In 2020 my wife and I had too many conversations around “most people” that we started catching each other whenever one of us used those words because we felt it was a circular loop that got us nowhere.
In 2021 as I wrote a lot of articles, I felt tired of how I kept on repeating “most people xyz” on this blog. I got sick of myself. I’m done with that subject.
Finally I had one last article on that topic before I put it to rest, but then I read Visakan’s article titled “Most people” so now I don’t have to write it.
In one of my previous article I shared this following quote:
Say it’s obvious and go further. Don’t waste time on convincing others of the obvious.
I hope this article can serve as a way to understand what I mean by ‘going further’. In the future my articles will be more like this one.
In 2020 I asked myself a question, “can I get a house for free?” (Or at least as close to free as possible)
What does Free mean to me?
- Obviously as low as possible in $ terms
- I should not have to sacrifice anything. If I have to live in a place I don’t want to, that’s a sacrifice and not free.
So the framework is simple, ‘doing what I’m already planning on doing, with as little sacrifice as possible for me to get a free house?’
Strategy vs Bonus
One of the most interesting ideas I shared with a friend is the difference between something being a strategy vs it being a bonus.
It’s best understood in finance,
- Holding Btc as % of net worth is a strategy. Holding part of that in Gbtc (to take advantage of the discount) is a bonus.
- Going to the gym and doing deadlifts, squats and bench is a strategy. Doing Pilates, abs, running on the treadmill once a week is a bonus.
Often times, mistakes are made by people who blow up treating ‘bonuses’ as ‘strategies’.
I’m not planning on being a ‘real estate investor’ fuck that. But I’m also not against the idea of owning multiple houses as a bonus.
But I already decided to spend the next few years working for the first time in a long time, so if I’m going to be making money, can a free house (or houses) be a bonus?
- Strategy with houses: looking at houses as an investment first, consumables second.
- Bonus: Houses are consumable like a safari, is it a good investment? That’s a nice to have.
‘Everything needs to be a strategy’ is a good way to waste your time over engineering things.
In terms of making money Houses are meh compared to online businesses so time spent over engineering it is a waste of my time. But that doesn’t mean I can’t exploit that system as well.
It’s similar to how I’m trying to reach 90% of the world deadlift record by only going to the gym 6 months a year. (I shared exactly how I train)
What important truth do very few people agree with you on?
Peter Thiel’s question is very useful here.
Here all are the beliefs I have that make buying a house for next to free (as well as what’s makes it a bonus investment) possible:
1. Societies collapse upwards
Here’s an image I made to explain this idea. Pay close attention to it cause Ill come back to it later.
- Green line: Future
- Red Line: Today
So while everyone is calling for the Venezuelization of the world, I believe most of the world especially Europe will be Japanified.
What does Japanification mean? Economists have their own definitions but let’s start with a funny quote
The great midcentury economist Simon Kuznets said that there are four kinds of countries: developed countries, underdeveloped countries, Japan — nobody knows why it grows — and Argentina — nobody knows why it doesn’t.
Japan never collapsed and is considered a success by many. Cool.
Let me explain what ‘success’ was, and why it’s exactly what’s going to happen in Europe as well.
Success/Growth/lack of inflation in Japan literally translates into
- 30+ years where the current economy didn’t grow in real terms
- Companies were kept in their positions and new companies were not allowed to replace them
- The same happened with positions in those companies, the new young crowd didn’t replace the old crowd.
- ownership became static
- stagnation where young people killed themselves on a large scale
- Young people stopped having kids, families and just overworked
- Only escape from the system was to leave the country
So yea Japan didn’t collapse, it’s a great country to visit and one of largest economy in the world. No Venezuela
But if you read the above and consider it a success you’re either stupid or an economist.
On a related note a thread about Hyperinflation: Today 0 countries in the world are going through hyperinflation :), How can prices of oil in Sri Lanka go up when there’s no oil?
The "right but stupid" academic perspective on hyperinflation is interesting when you realize that
Turkey never had hyperinflation
Argentina never had hyperinflation
Venezuela isn't in hyperinflation today
So, your country can become Venezuela & still not be in hyperinflation https://t.co/jyWQMWCjVb
— Jeremy (@JeremyNoronha) June 14, 2023
So there’s a quote from
20 years ago correction: the quote is 2 years old but the sentiments is 20 years old. “Europe’s a museum, Japan’s a nursing home.”
Well, the median age in Europe is now hitting the age of Japan when it stopped growing. So it’s more like “Europe’s a museum attached to a nursing home”.
Why do I share all this?
To highlight the fact that your expectation of ‘collapse’ is based on the extremes, Venezuela, Afghanistan, Sri Lanka and not Japan.
I consider the fact that young people continue to kill themselves every day ‘a collapse’ caused by central planning. Watch: Princes of the Yen
So back to the image.
- C is the developed cities, the country, the Londons, Paris, etc.
- B are the mid tier cities, Istanbuls, the Singapores etc.
- A are low tier/the frontier the El Salvador’s, the Danangs, Medellin, Tiranas of the world.
Everyone focuses on the fact that “San Francisco will collapse and Bangalore will grow”. Cool, you’re not wrong, but it’s not like SF real estate will go to zero like Venezuela, it’s more likely to be flat to even down a few % for the next 10-20 years in real terms while everything else in the world including salaries grow.
What’s more likely is that the curve of the world gets more flat:
Today an apartment in the center of London is probably 5x the apartment in the center of Istanbul. Cool the differential will probably be only 2x in the coming decades.
Can C go down? Of course. But it’ll probably still be higher than B.
In the next 10 years an apartment in the center of Bangkok can double in price, while Paris goes down 10%. The Paris Apartment will still cost more.
Separate “rate of change of growth” vs “who’s bigger”.
2. Remote work and countryside
Snippet from the article on most people that I decided not to publish:
In 2020, one of my wife’s friends started working from home during the Covid pandemic.
As 2023 rolled around she managed to negotiate for one day from home.
That’s better right? Than pre 2020?
But truthfully, what’s stopping her from being able to work from
- Home everyday of the week
- leave the city and move to the countryside
- or even move to another country
In reality, Nothing. Just the status quo, just the system.
The work would still be done.
Now let’s say this person switches jobs and works for a remote first international company, they would immediately jump.
But most people don’t “jump” they wait for the system to change.
and they’ll keep waiting and waiting
It’s not that things won’t get better, they will, but they won’t get as good as they can get.
The above sentence is what I mean by, “most people will get fucked”.
So if you’re waiting for the system to change, for your life to get better:
You either end up being part of the revolution camp and probably die before you see change,
or you get tiny improvements in your life and accept that as your reality.
End of Snippet
While the people in the “system” might have to spend years to get the system to change, that doesn’t mean it won’t gradually.
Remote work means that the city premium becomes less valuable.
Side note: also with Japanification the ‘escape’ was leaving to the USA etc. Today the escape is leaving to the internet. And moving to the affordable countryside and “exiting your country for the internet” will be more popular.
Again, go back to the image. It’s not that houses in the countryside will be the same price as cities, but more likely is that the curve just gets flat.
Will people be able to work from any country in the world? Doubt people in the system with jobs, but in whatever country you choose to invest in remote work does give it a great multi decade tailwind as people can move out of the cities and keep their high salaries.
”But Jeremy prices in Zoom towns already went up”
Yes, in the US. Markets internationally are much much slower and also remote work is less of the thing in European companies. Which means you have 5 years in Europe to take advantage of the “Aspen real estate boom” effect.
Yes effective markets are a meme because humans are organisms of belief.
3. Governments wants to limit growth of houses
Across the world today you can see that governments want to limit the use of houses as investments.
In Canada it’s the taxation of foreign ownership, in Berlin it’s the confiscation of houses owned by companies etc etc.
So basically everywhere Governments are sending you a message, “do not try and use real estate as a place to hold your wealth”.
Why do they do this? The population is angry about how high prices have gone.
When governments tell you clearly that they’re going to do something obvious, learn to believe them sometimes. Most of them are lying crooks but that doesn’t mean that they don’t speak the truth at times.
This doesn’t mean real estate in NYC collapses again back to the image.
Do you know what politicians don’t care about?
Cost of real estate outside cities.
So while the system trys to limit growth of real estate in population dense cities, the countryside exists as an escape valve.
Putting a cap on rents in Stockholm might be popular for a politician, doing the same at a ski town won’t get the same response.
4. Financial repression
And finally the obvious but yet people think it’s not.
Every country is in debt and needs to inflate themselves out of it. Don’t believe the bullshit around the fact that some countries aren’t.
Here’s an example. Italy, Germany, Turkey and Sweden.
Your perception is probably Italy, Turkey bad. Germany, Sweden Good.
Alright let’s breakdown where debt can exist. 1. The Government 2. The companies + The People
- Italy: 138% debt to gdp at government level. Everyone knows that. Total 138+ 180 = 318% FUCK!
- Turkey: Not much government debt actually. 41%. But 155% Corporate debt to gdp. Total 41% + 155%= 196%
- Germany: Germans? In debt? Get out of here. 69% + 82% = 151% of gdp.
- Sweden: “We’re part of the frugal 4” Yeah, one of the Highest household debt to income in the world. Nice. Total: 35% + 294% = 329%…. Wait what? Okay I didn’t expect this to be that high when I was writing this…😂 feels very meta but perfect for my point.
Yes, Germany is just a few % shy of Turkey if you count the companies and people. And Swedish companies and people are as fragile as Italy.
very interesting, in the process of writing this article I realized that Northern Europe today is literally exactly where Japan was in 1980-90. Everything from the real estate bubble to the high private debt but low government debt to homogeneous people keeping outsiders out of major positions in companies with language barrier etc.
”you don’t need to predict the future if you can just observe the present.”😉
So cool, everyone is in debt and yes your popular exceptions aren’t exceptions. Exceptions do exist but usually small countries/city states which don’t matter for the larger point I’m making here of financial repression of currencies like Usd, Eur.
High debt means that there’s only 1 ‘politically viable’ way of getting out of it. The IMF already published a paper on exactly how it’s going to happen.
It’s pretty simple, one sentence. Welcome to the decade of financial repression.
It’s literally right in front of your eyes.
2 simple charts. The second one shows the debt of the US going ‘up only’.
The first one shows debt as % of GDP going DOWN not up since Q2 2020.
What’s the more obvious idea? Simple next decade “interest rates < inflation” by force. That’s it, that’s all you need to know.
So it also means, when the government is “inflating” away their debt, they’re also inflating away your debt if you have a mortgage. Very nice.
So bonds bad, cash (as holding) bad, cash (as strategic) good, controllable + serviceable + government subsidized debt very very good, liquidatable/leverage debt very very bad.
Alright Let’s Talk Numbers
This might get complicated and I’m 100% sure I’ve made a few mistakes due to compound interest etc.
I’ll rather be vaguely right, than precisely wrong😉
So let’s say a house costs $100k in a nice area that I actually want to live in.
1. Downpayment $15k. Alright, have to pay that.
2. Savings: So it’s in an area that I want to live 6 months/yr for at least 2 years. (I’m not counting saving after 2 years because I don’t know if i still want to live there. Again my idea, “sacrifice = not free”.)
So airbnb @ $2k/mo*6*2= $24k. Cool so I can write off $24k of the house just by doing exactly what I already plan on doing. #nosacrifice
3. Financial repression = my assumption (-3% real interest rates).
So the $100k-15k= $85k mortgage
Real cost paid $85k-$13.5 = $71k
The Euro is unlikely to exist past this decade. Read Doom Loop. Even if it does (which I still put at 30% odds), in real terms and especially wrt $ (adjusted to inflation = m2 growth) it’s likely to go down.
I’m adding an extra -2%/year just by the fact that non-US fiat currencies are going to go through even more financial repression and devaluations.
So TLDR: A $100k house that I actually want to live in would cost me $100k-$24k-$13.4k-$9k= $54k in real terms.
Alright, that’s not free that’s just about 50% off. Nice but not great.
So if I can get a house for 50% off can I add on a few more things to make it even freeer?
- I’m sure I don’t want to live there for half the year = I can rent it out during months that I’m only 100% sure I don’t want to live there. I don’t need the rent money so I can be picky and only rent monthly so it’s very off hands. (Assumption: rent 3months a year at $2= 2*3*2= $12k)
- Hmm I’m in one place for 6 months a year, I haven’t settled down like that since I started traveling 6 years ago. Can I quickly build a webpage that covered the mortgage? Yes. Is it worth it? Maybe based on what else I’m doing. Nice to have so that the new webpage + house combination are completely independent and self sustaining. Would take 3-6 months.
Alright, so conclusion. Without any sacrifice, I can get a house for 60% off.
With sacrificing a little and working for 6 months I can make it 100% off. That’s actually pretty cool.
Maybe if I do this right, I might actually be able to repeat it twice in the next 5 years. I knew skipping the avocados was a good idea.
However that even might not be the optimal solution. It might be better to just get a house for 60% off for free and pay the rest because it’s easier to just spend the money rather and make it easier somewhere else vs making the ‘system’ in isolation self sufficient.
Sharing information and Effective Markets
People who live in ‘the system’ believe that they can’t be the exceptions and that effective markets means that they can’t spot opportunities.
or as my favorite passage from the sovereign individual. Really smart people are very good at convincing people and hence are very good at convincing themselves into failure mode or the “right but stupid/right but missing the point” view of the world.
I believe that people’s inability to observe reality means that the world is always full of opportunities.
People say that you can’t predict the future, they’re obviously right. But those same people don’t know the present. So you don’t have to predict the future, you just need to understand the present and you’re good.
The above idea about buying a house for free is just a framework, where the actual bits and pieces will change as reality hits me in my face.
There’s obviously information that if you share can make what you do harder. For example if you run affiliate webpages most people don’t share the domains because their competition (like me) can run their through a competitor analysis and jump in and compete and steal their money making rankings.
(Think of Coca-Cola sharing it’s recipe with Pepsi)
Human’s and their beliefs guarantee that they’re always be free lunches out in the world.
And the more skill and ideas you layer on top of each other, the less competition you have.
That’s why I can share exactly how I’m going to get a house for next to free and I don’t have to worry about people competing with me and making it not free.
Being in the top 1% in 3 different bubbles and combining those 3 puts you in the top 0.1% in the overlap. And it’s much easier to break into the top 1% of things vs 0.1% of one particular thing.
A good example I know is that 90% of top 0.1% seo people never got free out of SEO and have to work in large companies and agencies. While 1% seo people who are also good at 5 other things built businesses.
Let the 0.1% people do the work for you, they’ll have all the stupid arguments with other 0.1% of people that you can quickly skim through and get the results that are actually worth executing on.
Often with friends I try to highlight the difference between a ‘good opportunity’ vs the ‘best opportunity that can be possible’. Often my friends think I’m saying that their “good opportunity” isn’t good, what I’m often saying is ‘if you think more you might find a better opportunity’.
I’m not someone who asked himself “can/should I buy a house”, the question I asked myself was “is it possible for me to get multiple houses without even sacrificing anything or paying for them?”
Now the answer to that question might be no (it is, as you just saw by reading this article), but in the process of actually considering the question I have to think, a lot, sometimes for years but then I get closer and closer to it while never answering yes.
Someone has to Arbitrage
After publishing “Zoom Out” a friend of mine said a quote I like,
Someone has to be the one to arbitrage opportunities, why shouldn’t it be me?
So if you believe a house in xyz cities is going to go from $100k to $200k in 5 years. It doesn’t mean that the house staying at $100k and suddenly one day 5 years from now it goes to $200k.
Probably the houses (+ houses around them) trade at every level, $100, $98, $120, $125… Someone (a human like you and me) actually goes out there and causes the prices to go up by being the buyer at the margin.
That’s how the prices go up. Which means there are people who’ll buy that house at every price between $100k and $200k.
(‘House’ obviously used to mean real estate in the area, the same house won’t be sold that many times)
So if you can see this happening, why shouldn’t you be the one to buy the house at $100k or at worst $110k.
One reason you wouldn’t is because it’s a big sacrifice, for example I’m bullish on El Salvador but I don’t really want to live there and instead want to just visit. So buying a place in El Salvador is less ‘free’ because I don’t get the bonus of saving Airbnb money without a sacrifice.
I failed in everything I achieved
I’m expecting the above theory and plan to fail.
Why? Because that’s literally how everything in my life worked.
I got into fitness with the goal of running a marathon (I even told people that), instead a year later I won a powerlifting title and deadlifted 4x my body weight. Today 8 years later I still never ran even a half marathon. #failure
When I dropped out of college I said I would start an e-commerce store and become an online personal trainer (that’s why my blog used to be called ‘thinktravelLIFTgrow’) instead I became an seo consultant and built one of the worlds largest travel blogs. Never earned more than $20 from personal training. #failure
So will my plan of getting a free house be 100% successful exactly the way I described it? Of course not 🤷♂️ But who cares as I said earlier I’d rather be vaguely right than precisely wrong.
I just shared the way I look at something as simple as a house and layer on multiple aspects and ideas to get the most ‘bonus’ by going ‘further’ and not wasting time arguing about every individual idea.
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