Imagine you want to watch a film.
The cheapest way is to wait for the film to run on free TV. But what if you want to watch it as soon as possible and are prepared to dip into your Freedom Fund to get it?
You have a choice. You can either buy the physical DVD or you can use a Netflix type service to download the film. The film is the same either way, but the download model is more efficient; it’s faster, it uses less resources and creates less waste.
With the download there are no white delivery vans guzzling diesel, belching out fumes and trying to intimidate other drivers. There are no plastic packaging materials destined to sit in a landfill site for a couple of thousand years.
The market rewards the best use of scarce resources and sends you these signals via the price mechanism which is why download services can undercut the cost of physical DVDs. Buying films via physical DVDs is now becoming an outdated sucker move, financially as well as environmentally.
But physical DVDs will probably be around for a while because some people like their physical form – a box they can hold, a thing they can point to. Although we enjoy films as an experience and then as a memory, some people also crave a physical reminder.
This is the basis for the gigantic Hollywood film merchandising industry. When I was 8 and had just seen Star Wars, there was nothing on earth I wanted more than a toy lightsaber. Even though its performance in chopping my brother’s arms off would no doubt have been disappointing.
Physical possessions are not all they’re cracked up to be. As adults we may feel the same way about a new car as I felt about plastic toy lightsabers as a child. But its all just stuff.
Like most people, I was an acquisitive idiot when I was 8 years old. But the acquisition rush always wore off and I gradually learned to be slightly less of an idiot when it came to buying stuff.
Having children of my own now gives me perspective. They regularly fall in love with utter shite. My 12 year old boy sheepishly admitted to me recently that the “must have” toy frog that he bought on holiday last year was just a bit of tat. The next time your co-worker starts bragging about their new BMW, bear in mind that they have less self-awareness than a 12 year old child.
I think about physical possessions and money in the same way as films. Stuff is like physical DVDs. Once you have bought stuff, it sits around long after the thrill of acquisition has gone. Our house is full of these relics of our past spending. Now they just sit there, taunting me to take them to the charity shop.
Its better to have a big stash of financial wealth “in the cloud” that you can use to “download” anything you need. I like to walk around carrying as little emotional and physical baggage as possible. Instead I carry a little plastic card that allows me to access the awesome power of The Freedom Fund.
This is the opposite of how most people live. Most people spend their time and money accumulating stuff. Even when they have almost zero net worth, they are buying more physical shit to clutter up their minds and their living space. Once they’ve filled up the attic and the garage, its off to the self storage centre where they pay more for the privilege (this is good money after bad).
We all come into this world travelling light. Unfortunately, over time we accumulate stuff like ships hulls accumulate barnacles, slowing them down and reducing their efficiency gliding through the water.
When I was younger and renting a flat in London, I typically moved once a year. This was a great way of avoiding accumulating too much shit. When I moved, everything I owned in the world had to fit in the back of a Ford Fiesta. No lorries or workmen were required for the move…I just got in my car and drove to the new flat.
Our ability to accumulate shit grows as we get jobs and pay rises. You may meet someone special and inherit their shit as well. When you move in with a significant other, compromises and babies may get made. Result: more shit. Unless you successfully negotiate with your spouse, you may find yourself losing the war against materialism and end up living somewhere that looks like a cross between a Toys R Us warehouse and Imelda Marcos’ shoe cabinet.
But the good news is that we can always scrape the barnacles off the hull and travel through life with less shit. This requires making conscious choices. When I cycle up Mont Ventoux, I will be travelling light. I don’t want to be carrying panniers, tents, stoves, tins of baked beans and the kitchen sink up a mountain and then over 530 miles. What I will have instead is a credit card that allows me to access all the things I need as if by magic.
These days, I also travel light with my financial assets. I used to own some physical gold in the form of coins. One of the main disadvantages of these (other than not being wealth creating or income generating assets) was that they required storage.
That was fine most of the time when I just stashed them somewhere in the house. But then when it came to our summer holidays I would always feel a bit nervous leaving them in an empty house. So I buried them in the garden.
I then spent 2 weeks mostly enjoying myself…but also worrying in case burglars with metal detectors or some squirrels dug them up and stole them. It seemed unlikely but maybe I’d come back and see gangsta squirrels decked out in gold bling, fronting and maxxing in the garden. You may say that’s paranoid but that’s my point: focussing on physical possessions will do that to you.
If you want to visualise what an extreme focus on possessions does to your soul, remember Gollum from The Lord of The Rings. Gollum thinks that he owns the Ring but the truth is that the Ring owns him.
Gold was only a small part of my portfolio, but it created a larger mental burden than financial assets like shares. I didn’t worry about my shares…I knew that whilst I was on the beach, my companies would be working to create more value for me. So I think of money invested in financial assets such as equities or bonds as being “in the cloud” in the sense that it is not a burden and is not cluttering up my life.
The standard consumer sucker assumption is that the more stuff you have, the happier you will be. This may have been long ago, but most of us in the West have gone way past the point where diminishing returns set in.
Physical possessions come with liabilities. Every physical asset you have potentially requires space, storage, maintenance, insurance and cleaning. In other words, hassle.
When I was young and waiting in the Dentist’s reception, I used to look at the houses in glossy magazines like Country Life and imagine owning the tennis court, the woodland, the swimming pool, the maze and all the shit that went with it. After I actually owned a house (a small London terrace), I realised that stuff comes with an set of maintenance obligations and hassle.
And you don’t need to own something to enjoy it. For example, if I want to walk in beautiful woodland, there are two ways to do this. The Hard Way is to work for The Man, save a few hundred thousand pounds from your earnings (after tax ) and buy some woodland in the South of England.
The Easy Way is just to go walking for free in your local woods. The Woodland Trust plants and maintains woodland all over UK and the woods are open to everyone. If you feel the need to spend money, you could join the charity.
The trees don’t know you “own” them and it doesn’t make any real difference to your experience walking through the wood whose name is on the title deeds at the Land Registry. For all I know, there may be badgers, foxes and other woodland creatures strutting round the oak trees telling members of the opposite sex that they own the woods.
Another way to keep your stuff “in the cloud” is to sell your stuff as soon as you have used it. That way you can use Ebay as your cloud storage datacentre and have the proceeds compounding in your portfolio. Should you need the stuff again in the future, the internet and the stuff will still be there and you can just buy it back again.
In Britain we’ve been conditioned to believe that you can’t go wrong with property. I can understand wanting to own your own home as that provides a sense of security. I can also understand buying rental properties as financial investments.
But I don’t know why people feel the need to own holiday homes. I prefer to keep my holiday homes in the cloud, from where they can be rented with minimum hassle and maximum optionality.
We just got back recently from spending a week living in an apartment bang in the middle of Rome. The apartment was great and the neighbourhood (Trastevere) was beautiful and cosmopolitan.
But I didn’t feel any need to buy the apartment as I know there are any number of great apartments in cool neighbourhoods in amazing places all over the world.
Each time you buy something, you lose some optionality and freedom. Then you’re stuck with an obligation to look after that possession. If I bought the Rome apartment, the dream would be replaced with the reality of dealing with Italian council tax, expensive lawyers and tradespeople,
I wonder…what’s Italian for “You’ve ‘ad some right cowboy put that in” and “Its gonna cost yer“?