How dependent are you on various systems in your environment? Consider:
- the electrical grid
- internet through your local ISP
- reliable cell service
- accessible banking system
- clean water on tap
- your employer
- the borders of your country
- your automobile
- fossil fuels
- farm produce and farm animals
You probably know where I am going with this post. The more dependent we are on local systems, the more risk exposure we have, the more frail our existence, and the more likely that we will experience extreme financial pressures.
The financial pressure would result from trying to buy your way out of a system failure. It could be rather benign but could also cause tons of stress.
Everyone in the US is dependent on various systems to some degree. The rich, however, tend to be most reliant on systems, while those with fewer means tend to be more self-reliant.
So, at worst a major event would even the playing field. Which for us high-earners would mean that we’d suffer quite a bit while those with less resources would feel very little turbulence.
Big systems fail
Today I will have a 14-hour water shut-off in order for the city to perform some road repairs. I planned ahead last night and filled up some containers in order to use throughout the day.
Doing so made me intimately aware of how much water I use every day. And this morning I realized how often I reach for the faucet when I’m at home.
Any system can fail as we’ve seen around the globe and in the US. Our security than be threatened by a hemorrhagic virus or a violent overseas threat.
Our reliance on fossil fuels is one such system. Imagine a sudden drop in the supply of diesel or gasoline or coal. Renewable energy and nuclear power plants don’t have near the capacity necessary to support our current reliance on the fossil fuel system.
Even that fancy Tesla would be rather expensive to recharge.
Many physician day-traders in 2001 got hosed when the market crashed. Some got back into it in 2007 and got wiped out again by 2008.
This post won’t be about end-of-world events, don’t worry. But it’s important to recognize that even small hiccups can cost us a lot of money. Many of our gains may get wiped out or we may end up having to pay a ton more for services which we’ve gotten accustomed to.
Systems with high dependency:
- streaming video (Netflix, YouTube)
- social media (facebook, Twitter, Instagram)
- transportation (commuting to work)
- our health (hospital systems, medications, insurance)
These examples are enough to illustrate the point. They aren’t all that hard to solve for. Even a few degrees of decoupling can increase freedom. And it will allow for healthy competition to arise in the economy and prevent major crashes in markets.
It’s rather easy being a citizen in a dictatorship, you have very few options, leaving you with very few decisions to make. It might suck living there but at least the responsibility is off of your shoulders.
In a free economy, in a private ownership economy such as the US, each of us needs to vote daily and produce regularly in order to keep the system purring.
The voting sticker you get from your employer or local coffee shop for voting for a president is one of the least effective ways to vote. Not only are you choosing between only a handful of viable options which were pre-selected for you, but you also don’t get to revote for another 4 years.
As consumers we flock to Apple products. We shop on Amazon. We get our cell service from Verizon, AT&T, Sprint, or T-mobile. We rely on Whole Foods for our healthy food options. We get our medications from CVS or Walgreens. Our news sources are CNN, CNBC, BBC, or NPR. We search using Google. We consume our short videos through YouTube. Finally, most of us either live in California or New York.
Consumer flocking is when the majority of us pool our resources and give way too much power to one company. We become loyal consumers of Apple and then we go and buy their stocks and buy their bonds, adding even more fragility to the system.
Taking steps to decouple
Consumer flocking can artificially skew the economy way too far to one side, making it brittle and unpredictable. As for the solution, there are many.
Make conscious choices
Fortunately, these are rather pleasant. It’s good to recognize that you get to vote with your dollars and your presence. You can spend your money with whichever company you like and you can live in almost any location you like.
You can choose to pay for animal products from humane farms and not from Foster Farms.
Decoupling from the system doesn’t have to be as radical as getting rid of your car. But driving it only a few days a week can have astronomical results on making your life less dependent on systems.
The added benefit is that you’re spending more money riding your bike or riding the bus. The economy senses this and more resources go towards creating bike lanes and improving the public transportation system.
Consume responsibly and sustainably
When you’re looking to buy Qtips, you could go on Amazon and order yourself a box of them. Alternatively, if you have enough storage in your home you could contact the manufacturer directly or their reseller and order yourself a giant box of them since they don’t expire.
Even better, you could find a local environmentally friendly store which carries sustainably produced Qtips and shop from them. Or, you can buy a single metallic Qtip and never have to buy a Qtip again.
By not funneling more money to Amazon you fuel healthy competition and allow businesses to flourish. Amazon will still thrive and you decouple from the system.
I shop at Whole Foods sometimes. But I also shop at Fred Meyers and the Farmers Market. This gets rid of my dependency on one particular company and I’m fueling healthy competition.
I bake my own bread and am learning about urban gardening. This decouples me from the evil bread conglomerate. And by purchasing non-GMO grains, I am voting with my dollars.
The key is to not wait until an external pressure forces you to to make a decision. The smart consumer decouples from the system they are most dependent on which gives them options.
When you choose to be board certified by NBPAS instead of ABMS, you are taking resources away from a greedy, shady organization. Sure, you can wait until a bunch of doctors get together and sue the ABMS but by that time everyone has suffered.
You can start diversifying and get board certified by NBPAS while you’re board certified by ABMS. When the right time comes, you can cut your ties from whichever group you believe is taking advantage of you.
Decoupling from investing
I definitely drink the index fund Kool-Aid but don’t believe for a moment that I understand index funds. I believe index fund investing to be the safest of the many options out there, but not the only option or even the best option.
Does my retirement depend on index funds or an x% rule? No. I feel safer diversifying and having multiple potential income streams.
I could decouple from investing by saving a ton of excess money in form of uninvested cash for retirement. But since my goose doesn’t shit out money, I would have to trade in a lot of hours and that wouldn’t be worth my while for the years I gots remaining on this beautiful planet.
Just as it’s bad for me to give all of my money to Amazon and Whole Foods (ironically, one and the same), it’s bad for me to put all of my money towards index funds for the purposes of investing.
That’s why I stress that enough is enough. It’s good to recognize once you’ve reached enough so that you don’t keep investing in a particular investment vehicle. It just makes for a insecure system.
Feeling frail & scared
When a person doesn’t understand something, they are more likely to be afraid of it and they make poorer decisions. We don’t need to be experts but some understanding is necessary.
I’ve had flavors of such conversations with many colleagues in regards to their money. From retirement, to investing, to long-term care insurance, to taxes.
Even if they’ve employed a financial advisor, they never really owned their financial decisions. So they never trust their financial advisor or will bail out of the plan when shit hits the fan.
For medical professionals the frailty and fear stems from being so highly dependent on their careers; being strongly coupled to a bi-monthly paycheck in order to afford their lifestyle.
Our income, investing, and retirement is just another one of these systems. You can learn about it, figure it out, and apply your own degree of freedom to it and decouple yourself individually.
Then suddenly you feel free. You don’t feel scared. You have backup plans for backup plans and you have several layers of diversification in your financial plan.