Mr. Money Mustache is a 30 something retiree who now writes about how we can all lead a frugal yet Badass life of leisure at his blog. His goal is nothing short of a complete revolution of society, although continuing to run his growing blog is an acceptable substitute for now.
Kicking Ass with Money is much like healthy eating and joyful living. It’s a series of daily habits that get you ahead, rather than a one-time heroic effort that fixes all your problems so you can go back to whatever you were doing before.
Because of this parallel, the subject of food is one of the nicest examples of Mustachian living, and one of the most powerful and efficient things to master.
Your eating choices will drastically affect your budget (especially if you are raising a family), but they also affect your health, energy levels, productivity, and happiness. The path a great life goes directly across your dinner plate, so it is important to take this shit seriously and not mess around with your nutrition.
I’ve written about food several times before, sometimes with a focus on recipes or costs or general principles. But people often don’t believe me – they think I am either lying about my family’s grocery spending, eating a diet that is poor in nutritional value, or at least spending an inordinate amount of time on meal planing and preparation.
The truth is none of these things, although the actual story may still surprise you. So I thought that instead of issuing vague commandments like the preacher I am, I could share my functional and (somewhat) affordable eating style, even though it’s unusual and surely not for everyone.
So I’ll lay out a single day’s nutrition strategy, and why I think it is a good one. And then you can choose whether to ridicule it on Reddit, or adopt any tricks from it that you like for your own family. Are you ready? Then let’s take a trip into the MMM kitchen!
Alongside the Table Saw, the Cutting Board is also a favorite tool.
The first bit of crazy is that when I’m home, I eat almost the same thing every day. My son eats exactly the same thing every day* for now, and Mrs. MM runs her own show, perhaps with a bit more variety than either of us. This is a unique situation in our family that is different from most, and it adds extra complexity but fortunately not extra cost. You play with the cards you are dealt.
Most Important is your Eating Philosophy
For most people, food is just an automatic routine. They eat whatever seems tasty whenever they are hungry. People with stronger passions (sometimes known as Foodies), spend a large part of their day and mental energy seeking out perfect ingredients and flavors and meals. And for many, eating is an addiction – food calls to them (especially desserts and snacks), and they fight this addiction with varying degrees of success. People with a busy urban social life like New Yorkers get most of their food from restaurants, which throws both the nutrition content and the monthly cost into a randomizing hat.
The problem with all of these philosophies is that each is a huge gamble, with your life as the stakes. Because depending on your body chemistry and the foods you choose, you can end up anywhere on the health scale – I have met sweating car bound 25 year-old office workers who could barely stroll from the parking lot to the building, and also know a ripped 65 year-old carpenter who can still frame a three-story house by himself. The difference in the diets of these two men is as stark as the contrast in their physiques.
So my eating philosophy has always been that of the Engineer/Robot. Design each meal and each day’s food intake, according to my body’s current needs. Since my activity level changes drastically (yesterday’s mountain hike requires several times more calories than today’s work on this blog article), the food intake has to change accordingly. And since I don’t always get things exactly right, the mirror tells me when it’s time to make adjustments.
And finally, I’m a big fan of high standards and not fooling yourself. Stay lean and keep your body in condition to work hard. Learn to use the mirror, the measuring tape, and the scale as allies rather than generators of guilt and fear. If you’re not there yet, keep yourself moving in the right direction rather than being complacent. For example, if my abs get paved over with fat, I’ll adjust the variables below to go into fat loss mode until the problem is corrected. On the other hand, if I’m getting too skinny and trying to put on strength and weight, I’ll add the extra meals back in.
The Weird MMM Meal Plan
I have come to think of Breakfast as the time of Breaking the Fast.. but by now we all know that fasting is good for you, right? So the design of your breakfast presents an interesting life-boosting opportunity: When you wake up, you’re already in a nice low-blood-sugar state, which means your body is beginning to think about burning fats as a source of energy (ketosis). This means that you can just prolong the fast by skipping breakfast and just enjoying some coffee or water, or take a softer approach and at least have a breakfast that is very low in sugar. So I do this:
Coffee with Whole milk and Coconut oil
A handful of mixed nuts
A few squares of dark chocolate (85%)
Subjectively, I find this breakfast is satisfying and delicious, but also keeps my body in low-sugar mode so I can begin a day of physical labor without hunger – and potentially work as long as I want, even skipping lunch and running on stored bodyfat if desired.
The end result is this nutrition profile:
At this point, you may be asking, “Wait, does Mustache really weigh and analyze his food?” – and the answer is “sorta.” While I endeavor to lead a relaxed, hippy lifestyle, the Engineer/Robot side is always in the background running the numbers. If you have at least a rough idea of the nutrition content of what you are eating, you will have a far easier time getting the results you want.
Mid Morning Snack
After breakfast, I usually bike downtown to a mixture of construction and weight training in the back “prisonyard” of the MMM-HQ Coworking space. After a few hours of this, I am ready for a bit more nutrition:
A giant salad
Plenty of water, or even the indulgence of a second cup of coffee
These big salads are a big part of my daily food expenditure and effort, but probably an even bigger part of my health. So they are definitely worth it. I make it easier by making salad in bulk every few days, and starting with a base of a pre-made $2.28 Kale Salad Kit from Sam’s/Costco. This provides a bunch of greens and saves much chopping. But I discard the crappy sugary dressing that comes with the kit and use my own olive oil-based dressing, also made in bulk from high quality ingredients also bought in bulk, (like 3 Liter Jugs of olive oil!)
I may throw in a protein bar (30g protein, $1.00) to this snack, depending on the intensity of the work.
After the midmorning snack, I am back out for quality time with the saws and ladders for a few more hours, which feels great on a relatively light load of food because the body is burning clean and lean. The low carbohydrate nature of everything I have eaten so far keeps the hunger level so low that I could even work right through and skip lunch if needed, or if I were trying to lose fat. But since I’m currently at roughly right fat level and not wanting to be any lighter than I am, I break at around 2PM for something like this:
I have been on a bit of a Tilapia binge in recent months, because they are almost too convenient and tasty and easy to prepare. So much so, that I jokingly refer to them as “marriage savers” – there is no need to fret over whose turn it is to prepare dinner, if something with such a good nutrition profile is always in the freezer and just 15 toaster oven minutes away from your tongue.
While the nutrition profile is good, they are still a bit of an expensive source of protein. $2.00 sounds like chump change, but the same protein can be had for under fifty cents from other sources like bean and rice combinations, eggs, or even whey protein supplements.
A cost difference of just $1.50 per person per meal, multiplied over a four-person family’s 372 meals per month makes a difference of $558 per month, or about $96,000 per decade after compounding.
Yes, that is a hundred grand, and this is just the difference between a semi-frugal $2.00 meal component and a fifty cent equivalent from, say, your crock pot.
Imagine, then, the effect that impulse grocery purchases like those little $7.49 packs of sushi would make, if you casually toss them in the cart on a regular basis? A decade of a family’s innocent-seeming Whole Foods indulgence could pay for a house outright, while leaving them no better nourished than wiser meal planning with bulk ingredients.
Put a crock pot and a Costco membership to good use, and just watch what happens to your bank account.
Now, I took that sushi picture on my own kitchen table, so we too are guilty of this indulgence. But we are long past financial independence, and even then it is a rare purchase. The overall lesson is just, again, to take this shit seriously – make sure you appreciate every food purchase above beans-and-rice level as a conscious luxury rather than just a habit. And if you are in debt, no sushi for you!
Another typical dinner – main dish is based on potatoes/veggies plus fancy sausages baked into a cheese-laden casserole.
Around 3:30pm in the afternoon, I’ll walk or bike home from “work”, so I can be there when my son returns home from school – one of the biggest rewards of early retirement. One of us parents will cook him a homemade pizza at this point (I pre-make the personal size shells and keep them in stacks in the freezer), so he can recharge with about 480 calories from a delicious meal that costs only about 50 cents to make.
Then us Adults will usually collaborate to make something like pulled-pork tacos:
On the side, we might add chopped fresh vegetables, more salad, or something more substantial as the appetites require. Like the filets, it’s not the cheapest possible way to get a meal, but at least it is reasonable. Also, we are omnivores, which is a more expensive and polluting way to get protein – but if you’re not badass enough to eat vegetarian you can at least make a substantial dent in your eco footprint by making beef your last choice of meats.
Adding it All Up
Although it took me quite a few hours to collect all this data on what I eat and add it up in a spreadsheet, the results have been quite interesting because I had never done it before. With just the stuff described above, I arrived at this point:
And the numbers were a bit surprising to me, in the following ways:
I am spending a lot more on food than I thought. If all three of us ate the way I do, our annual grocery bill would be $8600, not counting additional indulgences or food for parties. Since our real bill is closer to $6000, you can see that I am doing more than my share of the spending. Then again, I do weigh more than both Little MM and his mother combined , so perhaps this is fair.
My base calorie level is about right for my age and height for a moderately active person, but on active days I need closer to 4000 calories (if you look up a 185 pound male “athlete” for the baseline)
My base protein level is also about right for moderate activity, but on highly physical or weight training days I like to boost that to one gram per pound of bodyweight.
So while everything in this article is detailed and accurate so far, I tend to eat a variable amount of additional food to meet hunger needs, scaling it all up and down depending on what the mirror says. I use one or more of the following boosts.
Handfuls of Nuts (1 ounce worth, 160 calories)
Protein Smoothie (banana, peanut butter, plain yogurt, tiny bit of milk, ice, water, and vanilla protein mix – about 1000 calories and 40 grams protein)
2-3 simple eggs cooked in olive oil with a bit of cheese: 500 calories, 20..
After three years, wall-mounted toilet paper has become the latest thrill.
When I built our current house, I decided to do as much of the work as practical myself, because I learned years ago that this is the most satisfying way I can possibly live.
I love sitting back late at night, especially during cold winter nights or intense summer rainstorms, and looking up at the high ceilings and the ornately framed windows and thinking about all that structure holding itself together and protecting us so nicely inside. Satisfaction.
Sure, practicality also required some compromises – I hired out the big, repetitive task of drywall, and hired friends to work with me on the heavy parts like framing the roof.
But as soon as the house was even remotely habitable, with plywood kitchen countertops and no bathroom sink, we moved in. This allowed me to keep working on the place without being away from the family, and also to move out and stage the previous house nicely so we could put it on the market.
That was in early 2014, and true to my nature I’ve never really stopped working on the house since then. The first things were urgent, like quality countertops and sinks and faucets, appliances and light fixtures and functioning closets, so I did these things quickly. Then I installed a really nice woodstove before that first winter came, then built the second bathroom, and moved on to renovate our son’s room in the old wing of the house that had not been part of the fully rebuilt section. Then more closets, trims, cabinetry, little features here and there as the need arose, and even the rather major feature of the detached Rock’n’roll Studio.
There have been a hundred little upgrades, always arriving with random timing, as time permitted. And the interesting thing about them has been this:
Each little upgrade – whether big or small – has brought a similar amount of short-lived but genuine happiness.
When I upgraded the countertops from plywood to stone, we were all thrilled at the new, smooth and easily cleanable nature of the kitchen. Then after a week or two, this thrill became the new normal, and it was gone.
But then, I added shelves to a closet, and fighting with piles of clothes in laundry baskets became a joyful flip through a row of hanging shirts and nicely folded pants on smooth wooden shelves. Another thrill! For another couple of weeks.
On and on these small upgrades went, each one accomplished by my own two hands, so that I got the satisfaction of a job well done, and also lived in a house that was constantly getting just a bit better every week.
Looking back, this has been so much better than just moving into a pre-made, perfect, fancy house that somebody else built for me, and doing it this way has also saved me hundreds of thousands of dollars at the same time. And even if you’re not a carpenter yourself, you can get the same benefits by understanding the human pychology at work here.
Hacking Hedonic Adaptation.
You may recall me cautioning you in this long-ago MMM Classic, to avoid buying yourself fancy shit, because the thrill of every new life upgrade – whether it is a nicer dishwasher or a faster Mercedes – always wears off, and your overall life happiness returns to exactly where it was. It’s quite an un-intuitive result, but if you watch yourself over time, you will notice it is uncannily accurate.
For example, I started this blog seven years ago in 2011, and distinctly remember being very happy with life, even way back then. Sure, I had problems just like everyone else, but on balance it was still a great life, because I was already pressing most or all of the actual buttons for human happiness
Some of the recipe for happiness (a slide from my WDS talk)
And many, many other nicer things (clothes, electronic gadgets, interesting trips, and so on)
And yet, I’m still not really any happier than before, sitting here right at this moment. My life looks more prestigious and luxurious on paper, but since I was already extremely fucking happy with life before, there was not much to improve.
This brings up a strange paradox. Because I also remember feeling quite giddy and thrilled with each of these upgrades as I made them. Those happy feelings were genuine. What Gives?
The Happiness Bump
The phenomenon at work was the temporary thrill of a new life upgrade. If we were to sketch it out on paper, it would look like this:
The Short-term Happiness Bump from lifestyle upgrades
As you can see, you make the upgrade, and you do get some genuine thrills for a short time.
The key thing to know about your happiness is that you have a ‘baseline’ level. Some of it is genetically inherited, but you can also have a strong affect on it yourself, by pressing the genuine happiness buttons in the diagram above.
Most lifestyle upgrades (cars, dishwashers, or even my new toilet paper holder) do not press these buttons, unless they truly address a shortfall in your previous life.
In the best possible outcome, you might make a life change that helps you gain new skills, increase your health, or improve your life’s core relationships. This could stretch out the shaded “Actual Benefit” part of the graph to be much longer, in the extreme cases for your whole life.
But in the typical outcome, most of us make changes that produce only a short bump, and then may even come back to haunt us with a payback time (which I labeled the “debt hangover” in the picture. Anything that puts you into debt, makes you less healthy or otherwise compromises your ability to live a happy life fits into this category.
Putting it into Practice
Your job as a wise, badass Human is to understand your strengths and weaknesses, and then arrange your life to make the best of things. The temptation to pursue shiny but useless upgrades is one of our biggest weaknesses. So try the following hacks:
Consider each potential change (whether it is a purchase, a trip, or a lunch out at a restaurant) from the perspective of one year in the future. How much better will your life be in one year, if you make this decision right now?
Delay everything and space it out as much as possible. The anticipation of a treat often provides at least as much joy as the consummation. Simply doubling your waiting period will cut your spending on this stuff in half.
By cutting your upgrades into smaller pieces (as I did with the piecemeal home construction), you get to experience the thrill more often.
Put your priority on upgrades that remove a strong daily negative or a barrier to happiness. For example, upgrading from a 2009 to a 2018 BMW will very likely not make you happier, but upgrading a barely-functional bike or shitty kitchen faucet to a to a good one you use daily can make a real difference.
Find ways to modify each potential upgrade so that it presses more of your happiness buttons. Make it more challenging, do things that require you to learn or accomplish something first, choose things that allow you to create or strengthen friendships, and choose the healthier options out of any alternatives you are given.
Use your temptation to buy or consume new things as a habit trigger: catch yourself in the moment of weakness (because this happens automatically and frequently), and use this to do something good for you instead. For example, every time I walk by my fridge and gaze longingly at the handle, thinking of pulling out a cold beer, I am reminded to go out to my back patio and do 100 pushups instead. In really disciplined times (like the last few months for me), I back this up by also not keeping any beer in the house. But even if the end result is a bubbly reward, I have improved the reward bump by packaging in a permanent benefit (fitness) with the otherwise very short term reward of a drink.
And finally, keep a list of your top life priorities on your fridge door, or your work computer monitor, or somewhere else that you see it many times per day. Stuff like better friendships, better parenting, health, financial independence, happiness, personal growth. Looking at this list before you decide to do anything – whether it’s planning a lunch or moving to a new house, can serve as a surprisingly powerful anchor to help you fine tune your happiness bumps – stretching out the good parts and eliminating the hangovers.
In the comments: which life upgrades have you made that ended up producing neutral results or even regret, and which ones have provided more lasting happiness?
So, I’m assuming you are here reading this because you want to get yourself some more money.
And since this is Mr. Money Mustache and not a standard financial publication, you’re willing to think about the bigger picture:
Not necessarily “Maxiumum money at all costs so I can have a nice, spendy retirement!”
More like “A good, fun amount of money so I can walk outa this cubicle with confidence and never look back.”
Making that mental leap is a huge one. It takes you from a life of permanent pursuit of the unattainable, to one where you get to the “Enough” stage pretty quickly. This alone will change the course of your life for the better.
But what if there were an even bigger mental leap that we were leaving out? One that starts with the hard-nosed math of living off of your investments, but then puts it on a more flexible scale that allows you take shortcuts and attain the freedom you want, much sooner?
Well, there is such a shortcut of course, and there is even a story right from my own life that illustrates it.
The Unnecessary Fears of Teenager MMM
Since I was a kid, I’ve always had confidence issues. I was afraid to attend the birthday parties of other kids, if there were too many strangers around. I was afraid to try new foods or join any teams. It took me a long time to become outgoing enough to start meeting girls in high school.
I compensated for these things by trying to be really good at everything, in an attempt to alleviate feelings of worry. Insisting on A+ grades even on the most pointless of assignments, just because I felt that “winning” was a safe defense against bullshit workloads.
I engaged in slightly compulsive weight training and with some of my fellow status-seeking schoolmates until we were all well-dressed two hundred pound muscleheads, safe from the risk of bullying and gleefully (but needily) soaking up the status rewards of having more prestigious outer appearances. We would have all claimed it was for fun reasons or health reasons, but there was plenty of teenage insecurity driving up those barbell plates at 5:30am as well.
Even as a young adult, my desire to build up a massive financial surplus was probably at least partly driven by a desire to protect myself from things that could go wrong – like unemployment or being stuck in a job that I no longer enjoyed.
I’m not ashamed to admit all of this, because you need to see your opponent clearly in order to beat it. I went through this journey of insecurity and came out on top – in the safety of a well-designed life with lots of advantages. But since then, as I have spent the subsequent thirteen years learning more about that life, and meeting new people with entirely different successful lives, I have come to realize something I wish I could have known earlier:
I had nothing to worry about in the first place.
It turns out I didn’t need all that money, because my needs and wants will never be more than I earn from my natural desire to do useful work. You don’t need to be a musclehead in order to have friends or meet attractive people or deter bullies – normal fitness is just fine and being friendly and open is much more attractive – whether your goal is finding love or running a powerful enterprise.
You don’t have to OVERACHIEVE at everything you do – you can be strategically great at things you truly enjoy, carve the rest of the unnecessary crap out of your life, and spend your days in a much healthier balance of work and play.
Many of us are focusing our energy on building up the wall of protective money and insurance policies around us to ever-greater heights, working one last year and funding one last insurance policy against an obscure risk, when really our deficit is not in money. It’s in confidence.
And thus, it turns out that Money and Confidence are Interchangeable.
Figure 1: With no confidence, you need a shit-ton of money to feel comfortable. Find a smarter balance.
Think about it: It took me seventeen years of school and ten years of work to become an expert software engineer, making a growing six-figure salary and with a million dollars* of investments by about age thirty.
But then, years after retirement I started a carpentry business just for fun, and within just a few weeks of spreading the word, I had enough business to easily pay the bills with very part time work. It was a lot of fun. So, would a sufficiently confident carpenter really need to do the engineering career and save that million, in order to live a satisfying life?
In 2011, I started this website to write about money. Even without the lottery-like success it has lucked into, I would have still ended up with a writing career in a popular subject that was loads of fun and could again have easily paid the bills through things like consulting, advising, speaking, or connecting with new friends for business opportunities. And I’ve enjoyed writing since I was ten years old – with enough confidence, I could have started writing about money decades earlier.
In 2017, I bought a small commercial building alongside some friends and converted half of it into a coworking space, and it easily filled up with members. Despite charging only a third of standard rates, the income from this business would also be plenty to fund a happy family’s lifestyle. If I had the confidence earlier in life, I could have shortcut the intervening work and achieved almost exactly my current lifestyle decades ago: no war chest of investments required.
More important than these examples from my life, are examples from yours.
Every day, I get emails from people describing their plentiful savings and unpleasant jobs, and then a description of the golden handcuffs or fearful assumptions that keep them working in their jobs.
They wonder when, if ever, they’ll be able to quit. When really, the problem is not the money, it’s the confidence. With confidence, they could quit right now.
Confidence allows you to change your current life entirely and instantly, without the need to change anything – because you’re just rearranging the feelings in your mind.
Imagine for a moment that you’re Jill CTO or Joe Attorney, locked into a prestigious firm and a two point six million dollar Washington DC dream townhouse. You’ve got an entire department reporting to you, your ex-spouse to manage, two kids in private schools, a standardized and rigorous vacation plan to address both sets of inlaws, and a comfortable, safe 2016 Lexus Hybrid SUV that you use several times per day because although you agree with Mr. Money Mustache that more people should be riding bikes, it just doesn’t work with your lifestyle right now.
You’re a high achiever, no doubt about it. But what is all this achievement buying you in life happiness today? Are you selling off your current years of youth to The Firm, and putting off your happiness because in just another decade or so, once the kids are grown and things settle out, then you’ll give yourself permission to be happy?
If so, you may have confidence issues, just like the rest of us.
What if could take all that complexity and ass-covering and self-protection in your current life, set it aside, and consider the following ideas.
In fact, let’s repeat all of this together in the first person so it sinks in for real:
A Recipe For Badass Confidence
I will always be able to get a job if I need one.
Billions of people are living far less expensive lives than mine, and yet many millions of these people are surely happier than me. What is their secret?
While I don’t control the entire world, I am in control of my response to everything I experience. And my response is the part that determines my happiness.
I am in control of my cost of living. Everything I do is a decision, and it’s made by me, not the world around me.
I can always learn new things. With proper dedication, I can gain any skill that I want or need. This means when I depend on other people, it’s just a positive choice we are both making. When others depend on me, they are acknowledging my strength and I will choose to pass some of it on to them.
My kids will be just fine. Just by giving them my love and support and being honest with them. They don’t need prestige and they don’t need the support of multimillionaire parents to prosper in life. Nobody does.
Exotic Travel (just like any other luxury) is not a necessity for a happy life. At a moment’s notice, I could choose to spend the rest of my life within driving distance of this spot, and still lead a completely blissful existence forever.
But on the other side of that same coin, I can always move. My current location is a mixture of chance and choice, but people move all the time and their lives are usually better for it.
I can always make friends. No matter where you drop me in the world, I could build up a loving support network of warm and caring relationships. Because people are the same everywhere – we all just want to be valued and given some warm attention.
I know that my real goal in life is happiness, and I will always have the right tools available to me to maximize my happiness. They’re everywhere, and they are free.
Millions of others have achieved this before me, with fewer advantages and in harder times. I have more than enough personal power to get this shit done, in spades.
That collection of points above, is my personal version of what Confidence means. But you’re welcome to use it, adapt it, even turn it into a t-shirt or tattoo for yourself. Confidence is the opposite of fear, and fear is the enemy that has stands between most people and greater happiness.
And because it’s interchangeable with the need for money, that dozen or so bullet points can easily be worth millions of dollars.
The biggest bonus about this multimillion dollar recipe? If you haven’t followed it before, your initial results will come strikingly fast and fuel your desire to get yourself even more of it. Confidence is addictive, joyful, and self-reinforcing.
What To Do With This Amazing Power
You now have two complementary tools in your belt: Money, and Confidence. Both of them are useful. But it would be foolish to develop one exclusively, while completely ignoring the other.
Most people work too much on the money and use it to compensate for a lack of confidence. To get to the next stage in life, you will need to stop doing that.
The Freedom to live happily is your goal. Confidence is part of the price of admission.
*based on 2005 retirement date inflation adjusted to 2018 dollars
It is pretty well known at this point that Mr. Money Mustache is enamored with solar power. Besides the obvious Sci-Fi coolness of it (Electricity, Satellites, Futuristic Robots!) and the eco-friendliness of it (energy with zero noise or pollution), in the last five years the money side of things has finally matured, so that solar power is now the cheapest way to make electricity – even before you account for the added bonus of any available subsidies and the benefits of pollution-free living.
A Watt of Solar Panels: From $100+ to under fifty cents (2017) in less than my lifetime (image source cleantechnica). And the 2017 number for the blue side of the graph hit over 95,000 MW.
It works for individuals: In many cases, if you can get a good rack of solar panels on your roof, your monthly savings will be equivalent to making an investment that performs better than the stock market. But the numbers look even better as your solar setup becomes larger, like if you’re running a solar energy utility or a community solar farm.
The fun part of this for me has always been the physics. Ever since I learned how much energy the Sun shines onto our planet’s surface (about 16,000 times more energy than all of humanity consumes, even with our current bloated habits), I have been certain that a mostly-solar-electric world was inevitable. The only obstructions were human inertia and politics, which are temporary. Physics is forever.
For example, consider the following map showing the tiny amount of our deserts we would need to cover with solar panels to replace all energy consumption (electricity, oil, gas, nuclear, hydro, wind, etc)
Fig. 1: Tiny land area required to power all of humanity. (image source)
And it’s actually even better than that: the image above assumes an old-school solar panel efficiency of 8%, whereas 18% is now a standard rate. So you can cut the black dots in half again, and then chop a few more times to account for the other existing clean energy sources.
And of course, you don’t have to concentrate the panels and run giant power lines everywhere as implied by the map. You can stick solar panels virtually anywhere and they will start working like little employees for you, tirelessly cranking out energy (which is equivalent to money) and automatically.
Which is of course the real subject of this article.
My DIY Solar Project
The new solar array at the MMM HQ workshop generates more than enough power to run the whole property year-round, plus charge the electric cars of the various members.
So naturally, I have always wanted to have my own solar power farm. Until now, various excuses kept me from getting it done: no great places to put panels on the roof of my main house, slightly unfavorable local regulations, but mainly a lack of knowledge of exactly what to buy and how to install it.
I vowed that whenever I finally got this project done, I’d write up a report to you, to spare you some of the research and time consumption that I had to go through.
So let’s get into it!
Part One: Show me the Money
As you can see from the picture above, I’ve started by building a relatively small solar array. There are twelve panels, each about 40 x 60 inches. Each one generates 300 watts of electricity when the sun shines, and when you run the numbers for my climate, the whole setup will crank out about 6100 kWh/year of electricity, a chunk which is worth about $732 per year at average US power prices.
Pretty amazing – enough energy to run my coworking space and Mrs. MM’s adjacent retail store… from a chunk of pretty black glass that is about the same size as a single car parking space!
Meanwhile, the wholesale cost of this equipment broke down roughly like this:
12 solar panels at $130 each: $1656 (a total of 3600 watts at 46 cents per watt)
12 Optimizer modules (which increase power output during partial shade): $650
One SolarEdge 6 kW Inverter (converts the DC current from the panels to AC for the grid): $1102
Various brackets, mounting racks, bolts, and wiring stuff: $460
So my total cost, due to the very good luck of having a friend who is both a dedicated Mustachian and the owner of a booming solar company, was $3900.
That’s the best case, but even after you add normal profit margins plus a 30% tariff that The Donald recently levied on solar panels (and remember the panels are thankfully only half the cost of the system), you can still buy a similar Complete kit for $6000 including shipping.
When you’re measuring the annual return on your investment (or “payback period”), there’s only one thing that matters on the cost side: price per watt. I ended up building this system at about $1.08 per watt, which is low by today’s standards but will soon sound high.
And remember, there are usually tax incentives to cut this cost further – you can take 30% off the top of this cost due to the US Federal “Investment Tax Credit (ITC)“, and possibly more from your state and local government or utility.
The Great Solar Journey to Durango
Last year, I met a badass Mustachian entrepreneur named John. He was in Longmont to visit some family here, but his real home base is in Durango, Colorado where he runs a successful solar installation company called Shaw Solar. There are a million stories that need to be told about this man, but for now we’ll start with this one.
Knowing how long I had been interested in a do-it-yourself solar project, John decided to step up and help me get it done at last. We went over technical details, calculations, strategies, and costs. All of this culminated in me taking a spectacular roadtrip to Durango along with another local friend, in May of 2017.
It was quite a trip, for much more than the acquisition of solar panels and advice. Durango is a stunning little town, and it turned out that John lives in a community of equally impressive siblings and friends – for example his brother Charles who DIY-renovated a 50,000 square foot school over a 20-year period, which has now become the jewel of Durango’s downtown.
Time For the Build
I drove back from this trip full of confidence and energy… only to end up storing the solar panels for months in my studio building as I worked to finish higher-priority parts of the Headquarters building, then waited for the time and motivation to plow through the building permit application.
It took another visit from John to really kickstart the project, and once we worked through it I realized my worry was completely unfounded – if you know what you’re doing, a simple solar array can be completely installed by two people in a less than a day’s work. Here’s what we ended up doing.
Step Zero: Research and Permit
Begin with the end in mind. The amazing Kari Spotts (LPC’s lead of renewable power metering) helps me swap in a new dual-flow electric meter at the successful completion of this project.
This is the part that stops most people before they even begin. The quickest shortcut is that if you’re not interested in these details, find someone who is, to catapult you through it. But if you have enough curiosity to learn the details, here they are:
How big a system should I build? In general, the bigger, the better. The cost per watt goes down as your system grows, making it a higher annual yield on the investment.
“I don’t live in Colorado. How much juice will I get out of it where I live?” This part is fun: The National Renewable Energy Lab runs a great, free calculator called PVWatts that does it all for you: factoring in average weather and solar angles in your area, even allowing you to specify solar panels placed at any crazy angle you like. (In other words, your house doesn’t have to have a perfect South-facing roof).
“Do I need some of those Tesla Powerwall Batteries too?” No. Unless you’re building an off-the-grid cabin, in almost all cases you will want to “grid-tie” your solar array, so you can effectively sell your surplus electricity back to the power company (and thus, other nearby customers), cleaning up your whole town and saving the huge cost of batteries. The Powerwall works great if you want protection from power outages, however, and can even pay for itself if you live somewhere with a smart grid that allows day/night price arbitrage.
“How do I get a permit to build this thing?” Your city’s building department probably has a page describing how to apply. For example, here’s the one for Longmont. The trickiest part is generating a “one-line diagram”, but I cheated by just photoshopping my own details into the example provided with my city, leading to this result, which they approved without question.
Step One: Layout
I had a nice, simple roof that was already facing South, tilted up at a 30 degree angle, which is just about perfect for solar panels. But you can also put them on other slopes or flat roofs, and they still work surprisingly well.
I needed two rails for each row of panels, and the rails get supported by “L”-shaped brackets bolted into the roof. So I ended up with this configuration:
Laying out support brackets, rails, panels, and power inverter.
Important consideration: Because I was putting this on a garage roof (technically “unoccupied space”), I was able to squeeze them all the way to the roof edge. If you are installing on a house, your city’s fire code may require that you leave a 3 foot walking access around the edges. Sometimes it’s wise to think outside the box: a garage roof, a standalone ground-mounted rack if you have lots of unused land, or creating the new workshop/carport/garden shed you’ve always wanted in the sunniest part of your yard.
2: Install your Brackets and Rails
Once you figure out where to put the long “lines” shown above, you measure them out and snap chalk lines right over top of your existing roof material. Then, use some sturdy 2.5″ lag bolts and washers to hold down the L-shaped brackets that come with the solar racking kit. Pre-drill each hole, and inject in some “Through the Roof” sealant with a normal caulk gun before driving in those bolts – this creates a permanent watertight seal. (There are also special brackets to accommodate different roof styles like tile and metal).
Once the brackets are in, you simply use the supplied slide-in bolts and nuts to attach the long rails, straighten them up nicely, and lock it down. Doing all of this with a cordless impact driver makes it quick and clean.
3: Bolt down and connect the Optimizers if you’ve Got ‘Em
These are just little flat boxes that you connect to the top of each pair of rails, about 6″ from the eventual right edge of each solar panel. There’s one optimizer for each panel, and it acts like a babysitter – monitoring output from the panel, compensating for voltage changes when necessary (such as when shade hits that panel). You’ll notice that each optimizer has four wires protruding from it, and there’s one optimizer for each panel. This will make sense in the next step.
Optimizer mounting (face down), plus a good shot of the connections between roof, brackets, and rails.
Once all the optimizers are in place, you connect each pair of longer wires together with the incredibly convenient fast-click connectors. The positive and negative wires have differently shaped connectors so you can’t accidentally reverse them.
You end up connecting inverters to each other, and each panel only to its host inverter, like this:
Inverter to panel connections
If you have two lines of panels as I do, connect the far end of one line to the far end of the next line, so you end up with a long series of optimizers where both ends terminate with a loose wire on the end closest to your inverter.
Grounding is Important: Using the supplied grounding screw terminals, connect all the rails together with bare 10AWG copper wire. From that last terminal, you’ll be running a length of the same size wire down to the inverter.
4: Install the Solar Panels!
The bottom of each panel has two long output wires. Use clips and/or zip ties to keep the cables tidy so they don’t dangle onto the roof too much.
This step is better with two people, especially on a steep roof. Starting at the furthest corner from the location of your inverter, connect each the panel’s wires to the matching ones on its host inverter. Set the panels down straight, and use the click-in clamps that come with the racking system to clamp down the panel using your cordless drill/driver.
By the end of this step, you’ll have one or more tidy lines of panels with just two powerful-looking DC wires poking out the end, with connectors to go.
You’re now ready to build the final run of wire, which will enter a metal conduit and travel through your roof, down the side of your house, and into the inverter.
5: The Home Run:
Drill a 1″ hole in your roof and put a roof boot over top of it, tucked under the upper course of shingles. From there, your goal is to provide a protected path to get the high voltage DC wires to from the panels, down to the inverter.
My city required 3/4″ metal rigid conduit, which gave me the opportunity to learn about the various fittings and connectors that are part of working with conduit. I also bought a conduit bending tool, since there are many more outdoor electrical projects still on the docket for the MMM HQ building.
One day last week, the icy grip of a winter storm broke and the skies of Colorado returned to their normal state of deep blue with bright sunshine. So I decided to head out for a hike on the warm red rock trails just outside of Boulder.
Taking a break on a big rock at the summit of the mountain, I pulled out a snack and a tiny glass-encased computer from my backpack. I unlocked it with my fingerprint and casually learned a few things, shared a few ideas, and conducted a few thousand dollars of business before the bag of carrots was done, then snapped a twelve-megapixel image or two before pressing the lock button and tossing the phone back into my pocket.
I took a brief moment to marvel at the efficiency of this whole situation, and how much wealth it brings to people like you and me who are privileged and clever enough to get set it up in our lives.
Efficiency reduces waste and multiplies your productivity, and even a small helping of it is enough to tilt you into a lifetime of financial surplus. Yet it is so rare that most people in the richest countries spend most of their lives in debt.
This contrast was illustrated dramatically as I descended from that Millionaire’s Rock and returned to reality. I needed to renew my driver’s license, so I stopped at the Department of Motor Vehicles only to find a two-hour lineup of people, waiting to speak to an understaffed roster of tired employees, manually entering information that was already duplicated on countless other government servers, into their own antique computers. And this was obviously not a new problem: I could see signs that a construction project was underway – the waiting room was being doubled in size to allow more people to sit and wait.
“THIS”, I thought, “is why so many people hate the government. Here we are spending taxpayer money on more drywall and willingly wasting my time, instead of figuring out the root of the problem, which is that I should have been able to renew my driver’s license with a smartphone app, at least any time after the year 2010.”
And I have similar stories about paying my city utility bills, applying for building permits, handling payroll taxes, and legally immigrating to this country in the first place. We need these public services, but we’d all be much wealthier if they worked more efficiently.
Why does this happen? Why is almost everything from Silicon Valley shiny and efficient, and almost everything from Washington DC (or the local government office) crusty and outdated?
In a word: Humans. When we work in big groups, we grow less efficient. When our groups have been around too long, we get even worse. When the management structure is too messed up, nobody is willing to take risks.
And most importantly of all, the most effective workers know all of this, so they avoid seeking jobs where they’ll be stuck in a crusty work environment.
In other words, truly talented tech workers rarely apply for government work, reinforcing a circle of inefficient services for citizens, and a low public opinion of government efficiency. Is there a way to fix this?
Enter Matt Cutts and the US Digital Service
Matt Cutts arrives in central DC, after a midwinter morning’s bike commute to work.
Luckily, this self-reinforcing problem was not lost on the world, and some people have been trying to crack it.
Imagine, for example, if we could take one of the core developers of the Google search engine (one of the most efficient pieces of software in the world’s history), and get him to leave the lucrative tech industry to help the ailing public sector?
Matt Cutts is famous enough in the software world that he has his own family of followers known as ‘cutlets’. The Wall Street Journal stated in 2009 that ‘Cutts is to search results as Alan Greenspan is to interest rates’. And some of his efforts leading the Webspam and SafeSearch teams are the reason you can get useful Google search results instead of the monetized junk that is always trying to game the system and collect your clicks.
Then, imagine you could pull in a bunch of other top-tier developers and designers, empower them in Washington, and put them to work solving some of the nastiest efficiency problems?
It would be a tough job, but it would also be some of the biggest bang for the buck you could ever achieve, because all the fruit is juicy and hanging very low from the trees.
In Silicon Valley, you might compete to shave a dollar off the cost of app-powered flower delivery for a few thousand high-income families. In the federal government, you can change the lives of hundreds of millions of people whose lives are affected by government services.
Veterans applying for medical help, people applying for visas, businesses trying to win contracts or comply with regulations. Doctors trying to finish Medicare paperwork so they can spend more time with patients. And the Department of Defense gaining better security, to avoid having their information (or their nuclear launch codes) pickpocketed by hackers from more nimble organizations.
So, this has actually started happening.
In 2014, a critical mass of tech-savvy people in the White House were able to form something called the US Digital Service and begin looking for talent. In 2016, they found a willing recruit in Matt Cutts, which is around the same time I met him*
After kicking around the idea for a few years as I watched some of the progress via his Twitter account, we finally decided to do this interview. So let’s get into it!
Matt Cutts and the US Digital Service
MMM: How did the idea of the US Digital Service get started? Was it directly from Obama’s staff contacting you, or someone from the tech industry looking East?
MC: The US Digital Service got its start from a pretty big disaster: when the healthcare.gov website failed back in 2013. Regardless of whether you’re conservative or liberal, it’s pretty wild to see a signature presidential initiative at risk because the enrollment website didn’t work well. Todd Park, who was the CTO of America — how cool of a job title is that — recruited a small cadre of tech folks to help the website hobble over the finish line. Within a few months after that success, the government stood up the Digital Service to help on other technology projects throughout the government.
MMM: When I hear the word “Digital Service”, it has some echoes of both Secret Service and the military, like you sign up to be one of The Troops. Do you see parallels (and major differences) between enlisting for military?
MC: Absolutely. One parallel is the Digital Service asks people for a limited tour of duty. Most people end up staying for over a year but less than two years. We also try to set the expectation that like all jobs, some days are harder than others and can be really challenging. The idea is that we promise to find high-impact projects that will benefit others when you bring your expertise to government.
That can mean working in stressful situations where things aren’t going well. Your readers know how important it is to stretch ourselves to learn in new situations though, and how meaningful it can be to align our mission in life with our beliefs**. And of course, one huge difference is that no one in the Digital Service is put in harm’s way like the military or Secret Service.
So the work is demanding, but it’s nowhere near as hard as the military. We’re still sitting indoors while talking to people or tapping on keyboards.
MMM: How do the pay, benefits and work environment compare between USDS and private industry? What about living expenses in the area. Any perks or career advantages you perceive to working there?
MC: It’s a misconception that you have to take a huge pay cut. USDS can pay up to the maximum government “General Schedule” salary, depending on previous experience and salary. That can mean around $160,000/year. We ask people to move to Washington, DC, which is an expensive place to live, but it also has great public transit. You really don’t need a car in DC and it’s possible to live close to where you work.
I usually ride my bike to work and get a free workout each day. I will note that when working for government, you don’t always get to use all the latest cloud-based productivity tools that you can access in a startup, but that depends on which agency you’re working with.
MMM: What major things has the Digital Service accomplished so far? Do you have an estimate for how many people are affected and how many dollars (and hours) have been saved, versus the amount spent on the program?
MC: Oh man, I could talk about the work we’ve done for a long time. Sometimes it’s bringing time-tested industry best practices into the government. Take bug bounties, for example. The idea of offering money to researchers who find security holes has been used since 1995 on Netscape. But the Federal government had never done a bug bounty before. Our team at the Pentagon has run 7-8 bug bounties with great results: the government is more protected, and bug bounties can be cheaper than other ways of finding security holes.
Here are a few additional accomplishments:
Launched vets.gov, which is a one-stop shop for Veterans to discover, apply for, manage, and track their benefits. It’s a much better experience to (say) apply for health benefits with a web form instead of proprietary/bad tech.
These are just a few projects we’ve done. If you want more nitty gritty details, check out our multiplereports to Congress. Or if anyone wants to apply to the US Digital Service, we’d be more than happy to talk about projects in more depth.
With a modest budget, we’ve helped tens of millions of people across the US. A pretty conservative estimate is hundreds of millions of dollars saved. Plenty of labor hours have been saved, too. When a computer can check that all the documents for an application are attached and complete, for example, that saves manual checking, not to mention time (and postage) mailing paper back and forth.
MMM: When working on complex software projects in a big company, I found the hardest part was often the beginning – after you have a foundation you can work off the same pattern, your reputation grows and your progress grows exponentially. Do you see this happening in your work so far?
MC: It really varies based on the situation. When there’s a crisis, we can move quickly. Other times, an agency does need to see that you’re committed over time. Lots of people in the government show up promising to help and then don’t deliver. So we start off small, building trust and credibility.
One example was veterans’ disability claims. The people judging those claims had to download dozens of documents one at a time. So we built a “download all” button for them. It wasn’t hard technologically, but it solved an actual problem. It showed that we were listening to their issues and were serious about helping. From there, we were able to build up a relationship with partners and stakeholders. In fact, we just passed 100,000 Veterans whose appeals happened a little better or faster because of tools that we built.
MMM: From the outside, I have imagined that many of the government’s priorities turned over after the 2016 election – Have you noticed a change from the inside, or do you feel your work remains prioritized and valued?
MC: Practically everybody agrees that we need government services to be more modern. Did you know that the government runs some technology systems that are over 50 years old? This still amazes me. Improving technology is one of the few ways where a service can get better and still cost less. Our work is nonpartisan, and we still get to work on important projects that matter to the public.
Earlier this week I got to have breakfast with members of Congress from both sides of the aisle, and it’s remarkable how much common ground there is on improving technology so the government works better for people.
MMM: There’s another group called Code for America that has a similar-sounding mission to the layperson. Could you explain the difference between CfA and USDS?
MC:Code for America is a great group of folks! They’re a non-profit that works primarily with state and local governments to improve their technology. The US Digital Service is a part of the Federal government, so we tackle programs at a national level. It turns out that the civic tech space is pretty small in some ways, so it’s still possible to get to know a lot of people who have an outsized impact on technology in government. Code for America is one of the organizations that got me interested in civic technology in the first place.
MMM: Has financial independence played a role in your willingness to do this job?
MC: No one needs to be financial independent to work for the USDS–we pay solid salaries–but my previous career as a software engineer did give me the freedom to work on what I want. But you’ve made the point over and over that financial independence doesn’t automatically mean that you stop working–it means that you work on what you want to work on. At the US Digital Service, I get to work with amazing people who are tackling projects that really matter.
MMM: Should readers of this interview apply to the USDS? If we wanted to filter to exactly the right candidates, how would we do it?
MC: Yes, they should apply! We’re always looking for mid-career software engineers, site reliability engineers, product managers, and designers–people who have accumulated some real-world experience and maybe a few scars. If you can stand up a major web service, for example, that’s a plus. We also look for folks with emotional intelligence and the ability to tell the truth in hard situations. You may need to sit down with a cabinet secretary and break the news that their new product isn’t ready to launch yet.
MMM: How else can they support you?
MC: If your readers are not ready to apply themselves, maybe they know a good software engineer and will encourage them to apply? Also feel free to share this interview with them or elsewhere on social media. :) It’s important to know that there’s a third path open to technologists now besides academia and industry. And it’s possible to find jobs that are meaningful even if they can also be hard. Keep looking until you find one that’s right for you. Lastly, you can follow USDS on Twitter and on Medium.
MMM: Thanks for your time Matt, and thanks for taking the time to help out in the world. This article is part of an ongoing series of “Interviews with Interesting Mustachians”, and there are quite a few in the queue for this year. To a prosperous 2018!
And if you have questions for Matt and the USDS team, feel free to write them up in the comments. I’ll invite them to participate in the discussion.
* I first heard about Matt when he sent me a random PayPal donation in 2015. It was a shock:in a long-ago article in the very early days of this blog, I had put a donation box in an article with a comment like “Hey, you can keep reading for free, but if you insist on sending me money, here’s the way to do it.” He shocked me by sending $100.00, so I looked up his biography and sent him a thank-you email. Later, he enticed me into attending an underground conference called “Foo Camp,” which involved spending a weekend camping out with 200 young Silicon Valley tech titans and giving impromptu talks to each other. I gave a talk on Mustachianism, and answered questions from a guy at dinner about index fund investing. Later, someone pointed out that it was sci-fi legend Hugh Howey, and both my son and I have since gone on to read most of his books.
** Matt and I did this interview by collaborating in a Google(of course) Doc, which means he was able to add his own links. So, all the links within are by him. I noticed that some of them, like this one, link to old MMM articles. I was impressed by his deep and historic knowledge of Mustachianism. ;-)
Well, shit. I’ve been watching this situation for a few years, and assuming it would just blow over so we wouldn’t have to talk about it here in this place where we are supposed to be busy improving our lives.
But a collective insanity has sprouted around the new field of ‘cryptocurrencies’, causing a totally irrational worldwide gold rush. It has reached the point that a big percentage of stories in the financial news and questions in Mr. Money Mustache’s email inbox are about whether or not we should all ‘invest’ in BitCoin.
We’ll start with the answer: No, you should not invest in Bitcoin. The reason is that it’s not an investment. Just like gold, tulip bulbs, Beanie Babies, 1999 dotcoms without any hope of a product plan, “pre-construction pricing” Toronto condominiums you have no intent to occupy or rent out, and rare baseball cards are not investments.
These are all things that people have bought in the past, and driven to completely irrational prices, not because they did anything useful or produced any money and value to society, but solely because they thought they would be able to sell them to someone else for more in the future.
When you make this kind of purchase, which you should never do, you are speculating, which is not a useful activity. You’re playing a psychological, win-lose battle against other humans with money as the only objective. Even if you win some money through dumb luck, you have lost some time and life energy, which means you have lost.
Noticed this ad on the corner of a website recently … because we ALL need daily updates on an obscure piece of niche software technology!
Investing means buying an asset that actually creates products and services and cashflow for an extended period of time. Like a piece of a profitable business or a rentable piece of real estate. An investment is something that has intrinsic value – that is, it would be worth owning from a financial perspective, even if you could never sell it.
Now, with that moral sermon out of the way, we might as well talk about why Bitcoin has become such a big thing, so we can separate the usefulness of the underlying technology called “Blockchain”, from the mania about how people have turned Bitcoin it into a big dumb lottery.
This separation is important because the usefulness of Blockchain is the primary justification people use for the big dumb Bitcoin lottery.
Once you make this separation in your mind, you can see that Blockchain is a simply a nifty new software invention (which is open-source and free for anyone to use), whereas Bitcoin is just one well-known way to use it.
Blockchain is just a computer protocol, which allows two people (or machines) to do transactions even if they don’t trust each other or the network between them. It can have applications in the monetary system, contracts, and even as a component in higher level protocols like sharing files. But it’s not some spectacular Instant Trillionaire piece of magic.
As a real world comparison, I quote this nifty piece from a reader named The Unassuming Banker:
… imagine that someone had found a cure for cancer and posted the step-by-step instructions on how to make it on-line, freely available for anyone to use.
Now imagine that the same person also created a product called Cancer-Pill using their own instructions, trade marked it, and started selling it to the highest bidders.
I think we can all agree a cure for cancer is immensely valuable to society (blockchain may or may not be, we still have to see), however, how much is a Cancer-Pill worth?
Our Banker friend goes on to explain that the first Cancer-Pill might initially see some great sales. Prices would rise, especially if the supply of these pills was limited (just as an artificial supply limit is built right into the Bitcoin algorithm.)
But since the formula is open and free, other companies would quickly come out with their own cancer pills. Cancer-Away, CancerBgone, CancEthereum, and any other number of competitors would spring up. Anybody can make a pill, and it costs only a few cents per dose.
And yet imagine everybody started bidding up Cancer-Pills, to the point that they cost $17,000 each and fluctuate widely in price, seemingly for no reason. Because of this, newspapers start reporting on prices daily, triggering so many tales of instant riches that you notice even your barber and your massage therapist are offering tips on how to invest in this new “asset class”.
But instead of seeing how ridiculous this is, even more people start piling in and bidding up every new variety of pills (cryptocurrency), over and over and on and on, until they are some of the most “valuable” things on the planet.
And yet this is exactly what’s happening with Bitcoin. And if you haven’t been digging into the cryptocurrency world much, it gets way weirder than this. Take a look at this shot from the website coinmarketcap.com, and observe the preposterous herd behavior in real life:
Fig.1: Various cryptocurrencies, ranked by how many people have been fooled.
“Holy Shit!” is the only reasonable reaction. You’ve got Bitcoin with a market value of $234 Billion Dollars, then Ripple at $92 billion with Ethereum right behind at $85,792,800,592.
These are preposterous numbers. The imaginary value of these valueless bits of computer data represents enough money to change the course of the entire human race, for example eliminating all poverty or replacing the entire world’s 800 gigawatts of coal power plants with solar generation. Why? WHY???
An Aside: Why should we listen to you, Mustache?
I’m only a mediocre computer scientist. But coincidentally, after I got my computer engineering degree I ended up specializing in security and encryption technologies for most of my career. So I did learn a bit about locking and unlocking information, hacking, and ensuring that independent brains (whether they are two adjacent CPUs on a circuit board or two companies negotiating across the Pacific) can trust each other and coordinate their actions in lockstep. I even read about these things for fun, with Simon Singh’s The Code Book and the Neil Stephenson novel Cryptonomicon being particularly fun shortcuts to pick up some of the workings and the context of cryptography.
But that’s just the software side (Blockchain). Bitcoin (aka CancerPills) has become an investment bubble, with the complementary forces of Human herd behavior, greed, fear of missing out, and a lack of understanding of past financial bubbles amplifying it.
Mustachianism – the mental training that gets you to very early financial freedom – requires you to evaluate inefficiencies in our culture and call bullshit upon them. Even if you are the only one in the room willing to do it.
In the field of personal wealth, this means walking your children past the idling lineup of your neighbors’ Mercedes SUVs, over the snowy grass and up to the door of the school – and being confident that you are doing the right thing. Even if you’re the only one doing it.
When evaluating investment bubbles, it means looking at where everyone is throwing their money – no matter how many billions – and being willing to say “Bull. Shit. Guys. Not going to do this with you.”
So I also read a lot about investment bubbles and fundamentals and how to tell those apart. One book that I found very useful in understanding the greed-fear cycle (and Central Banking and the Federal Reserve system to boot) is the 2001 classic Towards Rational Exuberance by Mark Smith. For a shortcut to understanding good investing, you can also simply look up Warren Buffet’s thinking on almost any topic – he’s careful enough about offering opinions that by the time he makes a statement on something, you can be pretty sure it will be among the best answers out there.
And of course, the purpose of this whole aside is that I want to establish credibility with you, so you will give this article some consideration. I believe the current Cryptocurrency “investment” mania is a huge waste of human energy, and our rate of waste has been growing exponentially.
The sooner we debunk the myth and come to our senses, the richer our world will be. So we need more credible people to speak out against it. If you’re one of these credible people, please do so in the comments or in a blog post on Medium that we can all read.
Why was Bitcoin Even Invented?
Understanding the motivation is a big part of understanding Bitcoin. As the legend goes, an anonymous developer published this whitepaper in 2008 under the fake name Satoshi Nakamoto. It’s well written and pretty obviously by a real software and math person. But it also has some ideology built in – the assumption that giving national governments the ability to monitor flows of money in the financial system and use it as a form of law enforcement is wrong.
This financial libertarian streak is at the core of Bitcoin, and you’ll hear echoes of that sentiment in all the pro-crypto blogs and podcasts. The sensible-sounding ones will say, “Sure the G20 nations all have stable financial systems, but Bitcoin is a lifesaver in places like Venezuela where the government can vaporize your wealth when you sleep.”
The harder-core pundits say “Even the US Federal Reserve is a bunch ‘a’ CROOKS, stealing your money via INFLATION, and that nasty Fiat Currency they issue is nothing but TOILET PAPER!!”
It’s all the same stuff that people say about Gold, which is also a totally irrational waste of human investment energy.
Government-issued currencies have value because they represent human trust and cooperation. There is no wealth and no trade without these two things, so you might as well go all-in and trust people. There are no financial instruments that will protect you from a world where we no longer trust each other.
So, Bitcoin is a protocol invented to solve a money problem that simply does not exist in the rich countries, which is where most of the money is. Sure, an anonymous way to exchange money and escape the eyes of a corrupt government is a good thing for human rights. But at least 98% of MMM readers do not live in countries where this is an issue.
So just relax, lean into it, and grow rich with me.
OK, But What if Bitcoin Becomes the World Currency?
The other argument for Bitcoin’s “value” is that there will only ever be 21 million of them, and they will eventually replace all other world currencies, or at least become the “new gold”, so the fundamental value is either the entire world’s GDP or at least the total value of all gold, divided by 21 million.
People then go on to say, “If there’s even a ONE PERCENT CHANCE that this happens, Bitcoins are severely undervalued and they should really be worth, like, at least a quadrillion dollars each!!”
This is not going to happen. After all, you could make the same argument about Mr. Money Mustache’s fingernail clippings: they may have no intrinsic value, but at least they are in limited supply so let’s use them as the new world currency!
Why not somebody else’s fingernail clippings? Why not one of the other 1500 cryptocurrencies? Shut up, just send me $100 via PayPal and I’ll send you a bag of my fingernail clippings.
Let’s get this straight: in order for Bitcoin to be a real currency, it needs several things:
easy and frictionless trading between people
to be widely accepted as legal tender for all debts, public and private
a stable value that does not fluctuate (otherwise it’s impossible to set prices)
The second point is also critical: Bitcoin is only valuable if it truly becomes a critical world currency. In other words, if you truly need it to buy stuff, and thus you need to buy coins from some other person in order to conduct important bits of world commerce that you can’t do any other way. Right now, the only people driving up the price are other speculators. The bitcoin price isn’t rising because people are buying the coins to conduct real business. It’s rising because people are buying it up, hoping someone else will buy it at an even higher price later. It’s only valuable when you cash it out to a real currency again, like the US dollar, and use it to buy something useful like a nice house or a business. When the supply of foolish speculators dries up, the value evaporates – often very quickly.
Also, a currency should not be artificially sparse. It needs to expand with the supply of goods and services in the world, otherwise we end up with deflation and hoarding. It also helps to have wise, centralized humans (the Federal Reserve system and other central banks) guiding the system. In a world of human trust, putting the wisest and most respected people in a position of Adult Supervision is a useful tactic.
Finally, nothing becomes a good investment just because “it’s been going up in price lately.”
If you disagree with me on that point, the price of my fingernails has just increased by 70,000% and they are now $70,000 per bag. Quick, get me that money on PayPal before you miss out on any more of this incredible “performance!”
Figure 2: Random people on Twitter doing some deep, useful Investment Analysis on Bitcoin.
The world’s governments are not going to let everyone start trading money anonymously and evading taxes using Bitcoin. If cryptocurrency does take off, it will be in a government-backed form, like a new “Fedcoin” or “G20coin.” Full anonymity and government evasion will not be one of its features.
And you don’t want it for this purpose anyway – after all, do you currently hide your money in offshore tax havens and transact your business on black markets? Do you practice illegal tax evasion as your primary wealth strategy? Probably not, because life is better and wealthier when you aren’t living a life of crime.
The Cryptocurrency bubble is really a replay of the past: A good percentage of Humans are prone to mass delusions which lead to irrational behavior. This is a known bug in our operating system, and we have designed some parts of our society to protect us against it.
These days, stocks are regulated by the SEC, precisely because in the olden days, there were many, many stocks issued that were much like Bitcoin. Marketed to unsophisticated investors as a get-rich-quick scheme. The very definition of an unsophisticated investor is “Being more willing to buy something, the more its price goes up.”
Don’t be one of these fools.
This YouTube Video is one of the best shortcuts I found for explaining how Blockchain works.
This Vice article explains yet another ridiculous aspect of Cryptocurrency: running the transaction network (called “Mining”) involves a deliberate computer-intensive crypto challenge syetem called “proof of work”. This inefficient design is now wasting more electricity than many entire countries. Doing one transaction burns 215 kilowatt-hours of electricity, enough to run the entire MMM household for more than a full month, or to power an electric car for more than 800 miles of driving.
Another interesting side-effect of bitcoin mining: big sales of computer graphics cards, and theft of electricity and cloud computer services. One of my coworkers at MMM-HQ works for Nvidia, and part of his job is hunting down the mining thieves. Some of my conversations with him inspired the research in this article.
I enjoyed this analysis by Aswath Damodaran, a thoughtful investor and Professor at NYU school of business
Another intelligent case by highly experienced crypto business lawyer Preston Byrne. Favorite quote:
“Bitcoin’s growth is not based on its technology alone (which, while powerful, is open-source and therefore easily replicable) but rather on the strength of virality, encouraged by the vested interests who held early and invested in marketing it; with no genuine business underlying it, it acquires its (very substantial) memetic potency only from the evangelism of those who hodl and preach.”
If you have more money than you need, you should start giving some of it away. That’s the lesson I learned about a year ago, when I took a gamble and donated $100,000 to a variety of charities, centered around the Effective Altruism movement.
At the time, I had no experience with giving to anyone other than immediate family and friends, so I didn’t know how I would feel about it. But over the course of this past year, I have had many late nights to reflect on life and what it means to live one that feels worthwhile. There are have been successes and failures, mostly happy times but also plenty of sadness shared with my siblings as our Dad made his departure.
During all this questioning of life, I kept thinking back to the times I’ve been less selfish and less fearful, and more willing to help other people. These were the things that reassured me that my life was indeed a good one, and that I wasn’t squandering the opportunity too badly so far. In short, being a good person was by far the most reliable source of happiness.
So. If hard work and generosity are what bring meaning to life, it makes sense to keep at it, even when it seems difficult. With this in mind, I vowed to make another round of donations of equal or greater size this year.
The Tricky Side of Philanthropy
While most people would assume that giving away money is easier than making it, when surveying wealthy people I have found the opposite is often true. After all, once you build a prosperous business or career, the income becomes almost automatic. You indulge in your natural and joyful tendency to work hard every day, and the money keeps flowing in, often faster with each passing year. There are no decisions to be made, and you know every dollar of net income is going somewhere worthwhile: to you.
But to give money away, you have to overcome a whole new set of challenges:
Overcome your fear of having less money. After all, more is always better – you can always benefit from more security, right? (this is actually wrong, but it can be hard to recognize)
Figure out who is most deserving of your money.
It took so much time to earn the money and overcome the fear of giving – the last thing you want is to see it go to waste.
Figure out how to get that money to the worthwhile recipient.
You have to find their webpage, mail a check so the credit card company doesn’t steal 3% of your donation, and ask politely that they don’t put you on their mailing list and hound you for the rest of your life.
Sort out the tax consequences. In most cases, you can deduct charitable donations on the “itemized” part of your tax return, but until you hit the itemizing threshold of around $10,000 you might not get any benefit. On the other hand, certain charitable expenses are deductible directly from your business income, if you run a business.
“Too confusing already. Forget it, I’ll just keep my money.” And thus, you end up in the same trap that keeps many people from being generous.
Since I had already pushed through the pain last year, I knew I could handle it and repeat the same thing this year. Just write the same checks and mail them to the same places. Job done.
But then I noticed a few shortcuts that make things even easier:
Betterment Investing just added a spectacular no-cost automatic donation feature. Using their existing tax-optimized system, they allow you to donate your most appreciated shares directly to any of their many connected charities. This gives you the maximum tax deduction right now, while reducing your taxes further when you later withdraw from your account later in life.
Paypal has a similar feature: even from within the minimalist phone app, you can click a “donate” icon and transfer out surplus bits of your balance directly to a large selection of good charities. Paypal does its part by not taking any fee for these donations, no matter how large. You can use up existing paypal balances, or have them draw through your connected checking account – I found this was a very smooth and easy way to try your hand at giving.
MMM Headquarters Becomes an Automatic Philanthropy Machine
MMM Headquarters shows off its holiday style, just last night.
I noticed that PayPal feature because I happen to have a constant, growing surplus in my account these days, as a result of starting the MMM-HQ Coworking space right here in downtown Longmont.
The money side of this situation is pretty interesting:
We bought the property (which now hosts two businesses) for $225,000, which means my half cost me only $112,500.
Then I spent about $30,000 in materials and subcontractors to whip it into shape. (Plus about 700 hours of my own labor, which I happily donated)
We now have about 60 paying members at $50 per month each, for a total of $3000 per month or $36,000 per year.
But the coworking space is still kind of quiet during the days, so we can sign up a few more people and bring this annual number to $50,000.
Property taxes ($4k), Utilities and Beer ($1600), and ongoing upgrades ($10,000) only consume 30% of this budget, leaving a huge surplus, as long as I keep running it myself and don’t draw any salary.
Many people and companies have started donating supplies to us, in an unprompted show of generosity. Authors send us books, Nimbus Roasters keeps our coffee stocked, Urban Tribe sent a fancy electric cargo bike, Aerobis sent some cool strength training equipment all the way from Germany, Flatiron Spice Company brought in red and green chili spices, Lefthand gave us a discount on beer kegs, members are donating useful equipment like 3-D printers and weight training equipment from their homes, and the list goes on.So I figured, in the spirit of all this sharing, why don’t we make this building a philanthropy machine? Its ongoing profits can be donated to charities – both local and international – on a regular basis. Along with doing a lot of good, this will probably give all of us members a stronger sense of belonging.
What if I’m Not Ready to Give?
I’m writing this post to encourage people who have plenty, to consider giving it to help people (and parts of our natural environment) truly in need. If I can prompt you, wealthy person, to decide that giving to the world’s most effective charties, is even better than getting a slightly better car or leaving your children an extra-large estate, then this post might be the most effective one on this whole website.
But I do not want to make anyone feel guilty for not giving away money, when they don’t yet have a surplus. If you’re working hard and saving effectively for financial independence, abundance will come. If you’re not there yet, don’t stress out about it. There is no “tithing” in the imaginary religion of Mustachianism.
Details on Easy Giving
Some of the staff of Givewell in San Francisco office perform the “Mustachian Salute”
As part of writing this article, I made part of my $100,000 donation via Betterment’s new system. I have three accounts with the company (my public Betterment Experiment, a rolled-over IRA, plus a personal taxable account with the largest balance of the three). All three accounts have seen rapid appreciation due to the current boiling-hot stock market, so there are lots of capital gains available to harvest.
Donating appreciated shares expands the power of your giving compared to just giving cash, which is quite a neat trick. This quick table from Betterment’s new Charitable Giving Explainer page lays it out very simply:
In this example, your donation nets about 19% more tax savings than a direct cash donation.
So I tried the same thing in real life. The largest of my donations this year ($70,000) was to GiveWell, through the Betterment system. As I fired it up, Betterment automatically estimated my tax savings in real time:
This $70,000 donation will cut my 2017 tax bill by $22,841.. AND reduce my eventual capital gains taxes by $4188. This is the true power of donating appreciated shares.
As with last year’s donation, this biggest chunk went to charities based on the Effective Altruism philosophy. What this means in practice is, “Create the best results for humans possible, on a worldwide basis, with each dollar.”
I believe this is both the most humane and the most logical way to donate money, because of the following course of events which has been proven again and again:
Improve developing world health and education
-> these people have better lives immediately
-> but also the more empowered people also choose to have smaller families
-> world population growth slows and eventually reverses -> everybody wins.
So in this round of donations, here is where the money went. You can click each charity name to get to their own website for easier research.
Note: there are more ideas for places to donate in last year’s article. Also, as of the day of publishing the WWF donation had not yet been made since I’m waiting for some money to transfer. This sentence is to keep me accountable – I’ll erase this once I get that last task done.
Note on Donating Appreciated Shares: you don’t need a Betterment account to do this, it just makes it easier. Several other financial institutions make this possible, and Vanguard has a nifty “Donor Advised Fund” feature.
Since this is an unusually important topic, I will try to invest extra time into answering questions in the comments section. And if you’re an expert on any of these subjects – philanthropy, investing, tax policy, the developing world, medicine, or the environment, please feel free to do the same.
Thanks, world, for another prosperous year and here’s to the next one!
Special Surprise: Did you know there is now an MMM Android App? It’s really good. Beautiful offline reading. Alerts you to new articles automatically, if you want. Thousands of users already. Free. Many more features (plus an Apple version) to come. It’s on the Google Play Store.
About two years ago, I switched from taking my personal car to the airport, to hailing Ubers and Lyfts. The math of it was pretty simple: Uber was cheaper than paying for my driving and parking*. And that was before the considerable joy and time savings of not having to park in the airport lot and cram in among the huddled masses in the shuttle buses. Nowadays I sit in the back and get some work done like an Executive, leaving the driving to someone else.
Once I arrive at my destination city, these ride sharing services have replaced at least 90% of instances where a car rental would be useful. Between walking, renting a bike, public transit and calling a Lyft, a car rental is only useful for destinations deep in the boondocks such as a ski resort or a distant beach cabin. Which is another great improvement, since renting a car at an airport has never been a fun experience.
But during all these Luxury Executive rides, I’d often get to talking with the driver. We would talk about life, family, money and business. I always inquired about their experience with rideshare driving, and the response was inevitably something like this:
UBER DRIVER: “Oh, it’s pretty good. On a good day I’ll make a hundred bucks, sometimes even two hundred if I really work it and stay up late.”
MMM: “Is that your profit after subtracting the cost of driving?”
UBER DRIVER: “No, that doesn’t include gas. But I’ll only use, like, not even a full tank – maybe thirty bucks”
“Hmm”, I would think to myself.
“If this driver is burning through $30 of gas, (twelve gallons), they’re probably covering over 250 miles. Whether they realize it or not, it’s costing them $125 in direct car costs before even accounting to the damage to their health or the risk of injury. Thus, the net profit might be as low as $50 for a big day on the road, or five bucks an hour.”
There’s no way Uber could be such a successful company if the pay rate were really this low. Is there?
But on the other hand, some of my Uber drives to the airport have included a Dodge Ram pickup truck (V-8 engine, fancy wheels, bought brand new on credit), a BMW X5 and even a Hummer H3 (with over 250,000 miles on the odometer). Maybe people really are that uninformed about the cost of driving. As my friend Bill said when we talked about this:
“Imagine developing a company specifically to take advantage of people’s ignorance of how expensive it really is to drive their own car. What would this company look like? “
(the answer is of course that it would look like very much like Uber or any other ridesharing company)
To resolve this mystery (and as a way of getting some test miles on my new electric car), Mr. Money Mustache decided to go deep undercover in September 2016, and sign up as a driver for both Uber and Lyft services.
Using another driver’s referral code, I signed up on the Uber system and started to follow the instructions. I needed a background check, medical exam, car safety inspection and a few other daunting things. Luckily, Uber runs facilities called “Greenlight Centers” which put all this stuff in one place. The closest one to me was about 40 miles away in Denver, so I charged up my new Leaf and headed down.
When I arrived, I found an interesting scene that nicely personifies our new sharing economy. It was a mashup of an Apple Store and the DMV. Modern design and furniture, good music and glossy tablets everywhere, combined with an ocean of slightly desperate and bored looking people waiting to start their new driving careers. And Mr. Money Mustache, trying to blend in.
It was a funny feeling, spending those three precious hours of my Tuesday morning, waiting in queues and filling out forms. I was keen to learn about the driver experience and how things work in the New Economy. But I also felt a bit of the nervous “I’m applying for a new job” energy of the other applicants, and like a bit of a fraud for being here when I had absolutely no interest in truly having a job.
There was a trendy little cafe in the corner of the room, so I strolled over and picked up a Clif bar and a coffee. Due to my naive privilege as a former tech worker, I expected it all to be free – after all, don’t all offices offer free coffee and snacks, along with a keg of local beer and another tap for Kombucha? But a man popped out from around the corner and rung me up for $3.85. On top of that, it was a bland coffee in a small cup. This was an interesting reminder that working in a lower-training job is a different world than the one you and I probably both inhabit, here at the top of the economy.
When the process was finally done, my 25-year-old Uber concierge looked up from his iPad and issued me a genuinely warm congratulations and we shook hands.
“So that’s it?”, I asked
“Yeah! That’s it! You could go out and get in your car start making some money RIGHT NOW!”
“Nah”, I thought to myself. “Eighty miles of driving plus three hours in an office building is more than enough wasted indoor time for me for the next little while.”
The spoiled retiree in me loves hard work, but only the right kind of hard work. The sedentary locked-indoors variety of work always falls to the bottom of the list. As you can tell by the low frequency of these blog posts.
My First Ride
Eventually, I was ready to give it a whirl. I cleaned up my car, stuck the Uber decal on the windshield, put on some nice clothes, mounted my phone on a sturdy dashboard clamp, and fired up the app. Within minutes, I had my first ring.
RIDE REQUESTED! John, 5 minutes away.
The ring was deafeningly loud, because (as I later learned after half an hour of looking unsuccessfully for a way to change it) the Uber app overrides your ring volume setting and sets it to !!MAXIMUM!! I was so startled that I could hardly slide the “accept” button, but I eventually got safely on the road.
I recognized the address as Longmont’s “Pumphouse” brew pub, right downtown. I headed down the hill and scoped the area, and eventually found John. As he hopped in the car I slid the “start trip” button and his destination was revealed as the local Marijuana shop, just 1.9 miles away away.
John and I exchanged pleasant conversation and he was impressed by the quick silence of the electric car. I dropped him off at Native Roots and then parked nearby, expecting another fare to pop up just as quickly.
Ride 1: 5 minutes waiting, 5 minutes driving, 1.2 miles unpaid, 1.9 miles paid. Net fare to me: $3.37
But the second fare wasn’t quite as quick. Fifteen minutes later, the Uber app rang again. It was John, now properly restocked and thrilled that I was still there in the weed shop parking lot. We headed back to the Pumphouse.
Ride 2: 15 minutes waiting, 5 minutes driving, 1.9 miles paid. Net fare to me: $3.37 … plus TIP $5.00!
Hey this wasn’t so bad: that five dollar tip really brought up the average. I was thirty minutes into my career and up about 12 bucks, minus five miles of car costs.
After another five minutes of idle time, the app rang again. This time it was a suburban address listed as 12 minutes (which turned out to be almost four miles) away. I decided to take the ride anyway, in the spirit of experimentation.
I got to the house, but nobody was there. After a minute, I used the Uber app to send the customer a text message. “Oh sorry!”, he said, “My phone GPS isn’t working well because we’re inside so it probably shows us in the wrong place! We’re just on the next street.”
I drove around a bit more and eventually found the young couple, and the app revealed a nice surprise: they were headed all the way to Boulder, which was over 12 miles from this part of Longmont. Surely now I would start earning the big bucks.
After 24 minutes of smooth, expert driving and pleasant conversation, I dropped them off at a restaurant. But I was surprised to see that the total wasn’t that impressive:
Ride 3: 10 minutes waiting, 4 miles unpaid, 12.4 miles paid. Net fare to me: $13.96. No Tip.
Driving in the Happening City
Now I was in Boulder, which has a much bigger scene than Longmont. Everybody is rich, every night is a big night, Colorado University is right downtown and it’s all action – there are no real suburbs. Due to high rider demand, the city operates in a perpetual “Surge Mode” which means Uber Fares are 20-30% more lucrative, and there is virtually no wait time for fares. And now, I was right downtown. So the app shrieked its notification tone immediately.
The customer was only a mile away, but due to the incredible slowness of trying to drive a 14-foot-long, 3300 pound Racing Wheelchair in a dense city it took me a lot of slow gliding in traffic and waiting at long traffic lights to get there. It was a couple of younger guys, heading back downtown.
We slogged through the dense traffic yet again at roughly one third of bicycling speed, and I earned my five dollar fare.
The app rang again, and I saw from the map it was yet another non-downtown person, probably looking for another ride downtown.
I decided not to play this game anymore, contributing to car traffic in a city that needs fewer cars. So I let this ride request go to another driver and set my destination to Longmont, hoping to find a customer heading that way so I could get paid for the ride home. There were none.
So I flew the Leaf back along the highway to home, and stopped at the grocery store to pick up some fresh food and a free battery charge for the car.
Total stats for the day:
4 Rides 1:51 hours
18.6 miles unpaid
17.2 miles paid
$32 including tips
~$18 of car costs
roughly $7 per hour net
After joining Uber as a driver, it was easy to add on a Lyft license: you can submit scans or photos of the same examination info to both companies. So over the next few months, I fired up both Uber and Lyft apps to do a bit more driving and collect some more observations. I had a lot of fun, but made very little money.
One time, I was summoned by a 13-year-old girl coming out of the middle school, effectively turning me into Mr. Schoolbus Dad. After finding her in the school lineup, she directed me to the elementary school, where we picked up her little brother. I dropped them both off safely at home in a rusty suburban area nearby.
Another ride was from a college student, deep in the Colorado U campus. It took me forever to navigate the throngs of after school foot and vehicle traffic and find this young lad in the crowd. During the ensuing 3MPH transit of Boulder, I couldn’t help but remark, “Wow! I apologize for how slow this trip is going. I’m usually on my bike when I cross Boulder, which is a lot faster.”
Our final destination was a strip mall, and he directed me meticulously through the entire parking lot so he could be let off within 20 feet of the front door of the restaurant. End fare for about 35 minutes of work, even with surge pricing, was another six bucks. My resolve to avoid driving cars in Boulder was reinforced.
My favorite times to be a driver were Friday nights. It was fun to feel the energy of people going out on the town, and find out what was going on. I could see Uber driving to be a good escape for single people looking to meet new friends (or romances), because I almost always got along well with the customers, often exchanging business cards or email addresses with people when we found something in common.
On longer rides with people over 30, the topic almost invariably led to life, business, and money, which led to Mustachianism, which led to me admitting my secret identity. Thus, some of my past Uber customers may even be reading this article today(?)
But in the end, it was hard to stay motivated to keep doing this experiment. There is just usually something better to do than driving around in a car, and I wasn’t willing to sacrifice too much of my life to gather more data. And with the financial gain of rideshare driving being negligble, I am surprised that there are so many people who do it.
How to Make the Most of a Low-Profit Situation
Still, as with everything in life, I did my best to optimize Uber driving for both fun and money. From my experience as well as reading online forums, the best way you can do it is:
Use the referral and bonus system heavily. Actual driving doesn’t pay well, but I have seen bonuses pop up on my app offering between $100-$500 to refer other drivers. There are also “weekly guarantee” offers that come up occasionally, offering more pay in exchange for meeting a certain threshold.
Use the lowest cost and most fuel-efficient car you can find. Uber requires you to have a fairly new (under 10 years) car, so get something on the older side of that spectrum, but with low miles. A 2009 Prius, for example, uses less than half the fuel of most cars of similar size.
Focus your driving around on “Surge Pricing”. By watching the app throughout the days and months, you will learn when your area enters periods of higher demand. Special events like Halloween, late weekend nights or major league sports events are popular times.
Try to find trips involving highways. Since you get paid mostly by the mile, you earn almost ten times more more money at 60 MPH than you make in on a long trip through central city where you might average only 6 MPH.
Experiment with the “set destination” feature to filter for rides going your way. Taking fares with you on your commute to work or to an airport.
Make the most of your downtime: there will still be lots of waiting between fares. If you bring a book, podcast, laptop or make business-related calls that help you learn a trade that pays more than driving, you can get yourself into a more lucrative trade.
Suggestions for Uber and Lyft
During the course of this experiment, I happened to receive emails from relatively senior people at both Uber and Lyft for unrelated reasons. So I took the opportunity to make some suggestions to make things friendlier for drivers:
Report the total driving time and miles for each ride and each shift, clearly specifying paid and unpaid miles and hours.
Provide an drivers an estimate of the car costs incurred, and estimated hourly earnings after these costs
Allow drivers to specify the types of rides they are willing to accept. For example, “only ring me for riders within 1 mile”, or “I would like to be paid for for both pickup mileage and rider mileage.”
Provide drivers with the details of where the person is going, or at least how long of a ride it is. Right now, Uber has all this incredibly useful information at the time of booking, but deliberately withholds it from the driver.
I was surprised that none of these suggestions got anywhere. This was a disappointment to the Economic Libertarian in me, because it seems obvious that an open market between buyer and seller is the key to more efficiency.
In fact, early in my driving career I learned how much the unpaid driving was hurting my profitability so I stopped accepting distant fares. The app quickly sent me this note:
Yeah, right. How about you just stop ringing me with fares that are ridiculously far away, instead?
When these companies deliberately tilt the field, they are being sneaky, which causes them to lose public trust, which causes the public to vote in a bunch of sclerotic regulation to protect the drivers and the public. If you, as a company, just avoid being a dick to people in the first place and treat them with complete openness and good old-fashioned honesty, they are more likely to let you run free.
Since I started this experiment a year ago, Uber has fallen into a world of trouble and bad publicity. Their internal culture of sexual harassment was blown wide open, along with the misdeeds of the wild and temperamental former CEO. From specific programs to evade government regulation to annoying treatment of drivers, Uber triggered a widespread backlash which became the #deleteuber campaign. Saying “Uber” is now a bit like uttering the words “ConAgra” or “Philip Morris” or “Exxon”.
In general, I really want companies like Uber and Lyft (and Tesla, AirBnb, Google, Amazon and many of the other tech companies that have been stirring things up so much lately) to succeed, because the benefits to all of us greatly outweigh the inconvenience of the disruption.
For example, some people worry about what will happen to driving jobs as self-driving vehicles gradually take over. But I’m excited about the ways this can make our lives safer, quieter, and less expensive as we give up on owning personal cars, ride bikes much more, and use automated cars as a service whenever the bike is impractical. Technology provides a lumpy ride, but it also provides change which is an essential ingredient in every human life to avoid getting into a rut. So, share on.
Further Reading:How Big Oil Will Die – an interesting walk through the changes today’s technologies have already set in place – leading us very quickly to a place where nobody in 2010 would have even guessed.
* this sentence surely made you ask, “but what about the BUS, Mustache?!?” – good question. Of course I’d always choose biking, then public transit as the first two options, but the airport is 45 miles away (well over 2 hours by bike) and the bus requires a transfer in Denver, which makes it even slower than biking. Also, both Uber and Lyft have referral programs which give you credit for referring friends – I still have a few credits in my Uber account.
If you want to try Uber or Lyft, sign by randomly choosing one of these codes from friends, and you’ll get $5-10 off of your first ride (and give a small surprise to some of the members of the MMM-HQ coworking space!)
Well, despite Mr. Money Mustache’s outrageous optimism, I think we all saw this coming. I opened up my premium renewal email from Kaiser and saw this:
Figure 1: My new insane medical insurance premiums for the minimum available “Bronze” program, with a $6500 deductible.
My family’s monthly health insurance premium, which had already more than doubled in the last few years to $674 per month, was going up a further 44% for the coming year. For no good reason, other than perhaps the the current government’s attempts to kill off the Affordable Care Act. (By cutting various parts of the structure, the insurance market becomes less stable and predictable, and thus more expensive).
Now, before we go any further, I have to note that this is a situation that only affects high income earners. If we were really retired on a $30,000 passive income as we were for some of the decade before this blog started making significant money, our family’s monthly cost would be more like $128, due to tax credits and the Children’s Health Plus plan.:
Figure 2: Net insurance cost for a $30k per year family of three.
But in my email, I just saw the thousand bucks. And if you know how know how I feel about rules, unnecessary costs, and insurance in general, you can probably guess what my initial gut reaction was:
“Fuck. FUCK THAT! This is absolute bullshit. Fuck you, I quit, I’m not paying it.”
But, since I’m not sixteen years old anymore, I was eventually able to get past this first stage of the analysis and think about an actual course of action.
After all, all the power and freedom in the world is of no use at all, if you choose to wallow in your anger rather than taking steps to create the life you want. So I thought about why I was so angry. It boiled down to this:
The premiums are not an accurate representation of my risk.
The value of medical insurance is pretty easy to estimate: the National Institute of Health calculates that the average person consumes about $449,000* in health care spending over an 80-year lifetime, or $5600 per year. This is less than my plan’s deductible alone, which eliminates the value of insurance right off the bat. My plan really only covers catastrophically expensive events, which means it is unlikely that I will ever use it.
Plus, most medical spending is loaded towards the last decades of life, where the Medicare program already picks up the bulk of the costs. And, we are healthier than average – aside from one baby delivery about twelve years ago, none of us have ever actually benefited from health insurance in over nineteen years in the country.
When you add up these factors, it is obvious that the insurance is a bad deal. When presented with overpriced insurance, I always just choose not buy it, which is also called “self-insuring”. But whenever I talk about self-insuring for medical expenses, everyone asks the same question:
“But what if you do get hit by a falling piano and have to spend months in the Intensive Care Unit?”
The answer is that I guess I’d receive some large medical bills!
I’m not denying that an expensive treatment absolutely can never happen to me. I’m just putting an estimate and a limit on how much I am willing to pay for insurance on it.
Remember, health insurance not really health insurance. It’s just “large medical bill insurance” – a shaky precaution against having to pay for expensive procedures, so you can keep your investments instead of using them to pay the bills, perhaps eventually becoming poor enough that you are covered by public health insurance (Medicaid). A better name for it might be wealth insurance.
We have been trained to think that going without medical bill insurance is very risky. But that’s just because the subject appears frequently in the news. If it weren’t such a hot topic these days, the average person without a chronic illness would rarely think about it.
After all, by comparison, what precautions have you taken against being hit by a meteor? There could be one streaking towards you right now. It could kill you, or your children, or it could leave you with lifetime of chronic care costs. Are you telling me you don’t have separate meteor insurance? Why not?
In 2013 a 60-foot chunk of rock came from space and hit Russia with the force of 30 Hiroshimas. The human race escaped with just 1500 injuries, but only because the rock came in at a shallow angle and landed in a very remote area.
If space rocks are too far-fetched, how about motor vehicles? If you choose to drive a car, you are willingly throwing yourself into a far riskier situation than simply self-insuring for medical bills. Even more dangerous, statistically: being inactive and/overweight, a boat in which over 66% of us sail every day.
The point is that while huge, uncovered medical bills are inconvenient, they are rare. Therefore, my willingness to pay for insurance against them must have a limit. I’d definitely pay $50 per month for it, but should I be willing to pay $1000?
What about $2000? $4000? $12,000 or $1 million per month? I think that everyone would hit their “Fuck That” point somewhere in there.
And remember, this problem of expensive medical procedures is unique to the US. You can take your dollars almost anywhere else in the world and pay out-of-pocket to get the same (or better) quality care for a fraction of the cost. At some point, a rational person has to be willing to stop overpaying for this inefficient system.
After doing the math, I decided that my limit is definitely less than $1000, which means I should at least consider other options. So I looked into some of them:
Full Self Insurance
2.9 Months per year of Self Insurance (to avoid IRS penalty)
joining a “Healthshare Ministry” like Libertyshare
expat insurance like Cigna
Artificial poverty (reducing my income to a level where we’d qualify for subsidies)
Self Insuring is the easiest choice: you just don’t renew your insurance and start banking that sweet surplus right away. There is a tax penalty for that: $695 per adult, $347 per child, or 2.5 percent of your adjusted gross income – whichever is greater. Thus, a family with $100,000 of income would pay a $2500 fee. With my new premium at $11,500 per year, the penalty would still be cheaper all the way up to $461,000 in income. Plus, there are a surprising number of qualifying exemptions, including a death in the family within the last three years, a category which unfortunately includes me.
A 90 Day Insurance Vacation is the lightweight version of self-insurance. The penalty only applies if you were uninsured for three months or more. So if you set your new insurance to take effect on, say, February 27th, you cut your premiums by about 25% in exchange for the reduced risk protection. Just be sure to postpone your Wingsuit Jumping vacation until at least March.
Medical Tourism is an important thing that every US resident should be aware of. After all, we live in the country with the most overpriced medical procedures in the world – why should we insist on doing 100% of our shopping here? This would be like insisting you buy only US-produced goods and services: no electronics, no shoes, no Amazon and no blueberries in winter. We should all read a book or two on the subject to understand just how easy it is, to free ourselves from the US-centric assumption that doctors are shockingly expensive.
Health Sharing Ministries like Liberty HealthShare looked like the most promising loophole. Due to the strong influence of organized religion in the US, if you can join one of these, you are exempt from the tax penalty. The downside is the same as the upside: these ministries are exempt from ACA rules, which means they can drop you for having a pre-existing condition. And they also want you to affirm their value system, which can range from agreeable stuff like “taking care of your health” to excluding coverage for things that violate religious taboos like abortion or attempted suicide.
Expat Insurance sounded promising when I first heard about it from some fellow Canadian early retirees who write the blog Millennial Revolution. Companies like Cigna will cover you for worldwide medical costs for a fraction of what we pay here in the US. But the hitch is it only applies if you are truly on the road and don’t actually reside here. So it’s not an option for now. But in the long run when I retire to an oceanfront compound (or commune?) in Costa Rica, yes.
Reduced Income is the last and least feasible option on the list for me right now, but it’s genuine and not even artificial in the case of the typical early retiree.
Suppose you are retired with, say, a mortgage-free home and $800,000 in index funds, and living on a plentiful $30,000 per year. Your income tax return will show only about $18,000 in dividends, some of them even tax-exempt. On top of that, you’ll sell just a few shares and pay taxes only on the capital gains. This taxable income in the mid-20s will keep you in a very low tax and health insurance bracket.
So What Path Did the Mustache Family Take?
I brought all this stuff up to Mrs. MM – the other, less morally-outraged, leader of our household. Our conversation brought up a few things:
Although a $12k insurance bill is insane, we would not even notice a $12,000 difference in income taxes if the brackets were to change. We currently have a high income, but this has not caused us to increase our family spending at all. This is because of the magic of living below your means: once you have enough money, the surplus is just that: a big, fat, awesome bonus. Since I want this enormous surplus to go back to society over my lifetime, why should I be upset about some of it paying for other peoples’ health insurance right now?
But, I countered, this doesn’t apply to everyone. The typical MMM reader earns enough money to be hit by these higher premiums, and many are raising families and running small businesses, thus purchasing health insurance on the open market. At the same time, they are trying to save as much money as possible to reach financial independence while they are still young enough to enjoy it. Burning $12,000 per year on mostly-useless insurance can wipe out 25% or more of the amount you could otherwise save for retirement.
Given this, the Healthshare ministry was one of the better compromises. However, she felt that pretending to agree with a religion (especially if it’s one that actively oppose some things we value like same-sex couple equality and women’s reproductive rights) wasn’t worth it for us.
In my own hypothetical pre-retirement situation (a self-employed couple making $200,000) I would probably go for full self-insurance, simply paying the tax penalty whenever necessary and using medical tourism for any expensive procedures.
But also remember that if you’re a high-income business owner, your business can pay for your health insurance with pre-tax money. This cuts your net cost after taxes by 30-40%, making it a subsidized program after all.
So in the end, we’re just letting the policy auto-renew for now, using that last bullet point as a consolation prize. And these premiums will probably remain outrageous, unless we fix the underlying problem in the US: it’s not the insurance, it’s how much money we waste on medical care. If the Medical system could grow a Money Mustache**, I am certain we could cut our costs down by at least 75%, just as the average consumer can cut their costs by a similar portion just by learning to life a joyful and efficient life.
* I adjusted the NIH paper’s 2000 numbers to 2017 dollars.
** Ideas for making US healthcare less expensive – please critique and add your own in the comments!
Eliminate the 75% of healthcare spending we currently waste on self-imposed lifestyle diseases: eliminate subsidized urban car infrastructure in favor of muscle-powered transportation. Treat soda and products with added sugar in the same way we currently treat liquor. Treat health and fitness (rather than medical treatment) like a human right, instead of a vanity accessory just for rich mountain-dwellers and celebrities.
Make health care purchasing look more like Wal-Mart and Amazon, and less like the DMV. Every standard procedure needs to be listed on a menu with a price, and those need to be on the front door so they are subject to competition. By huge national or even international companies and co-ops.
Drastically increase the supply of doctors, and make the job more enjoyable: Cut mandatory work hours for residents from 80 to 40 per week. Modernize the medical school curriculum to eliminate pointless memorization, reflect current technology and reduce the cost of the degree. Open the borders to qualified doctors from other countries. Allow telemedicine – let doctors in other countries certify easily for US diagnostics and prescriptions.
Elevate nurses to do all the stuff they already do, but in their own clinics without working for a doctor and paying the money up the chains.
Start using search engines and artificial intelligence for diagnosis, rather than flawed and expensive humans.
Open state and national boundaries for insurance and hospital services with only the required regulations for safety as we do with other imports.
Eliminate the right for anybody to sue for medical malpractice, or indeed for pretty much anybody to sue anybody else for anything. Let’s make our professional reputation and our actions public and then just suck it up like adults, reinvesting the enormous proceeds currently wasted on litigation.
Figure out if we can make single-payer health insurance can work for us as it does for most countries. There are many benefits, but the biggest is probably just eliminating all the mental energy we each waste on thinking about this mundane topic. As an analogy, imagine if every citizen had to hire their own police force for personal security – just think of how much energy and fear would be wasted on this topic, which we barely have to think about right now. As it turns out, it works the same way with health insurance.
MMM Note: The following is a lesson from our Canadian friend Mr. Frugal Toque, a long-time reader and contributor to this blog, and soon-to-be early retiree.
“This above all: to thine own self be true.”
– Commander Data, probably quoting some old English guy.
I can’t say for certain that we Mustachians need perfect honesty: I’d be lying to you. But if we’re to proceed with the utmost efficiency, we’re going to have to at least cut the crap out of our own lives when we look in the mirror and get down to business.
Do you drive a car? I do. Do you lie to yourself about how much the use of that car costs? I used to.
The Toque family makes an annual visit to Grandpa and Grandma Toque every summer, a family reunion of sorts to meet up with the entire Toque clan. Mrs. Toque and I would always record this journey, 600km in each direction, at a reasonable cost of about $100: billing the whole thing to ourselves as if it were simply the cost of gas.
We’ve made this journey for 18 years, every summer we’ve been married and the one before that, and sometimes more than once per year. To add to the issue, before we’d even met, I’d make that 1200 km round trip several times a year in a small sports car with at most one passenger, always billing it in my head as the price of gas.
I would lie to myself, basically. Even while train rides made themselves available, at something like $70 or so round trip, I’d take my own car because, “Hey, it’s same price, right? Plus, I’d have my car with me when I get there.”
Never mind that the Toque grandparents live within walking distance to everything and had extra space in their car for events farther away. No, I took my turbo-charged sports car on that long journey, never really accounting for the insurance, maintenance and depreciation it cost me.
Nowadays, having chosen the career Software Engineer over Professional Race Car Driver, I got rid of the sports beast and drive a tidy little Nissan Versa. It only burns through my cash at about 20 cents per km. Despite this savings, this past summer, we took the train on our annual sojourn.
First of all, I have to say, “Holy shit! Trains are awesome.”
If we book our train seats all at once, Mrs. Toque and I and get two comfy seats facing our two children. Then, like a particularly fast cloud, we get to drift lazily past all of the highways we’d normally find ourselves jammed up in. I calculate many tens of dollars of benefits associated with the absence of swearing at stupid drivers and worrying about getting ourselves in another highway collision requiring the procurement of a new car.
In my sports car days, my racing vehicle must have burned through at least 40 cents per km, some $500 per round trip, when a VIA train ride would have cost a tiny fraction of that for a single person. Nowadays, with four seats purchased for the entire Toque family, the cost of the equivalent train ride runs up to $360, exactly the cost of taking an average 30 cents/km car on the same trip.
But here’s the thing: the cost of the train ride is honest. Our consumption stares at us, right there when we hand our credit card information over and click “Proceed with Order”. It doesn’t hide away in the depreciation of our car, maintenance costs and insurance. We can’t lie to ourselves that our trip only costs the price of gas.
Yes, nowadays we drive a cheaper car. But taking a car because it’s cheaper is still lying to ourselves. Believe it or not, many of the costs of driving a car are hidden away in road maintenance and pollution, line items we find really hard to quantify. I feel confident, mind you, that if we were to find a way to quantify the damage exhaust fumes do and the subsidies that go into highways versus railroads, we would discover that the train ride costs a lot less.
This is what I mean by saying that we can get richer through the use of Conspicuous Consumption. By putting your consumption out there where you can’t hide it, where you have completely honesty, you’ll find yourself getting richer. If, when I’d driven an Eagle Talon TSi, I’d been honest with myself, I’d have saved over a thousand dollars in wear and tear on my car every year.
Moving on, I’d like to give one more example.
A few years back, Mrs. Toque had lamented that many of the children’s Lego constructions had grown dusty. Since the mini Toques wanted to keep many of their toys in the fully assembled state for playing purposes, they would store their toys on dresser tops and inside bookshelves. Layers of dust had accumulated and become unsightly. Now, you might begin to wonder, how many Lego sets are we talking? Figure for a pair of boys, 9 and 11 years of age, receiving a Lego set for each birthday and Christmas since they turned 4 or so. Add in there Mr. Toque’s own building block stash from his own childhood, and we have a lot of the magical clicky-blocks hanging around.
Mrs. Toque wisely proposed the purchasing of a set of simple glass cabinets, which the children could easily operate to retrieve their toys, but would encourage them to “put things away”, and also keep dust from accumulating on them in an unsightly fashion. As a side note, many of these cabinets can be found cheap, but slightly used, over the Internet.
What does this have to do with Conspicuous Consumption? Behold the image.
This is going to hurt my Frugal cred, I know.
We’ve discovered a delightful side effect of these cabinets, and thus I’m writing to you about it. Whenever the children show interest in acquiring new toys with their allowance, we take a moment and pause in front of the glass cabinets to look at all of the toys currently available. Are you certain this new toy is significantly different from the toys you have here? Isn’t such-and-such just a re-paint of so-and-so? Is the new toy going to increase your happiness enough that it’s worth the allowance money you’ll use up?
Like many other money-related exercises, the goal is to build habits in our children that will serve them for life by preventing them from becoming Clown Consumers looking for happiness at the far end of their credit cards’ limits.
Toque Junior (II)’s custom creations.
It’s not fool proof, mind you. Allowance still flows into toys, but even the younger of the two brothers, at nine years, shows a lot more conscientiousness about it. He has since built a fleet of his own creations, rather than relying on the official designs, and he spends a bit of time disassembling the formal constructions in order to harvest pieces from them.
There you are: a Hot Tip from the man in the Cold North. Make your consumption as conspicuous as possible and learn the very finest lessons from it.
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