Ornoth

A while back, I came across an article entitled “These are the bad things about early retirement that no one talks about” (sic).

Although I haven’t (to my knowledge) retired, I have some firsthand experience, having successfully avoided working for 11 of the past 18 years. And I don’t think the article contains any significant revelations.

Let’s look at the author’s five main points about early retirement, before I tell you the meaningful lessons I’ve learned from taking time off.

1. You will suffer an identity crisis for an unknown period.

   I think this only applies if you largely derive your identity from your employer. In a time when corporations offer zero loyalty to employees, identifying with an ephemeral job is a dangerous, outdated delusion.

   Since I’ve always had a strong sense of personality outside the workplace, time off didn’t erode my identity. Instead, it gave me the opportunity and time to fully indulge in activities that I valued, which has been extremely rewarding.

2. You will be stuck in your head.

   This problem will only arise if you cannot fill your free time with meaningful activities.

   And even if you can’t, a little time for introspection is probably good for you. But free time usually amplifies our existing inclinations: if you are by nature content, in retirement you’ll find lots of contentment; whereas if you’re a doubtful or insecure type, you'll probably be plagued by lots of doubts and insecurities.

3. People will treat you like a weird misfit.

   If you've lived a full life, you’re probably already used to stepping outside other people’s narrow-minded expectations of you.

   But if you stayed comfortably “inside the box” that society expects, then don’t you think it’s high time you stepped out and tried life as a weird misfit? It’s a lot more interesting!

4. You’ll be disappointed that you aren’t much happier.

   If you’re financially able to retire early, you've probably already discovered the importance of having rational expectations. But if not, let me clarify for you:

   When you retire, you will have lots of free time and the ability to choose how you spend it. Unless you spend that time doing things that make you happy, you won’t be any happier in retirement than you were before.

5. You constantly wonder whether this is all there is to life.

   Yes this is, in fact, all there is to life. And it’s a miracle! You have all the time in the world, financial security, complete freedom, and lots of resources to find how to make that time meaningful and rewarding. If you do nothing but sit on the couch waiting for the world to entertain you, you’re clearly doing it wrong!

So that’s my response to the author’s absurd early retirement handwringing. Let’s dismiss this amateur’s fear-mongering and talk about the real issues surrounding early retirement.

1. The inertia of rest is insidious.

   To be fair, the article’s author kinda dances around this vital life lesson that everyone should bear in mind. Rest, comfort, and sticking with the familiar can be important elements of stability, and can help you break your enslavement to compulsive productivity. But rarely will they provide a sense of achievement, satisfaction, or lasting happiness. A rewarding life requires initiative and effort, not lethargy and passivity.

2. Manage your fear of running out of money.

   There are probably a few people who don’t have to worry about money during their retirement, but for most of us managing our shrinking nest egg will be our single biggest preoccupation.

   It’s important to spend time on financial planning, but it’s just as important to develop the emotional skill of setting those worries aside. Don’t fill all that hard-earned free time with worry, fretting, and panic.

3. Plan for medical expenses.

   The biggest threat to our nest egg is healthcare. Unfortunately, our health—and the amount of money we need for it—are completely unknowable.

   However, that doesn’t mean they’re unmanageable. As a reasonable person, you can soberly address the risks up front, become an informed consumer, obtain professional advice, stick to a plan, and cultivate the trust that you will be able to manage through whatever circumstances arise.

4. Find the right balance between thrift and indulgence.

   Again with money! Though to be honest, these issues aren’t really about money itself, but about how you relate to it.

   My point here is to find a way to relate to money that allows you to plan and feel secure about your future, while also putting your savings to use in service of your own happiness, whatever that looks like.

   It might be travel; it might be charity; it might be assistance for your grandkids. But the important part is relating to your nest egg in a way that’s mature but not obsessive, and fulfilling but not shortsighted.

So there you have it. In a nutshell: take responsibility for how healthily you relate to your most precious resources: time, money, energy, and health.

My previous post, The Ghost of Munny Past, covered some of my pre-2015 experiences with money and investing. Here we get caught up to present-day with a few more recent adventures.

At the start of 2015, most of my net worth was tied up in my Back Bay condo, which had originally been purchased with proceeds from the Sapient stock I’d acquired as an early employee.

At the end of 2015, I moved to Pittsburgh, which meant putting the condo on the market: my first home sale. Fortunately, despite needing renovation, it sold promptly on Leap Day 2016, for a reasonable “profit”. I use the word “profit” advisedly, given the things I said about mortgages in my previous post. Still, investing the proceeds from my condo sale has been one of my biggest preoccupations for the past year.

Cash: I Has It! Now What?

After the closing, I suddenly found myself sitting on a buttload of real and actual cold, hard cash. Now, everyone “knows” that cash is presumably the worst place to keep your cash, but having been kept busy with the move and the home sale, I hadn’t developed a plan for what to do with the proceeds.

I hesitated to move it into anything riskier than cash, since the stock market in early 2016 wasn’t looking all that sanguine, and I wasn’t comfortable with bonds or other investment vehicles. I didn’t know what to do, but at least I knew I didn’t know what I didn’t know,

So I did what any red-blooded intellectual (who didn’t know what to do) would do: I devoted myself to studying what to do! For more than a year, I read books, studied the financial news, took online education, consulted brokers, and gradually developed a plan of action. All while enduring the increasing bemusement of my partner, who naturally saw a lot of preparation happening, but almost no action.

To further emphasize the point, my mother’s passing at the beginning of 2017 resulted in a small amount of insurance and pension proceeds being added to my languishing all-cash position. It really was time to start putting a year of immobile study into action.

Strategic Redeployment

The biggest theme in personal financial planning is asset allocation and diversification. While it was easy to come up with a theoretical target allocation of one third cash and bonds, one third stock, and one third mutual funds and ETFs, that proved a little more challenging to accomplish in real life.

I found myself faced with decisions regarding actively-managed funds versus passive index funds; whether I wanted to get into options trading; environmental, social, and governance considerations; market timing vs. dollar cost averaging; gold and commodities futures; and more. And I was especially dismayed by the prohibitive complexity involved in buying bonds, which are presumably among the safest investments around.

Ultimately I developed a watchlist and opportunistically market-timed my way into several positions. For all my equity investments—stocks, mutual funds, and ETFs—the idea is to buy them once and hold them long-term. Frequent trading incurs a lot of taxes and sales charges that dramatically erode your returns.

Leaving equities aside for now, I threw a chunk of my cash allocation into a 2-year certificate of deposit, bought a similar-duration US Treasury Note, and bought into the GLD gold ETF. Those are defensive options that will be readily available if I need to tap my cash reserves in the near future, while having the advantage of giving me protection from market downturns and some return on my cash.

Mutual funds and ETFs represent my core holdings, since they’re less risky than individual stocks. I’m still tweaking and building these positions, but the current plan is to spread the bulk of my savings out over a core S&P 500 ETF, domestic and international dividend funds, municipal bond funds, and a small cap ETF.

My smaller chunk of discretionary / aggressive investing money has been spread between a couple dozen individual stocks. Being more volatile than mutual funds and ETFs, stocks can give you significantly market-beating results, but with corresponding downside risk, of course.

Since people enjoy hearing specific stock picks, I’ll mention those holdings. For the most part, there are no big surprises here: Wells Fargo, Johnson & Johnson, Amazon, KeyBank, Google, Facebook, Embraer, Fedex, Home Depot, Thermo-Fisher, International Paper, Emerson Electric, US Bancorp.

Unlike my tepid stock purchases prior to 2015 (listed at the end of my previous post), my 2017 picks have done very well so far. I’ve held most of them for less than a year, but already have an overall average return of 22 percent, with the worst having appreciated by 12 percent. Fourteen winners and zero losers! Well, I can’t take a lot of credit for that; it helps that the overall market had a tremendous year in 2017. As during the internet boom, I have again benefited from fortuitous timing.

Still, both the performance of my picks as well as the resulting paper profits make me feel pretty good. I’ve got more work to do, but two years after my condo sale, my portfolio is finally starting to take shape, and earning me some significant returns. Hopefully that will hold true until my next big financial milestone arrives.

Future Returns?

Returning to what I said at the start of this series, money is one of my six necessities for happiness. So far I’m meeting my needs while enjoying and mostly succeeding at hands-on money management.

Of course, that’s easy to say when the whole market is trending upward, but no one knows what challenges the future holds. Having written about The Ghost of Munny Past and The Ghost of Munny Present, there’s not much I can say about The Ghost of Munny Yet to Come. I can only take prudent precautions and hope that when he shows up, he’ll be as nice to me as his predecessors have been!

But here in my fifties, I’m delighted to be able to sit back and say, “So far, so good…”

With the perspective that comes from thirty years in tech, I’ve gained quite an appreciation for the basic absurdity of developing software.

A quick look in the rear-view tells a revealing story.

Of the volumes of software I’ve written, perhaps a quarter of it was never even used. And nearly all of the code that did make it into production was gone and deleted within five years of its creation. Heck, half of the companies I worked for disappeared within eight years! And nearly every programming environment I ever learned was obsolete within ten.

While everyone talks about how rapidly technology evolves, it’s rare that anyone thinks through the implications. The software that I was quite well paid to craft has been astonishingly ephemeral, and the development tools that I’ve used have had a useful lifetime somewhat shorter than my last pair of socks.

Needless to say, this isn’t just my problem; everyone in our industry faces the same underlying challenge. Nothing lasts forever, but in tech, everything we learn, use, or create should come with a “use-by” date of fewer than 60 months.

When you were young, you probably got the impression that your career would be a linear journey from Point A (your first job) to Point B (a comfortable retirement).

In the tech field, it’s more like trying to steer a sailboat at sea. You can point yourself toward a destination, but the water’s hidden currents and tides will pull you in different directions. The wind, waves, and other people’s passage will also push you off course. Never mind that every employer and project asks you to use their own boat with completely different rigging! And sometimes, either by choice or necessity, your destination changes mid-stream. About the time you reach the middle your career, you realize that your industry and career trajectory are far more fluid than you foresaw when you first set out.

While all this change and dynamism makes it hard to make progress in any one direction for long, if you develop the insight and skills to respond to these changes wisely, you can still get to a happy destination, even if it might look nothing like what you imagined when you got your first offer letter.

What follows are a list of observations I’ve made over the course of my shifting career: some often-overlooked implications of trying to navigate my way through such a turbulent industry. I hope they are of value to you on your own journey.

First, let’s look at the implications the ephemeral nature of software has on companies as a whole.

As soon as a development team delivers a software system, companies and product managers need to immediately start planning for its replacement. These days, you have two options: either factor a perpetual enhancement and revision process into your product strategy, or plan to simply throw away and reinvent your system at great cost a little further down the road. The traditional concept of implementing a system once and then scaling back for a lengthy “maintenance phase” died about the same time as pay phones and busy signals. It’s a nice old-fashioned idea that will lead you directly toward your Chapter 7 filing.

Whether you are a product manager or a development lead, you must accept and somehow communicate to your development team that time to market is infinitely more important than the elegance or academic correctness of their code. Bug-free code does not exist, and companies are much more rigorous about following the old 80/20 rule. If you’re truly following the Agile model (rather than pretending, as so many companies do), your top priority is to ship the beta: get an initial offering with a minimal feature set out into the market, and then react rapidly to customer feedback. These days, software that is “good enough” is almost always good enough.

When I first became an engineer, my older brother offered me one of the most valuable insights of my entire career: never hire technical staff for the knowledge they already have; instead, evaluate candidates primarily on their ability to learn new skills quickly and effectively. Five years down the road, the knowledge they walked in the door with will have no value; their usefulness as employees will be determined by how easily and quickly they can become productive with new languages and tools. Furthermore, the optimal way to retain the best technical talent is to support their desire to keep up with current and emerging technologies.

Now let’s talk about a few things that apply both to individuals as well as companies.

Whether you’re an individual managing your to-do list or a product manager specifying features and enhancements, you’re always going to have more tasks than time and resources to complete them. Therefore, always work on the highest value item. Constantly ask yourself whether you and your team are working on the most strategically valuable task. Always attach yourself to the tasks that truly have the most impact, and don’t waste your time on anything else.

Risk is uncomfortable. Risk is a threat to one’s company and one’s career. And yet risk is an inherent part of every single thing we do. While moving cautiously forward might seem like the most comfortable and risk-free approach, it really only defers that pain, because there is a huge hidden risk associated with not moving forward assertively enough. Both corporations and individuals must learn how to embrace risk, tolerate its associated discomfort, and recover from failures.

Software engineers and managers often have a grand dream of software reuse: the idea that if you’re building a program to handle Task A, you should invest some extra time into making it generic enough to handle anticipated future Tasks B and C. In the real world, B and C might never be needed, and their requirements are likely to change between now and then anyways. While it goes against our sensibilities, it is often quicker and easier to just duplicate and customize old code to handle new tasks. If the additional cost of maintaining multiple versions becomes sufficient, only then should you invest the resources to refactor it into a single generalized solution. That might sound like blasphemy, but in thirty years I’ve rarely seen a compelling example where software reuse saved money in the long run.

Finally, let’s talk about how we as individual employees should respond to the fact that our work has such a surprisingly short lifetime.

On a purely tactical level, as soon as you finish a project, save some screenshots and code samples for your portfolio. Six months later, those sites you built will have changed significantly, if they survive at all.

While everyone wants to be the best at what they do, building deep expertise in any tool or language no longer makes sense, because most languages are supplanted in a few short years. Rather than becoming an expert at one thing, a better strategy is to become the long-derided jack of all trades: someone who has a wide breadth of knowledge, an understanding of the general principles that apply to all environments, and the ability to adapt to changing business needs and a changing job market. Cultivate your passion for perpetually learning new tools, and your ability to be comfortable doing so under stress and time pressure.

In terms of getting your resume noticed, what you have done is not always as significant as who you worked for. Sites and projects are ephemeral, but major companies last longer and will catch the reader’s eye. Working with companies that are household names will—for the rest of your life—help you get that first phone screen.

My advice to all individuals is to focus on saving cash when you’re working, so that you can comfortably weather the inevitable downturns in the business cycle. Every time I’ve been laid off, I’ve been able to take a year or two off to decompress, have some fun, wait for the next upturn in hiring, and then be selective in my hunt for a new position. Layoffs and buy-outs weren’t personal emergencies because I had the cash on hand to weather any situation that arose. But if you take time off, devote some time to keeping your skills up to date and learning marketable new technologies.

Unlike the coding I’ve done, the one element of my career that has proven surprisingly durable over the long-term has been the relationships I’ve built with my coworkers. Despite everyone moving from project to project and job to job and often city to city, people remember you forever, and a robust contact list is immensely helpful in finding great places to work (and knowing which ones to avoid). It might sound crazy, but this has been one of the most important elements of my career success: put just as much effort into developing good relationships with your coworkers as you put into the software you write. Software doesn’t last, but people do.

Finally, one closing bit of advice about the long-term. If you want to be happy when you look back on your career, you must work for companies and projects that improve people’s lives, rather than just making a buck. Being a successful spammer or marketer might pay the bills, but money isn’t fulfillment. No matter how elegant, satisfaction will not come from the short-lived systems you build; real, lasting fulfillment comes from the impact your work had on real people’s lives. Life is too short to waste your time working on shit that doesn’t have any meaningful value, so make sure you’re contributing to a business you can really believe in.

And, of course, don’t be surprised or dismayed when the systems you worked so hard to build disappear overnight. It’s one of the facts of life as a software developer…