There is no doubt that the transition towards the Sovereign Individual has started. While many worry about “taxes” and “surveillance” the way you win at the game of life is by predicting the future. No one makes money or succeeds by doing something that is obvious. Obvious things include comments such as “work remote is here to stay” and “the government will print money/raise taxes”. The key is *how do you benefit* knowing those changes are coming? For those that don’t understand that those trends are here… we have nothing left to say. The writing has been on the wall now for over 12 months. With that said, it’s time to predict the future!
Birth of Sovereign Individual: Like any long-term change, it takes many years for this to play out. That said, the wheels are spinning at this point. It isn’t too late to adjust your life for a future where you’re in charge of your own education, income and time. Those that fight this change will slowly fall backward into the middle class which then eventually falls into the masses.
What is the sovereign individual? There is a book written on this topic (“The Sovereign Individual” – Mastering The Transition to the Information Age) and we’ve recommended it on here before. In short, the “new rich” will be able to earn their income 100% remote and they will have assets that are difficult if not impossible to seize (such as crypto currencies or NFTs).
How does this relate to taxes and remote work? Well it means the path is clear. People will work from home and slowly realize earning income online is possible (this means even more economic activity goes online). In addition, if you can work remote, this will lead to less centralization – ie. major cities will unlikely be jam packed with people running to cubicles. Therefore? People will be able to move around smoothly and on top of that they can decrease their tax profile.
In the near-future, taxes will certainly go up (targeting the rich). Only for the governments to realize that the new rich are “internet based” and will simply leave to the best tax situation. This could be as simple as Florida/Nevada/Texas to more complicated ideas such as the Cayman Islands or Puerto Rico if you are more focused on capital gains taxes.
How Do You Benefit? Pretty simple, you want to become more location independent now vs. later. You should put a massive premium on working from home even if you only have one income. Why? You need a chance to grow by building something online. At this point, there should be no “push back” on the idea of working remote if you’ve survived the 2020 recession and work in a knowledge based field. So this is your chance! Take it while you can. Also. If your firm isn’t smart enough to work remote, you should look for a firm that is smart enough to hire you for a discount (allowing you to work remote for good).
The second benefit is certainly crypto currencies/crypto assets. The arguments against the space are officially dead at this point and written by low IQ monkeys or old people who are behind the times (not legal or financial advice). Why are we so certain? Just look at the numbers. Even if the crypto market triples, that would be a drop in the bucket and change nothing. Even if the crypto market went up 20 times (all currencies in the crypto space), the total value would be “roughly” equivalent to Gold alone. That is pretty attractive considering that there is no “world disaster/collapse” with a store of value (gold) being valued at around $10T or so (estimates range from $8-10T). Also. How else are you going to have usable assets that can be transferred by memorizing a few words? There is no monetary network comparable to this industry.
The third way to benefit is by becoming more liquid. If you are well off and own a lot of real estate, you could become a tax target. Your average person with a $300,000 home is unlikely going to become a tax target. However. The guy with $50M locked up in California or NYC could see problems in the future… the home is locked into a state with growing deficits and economic division. So on and so forth. If you want to benefit from mobility, you should become mobile from a financial perspective as well (the days of only owning stocks and real estate are also … dead).
The fourth way to benefit is by avoiding shut down costs. The sovereign individual (in the future) does not care as much about how much he earns but how freely it is earned. For example, an intelligent person who recognizes these trends will not try to maximize a single income stream as that can quickly lead to ruin. Think about the restaurant industry or a profitable retail store. As soon as the single entity was shut (by force) everything is lost. Instead you want to ask yourself “how hard is this to shut down”. Yes you read that correctly, shut down. If you have something that has low OPEX and low COGs, if you shut it down… You don’t lose much! No one talked about this angle until 2020 or so. Any income stream with high fixed costs should be less valuable to you when compared to low fixed cost opportunities.
The fifth way to benefit is also directed at the well off: a second passport/exit plan. This is an extreme example but some of you may have this issue in the near future. You want to have more options (tax wise and lifestyle). As the saying goes, if you don’t know what the future holds “Choose the door that provides the most options”. Changes are coming and increased mobility is not a bad thing.
How Do You Fall Backward? Ahh yes, as explained many times here… You can live a very good life by simply avoiding major problems. Major problems include large amounts of debt, substantial loss of savings (50%+), severe health issues and wasting your 20s partying 5 days a week without building any sort of revenue generating/equity building options. In the “new world”, you are forced to adapt to new technologies at a blistering pace or fall behind.
For example, take a company that does not adopt work from home initiatives. They do not get to reduce their OPEX by 10-15%. That is 10-15% on a billion dollars in revenue which would imply $100-150M in total profits. Since interest rates are at nearly zero, that $100-150M can easily be levered up four times to $400-600M. That means they will be $400-600M behind the firms that adopt the new work environment.
While the numbers already sound big, it gets worse! If you fall behind the times and don’t change with the new environment, that profitable company will now acquire all the poorly run businesses ($400-600M in additional usable money can acquire a decent piece of the competition). You can already see this in many industries where private equity firms go into tech companies that can work remote, fire a ton and sell the real estate. Sudden spike in operating income (sustainable) and practically no interest payments! Incredibly intelligent. Headcount is not a measure of success anymore (relic of the past).
The second way you can fall behind is by following the “old path”. The old path used standard education as the future. It is no longer the future. If you need to learn new skills, you have to learn it in a niche setting. That could be a coding bootcamp or it could be through trial and error in copywriting/affiliate marketing for example. The point is the same. Going to get a piece of paper that says you know stuff, won’t be valuable longer term. In fact, any industry that relies on “prestige” is in trouble. No one cares about where a homebuilder went to school, they only care if the home/building is built correctly. So. Avoid industries that rely on paper vs. skills/results.
The third way you can fall behind is by increasing your fixed expenses. If you get nothing from the post it should be “liquidity and options”. Under no circumstances do you want to decrease liquidity and decrease your flexibility. In times of wild amounts of change, you need to be able to move with the environment as well.
Conclusion: This was purposely written as a string of thoughts as it may have a part two. That said, one thing that “clicked” is that the sovereign individual is coming soon. Self reliance and freedom will become the ultimate “status symbol”
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