Why the Pursuit of Passive Income Might be a Fool’s Errand
When many people attempt to start online projects of any sort they have dreams of earning “passive income.” They do a google search for how to make money online and stumble on websites that sell them on the dream, not the reality of building something that earns money. Somehow we’ve developed this cultural narrative of receiving PayPal notifications of while we sit on a beach in Thailand posting pictures of our curated lives on Facebook and Instagram for the world to envy.
Ramit Sethi teaches a course called Earn 1K. And it teaches you absolutely nothing about how to earn passive income. It requires you to do actual work, provide real value, and find a real customer. Successful people really do take 10 years to succeed overnight.
Years ago when I interviewed him, he said: “passive income is bullshit for the majority of people.” If you haven’t seen it I’d highly recommend this interview with Ramit from Chase Jarvis’ 30 days of genius series:
While Tim Ferriss popularized the idea of passive income with The 4-Hour Workweek, Tim himself has more or less said that to sit on your ass for every other hour of the week other than the 4 that you work isn’t really the point. And the guy who wrote The 4-Hour Workweek works far more than that.
One of my mentors said to me “the best way to earn passive income is to spend years working your ass off.
Build a Brand or Build a Factory
For decades, people built factories and the economy thrived, creating an industrial revolution. And the goal of the factory was simple, maximize output in the most efficient manner possible.
You don’t give a shit who filled your coke bottle
You don’t care how many bottles the factory produced.
All that matters is that you get your Coke and it tastes exactly as you expected. It’s not a connection. It’s a transaction. It’s a zero sum game. You pay for the Coke, and the relationship ends there.
A brand on the other hand is completely different.,
- A brand creates a connection between a customer and a product
- A brand touches our hearts
- A brand makes us feel like we are part of something bigger than ourselves
- A brand fascinates us
- A brand is something that we love more a year from now than we do today.
It’s really easy however to confuse the two.
Some people build successful “personal brands” and end up turning them into factories. Jon Acuff once said that “if you see people as your platform you end up stepping on them. A brand becomes a factory when it sees people as nothing more than a platform, an opportunity to squeeze blood out of a stone. When we treat a brand like a factory, we tarnish the reputation of the brand
When an internet marketer hammers a list over and over until as much profit has been squeezed out of it as possible, a brand turns into a factory. By all means, we should get paid for our work. But it’s a delicate balance between art and commerce.
Factories result in transactions. Brands result in connections. Factories might produce passive income over the short term. But over the long term you have to keep building more factories to produce more passive income. The sustainability and more importantly the meaning that this approach adds to your life is somewhat questionable.
In their book, The Last Safe Investment Michael Ellsberg and Bryan Franklin said the following about passive income:
If you are lucky enough to achieve it, passive income may offer you the choice of playing Xbox all day, but it rarely gives you the opportunity to sit on the board of the non-profits that inspire you most, have dinner with your living heroes like sir Richard Branson or you favorite musicians, or be invited to be the keynote speaker at a cutting edge conference in a field of your choice. You are free to choose any of these options if you’ve earned them through your own power of contribution and value to others.
In our experience, the skill of generating passive income has a similar risk/reward profile as that of trying to be a movie star-and leaves most its suitors broke and disenchanted, as most aspiring movie stars are (without the creative fulfillment or romanticism that comes from being a starving artist).
The pursuit of passive income might just be a fool’s errand that makes only the person who is selling you the dream rich.
I’m the host and founder of The Unmistakable Creative Podcast. Every Sunday we share the most unmistakable parts of the internet that we have discovered in The Sunday Quiver. Receive our next issue by signing up here.
