2018: The (half)year of the BIBY
This is a three part post sharing updates and learnings from a sabbatical of sorts that I took in 2018. I wanted to explore how one might create a BIBY — a cheeky term for a business that generates a recurring, passive income stream, in order to cover basic living expenses.
Part I covers the Why, Part II covers the How, and Part III covers my own story with the BIBY. I hope the post kickstarts some ideas, shortcuts some learnings, or at the very least makes you giggle. Happy reading!
Part I: Why Make a BIBY
Feb 11, 2018
BIB · Y
[noun] BIBY stands for Basic Income Business + Y, just for fun. A BIBY is a mechanism to generate a recurring, passive income stream that covers your basic living expenses.
We all fall asleep differently. Some of us hit the pillow and are out. Some of us browse Instagram until we’re saturated with pictures of cats wearing toast hats and fall into a delirious dreamland. I run through a variety reel of questions and thoughts until sleep washes over me. “Wow, I think we might go to Mars in my lifetime.” “Smoothie or oatmeal for breakfast?” “How will the growth of automation be distributed?” “Why are well-made sports bras so expensive?”
And, every now and then, the age-old questions of humanity: “Why are we here? How did we come to be?” I’d be fake-newsing if I pretended to have even the beginnings of answers to these questions, but I do have a character and a story.
I like to think that inside each of us, there is a little soul spark. I call mine Lil Sol.
Lil Sol’s story goes something like this:
Some nights, that’s as far as the story gets before sleep calls. But other nights, the story plays on, and gets a little darker.
Lil Sol (aka Lil Ball of Existential Angst) is asking some deep and deeply relevant questions. We ascribe to religions, switch from job to job, call our best friends at 2 am, blast hip hop lyrics, and write posts such as this — trying to get closer to the answers to these questions. But there is no universal guide on what it means to live a good life, and ultimately we each have to answer Lil Sol’s questions for ourselves.
For me, the critical first step is time autonomy. I need autonomy over my time to explore what kind of life I want to live and to then live it. I need autonomy over my time to see the great world spin and help my loved ones thrive and contribute meaningfully to this earth and its people. I need autonomy over my time to figure out what this last piece, the meaningful contributing, looks like — to cultivate my passion / purpose / ikigai, step by deliberate and effortful step, rather than hoping to stumble upon it three sporadic career transitions from now.
Great, good, nice impassioned rant, Lil Sol, but now what — what’s stopping you?
Enter Mr. RealT. Mr. RealT is (you guessed it) the voice of reality, and he says that unless you’re an off-grid, living of the land, Walden-esque enthusiast, you need a minimum amount of money to live in this world. Let’s call the money we need to live, which covers Maslow’s basic tenets of food, housing, and health, basic income.
Some of us are born with a lifetime supply of basic income. Most of us are not.
Those of us in the latter camp often end up spending a major chunk of our existence trying to make our daily dough. If you’re working a 9–5 job to make a living, then you are giving a third of your waking hours to your job, and the flexibility of your non-job hours is likely significantly restricted. Choose your favorite metaphor — the daily grind, the rat race, the dumbass drudgery (okay I made that last one up, but you get my point) — we spend a lot of time on soul-numbing activities.
But here’s the thing — making our basic income does not have to be a perpetually time-intensive endeavor. That’s where the concept of a BIBY comes in. At its core, a BIBY (Basic Income Business + Y, just for fun) is a mechanism to generate a recurring, passive income stream that covers your basic living expenses (i.e. rent, food, healthcare). The specifics of what a BIBY might look like are covered in the next post in this series.
It requires up-front investment to set up, but after that it pays your bills with relatively little time investment on your end. And suddenly your days look like this:
A BIBY is about freedom — it is about unlocking choice. What you do with the choice is up to you, but having the choice makes all the difference in the world.
Lil moments with Lil Sol
“How you live spend your days is how you spend your life,” whispers Annie Dillard. “Will you spend your life numbing your soul?”
“NO!” shouts Lil Sol
“Tell me, what is it you plan to do with your one wild and precious life?” demands Mary Oliver.
“I don’t know, but I am so fucking stoked to find out,” exclaims Lil Sol, doing a lil tap dance of joy.
“Don’t curse,” says Mama.
“Oh shoot, gotta go.”
Wait, no, we can’t do this without you Lil Sol!
Oh well. Until next time!
A note on privilege
Some of us are born with a lifetime supply of basic income. Most of us are not. And many of us in this second camp are born into cycles of poverty and debt that make a BIBY a lot more complicated to achieve. I believe that a basic income business is a versatile concept, and some of the best examples of this concept have come from people who overcame serious financial challenges. However, I am fully aware of how much easier it is to work on a BIBY when you don’t have to worry about making ends meet every day. Personally, I have the incredible fortune of having parents who can act as a safety net, a college education, and a secure, well-paying job — these things enable me to have the time and mental space to work on a BIBY. I am immensely grateful for and humbled by this luck.
A note on liking your 9–5
But, wait, what if I really like my 9–5 job? What if I’ve found the perfect intersection of my passion, skills, and service to the world, in a job that pays my bills?
Well, hey — you’re a lucky duck, that’s amazing, especially if it’s a job that grows with you. The way I think about it is like this:
Imagine two ladies: Jina and Lina.
Both ladies are working at RNC (Really Nice Company), and love their jobs. Before starting this job, Lina had spent six months setting up her BIBY — a monthly graphic design gig. One evening after getting home from work, Jina and Lina both see an email from their favorite social enterprise (yes the two of them are oddly similar), offering a once-in-a-lifetime learning opportunity — it’s six months long, it’s on a travelling caravan with fifteen highly-accomplished green energy experts, it opens up a lot of career doors, and it looks dope! But it pays a stipend that is unlikely to cover basic expenses.
Here are the two ladies’ decision trees:
As soon as she leaves her job, Jina’s savings account starts counting down, and she needs to worry about finding another source of income. Lina’s savings account will slow its growth, but it won’t start decreasing. For Lina, taking survival money out of the decision calculus helps her consider better options and ultimately make better decisions.
Framed differently, you could say that Jina has narrow “small c” choice. She has choice over who she chooses to work for, but not over whether to take on work or not.
Lina has broad “Capital C” Choice. She can choose to continue working for RNC — a company she admires, or she can choose to join this green energy caravan, or she can invest in learning how to code to make the education technology product she’s always dreamed of creating. Her choice transcends a short-term money decision.
A BIBY enables capital C Choice.
Part II: The Three Ways to Make a BIBY
Feb 27, 2018
I often leave my encounters with the internet feeling like I’ve hung out with a omnipotent five-year-old. All of the knowledge, so much enthusiasm, and zero structure.
A BIBY is a type of passive income strategy. [Passive income, defined succinctly by Wikipedia, is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it].
To figure out whether something qualifies as a BIBY, there are two simple questions:
- D̶o̶e̶s̶ ̶i̶t̶ ̶h̶a̶v̶e̶ ̶c̶h̶u̶b̶b̶y̶ ̶c̶h̶e̶e̶k̶s̶?̶
- ̶D̶o̶e̶s̶ ̶i̶t̶ ̶f̶l̶u̶c̶t̶u̶a̶t̶e̶ ̶b̶e̶t̶w̶e̶e̶n̶ ̶s̶m̶e̶l̶l̶i̶n̶g̶ ̶l̶i̶k̶e̶ ̶t̶h̶e̶ ̶b̶e̶s̶t̶ ̶t̶h̶i̶n̶g̶ ̶e̶v̶e̶r̶ ̶a̶n̶d̶ ̶c̶h̶o̶k̶i̶n̶g̶l̶y̶ ̶a̶w̶f̶u̶l̶?̶
- Will it take up less than 10% of my time, once set up?
- Does it generate enough money to cover my basic living expenses? (my current goal is $3 K / month)
I have a few ideas that meet these criteria, but I wanted to survey the landscape before I jumped into one of my half-baked plans.
So I turned to my five-year-old mentor the internet. Since you can’t keyword search BIBY (yet!), I asked many variations of the question: “What are the different ways to set up a passive income stream?”
And the internet, of course, had a lot to say:
I scrolled through too many of these articles trying to make some sense of their ideas. Some of my faves:
(Brb, gonna try my hand at a batting cage business.)
Anyway, after wandering this part of the internet for many an hour, my conclusions are as follows: There are three main ways to make a BIBY — you start with financial assets (money), physical assets (property), or time. Within each of these approaches, there are several options that meet the BIBY criteria (<10% of time and >$3 K income / month) to varying degrees. For me, the pathway that has emerged as most promising for the BIBY [as of March 6, 2018] is digital knowledge products. (Note, in an earlier version of this post I had also mentioned drop-shipping and Airbnb-ing a property as promising pathways. I’ve explained in the deeper dives why these aren’t the best options for me — but they still might be viable options for others).
The section below explores these in more detail, so browse at leisure (or just scroll to the Lil Sol comics — let’s be real, that’s what you’re here for anyway).
STARTING WITH FINANCIAL ASSETS (AKA MONEY)
tl;dr — You’d already have to be rolling in cash (to the tune of $1 M) for this to be a viable BIBY, but you should probably look into investing regardless for long-term financial health
If you want to actually live off of the money you gain from investments, you’d need to have a lot of cash on hand right now. Let’s do a quick back-of-the-envelope calculation:
Say you are investing in a historically high-performing portfolio of stocks.* Let’s assume an optimistic average annual return, adjusted for inflation, of 7% (based on historic S&P 500 trends). To get to my basic income goal of $36,000 / year, I would need to invest a little more than $514,000.
As a functional passive income strategy for someone who is likely starting off with very little capital in the bank, investment is only a partial solution.
But as far as a partial solution goes, it’s still pretty handy. Let’s do another back-of-envelope calculation: Let’s say I’d like to have 20% of my passive income come from financial investments. That’s $7,200 / year. Then I need to invest a little more than $100,000. Still a big number, but doesn’t seem out of the realm of possibility to reach.
Finally, separate from the pursuit of passive income, if you are lucky enough to have savings just hanging out, investing your money wisely gets you from the surviving to thriving side of financial health. The SEC’s compound interest calculator tells me that I can almost double my wealth in 10 years with that 7% return rate, and that’s without contributing any further money beyond my upfront investment. So given the relatively little time you need to put in up front to set up an investment portfolio, you should get on this homes! (I’m kicking myself for not doing this earlier and kicking our entire education system for not teaching the basic life skill of Investment 101).
*Note that stocks are just one form of investment — you can also put your money into other financial instruments (e.g. bonds), into real estate, into businesses as silent partner, etc
STARTING WITH PHYSICAL ASSETS (AKA PROPERTY)
tl;dr — Airbnb-ing an apartment could get you halfway to a BIBY, but you’d need said apartment first
Here, we’re talking mainly about real estate (unless you just happen to be sitting on a case of industrial machinery). If you own a home, you can rent it out or list it on Airbnb.
Again, as a short-term passive income stream, the margins on long-term real estate rental are not enough to provide a basic income. $5–10 K / year is a rough benchmark of what you can expect in rental income from a decent property, according to Forbes and Mr Money Mustache.
The economics (and legal status) of AirBnB are highly variable, but $20 K / year in profit for renting out a full two bedroom or 81% of rent for listing a room in your residential two bedroom are feasible ballparks, according to SmartAsset. Note that these ballparks assume that you are strategic about location and promotion of your properties.
I don’t own a home, but I do have some money in the bank and friends who also want to put money into a property. I’ve put the Airbnb home option in the “to explore further” category, since the economics of investing in land, an ever-more-scarce resource, do make sense, even if those of Airbnb do not.
The denizens of the internet also suggest renting out your car / boat / nice shoes / other good that is too expensive for someone else to buy for infrequent use. My cursory research and also gut say that these aren’t great BIBY strategies, but I’m very open to being proven wrong #feedbackislove
STARTING WITH TIME
tl;dr — Drop-shipping and digital products are promising
Back to the BIBY criteria — <10% of time and (for me) >$3 K in monthly income, once set up. For all of these options, specificity matters — your product and niche and timing determine a lot of whether any one of these approaches might constitute a BIBY.
Manufacturing products. You’d have to be efficiently producing a really high-margin product and / or have guaranteed buyer(s) in order to meet the 10% time criteria. Otherwise you’d need to be managing sales constantly. I haven’t found an accessible example of this in BIBY form, so thoughts welcome. — idk maybe you make really fierce sunhats and sell them to corporations.
Upgrading / packaging products. Here’s where ideas like subscription boxes come up — where you buy goods wholesale, put them together nicely, and sell them at a premium. You’d likely have to outsource all management of this process, and the margins are totally dependent on the product and market. Sourcing BIBY-level examples here as well.
Trading / reselling products. Here we’re talking about dropshipping — a fulfillment model that removes the need for you, the seller, to manage inventory. Basically, you list a third party supplier’s merchandise, and when a customer buys something, your supplier is the one who fulfills it (sends it to the customer). You can either have an independent store a la Shopify, or you can use Amazon FBA(fulfilled by Amazon). This option has BIBY potential — basically you’re just taking advantage of arbitrage and, in the case of Amazon, a huge sales platform. Yes, that’s right, now you, too can be a middleman!
Update on why I’m not pursuing this as a BIBY option: A bit of digging into drop-shipping reveals challenges that aren’t ones I am excited to work on. Because there’s a low barrier to entry, it’s highly competitive. You’d need a very specific niche and differentiator and a lot of testing time to succeed. And to feel good, from an ethical perspective, you’d have to make sure that the goods you’re buying on the cheap and selling at a relative premium are quality enough to resell. Reply All has a good exploration of the drop-shipping scene- tl;dr the real money in dropshipping is in teaching others how to dropship.
If you can design, code, or organize / write in a way that is helpful to people, you can sell digital products. The options here are fairly straightforward — sell your designs (e.g. t-shirt designs), photos, audio snippets, website templates, apps whatever online. I haven’t dug deeply into this, but my guess is that this’d be a volume play and you’d have to get your product on a platform with a large audience (e.g. Society6 or CafePress), find your niche, and market really well. If we use the example of website templates, with a benchmark price of $20 from Themeforest (and assuming Themeforest takes a 25% cut), I’d have to sell 200 of these templates a month to meet a $3 K / month goal). Doable? Probably. Challenging? Depends on how quickly I could make / learn to make nice templates.
Then there’s the knowledge product route. Remember our five-year-old mentor, the internet? Yes, well, there’s a lot of value in taking this five-year-old’s omnipotent gibberish and condensing this vast, unwieldy amount of information into a digestible form. When I was angsting over what the value proposition of posts like this one was, a friend said, “There’s too much stuff out there. Help me structure it since you’re interested in doing the research anyway. And add a touch of personal flavor to it.” (Thanks Rohan!)
What are you knowledgeable / interested in learning about, that other people also have a motivated interest in learning? Motivated interest meaning that there is a direct application in learning a topic — like how to travel more cheaply and build better habits and eat better. Knowledge products can take the form of e-books, or online courses, or a subscription service (although the last one implies regular upkeep, so may not be BIBY material). Again, the $$ sitch here seems pretty variable. People need to trust you / your product to buy it, and building trust takes time.
Here, we’re talking about content marketing, where you make blog posts, product reviews, social media personas, etc, and then either sell ad space on your site or endorse products for commission. Your audience is your product because their clicks on the products / services you endorse bring you revenue. Oftentimes, people who end up successfully selling knowledge products are ones who’ve followed the content marketing route and build up an audience that they then sell to. Again, building an audience takes time — there are more strategic ways to do it, but you have to put in the work, and more importantly put in regular work because your whole thing is making content. This option fails the long-term <10% criteria.
Part III: BIBYs Take Time
May 29, 2018
To all the wonderful humans who’ve been following along this journey because they care about me or just like the sound of the word BIBY: the end is nigh! (sort of)
May is wrapping up, and so is my official sabbatical. Going into this time, I knew that I would need more than four months to get a personal business of the ground. What I didn’t know was whether I would enjoy the process enough to spend more time on it. Now I know — I freaking love the BIBY-making process — of ideation, prototyping, and putting a business model behind things. And while I am not on a solid path to any one business, I have planted several seeds, and have much more clarity on the type of projects I want to be working on.
Here’s what I explored and learned these last months, in the event that you decide to make your own BIBY:
- I found that the most interesting and straightforward path to basic income for myself was a digital knowledge product, specifically an online course. I fleshed out other paths in an earlier post.
- Following this digital knowledge product route, I asked myself — “What do I feel that I am well-equipped to teach?” Note that the question I didn’t ask was “What am I an expert in?” I firmly believe that for many subjects, someone who is one step ahead of you is in a much better position to teach you than someone who is fifteen steps ahead.
- Problem-solving 101: First I tried teaching one of the methods from the consulting toolkit: structured problem-solving. I found it hard to articulate a super-clear value proposition for this tool for people who aren’t already consultants. I tried targeting grad students tackling research problems and strategy folks at start-ups, but my messaging didn’t resonate. If you’re reading this and want some pointers on storylining, I can send you some good material :)
- Real Estate 101: Next, as a two-birds-one-stone activity, I threw together a Real Estate 101 workshop with my realtor friend Lauren. I’d been looking at property investment / AirBnbing as a BIBY pathway, and wanted to see how feasible it was. Turns out that I don’t feel ready to accelerate gentrification, even if it is inevitable, in a place I am not actively participating and investing in. But you can learn about buying property for yourself and see the presentation from that workshop here.
- Millennial Money Manifesto: The final major exploration I did was also a two-birds-one-stone activity. I felt a major gap in my knowledge about personal finances and specifically investing, and many of my friends felt the same. I did a round of beta testing with peers actively seeking to figure out their finances to see what pressing questions and pain points they had. From this emerged a roadmap to saving and investing for millennials in the US — you can find that here.
- One of my favorite parts of this experience was having the space to actively support friends with their own projects, whether it was helping Kevin soundboard his travel hacking toolkit, or coworking with Nick as he got his first novel to publishers, or applauding at trailers of Sam’s upcoming documentary on a monastery in West Virginia, or reading over grant proposals for Lisbeth’s craft fashion start-up, or helping a Raleigh-based volunteer platform test a new venture, or running analytics to help a friend’s band in Berlin expand their audience — it’s been such a joy to contribute to other people’s labors of love.
- Finally, I had the chance to learn from and fall in love with two cities full of pioneering energy — Raleigh and Berlin
Soooo what now?
BIBYs take time. These past four months have given me quality seeds for the BIBY, and now I want to find a wide-open, fertile field where I can plant and tend to these seeds. Okay, nice plant metaphor Minahil, but wtf are you actually saying?
The sabbatical afforded me space to thing big picture. I’ve done some reflecting about what’s important to me, and it is this: I want to spend time working with people I love and admire, on problems that I feel are important to the world. And I want space to think and create and love and be.
Practically, this means finding a (likely small) company that is creating good shit and values its employees’ humanity. That’s half my time. The other half I want to spend continuing to incubate a delightful BIBY.
It’s been an incredible ride. I hope you guys can use my learnings to accelerate your own journeys — and remember — Lil Sol is always up for a round of creative brainstorming or existential angsting if you’re in need.
PS — here’s a list of random venture ideas, some totally silly, some semi-serious, that emerged during this time — actualize / adapt / get a laugh from them as you need:
- Kidvest: Kids grow up without learning the key life skill of money management. Many parents don’t know how to teach their kids about money. The idea: Learning program teaching kids how to manage their money. Could be a series of exercises parents could go through with their kids, could be a set of videos, could be a digital game
- Good clothes aggregator: It’s hard to just have one platform that aggregates all vetted quality clothes. Idea: the Amazon for sustainable, high-quality fashion
- Precision news app: getting you hyper-local and hyper-relevant information, as well as broader, perspective-giving context
- City orientation programs: There’s no system for helping newcomers adapt and learn how to contribute to a city
- A Tinder for group house roommate matching
- A landlord review platform
- Exporting German dog training methodology to the US (seriously the pups here are SO well trained)
- Visible Hands: Using latest smart tracking tech to let consumers access the stories of all of those who contributed labor to making their goods
- Travel site for less shitty tourism / how to be a decent tourist
- B-Corp-type certification for company culture
- Personality cards — like business cards except they give basic info on how you function as a person
- Treezam: An app that lets you take a picture of a tree and identifies tree and gives you basic info
- Single Device Co: A platform that breaks the smartphone back down into beautiful, minimalist devices so that you avoid the all consuming black hole that is your phone
- Handprint: An app that collects your data on finances — investments, savings, expenditures — and shows you your impact on society (from labor, environmental, political perspectives)
Originally published at minamin.co Feb -May 2018