Episode Transcript
[00:00:14] Speaker A: Hello.
Welcome to the call it like I see it podcast.
I'm James Keyes, and in this episode of call it like I see it, we're going to take a look at some numbers which show that us manufacturers have recently begun investing a lot of money and building of building factories. And we're going to discuss whether the US, if this, you know, is what it looks like, where the US is about to enter a manufacturing boom, at least in some industries.
And later on, we're going to take a look at the financial independence retire early, which is sometimes referred to by the acronym fire lifestyle that many adopted over the past generation or so, and consider whether this is something that has been able to deliver on its promise for its adherence.
Joining me today is a man who may just now be well known enough that he can change his last name to legend Toonday Ogun Lana Toonday. Are you ready to show us ordinary people how it's done?
[00:01:18] Speaker B: Man, I don't know how to respond to that. Cause you always have these intros, like I'm some kind of narcissistic dude. Mandy, that's okay. I appreciate it. I'm flat. Let me just say that. Okay.
[00:01:31] Speaker A: Now, recording this on June 26, 2023, and we see, we've seen some pretty amazing reports this past month from the US Census Bureau about the huge jump over the past year in spending on the building of new factories.
Now, many may recall that last year the Biden administration worked to get two major legislative bills pushed through, each of which could operate to increase domestic manufacturing, one being the Chips and Science act, which was back in July of 2022, and also the Inflation Reduction act of August 2022. And so there's a school of thought that's thinking that this big jump in spending. And when we say a big jump, it's a big jump. It's more than double the amount of spending from the previous year on building new factories.
Many are thinking that that may be related to the legislation, again, particularly because the jump is so large year over year. But whatever the reason, it would seem to be a positive thing, at least from a jobs and employment standpoint in the US. Because whenever we hear about companies shipping jobs overseas, that's always looked at as a negative thing for jobs in the economy. So at least in that context, we can look at this as something that's positive. Now, it's obviously more complex and we'll talk about that. But to get us started, Tunda, what are your thoughts on these numbers suggesting that domestic manufacturing may be about to be on the rise from a significant standpoint?
[00:02:52] Speaker B: Yeah. I mean, look, I think it's great. There's no other way to. I mean, I guess you could, someone out there could think it's a bad thing that the United States is going to ramp up manufacturing, but I think myself, along with many Americans, would think that this is great news. And you're right, the construction, or let me put it this way, the investment in construction for manufacturing has more than doubled. So it was 190 billion for the last year from April 23 numbers from the prior year. And from 21 to 22, those numbers were 90 billion. So it's a huge jump. So I think, yeah, in the short run, the great news is spending that much on construction is going to have a positive effect. I think just generally with the velocity of money circulating through the economy, particularly.
[00:03:43] Speaker A: As construction in other areas may be slowing down, like with office buildings, or at minimum, it'll also offset some other areas where construction might not be.
[00:03:52] Speaker B: No, that's a great point, and I want to come back to that in a second because that's a very good point.
So I think in the short run, that's great. And then in the long run, the ability for us to have manufacturing or more manufacturing, I know not everything will be manufactured here, but more manufacturing back in the US is great, too.
God forbid there's another supply chain shock like we saw with the global shutdown in 2020. You know, hopefully having more manufacturing domestically would curve any future issues around that. And then, of course, as we've talked a lot on various shows over the years, is, you know, we appreciate the american labor market, and so we hope that this will be good for Americans and having jobs and all that. So I think that it's a good thing. And just to come back to what you had said. Cause I wouldn't have thought to say this. Well, let me jump in real quick.
[00:04:42] Speaker A: Cause I do want, I wanna say that a little separately, but I look at it in a similar sense, like, to me, the, and I know we're going to go back into how the construction itself is helpful, but just looking at, like, I think it's natural to just jump to this immediately and say, oh, wow, this is great for manufacturing. Ultimately, if you're talking about domestic manufacturing, because building more factories is a prerequisite to increasing manufacturing output. So at minimum, the first step towards that is happening right now. So therefore, we can, if things continue on this trajectory, we can expect a substantial jump in manufacturing and we'll get into later, like the specific industries that that's in but when you look at it from the standpoint of this happening, the thing that I would say I express a little bit concern about is just that it happened. It's so quick right now. Like this is, if we're looking at what was done in 2022 and saying this huge jump happened almost overnight, essentially I still would want to look around and see is there anything else? What else is happening here? By and large I would think it's going to be all positive, but I do think we just need to kind of keep our eye on the ball here. A lot of times we tell ourselves stories we want to hear like, oh well, you know, these, this legislation or these two pieces of legislation that we were trying to make. Make have people manufacture more chips here or have people manufacture more electric batteries here or whatever, it's working. You know, now they're building factories and stuff. But I would press a pause a little bit and say okay, let's look and see if there's anything else going on here because it's such a significant jump that it would look to be great news that, you know, it's a drought and now it's raining, but at the same time we probably need to look around and just make sure that that actually rain and not somebody peeing on our headland.
[00:06:19] Speaker B: Yeah, and I think, I mean that's a good way to put it because I don't know, put it this way.
Our society's so complex in certain ways that inevitably some people see it as rain and some people see it as pissing on their head and I think that's just gonna happen.
[00:06:37] Speaker A: Stakeholders, man.
[00:06:38] Speaker B: And. Yeah, and I think so. So let's go into that. Right? Who are the stakeholders? Cuz, cuz you have a good way of usually breaking down the two sides in these discussions as being if you go to 30,000ft with it is capital and labor, clearly this isn't happening because capital doesn't want it to happen.
[00:06:57] Speaker A: Well this is in fact happening because capital does. Most people say again what the school of thought right now is that incentivized by the government, tens of billions in subsidies, incentivized by the government. This is capital acting right now like this isn't labor doing anything so to speak, correct. Capital, the money up and then I guess labor is building stuff but you know the capitalist is doing this.
[00:07:19] Speaker B: Yeah. And that's what in the financial world they call it Cap X which stands for cap capital expenditures which is really the investments of large corporations for long term stuff. Right. And usually things like factories and power plants and all that kind of stuff is seen as capex spending. So the good news, again, like we talked about, in the short run, that means these companies will be purchasing goods from other companies, and I big machines and all that, and they're going to be hiring construction workers and all that good stuff. However, I do think, and as I was preparing for today, kind of like you, I thought, okay, where could we have some blind spots? And those will appear at some point, right? We'll know what they are. But I think in the short term here, this kind of reminds me, as I see some of the wording in the media.
It's almost like the Make America great against sentiment, where because of nostalgia and the word manufacturing, it's almost like in this sense, there's this image being created that we're going to go back to those images of people working 50, 70 years ago on the Ford automotive plant on a factory line where you had literally 25 guys and a conveyor belt assembling a car. And what it made me realize is, again, we should be prepared as a society that this time will be different. I'm going to assume that as they build these new factories, they will probably be very technology intensive. Then we know that we have things like chat, GPT and AI, that's these companies are experimenting on, how can they use this to become more productive? I just think that it's great that we're going to have this manufacturing come back domestically. But I think you're right. Maybe one of the unintended consequences that some might see as peeing and not rain will be that maybe it doesn't create as many jobs as what might be sold to the public just because of the word manufacturing and people still having this kind of old school view that it's actually people with their hands building something and not robots and not AI.
[00:09:27] Speaker A: Does this portend a return of unskilled labor?
[00:09:31] Speaker B: Exactly.
[00:09:31] Speaker A: And it probably doesn't. You know, like, the way that the factory, these aren't going to be manually operated, like you said, five guys sitting around the table kind of factories, you know, like, it's going to be very tech heavy and so forth. And so that is. But that's part of the adaptation and evolution that as a society, we have to be prepared to go through and engage in, because even still having the building here versus somewhere else is better for the nation, so to speak. It's creating more jobs than it would if it was halfway around the world. And so from that standpoint, what I look at also is, okay, well, are they, by putting this stuff here, is that going to create the demand for different kinds of jobs as well? Like, okay, well, we're going to need more of a certain type of tech type of jobs or different things like that. But beyond getting to kind of where, what, in our euphoria of seeing the headline, are we missing anything?
I know you wanted to get into just the idea of the construction itself, and so did you want to hit.
[00:10:29] Speaker B: That real quick before? Yeah, I mean, really what my comment was going to be is just, this is why everything like this, like we're talking about in this topic, is very unpredictable from an economic standpoint long term. Because if you were to ask someone, let's say in 2020 about things like construction and all that, like, and that's why I said, you just brought up a good point, that, you know, the commercial office space and people working from home, everybody thought it would all be decimated. And, but like you're saying based on certain recent legislation now there's going to be billions of dollars spent in construction, maybe not construction of office buildings, but construction of other stuff, which is going to continue to generate economic activity in the construction space. So my point is just going to say is that that's the beauty of our system, that it's ever evolving and ever forming, and people keep thinking that what things look like today is just how it's going to always be. And I was going to say, your point is valid, that everyone was wondering what's going to happen with construction. And we get this nice surprise that literally from 90 billion to 190 billion, over 100%.
[00:11:36] Speaker A: And I mean, these, these are fluid situations. I mean, you call it a nice surprise. It may not be a surprise. Everybody, like I said, I mean, these are one of those things. This is another one of those things. Like, we've talked about it over the years, like, the Biden administration seems to hit, hit some singles and doubles or triples, you know, like, and we don't really seem to notice it as much as a society because we're so consumed with culture wars and this and that. But this, it, if this is working.
[00:11:57] Speaker B: If this was the plan, because no one likes Biden, that's why.
[00:12:01] Speaker A: No, but my point being, if this was a, if this was the plan, this is a great plan, like, for.
[00:12:06] Speaker B: It to happen like this, this quickly came from Biden. No one's gonna like it then that's life. You know what I mean?
[00:12:13] Speaker A: Well, some people are gonna like it, but I think it's not gonna talk about it. Even people that would be inclined to like it, aren't talking about it. It's not, it's not that interesting. I mean, hey, I, we're doing a podcast on it. We know that this isn't going to get as much engagement as if we were out here throwing fire at somebody.
[00:12:27] Speaker B: Well, it's not as fun as Hunter Biden because, you know, it's not, doesn't have a crack pipe and doesn't hire hookers, you know, so, but I do.
[00:12:36] Speaker A: Think there is a benefit to the idea of having manufacturing. And then let's get to that right now, because just from an economic standpoint, what, what's the significance, you know, that, do you see from, you know, the idea of having a robust, strong manufacturing sector in a nation?
[00:12:55] Speaker B: Well, number one, like you said, and again, as I said, let's see how this plays out on the jobs front as compared to technology. But the idea would be that, yes, hopefully it increases the ability of people that have more jobs in the country. Right. So that's number one. Number two, the term that I used earlier, the velocity of money, the speed at which money circulates through the economy, should jump first through manufacturing and then second through when companies actually begin to use these factories and have output. Third, I think that, like we talked about earlier, just the supply chain issues, that if we ever do have a global shutdown again from another pandemic or a big war or something like that, that we'll have more of the things that we find that we learned are very important during the global shutdown of 2020, like microchips that go into almost everything now that will at least have the manufacturing bases here.
And I think that there'll be other offshoots. Right. Like, number one, one reason why we began to outsource to all these other areas of the world was for cheaper labor. So it remains to be seen. Time will tell if this has an effect on prices of these, of these materials. The second would be things like, you know, obviously there's going to be a lot less activity shipping these items from Asia and other parts of the world to here. So I wonder, will that cause container ship prices to go down? Maybe they need to start competing for more business, or will it cause it to go up because they just start raising prices because they have less revenue? So I think, you know, there's, there's obviously a lot of directions these things can go. But I think, again, for us as Americans, I think we can see this as a positive because we know that's one thing from a macro standpoint that we've become more of a service economy. And having more manufacturing would just be a healthy thing for the overall economic structure.
[00:14:50] Speaker A: Yeah, I mean, I think one, like, if you started at a core place, like at just at a baseline level, you said service economy. That's a good kind of reference. I'm a service economy worker. I'm an attorney. You're a service economy worker, like, but service economy people in general, whether they are serving, you know, whether it's, you're talking food service or whether you're talking, you know, or attorneys, you know, like, or financial planning or whatever, the concept of service doesn't necessarily create wealth. You know, it's really just moving money around. You know, a banker is service economy, you know, and that's moving money around. And they take a piece, and so it doesn't really grow the piece of. And the thing about manufacturing, one of the defining characteristics is that it does grow the pie. You know, like you're taking a dollar worth of raw material and a dollar worth of labor and creating a ten dollar item, you know, so to speak. And so, and you're growing up by that. The value add right there, that's being created. So having that in your society is very helpful for growing the wealth of the collective wealth of the society you have. You're not pulling. One way to grow wealth is pull it out of the ground. We've seen that, you know, in mid, with many countries around the world or several countries around the world that pull oil out of the ground, and they're just insanely wealthy because they need more money. Money does just come up out of the ground for them. You know, I pull it out of the ground. But if you don't have that going or if that's not enough to be a dominant portion of your economy, you don't want to always be in a situation where all your economic activity is just moving around money that's already there. You want to be growing the pie at all times, too, because everybody's going to keep wanting more and more and more. So you better be growing the pie. And so if you look at it for just from that context, bringing in businesses or bringing in activity, that's going to grow the pie more in terms of the overall nation's wealth is a, is a plus. So you mentioned the reason for outsourcing initially. You know, there's one factor you mentioned which was typically we were going to places to manufacture things with where the wages was lower. The other piece that went hand in hand when that is that transportation costs went down over the 20th century and the speed in which things could be moved around and the amount of things that moved around went up. And so when you had that together, then essentially China goes to be manufacturing 30% of the things around the world completely overall, like, and it's just a huge number becomes a huge manufacturing floor of the world, is what it's been called in that sense. That type of, you know, like, everybody's taking advantage of those. Those. Those wages was good for keeping prices down, but it does take away jobs. And so on one hand, you're trying to balance this. We want lower prices. How do you get lower prices? You have lower wages for the people making the stuff. That's one way to get lower the prices or put downward pressure on the prices. But the people who they're buying the stuff here in the US at least, are making less and less money. So it creates this cycle of, you know, things getting more and more contracted. You know, we pay less, but we make less. And so at minimum, this will add a counterbalance to that, you know, like, and it's, okay, well, you could still have some more jobs here. It's not going to be, again, we're not going back to 1950s, you know, type of stuff, but you don't want all of the pressure going in one direction, basically. And so that, to me, where it was a concern to me is it seemed like we had kind of given up on trying to produce more here. And I think it's good. You're going to have. You have to have some diversity in that.
[00:18:04] Speaker B: Yeah. And let me draw a line here. Cause there's two things.
Certain things historical, which I'll get to later, but on the now side, which is, you know, the United States, I don't know if we were the first to kind of perfect this stuff, but we've done a very good job over the last hundred years or so with the whole kind of private public partnership between the federal government and domestic us contractors that are usually big companies. And the one that usually gets the most attention, and it's usually for negative reasons, is the military industrial complex. But there's a lot of other just sectors of the economy that also benefit from the government going in certain directions with policy and then allocating certain spend in the budget for companies to experiment on new technologies to get them right. Because, and I'll say this, if you're a private corporation that is raising money from investors either through issuing stock or issuing debt through bonds, all of us that invest, what do we want? We want to make a return on our money. So if someone were to tell you, I'm gonna go invent airplane that can run on water today, that person might get laughed out of the room by a room of investors because they're gonna say, well, we're gonna have to spend billions of dollars to watch this thing fail before we ever even think about making a dollar. So traditionally, that's why the space race is a great example of this. Where when Kennedy and when was it 61 or 62 said that we're going to the moon? I know he was only president, unfortunately, for three years before he was assassinated. So it was somewhere in that time period.
And by 1969, Neil Armstrong was walking on the moon. But a lot of us have seen that footage of all the rockets exploding on the launch pads during the 1960s when they were testing them out. And so what happens is, without the federal government making that kind of investment and then letting the companies like Bell Labs and Lockheed Martin and General Dynamics and all those companies back then actually build and test the rockets through contracts from the government, then we would have never gone to the space race. Fast forward.
[00:20:18] Speaker A: We would have waited, relied purely on the market system. It wouldn't have happened because the chance of success wasn't high enough to justify the amount of investment that it took to get there, and people would have given up in time.
[00:20:32] Speaker B: So let's fast forward to the year 2009. We're coming out of the great financial or not, we're coming out. We're in the middle of the great financial crisis, the height of it. And, you know, there was an idea that maybe, you know, we could have vehicles that run on batteries, right? And not just golf carts and commercially viable.
[00:20:49] Speaker A: Commercial viable.
[00:20:50] Speaker B: Commercially viable. And so, you know, a new president at the time named Barack Obama had a stimulus plan that allocated $500 million for R and D research and development in the space. And the grant was given to a small startup company that no one had heard of called Tesla. And three years later, by 2012, the first model S is rolling off the assembly line. And here we are, what's now, 1314 years later. And electric vehicles are part of the global economy now. And so without.
[00:21:22] Speaker A: Tesla's a huge, huge company.
[00:21:24] Speaker B: Tesla's a huge company. And the CEO or the founder at this point, I don't think he's CEO. I don't know if he's CEO anymore that way. But the founder is the richest man in the world. So it's an example of how the private and public sector can work together for long term benefit of everybody. And what I'll say this and then I'll hand it back. What I found interesting in reading an article preparing for today about the electric vehicle kind of thing because that's a big part of some of this infrastructure build. Now, you know where the top states that are going to be getting the construction for these plants is? Kentucky, Tennessee, Georgia, Michigan and Alabama.
[00:22:05] Speaker A: Well, that makes sense, man, because all of those states love Joe Biden.
[00:22:12] Speaker B: They may reward him next year. What do you think?
Maybe if Hunter goes and sells it, that'll be. Yeah, but anyway, but real quick, I'll just finish up and say the reason that's that I just cite that is because of the land, like you said, cheaper land, more space and lower wages in the United States.
[00:22:33] Speaker A: In the United States.
[00:22:33] Speaker B: So it's a good thing in the long run that we have the ability to do this stuff because now we're going to bring economic activities to these five states that haven't had great economic situations in recent decades.
[00:22:46] Speaker A: Yeah, well, no, I think the Tesla example is a good example because that's when I saw this. That's actually what I was looking at. Okay, wow. Maybe then we can get another Tesla or two out of this, out of this type of investment. Because you look and say all the government's putting in, like I said, the government's putting up over $100 billion in general in terms of trying to increase production, domestic production, and thing of things like computer chips, of electric car batteries, things like that. They want the US to be on the forefront. This is part of the stated goals on the forefront of some of these newer technologies and really driving this stuff. And so, yeah, the hope would be that, yeah, you're going to have some, some businesses either grow out of this, either grow new kind of new sprouts, you know, oh, you know, here, you know, Intel's a big company doing something here, or new companies altogether, or companies that are small now that become juggernauts in the future. Because what ends up happening just as the economy goes is that all the companies that are now that are big and bad aren't going to remain big and bad forever. So we're going to have to constantly have this tree refreshing. And this is, like you said, a good example of the role of government in that instance where something where the results are more speculative and or the road to get there is a little more uncharted. Private capital usually is not going to bridge that gap for you. And that's where the public can be used to do so. And then it's for the public benefit. To create the next round of behemoths. So it's a good point that you make. And again, a lot of this gets lost, you know, because it's just not as exciting as the day to day soap opera that we like to follow. But it is stuff that's very important for our economy to continue to grow and to become something that we can, that supports us and that we can live through. The last piece I wanted to get to on this is just kind of a bigger question or bigger view of this, you know, like, based on what you see that's driving this. And you could take this either way because, you know, it's, it's, it's, we're looking at legislation that may be at least a big part of where, how this is going like this so rapidly and such, so suddenly.
Do you think this is, this kind of uptick has staying power, or do you think that things, this is kind of a blip that people are taking? People are going to try to run that, that government money that was allotted out and then they'll just go back to doing whatever they were doing?
[00:25:07] Speaker B: Well, no, I mean, look, I hope it's kind of, this is the start of some more of this stuff. And I think, you know, look, the fact that $190 billion is being spent on construction these plants, I mean, it's hard to say. I mean, I know that you can have cost overruns and, you know, charge $500 for a hammer, you know, and all that kind of stuff.
[00:25:26] Speaker A: That's the, that's what's just now, it's not like there's money that's already lined.
[00:25:30] Speaker B: Up to be spent, but saying that, I know that there can be waste in the system. Right. And especially when you're dealing with government contracts and all that, just like there was a lot of waste in the PPP and the CaRes act and all that. But I'm not one of these people that says just because there's going to be some waste means it's so bad we shouldn't do it. I'm all these people that says, if we can clean that up, great. And if it can never be cleaned up, then that's just probably the cost of doing business.
[00:25:54] Speaker A: Minimize it.
[00:25:54] Speaker B: But, yeah, minimize it. But, but let's not, what do they say? Let's not, um, hold a good at the, you know, like, hold a good at the altar of the perfect, or so whatever that saying is, you know, but so that's my point.
[00:26:07] Speaker A: Good at the altar are perfect.
[00:26:08] Speaker B: Yeah. Yeah. So there you go. So, so my point is, is that, yeah, I hope things like this would continue. And I think this is, again, not to get into kind of the political world here, but, but you can't avoid it when you're talking about the decision of leadership, whoever that is. That's why it's not about anything current and where they look to allocate this type of energy and activity. So, for example, this is happening specifically because of new technology that was being pushed by this administration over the last two years through, like you said, the Chips act, which was 65 billion, and then part of the Inflation Reduction act, which is over a trillion, all that kind of stuff. Right. But in those bills and the line items was things like, okay, we're going to invest $65 billion in, specifically in manufacturing plants to build chips in the United States. Okay, boom. So I know that that's, that's a real economic spend right there. Then if you look at what I just said about the electric vehicle plants in those five states, they are now, the goal is that the money is already on the table to spend 20 times of what is spent today by 2030 on that sector, on electric vehicles. Now, there's other administrations in our lifetime together that we've lived under that when they get in, their priority is maybe to give more subsidies for land leases to fossil fuel companies and oil so they can drill more that undermine and.
[00:27:39] Speaker A: Or undermine solar or electric types.
[00:27:41] Speaker B: Well, and my point in saying that is not to say that. I'm saying that in this way to take a side. What I'm saying that is if I were to look personally and say what would benefit the us economy and the us manufacturing space and us jobs? It's not about because this is where you get, you know, not you personally, but people will hear this and say, oh, well, he's either for, he's either a lefty because he wants electric or he's a righty because he's siding with the fossil fuel companies, I want to take that out of people's minds right now and say what would produce more positive economic output going forward, old technology or new technology, period. The reason why we spending 190 billion now to build all these new plants is because we don't have electric vehicle plants, period, like en masse, and we don't have a supply chain system internally in this country to get all the parts around and to move the batteries and the lithium and all these little things. We have a very well established fossil fuel supply chain and logistics infrastructure. So if you spend $100 billion on just adding to the existing fossil fuel infrastructure. You're not going to have the multiplier effect of job creation and economic velocity that you would if you're spending on new technology. And so that's, to me where, again, that's why I said it's political. But it's not in a sense, but it's important to say, okay, you know.
[00:29:00] Speaker A: Well, no, but hold on. It is political. It's not cultural, though. That's the thing that this isn't, this is not something that should be part of a culture war. Like, that's just, it's a political point.
[00:29:11] Speaker B: Yeah.
[00:29:11] Speaker A: And you can make the call, you know, based on you now, you can make the call for good reasons or bad reasons, like you met, you point out a very sober kind of way to make the, look at it and say, hey, well, what generates more, you know, more return on investment or what has the greater upside? But, you know, I don't think there's an issue necessarily with something being a political calculation. The concern is, is when it's reflexive, when it's cultural, it's like, oh, well, I, regardless, if something may generate a greater return, that's something I can't support because. For a cultural reason, so to speak. Because then you're, you're out of kind of. You're not supposed to be doing that in economics.
[00:29:43] Speaker B: Yeah.
[00:29:44] Speaker A: That's not the way it's supposed to work.
[00:29:46] Speaker B: So that's, so that's kind of where I see that.
And I've got one more from a historical.
[00:29:55] Speaker A: Well, let me jump in.
[00:29:56] Speaker B: Yeah, I was going to say, I talked a lot, so you come in.
[00:30:00] Speaker A: I think that you actually got to the point in this. I'm not going to make it a political issue, but I think that's the place where we typically have seen these kinds of things get sidetracked is the politics of it, because for oftentimes emotional reasons, sides are taken and it's an all or nothing type of thing. Like, I look back at, you know, when, when we, when Ronald Reagan comes into office and he takes the solar panels down, you know, or something like that, and it's just like, okay. I mean, that, that's your call, you know, so, but it, that's the kind of abrupt shifts that I would think would be of concern here. And the sense that right now the objective, you would think, is to get the people who are spending the capital that's being spent on all of these new construction projects for factories, to get them pot committed to where they're going to see this through for the next five years, because things don't get built overnight. Like they'll see this through for the next five years. Something's going to stop, is going to start operating because they've already put in enough money that they got to see it through. But that's just not always the case because political calculations can undermine kind of rational decisions or, you know, optimizing decisions because, because people are emotionally invested in issues without regard for kind of the merits of them, so to speak. And it's just because, hey, I either like it or I don't. And that's how it works, you know, with humans, sometimes human beings, that's how we are sometimes. But I think that's the kind of thing, from an investment standpoint, it seems like when incentivized to try to create a new industry or to try to try to build in this way, people are jumping over, jumping over themselves to get in here to go from 90 to 190 billion in one year is crazy. That's just a crazy jump. And so it seems like there's a will there. But the question is whether or not enough or some people will see this as just the direction they don't want to go, period. It doesn't matter if it's good or not. And so that's where I could see something where you get like an abrupt shift, which would concern me. I don't think it would happen from a market standpoint, so to speak. Because once you start going down the road, it becomes, the incentive quickly becomes to see it through.
[00:32:07] Speaker B: Yeah, well, I mean, the market's already spoken if we look at it that way. And so, because like you said, the investments already been made.
[00:32:14] Speaker A: Well, but the investments were made in a, in an environment that were, that were supportive of, like because there's subsidies and all that kind of stuff. So that wouldn't be a pure market decision. But it goes back to your original point when you were saying in terms of doing things that we haven't done yet. A lot of times that's where that public private partnership is very important, to lessen the risk that you're asking people to take because the return is uncertain. At least it's uncertain in terms of timeframe. It'll probably pay off at some point, but we can't say if it's three years or ten. But the second topic we wanted to discuss today dealt with the fire lifestyle. Now that's something that I'm sure, Tunda, you've heard of more than many of us, just in terms of the profession that you're in, but it's financial independence. Retire early. And so, you know, there's a financial planner, you know, somebody that's, that's, I'm sure you've heard that kicked around from time to time, but basically it's people living very frugally in their young age. Like, very, very, very frugally in the hopes of saving up enough money to retire very early, in their thirties or something like that. So you're saving 70% of your income of your take home and living on 30% for years and years and years and stacking it and trying to do that. So what, I guess you bring some, because you're, this is something that floats around in your industry. You probably bring some baggage into this, but just your thoughts on the fire lifestyle. And, you know, for some, like, we'll have something in the show notes talking about people that have engaged in it. And it may not have been all that they thought it was going to be or that, yeah. You know, that it was for, that they thought, yeah, that they thought it was going to be when they started. But what are your thoughts on this thing?
[00:33:48] Speaker B: It's interesting, man, because I appreciated the art that led us into doing this discussion today because it was, people I think are around our age, they seem like they're mid forties and they now have children and they've been retired. They accumulated around 4.3 million in investment assets and have been living off that and been penny pinching. And I guess as their family's grown and they want to do things like just take their kids to a nice dinner.
And the guy was talking about how he was so anxious because he spent $99 at dinner for his, with his wife and his kids. And what I appreciated about his attitude in the article was he said himself, he goes, I know that's wrong, and I'm tired of being anxious and stressed out about this. And so I'll answer you directly. Going back to when I first heard about this, which was over a decade ago, and being in the industry I'm in, which is wealth management, financial planning, you know, stuff, I always looked at it as another idealistic, pie in the sky type of way to, you know, just like people have very idealistic views in various areas of life, this was one I thought was a little too idealistic in the financial side of life. And part of it is because, number one, understanding our lives, right, we're complex.
We have a lot going on, and life changes. And I didn't understand how someone could save one or $2 million by age 35. And literally think that they will never have to work again. Earning, let's say, 5% income on dividends or interest, let's say, just to put a number out there on a million bucks, is $50,000 a year. So on 2 million would be 100,000. And, yeah, I'm sure that somebody out there can live pretty good right now of 100,000 a year. At 35 years old. I just don't know if by 70 they're still happy because of things like inflation, interest rate changes, so on and so forth. So seeing some of the things that we've reviewed is kind of like, it kind of confirms some of my concerns about this when I first heard about it, is that I think a lot of those people that did this when they were younger, realizing that it's not all what it's cracked up to be, because happiness isn't about not working. Happiness is about being happy. And what I think a lot of them are finding is trying to stay in this box and this discipline of always being frugal, no matter what. For a lot of them, they're realizing they're not happy doing it.
[00:36:22] Speaker A: Yeah. So, no, I mean, it's. To me, it's the changes we go through as we age that looks to be kind of the driver of this. Like, in my mind, I think if you're talking about how you want to. How somebody wants to live in their twenties, how somebody wants to live in their sixties or seventies, maybe this probably can work. But just the natural flow of our lives, like, you're a different person each decade of your life, so to speak, whether we recognize it or not, and your life and who's counting on you and what, you know, who you're dealing with and your kids and all that kind of stuff, it's very different to make this. It's very difficult, I would say, to make decisions when you're 25 on what your 45 year old self with kids in school or this and that, or, you know, kids in college or whatever, wherever the kids are, what that person. What that person's gonna find fulfilling or make them happy, what that person's gonna think they need versus not needing and so forth. So to me, it's really that in between that meat of middle age that this mentality kind of overlooks, so to speak. Because, yeah, I mean, it's saving so much of that money at that. At the time when you are. When you're young and, you know, you're single or you're just married and you don't have the expansive family. Your family's not wanting to just enjoy life. You're not wanting to just enjoy life with your family. Like, it's kind of easy to keep your nose to the grindstone then. But then you're. You're setting up this, this setup. You're setting up this thing where it's like, okay, well, once I get here, then I'll enjoy this stuff. But the way you get here requires a level of rigidity that it would seem like. And what we seem like we're observing is that it's hard to change that rigidity if you've done it for 15 years or something like that, and then you setting it in, in the time when your life is very different. And so then you actually would really. You're cutting off your ability to enjoy your very different life because you're stuck with this mentality you had when you were 25.
[00:38:16] Speaker B: Yeah. And I think to go a step further, you can't change it once you retire, that, that, that rigidity, because if you change it, you're gonna go broke. And that then creates the anxiety that these people, a lot of them are living with it, that they're constantly at the knife's edge. And if, like, you're saying if something pops up in their life, that's an emergency spend or something, that it's gonna maybe collapse their ability to maintain their retirement lifestyle. And I think, and somebody could say.
[00:38:43] Speaker A: Oh, well, they could always go work again. But see, the thing is, you're so pot committed at that.
[00:38:46] Speaker B: Yeah.
[00:38:47] Speaker A: And all the sacrifices you made to not have to work, that, that's a very difficult thing to go back on. Presumably, it's like, oh, well, then why did I eat ramen noodles every day for three years? You know, now I gotta go back and work again.
[00:39:00] Speaker B: And there's things that, you know, number one, are out of our control. Right? Like things like interest rates. I was reading an article that said, you know, this, this really started from a book bestseller in 1992 that was called your money and your lifestyle by Vicki Robin. And I went back and it's like, you know, the ten year bonds at 7% or so back then. So, you know, I'm just saying, like, let's say you had 2 million and you retired in 1992 for 20 and had a 20 year bond paying you 10%, just some corporate bond that's 200,000 a year. Number one, there's a lot of inflation over that time because it's 20 years. But number two, think about it. Your bond matures in 2012.
You're rolling into a new bond at what, 2%? Because remember, rates were at zero. So that's what I'm saying. That's out of your control. I don't care how much you save, how smart you are, you can't control interest rates and where the economy is going to be.
[00:39:51] Speaker A: That's very humble of you. Tuned in, but we know you control interest rates.
[00:39:54] Speaker B: Oh, well, you're not supposed to tell everyone, come on, now my phone's gonna blow up. But no, and so, and so that's one thing. And the second thing I was thinking was more again, of this lifestyle thing, which is, again, it's another example, I think, in our society where people are looking and trying to figure out how to be unhappy. And I was just thinking, like, I thinking about myself and I was like, you know, and this is not to toot my own horn, right? But it was more like I'm just, I feel content and thankful that I'm in an industry that I really like and I'm happy what I do. So I don't have this need that I need to just hurry up and crank it out to stop working. Like, I've already thought about it. You and I are similar in a sense, with legal practice and financial planning practice. I might be a little bit in a better place because I can sell my practice one time or one day, I should say, at three times my gross revenue. I don't know if that's kind of the industry standard for us. From what I hear with law firms and CPA firms, this is like one time. Whatever your annual billing is, that's what you're selling for. So both of us are in careers that we're not. We don't have a widget company as entrepreneurs that we know we can sell at twelve times EBITDA one day and just have this big cash out moment and sail into the sunset with a big bag of money. And I've just resigned myself to, you know, that's cool. So it'll be my job to be responsible enough to do different kind of investments on the side, or I enjoy what I do. As long as I stay healthy, I'll be fine doing this when I'm 70, 72 years old, but doing it my way. Maybe I don't have 100 clients, maybe I got three clients, my close friends that are wealthy guys, I'm just helping out, but I'm still making some income doing it and enjoying myself. So I kind of realized that part of this is how do we look at things like our career and employment? Because if you're just unhappy working, then you're always going to be looking for these answers out. And like this fire example, sometimes you jumped from a frying pan into a fire. You jumped into something else that's going to create its own stress. And that is what we're talking about, having to be so rigid and frugal and not being able, because I thought about, like you said, what's changed since I was 25 or 30? And we joke about this, right? I like drinking hundred dollar bottles of bourbon.
Now, I used to drink southern comfort and, you know, old English.
Right? So, so, you know, that's one of many examples where I can say my.
[00:42:17] Speaker A: But let me give an example of that because that's, that's precisely what I mean. But you putting real products on it. Yeah, it kind of really helps me because my point with that we're like, in the way that we're different. And how I wouldn't want my 25 year old self making constraints for my 45 year old self is that you at 25 would have been like, oh, yeah, but 45 year old tunde will be fine. Yeah, man, you'll be fine drinking this.
And it's like, yeah, and so, and then, so then you're committed to that for the next 20 years regardless of anything else. And so it's like, it be, it, this is like the interesting thing about the way that we age. You know, youth is wasted on the young and yada. And you gotta experience as you get older. If the 45 year old, you could tell the 25 year old you and say, okay, here's the good, here's the places to put your money, here's the place not to put your money and so forth, that could be helpful. The 25 year old, you can't offer that because you're just going to evolve. Your needs are going to be so different and so forth. And so that, to me, was the, again, that was the biggest thing about this, is that it's asking you to make all these decisions for middle age you at a time when your level of experience and sophistication, dealing with yourself and dealing with the world is just at a relatively low point in your life.
[00:43:32] Speaker B: Yeah, no, and I think, and that's what I started thinking. I was like, wow, this came from a best selling book 31 years ago. Why all of a sudden did it get popular with the millennial crowd who were too young at the time? You know, if you figure millennials started in 81, that 92 is kind of young for millennials to be reading that kind of book, right? So I thought about it. I think this comes, the popularity of this idea came off the heels of the great financial crisis when that generation, let's say the zero eight through 2010 era number one, maybe the older people in the millennial phase might have lost some of their jobs, but I think the younger millennials were watching their parents lose their jobs and hearing all that stuff from their parents. I worked at this company 2025 years and now I'm gone. And I think there was a lot of anxiety in that generation about and distrust for corporate America and Wall street and all that stuff.
[00:44:23] Speaker A: And it might be really an appropriate level of mistrust in the sense that, hey, they're not there for you, so to speak, like, get what you can get while you can, but don't count on them always being there for you as you get older. Cause that you could see how that kind of thought, that's what I'm saying, directly lead you to this.
[00:44:39] Speaker B: Yeah, and that's what I'm saying. I can appreciate how if you mistrusted corporate America on Wall street, then, yeah, you're gonna try and crank out as much as you can out of that as quickly as you can and then try and exit yourself from that environment. But again, I think that the interesting thing about these articles we're seeing now from some of those that have lived it, is really that it's almost like any direction you go has its own unintended consequences. So now nothing's perfect, right? So now a lot of people have tried this, and it's having its unintended consequences. And I would assume that maybe why we're hearing this more now, too, is we've had real inflation in the last 24 months. So people that are living on a real fixed income and budget now are just not feeling as good as they put that.
[00:45:25] Speaker A: Kind of summarize that a little bit. It's like, okay, you, when you're making this decision or when you're charting this out, you have limited knowledge of yourself in 20 years. And then to your point, you have very limited knowledge of how the world's going to change throughout that time, you know, and so you're really, you're really locking yourself into something. And so ultimately, though, I mean, I've said a lot of, you know, kind of the, or pointed out a lot of the blind spots or areas where this could be limiting. I do think that as have, like, setting goals is good, you know, in general. Like, it's setting, setting goals going from point a to point b, that's something that can be very healthy. Where you get into trouble is, and we've talked about this even when we did the book, the, the power of now and so forth, is where you get into trouble with any of these things is where the destination becomes what your life is about and not the journey. And so if someone wanted to do something like this, you know, like the caution that would have to be put with it is that this doesn't mean you should make yourself miserable for the time period that you're trying to save all the money and so forth. That needs to be something that's enjoyable, at least in some part to you, because you are not sacrificing a bunch for a utopia life later. You know, it's, it's a different way of doing things. There's going to be just like with anything, there's going to be trade offs. There's going to be pros, there's going to be cons. And so there's a, like, you're going to say, okay, I'm going to trade off working harder now, save, you know, the spending less now so that I can work, do a little less work later and still have money to spend. But neither one of those is going to be the utopia, so to speak. You're going to have to, you live through both, and you better make it a point to try to enjoy your life through both, because again, you, you get into the whole destination living and your whole life is spent in the journey, you know, like in your destination is just where you tap, you touch the base, you know, after you, after you hit the home run or whatever, and that's it, you know, but it's the whole time you spent running around the bases, you know? So, yeah, I think that's something people have to keep in mind with something like this. This is just another example of that.
[00:47:26] Speaker B: Yeah. And I think just to wrap it up here, I mean, part of it, the guy did acknowledge, which I'm glad he did in the article. A lot of this does come down to your psychology and a lot about how you were raised. I mean, I've learned that a lot in my practice. Money, kind of like food. A lot of it has to do with how our parents dealt with these things.
[00:47:42] Speaker A: Like people's relationship with money.
[00:47:44] Speaker B: Yeah, exactly. Just like the relationship with food can not just be about being hungry.
[00:47:48] Speaker A: Right.
[00:47:48] Speaker B: There's comfort food and stressful eating and all that and the same thing with money. So I think it's important for each of us to look at ourselves and really kind of get in our own mind and say, okay, what's my relationship with money? And how did I grow up around, how did my parents talk at the dinner table around it? Because I was a kid, grew up from a single mom that was always check to check and always had money problems. So that's why I say, when I was in my twenties, I was very cheap all the time in frugal. And it took me getting older and took my wife showing me a few things to understand. For example, and we've joked about this, right? When I was a young professional, I would buy the dollar, $40 50 Kenneth Cole shoes on the Amazon or whatever, and they'd have holes in them six months later because I walk on them and all that. And my wife was the one because I thought I couldn't buy four or $500 pair of shoes because I just thought that you don't spend that on shoes, right? Because as my mom would always say, we don't spend that kind of money on stuff like that. And my wife was the one that said, hold on. But if you buy the Ferrogamos or the Bruno Molly's, you know, and pay a few hundred bucks, those shoes will last you 1015 years.
[00:48:51] Speaker A: Exactly.
[00:48:51] Speaker B: And you're spending $600 over the last three years on shoes. You don't realize it. And so it's just little things like questioning yourself and looking at those type of things, I think can help you go a long way as well with your relationship with money.
[00:49:04] Speaker A: Yeah, yeah. Which. And that goes back to that point of, you know, like, the being careful, locking yourself in from a decision making standpoint at a time when, like, again, 25 year old tunde wouldn't have accounted for that, you know, like, in terms of how he's going to plan his early retirement. So, you know, like, there's. There's fridge.
[00:49:24] Speaker B: 25 year old tuna. Didn't even know how to dress, man. You should have seen the type of shirts I wore. I didn't even remember showing up to meetings with no jacket, just a shirt and a tie.
So that's all the stuff you learn, man.
[00:49:38] Speaker A: But that's. You got to be able to.
[00:49:40] Speaker B: Sometimes I'd be an embarrassed. You learn those things.
[00:49:43] Speaker A: So, I mean, there's a discipline there. It is to be honored, you know, as far as the fire lifestyle, but definitely it's not something that's foolproof. And so I think that if people want to go down that road, they definitely have to make sure they think about more than just what maybe they need to talk to you. You know, you could tell them, you know what, 45 year old, you know, this is what you need to be. You know, what you'd be able to be thinking about or something like that. So. But, no, I think, I think we can wrap from here, man. We appreciate everybody for joining us on this episode of call. Like I see it. Subscribe to the podcast, rate it, review us. Tell us what you think. Send it to a friend. Until next time, I'm James Keys.
[00:50:15] Speaker B: I'm Tunda Iguana.
[00:50:16] Speaker A: All right, we'll talk to you next time.
