I’m taking a break from tech to talk about the Financial Independence (FI) community. If this isn’t interesting to you, please skip it. I’ll be back with a new tech post soon.

As someone who has been enamoured with FI I want to discuss the drawbacks.

Over generalist

Many FI writers emphasise the importance of developing a broad range of skills. Early Retirement Extreme is one of the most extreme (surprise?) versions of this. The author turns his hand to seemingly everything: making fires with flint, carpentry, writing, property maintenance, accounting etc. The idea is to retain as much money as possible by reducing the need to pay others for services.

I read a book which really challenged my thinking on this, Thou Shall Prosper. I’m not religious so parts of the book were lost on me but there were some interesting ideas. One in particular was that specialising and outsourcing is the path to building wealth:

Finding genuine joy in friendship with others and cultivating many such friendships is essential. This alone, however, is not sufficient. One must be master of some way to help others live their lives. For example, suppose I have 90 minutes available this afternoon. Because time is the scarcest commodity, I want to decide very carefully how to invest that time. I could watch a game on television, but that would not be an investment of my time; instead, it would be a dissipation of my valuable hour and a half. I could mow my lawn with my hand pushed lawn mower, which would at least have a health benefit for me. Or I could finish writing a manual for a car dealership owned by a friend of mine. The car dealership had provided me with details of its operation and desperately needed a flowchart-based operations manual. Writing the car manual for my friend is the best use of my time. Here’s why. Once I have completed writing the manual after about 90 minutes, I can drive over to the dealership, give my handiwork to the owner, and pick up a check for $ 350, the agreed on price for the work. When I get home again, I find that the person I hired to mow the lawn has just about finished the job. I happily pay her the $ 60 we had negotiated and retire to my armchair to think about life. During the passage of the past two hours or so, instead of mowing the lawn, I had made two people happy—three if you count my wife who wanted the lawn mowed. On top of that, I still made myself a profit of $ 290. I could have mowed the lawn myself, but it would not have looked as good as it looked after being manicured by someone who really knew her job. Life is a miracle, provided you have many friends and provided everyone knows what everyone else does best. That, of course, is the value of advertising.

I don’t subscribe to the view that an individual should only specialise in one thing. However, I like the idea of building a network of people who serve each other with different specialities. Specialisation enables people to get highly skilled. I recently spent a weekend changing the taps in my bathroom. I didn’t particularly enjoy it. I also didn’t do a particularly good job. The difference between my handiwork and the rest of the bathroom is obvious.

Penny smart pound foolish

This idea follows on from the last. Let’s go back to the example of my taps. I spent approximately £50 on equipment. I spent the best part of a day. And, I’ll have to get it re-done by a professional because the finish is not up to standard. The cost of calling a professional would have been around £200. I saved £150 in the short term but I wasted a lot of time and will need to pay the £200 at a later date anyway. Penny smart and pound foolish!

Moreover, I think that the FI mindset encourages short-term thinking. How can I earn £10k more this year? How can I save an extra £1k? These are short term questions. A better question to ask is: How can I build more relationships that will benefit me for years to come? For example, one way to save money is by making lunch/dinner at home. It saves money and is typically healthier. In general, cooking at home more and eating out less is a great idea. However, taken to extremes it can lead to missing out on relationships and job opportunities. Meeting up with friends/colleagues can yield job opportunities. Missing out on a £50,000 a year job opportunity to save £2.50 on lunch is not a good tradeoff.

Perceived as mean or selfish

If I save 50-70% of my income, I can’t offer to pay for somebody’s lunch. I can’t afford to book a surprise trip for my partner or go on a last minute holiday with friends. The result of these individual actions is hard to measure but I believe they erode relationships overtime. A partner who doesn’t feel special is unlikely to be happy. A friend who always pays for lunch is unlikely to stick around.

Always living in the future

FI is all about doing things now that will lead to a better future. Nobody would save 50-70% if there wasn’t a positive future outcome. Saving for the future is sensible. In fact, I’d argue that it’s reckless not to save anything. However, I’ve found that FI leads to an unhealthy focus on the future. Hustling to retire at 45 is great but then what? Personally I’d continue writing software. Nothing would change! As someone who spends too much time living in the future, already. It’s important for me to be present and enjoy what I have right now.

Fooling yourself into believing that a person can ever be fully independent

What I find appealing about FI is attaining independence. Not needing to rely on others. Being secure whatever happens in the world. I now realise that is an illusion. Thou Shall Prosper Illustrates this nicely:

Imagine some catastrophe that wipes out all human beings but one. Surely the survivor is the wealthiest human ever to inhabit the planet. The survivor owns not only Fort Knox but also all the gold beneath the offices of the Federal Reserve in New York City. He has access to every safe deposit box and owns every office building in the heart of every city. He owns more airplanes and yachts than have ever been owned by anyone in all of human history.

You might peer into the daily life of this unprecedented tycoon. What does he do once the sun goes down on his first day as ruler of the world? Why, read by candlelight, of course, because lights no longer go on at the touch of a switch. Nobody is left to operate the electricity utility. At first he will eat fairly well, at least until the grocery stores (all of which now belong to him) run out of produce. Sooner or later, even the canned foods will spoil. At that point he had better hope that his first harvest ripens successfully before he starves to death.

I believe the best way to be resilient against future change is to keep learning. And to build a valuable set of skills, relationships and reputation.

FI is a defensive mindset. Save as much money as possible and retire early. Hold on to it as best you can in order make it through to the end. It’s not a recipe for doing interesting things or taking any risk. I don’t think it’s a recipe for building a great career.

Final thoughts

All that said, I’ve learned a lot from the FI community. I reviewed my expenditures and cut out everything unimportant. Most people would benefit from applying some FI principles. However, after going extreme, I’m seeing the value of spending a little more and focusing on having a good life and doing great work. I think this will lead to a richer life and a better kind of financial independence.