Short note: on burn rate

the idea of burn rate is how fast you expend your resource.

Burn rate is usually used in the context of startups. Usually, startups (at the beginning) aren’t profitable. They burn cash to scale (blitzscaling they call it). Burn rate is an important metric, especially when the company is not profitable and cannot easily raise money from investors. It literally can be the reason a company survives. Amazon survived the dotcom bubble because of their cash position.

Now let’s focus on ourselves. There is only one resource without which all other resource is useless. It is time. Unfortunately, we don’t know the time we have left, but we are all burning it anyway, at different rates as we live. Time is a resource that should be measured in depth and not necessarily in length. How you measure your life is the key to answering how well you lived.

What are the things you measure, or what pointers do you use to measure if you’ve lived this life as you ought to?

Money, another essential resource, is one which can easily be measured. Hence, we can quantify, adjust and recalibrate our burn rate.

In monetary terms, your burn rate is the rate at which you spend until the next cycle (usually the next payday).

An illustration:

Two people, MT and his friend.

MT spends an average of 80k per month from his 200k salary, his friend spends 50k from his 100k salary. In absolute terms, MT spends more than his friend. But relative to their earnings, MT has a lesser burn rate than his friend.

This means that MT spends less in context to his salary than his friend. (40% vs 50% of their salaries, respectively)

Keeping your burn rate low, as a young person, is a good idea, it allows you the freedom to explore. which is what you should be doing, maybe?

With a low burn rate, you have a lifestyle that is flexible, usually low possession, and low spending. It gives you the room to do other things you want to do without having to worry about money. It allows you to stay longer than others in the game.

Lower your cost, minimize your needs and maximize your income. That is how you get a lower burn rate.

When we have an increase in income, we tend also to increase our spending. Usually in greater proportion to our earnings than before the boost. This is lifestyle inflation, and probably why you shouldn’t buy the new iPhone.

Knowing this is important, but this gets interesting when you understand that this is usually because of memetic desire.

As humans, we tend to want what other people around us want. We mirror their desires. This is why groups all tend to want the same kind of things.

Memetic desire can either be good or bad. If you are around good people, you tend to want what good people want, and the same is true for the opposite.

Instead of the usual readings, here is an excerpt.

Shan Parrish of FS wrote:

We unconsciously become what we are near. If you work for a jerk, sooner or later you will become one yourself. If your colleagues are selfish, sooner or later you become selfish. If you hang around someone who is unkind, you will slowly become unkind.

Few things are more important in life than avoiding the wrong people. It’s tempting to think that we’re strong enough to avoid adopting the worst of others. But that’s not how it typically works. The changes are too gradual to notice until they are too large to address.

Over a long enough timeline, bad people eventually destroy themselves. They ignore relevant data because it doesn’t agree with them, they take unwarranted risks, they end up alone, without any friends. They might achieve external success, but they lack inner calmness and clarity.

Just as you watch what you put into your body or your mind, closely look at who you spend your time with. Are they kind? Are they honest? Are they thoughtful? Are they helping you or pulling you down? Are they reliable? Are they clear thinking? In short, are they the things you want to become? If not, don’t tempt fate, cut bate.

Distance yourself from the people you don’t want to become. Cultivate people in your life that make you better. People whose default behavior is your desired behavior. If circumstances make this difficult, choose among the eminent dead.

Ps: I just learned I only have months to live. This is what I want to say.

Originally published at https://iamuhammadtahir.substack.com on November 13, 2022.

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writing on personal finance, investing and other ideas

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