I rarely write on anything else than Tokyo on this blog anymore. But I have previously used this blog to reflect on some more personal financey topics, especially in this fiery treatise arguing against our real estate obsession which got a good deal of clicks.
Other posts in this category included those on impact investing and the state of economics education, among others. Anyway, this just to refresh my mind and gather some courage to stray from the all-too-familiar Tokyo and Yangon posts this blog has seen over the last few years.
FIRE (short for “financial independence, retire early”): First off, I am not among the initiated, and do approach the movement with some skepticism. I hope that such transparency upfront creates some goodwill among the believers.
This being a blog I also do not want to spend too much time on describing the movement, but am aware of its desire to achieve financial independence through frugality, financial literacy and the informal capitalization of everyday possessions and activities (summary borrowed from this great paper, more from it below).
I wanted to write a few words on this after reading a Spiegel article the other day – basically on “how to become financially independent”, in which FIRE proponents are given some space. They save a large chunk (>50%) of their income now in order to be able to retire early, often decades before they’re “due”. Needless to say, they become masters at saving, by keeping tight budgets, downscaling their expenses and lifestyles, etc.
There is a lot to agree with if you think about FIRE: a skeptical view toward consumerism and a life spent at work in all-too-often mundane (i.e. bullshit) jobs. It perhaps inadvertently helps scale down our carbon footprint and allows for more meaningful social interactions, especially with family.
I think this VOX article sums it up nicely and also reflects some of the critical voices within the movement and outside of it, especially surrounding the many privileges of those who can make FIRE a reality for themselves.
I have some personal reservations with FIRE as a philosophy – primarily because I don’t think that frugality is my cup of tea. Perhaps it is because of a health condition that someone like me views mortality differently, hence assigns a higher discount rate to future consumption. I also really like to eat and drink out (when that is possible in this new normal), and am not against the occasional frivolity of conspicuous consumption.
The problem I see with FIRE is also not a flaw within itself. FIRE does not aspire to be political, or even “anti-capitalist”. Some of its main tenets lie in a rejection of certain capitalistic principles (FIRE detests debt and consumerism) but it is not about constructing an alternative, inclusive social vision, or even an ideology.
It is inherently individualistic, and in my mind just another answer capitalism has found to mute some of its critics. The financialization of everyday items like bikes, coffee machines and DIY work at home is meant to free you from the shackles of a capitalist world, but does it not enslave one to an equally confined world of Excel lists and budgets?
That is not even my main point, which to me is that in its rentierism, FIRE propagates a contradictory worldview:
What is crucial here is that the mentality of investment and calculation is turned against an allegedly exploitative and mendacious system of capitalism, and put in the service of a more honest, decommodified existence.
Nick Taylor & William Davies (2021): The financialization of anti-capitalism? The case of the ‘Financial Independence Retire Early’ community, Journal of Cultural Economy,
This more honest, decommodified existence requires FIRE individuals to be rentiers: they often own real estate (which is problematic on its own as I have polemicized before) but are primarily invested long-term via index funds. Those passive investment vehicles mirror major stock market indices such as the S&P500 or the FTSE100. The logic goes that being long stocks so broadly delivers in the long-term if you can see past the regular volatility.
Stock market indices are a reflection of our current economic model, i.e. they are composed of carbon-intensive corporates serving a consumerist society, whose mission statements are at odds with a sustainable world. To wait for a change in the composition of these indices by remaining passive, hoping they will go “green” one day, is arguably little more than wishful thinking.
The world FIRE devotees want to retire in might therefore not be around if they invest passively. We struggle with this not just in FIRE, but in all other long-term pension / endowment questions but I find the contradiction in FIRE especially blatant given the centricity of money and asset accumulation to its founding philosophy.
Come to think of this, I see this in a lot of people my age and younger, millennials and Gen Z; they’re critical and likely way more liberal than older people. However, they seem to have taken to heart that stock market returns will be always be positive, in the long run (dangerous), and that they can separate their worldview from their investment decisions (morally dubious). Basically all that counts is compound interest.
The recent growth in responsible investment options for the retail investor remains a smoke screen, at least as long as most “good” and broad ETFs out there offer the thinnest possible reduction of our investment universe.
In the end, the reclusive “opt-out” nature of FIRE to me seems strangely apolitical in a world that needs more activism, and perhaps fewer Excel sheets.
The alternative? Fight for meaningful work, become politically engaged so you can become an active proponent of alternative work/life models that already exist out there and that will take those along who are not as fortunate as you are, invest your money in a more targeted way,…