Life Math: Health, Finances and Psychology

This is going to be another post where opinions will vary wildly. Some people want the Lamborghini other people would never buy a car. Some people think the grind should never end and you should be working hard until your last day on this amazing planet. Others, would prefer to let off the gas. While we’re still on the side of intensity when it compares to the top 10% or so, we think there is a good middle ground between all of these items where you can still get rich without giving up your life. Since we give our formula away in the form of a book, this one is going to provide some time-lines for you to think about.

The Health Timeline: This one is a life long battle and is probably the hardest to get right. You have different genetics when compared to every single person on the planet. The good news? You should know your strengths and weaknesses by age 18 or so. It is not acceptable to be out of tune with your body since it is the only one you’ll ever get. You should know the following: 1) the type of skin you have and the amount of sun it can sustain, 2) your body composition between endurance versus sprinting (type of muscle fiber you have), 3) hairline and hair-type, 4) heart and lung functionality, 5) stomach functions – which foods give you more energy versus less and 6) level of flexibility and coordination difference between your left and right side.

This is honestly the basics. If someone does not know this and know it early, they are going to be in for a world of hurt later in life. By knowing these key metrics it is now possible for you to maximize your peak fitness levels at each age. We know that you can generally improve through around age 30 and real declines set in at around the 35-40 range. This means you have wiggle room (you don’t need to be at 100% peak fitness through every year of your 20s). But. You absolutely need to be near peak capacity at around 33-36. Why? Well we know the declines will start to show up which means you want a “soft landing”. As your physical performance metrics erode you want to see a thin slope because compounding is worse on the way down.

The last part is critical to understand since we ask the question a lot. Most people can’t do basic math and assume if something goes up 10% then down 10% that they are at the same number. This isn’t true and if you go up 10% and down 10% every day, you’re actually going down in total. Compounding is incredibly painful in the negative direction so changing something from a -10% to a -4-5% is a HUGE deal. We would also say that taking the time to max out in your mid-30s will save you hundreds of thousands of dollars in health costs (injuries are very common in this area as people believe they are still in their early 20s). In Short, you want to know your body composition by age 18, exercise quite a bit in your early 30s (everyone does the opposite) then focus on managing the declines by getting a private doctor and monitoring your blood work consistently past age 35.

The Money Timeline: The money game gets less interesting as your ability to grow your net worth declines. While we are 100% against taking it easy in your 20s  (unless your family was rich of course!). And. We’re also 100% against taking it extremely seriously in your 40s (here we’re talking about *hours* dedicated to getting richer). The math is quite interesting because you’ll find that the capital base you have does more work for you. Meaning? At 35-40 or so your actual investments earn more than your effort/labor (unless it’s an incredible year for you).

Run the numbers. If you are a successful person and get to around $2-3 million by age 35, this means an 8% increase is going to move you $160-240K. Now if you got to $2-3M by that age we’d guess you’re currently earning around $300-500K per year (pre-tax), on a post tax basis that probably gets you closer to $190-300K (rough math). If you’re significantly more successful and have $10M at the same age, we’d guess you’re making $2M per year. Again, the same issue springs up. You’re making $800K a year off of returns and post tax your income is roughly the same. Mathematically, if you get to these levels it becomes harder and harder to grow your net worth beyond 20% or so per year.

What does this all mean? It means that compounding works for *You* as soon as your investment income equals your active income. At this point it is essentially impossible to have money worries. The only way this does not work is if your investment income is not diversified. We’re making the assumption that you’re responsible and maintain a diversified investment portfolio. The most obvious example is anyone “hurting” from crypto currencies. First of all they should be up a ton and second of all, if they feel any significant pain, they were irresponsible with their lives (it’s venture capital investing which should never become a major portion of personal net worth).

We can put it all together. We suggest sacrificing *some* health/fitness in your 20s (insanely easy to recover) to get the money ball rolling. No. You do not work 120+ hour weeks and do real damage to your body. You work 60+ at least and then cool off before you’re thirty so your body can take the harder hours without damaging your actual health. (Yes. Despite millions of examples, people still believe working long hours will make them die. This is laughable since rich people live longer and generally worked hard in their 20s). In short, by your 30s you should have your active income roughly equal your investment income. This is a good *qualitative* metric to use without putting exact numbers on them (for exact numbers see our opinion in Triangle Investing).

The Psychology Timeline: This is much more artsy. If you have the two items above down, it still isn’t enough. Surprisingly life is more than health and money! There is happiness, mental models, personal relationships etc. We’ll start with the first and move down the list.

Happiness: There is no reason to be unhappy if you live in a first world country. The chances that you were born in a first world country in the first place was slim. Quite low actually. Luck. That alone puts your standard of living above the norm and gives you more opportunity than the norm as well. Complaining about life in a first world country is like complaining about getting pocket kings in a poker game. From what we’ve seen, the real issue with unhappiness in first world countries is the influence of outside forces.

Outside forces are awful. As soon as someone puts their happiness in the control of anyone they are in trouble. You see it in hollywood, You see it with many successful people. They live in high pressure situations where they need to perform, other people may lose their jobs if they don’t perform…. Everyone wants more out of them because they have the talent and power to change lives. There is a negative to this as you can see. It can significantly impair your personal health (psychology). Instead, we recommend stoicism in a big way. This will help you stave off all of the negativity being thrown in your direction. In basic terms you’re only going to 1) worry about things you can control/change yourself and 2) you’re only going to take on responsibility for other people when you’re certain it won’t become part of their livelihood.

The first one is quite easy to master and the second is more difficult. Generally, you’ll be interested in getting people jobs, helping them make money etc. But. Once you’re forced to fire someone or see their livelihood shaken up, you realize the level of responsibility was quite high. This is fine only if you’re certain it is something you can sustain into perpetuity (forever essentially). In short, happiness is something that is earned. We think it’s possible to become an “expert” at being in a good mood all of the time by around age 30. Yes you will still have good and bad days, but we actively avoid unhappy people in their 30s since they should be well off physically, financially and emotionally mature at that point.

Mental Model Development: While we’ve given one of the mental items to be aware of (only caring about things you can control), there are many more. The first one is entirely based on you. You should have your own view of the world and how you attack problems. This is going to be your “bread and butter”. The only thing that makes someone successful is their ability to capitalize on unknown information or strategies.

Information has several tiers. The first is a fact/strategy that everyone knows (100% worthless and no value), the second is a fact/strategy that 10-15% of the population is aware of (20% useful, good enough for a job), facts/strategies that can only be executed by 5% of the population (high value – Careers are generally in this segment) and finally the golden ticket facts/strategies that only a handful of people know (huge value as you have access to something no one else does).

Going by brute force, if you have no useful skills to offer you’d use the following approach… You read a ton to get caught up on what everyone in the world knows as fact. You then use this to filter down to the “job level” skills. Then you throw 100s of different new twists to the same strategy to break into the top 5%. After that it’s all talent. Naturally, if you’re an expert in your field, you should have a *faster* ramp every single time you move into a new subject within a similar industry. In short, after doing one hard ramp on something you have talent in, you should have a specific mental model you use to learn about a new skill. This methodology should be mastered *before* you turn 30. If you’re forced to try a million things at age 30, you’re going to be working overtime to catch up to the people who already have a mental model that works.

Personal Relationships: Think long-term. If you have relationships that are over 10 years then those are of value. Anything below 10-years is essentially an acquaintance. This blog has been around for about 6-7 years and we need to stay another 3-4 years before we even consider this hobby a success. Long-term thinking is the only one that has actual value.

The second item is dating which we separate from personal relationships (lots of emotion here). This is an easier one, if someone has spent longer than a year or two trying to “figure out” this side of the equation… We’d jump ship. After a short period of learning, you should be able to move on for good laughing at the constant debates over things that don’t really matter in the dating field. After this dynamic is figured out the only real question you’ll have is “what area of town in XYZ city is good for this type of person”. That’s seriously it.

Interestingly, we’ve felt pretty lucky in this arena. Knowing a handful of friends for over 10 years and figuring out the dating dynamics in a year or two is more than enough. In short, unlike other items we have a 2 year cut off for dating and a 10-year rule for a personal friend. If either of these are problems then there is an issue in terms of choice. And. There could be an issue with the person in the mirror if you’re over 30 without a few friends you’ve known for a decade.

Concluding Remarks: As usual there are always exceptions. And. We would use this as a good way to *gather* information. If you meet a guy who is rich but lacks in the social realm, only take his business thoughts seriously. If the guy is insecure buying things to impress other people, avoid his personal life advice (they are likely leeches around him for the $$). If a guy has everything you want? Better not waste any of his time or else he’ll move on very quickly. That is really all there is to it. Once you’re successful the other acquaintances and riff-raff fixes itself. Successful people befriend other successful people because they don’t need each other.