Early Retirement Extreme: A philosophical and practical guide to financial independence by Fisker Jacob Lund; Averbach Zev; Beaver Ann

Author:Fisker, Jacob Lund; Averbach, Zev; Beaver, Ann
Language: eng
Format: mobi
Tags: Personal Finance
Published: 2010-09-30T05:00:00+00:00

A curve relating additional reward to additional effort.

To give an example, professionals are often encouraged to hyperspecialize, that is to put in maximum effort so that they'll achieve maximum production (upper right of this figure), to win the competition with other professionals and attract the highest salary. If money is the only utility that matters, this is the optimal strategy. If, however, happiness, low stress, leisure time, or other things in the work-life balance also matter, it would result in a different strategy, since the last, say 80% of the effort, to gain the last 20% of the results, would be wasted. Once you understand the maximum power principle intuitively, it'll be quite easy to follow. In the simplest terms, it says that you can gain the maximum utility by being relatively competent in large numbers of topics by contributing a nontrivial but fairly small effort. This means that you may gain more utility by being competent (journeyman level) in 10 different topics than by spending the same amount of time to become an expert in a single topic.

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