Sunday, June 28, 2015

More. Or Less.

How much is enough? We know that we think in contrasts. The Easterlin Paradox shows that while richer countries (up to a point) report more happiness than poorer countries, within countries there seems to be less evidence that happiness changes over time. A lot of our happiness comes from relativity. We like things to improve, and this carrot keeps us moving forward. As things change, we adjust.

Mean Subject Well-Being in Japan (Easterlin 2011)

I can remember the first time I stayed in a hotel for work. I didn't know that it was close to the cheapest possible hotel you could be in. I had no benchmark. What I did know was that there was free hot chocolate in the room! And two biscuits. The fact that I still get excited by free biscuits kind of gets in the way of this being a good story to emphasise my point. That said, all my colleagues at the conference were less than impressed with the accommodation. The more business travel you do, the more difficult it is for the room to excite you. It can irritate you if the wifi connection or water pressure is bad, but it is difficult to recreate the feeling of a new traveller.

The problem with relative happiness is that it is an arm's race. As we and those around us adjust, happiness ends up fading. I think this quirk of our psychology is good at dealing with motivating us for the brick and mortar foundation of happiness. Ripping ourselves out of poverty and putting a roof over our heads and food in our bellies requires some grind. The Hard Stuff. We do what we have to do when the people we love need us. Like toddlers, it is only when we have a safe base that we can confidently venture off to play. 

Putting a roof over our heads should theoretically be getting cheaper and cheaper. We can also, theoretically, eat healthily and affordably. The answer to the question of how much is enough? More. More than the people you benchmark your success against. More than your friends. More than your family. More than you have now. Unless you are able to break free from that. Then the answer is probably - less than you think. Perhaps, less than you have. It is incredibly humbling to look at a graph of GDP per capita around the world.

Enough is relative. To use investments to generate the nominal average GDP per capita of South Africa per year (c.$6,500) you would need about $65,000-$130,000 in capital (c. R750K-R1.5m) if that capital was productively invested and returned 5-10% per year. South Africa is 80th out of 183 countries. Here is where perspective gets crazy. That may be the average, but the average gets pulled up by people at the top. The majority of people would be living on much less than that. In order to get that income - there would also be expenses involved (commutes, food cooked by others). Our biggest expenses come from needing to live and work where everyone else is, and because we are time poor.

If you had that capital, but didn't have to work, you could get very creative in dramatically cutting down your costs. Less costs need less capital to sustain. If the money is invested, it isn't just about how long it will take you to spend the money. It becomes a different kind of relative competition. How much do you spend relative to how much your money makes. Your money can work wherever in the world it is most productive. It doesn't mind being made redundant if it is more useful elsewhere. It can work for a few companies at the same time so it has a much more level playing field with the bosses than you do.

Your job then becomes the frugal homemaker. The top three bits of Maslow's triangle become how you get rewarded. Of course this all means a complete mind shift from what you may have been aspiring to. The answer to the question how much is enough is still - More. Or Less.

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