrong.com/posts/SGR4GxFK7KmW7ckCB/something-to-protect), what are your means?

If, when pondering a question,
you discover what something smarter than yourself would answer,
perhaps you have found your answer also.

What would a superior intelligence do in your shoes?
What would a more advanced culture think of ours?

You can't know all the answers to these questions,
but we do know this much: acquire resources.

## "Need" Is a Relative Term.

Distinguishing a "need" from a "want"
is one of those elementary-school tasks that we all think is easy, at the time.
It's a basic budgeting skill:
buy what you _need_ first,
then buy what you _want_ with what's left over.

But upon deeper examination, it's not so simple.

Do you _need_ to see that doctor?
Your ancestors only a few generations back lacked access to competent medicine.
The physicians of the past often did more harm than good.
Were their basic _needs_ being met?
And in the more recent past, many diseases which now have effective cures were fatal.
Were their basic _needs_ being met?
Not by today's standards.

From the perspective of a more advanced culture (if we [knew more](https://wiki.lesswrong.com/wiki/Coherent_Extrapolated_Volition), thought faster, were more the people we wished we were, had grown up farther together),
are your basic needs being met?
Is effective [cryonics](https://wiki.lesswrong.com/wiki/Cryonics) a _need_ or a _want_?
(And are the current options effective enough to bother with?
That's a point of some contention.
Wikipedia [still calls it pseudoscience and quackery](https://en.wikipedia.org/wiki/Cryonics).)

If, when pondering a question,
you discover what something smarter than yourself would answer,
perhaps you have found your answer also.

I posit that _if you are not clinically immortal_,
then your **basic** health needs are not being met!

This is not a _want_ from the outside perspective of a competent culture.
Just like how we know antibiotics are a basic medical need for someone with a life-threatening infection,
clinical immortality is a basic need for a culture that has a cure for aging.
And a humane technological culture will eventually achieve that.
There's nothing in the laws of physics that _requires_ you to age.
[The Dragon Is Bad.](https://nickbostrom.com/fable/dragon.html)
So we know what the smarter culture thinks.
Shouldn't we think so too?
That it even occurs to you that this might be a _want_ is an anomaly caused by the peculiar time and place you find yourself in.
You're weird.

So you see, there are degrees of need.
There are the immediate needs that you already think of as needs,
and less immediate, yet _vital_ needs that are far more than you can afford.

Self-preservation is an instrumental goal of sufficiently advanced humans.

Are you clinically immortal?
That was rhetorical.

How do we get there?
Resource acquisition is an instrumental goal of sufficiently advanced humans.
You need more money! A lot more money!
We all need more money!

## Effective Altruism

If you're rich and have a pressing medical need,
perhaps there's an option open to you that others in your situation couldn't afford:
fund medical research for your condition.

Money can buy you a lot of safety. (Self-preservation through resource acquisition!)

But besides donating to research that may save your life one day,
there are a lot of other problems you could help with if you had more money.

Friendly AI is the most important.
If we get that one right,
it will solve all of our solvable problems.
If we get it wrong, nothing else matters,
because we will no longer be in control.

Much ink has been spilled on the topic of EA and FAI.
I'll not say more here.

## They Say Money Can't Buy Happiness. Jealous much?

Poverty is misery. Money gets you at least halfway to happiness.

But are you even that far yet?
[This Princeton study](https://www.princeton.edu/~deaton/downloads/deaton_kahneman_high_income_improves_evaluation_August2010.pdf) suggests that you need an annual income of at least $75,000 for peace of mind. But that was in 2010.
Based on the consumer price index, that would be about $90,000 in 2020 dollars.
Does it need to be more if you live in an expensive area (like the Bay Area)?

Is your income at least that high? No? Then you need more money!

Maybe you can do better than halfway if you spend it wisely.

## Money Is Time

Perhaps the most valuable thing you can buy is time.
It's a shame that we still have to work 40 hour weeks.
It used to be worse.
Civilization should be past that by now.
Free time gives you the opportunity to work on everything else.
You can become that [thousand-year old vampire](https://www.lesswrong.com/posts/5QpufhoH2ASnppsjs/how-to-become-a-1000-year-old-vampire),
or at least eight hours closer to it per work day than your peers.
The right skills probably have compounding returns.

More time for family. More time for saving the world.

To get $90,000 per year without working,
on a fixed income of 4%, you need $2.25 million.

Do you have at least that much?
No? You are not rich yet! You need more money!
Yes? Maybe you are (barely) rich,
but you are still not immortal yet! You need more money!

## Time Is Not Money

How long will it take you to earn that $2.25 million?
40 years? Too long!
We're trying to buy free time here,
not waste it on a 40 hour work week for 40 years.

You need more money.
[Rationalists Should Win.](https://wiki.lesswrong.com/wiki/Rationality_is_systematized_winning)
So why aintcha rich?
Because we are not winning hard enough yet.
We are _doing it wrong_.
You can't wait 40 years.
You're supposed to be a rationalist.
Get creative.
Solve this problem.

Move to Costa Rica where the costs of living are lower?
Maybe that's a backup plan. But you're still not immortal!

Live in a trailer while doing remote work for a software company?
Remote work seems like more of an option now than ever before.
The pandemic has changed things.
How about your parents' basement?

Getting better, but no, the answer is clear:
**You have to decouple time from income.**
As much as you can.

Having the $2.25 million will do it,
but it takes money to make money, doesn't it?

## Rationalists Are Already Halfway to Quant

We've got a chicken-egg problem.
The solution to chicken-egg problems is bootstrapping.
You need to develop sources of income that don't take too much time.

Sell cheap Alibaba junk on Amazon for five times the price?
Sell easy Facebook ad development services to local small business that barely know how to use a computer?
Flip houses?
Do the Bay Area startup thing until you hit a home run?

I don't particularly care how you do it (I mean, don't be a criminal),
as long as you're decoupling.
Whatever business you think you can handle,
more power to you!

What talents do we have, as rationalists?
Reasoning and acting under uncertainty.
Computer literacy: web searches, spreadsheets.
Data science: code, statistics.
The discipline to act on the numbers.
What else?

It sounds to me that the typical rationalist is already halfway to quant.

## Early Retirement

Retirement should not take you 40 years to earn.
If you can save money, and I mean a significant fraction of your income
-- preferably half or more,
and manage your investments well,
you can retire a lot earlier than your 60s,
or at least have a shorter workweek doing trading instead of whatever it is you're doing now.
(Assuming, of course, that you aren't already too close to that old.)

If you earn 4% per year,
then you need the aforementioned $2.25 million for the $90,000 half-happiness income.
If you earn 10% per year, you only need $900,000.
If you earn 15% per year, you only need $600,000.
At 18% you need $500,000; at 24% you need $375,000.
And of course, you can acquire that nest egg a lot faster if you're earning a good return on your smaller investments.

And if you really want your free time sooner (and I do),
perhaps you can settle for a quarter-happiness income of $45,000
plus lots more free time to start?
You could keep saving money and grow your income over time.
At 18% you only need $250,000.

Now maybe that still seems like a lot to you, but it's much less than $2.25 million!

I'm oversimplifying a bit here.
While I do think 24% returns (or more!) are achievable,
they would be volatile.
You still have to pay taxes and health insurance.
You'd need a cushion for drawdowns,
which could last for years if you are unlucky.
Maybe it's just an extra $90,000.
Maybe you could arrange to move back in with your family for a short period.
Maybe your previous company would take you on for a while.
Perhaps you have a spouse who could work part time
(or full time, that helps with insurance too).

Do those returns seem unrealistic?
I hope to convince you otherwise.

## Wealth Is a State of Mind

Not _literally_ true, but hear me out.

Your talents are not just your skills.
They're also who you know and what you own.
Develop them.

If you found yourself broke in a poor neighborhood,
how long would it take you to get out?

Borrow a phone and contact a wealthier friend or family member,
and they'll probably have you out the same day.

Suppose that way was closed to you,
but you had resources comparable to the people living there.
Poor neighborhoods are a "[poverty trap](https://www.investopedia.com/terms/p/poverty-trap.asp)".
How long?
Really think about it.
For at least [five minutes by the clock](https://www.lesswrong.com/posts/erGipespbbzdG5zYb/the-third-alternative).
How would you do it?

Maybe your education is an advantage.
Suppose you were unable to prove your credentials.
Your university lost your records in a fire.
You don't have your diploma.
But you'd still have your skills, what you can remember of them.

How long?

Now suppose an upper-class person found themselves in _your_ neighborhood with _your_ resources?
I don't mean a lazy trust-fund kid with no skills.
Someone who culturally understands money,
who earned it themselves, or had parents who taught them well.
How long would it take them to get out and back up to their standard of living?
How would they do it? Really think about it, for at least five minutes.

Maybe their credit with financial institutions is an advantage.
In his period of financial ruin, Donald Trump once famously remarked,
"See that bum? He has a billion dollars more than me."
Say what you will about Trump,
but recently, he had the finances to fund a presidential campaign, and win.
The bum is probably still homeless.
What's the difference? What advantage was enough to overcome that?

If you only had the requisite talents,
a mere lack of savings would be no object.
Saving for retirement is middle-class thinking.

Suppose that way was also closed, due to whatever reason they're stuck in your neighborhood.
The banks won't go for it.
No loans bigger than you could get yourself.
How long? How would they do it?

You have the same resources!

If, when pondering a question,
you discover what something smarter than yourself would answer,
perhaps you have found your answer also.

How long would it take you?

I first heard about this thought experiment from [this 2015 talk by Douglas Kruger](https://www.youtube.com/watch?v=_ruRiTeX1jE).
He has more to say about the topic.
I think it's worth a listen.

## Systematized Resource Acquisition

I hope you now have [a sense that more is possible](https://www.lesswrong.com/posts/Nu3wa6npK4Ry66vFp/a-sense-that-more-is-possible).
Why aren't the "rationalists" surrounded by a visible aura of formidability?
Because we have not developed the Art sufficiently.
We haven't really gotten together and systematized our skills.

**Resource acquisition is a core rationality skill.**

This sequence is the beginning of developing that skill into a system.

Perhaps you don't have the talents to woo investors
and run a business well,
or to even recognize and negotiate with people competent in these areas.

But perhaps if you made the right kind of friends,
or at least knew the right kind of people,
you could learn some of these things and share them with us.
I'm certainly not there yet.
This sequence is only a start.

So let's work on saving for early retirement for now.
If only to buy us the free time needed to develop the skills
to become truly wealthy.
***
Up next, the foundational skill of trading: how to not lose money.
- Part 2: [Repeat Until Broke](https://www.lesswrong.com/posts/ub4M6Yc3xA5TY2k47/repeat-until-broke)
- Part 3: [How to Lose a Fair Game](https://www.lesswrong.com/posts/fiPNjEGDbxy4mdhhT/how-to-lose-a-fair-game)
- Part 4: [The Wrong Side of Risk](https://www.lesswrong.com/posts/pb6ZREpbBXyojqDT4/the-wrong-side-of-risk)

Followed by an introduction to alpha.
- Part 5: [Market Misconceptions](https://www.lesswrong.com/posts/rXWCg2gg35JKvxFYf/market-misconceptions)
- Part 6: [Charting Is Mostly Superstition](https://www.lesswrong.com/posts/iiTcTYJpuWd5JhC8B/charting-is-mostly-superstition)