Monthly Archives: November 2013

Path Functions and Life

path function


A Path function depends on how you get from point A to point B.  A State function doesn’t depend on how you get from point A to point B.  Think about how many Path functions there are in life and how many State functions there are in life. In an earlier post I mused about how important it is to avoid wasting money on State functions ( ).  This post is devoted to the importance of Path functions in our lives.

There are the small Path functions that we have to decide on every day.  The cumulative effect of these are a major factor in our life.

If you arrive at an office and have to get to the second floor for a meeting you can take the stairs or the elevator.  Either way you will get to the meeting on time.  If you take the stairs you will get some exercise and burn some calories compared to taking the elevator.  It is less convenient to take the stairs.  This is typical of a daily Path function – the better option is less convenient and the better option requires more work.   The sum of these choices have a large effect over a lifetime.

There are also large Path functions that influence our lives.

Consider 2  forty year old men.  Both have a net worth of exactly a million dollars.  Both are university educated.  On the face of it, they appear equal.  But because of the Path function they took to get to where they are, one is financially independent and one is nearly destitute.

The first man was a trust fund baby.  He inherited a large sum from his financier father and scraped through college with a liberal arts education.  He has never worked and has been depleting his trust fund since he gained control at 21.  Nineteen years later, he has lost 95% of his inheritance.  He has current payments for his rental house, second home, gardening and cooking staff, boat, and leased BMW.  He will burn through his remaining liquid assets in the next six months and then have to start selling his toys to raise money to live on.  This man is spending a great deal of time worrying about the future and his place in the world.

The second man came from a working class family.  He worked his way through University and earned a STEM degree.  He gained employment after graduating and lived modestly and saved.  At this point (at 40) he has enough in investments to cover his expenses using the 4% SWR.  He can continue to work (or not), but is not beholden to his job.

The Independent Penguin is an expert at identifying and focusing his energy on Path functions in his life.  I will try to do the same.  Will you?

Good To The Last Dropping

Sometimes you can get quality in exchange for money and sometimes you can get rare items for money.  Sometimes you get neither.

There is a coffee called Kopi Luwak from Indonesia.  Originally the Dutch plantation owners had a rule that the plantation workers were forbidden from using any coffee beans that they gathered.  The observant workers noticed that the poop of a local cat (the Civet) contained the beans after the fruit was eaten.  By carefully collecting and cleaning the beans they were able to get enough coffee beans to use.

Then the Plantation owners saw this and they demanded to get those beans too.  It became their favorite drink.  I can’t help but think the plantation workers had a bit of a laugh thinking about the owners ignoring the fresh beans in order to use the poop covered ones.  Wikipedia has a quote from the Specialty Coffee Association of America (SCAA)  that there is a “general consensus within the industry … it just tastes bad”.

The Kopi Luwak was expensive since the beans “processed” from the wild cats were pretty tough to come by.  But since the coffee was expensive, there was a great effort to improve the sourcing of the beans.  And it has come to this:


Now the beans aren’t especially scarce.  They are collected from caged wild animals fed an unbalanced diet in order to increase the “yield” of the beans.  The beans are easy to find in the litterbox.   But the price is still high  at $100 to $600 per pound.

Are there winners and losers in this transaction?  I suppose the farmers are winners since they can make huge profits on coffee.  And I suppose that the consumers are losers since they are paying a high price for a substandard bean that isn’t scarce anymore.  But the real losers are the Civets that are having to spend their lives caged and mistreated because people want to make make more money faster.

When To Plant



There is an ancient Chinese saying that has tremendous applicability towards investing.

When is the best time to plant a tree?   Twenty years ago.
When is the second best time to plant a tree?  Today. 

Are you planting?