The FIRE Movement Is One of the Saddest Things on the Internet
Here’s why.
FIRE stands for Financial Independence Retire Early.
FIRE proponents strive to get high-earning jobs, invest 70% of their income into the stock market and reach a big enough sum to live off their dividends without having to work.
According to Wikipedia, two books written in the 90s and one blog called Mr. Money Moustache spread the gospel of FIRE to the Internet.
In this article, we’ll look at why the FIRE concept is flawed and hopeless.
1. It Stems Out Of Laziness
The FIRE movement wasn’t established out of a need to reclaim your freedom.
It was established out of a need to do nothing. To just lazy around.
And to watch other people work.
It’s not only lazy, but it’s also incompatible at scale. Think about it.
If everyone saved one million and retired early, who would get the world running?
This is why I don’t like FIRE. Whatever principle I adopt, I always make sure it respects the Kantian principle that the world would still work out if everyone applied it.
The FIRE movement ain’t it.
2. They’Re Not Using the Right Techniques
The problem with FIRE is that it includes keeping your job.
However, no one ever became rich out of working 9–5.
Why?
Because getting a job is an event-driven activity. You apply, get a job, and a month later, you earn money.
You earn money because someone already worked hard at establishing a business (or a country) and made a nice, warm place for you to come work for them.
It’s too easy. You can’t just make a lot of money by working this little.
This is (one of the reasons ) why jobs that demand processes (learning skills, like IT) pay much more than jobs that don’t (serving burgers).
Trying to get rich with a job is like trying to bike to China on a Peloton bike.
It rarely works.
3. They’Re Sacrificing Today for Tomorrow
FIRE sacrifices the pleasures of youth for the comfort of old age.
FIRE people, often in their twenties or thirties, don’t:
- Drink with friends
- Watch movies at the cinema
- Travel
- Take holidays
- Buy without looking at the prices
- Enjoy life
Every nickel is spared and accounted for. Everything is invested to grow “the pot” into a sum that will make them enough money for the rest of their lives.
Great life!
4. It Rarely Actually Works
And the reason why it doesn’t is that one million is a lot of money to spare with just a job — and it’s not even making you that much.
If we take the stock market as an example, you can hope to make on average 7% yearly but you need to discount 3% to reinvest due to inflation.
So let’s 4%.
That’s 40k a year.
Are you sure you can afford the restaurant with 40k a year? How about heating in winter?
The other reason why it doesn’t work is that people whether consume, or produce. It’s a zero-sum game.
You whether produce stuff, or you consume them.
There is no in-between.
This is why people that do nothing never have any money (they’re constantly consuming since they are not producing anything).
So, once the FIRE people reach their million, they have a hard time sticking to their budget since they stopped working.
They’re “free”…but they can’t do anything since they have nothing to spend.
Is it really freedom?
5. They Are Counting on Something They Can’t Control
I think the reason why the FIRE movement is still strong is that we haven’t had yet a major stock market meltdown since 2010 when the movement started.
The market crashed in March 2020, sure, but quickly recovered.
Why am I speaking of this?
FIRE is based on giving all your money to Wall Street (or Euronext) and enjoying dividends and asset appreciation.
So far, the FIRE people that became free in 2010 have been enjoying a pretty rewarding stock market.
Let us not fool ourselves — this won’t last!
What will you do when your $1 million net worth crashes and the S&P500 erases half of your income and net worth?
What will you do when Apple and Coca-Cola suddenly refuse to pay out dividends?
The money the FIRE people set aside is not enough.
By putting all of your money in one basket, you will lose a lifetime of savings when the inevitable eventually happens.
The stock market can’t be controlled.
Do you really want to count on it for your ability to eat?
And yet, a stock market crash is not the worst thing.
What if you spend the first 15 years of your working life to retire at 40 years old and live off your savings…but die before that?
Life is now.
God knows what will happen tomorrow.
6. They Are Building Their Asset the Wrong Way
FIRE is built on the passive income idea.
Passive income happens when you have a low-maintenance asset that wires you money every month without you doing anything.
Money is the “lowest-maintenance” of the low-maintenance assets, hence, it’s the one the FIRE people are trying to build.
The FIRE people and I agree that money makes money.
Good.
But…there is a but.
Money is one of the most difficult financial assets to build.
Imagine you earn 200k/year, which is…a LOT of money (mainly happens in the US btw, doesn’t happen in the rest of the world).
You save 70% per year. That’s 140k. 1 000 000/140 = 7 years.
7 years to build an asset that will make you 40k per year (1 000 000*4% per year = 40k).
Does it look like a good bargain?
Let’s be honest. No one ever got rich from a job.
7. They Ignore Mankind Needs Work
That’s the most important point.
What the hell are you going to do once you’re free from your job?
If you think you will “enjoy life”, let me tell you: you won’t, and for two reasons.
- Mankind finds meaning in building something, taking care of something, or fighting for something.
- Doing nothing costs money (as we said above).
As a result, you will end up in a self-made prison. Dying to do something meaningful without the financial means to do so.
Too rich not to need to work, but too poor to buy anything.
8. They Rever Warren Buffett But Don’t Understand Him
One more time for the people in the back.
WARREN BUFFETT DID NOT BECOME RICH BY INVESTING IN THE STOCK MARKET.
Buffett bought companies and actively managed and grew them (and on top of that, he is a terrible investor, but this is out of scope here).
Most companies that Berkshire Hathaway owns are privately owned.
The difference between Warren Buffett and the rest is that Warren never created any company.
Too lazy (and risk-averse) to do so, he bought companies that were already making money, waited 4 or 5 years to recoup his investment, and bought more companies with the profits.
Furthermore, Buffett became rich old.
In an interview, Charlie Munger declared that Warren Buffett only became a good investor at 65 years old.
Way past the FIRE people’s deadline.
Conclusion: You’ll Burn Yourself With FIRE
The FIRE idea is honorable.
After all, we weren’t born to pay taxes and die.
But the methods that FIRE is built on are wrong.
The premises are wrong.
And the promises are wrong too.
You can’t become rich with a job.
You need to build a business.
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