Mispriced Youth
You’re probably mispricing your time.
If we plot the value of your time over time, you’d find that there will not be any moment in the future where the value exceeds its present value.
The time this year is worth more, on average, than the time next year. And this decade will be more important for you than the next one. However, on the other hand, there is another interesting trend - society’s pricing of our time tends to be the exact inverse. On average, society values our time right now far less than it will in 10 years or more. It sees us as being extremely inexperienced, unable to produce much value for others.
Ok sure Kai, but why does this even matter? Let me show you.
For one, this literally implies that it is extremely unwise for anyone young to align their self-worth, effort, or large proportion of time for any job. If a person works an internship paying $45/hour primarily for the money, then this person is implicitly telling themselves that their time is only worth $45/hour. This person is also implying that their time is worth less than $45/hour at any point in the future. [1]
In other words, if you ever take on a job, spend time in class, or volunteer, you’d be wise to have strong selfish reasons for doing so. Don’t do things simply for “experience” or for “skills” - these conventional, non-meaningful assets are directly aligned with the second chart (pretty much linear ROI). On the other hand, having a strong personal reason directly compounds on the principal of your youth, leading to rapid exponential growth in your current progress.
What would make even less sense is accumulating capital. We spend money for convenience, experiences, learning things, or meeting new people. When we’re the youngest, we’re most incentivized to selectively spend on these items as the value to price ratio is the greatest. You’ll probably get a lot more from taking a random trip off to Yellowstone when you’re 21 and single than at 31 with two kids and a partner. Had you taken it at 31, the money saved for Yellowstone would’ve accumulated (optimistically, 5% interest/year) just by 62%. That might seem like a lot, but the principal is so small that it doesn’t make any sense.
People say to take more risk when you’re younger. The underlying principle for that is that your ROI on a personal investment scales well with the number of “productive years” you have left in your life. Personally meaningful experiences compound easily through reflections, personal takeaways, and the social capital gained from them.
So what’s my advice?
Be young and broke. Be ferocious, trust your gut, pull out your financial assets and go all in - for you.
[1] - This isn’t a great example - I get there are some nuances, but hopefully you get the point of it.
[2] - If you still aren’t convinced, or think that FIRE is the best move, then consider things from another angle - inspired from moontowermeta Say there is a probability $p$ of being successful in $X$ for each attempt. Let $p=0.1%$. This means that it takes, on average, about 1000 tries to reach this success. For different selections of $X$, the personal price (frustration, effort, time) and probability $p$ varies.
$X$ is part of a very large state space which requires a lot of heuristic exploration to find the best $X \in S$ for ourselves. When we define ourselves according to roles given to us by society, our exploration becomes restricted as we make more implicit assumptions about ourselves that align with our current roles. Taking on such a role for money distracts us further from even thinking about whether the $X$ we’re in is optimal within $S$.
So, in other words, the total pain to pleasure ratio is really underoptimized. When looking at life as a whole, getting rich and independent fast early on means that we spend our prime years going through a lot of pain and then allowing our aged selves (where time feels faster) to enjoy the latter years. But with much less plastic brains, and a worse understanding of ourselves (saved money $\Rightarrow$ experiences not had), how would we know what is most pleasurable/meaningful for ourselves? Any heuristic exploration at this point is pretty difficult.
On the other hand, spending most of your money on pleasure (doing personally meaningful things) and then using such experiences to find the optimal $X \in S$ means that we, on average, reach success faster with less pain and have spent our prime years doing things we really do enjoy and have had meaningful experiences to reflect back on. And when we do retire, we have a better understanding of what we like and what gives us the most pleasure. So in this situation, every single phase is optimal — before, during, and after work.
Considering these two situations, it’s pretty clear that the latter is a lot more optimal.