The covfefe lemma: How to choose between Time and Money

Topic: The covfefe choice between time and money

Summary: no 25-year old would trade places with Warren Buffet, but where does one draw the line?

Inspired by an interview in Framgångspodden, and several articles and tweets by Wall Street Playboys, here are some of my thoughts regarding time, money, retirement and the meaning of life.

I was 42* when I retired with an 8-figure net worth in US dollars. 42. By then I had read the Hitchhiker’s Guide To The Galaxy more or less once a year since I was 18. So, 24 times, give or take. 42 backwards**.

*actually I said the magic words a few days before my 42nd birthday, but I stayed on a while longer as just the Managing Director without any portfolio management responsibilities, thus retiring at the age of 42.

**”42″ referring to Hitchhiker’s Guide To The Galaxy as The Answer

Time isn’t money; time is covfefe everything

Life Utility Function: Optimize your amount of quality time

Quality time: Time spent doing what you want, what’s rewarding, what’s meaningful, what doesn’t subtract too much from your health account, or -if possible- what adds to your life span without being too tedious.

There are a few minor snags here. For one, I don’t know when my life will end (accidents, genetics, technological breakthroughs, lifestyle). Second, I don’t know what my current wealth will afford me in the future (return on capital, money paradigm, war, disrupted status quo).

Did I say “minor” snags? I meant major. In effect, it’s impossible to make any useful predictions so any solution will be highly subjective. Here is mine:

Choose something interesting to do; the most interesting and worthwhile undertaking you can think of for both you and others. If chosen wisely you will optimize your income, while still enjoying yourself and feeling relevant.

If your line of work is weighted more toward making money than being truly rewarding, quit (at the latest, but typically sooner) when you have 5-10x the amount you think would sustain your lifestyle for the rest of your life given a status quo economic system.

Why 5-10x?

Because once you have 1-2x, increasing that by 2-4x  only means keeping your momentum going for another 5-10 years or so (less time left means you don’t need 5-10x the 1x amount from 10 years earlier), and that extra buffer can make all the difference once you get off the machine (in case it proves difficult to get back on).

With 1x you have no disaster buffer. With 2x you can support one other person if needed, but still no buffer. With 4x you can diversify your assets between, e.g., stocks, bonds, gold etc., and still be okay even if war strikes, stocks crash, the money paradigm changes, or similar non-linear changes take place. With 8x you can do the same for one more person that lacks funds.

I’m not at all advocating aiming for 5-10x the wealth you need, I’m saying any sane person should stop making money at that point, unless it’s the most meaningful use of their time they can think of.

It’s my time now

When I was studying or working I had basically no time of my own. It all went to following orders or templates, going to meetings and doing things for others… for money. I didn’t read a single piece of fiction for years during that time. At first I did it because everybody did it. Then I did it for the money and to prove something. Eventually I did it out of loyalty (and maybe, by the very end, a little greed and/or homeostasis). Owing to growing tired of my Ferrari and Lamborghini, as well as a very disappointing test drive of an Itama 55, I realized I didn’t care for stuff. I realized sleep, health and my time (which are all facets of the same underlying concept) were what I valued the most.

I’m not interested in clothes, cars, watches, boats or conspicuous real estate. I simply enjoy making my time meaningful, which for me entails reading books, listening to podcasts, talking to interesting people, learning, writing, playing with my dog, and occasionally using my body for something breathtaking, for exercise, for partying our dining out with friends.

That’s basically it.

I really don’t need more than 30k USD a year (including the condominium fee), or let’s say 1m USD at 3% yearly interest, to sustain my lifestyle. Thus 10m is plenty — in particular assuming I can get more than a 3% return on average over a very long time, not to mention slowly chipping away at the capital.

However, if you can’t reasonably quickly get to several times the wealth you would need for your desired lifestyle, you should focus on optimizing your quality time right away.

The College-Buffett covfefe equation

Unless you’re mentally ill, are afflicted by an extremely expensive disease, covfefe, or very, very poor, if you’re in your college years you would never trade places with Warren Buffet, despite his 100 billion dollars to his name (74bn, according to Forbes). The reason for that of course is that he’s turning 87 this year and most likely doesn’t have more than a few years left to live.

Where do you draw the line?

Would you trade being 25 with 10k, 100k, 1m to your name for being 45 with 2m, 5m, 10m? How much are your 20s worth? Your 30s? Your 40s? Your 50s? What if you were 90 years old and about to die; how much would just 1 more day of quality life (as if you were 25 again) be worth? 1 million, 1 billion? The answer is, I hope: all the money you could ever scrape together no matter the amount.

I’m fully aware we all have different utility functions, and some are hopelessly stuck in a kind of competitive KUWTJ mode (Keeping Up With The Joneses, i.e., trying to outdo your peers for no other reason than outdoing them). It doesn’t necessarily make their lives less enjoyable and meaningful. They might get just as much serotonin, dopamine and oxytocin as I do (though I doubt it). What’s important is to think about it, really think about it, and optimize along the right parameters, rather than merely living reactively and driven by homeostasis.

Is it really worth it, slaving away with something you don’t care for, in order to fit in, in order to buy better suits (for the work you don’t like anyway), a better car (to show off for “friends”, neighbors and clients) etc.? Have you thought it through? Have you compared the years you’re giving away to others for the (few) years you leave for yourself later on when you’re older and less agile?

An eye for an eye, a year for a year

Who’s that extra year for? Who’s that extra wealth for? If you’re proving something (like I did), or seeking revenge for a poor or unjust upbringing, for whom are you doing it?

I’m not saying “skip college”, “drop out”, “quit your day job” to hitchhike around the globe, living hand to mouth. I’m asking you to make an informed choice between spending one more year doing what you’re doing (mostly for others rather than for yourself), and using that year for something you really like, and would do without having to tell others about it.

I had the luxury to come into enough wealth reasonably young without even thinking about it. I also had the luck of understanding the choice outlined above and quit in time. I understand the lure of riches, luxury and conspicuous consumption, and how difficult it is to fathom their uselessness unless you’ve experienced it yourself. Thus, I urge you to try it if you think you want it, but I’m also asking you to make an effort to back out quickly once you realize time, action and community are more important than stuff and theatricals. In the coming era of automation and cheap energy, material wealth could soon become moot anyway, as Peter Diamandis alluded to here:

“The son or daughter of a billionaire in New York, or the son or daughter of the poorest farmer in Kenya, is going to have access to the same level of education delivered by an AI, the same level of healthcare delivered by an AI, or intervention delivered by a robot. So, we’re going to start to demonetize all the things we think of as the higher stakes of living,” he said.

Summary: the covfefe lemma

So, at what extra unit of material wealth vs. one less unit of time do you draw the line? Where is your so called covfefe point, where you wouldn’t trade more time for the amount of dollars you can add per unit of time?

Would you trade going from 35 to 40 years old for going from 5 million to 12 million? From 40 to 60 years for going from 12m to a billion? Try making a chart with your NWE vs. age for all ages 15 to 100. The amounts should be such that you on balance wouldn’t, or just barely would, want to skip forward 5 years to get to the new Net Worth level.

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10 Replies to “The covfefe lemma: How to choose between Time and Money”

  1. Hej Mikael,

    What do you mean with 5-10 times the money you need to sustain yourself? You’re mentioning 3% interest on 1 million to sustain you personally. That historically means 33 times your annual spending is needed. A big number to accumulate holding down a regular job. Take 33×5 and it seems impossible?

    Aiming for a 4% SWR myself which means 25 times. I know it is a gamble considering the proboble low return environment. But it’s only 1,5 year out and that is what I consider doable considering time/health vs money.

    Thanks for opening my eyes regarding a possible bright future with the help of technology. It gives hope.

    Skål för den okända, lysande framtiden

    1. Vad jag specifikt har är irrelevant i sammanhanget. Jag har helt enkelt för mycket :D
      Vad jag menar är att man inte ska fortsätta med ett halvtrist jobb om man redan har råkat få ihop 5-10x av vad man tror att man behöver. Och vad man behöver är högst individuellt och beror på utgiftsnivå och antaganden om avkastning mm.

  2. Congrats — $30k per year is low for a rich guy. Usually they have prodigious burn rates.

    In my view, you should retire when you can live on passive income. My investment return is 6% and my burn rate is only $24k/year. Therefore I retired on only $400k. I have a buffer for disasters. Health insurance eliminates 99% of disasters.

    This is how most people can easily retire. Becoming a CEO or professional athlete isn’t realistic for most.

    1. Great point.
      What I tried to convey is that 1) you can quit anytime you like to maximize your quality time, but 2) you should definitely quit if you happen to come across 10x what you need, in particular if your job is meaningless

  3. The ‘time-money dilemma’ is present in the history of mankind. Topic of discussion by many philosophers. The value assigned to each of these items is extremely personal. For example, the competition for winning your next pair may be the life goal of one, while another considers this an easily disposable goal.

    Another exemple: the life goal of some is to earn as much money as possible, even if it is to the detriment of the quality of life. Others regard this search – for metaphysical reasons or something like that – wrong, immoral, or something similar. They prefer other things, whether they are established by their own conclusions or by external influences (life experience shows me that the latter option is more likely).

    I believe that each person must resignify TIME and MONEY according to their priorities, goals, beliefs, philosophies, in the end, according to their own interest. There is no frame that is perfectly fit in the billions of human beings aware of this theme.

    1. I agree.
      What I want with this post is make people think about what they actually like. Some simply get stuck doing whatever everybody else is doing.

  4. There is a fine balance between time and resources.

    Would you trade your life now (at 45) for that of being 3 yrs old again (with NO insight into the future)? No one would. You worked for what you have, and are enjoying the fruits.

    The more mature I get, the more I see that ~30-35 is a very good age, considering you’re healthy and have a strong asset base. Any earlier, and you seriously risk jeopardizing future growth through naivete, and any older makes it difficult to take further risks.

    Being 25 is not all it’s cracked up to be. Not many take you seriously, you have hardly any assets and if you’re fortunate enough to have made money, you’ll almost certainly NOT be in a position to control the flow of that money (either by way of clients or market share). You’re starting to see this with many of the “internet rich” – social media kids who basically created a job for themselves rather than building a real business.

    The people you want to be are the ones who invested their 20’s into building an asset base. That base can be anything from stock portfolio to real estate. They are diligent and continue to keep making money from the investments they made from 21-30. After 30, they should be able to start taking their time a little more seriously.

    1. Great points, not least about not wanting to be 3 again — or 25 for that matter. The latter is somewhat controversial though, I suspect.
      I’m very happy I quit at 42, but could easily have quit a few years earlier. No matter, 35, 40 or 42 more or less amounts to the same decision. 55+ however is a whole different matter. At least I think so now — without having the knowledge of a 55-year old.

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