I am concerned that our argument takes the form: "I think this effect is bigger than you think it is!" "Oh, but I think it's smaller than you think it is!" repeated a few times. For all we know, we agree about the actual effect but have wrong ideas about one another's estimates of how big it is. Can we perhaps find some actual concrete proposition that we disagree on? (Or, as may well happen, find that there isn't one.)
Here's a candidate. It's a more detailed and, where possible, quantitative statement of my own opinion. It's a conjunction so there should be plenty to disagree with :-). I don't believe anything I've said in this discussion has been incompatible with any of these points.
(1) Survivor bias at the country level is an important issue and you shouldn't ignore it in estimating the prospects of an investment portfolio. (2) The possibility that your own country gets wiped out economically is real; it has probability on the order of 0.5% or so per year (let's say 0.25% to 1.0%), it affects people who are still working at least half as badly as early retirees (I suspect nearer to parity than that), and while it's worth trying to be prepared for it I don't see it as a major factor in deciding whether to retire early. (3) The possibility that another country you're heavily invested in gets wiped out is also real; if your international investments are reasonably diversified (or small, though that has its own problems) then the impact is on the order of 0.3% loss per year. More precisely, I'll say 0.2% to 1.0%. (4) The possibility that another country with impact on one you're heavily invested in gets wiped out is also real; there are more ways for it to happen but the impact is smaller per instance. However, it's somewhat "priced in" already even for someone who's ignored the issue, because such impacts already affect whatever indices they've looked at. Let's say that the size of this effect beyond what a naive prospective early retiree is already expecting is in the range 0% to 0.5% depending, e.g., on where they are. (5) The net effect of all this is that if you're considering retiring early, you should deduct 1% or so from your estimate of annual investment growth if you haven't previously contemplated this sort of risk, and when comparing the risks of early retirement with those of continuing to work you should not forget the risk of your own country getting wiped out economically by war, hyperinflation, etc.
Why don't you look at reality instead of going for abstract approximations?
Because doing the necessary research would take maybe 10x as long (quite possibly 100x as long) and I have higher-priority uses for that much time.
You are assuming that a "major country" being wiped out by a war would not affect other countries. [...]
No. I am assuming that what we're interested in here is the differential impact of this sort of disaster on an early-retired person's savings, compared with its impact on a still-working person's job, job prospects, and savings. (Because the relevant question is whether retiring early and living on savings is a worse decision than it might otherwise look like, because of this danger.)
The more countries affected by a disaster, the more likely it is that there's a big effect on the country in which you live, and hence the more likely that it hits still-working people hard too.
And yes, countries' outcomes are correlated. Also, there are considerably more than 10 countries of substantial size in the world. Using a low figure there serves as a partial correction for the correlation, as well as for the fact that most people don't have a portfolio balanced equally across all the world's countries.
The historical performance of an index like the S&P or Nikkei has the cross-country effects of disasters elsewhere already factored in. Such effects will be underestimated by someone looking at historical index performance only if the indices they look at are, for some reason, less affected by cross-country effects than others relevant to them. That certainly might be true (e.g., European countries' stock markets may be more correlated with one another than any of them is with the US, in which case looking at the DJIA or the S&P 500 would underestimate the risk of being hit by another country's disaster if you're in the US but hold substantial investments in Europe) but this feels like a second-order effect to me.
I think my original point was just that the effect (survivorship bias at the country level) exists and most people happily ignore it. Looks like we agree about that.
My follow-up point was that this effect -- survivorship bias at the country level -- belongs to the class of things which makes your estimates of future returns suspect. However we've moved on to another issue -- how to account for the possibility of a major disaster (war, revolution, hyperinflation, etc.) while planning your life and what does this possibility and its consequences look like.
I ...
This was originally a comment to VipulNaik's recent indagations about the academic lifestyle versus the job lifestyle. Instead of calling it lifestyle he called them career options, but I'm taking a different emphasis here on purpose.
Due to information hazards risks, I recommend that Effective Altruists who are still wavering back and forth do not read this. Spoiler EA alert.
I'd just like to provide a cultural difference information that I have consistently noted between Americans and Brazilians which seems relevant here.
To have a job and work in the US is taken as a *de facto* biological need. It is as abnormal for an American, in my experience, to consider not working, as it is to consider not breathing, or not eating. It just doesn't cross people's minds.
If anyone has insight above and beyond "Protestant ethics and the spirit of capitalism" let me know about it, I've been waiting for the "why?" for years.
So yeah, let me remind people that you can spend years and years not working. that not getting a job isn't going to kill you or make you less healthy, that ultravagabonding is possible and feasible and many do it for over six months a year, that I have a friend who lives as the boyfriend of his sponsor's wife in a triad and somehow never worked a day in his life (the husband of the triad pays it all, both men are straight). That I've hosted an Argentinian who left graduate economics for two years to randomly travel the world, ended up in Rome and passed by here in his way back, through couchsurfing. That Puneet Sahani has been well over two years travelling the world with no money and an Indian passport now. I've also hosted a lovely estonian gentleman who works on computers 4 months a year in London to earn pounds, and spends eight months a year getting to know countries while learning their culture etc... Brazil was his third country.
Oh, and never forget the Uruguay couple I just met at a dance festival who have been travelling as hippies around and around South America for 5 years now, and showed no sign of owning more than 500 dollars worth of stuff.
Also in case you'd like to live in a paradise valley taking Santo Daime (a religious ritual with DMT) about twice a week, you can do it with a salary of aproximatelly 500 dollars per month in Vale do Gamarra, where I just spent carnival, that is what the guy who drove us back did. Given Brazilian or Turkish returns on investment, that would cost you 50 000 bucks in case you refused to work within the land itself for the 500.
Oh, I forgot to mention that though it certainly makes you unable to do expensive stuff, thus removing the paradox of choice and part of your existential angst from you (uhuu less choices!), there is nearly no detraction in status from not having a job. In fact, during these years in which I was either being an EA and directing an NGO, or studying on my own, or doing a Masters (which, let's agree is not very time consuming) my status has increased steadily, and many opportunities would have been lost if I had a job that wouldn't let me move freely. Things like being invited as Visiting Scholar to Singularity Institute, like giving a TED talk, like directing IERFH, and like spending a month working at FHI with Bostrom, Sandberg, and the classic Lesswrong poster Stuart Armstrong.
So when thinking about what to do with you future my dear fellow Americans, please, at least consider not getting a job. At least admit what everyone knows from the bottom of their hearts, that jobs are abundant for high IQ people (specially you my programmer lurker readers.... I know you are there...and you native English speakers, I can see you there, unnecessarily worrying about your earning potential).
A job is truly an instrumental goal, and your terminal goals certainly do have chains of causation leading to them that do not contain a job for 330 days a year. Unless you are a workaholic who experiences flow in virtue of pursuing instrumental goals. Then please, work all day long, donate as much as you can, and may your life be awesome!