Sunday, March 15, 2015

Creating Muses

Lots of people like the idea of working for themselves. No boss. Bob Dylan claims no matter what you do, you still gotta serve somebody. Despite Bob's warning, Tim Ferris argues that we should instead aim to have a muse. A muse is something that generates a cash flow and so allows you to get on with something else. Branko Milanovic argues that we shouldn't call things Human Capital. The difference between Capital and Labour is that Capital can get on with it while you do something else. Capital is a muse. While Capital and Labour may both generate $10,000, the owner of the Capital may have no involvement whatsoever. Now that slavery is gone, you can't own labour. Labour belongs to the labourer. So the owner of the labour can't get on with something else. You have to convert Labour into Capital for it to become a muse.

The large majority of income earners will think of their greatest asset as their car or their house. They forget themselves. You may be a muse for other people, but for the most part you will be trading your time and skills for income and so you are in fact your biggest asset. But you aren't Capital. That is why disability insurance is so important. If you can't work anymore, the income will stop coming in and you will still be around needing to spend it. If you have capital, or a muse, that cover your needs, insurance is no longer required.

Retirement is very much an industrial age idea. At some point if you depend on your labour, the body will decay and you will have to stop. You need to make sure that you have money for that eventuality. Instead of retirement, I like Ferriss' way of describing a process of creating muses. If you don't spend everything you earn, you can slowly become your own patron.

Things have gotten cheaper. The world has moved forward. If you cast your mind back to the lifestyle you had growing up in terms of material goods, I imagine most people had a far simpler life. Simpler merely from the point that we could probably make the things that we had for a fraction of the cost. We just have better things now.

We don't have to carry on shifting. We can decide we have enough and start the process of shifting labour to capital. If you think of your money as an employee, and make sure it is doing something useful, it can become your muse.

What would you do with your time if you didn't have to work?
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