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”
Newer Readers: For those that are unfamiliar with our blog we have three high quality products in order: 1) Efficiency, 2) Triangle Investing and 3) Spending for Maximum Return. In order, you learn how to make a good amount of money (a million liquid within 10 years or so), how to correctly invest it and finally how we’d avoid blowing it all with intelligent spending and PED use to improve quality of life. We hold Q&As 1x a month for purchasers only.
In the process of transferring out of a very cushy DoD job to a much more demanding FAANG company only because the former does not allow me to WFH (opsec)
Glad to see my instincts were right.
Next three to five years are going to be incredible for many, terrible for most. I hope more and more find this site and get their life back on track.
No one cares about where a homebuilder went to school, they only care if the home/building is built correctly.
^ Dunning-Kruger effect is a huge problem here. The skills needed to determine whether something is done right are usually the skills required to do it yourself.
You can’t do everything yourself, the ability to leverage specialists is basically a superpower. Credentials are a shortcut so non-specialists can identify talent. Poisoning their value makes everything worse for everyone by opening the door to ‘sure I can do it, here’s the bill’ fraudsters who are long gone when the house falls down. I’ve seen a ton of credential fraud in the tech space for high skilled professions and it’s only going to get worse.
This is why rich people have work done by people they trust.
Most people the rich hire are word-of-mouth referrals from close friends or a trusted advisor.
It would be prudent for an entrepreneur to think about how he could help these high net worth individuals become more sovereign in their operations.
I predict there will be massive amounts of money to be made there (no-brainer after all, if you save a guy $100M in taxes you would not be crazy to charge $1M)
Anybody that rich is smart enough to figure it out themselves, unless it was given to them.
Au contraire.
I’ve found the opposite to be true: anyone rich is sharp enough to delegate away everything that isn’t a core, non-fungible skill that only they can perform (see: leadership, long-term decision-making, etc.).
If nothing else, go and expand your circle to those not like you — but still well-off or very wealthy; you’ll find they’re quite incapable of having any original ideas themselves — but boy do they know how to spot them in others, and know when to put “all of their chips in.”
I.e they’re delegating away their critical thinking to someone much smarter than them. Why would you do go and do your taxes yourself, when you can pay someone more experienced than you?
Well done post. Clear and prescient. Cheers to the death of the nation-state.
Excellent as always. Thanks for everything!
Can you elaborate on “ (the days of only owning stocks and real estate are also … dead). ”
Owning stocks (being a liquid asset) should promote mobility?
Assuming because stocks can be easily taxed via capital gains.
I think he’s talking about crypto
This is weirdly timely as I just finished reading 4 hour workweek
Learning to navigate and maintain boats. It’s a lot of fun. Reliable Internet available at sea despite scarce providers but costs are still high compared to land ($2,000/month+). Lots to learn, but I like the sailors’ balance of mathematical precision and joie-de-vivre. Would Felix Dennis change his mind about renting things that float?
If you have more ‘string of thoughts’. Please share. As always, thank you for your time for sharing this with us.
The tools and gadgets that were supposed to be part of our subjugation into a social-credit technocracy ended up being the means to our liberation instead. I can fuck with that.
Good write up. To back this up here are some stats regarding new account opens at major trading firms throughout June of 2020:
Robinhood: 4.31 million
TDA: 3.84 million
IB: 1.86 million
Charles Schwab: 1.8 million
E-trade: 1.1 million
That is for one single month! These numbers are mind boggling and it’s changing the entire marketplace. Whereas institutional trading firms accounted for most of the trading volume in equities up until late 2019, this is now rapidly changing with retail commanding an ever larger chunk whilst chasing the market higher.
TSLA for example has continued to run despite long term short positions by several large hedge funds, and it’s been retail that has been benefiting in a big way. Not something you see very often or for too long, at least during my time in the game, but here we are.
The next few years are going to be incredible if one has what it takes to take advantage of this secular shift. Everywhere I look I see blackpillers wasting their time on things they have zero control over (e.g. politics or social strife). This makes absolutely no sense to me and it seems that most don’t see the forest for all the trees.
I believe that we are going to see increasing polarization between the upper 10% and the rest of the population. The ‘middle class’ as you know it is going to be dead and disappearing by the end of next year. What we are witnessing effectively is the fastest and largest wealth transfer of our lifetimes.
There is simply no choice at this point: Become location independent. Be as sovereign and anti-fragile as possible. As this post already outlined, get a 2nd and 3rd passport, spread your assets around nationally if you must but internationally if you can, secure multiple income sources. Everything is going to happen online now and veritable fortunes will be made by a small minority of connected insiders. The rest of the population unfortunately is going to be left behind and will most likely subsist via some form of UBI.
I take no joy in predicting these changes as this will affect the lives of many people in a very negative way. But it is what it is – adapt or perish. This is not just a choice of whether or not becoming or staying wealthy, it’s a choice of being part of the game or finding yourself relegated as non-entity.
As you mentioned in the past you have older readers, will add homeschooling/remote learning. This will increase your family’s location independence as you need not worry about pulling children out of school mid year, etc. Personally found this very valuable with a second passport.
Will also add, historically three ways to obtain a second passport
1. Sex (marriage)
2. Money (investment/biz)
3. Blood (ancestry)
Sovereign individual is nothing new. The founding fathers intended for the citizens to be individualistic because they saw that the best way for a community/colony to grow was for each individual to seek to better themselves as best they could, which would ultimately cause the entire colony to profit over the long term.
A few hundred years later, we’re getting back to that after we adopted collectivism and now essentially socialism but the sovereign individual will not be common. It’ll be only those who have the wherewithal to want to be wealthy and have more freedom so essentially nothing has really changed since those individuals would have survived regardless of the means to get there.
Regarding real estate: most properties (outside of apartments, condos, houses) have property tax paid by the tenants, not the owners of the real estate. So when you speak about avoiding ownership of large amounts of real estate in fear of getting slammed with higher prop tax is incorrect. Whether you own a Starbucks, and Whole Foods, a Chase bank, a gym, a warehouse, or even a data center housing servers, you as the owner don’t pay the prop tax, the tenants do. An increase in prop tax means an increase in the cost of essentially everything in the economy.
Interesting note: while everyone was crying about the death of office, Amazon, Facebook, and Microsoft have bought and/or leased large office buildings in different parts of the country all for AI departments throughout this year.
Part two definitely welcome.
Now, time for more research on non-fungible tokens…
You insist on forgetting that WFH is only beneficial to the lower ranking employees, such as the devs and coders.
From the managers’ POV, right now no one knows that they exist unless they schedule a fuck ton of zoom meetings to “manage” around their employees.
now, These people are the ones that call the shots in most companies, and they cannot allow this wfh situation to continue, revenue be damned!
So, I predict that in less than a year from now, everyone would be commuting to work as we all did for the last 100 years or so….
Until a more efficient competitor comes in and acquires them. Then little managers are gone.
Pulled the trigger on leaving Seattle for Arizona, I was only in Seattle for a FAANG job and at this point FAANG has been 100% remote for 9 months. The only reason I didn’t leave earlier was a lease, should have just paid the 4k and left months ago.
Incredible post as always. This year advanced the movement towards personal sovereignty by an exponential factor. If you’ve been preparing for the coming change, you should have made a lot of money this year.
Thanks for sharing your thoughts.
Thanks for the thoughts WSP. I’m hard on myself at times but reading your posts remind me I’m not far behind and I’m on the right track. I have crypto and exposure to stocks and real estate. Only thing I would like to add besides the usual insightful comments (i.e. homeschooling) is smart contracts. I’ve been around some engineers that think that will blow up next year. Some people also think if countries ever were to fall apart smart contracts can be used to negotiate with foreign governments.
I’m typing this out while I’m in Medellin. The pandemic is really screwing with my pickup attempts :/
1st world problems