In this article, I reflect on my personal situation. However, I hope my candid thoughts prompt you to reflect on your own situation.
For the next couple of months at least, I’m reducing the amount of time I spend blogging.
I’ll probably keep posting, but not at the weekly cadence of the past four or five years.
Consider it a “sabbatical”.
The thoughts in this article are related, but I couldn’t make them flow from one section to the next. So I’m breaking the article up into lots of discrete parts.
In the first draft of this article I also mentioned that I was taking something of a sabbatical from Fairhaven Wealth, as well – or at least, taking some time to work on the business, rather than in the business.
In some cases, that’s still true: I can’t bring myself to take on new clients for my full financial planning process. The process has been taking too much out of me over the past 18 months.
Having said this, I’m working on a new project which has ignited me. Much of the time and energy I would have spent on blogging will go towards that project for the foreseeable future.
I wouldn’t have come up with this idea without the mental space from committing to step back.
Sabbaticals were primarily for the benefit of institutions, not teachers/researchers
My understanding is that sabbaticals were introduced by colleges and universities. They weren’t introduced for the benefit of staff who took the sabbaticals, but primarily for the good of the institutions.
By allowing faculty to take time off periodically, these teachers and researchers would often use the time to pursue interests they wouldn’t ordinarily be able to pursue.
In some cases they’d visit other institutions and work with peers who saw the world in a slightly different way, resulting in cross-pollination of ideas and techniques. In others they might have used the time to write the book they wanted, collating their work into a more cohesive whole. Etc.
Offering sabbaticals was a pragmatic decision. All up, these sabbaticals resulted in faculty being more effective researchers and teachers. It was for the good of the institution as much as the individuals.
This logic can apply beyond academic institutions.
I’ve got dozens, if not hundreds, of articles in various states of completion. But spending the time to bring them to completion involves time and energy that is better used elsewhere.
I use writing (including polishing off articles) as a tool for thinking and making decisions.
One reason I’m taking a break from blogging is that I’ve been spending a lot of my time thinking (and writing) about things that probably aren’t of direct interest to many people, or that won’t come across very well.
* On buying land to build a bach – seeing it as a bach as a terrible investment, but an investment all the same (partially financially, but more importantly in terms of a broader definition of “wealth” and the inheritance I want to leave my children).
* On buying a Porsche Cayman (finally!?) and justifying (rationalising?) the purchase.
Maybe articles like this would be useful to some people. But they would also put a lot of people off.
I also feel like some of my presuppositions have shifted. The last couple of years have provided quite a few additional data points that I’m still trying to incorporate.
As the saying goes – when the facts change, I change my mind. The same goes for compelling arguments – I’m open to changing my mind.
Writing is a powerful tool for working out what I think, and ironing out the wrinkles in my thought processes. I will use writing as a way to reassess some things, and I can’t churn out work at a regular tempo (ie, weekly).
Things I’m wrestling with:
- Do I need to reassess my views about property and leverage? (I don’t think so: it ultimately comes down to the individual(s) at play, where they, where they want to go, their tolerance for risk, and their willingness to put in the relevant effort where necessary. I’m not wedded to that. But I want/need to interrogate my views.)
- I'm still wildly ambivalent about cryptocurrency (tending towards skepticism of a non-income generating asset class littered with a disproportionately high number of dodgy actors).
- Who am I writing for with this blog, and working with in respect to Fairhaven Wealth? In what cases are the ideas I advocate helpful for some people, and harmful for others?
My comments below are a good case in point regarding who I'm writing for. I’m basically making an argument that if you’ve got some professional runs on the board, you should consider a sabbatical at some point in your life.
Is this sound for everyone? No. I’ve got a friend who is going through something of a “sabbatical” at the moment and, to be frank, the only “productive” thing he seems to do is research topics on his phone with little instrumental impact on his life or ability to create value for others, and become progressively more red-pilled.
Another example: am I going too far in the direction of encouraging people to invest in non-balance sheet assets? I think this is sound advice for a lot of people – but could be harmful for many others.
Your most valuable investments may not be on “balance sheet assets”
Many of the best investments you can make can’t be found on a balance sheet.
My wife and I have equity in a home, investment assets, and various trappings (“stuff”). All of these things show up on our balance sheet.
But a balance sheet is narrow, in that it ignores our most valuable assets.
We’re in our very early forties. Our most valuable assets are our productive capabilities.
Our income-earning potential over the next two decades or more exceed all of the assets currently on our balance sheet by quite a bit.
We’ve acknowledged the value of our productive capacity by insuring ourselves through personal insurance policies such as income protection and life insurance. We pay a lot of money in personal insurance.
But I sometimes wonder whether we’ve given as much thought and energy as to how we utilise our productive capacity, compared to the balance sheet assets we’ve accumulated.
If that’s the case, we’ve probably got things around the wrong way.
Not only is our ability to create value (and income) extremely valuable, but it’s something we have a lot of control over, at least over the medium-term. (It can take a long time for a big boat to change direction.)
Ultimately, investing in financial assets is pretty easy. Beyond getting asset allocation right and investing in one or more reputable funds that align with our investment goals, there isn’t a lot more we need to do.
In terms of underlying investments, I have virtually no control over investments in publicly listed companies in my KiwiSaver or managed funds. Nor do I have any predictive ability in these assets.
But the opposite is the case with my productive capacity. I have control, and I can bring predictions about the future to bear on my professional decisions.
Costs, opportunity costs, potential rewards, and risks managed
There’s a cost to taking time off, or taking career risks.
Arguably, I’m in one of the peak periods of my life in terms of income-generating capacity. By taking a sabbatical, I’m leaving money on the table.
It’s a cost, and an investment, that doesn’t show up on my balance sheet.
The “investment” is made up of opportunity costs – foregone income.
I know enough about compound interest to know that foregone income during this period of my life can add up significantly over time.
Let’s say I forego $100,000 in income for one year at age 40, and that money could have been invested and generated a 5% real return until age 65 (ie, over 25 years). That $100,000 wouldn’t just be $100,000 – it’d be worth over $320,000 by age 65.
But compounding doesn’t just relate to returns on financial investments. Compounding can relate to other domains of life, even if they can’t be measured as easily.
What about if taking a year off at age 40 meant that you could increase your earning potential in the following 25 years by $10,000 per year? If we add that extra income up, and compound it by 5%, you end up better off by nearly $480,000 – $160,000 better off for taking a year off.
Maybe it increases subsequent income by $5,000 per year – in which case you’d end up slightly worse off (~$240,000 instead of $320,000).
I’m simplifying, and ultimately quantifying something that can’t really be quantified without the benefit of a crystal ball. But you get my point.
Here’s another thought experiment: taking time off doesn’t increase your earning potential. But it might have two added financial (and quality-of-life) benefits:
* If done right, it might reduce the likelihood of being displaced from the workforce as you get closer to retirement.
* It might mean you enjoy your work and can continue to earn some extra income for longer. I won’t run the numbers in this article, but working for even a couple of extra years can make a big difference to your long-term financial outcomes. All the better if it’s doing something you enjoy and that creates value and is meaningful.
The risk of regret
There’s also another risk. The risk of regret.
Step twenty years into the future. If you continue you on your current course, how will you feel?
If you’ll feel great – congratulations! To me, that’s a mark of success.
If, however, you’re delaying gratification, what are you waiting for in order to do something more rewarding?
Are you waiting for an arbitrary milestone? Like a certain level of passive income or wealth?
If it took you a little longer to get to that milestone, but you enjoyed the journey significantly more, would that trade-off be worth it?
If you’re a clever, resourceful person, you’re probably going to end up fine, no matter what you end up doing. That’s not to say it’ll be easy or that it’s guaranteed. But I’ve developed enormous faith in the resourcefulness of thoughtful, motivated people.
All else being equal, I prefer to see people enjoy their lives, and do things that are meaningful to them. For their own sake, but also for the positive ripple effects this usually has on the rest of us.
My biggest failure of the year
When I prepare financial plans, the most important advice I give is quite often not what you’d expect.
Recently, for example, I’ve emphasised to clients who owned businesses that their key financial (and lifestyle) focus should be directing their energy and attention towards business succession.
I’ve also told clients to take sabbaticals. That was the case with a client earlier this year. For various reasons, they needed to step away from their work situation, and focus on other areas of their life.
I wasn’t recommending early retirement. But while taking time off, I suggested that they reflect on the next step in their professional journey.
In a sense, one of my biggest failures of the year was not communicating this advice persuasively enough.
I was clear about my views, and what I thought they should do they should do. But they didn’t do it when they could or should have.
They regret it, and for their sake, so do I. I keep wondering if there was more I could do.
I’m conflicted about situations like this. Philosophically, I see myself as an adviser. The client is always the decision-maker. My role is to help them make an informed decision, and in doing so I tell them what I would do if I were in their situation, and what I’d recommend to close friends and family members.
I don’t see my role as forcing or coercing people to follow my advice. I also need to be careful: if I’d pushed harder I might have broken the client’s confidence and trust in me.
But I keep wondering if I could or should have done more to encourage them to follow my advice sooner than later.
The best we can do is live and learn.
Personally, I don’t want to look back in regret. And I don’t you to feel that way, either.
There is privilege to being able to take time off.
If you have significant commitments, then this might be hard to do.
If you don’t have funds and/or a supportive partner, then it is harder to do.
You might also feel responsibilities to other stakeholders in your professional life.
If that’s the case, ask yourself: what would happen if you died or became seriously ill? Would everything fall apart? Or is it likely you could be replaced or others would step up to the plate? In the medium- to long-term, could it be good for others?
To take a sabbatical, you need to have some ability to take a sabbatical. Some optionality, as it were.
Personally, I’d like to live in a world where more people had an opportunity to do this. I think it would result in people being more productive and able to add value throughout their working life. In total, it would result in all of us in society being better off. But perhaps I’m sharing my prejudices.
In sum: one of the best investments that some people can make is in taking a sabbatical.
(Perhaps you could call it a "skillbattical".)
If you’re in a knowledge-based role that involves decision-making and a bit of creativity, it’s quite likely that a sabbatical will benefit you – and the people you serve.
I’m not just preaching this. I’ve done it, and, to an extent, I’m doing it again.
For the next while, I’m taking a sabbatical from posting regularly on this blog.
I’m also taking a slightly different direction with Fairhaven Wealth.
This article is influenced, in large part, by Paul Millerd’s article, “The ultimate guide and reasons to take a sabbatical”, along with some of his other writing. Thanks Paul!
A great resource for thinking about your career is 80,000 hours. A good starting point is its article “This is your most important decision: Why your career is your biggest opportunity to make a difference, and how you can use it best.” (The 80,000 hours podcast is also great.)
And of course, anything by Tim Urban (of the Wait But Why blog) is self-recommending. He wrote a great article on “How to Pick a Career (That Actually Fits You)”
While I’m at it: I love David Epstein’s book Range: Why Generalists Triumph in a Specialised World, which is a liberating read for a certain type of person.