Are We There Yet?

A meditation on life, happiness, and wage compensation in a modern world.

🌱 Life = Time 💀

Our life is the time we spend and/or invest. Jobs take up a disproportional amount of that time. If we want to live in a world with equality and happiness, we need to have fulfilling jobs that pay us a living wage.


[1]

[2]

Knowledge Is Power 💪🧠

So let's get some data :)

Once upon a time, in a land not too far away, a guy named Daniel Kahneman did some research [3]. He thought that in 2010, on average, living on less than $75k per year in the United States would lead to increased stress and unhappiness. Don't take my word for it though; here's what he said:

  • "We conclude that lack of money brings both emotional misery and low life evaluation; similar results were found for anger."
  • "More money (> $75k in 2010) does not necessarily buy more happiness, but less money is associated with emotional pain."
  • "We conclude that high income buys life satisfaction but not happiness, and that low income is associated both with low life evaluation and low emotional well-being."
So, while money doesn't buy happiness, it does cap your downside risk by minimizing pain and suffering. Capping downside risk isn't just a nice to have: it means being able to eat healthy food, spend time with loved ones, and focusing on productivity without added stressors. It also means that if the average American was making 75k a year they would actually be able to do things like pay their rent on time, exercise, have decent healthcare, pursue extracurricular activities, and maybe even put aside some money in savings to pay down debt or buy a house. All in all these things lead to happiness and productivity, and money gives you the opportunity to pursue them. [4].

NYC 🍎

The Big Apple

Now national averages are well and good, but the United States is not a homogeneous entity [5]. Some cities or areas are more expensive than others so the benchmark at which one can live comfortably and productively needs to be adjusted accordingly. With this in mind, let's look at NYC.


NYC is a thriving metropolis of culture and diversity. It's also ranked as one of the most expensive cities to live in [6][7]. If we were to adjust the "happiness benchmark" for NYC rather than an average of the United States we would see a very different picture[8][9]. If we were to then fast forward from 2010 (when the survey was done) to today (2019), we might even be shocked! Let's see what happened :)

The Facts 🔍

Life is hard.

Ok, so all of that happiness stuff is well and good, but let's be real: life isn't all sunshine and roses. Hard things are hard, and that's ok, but let's look at the facts. What were the increases in the cost of living: things like the rate of inflation, the increases in rent, and increases in other things like healthcare, transportation, and food? The City of New York was curious too so they looked into it [9].

  • Rent takes up the majority of income[10], with 1/3 being the average[9].
  • Rents have increased 5%/yr[9], but in the last few years they've increased between 20-45% in many Manhattan neighborhoods[11], with 31% being the average increase since 2010 [12] (the "happiness index" was modeled on the costs of living at that time).
  • but... the income requirements in NYC are anywhere from 40 to 50 times the rent of the apartment[13]. Using that formula, someone renting an apartment for $3,000 a month must earn at least $120,000 a year [14][15].
I Just Can't Even... 🤦

The Struggle Is Real.


Wait what?! How can this be... if the cost of living is so high in NYC, how can anyone live here? Answer: they don't. They commute, a lot... [16]


Hold your horses... so you're telling me that every month:

  • the minimum you have to pay in infrastructure costs for things like rent, water, electric, heating, garbage, internet, phone, and transportation is 3k [17]
  • basic things like food, clothes, pets, household supplies, furniture etc... are on average 1k
  • and then on top of that you need another 2k for taxes and health insurance...
  • and after that whatever you're left with afterwards can be put towards paying off your loans, saving up to buy a house, or... maybe... just maybe... entertainment and/or a vacation???


So... the "happiness benchmark" is really just the "can I eat and pay my bills without working 3 jobs benchmark?"

And to even be eligible to apply for the cheapest apartments in NYC you need to make over 100k a year, and if you're lucky enough to be chosen you then have the privilege of paying roughly 1/3 of your salary towards rent every month while you survive just paying your bills on time. [10]

I don't believe it... let's check the data.

  • The cost of living in NYC is 33% more than the national average [8].
  • In 2010 as a national average the minimum one needed to make to cap downside risk associated with stress, financial ruin, and deliquincy was 75k.
  • Adjusting that for NYC that's actually more like 100k.
  • On average, living expenses (esp rent) have gone up 3-5%/yr, with rent going up an average of a 33% from 2010 to 2019 [18].
  • Adjusting that upwards 33% for NYC, the 2019 "happiness benchmark" is more like 130k.
  • If we then look at the budget we laid out for a single human to cover the basic necessities of living in NYC, it's roughly between 100k and 120k when you consider renting restrictions that salaries have to be 40-50x the monthly rent [15].
As we saw from the original paper, money caps downside risk that comes with financial burdens and loss of health and opportunities, but it does not buy happiness. Considering that in NYC you roughly need an amount of money equivalent to the "happiness benchmark" just to survive and not go into debt, that makes sense.

Web3 To The Rescue? ⛑️
Something Positive?

Well this is sad. In one of the most developed nations on earth, most people, on average, are below the "happiness benchmark": aka unable to take care of basic necessities and more likely to incur "emotional pain", "misery", and "anger" [3]. Most people in the world are not in developed nations, so it goes without saying that they're probably not super stoked about things either.

Meanwhile... the finance and software industries enjoy the highest margins of any industry to date [19]. So... who is Web3 really going to empower with cryptoeconomic mechanisms like blockchains: everyday folk who can't make rent, or people who understand the intersection of finance and software? As naive as it sounds, hopefully both :)

Here's why I think that:

  • Traditionally opportunities for almost everything humans want to do has been reserved for those lucky enough to be born on a piece of dirt with a favorable economy. Web3 aims to be a "decentralized first" community that allows anyone, anywhere, with consumer hardware to communicate, coordinate, and collaborate. This means large pools of talent that were previously untapped will be able to enter the market.
  • Traditionally lucrative employment opportunities have been reserved for those who had the opportunity to pay through their teeth for a higher education. Anyone can contribute to Web3 simply by reading about it online, engaging in discussions with the community, and then contributing feedback, ideas, and code. It's still not easy, but the barriers to entry are much lower.
  • Traditionally businesses with high margins have been gate keepers. You need them more than they need you, so they can change a lot for not doing a lot. Web3 aims to dis-intermediate gatekeepers by allowing anyone to create autonomous software that is verifiable and cheap to deploy.

This plan is far from perfect, and it's going to require a lot of work... but I think that it moves us in a positive direction. The goal is to create a world where everyone everywhere is over the "happiness benchmark" and can live a happy productive life. Wouldn't that be nice?


References

[1]: https://waitbutwhy.com/2014/05/life-weeks.html
[2]: https://waitbutwhy.com/2016/10/100-blocks-day.html
[3]: https://www.princeton.edu/~deaton/downloads/deaton_kahneman_high_income_improves_evaluation_August2010.pdf
[4]: https://blogs.wsj.com/wealth/2010/09/07/the-perfect-salary-for-happiness-75000-a-year/
[5]: https://www.citylab.com/equity/2015/08/where-15-is-only-worth-12/400295/
[6]: https://www.numbeo.com/cost-of-living/rankings.jsp
[7]: https://www.businessinsider.com/new-york-75000-salary-compared-to-big-cities-2019-1
[8]: https://www.advisorperspectives.com/dshort/commentaries/2016/10/21/happiness-revisited-a-household-income-of-75k
[9]: https://news.ycombinator.com/item?id=5080038
[10]: https://comptroller.nyc.gov/reports/affordability-index/
[11]: https://www.citylab.com/equity/2014/07/cost-of-living-is-really-all-about-housing/373128/
[12]: https://www.nytimes.com/2018/08/24/realestate/the-new-high-rent-districts.html
[13]: https://streeteasy.com/blog/nyc-rent-affordability-2018/
[14]: http://nyc.officially.nyc/apartments-in-new/new-york-city-rental-requirements/
[15]: https://www.nytimes.com/2011/07/17/realestate/prospective-renters-have-much-to-prove-to-landlords.html
[16]: https://www.nytimes.com/2016/10/23/realestate/how-much-of-my-income-should-be-budgeted-for-rent.html
[17]: https://manpopex.us/
[18]: https://www.cnbc.com/2017/03/24/how-much-it-costs-to-rent-a-1-bedroom-in-30-cities-around-the-world.html
[19]: https://www.prnewswire.com/news-releases/rents-have-increased-twice-as-fast-as-wages-in-new-york-city-since-2010-300505028.html
[20]: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/margin.html
[21]: https://www.numbeo.com/cost-of-living/in/New-York