There’s one defining characteristic way about the way I plan: I may not win, but I never lose. (You may have picked up this sentiment from some of my discussions of strategy.) Hence I will focus my efforts disproportionally towards avoiding bad outcomes rather than seeking good outcomes. This leads to a modest but tranquil life; perhaps suitable for a stoic.

It also annoys the optimists.

As you may have noted, I have a background in peak oil. Peak oil is currently at a stage where climate change will be in ten years. Nobody denies it anymore. When I first got interested in it, back in 2001/02, this was far from the case. The USGS and the IEA were very optimistic (they have since brought their predictions in line with more realistic numbers based on reality rather than on predicted economic demand(*) ) and peak oilers were somewhat of a fringe group. Officialdom believed in the magic of technology. It was considered a crazy idea that oil would ever exceed $100. (It later did.) We had very reasonable and rational arguments that it would—and it did. But we were unable to convince anyone else about it. We could only prepare for it on our own.

(*) The theory being that if you and I are in a lifeboat in the middle of the ocean and we’re running out of water, then if I write you a big enough check, you will mange to procure/invent a glass of water for me.

What to do? I decided to “leave” the field and stop preaching to the choir—I have learned what I could and taught what I could. (Since then the choir has gotten much much bigger. Back then there were only a small handful of books about peak oil—I’m a coauthor of one of them. Now there are dozens.

A huge problem with peak oil (like with climate change) was that the problem is caused by the emergent behavior, the sum total of many individual behaviors, of all of us. An even bigger problem is the problem Hardin discussed as the tragedy of the commons. His only solution was enlightened self-restraint. Our current solution is war.

For this, I eventually found a better solution. Or maybe it found me. If I save a lot of money AND learn to live on very little by being adaptable and widely skilled, I can retire early in the present. This is a good thing all around.

There are essentially twothree extreme outcomes for the future.

Remember that I never lose.

1) Fears about overpopulation, climate change, and resource depletion turn out to be overblown. Fusion gets developed within the next 20 years. Soon thereafter technologists discover warp drives and free beer. The outcome of this scenario is that my savings will grow at 10% annually. Anyone pursuing ERE will be wealthy and spend the rest of their life having fun in whatever form that may take.

2) The fears turn out to be true. In about 2-3 decades, things will begin to change for the worse—you can argue this has already begun. The financial system will enter an extended decline, etc. This will happen concurrently with real world shortages in energy, water, and/or food. Anyone pursuing ERE will be in the right frame of mind to deal with this better than almost everyone else. For instance, did any of you guys notice personally that we have some kind of recession going on? No impact here.

3) Everybody adopts ERE. Disaster is avoided, but you won’t be getting 10% investment returns. In fact returns may likely fall a lot. This will be bad for the credit based growth economy (as nobody is interested in credit anymore), but the increased focus on the future means that economic production will focus on durability rather than turnover. Overall, this will be a lot less wasteful.

At any one time the future is somewhat in a “fog”. The best strategy is therefore to plan for multiple outcomes making sure that actions are chosen out of a set so that the subset has optimal outcomes for minimal investments (Reverse fish bones / web of goals). ERE is the best strategy I have been able to come up with for individuals. It should allow for a happy retirement/life. For a more community oriented approach, consider Transition Towns.

To be able to think, a frame work is needed.

If I had to present you with just three books which would give the best understanding of how to navigate the 21st century, the books below would be it. Of course, reading books are not going to substitute for actual learning. I have read many books on racing sail trimming—adjusting the sail for maximum aerodynamic drive—but while this has helped me become a better trimmer it does in no way replace the experience of being on a boat and going through the motions under real conditions. Conversely, one can be going through the motions for many years without really understanding what’s going on. For that books are helpful.

Another caveat about books is that they can never present the complete picture. All books have a certain perspective, which means they concentrate on some things and leave out other things by necessity. An advanced text must leave out the basics lest it be a thousand pages long. A basic text must skimp over advanced understanding.

So I picked three. But note that I picked them after having read hundreds. If these are among the first handful of books you ever read—some people truly don’t read—they may not be sufficiently digestible. It also means that just three aren’t going to cut it. These are just the beginning … or the end.

Overshoot by William Catton
This book provides the perspective from 10,000 feet. Maybe 100,000′ is more accurate since this book describes problems of a planetary scale. We are talking humanity as a whole; problems which go beyond humanity; and powers which are beyond the capability of humanity to control. This is the best AND the most depressing book I have read in my life. It was written in the late 1970s and then put on hold while Catton was looking for a publisher because the market for such books was believed to be saturated. It never got the appreciation it deserved and it’s a tragedy that it’s not on everyone’s book shelf.

The idea of overshoot is that our culture (farming and later industrialization) was formed during a time which the carrying capacity was greater than the impact of humans. If this capacity has capital reserves such as soil or oil, it is possible to exceed carrying capacity briefly—much like having savings allows you to spend more than you earn. This is called the overshoot and it is followed by collapse. You see a similar pattern in the way we have structured our economy. Our economic understand has been patterned on the ideas of growth and infinite substitution—essentially the world as it was in the mid-late 19th century. As substitution becomes impossible and as every niche becomes exploited/developed, growth stops. What we were seeing in the past ten years was the capital drawdown as people built unproductive mansions and filled them up with unproductive stuff. This is now been followed by monetary capital destruction on a massive scale as asset values plummet AND real capital destruction as mansions get boarded up and left empty.

The reason why this book is so important is that it teaches us to think ecologically. It is where I started my ecological education and it has formed my thinking ever since. You see a lot of its ideas in the ERE book.

Survival+ by Charles Hugh Smith
This book provides the perspective from 1,000′. The strength of this book is that it is mostly descriptive rather than normative. The level of insight is truly amazing (I’m not easily amazed!), especially given the level of details. Instead of thinking of people and institutions as different species, they are described as organizations. This means that there are far fewer players that matter and consequently fewer degrees of freedom that matter. Considering transnational corporations as fiefdoms with various governments as simply another player (fiefdom) is brilliant. (Also see the sovereign individual.) It also explains why a representative democracy is failing the middle class. In my work I have mainly concentrated of how the system affects the individual in the middle class and ways to opt out, without considering the greater scope of things (politicians, underclass, middle class, financial class). Survival+ explains why the system works as it does. In particular, why do corporations and institutions act as they do and what they may do. Essentially, it is an explanation of the organization sized ecosystem we inhabit.

Early Retirement Extreme by yours truly
This book provides the view from 100 feet up. If you get the image of this being close enough to shout but too far away to hold your hand, you get the picture! I can’t say objectively whether this book is good or not but as far as I know there are none other like it. As many have pointed out, this book has little to do with early retirement in the direct sense, much like a hammer has little to do with a house. It is more of a guide on how to think. If you learn how to think, navigating the financial and economical systems described in Survival+ becomes easy as you’re not locked into the typical structures that are designed to leave the people in them “locked in” without a freedom to choose. Well, maybe not that easy, but I become financially independent about 8 times faster than people in the middle class traditionally do, so that’s saying something. By design, this book is not directly useful without a working knowledge the fundamentals. Returning to the sailing analogy, it will explain the aerodynamics of sail twist and draft, but it will not show a picture of where to find the mainsheet and other controls on a boat. For handholding, google is your friend. If you don’t know how to make a budget, you don’t need a book—you can google for the instructions and get them in 15 seconds.

You can read these top-down or bottom-up whichever way suits your style of learning. If you start from the top you’ll know why, but you won’t know how until the end. If you start from the bottom, you’ll know how, but not why until you’re finished. I think starting from the top is more efficient. Starting from the bottom means learning the right things by accident, along with a bunch of useless things. Starting from the top means you don’t have the technical background to appreciate a lot of the things.

The beauty of the hedged strategy is that it has a positive outcome no matter what happens. The nonhedged strategy may turn out well or it may turn out badly. The point is not who is right or wrong or what is going to happen. With a hedged strategy the exact prediction of the future does not matter. If a system allows such a solution you take it. ERE is such a solution.

Much thanks to TL for the donation.

Originally posted 2010-10-28 10:11:59.