Once upon a time, I educated myself on interest rates, compound interest, different tax advantaged retirement accounts, index funds, insurance, strategies for debt payoff, and so on. I was so passionately engaged in the world of finance that I gave presentations to others and helped multiple people set up their Thrift Savings Plan (military version of a 401k). I preached the magic of compound interest and encouraged folks to begin investing as early as they could, so that their money could go to work for them.

I am here to tell you as a former true believer in compound interest and investing, that I now think it's a crock of shit.

Now folks, before we get too deep into that steaming pile of fragrant excrement that is the world of finance, I have to tell you that I am in no way qualified to give you or anyone else investment advice. I hold no degrees or credentials. I haven't worked in the financial world professionally. No one has ever paid me for my advice. Someone asked me for investment advice the other day and I didn't tell her that her money was going to be hyperinflated out of existence (excuse me, "quantitatively eased"). I gave her the same advice Warren Buffet gives his family: Stick your dough in the S&P.  Warren Buffet is a lot more qualified than I am to be dispensing investment advice. 

With that mandatory disclaimer firmly at the forefront of your mind, let us proceed.

The Wealth of Nature covers a lot of ground. John Greer is an intelligent, widely read, and eminently readable author, so I don't pretend to be able to break a dense, 250-page book down into a blog post. His fundamental idea centers around the three different types of economies, though, so that's what I'll focus on here. If you're hooked, go read the book (He gets more money if you buy it from NewSociety rather than from Amazon, but you do you. I got my copy at the library).

There are three economies. The primary economy consists of the products and services produced by nature. The air you breathe comes from a service cycle of plants inhaling carbon dioxide and exhaling oxygen. The water you drink comes from a service cycle of evaporation, condensation, and precipitation (mostly--even ground water was once a part of this cycle, and once it comes out of the ground it rejoins the cycle). The food you eat comes from an intricate balance of soil, microorganisms, sunlight, water, and pollinators--all working together in the service of producing growing things. Trees, iron, coal, oil, gas, and so on are all products of the primary economy.

The secondary economy consists of what is needed to turn the raw materials of the natural world into useful items for humans. Sometimes, we don't need to do much. The water and oxygen cycles will continue without our intervention, though we can certainly fuck them up in a variety of ways (pumping chemicals into our ground water, pollution in the air producing acid rain, cutting down the Brazilian rain forest). To turn trees into furniture or toilet paper or homes takes one kind of economic activity. To turn iron into skyscrapers takes another. To take gas and turn it into fuel for the truck that dropped off that book you ordered from Amazon takes a third. 

Sometimes this concept can be confusing. A farm belongs to the secondary economy. The soil, water, sun, and seed-stock belong to the primary economy. A mine? Secondary. Geology that put iron in the ground over millions of years? Primary.

The tertiary economy consists of mainly pieces of paper that, theoretically, have exchange value. You give me a dollar, I give you a chocolate bar. I take that dollar, add it to ten thousand others, and buy ten thousand dollars in stock from Amazon in the hopes that the company will be worth more money later, so that I can take twenty thousand dollars out of an investment account and live off it in retirement. Or buy a boat. Whatever floats yours. 

The modern industrial world does not value the primary economy or include it in calculations of economic growth or contraction. Those of you awake in the world have probably already identified the major issue I'm getting at: The way we treat the primary economy to create growth (compound interest) is primarily extractive.

If I invest in an energy index fund, that index fund is going to be full of companies like BP, Shell, maybe even Tesla. When those companies earn more money, I earn more money. The gas and oil companies make money by extracting oil and gas out of the ground, refining it, and selling it. Tesla makes money through government subsidies--oh excuse me, through selling solar panels and electric cars. Solar panels and electric cars are made from steel, iron, silicon, lithium, plastic, glass, and a whole host of other things that are mostly dug out of the ground and refined through an input of energy of some kind (electricity, gas, oil, or coal, usually). 

The secondary and tertiary economies aren't a closed loop. In the previous example, two things are going up--the value of my investment and the value of the underlying companies. One thing is going down--the available amount of oil, gas, coal, steel, rare earth minerals, and so on that the companies are basing their increasing value off of. Meanwhile, the pollution caused by the manufacture and combustion of basic energy products (including lithium ion batteries) is by and large dumped into the primary economy without a lot of mitigation, potentially damaging the primary economy's ability to provide other services (like, I dunno, breathable air?). Even where there is mitigation--many different types of batteries can be recycled, for example, the loop is not closed. A significant amount of energy is required to melt plastic and separate the various components of a battery for re-use. That energy comes from the primary economy and again, the loop isn't closed. The basic form of our economic growth--compound interest--is extractive in nature.

So what's a person to do if they accept the basic premise that we've thrashed the primary economy so hard it's going into a tailspin, and that we're beginning to see those impacts in the secondary and tertiary economies now? Well, I wouldn't get a job in finance, for starters.

I would get a "job" in the secondary economy, with an eye towards adding to (instead of subtracting from) the primary economy, though that might not look like an actual job with healthcare and a 401k. It might look like expanding your backyard garden, or learning how to build an earth sheltered house, or finding a way to build a landscape for optimum water management.

I would also not depend on my investments to see me through that novel, half-century old phenomena known as "retirement," especially if I was more than thirty years out from said retirement. I would begin to take that money and use it to invest as much as possible in the primary and secondary economies--in my own education on sustainable energy, food production, or simple skills, in tools and equipment that can be used with less energy input, in restoring or increasing the resiliency of the natural environment around me, or in building social capital.

I would also take a good hard look at what the primary economy around me is going to look like in a few years. I would get the fuck out of central Texas.

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