Over the past few years the biggest buzz word for people in business or those seeking financial freedom is “passive income”.
As the name suggests, its an idea that you can earn income that you don’t have to work for.
In my experience it is also the most damaging “wealth creation” idea I’ve ever come across. It sucks the life out of people and causes them to do dreadful things that waste their time, money and energy.
I view the idea as a modern day “pot of gold” at the end of the rainbow and I believe it’s just as mythical.
Let me explain:
- The idea of passive income by definition means you are trying to make money from something that you don’t want to be doing – I see people who fundamentally aren’t interested in property, going out buying property because they think it will be “set and forget”. I see people who loath technology, setting up web sites because they think their dull, average, uninspired creation will replace their wage. I see people who have never taken an interest in large publicly traded companies suddenly fixating on price charts so they won’t have to worry about money some day. There is a deep fundimental flaw in this logic.
- The idea of passive income stimulates the most primitive part of the brain – The reptilian limbic system of the brain is a sucker for “easy wins”. It’s the part of the brain that controls fear, fight and flight. It believes we live in a scarce world with an imminent drought around the corner. Passive income appeals to the parts of the brain that think Lotto is a good idea because it feels emotionally rewarding despite being a logical disaster. This primitive part of your mind isn’t built for complex thinking, it can’t figure out that spending 1000 hours and £5000 setting up a £87.60 per month surplus is hardly time well spent. It just wants the emotional payoff of never having to worry about money some day. The worst thing is that when the limbic system is in control, the creative parts of the brain that do generate lots of opportunity can’t function.
- It’s NOT passive - What most people come to discover is that a property portfolio is hardly passive, nor is a web site, or an MLM downline. All of these, so-called “passive-income” vehicles require maintenance and upkeep. Tenants cause dramas, web-sites consistently need updating and downlines require constant encouragement.
- I don’t see examples of it working - When was the last time you were on holiday and you bumped into the couple who proudly declared that they were traveling non-stop thanks to their passive income? Theoretically, every beach in the tropics should now be over-run with people who can’t even remember how they make their money.
So what does work? What is the alternative that does produce results? What has been the secret to wealth since the dawn of time?…
Building your Empire.
Building an empire is the failsafe way to wealth, power, influence and fulfillment.
Building an empire requires you to commit fully to something that you will never turn your back on. It requires you to take a stand for something, to have a vision, to enroll others in your world-view and to keep pushing the boundaries of what’s possible.
When you build an empire, there will be things that happen within it that happen without you being in the room – sales get made, rent comes in, fees are paid, royalties are collected – however it isn’t “passive”. You can never turn your back on your empire, it will always be something that you are building and protecting.
It will be the source of joy, frustration, passion, fury, boredom and exhilaration. It will be an extension of your authentic self, a piece of living art in the world that is never quite finished.
All the examples who get pointed out as beneficiaries of “passive income” are actually empire builders. Richard Branson doesn’t have passive income, he has the Virgin Empire. Donald Trump didn’t create a big “passive income” machine, he built a property empire. Warren Buffet goes into his offices at Berkshire Hathaway each day and builds his empire, he doesn’t sit back thinking about how great it is to have his “passive income” sorted.
The quest for passive income brings out the juvenile desire to shirk financial responsibilities. It’s a desire to “get money sorted once and for all so I can get on with life” and of course that never happens.
The quest for building an empire requires you to run head-on at the challenges of money, business and work in the knowledge that it will be like this until the very end. The empire builder must chose to play an inspiring game, because the game will never quite be over as long at they have air in their lungs.
It might sound pedantic, it might sound like a slight of words however there is a chasm between the inspired person who goes out to build their empire each day and the sad group of people who are delaying life while they get their “passive income” strategy in place.
The quest for passive income ends in disappointment, building an empire is an inspired journey that brings you closer to the work you were born to do.
Junior
February 14, 2011
Hi Daniel,
I would just liketo say that I found your post a refreshing read. I was very interested in some of the points that you raised. But allow me the opportunity to play devil’s advocate to your thought provoking blog:
Firstly let me agree with you that whole idea of passive income has been greatly distorted. There is no such things as ‘passive income’ in the sense that many people think; something you ‘set and forget’ as you rightly said. Every asset you have has to be maintained and taken care of if youwant it to grow strong and support you.
The original idea of ‘passive income’ was to open an individual’s mind to the possibility that he can take care of himself without needing a ‘conventional’ job so to speak. One of the big obstacles that prevent people from creating that ‘empire’ you speak of is the fear that they will not have enough money to sustain themselves and their families if they should quit their job and ‘start building’.
Although you have named many of the billionaires, Donald Trump, Richard Branson, Warren Buffett who have becoming incredibly succesful by building an ‘empire’. There are also many millionaires who have become that way by first concentrating on replacing their income with assets; the websites, MLM downlines and property you speak of, which then acts as a safety net for them to then go off and build an amazing ‘empire.’
I am sure you would agree with me that one of your biggest assets is your ‘time’. By initially replacing your income with these assets, you have created more time for yourself as well as money. This can then act as your ‘safety net’ to then allow you to build that ‘empire’ you speak of.
I look forward to your response.
Best Wishes
Junior
Daniel Priestley
February 14, 2011
I love that you play Devils Advocate here. You make some valid points and I think you open me up to give deeper explanation as to why I still hold the line that “the quest for passive income elicits a juvenile approach to money”.
Lets cover some of the points you raise…
1. “The original idea of ‘passive income’ was to open an individual’s mind to the possibility that he can take care of himself without needing a ‘conventional’ job so to speak.”
That would be a noble thing to do however from day 1, the passive income speech is followed closely with the “buy my widget” speech. It’s the same trick that churches have played on plebs for centuries “work hard now for very little rewards, don’t question the ideas, and one day in the far away future you will experience bliss beyond your wildest dreams”. For whatever reason, the human brain seems pre-disposed to buy into this logic with far too little exploration.
I believe that there is a massive trend towards self empowerment through enterprise. I think entrepreneurship will set people free and in-turn create a more free thinking and wealthy world. I don’t believe however that they way to lure people into the world of entrepreneurship is with false promises and strategies that are destined to disappoint. I think that the truth of entrepreneurship is glorious and theres no need to dangle a carrot that could potentially leave someone jaded and less confident in their abilities.
2. One of the big obstacles that prevent people from creating that ‘empire’ you speak of is the fear that they will not have enough money to sustain themselves and their families if they should quit their job and ‘start building’.
You make out that this stuff actually works. I’ve seen people dedicate years to an MLM only to find that they have a whopping £500 a month residual comissions. I’ve seen people spend 10 years buying property on the side only to wipe away all the excess cash flow with some basic repairs. I’ve seen people spend £5000 on web sites only to discover that in 2010 ebooks don’t sell like they did in 2002.
On the flip side, I’ve seen a lawyer double his income by setting up his own home based firm (starting with private clients at night)… it took 4 months. I’ve seen an accountant who secured 5 clients at £1500 a month and wen’t from £40k a year to £70K in a matter of months.
When people leverage upon the skills and talents they already posses, the process of going from employed to self employed is fairly straight forward. If they get a good mentor, it’s not that hard at all.
Bare in mind, that my major gripe isn’t with property, shares, ecomerce, MLM’s or home businesses. My gripe is with people doing stuff they don’t want to be doing in a hope that they have stumbled upon some easy, quick money… This NEVER happens.
3. There are also many millionaires who have become that way by first concentrating on replacing their income with assets; the websites, MLM downlines and property you speak of, which then acts as a safety net for them to then go off and build an amazing ‘empire.’
I know lots of people who fit the description of being a millionaire who first started with a sideline business. One guy in particular comes to mind who’s story I know very well. He was a cleaner and he wanted financial freedom. He tried several MLM’s and Wealth Strategies only to discover he didn’t have the patience to stick with them after he figured out how much work was actually required. He took a small loan from his parents and bought a cleaning van instead and at night he stacked supermarket shelves. He worked his tail off and payed back the loan, then he bought another van, and another and another… Until he had 30 vans on the road. On weekends he renovated his own home and got the bank to loan him money for a run down home accross the street. On weekends he renovated that one, and then another and another and another. Until he had about 15 homes. This whole process took 12 years. It wasn’t passive, it was active. Like building an empire.
At the end of 12 years he sold the business for $2Million. He was then advised to put his money into “passive income” generating assets while he went traveling. The strategy seemed so great that he decided to sell most of the houses too and make them into “passive income” machines. While he was away traveling, the markets crashed and he was too slow in getting the right advice. His capital shrank back to a few hundred grand (from millions).
Today he is back building his empire and succeeding again. It will take him 7 years this time around, I’m guessing. When asked what he learned from it all, he says “don’t take your eye off the ball, stick to what you know and love… there’s no easy money out there, even if you have millions to invest”.
4. I am sure you would agree with me that one of your biggest assets is your ‘time’. By initially replacing your income with these assets, you have created more time for yourself as well as money. This can then act as your ‘safety net’ to then allow you to build that ‘empire’ you speak of.
Time is our greatest asset by a long shot. Who knows how many days we are promised. None of us know for sure. Each day is precious. So, so, so precious…. Don’t waste a day of it doing something that you want to stop doing.
Do something that you want to get better at. Do something that you would want your kids to do too (if they chose it). Do something that lights you up and challenges you for all the right reasons. Be smart, grow it wisely, be excellent at your execution. Make a name for yourself.
If the thing you are doing, makes you dream of far away places and escaping it (be it a job, a business or an investment)… you do not have a safety net… you have a ball and chain.
Hope that helps to clarify my position. Dan
Junior
February 15, 2011
Hi Daniel,
Thanks for replying. Just two questions I would like to ask how your idea applies to two questions:
1) What happens when you are building your business in order to sell it on. Are you still looking to build an ‘empire’ if you’re still going to sell it anyway?
2) What about if you’re a serial entrepreneur. I for one have many different interests, does that mean that I would have stay in the same business or stay in the same sector (especially if I am looking to become a key person of influence)?!!
Thanks a lot
Junior
Daniel Priestley
February 15, 2011
Hi Junior,
To answer your questions…
1. I have a good friend who’s whole business is buying and selling businesses. He’s great at it and he’s dedicated to it. Part of “building his empire” is having a kick-ass team of professionals around him who know that he is the man at doing deals and they like supporting him at it. He’s so dedicated to buying and selling businesses that it’s what he is known for and people send opportunities his way all the time. This guy lives in Spain but does business in the UK. What’s the big difference? … He isn’t doing this because he doesn’t really like doing it… He LOVES it and the very thrill of his work keeps him going. Hope that helps.
2. I would suggest that you figure out what is that is the linking theme for your entrepreneurship. For example… Steve Jobs is all about “putting a dent in the universe by giving passionate, creative, crazy people the technology to light up their passion to make the world a better place”…. everything he’s done from Apple to Pixar, from Computers to Phones is all about that. Branson is all about thumbing his nose at the established monopolies and taking a stand for a better deal and better experience for customers. All of his businesses (except Virgin Galactic) have that theme. What is the thme that connects all the businesses you like to be involved in?
As you rightly say, it is the Key People in any field who attract the flow of opportunities, so it is vital to be seen as a key person for something that is clear. Hope that helps.
Neil Mansell
February 14, 2011
Hi Daniel. ‘Passive income’ in the definition we know of it is possible but only after the stage that you talk about which is building a business. That takes time and effort but if you can build it correctly and then remove yourself from the day to day hassles it can become ‘relatively’ passive. Our friend, Steve Bolton prefers to call it ‘Leveraged Income’. Leveraging our time, knowledge, resources etc means that we should seek to maximise our income but acknowledge that it will need some input from ourselves to make it work on a continual basis.
Neil Mansell
Daniel Priestley
February 14, 2011
I completely agree. I guess I can put it best with an analogy…
The Queen heads up the British Empire. She isn’t involved in the day-to-day running of it. She isn’t even able to govern if she wanted to. But at all times she must remain the head of the empire. If she were to turn her back on the empire and take it for granted, it wouldn’t last long. She knows this; in her 80′s and she still sees to over 200 engagements a year, she still reads the contents of the “red box” each week and she still looks for talented people to recognise.
Can you imagine her at coronation in 1953 saying “I am looking forward to all the privileges of inheriting this empire. I intend to travel and enjoy the passive income that comes with this position. I now don’t have to work, and so I won’t, for as long as I shall live.” … I’m not sure how well that would have gone down.
Can you imagine Richard Branson saying “right, I’m done with the Virgin Empire. It’s time I stopped serving it and it started serving me more. I’ve earned this, I’ve built this and its mine to enjoy”. His management team would overthrow him faster than you can say “brand loyalty”.
I know from talking to Steve Bolton that he cares deeply about his business. He knows people by name, he goes out of his way for them and he is always looking for better ways to be of service. I know Steve is building an empire and a good one at that. He speaks, he teaches, he gives awards, he does meaningful work and he hardly stops thinking about how he can do more. Steve doesn’t have a secret plan to live off passive income, he has a plan to keep doing the things that he loves and serving others to do the same.
As I said, it might seem like a trivial difference between meaningless words but my belief is that a mindset of “passive income attainment” will send you broke and a mindset of “building an empire that is excellent and of service” will get you rich.
Eric
February 14, 2011
While I agree that the catch-phrase and often-sold-from-stage-by-charlatans concept of Passive Income is dangerous, it is still the most important type of income people should seek in the long term.
The key, however, is that people should not be looking for get-rich-quick turnkey passive income solutions but, rather, that they should find passive income opportunities to invest in as part of their long term ‘retirement’ plans.
1) Bonds/Securities — I lived for many years on passive income from bonds that required only two actions from me; that I buy them and than I earned the money needed to buy them. Once purchased, however, the income was truly passive.
2) Entrepreneurial — I believe that every entrepreneur should be grooming themselves and their businesses for a day when the entrepreneur is not NEEDED by the business. That does not mean no longer working for or on the business, it means being free to work on the aspects of the business that are most enjoyable. You mention Branson — be assured, the VAST majority of his income is in fact passive. Sure, he works on/for his various businesses but the business also work for him. If he decided to stop, he would keep earning money.
3) Leverage — Some people will also find that their ‘active income’ leads to inventions, systems, intellectual property and other assets that can be sold or licensed to third parties generating additional or, even, passive income.
The more passive income you have the more you get to work on what you love.
And still your message is important because most of the ‘Passive Income Pitches’ I have heard are related to the sale of some kind of pyramid marketing system or pipe dream.
Do what you love. Find a way to get paid for doing what you love. That is the best ‘passive’ income in the world.
Daniel Priestley
February 14, 2011
Nice reply Eric. And I know you come from a place of having done it as opposed to having learned ideas about it.
I have some genuine questions for you…
1. When you bought bonds, did you think of them as a “passive income vehicle” that you could finally retire on… or was it a safe place to park money while you established your next move?
Clearly I am all for investing. If I sold my company tomorrow for 7 figures I would be looking for a safe place to park it and a fair yeild as well.
2. If you had to invest into one of two entrepreneurs and all you knew about them was that Entrepreneur A described himself as an empire builder who was constantly systemising and grooming a team so he could expand his empire … and Entrepreneur B describes himself as a Passive Income Builder who is constantly systemising and grooming staff because he wanted passive income… Would it sway your decision either way?
3. Do you feel that people who are entering a field because they think it leads to Passive Income would likely be out-innovated by the people who are fully committed to the expansion of that field?
4. Do you currently feel that you are building your next empire or that you are trying to create passive income?
… Clearly I believe in systems, intelectual property, royalty income, license agreements, distribution deals… I’ve earned money from all of those things in my career… Clearly I am NOT advocating that hard work is the answer (there’s a chapter in my book called “The Harder You Work The Less You Earn”)… I’m simply debugging the idea that its wise to adopt the idea that “passive income” is the goal and that some “easy new thing” is the vehicle.
You mentioned Branson. I have heard Branson talk about the Virgin Empire many times but not once have I heard him talk about Virgin as his passive income vehicle.
Junior
February 15, 2011
Ok so “passive income” is not the goal, “building an empire” is. But being realistic, you still have to sustain yourself and you can’t work for nothing forever. How do you take care of that aspect?!
Daniel Priestley
February 15, 2011
For me, I utilised product launches from day 1 to make more money in a day than most people earn in a few months. At 18 I ran dance parties…. I promoted them on the side for 6 weeks (while I also had 2 jobs and study) and then I would make up to $10k in the night of the party ($10 per head x 1000 people). From age 21, a big part of my core business has been running product launches through live events. Today I run them online as well. I’m now fortunate that I’m in a position where my businesses have contracted revenue for 6-12 months in advance that covers all overheads… but in the beginning it was product launches that got me started.
Sue
February 16, 2011
I read this entire string with great interest. I wish to thank Junior in particular for his interaction above, since he has brought more of Daniel’s most interesting points out.
I would aspire to the “empire”, but of course it takes time. Most of the key “teachers” – or writers – out there recommend a business (or twenty!), property, equities, and investments (in gold, silver or bonds etc) as the bedrock of a stable asset base and income stream. I wouldn’t dream of going against those teachings. Certainly, over-exposure to any one type of asset leaves one open to massive risks (as in stock market crashes, property crash, change in tax laws, whatever.
Some passion is a massive “nice to have”, nay almost a “must have”, however, or as Daniel says, you are “serving your time” working in a field which you wish you weren’t working in. Even if you don’t have a job, you will be at risk of burnout. The passion is what keeps the whole thing vibrant and makes you work all night and go the extra mile – for YOUR empire.
I have worked with a number of entrepreneurs over many years. Many started with very little (market traders, some of them, as was Philip Green, I believe, although I don’t know him, but there are loads to mention). All have that delightful, vibrant, creative “fire in their belly”. Give me an entrepreneur like that any day – “in sickness or in health” so to speak, business-wise. The sheer stimulation of being around those driven people makes life so much more “alive”. I love listening to them talk – the ideas that come, minute by minute, hour after hour are electric.
The flipside of that is those “enjoying” their “passive income”…… they are perhaps “free” (you can have your properties fully managed, Dan – so no “maintenance issues”, no blocked toilets – it’s a choice) – but they are actually running down to a bored grave….. The spark isn’t there. They don’t live on their wits, they don’t get what was once graphically called “deal heat”, they have no need to be driven….
Many of the truly driven types never retire. Soros? Buffet? Trump? None of them need to work – I am sure they have “passive income”…. it just doesn’t show!!!
Anita
February 25, 2011
I also read the entire string with great interest. I have felt that there has been a lot of wrong messages/sales pitch given at various training events. Due to work pressure of modern society and instant gratification of the modern world. Unfortunately some people have fallen for the idea of ‘passive income’ thinking of an easier route out and only to find out that passive actually requires very active work for a long time.
By the time people found out that what they think passive is not really passive, they have got themselves into more financial committment and they have to dig themselves out of the hole.
What we need to understand is that there is no easy money and everything require works. Passive income may come at a later day after we put in the hard work to build up the business.
Life is just a process, there will never be an end until we leave this earth, we will always continue to do what is necessary and what we think best. Most important is our ability to do what we love and enjoy. Hope this help
Jason McCarthy
March 13, 2011
Many thanks for such an enlightening post…
- I appreciate that it might only be a fine distinction in words, but the psychology behind those words is everything…
I am willing to put my hands up and say that I have been working towards that ‘holy grail’ of a passive income for years – and I’m no closer than when I started…
I know my motivation has always been: ‘as soon as I don’t have to worry about where my monthly living expenses are coming from, I can focus on what I really want to do with my time’
- and the limitation I’ve placed on myself has always been my assumption that I wouldn’t be able to earn a living doing what I love…
And now I know that whilst that might have been true 10-20 years ago, with the tools that the internet and modern technology give us – and your KPI program highlights – it is possible now to create a lifestyle that is funded by doing the things you love and SHARING that with other people.
I can now look at my variously unfinished projects with fresh eyes and realise that my initial motivations were misguided – there are so many opportunities open to all of us that its foolish to even consider working on something that you don’t enjoy.
All I need to do, is realise what I want to be doing with my time once I no longer need to work every day to ‘earn’ money – and look at those activities with a fresh perspective and ask myself “where is the money in that?” and “what are the frustrations of other people who are interested in the same activities and how can I help them?”
- and as the famous Zig Ziglar said “the more people I can help to get what they want, the more I’ll get what I want”…
Thanks again Daniel
Daniel Priestley
March 13, 2011
Wow… Brilliant… Reading your comment is exactly the reason I write my blog.
David Kyte
March 17, 2011
Life is a journey not a destination.
Me – I’m a geek. I love computers and I love what I do – membership sites.
Passive income sucks. I love the story by Seth Godin. He was checking his email when he was on holiday. A couple took pity on him saying how sad that he had to check his email on holiday.
His retort was “how sad that you enjoy what you do so little that you have to run away from it”
Find something that you really enjoy and get paid for it. Work should be fun. If it’s not get out.
Me I do this stuff if If get paid or not. How lucky I am that people are happy to pay me for my “enjoyable” work
Dave
Judy Rees
March 21, 2011
Hi Daniel, great to meet and be inspired by your talk yesterday. I’ve blogged about it here: http://www.xraylistening.com/blog/2011/03/21/is-passive-income-damaging-your-health/
Andrew Collinson
March 31, 2011
You have to give before you get and if what you are giving does not come from the heart then you will struggle to build a successful business.
hattieh
June 9, 2012
Reblogged this on Stopcocks Women Plumbers and commented:
In 2006 I stood up in front of 250 entrepreneurs and vowed I would build an army of women plumbers to make a difference to the world. That dream is coming true.
Nick Haines
June 10, 2012
Hi Dan,
I am with you on this one. I think that there are a number of issues that trip people up here with this whole ‘passive income’ smoke and mirrors
One is that there is a failure to understand your value and the value you deliver and the other is that who is leveraging who or what. Typically this falls over when one person thinks they are delivering some value but in reality they are merely a form of leverage for someone else’s value ( perceived or true value).
As you know, the extreme version is in some forms of MLM where the product has little value but the business is based around the person leveraging the hell out of everyone’s ability to sell the ‘passive income’ dream to the next person down the chain.
Energetically there are ‘five ways’ to leverage and none have a possibility for a ‘passive income’.
If you understand your value and can ‘stack’ or combine these five ways to leverage then you can have a ‘sustainable income’ but not ‘passive’. But stacking and combining leverage is a tricky one as you can leverage a problem just as quickly as a value.
As you know I am a MASSIVE fan of KPI, as you do some really solid work around value appreciation, recognition and positioning and then and only then do you teach people ways to leveraging and then start people off on stable stacking those forms of leverage.
I love KPI because it is a solid foundation and not a dream factory business.
When I talk on value, stacking leverage and the dreams of a passive income, I usually sum it up by saying “Passive income is sold as a dream and usually turns into a nightmare…
be careful who is selling you the dream”
Hope to catch up soon… and I love your stuff. x
robbridge
June 10, 2012
Passive income as something forced or unnatural, you right with this type of thing or investment it is completely transformational and the transforming is as passive as it sounds. Living the lifestyle from start to success, and juggling the mindset needed to concentrate is tricky regardless of the extensions. Well done Daniel Rome was not built in a day. And Rome was Rome with an Empire before it expanded out to build stone roads between the whole of Europe and Britain. Thanks Daniel as ever I really liked this post, thanks.
MLM champion
June 13, 2012
Hello Daniel
This was a very interesting read with a very attention grabbing heading. I applaud your work. First of all I would like to say thank you very much; I attended the Key Person of Influence brand accelerator event in Melbourne recently, it was fantastic and I got heaps out of it (including a few business contacts). The reason I’m responding is because I am using a very well-known and strong MLM myself. There are some points you’ve made her that I agree with and others I don’t. “The idea of passive income by definition means you are trying to make money from something you don’t want to be doing.” I disagree (and so does Wikipedia). According to their website a passive income is “an income received on a regular basis, with little effort required to maintain it”. That says nothing about making money from something you don’t want to do. In the examples you provided, sure it’s not a passion for people it’s just a lazy way of making money which never works. I love the work I do now. I’m no longer working a 9-5 job. I get to meet great people all the time, have a fantastic support network and I’m very proud of the company that pays me.
“The idea of passive income stimulates the most primitive part of the brain.” Again, I disagree. I’m not going to say what I do is easy. Sometimes it really takes something to talk to someone new. I never know how they’ll react. Truth be told I don’t know how you’ll react to this. But I choose to build a business that is strong, long lasting and allows me the freedom to spend my time how I choose. And I choose never to take orders form a boss again.
“It’s NOT passive.” I agree with you on this one. I suppose there is nothing really passive; if by passive you mean osmotic. I refer again to the reference on Wikipedia. Passive income is simply the word given to a way of receiving income that you don’t constantly have to give all of your energy and attention.
“I don’t see examples of it working.” I can’t speak for you. Clearly you haven’t seen examples of it working but I have. I constantly meet with people successful in this industry, most of them using Amway but not all. There is a myth that if passive income is so easy everyone would do it and be successful. This business, like any other does take time and energy. Nothing is free. People who want a quick fix or an easy way out will always find a way to justify the way they live their life and that usually results in criticising those who are making an effort to get ahead. Any person who is successful at what they do has had to learn, apply and persist. They’re regular people just like you and me. They may be spending their endless amounts of free time shopping, at the movies, at home, the gym, anywhere but a boring, dull office or whatever job they left. This lifestyle is not for everyone. Even the people who pursue a passive income stream or success in any industry are not always successful. Some are, some aren’t. That’s the way it goes. You know this yourself being a businessman. 80/20 rule. Naturally the beaches won’t be packed with holidaymakers enjoying the spoils from their passive income stream. Even when they are on holiday there is not a high chance you’ll run into them and find out how they make their money. It’s not a typical holiday conversation.
Clearly you are wanting to warn people of the dangers and risks of seeking a passive income and highlighting the advantages of an alternative but I suggest in future you do a little more research first instead of writing a blog like the rest of the universe, for the sole purpose of letting everyone know how you feel and what you think about something or everything. A better use of your time could be to advise people on the risks and point them in the right direction to avoid those but still in that field if that is what they choose. You are a key person of influence and that needs to be used wisely. People will take your advice. You need to make sure it’s in their best interest.
Thanks for the read. Look forward to the next post.
Daniel Priestley
June 13, 2012
Thanks for such a thoughtful response. I’m not against MLM, Amway or any wealth creation vehicle in particular. I have met and spent time with Amway “double diamond deluxe” people and had chats about how they grew and how they maintain their business. The approach is “empire builder”. They energetically leaned in, they loved the business, they didn’t see it as work and they cared for the people in their downline. With this level of care and energy they built a great business. I also know a guy who, after getting into the top bracket, decided to “go passive” on his downline and it went from a $20k a month check to a $2k a month in 2 years. He discovered pretty quick that when you “lean out” from the empire, the good people move shop to where the action is. My blog is more about energy than it is about any type of vehicle. If your energy is behind something it tends to work, if not it doesn’t. My belief is that you need to chose a vehicle that you’ll stay engaged with AFTER the money shows up. Engaged doesn’t mean “9-5″ it actually means 24/7… any time of day, you’re happy to be involved.
Matt Lohmeyer
June 22, 2012
Hi Daniel, of course it’s difficult to argue with your “black & white” definition of ‘passive income’ – i.e. if you have to as much as buy or sell a bond, it no longer counts as ‘passive’. Of course, pretty much all revenue streams needs to be nurtured to some extent (even buying and turning over bond portfolios requires a small amount of effort), but that doesn’t disqualify them from being “passive income”. As in most things, there are lots of shades of gray – lots of different levels of “involvement / effort” to earn revenue. Perhaps a definition of “passive income” could be income that arises independently of your own personal exertion at the time. That does not mean you don’t have to anything, but passive income streams are income streams that are not *directly* tied to your personal effort.
Investment returns, for example are rewards for past efforts and can keep coming for long periods of time with minimal further input.
Intellectual property: how do successful artists, singers and (song) writers make their money? Through licence deals of records, merchandise, etc. Of course, due to rampant piracy, they again need to go out touring these days, but there is still good money made from past exertion.
Of course, you are not wrong – relying exclusively on passive income will see that income diminish over time (which is no problem if you are the Rolling Stones or the Elvis Foundation), but you are wrong to assert that only empire building will bring you success.
What will bring success and fulfilment is what you enjoy – and that is often best attained by just the right mix of “passive” and active income.
I prefer to choose just the right shade of grey for myself, thanks.
Li Sharratt
November 28, 2012
One point of particular interest to me was the comment about doing what you love – as I think this is a very negelcted topic. In fact, some people say to me, business is business, which I guess is okay if you’re good at it and only in it for the money.
I’ve done various business/investment related things and done well at them, but I didn’t love any of them to the point where I would base my whole life plan on them. Then I got the psychology bug. Four years of my life later, I am nearing the end of my psychology degree, and have just finished my first book. I have done both the degree and the book working evenings and weekends, following 10 hour days doing work for clients.
The difference here is that it is something I really love – it does not feel like work. I would advise anyone that whatever you do will be a grind, even if it pays well, unless you love it.