Stock To Flow in Firefighter Goggins Terms

David Goggins is an ex Navy SEAL, endurance athlete and all around bad ass. His book Can’t Hurt Me a fantastic exploration into what any of us can achieve should we decide to develop our mental discipline to push the envelope. Also, after listening to his book, I found out that he’s a wildland firefighter. His Instagram is chocked with videos of him running a hundred miles in the desert or doing some crazy ass feat of endurance, and often ends with one of his signature slogans. My favorite one, and the one that speaks to the economist in me is “Stay Hard Motherfuckers!” In my mind David Goggins and his over the top zeal for hardcore badassery is perfect symbolism when we compare to our weak dollar compared to the time tested performance of hard money assets.

What Is The Stock to Flow Model?

The stock to flow model is what we use to evaluate how resilient our currency is to corruption and dilution. We take into the account the “stock” of existing currency units and divide it by the “flow“ or creation of new units. Consider gold. There is a current small stock of gold scattered about the bank vaults, pawn shops, jewelry stores, etc. in the world. We also have a small flow from mining operations each year. It takes a lot of energy and effort to mine more gold, so the flow is pretty small. With Bitcoin, there is a fixed amount of Bitcoin in circulation with a known flow rate from Bitcoin mining. Unique to Bitcoin, we know the flow, or amount of new coins that are introduced into circulation halves in number periodically (about every 4 years). Bitcoin and gold have pretty solid stock to flow ratios, and are therefore considered sound money or “hard money.” Now consider the US dollar at the helm of the Fed this decade. We have a flow rate that is absolutely out of control. More money is being created out of thin air at a faster rate. In fact, more money has been printed in the last two years than in the entire history of our nation. This can and will lead to inflation and potentially the collapse of the US dollar.

I don’t know if David Goggins invests in gold, silver, or Bitcoin, but he is a spokesperson for the baseline reasons why these assets are theoretically such a great store of value. So how do I remember this term in firefighter logic? Well, when you consider the stock of psychopathic endurance athletes like David Goggins, they are few in number. Therefore the “stock” or number of athletes like him are pretty fixed in society. The “flow” or new creation of new athletes is pretty small because in order to get to his level, you must have to be a little bit unhinged and a lot a bit motivated. Thus Firefighter Goggins is the poster child for the stock to flow model. There are few like him and very likely few new Goggins to emerge making him more valuable.

Why is this important?

Currencies with weak stock to flow rates are not good long term stores of value. For those of you with a ton of money in your savings account, that money is being bastardized with every stimulus package and every printing of money out of thin air. If the flow rate of our currencies are outpacing the rate at which we are creating new goods and services in our economy, it will take more of a currency to buy the same goods and services. Sounds like inflation to me…

Keep your money in the bank, or under your pillow in the long term and all your hard earned currency will erode away in value. Find investments that are better suited to keeping pace with inflation is a good idea, but if inflation kicks up a notch, you will need to find an investment that has a higher yield. Do keep in mind that higher yields or return rates usually translate into more risk…seems too risky? What other choices do you have to save your wealth?

Moving Forward…

My plan for retaining my families wealth is twofold. First, I want to seek investments that are relatively inflation proof and are relatively safe. As mentioned before this may get tough if inflation rates get higher, but that’s for another post. The other part of my plan is when saving money, I’m not leaving it in the bank, but rather keeping the stock to flow model in mind. Gold, Silver and cryptocurrencies that have a strong or “hard” stock to flow ratio will be my primary focus. When it comes to keeping my money safe, I’ll prefer to store it as David Goggins lives everyday….and that is HARD (Motherfuckers)!