Active, passive, and not-so-passive income

Yan Babitski
Apr 2, 2020 · 6 min read

— I’ve been thinking about money recently. Specifically, how do I earn it?
— That’s an interesting topic. What do you have in mind?

This nice trip would cost you X months of your life

— You see, I like my current job. There are challenges to take on, I care about people in my team, and it pays ok. There is one thing though which I sort of like and dislike at the same time. Whatever happened, I would get a fixed amount of money twice a month.

I like it because it gives a sense of safety — if I get cold, I could spend a few days not in the office, not worrying that I won’t have money to pay the rent.

And I don’t like it because then money becomes time. I know how much I have to pay for rent, for groceries, car and so on, I know how much I want to save, and I know how much is left to spend. And then if I wish to, say, go to Burning Man or to spend a week in Mexico, I would immediately know how many months should I “wait” until I have that amount. And it feels like I’m exchanging part of my life for it. It’s hard for me to take it easy.

To get promoted you should work to get promoted

— Sounds like a good reason to get a promotion
— Well, that’s one way to go. But to be honest, I don’t feel like I’m ready for it. I joined the team not that long ago, and I feel that I’m just starting to add value. I’d like to enjoy the fact that I’m playing my role in the team and that I’m doing it well so people could rely on me.
But even when you are ready, it’s not that simple. To get a promotion, you would have to switch to a different mode and look for things that would look good in a promotion package instead of doing work that would move the team forward. Some times these two sets would intersect, but you know how it works — to get a promotion, you should work on getting promoted.

Passive income

— Fair enough. So you‘re thinking about some kind of passive income?
— Yes, that’s what I’ve been doing recently. You might think it’s hard, but actually, it’s not: all you need to do is to make a deposit into a trustworthy bank or buy some stock that pays a dividend, e.g., with Robinhood (affiliate link, if you are interested) or similar fin-tech product. You might need to do some paperwork, figure out what tax implication it would have, but it’s not much more complicated than to get a driver’s license or to get internet connection into your apartment.

There is a catch with this kind of passive income, though. If you are lucky to have a big chunk to invest — you are good. My case is not that encouraging. Let’s say I put $10,000, and the return is 5% of this amount per year: that’s $500. It’s definitely much better than nothing, but it doesn’t make that much difference. I could buy two airplane tickets, but that’s about it. And that’s not even mentioning that I have to get $10,000 somewhere…

And of course, it’s subject to risk. Last year famous index fund S&P 500 did extremely well, but past performance does not predict future performance. If I had invested my hypothetical hard-earned $10K in S&P500 two months ago in January, it would have turned into 7K today.

Not so passive income

— Yeah, not much
— The good thing is that it’s not the only option. Passive income is nice, but it’s, you know, passive. It requires zero effort (after you’ve made a decision and invested the money). But I’m actually ready to put some effort. In fact, I would love to — what could be more rewarding than do some work that you are proud of and get paid well for it?

And not only that. With passive income, you don’t create any value. Well, maybe you are a little bit by participating in the economy, but there would be no people you know who would be thankful for your service. You won’t make any new connections, visit new places and get new experiences. The process of earning money is not only about money — it’s also about social interaction where payment indicates that other people find the things you do valuable.

— So what’s the plan?
— To be honest, I don’t know at this point. One way to go is to do “gigs”: drive for uber, do the delivery or something like this. This income from gigs would actually work quite well for the vacation thing I’ve been talking earlier: just from the job income, it would require X months of savings, but with doing gigs, it could be half that time or maybe even less. That’s good.

The only thing that bothers me is that an evening driving for Uber is an evening away from family and friends. And it also doesn’t scale well: even though I’m not ready for promotion right now, I might very well start working for it in a few years and would eventually get it. That wouldn’t work for Uber (at least from I know).

Blogging and making videos must be good in that regard. Take the “Veritassium,” “VSauce,” or “3Blue1Brown” as an example. I bet It takes a lot of effort to create each video, but once it’s out — it’s available for everyone at any time. If you learned about VSauce today and liked the very recent video — you might go and check out a previous video, and then another one, and so on.

The same goes for podcasts, artwork, courses, and other similar things. There you sort of building an assert which has potentially huge initial investment, but then it starts (hopefully) to generate dividends. And not only money — people would hopefully find what you do useful and would have a good time watching your content.

The answer to the question

— Well, it looks like you have a pretty clear idea of how to earn money.
— What do you mean?
— You just described all of it: there are“active,” “passive,” and “not-so-passive” ways to have income, each with pros and cons, and that you care not only about the balance, but also about being useful to other people. You just gave me a comprehensive answer to the question you’ve asked me at the beginning of our conversation: “how do I earn money?”
— Hmm… I guess you are right. I do have an answer to this question. This doesn’t make the situation easier, though.

A new question

— I guess
— So the answer to my question, “how do I earn money?” is that I continue to work and look for some form of creative side projects where I could be useful to other people. The question then becomes “what creative side project should I do, and how do I earn money with it?” In other words, “how do I become an entrepreneur?”

I guess it is progress, but it feels more like one step forward, two steps back. “How to chose what to do?” “Where to find the audience?” “Would anyone like what I’m doing?” “Would anyone like what I’m doing and would be glad to pay me?”. This new question is even more difficult than the previous one.

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Yan Babitski

Written by

Software engineer @ Google

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +787K followers.

Yan Babitski

Written by

Software engineer @ Google

The Startup

Get smarter at building your thing. Follow to join The Startup’s +8 million monthly readers & +787K followers.

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