Building ‘real options’ in financial planning

In finance, the term "real option" refers to having the ability to make an economically-valuable choice (see here for quantitative explanation). There is considerable literature on real options in many areas of finance, but I have yet to see a discussion of how this concept applies to personal finance. I have come to believe that … Continue reading Building ‘real options’ in financial planning

Rethinking earnings and consumption through life

In the United States, many people are re-evaluating the traditional model of working and saving through life. The traditional model is that you get an education and then work full-time until you exit the workforce entirely and live on a pension, Social Security, and/or savings. In recent years, the Financial Independence / Retire Early (FIRE) … Continue reading Rethinking earnings and consumption through life

Job Clustering

The industrial revolution created an enormous economic shift in which work became highly centralized. People moved to cities to work in factories and office buildings. The tendency for jobs to aggregate in small geographic areas was required for large-scale production of goods as well as for large-scale research efforts. The growth of the financial sector … Continue reading Job Clustering

There are (at least) two distinct gig economies

There is little question that people working in non-traditional employment (freelancers, contractors, other forms of self-employment) make up a substantial and growing fraction of the working population. McKinsey estimates that about 20%-30% of Americans and Europeans perform independent work. Some estimates for the U.S. are even higher. There are projections that as much as half … Continue reading There are (at least) two distinct gig economies