Can everybody do FIRE? (Financial Independence, Retire Early)
No, this is not the usual talk about motivation, start early saving, clever investing or minimalism.. this piece wants to shed a critical light, a economical picture of what's actually happening if everybody tries do do FIRE...
Or better to ask: if everybody is a billionaire, who serves the Champaign?
Many things in live are relative, the success in sports for example is always measured against the opponents team, business success is measured as success vs. the competition in a defined market.. this is also true for wealth and money.
While a million USD in 1965 gave you access to the most privileged classes, a million today will only buy you a mediocre apartment in of the big cities.
This is actually true for the whole FIRE principle, too.
As an economist could argue that savings flow back to the economy as investments and those investments enlarge the offering of goods - e.g. a FIRE investor investing into his own fleet of robot servants... this is only true (and only to some extend) for produced goods.
Everything that has a certain limit - and there are a lot of things on this finite planet that have limits - is claimed by the consumption demands of nearly 8 billion inhabitants on this little planet.
This is true for services provided by other human beings (as the number of possibile servants is limited by the human population), natural resources, the ability of the earth to carry humans solid (e.g. plastics) and gaseous (e.g. carbon dioxide) waste as well as real estate.
So just imagine a closed community on a small island.
There is one rich guy, lets call him Mr. Whale who owns most of the island. And we have 99 other people, some own houses some own a little piece of land where they grow food, some a donkey to travel, but all have to do work to make a living - apart from Mr. Whale.
So now 10 out of the 99 people - lets call them Orcas - decide to do FIRE... they work massive hours, consume as little as possible... in the process they start to accumulate savings.. e.g. they own a little bit more land, they buy the donkey from another guy that does not work so hard... finally we have one person Mr. Whale still owning most of the valuables on the island and the 10 Orcas owning nearly everything else...
The 89 other persons - lets call them plankton - have no more assets in their belonging and can not make a living on their own but work for the Orcas and Mr Whale who own all the arable land, all the donkeys for transport and all the huts for shelter.
The planktons look up to Mr. Whale and the Orcas: they do not need to do any work any more but are provided with any good or service available on the island by the planktons.
Many start to dream to become an Orca, too... but for that they need assets... they can not take any assets from other planktons as they do not have any left and Mr Whale and the Orcas do not need to sell any of their assets, as the planktons serve them anyway to get shelter, food and transport from Mr Whale and the Orcas.
They work and work long hours, but they do not get out of the rat race... frustrated one day 50 planktons build a raft and set sail to find an uninhabited island - which they do.
On the old island suddenly there are not enough planktons left to cater all the demands of Mr. Whale and the Orcas.. the remaining planktons get offered substantial more pay for their services... Mr Whale and the Orcas even have to hand over some of their assets as they are in competition to each other about the services from the planktons.
There are actually many things we could take from this little story...
The three things that are most important in my point of view are:
1.) FIRE could make you rich by accident, but the regular plan should only be to transfer working hours on a nearly 1:1 basis from your young ages to your older ages. (yes sure.. 25% IRR etc... tell this to the Orcas who had to watch in awe most of their servants sailing away) Key is not to increase consumption over time, and you should do well and even not take an unjustified high stake from the earth scarce resources. So a modest living is as important as working long hours in young ages, there are simply not enough downtown penthouses for everyone.
2.) If you are trying trying and trying to get out of the rat race but with no success at all... leave the island or have more stamina than your competition, as the guy next to you could be the competitor for your place by the FIRE.
3.) If you made your FIRE exit and became one of the Orcas, always be paranoid, your servants could leave the island.. or start a revolution and strip your of your belongings... better treat them well, keep them happy and motivated... and you need reserves for possible bad times ahead..
and yes.. there is even more wisdom in this story, a second line so to say.. :-)