In my introductory post, I referred to the cookie-cutter life manual which is popularly prescribed as the ultimate guide to progressing in society. Here I am going to share more details about my strategy and how millennials and Gen Z can benefit from it.
Understand the Problem
What is the cookie-cutter life manual? It’s the belief that the best path to upward social mobility for most people is through a college degree, home ownership and a steady job. So, you do these three things right and you are well on your way to coasting into the golden sunset. There is plenty of evidence for this belief. Thousands of baby boomers and Gen Xers with tons of equity in their homes and juicy pensions can attest to that.
This advice is bombarded on millennials and Gen Z. Because it worked so wonderfully in the past, didn’t it? Many people have followed this advice without giving it too much thought. However, in my opinion, adopting this strategy is a recipe for failure, not success. Why? Because of three main reasons:
- Inflated real estate prices
- Astronomical student debts
- Technological evolution
The problems of inflated real estate prices and astronomical student debts are well known and understood. I talk extensively about the reasons behind these bubbles in another post. You can read it here.
Technological Evolution
Technological evolution is another phenomenon that millennials and Gen Z have to face with an intensity unknown before in history. Entire business models become obsolete within a short period of time, leaving companies with no other option but to shut the doors down. The oil industry is a classic example. Oil companies, as late as 2012, made record profits due to high oil prices. However today powerful trends such as climate change and electric vehicles have thrown the entire industry in an existential crisis. Not surprisingly in Aug 2020 ExxonMobil, arguably one of the biggest heavyweights of the industry, got kicked out of the Dow index after 92 consecutive years.
Due to the COVID pandemic, the trend has unfortunately accelerated, with automation increasingly used to replace “frontline” jobs. Advances in concepts like machine learning and artificial intelligence have made it possible to carry out highly specialized tasks typically reserved for doctors and lawyers.
These technological advances have permanently altered corporate culture. Longevity of service and employee loyalty are no longer sacred cows. As a result, a steady job is increasingly a relic of the past.
The Solution
In today’s environment, a much more effective strategy is to pursue financial independence and personal branding. Financial independence is directing your savings towards investments that will, over time, increase in value to a point where they can be safely harvested. It can provide you a source of income, without depleting the original capital. The concept is identical to planting a tree – in the early days you have to nurture and water it. In the latter days, the tree provides you the fruit.
There are other intangible benefits to financial independence. It allows you to get rid of the golden handcuffs (the perception that the financial impact of quitting a bad job is too huge and it is better to bear the misery). It allows you to say no to bad bosses and toxic corporate cultures. Not only that, financial independence protects your mental health.
In the era of technological change, developing your personal brand is the prime way to keep yourself relevant. Essentially, it focuses on specialization and scaling the high barrier to entry. By choosing your work experiences that build upon your knowledge, you can develop skill sets that sets you apart from the competition. It increases your market value and strengthens your negotiating position. As a result, it keeps you highly motivated. You keep getting better at what you are doing until the point where you are seen as the expert.
Don’t get me wrong. Following the strategy of becoming financially independent and building your personal brand requires several individual traits such as effort, continuous learning, willingness to make mistakes and staying disciplined. There are no shortcuts to success.