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Why 'Passive Income' Is A Dangerous Fantasy (2011)

211 points by nanodeath 13y ago

dylandrop 13y ago
Re: #3 Isn't the whole point of passive income that you don't need a team? Re: #4 Can't you use the money you get from whatever you're doing passively to spend on something you support passionately?
- johnward 13y ago
  Yeah I saw #3 and realized the author has no idea what the goal of passive in come is. It's completely the opposite of "scaling" and "growing a team".
clavalle 13y ago
What makes it a fantasy is not that it is impossible. The fantasy is that it is quick (think 20 years not 20 months). Oh, and you need to find and keep amazing managers which is a whole world of finesse unto itself. I would like to point out that it is equally fantastical for the author to suggest that everyone just find a business area they can put their heart and soul into. Some people really enjoy the process of business itself, somewhat separated from the product or service.
josephjrobison 13y ago
What's interesting is that he's done some stuff with Tim Ferris, who he sees as a mentor and helped him a ton with his book launch, so you think he would have read Tim Ferris' 4-Hour Work Week to counter all his arguments. He's got really good Forbes articles to be honest, but his Education of Millionaires book was not that good at all and I can't recommend it.
- wyclif 13y ago
  Association with Tim Ferriss would not be a point in his favour IMO. http://blog.penelopetrunk.com/2009/01/08/5-time-management-tricks-i-learned-from-years-of-hating-tim-ferriss/ http://blog.penelopetrunk.com/2009/01/08/5-time-management-t...
- phaus 13y ago
  I read the first few chapters of the 4-Hour work week, it's written like one of those cheesy, scummy, get rich quick commercials. Is the rest of the book worthwhile? I got sick after about 50 pages of the author describing how awesome he is at literally every single endeavor that humans can participate in. There have been maybe five times in my entire life that I've failed to finish reading a book that I've started, this was one of them, and it was by far the easiest to put down.
  - jere 13y ago
    IIRC, there's only one chapter listing all of Ferriss's accomplishments and it was only a few pages. I thought the book had a lot of great information and case studies. Honestly though, the biggest takeaway is "get lucky starting a business and make a bunch of money and then you can justify anything that follows." Easy to travel when you've made a bunch of money, easy to hire assistants when you've made a bunch of money, etc. Of course, there are case studies that are specifically chosen to show people with fewer means doing the same things. I will say though that, from the title to the terminology, the book definitely has its cheesy, "get rich quick" moments. Why? Probably because that was the best way to sell it. It wasn't initially called "The 4 Hour Workweek," but Ferriss tested titles and found that one got the most reaction.
    - phaus 13y ago
      Maybe I'm not a good representative of his target audience, but to me, sounding like an infomercial con-artist isn't a good way to sell a product unless it has no value and you are merely attempting to take advantage of people. That may not be the case, but that's how I interpret that method of promotion. It's been a while since I read it, perhaps I did exaggerate the page count of his self-promotion, but I remember finding it extremely off-putting.
      - count 13y ago
        I think patio11 was the one who said that a lot of successful things sound scummy like that...because that works really, really well, outside of the specific demographic that inhabits HN.
soup10 13y ago
One of the reasons is that people don't know what to do with themselves after they make passive income? Therefore you shouldn't aspire to make passive income? LOL. Passive incomes means financial independence and freedom to make life decisions independent of monetary compensation. Financial freedom means having leverage in the business of life. That's hugely valuable and worth aggressively pursuing in my opinion. You can always find and pursue your passions after that.
- derefr 13y ago
  Sounds like people are scared of passive income in the same way that they're scared of immortality. Lacking imagination, they cry, "but wouldn't you get bored?"
  - StavrosK 13y ago
    Who would get bored with immortality? There are so many things to learn, and even more to discover! It would be amazing.
    - icebraining 13y ago
      You should read Gulliver's Travels.
      - StavrosK 13y ago
        I half-read it a while ago, what are you referring to?
        icebraining 13y ago
        Well, to the Struldbrugs, the immortals of Luggnagg.
        StavrosK 13y ago
        Ah, I will read that again, I have no recollection. Thanks.
greghinch 13y ago
#4 particularly stands out to me. I always feel sorry for people who make statements like, "my work isn't my life" or "I work to live, I don't live to work". Considering how much of your life you dedicate towards working, why the hell aren't you making damn well sure it's doing something that gives you at least a sense of fulfillment, if not outright joy. Even passive income takes a good deal of effort and time to generate, albeit with the goal of minimizing the continual work. Also worth considering is that, in the slim number of ventures that will generate sustainable passive income, and even smaller number of them will be something that generates that income for the rest of your adult life. So the likelihood is, even if some app you wrote is passively making you 5 figures now, in a few years it's quite likely it won't be, particularly if you're neglecting it. So you will likely work again. And if your mindset is always that all work is bad, how are you ever going to find real meaning for how you've spent your life?
- johnward 13y ago
  Because not everyone can do what they want to do and support their lives? I've hated every job I've ever had. I still have to do it. edit: Why is it that you associate work with meaning in your life? What if someone find meaning in spending time with family, or whatever?
  - zipppy 13y ago
    Those aren't mutually exclusive. You can find meaning in work & in spending time with family, etc. No one thinks it's bad to find meaning in relationships, or whatever.
    - johnward 13y ago
      That is true but the original post seemed to come to the conclusion that if you don't find a job you like you will never have meaning in your life.
  - rhizome 13y ago
    Why is it that you associate work with meaning in your life? It's a common sensibility in the US and Western Europe because that's the Puritan Work Ethic. http://en.wikipedia.org/wiki/Protestant_work_ethic http://en.wikipedia.org/wiki/Protestant_work_ethic
Yourfags 13y ago
Is it really so horrendous to consider that there are only so many people in the world? I've yet to see a place on earth where the majority of the people don't work for there living, so the probably of doing something that requires less effort than everyone else and having a better lively hood than them seems well unlikely. I mean houses just do not build themselves...the real path to success is finding a way to live the life you desire. I mean if you like sitting in fine restaurants ordering people around, then probably you should find a way to own your own restaurant, etc. Just my 2cents but all these schemes are just that schemes!
- derefr 13y ago
  > so the probability of doing something that requires less effort than everyone else and having a better livelihood than them seems, well, unlikely Tell that to everyone who is wealthy enough to live off their investment portfolio (or just savings-interest, which is implicitly a very low-volatility investment portfolio provided by the bank.) Tell that to trust-fund kids. Tell that to artists and musicians and writers who make their money off royalties. And, meanwhile, also tell that to the population of some cities in the US where business revenue is supported entirely by disability cheques[1]. There are a lot of people in this world who don't "work for a living"; the middle-class seems to have a mental block associated with imagining how they got there. [1] http://apps.npr.org/unfit-for-work/ http://apps.npr.org/unfit-for-work/
  - ricardobeat 13y ago
    Not exactly a fair bundle; unlike investment bankers, musicians and artists create real value.
    - theorique 13y ago
      Somebody must consider the work output of investment bankers to have some value, otherwise that money would never change hands. You may personally consider their work to have no value for you, or think it is morally dubious, or whatever, but for anyone to be paid, his work must have value to somebody.
md224 13y ago
> This is the basic mistake they’ve made: they’ve fallen prey to the belief that money and meaning are two totally separate things. Ah, what a terrible mistake to make! To think that one could derive meaning from one's life independently of wealth accumulation! What a ridiculous concept! EDIT: Here's another theory: what if the reason these people are miserable is because they made the "basic mistake" of assuming money would bring them meaning and/or happiness? They believed wealth would be an end-in-itself, and upon reaching that holy grail of financial security, they were struck with the terrible realization that there was no instant nirvana waiting for them. And now, having achieved the goal they were supposed to achieve, they're left wondering just what it is they're supposed to do now. In other words, the problem wasn't believing money and meaning were separate. The problem was believing that they were innately connected.
- noonespecial 13y ago
  I call it "what the hell do I do now" syndrome. If you make money so you can work on what you want, you're immune. If you work so that you can make money, you might one day be stricken.
- batgaijin 13y ago
  Whenever people start acting all pomped up and talking about how the market chooses as though somehow a fiat zero-sum game is rational indicator I have to ask: What percentage of the worlds GDP is founded in open source technology? How many people working for peanuts in their basements wrote code that changed the world for nothing? It's like economists don't understand that there are people who can create utility at an exponential, amplified, perfectly scaling rate and their only limit is their self-determination and the empowerment of their chosen language. And they work on their own time. What happens when programmers start truly proselytizing the power of digital creation to the horde of consumers? Considering the lacking macro facilities in algol-syntax derivatives it's important to understand that programmers are not any more rational than economists. Complexity has gone from being a price of performance to being the crux of a fallen generation, of individuals unable to shower themselves of their neighborly turing tarpits. I guess at this point what I am trying to say is that there are new fundamentals for the tech economy that are simply unknown. They aren't variables, they are completely off the board. I mean we use emacs/vim, pretend that virtualization can count as security and seem utterly choked in our own miasma of complexity. Integrating old ideas with new is not a matter of mixing software like a chemical mixture but a dick sizing competition without a ruler. We are mechanics who barely understand our own tools and more than that are philosophically against questioning the separation between programming language/user. It is this behavior that puts more fear in me than what the government does or what tragedies may occur... because it is a sign that our communal process, despite making progress, is a frictional force that doesn't abide by logic. I know most people are going to latch on to stereotypes or how the models used by an editor/os are still useful... but that isn't the point. The point is that the dynamics and decisions we see reflected everywhere are issues of personalities and groups, and thus the source and solution is via communal interaction. The solution is of course deeply unsettling but luckily novelized throughout our televisors in the form of AI systems that are doing there best to hide their HAL face. When google shows you custom results, what are they doing? They are acting as a moderator or parent would. But it has always been seen under the guise of the friendly mentor. What happens when our mentors start making suggestions? Do you think that same data could be used to find the most efficient manner to shift your opinion? How deeply does the ranking of links affect your judgement about a subject? Are these new questions to you, or have you simply been holding your hands over your ears? This isn't about google being malicious, or about another entity forcing their hand. The point is much more unsettling... that there are incredibly important and influential decisions being made not by individuals or beliefs, but by circumstance and yet they remain unquestioned despite their significant social and economic impact. I am supposed to be afraid of the NSA or some entity but what I truly fear is how blinded we all our own confidence with predicting the next day of this collective delusion. I do not fear the man in Washington, the man in the Vatican or the man in Moscow. Instead I fear our inability to hold ourselves accountable as individuals and as a community to taking the stance for quantifying decisions based on potential impact and not limiting the debate to mob rule or to hand picked numbers. It is only through the somehow supply/demand immunized Moore's law will humanity be given its mirror, and that truly is an act of a fearful god if there ever was one.
chipsy 13y ago
The formulation of passive income the author talks about is specifically addressed to the crowd that wants(or is being instructed by "self-help gurus") to turn around a product of minimal or transient value. Although that sector makes an undeserved amount of noise, it's not representative of all the possible ways in which one could make a low-maintenance product, and the reasons for doing so.
michaelochurch 13y ago
Technology is not fertile ground for truly passive income. It might be one of the best places to go for long-term active income, and of course there are the outlier startup successes, but technology is all about change. I've seen enough people go from thinking they were rich on $30k per month to losing the golden faucet and not knowing what to do. What most people want is more freedom-- so they don't sweat the prospect of losing this job or that client-- and that's an admirable and worthy thing to strive for, but not necessarily long-term passive income. This is just the wrong business for that. The idea that an iPhone app is going to be making the same money, with no improvements, 20 years out, is laughable. What people are experiencing and calling "passive income" is actually a result of the fact that good engineers are so underpaid in comparison to their value that, by going alone and interacting with the market directly, they can often do better than they would under an employer and taking a 90% haircut (largely, to pay for all the less competent people) on the value they deliver.
jackschultz 13y ago
The author seems to be aiming this article at people who decide to spend their time on something that can generate passive income because it generates passive income. And I agree with that sentiment. That being said, if you enjoy doing something that can generate passive income, the by all means go for it. The author almost gets there by saying, >Of course, you can make honest money in Internet info-products, or affiliate marketing, or other such areas where people tend to get drawn to “passive income” fantasies. But, to make real money over the sustainable long-haul, you must treat these like any other business. If this were true, then no one is able to generate such income. Not sure if I agree with that then. Interesting read though.
tryitnow 13y ago
The author has some good points, but the most important thing to keep in mind is that in a free society, anyone else can come along and do what you're doing and do it cheaper (which is apparently what has happened after Ferriss et al. widely publicized various passive income approaches). I do like setting "passive income generation" as a goal, but only as a useful thought experiment. It helps to think about "what would have to be true for me to remove myself from this business indefintely?" That's great as a thought experiment; it can facilitate some creative brainstorming, but it's not so wise as a business strategy.
johngalt 13y ago
Is retirement a dangerous fantasy?
- ccera 13y ago
  Yes.
nrivadeneira 13y ago
Just as I'm hesitant to take advice from a personal trainer who has never worked out, I'm hesitant to take advice on starting a business from a guy who has never started a business. While I agree that info products and affiliate marketing are not the passive cash cows that a lot of people are being tricked into believing they are, those are not the only forms of passive income. In addition, it's completely possible to enjoy the passive business you've created while at the same time enjoying stuff that brings you no monetary value. I personally enjoy snowboarding, track racing, rock climbing, and power lifting, but I don't have any desire to try to turn them into income generating activities. It's like the author is completely unaware that there are other things to do with your non-work time than partying on a beach. I find my most fulfilling moments when setting and accomplishing goals in activities that give no other reward than the meaning and gravity I have given it. This whole article reads more like SEM/lead-gen for his book. I read it a bit over a year ago and found it disappointing.
wallflower 13y ago
As someone wiser than me once said, true wealth is how long you can maintain your preferred lifestyle without working. By that definition, I've only met a handful of people who are wealthy. Some people who I've thought are relatively wealthy have alimony, child-support, large mortgages on 2nd homes in nice coastal areas. Even consultants I've met who have charged $10k/day (healthcare), they can't sit around and play golf - they go nuts. The best passive income is selling something that improves people's lives in a small way (whether it be an entertaining iPhone game that connects friends for a game or a healthy meal planner that brings a family together for dinner).
- badman_ting 13y ago
  Interesting, but I'm not sure how much sense it makes to redefine wealth as a length of time. If your goal is to sustain a lifestyle without working, I can certainly see the appeal of that, but to me the standard definition of wealth is fine -- something along the lines of abundance of resources.
- wslh 13y ago
  As someone wiser than me once said, true wealth is how long you can maintain your preferred lifestyle without working. I don't see it in that way because wealth is also about protection against risks. If a big economic crisis arises being wealthy gives you, in general, more weapons to defend you and your family.
mathattack 13y ago
I find the quest for passive income comes from a laziness - it's like wanting an easy way out. Those folks rarely do well in the long term.
mitchellh 13y ago
I don't disagree absolutely with what this post is saying, but as someone who has run multiple successful ventures that I'd consider "passive" income, I have to say its not a fantasy. But maybe my concept of "passive" is different from yours. Here we go. My first passive income business was in high school. I sold video game cheats I made through the internet. I made around $400 a month (a fortune for a high schooler). I considered it "passive." Sure, I'd make some cheats per month, but not because I had to, but because I wanted to. It took me maybe a handful of hours per week to do this. No support. My next passive income venture was in college. I built a service for students that I scaled up to almost $100,000 a year. I would work on this around 8 hours _every 3 months_. I considered that passive. I also had a full time job. So I was basically raking it in. PayPal transfers every night, a few thousand would show up per week. Passive. My current passive income venture is a SaaS. It almost pays my rent every month. It takes up about 1 hour a month of my time for support. At the same time, I'm starting a real, very not passive company that is unrelated to anything above. So each and every passive income venture shared the following traits for me: * I built it to solve my own problem, then charged for it because I figured other people would have that problem as well. * I didn't expect to get "rich" from it, but if the income to hours spent ratio breaks down well, I'm happy. i.e. I'm paying rent on an hour or two of work a month right now. That is pretty good. * I never had a "team" of more than 2 people. This was not a _business_. It is just a thing that makes money. Legally it is a business, it is taxed like a business, but from a managerial perspective, it just runs itself. The "employees" (all two of them) run themselves. * When I felt like I didn't need it anymore, I let it go. So far, I'm 2/2 at selling my ventures. The first I sold for a few thousand dollars, the second I sold for much much more. The third I have no intention or plans on selling, but if I feel like I'm not giving it the time it deserves, maybe I will (but don't plan to anytime soon). And if I don't sell it? I'll keep running it, because it is easy. * During all my passive income ventures, I've had a real job. I think passive income works best when supplementing your natural income. I've had steady passive income for the past 8 years of my life. This can really change your quality of life or your ability to save for retirement or that "next big thing" (car, house, etc.). My point is: Don't try to build a life on passive income. Just let it happen if its going to happen. You can't force it. You shouldn't force it. Just do what you like to do. And if you make money doing it, that is pretty darn cool. But if not, you're still doing what you like to do, so smile.
sehugg 13y ago
... says the blogger who makes money pennies at a time on page views from people wanting to read about passive income.
6ren 13y ago
one page (print dialog) http://www.forbes.com/sites/michaelellsberg/2011/06/24/the-top-4-reasons-why-passive-income-is-a-dangerous-fantasy/print/ http://www.forbes.com/sites/michaelellsberg/2011/06/24/the-t...
rodolphoarruda 13y ago
Oh Forbes, you pay writers like this guy to come up with some discomforting topics along a text broken into X number of pages on purpose to force readers to reload all those ads each time. That looks like a form of "passive income" to me.
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Theodores 13y ago
Call it 'rent seeking' and there is not a lot of danger or fantasy to it: http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wiki/Rent-seeking
hkmurakami 13y ago
The first time I ran into this idea in a somewhat 'formal' message was in Tim Ferris' "4 Hour Workweek". Was it this book that brought the idea of passive income (especially using the leverage of outsourcing) to the masses, or was there some other mass media fad generator before this book?
- jurassic 13y ago
  Passive income was definitely a thing before Ferriss. I actually admire Ferriss because what he describes is building the simplest thing that actually delivers a valuable product to a customer, whereas most others who I've seen try to explain "passive income" for the masses just recommend writing ebooks. People have been googling about "how to make money online" as long as Google has been a thing, and after researching for a while you are likely to end up finding advice about creating "information products". This is because, for most people, writing and selling an overpriced niche ebook online is one of the few borderline legitimate ways they can make better-than-McJob money if they do a good job on market research and actually possess some knowledge that's valuable to others. There was an epidemic of this among leaders of the "minimalist lifestyle" fad a while back: Leo Babauta, Tammy Strobel, Ev Bogue, and others. I'm sure it's cropped up in other niches too. That's where I learned about it. I think the reason passive income gets a bad rap, in this forbes piece and others, is that most people don't possess the skills to create a passive income source that is not a scam. Paying $1/page for an ebook that doesn't deliver leaves a bad taste in peoples' mouths. But simple SaaS businesses can absolutely create real value to others without significant maintenance as many people in this thread have already described.
  - thenomad 13y ago
    It's also worth noting that it's possible to write an ebook that does deliver. I've bought quite a lot of ebooks in that category.
glup 13y ago
6. You have no reason to read Forbes...
k-mcgrady 13y ago
I couldn't even finish reading this it was such BS. 1. An ebook is a shitty source of passive income. People buy it once and there will be a limited market for it, specifically if you are targeting a niche. Anyone who thinks an ebook is the path to financial freedom is an idiot. You need to find a market you can serve where people pay monthly or have to order your product regularly (something that runs out/gets used up). 2. If you're aiming for passive income why are you building a team?? When you need something done you hire a freelancer for a few weeks, solve the problem and move on. If you require a team and 'great talent' you're running a startup, not a passive income business. 3. Your customers won't leave if they realise you aren't spending all your time on the business. This doesn't mean you don't care about them. Of course you do. Without them you would be working 9-5. If you have a superior product they will stay with you. Your customers only care that you have a good product and are there to help when they need you. How much free time you have is your own business. 4. You can stay ahead of the competition. People who run these types of businesses don't spend all day doing nothing. With the business generating income passively you have more time to research how to stay ahead of the competition. If someone is coming out with a better product you can spend 100% of your time improving yours and once you're competitive advantage is maintained, go back to living your live.
- walshemj 13y ago
  The best passive income are some good equity/income Investment trusts. Just before Christmas a checked one of my Investment accounts and found that I had an extra £1500 in dividend income that I hadn't realised I had. And in the UK maxing out your share save (share options) should your company offer it is a no brainer - the one that is just due to end at BT is returning over 50K (tax free) on an investment (over 5 years of 8k)
- antidaily 13y ago
  Actually, I'm continuously shocked by what people are able to earn off ebooks and guides. It's more than you think. But takes real marketing legwork and finesse.
sytelus 13y ago
Looks like a lot of young people are taking page directly from from Time Ferris's book Four Hour Work Week. A LOT of people I know have a singular goal in their life: Make X million dollars in shortest possible time and then live off of that for rest of the life. It would be astonishing how much of the activities are generated in software world from this goal compared to other areas of engineering and art. The net effect is large number of short lived and/or crappy products that is designed for nothing but cashing out as quickly as possible. Founders creating companies not to create a long term value or advance humanity or state of the art or make people's lives better but find people with money who can be talked in to to shell away some money with promises of future. Someone had stated before that best minds of our generation are busy increasing ad revenue by 1%. I think things are more worse than that. Best minds of our generation are busy plotting shortest possible path to retire at youngest possible age.
paulhauggis 13y ago
The problem I see with many of these "passive income" businesses is that they are not long-term. You might make money for a couple of months or even a year..and then it dries up and you have to start over. It also don't know any business that is actually making money that is considered passive. You will have customer complaints, returns (or chargebacks), the market changes, If you are attempting any of the passive techniques you see on the various SEO forums, you may get banned by Google and have to start over.
- mike_esspe 13y ago
  That is exactly what "passive income" is in my experience - you spend several months working, then several years resting. Rinse and repeat.
Dewie 13y ago
The author doesn't seem to factor in the idea of creating passive (more or less) income from software development. At least ideally, a lot if not most of the software that is out there has the purpose of creating relative passivity (automation) with regards to some endeavour. The author's point that if you are creating (again, more or less) passive income you are most likely not creating value yourself is hogwash.
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abritishguy 13y ago
I'm 18 and starting university in September, it is my intention to entirely fund my university education on passive income (I've been earning an increasing amount for almost 3 years with very little work).
adios 13y ago
the ironic thing is that the audience for this magazine consists largely in people who are making bales of money the entire time they're reading that article, most of it ``passive'' by the lights of the author.
ChrisNorstrom 13y ago
Why do I feel like there's a hint of Jealousy? Jealousy that others have found a way to make money with minimal work while the average person has to work their ass off for it. Like it undermines others' work ethic and that drives them to want passive income hackers to stop.
rhc2104 13y ago
Company idea to anyone that wants one- a website that just sells fitted sheets. I pick my bed size, and see a list of the various type of fitted sheets. Then I select a type and pick a color. This might work as a dropship company. I do not want to buy a sheet set. I don't use flat sheets. When I look on Amazon, some bed sheets list "1500 thread count" in their title, but there are one star reviews explaining that it's microfiber, not cotton. At my local Bed Bath & Beyond, all the fitted sheets available are for Cal King beds, not King beds. In fact, as of typing this post, "buyfitted.com" is still available!
EugeneOZ 13y ago
Well, I saw absolutely controversial article and I have little (4 years) expirience in passive income, so I think advice "don'd even try" is worse than "it will not be easy, but try harder".

211 points by nanodeath 13y ago

Re: #3 Isn't the whole point of passive income that you don't need a team? Re: #4 Can't you use the money you get from whatever you're doing passively to spend on something you support passionately?

johnward 13y ago
Yeah I saw #3 and realized the author has no idea what the goal of passive in come is. It's completely the opposite of "scaling" and "growing a team".

clavalle 13y ago

What makes it a fantasy is not that it is impossible. The fantasy is that it is quick (think 20 years not 20 months). Oh, and you need to find and keep amazing managers which is a whole world of finesse unto itself. I would like to point out that it is equally fantastical for the author to suggest that everyone just find a business area they can put their heart and soul into. Some people really enjoy the process of business itself, somewhat separated from the product or service.

josephjrobison 13y ago

What's interesting is that he's done some stuff with Tim Ferris, who he sees as a mentor and helped him a ton with his book launch, so you think he would have read Tim Ferris' 4-Hour Work Week to counter all his arguments. He's got really good Forbes articles to be honest, but his Education of Millionaires book was not that good at all and I can't recommend it.

wyclif 13y ago
Association with Tim Ferriss would not be a point in his favour IMO. http://blog.penelopetrunk.com/2009/01/08/5-time-management-tricks-i-learned-from-years-of-hating-tim-ferriss/ http://blog.penelopetrunk.com/2009/01/08/5-time-management-t...
phaus 13y ago
I read the first few chapters of the 4-Hour work week, it's written like one of those cheesy, scummy, get rich quick commercials. Is the rest of the book worthwhile? I got sick after about 50 pages of the author describing how awesome he is at literally every single endeavor that humans can participate in. There have been maybe five times in my entire life that I've failed to finish reading a book that I've started, this was one of them, and it was by far the easiest to put down.
- jere 13y ago
  IIRC, there's only one chapter listing all of Ferriss's accomplishments and it was only a few pages. I thought the book had a lot of great information and case studies. Honestly though, the biggest takeaway is "get lucky starting a business and make a bunch of money and then you can justify anything that follows." Easy to travel when you've made a bunch of money, easy to hire assistants when you've made a bunch of money, etc. Of course, there are case studies that are specifically chosen to show people with fewer means doing the same things. I will say though that, from the title to the terminology, the book definitely has its cheesy, "get rich quick" moments. Why? Probably because that was the best way to sell it. It wasn't initially called "The 4 Hour Workweek," but Ferriss tested titles and found that one got the most reaction.
  - phaus 13y ago
    Maybe I'm not a good representative of his target audience, but to me, sounding like an infomercial con-artist isn't a good way to sell a product unless it has no value and you are merely attempting to take advantage of people. That may not be the case, but that's how I interpret that method of promotion. It's been a while since I read it, perhaps I did exaggerate the page count of his self-promotion, but I remember finding it extremely off-putting.
    - count 13y ago
      I think patio11 was the one who said that a lot of successful things sound scummy like that...because that works really, really well, outside of the specific demographic that inhabits HN.

soup10 13y ago

One of the reasons is that people don't know what to do with themselves after they make passive income? Therefore you shouldn't aspire to make passive income? LOL. Passive incomes means financial independence and freedom to make life decisions independent of monetary compensation. Financial freedom means having leverage in the business of life. That's hugely valuable and worth aggressively pursuing in my opinion. You can always find and pursue your passions after that.

derefr 13y ago
Sounds like people are scared of passive income in the same way that they're scared of immortality. Lacking imagination, they cry, "but wouldn't you get bored?"
- StavrosK 13y ago
  Who would get bored with immortality? There are so many things to learn, and even more to discover! It would be amazing.
  - icebraining 13y ago
    You should read Gulliver's Travels.
    - StavrosK 13y ago
      I half-read it a while ago, what are you referring to?
      - icebraining 13y ago
        Well, to the Struldbrugs, the immortals of Luggnagg.
        StavrosK 13y ago
        Ah, I will read that again, I have no recollection. Thanks.

greghinch 13y ago

#4 particularly stands out to me. I always feel sorry for people who make statements like, "my work isn't my life" or "I work to live, I don't live to work". Considering how much of your life you dedicate towards working, why the hell aren't you making damn well sure it's doing something that gives you at least a sense of fulfillment, if not outright joy. Even passive income takes a good deal of effort and time to generate, albeit with the goal of minimizing the continual work. Also worth considering is that, in the slim number of ventures that will generate sustainable passive income, and even smaller number of them will be something that generates that income for the rest of your adult life. So the likelihood is, even if some app you wrote is passively making you 5 figures now, in a few years it's quite likely it won't be, particularly if you're neglecting it. So you will likely work again. And if your mindset is always that all work is bad, how are you ever going to find real meaning for how you've spent your life?

johnward 13y ago
Because not everyone can do what they want to do and support their lives? I've hated every job I've ever had. I still have to do it. edit: Why is it that you associate work with meaning in your life? What if someone find meaning in spending time with family, or whatever?
- zipppy 13y ago
  Those aren't mutually exclusive. You can find meaning in work & in spending time with family, etc. No one thinks it's bad to find meaning in relationships, or whatever.
  - johnward 13y ago
    That is true but the original post seemed to come to the conclusion that if you don't find a job you like you will never have meaning in your life.
- rhizome 13y ago
  Why is it that you associate work with meaning in your life? It's a common sensibility in the US and Western Europe because that's the Puritan Work Ethic. http://en.wikipedia.org/wiki/Protestant_work_ethic http://en.wikipedia.org/wiki/Protestant_work_ethic

Yourfags 13y ago

Is it really so horrendous to consider that there are only so many people in the world? I've yet to see a place on earth where the majority of the people don't work for there living, so the probably of doing something that requires less effort than everyone else and having a better lively hood than them seems well unlikely. I mean houses just do not build themselves...the real path to success is finding a way to live the life you desire. I mean if you like sitting in fine restaurants ordering people around, then probably you should find a way to own your own restaurant, etc. Just my 2cents but all these schemes are just that schemes!

derefr 13y ago
> so the probability of doing something that requires less effort than everyone else and having a better livelihood than them seems, well, unlikely Tell that to everyone who is wealthy enough to live off their investment portfolio (or just savings-interest, which is implicitly a very low-volatility investment portfolio provided by the bank.) Tell that to trust-fund kids. Tell that to artists and musicians and writers who make their money off royalties. And, meanwhile, also tell that to the population of some cities in the US where business revenue is supported entirely by disability cheques[1]. There are a lot of people in this world who don't "work for a living"; the middle-class seems to have a mental block associated with imagining how they got there. [1] http://apps.npr.org/unfit-for-work/ http://apps.npr.org/unfit-for-work/
- ricardobeat 13y ago
  Not exactly a fair bundle; unlike investment bankers, musicians and artists create real value.
  - theorique 13y ago
    Somebody must consider the work output of investment bankers to have some value, otherwise that money would never change hands. You may personally consider their work to have no value for you, or think it is morally dubious, or whatever, but for anyone to be paid, his work must have value to somebody.

md224 13y ago

> This is the basic mistake they’ve made: they’ve fallen prey to the belief that money and meaning are two totally separate things. Ah, what a terrible mistake to make! To think that one could derive meaning from one's life independently of wealth accumulation! What a ridiculous concept! EDIT: Here's another theory: what if the reason these people are miserable is because they made the "basic mistake" of assuming money would bring them meaning and/or happiness? They believed wealth would be an end-in-itself, and upon reaching that holy grail of financial security, they were struck with the terrible realization that there was no instant nirvana waiting for them. And now, having achieved the goal they were supposed to achieve, they're left wondering just what it is they're supposed to do now. In other words, the problem wasn't believing money and meaning were separate. The problem was believing that they were innately connected.

noonespecial 13y ago
I call it "what the hell do I do now" syndrome. If you make money so you can work on what you want, you're immune. If you work so that you can make money, you might one day be stricken.
batgaijin 13y ago
Whenever people start acting all pomped up and talking about how the market chooses as though somehow a fiat zero-sum game is rational indicator I have to ask: What percentage of the worlds GDP is founded in open source technology? How many people working for peanuts in their basements wrote code that changed the world for nothing? It's like economists don't understand that there are people who can create utility at an exponential, amplified, perfectly scaling rate and their only limit is their self-determination and the empowerment of their chosen language. And they work on their own time. What happens when programmers start truly proselytizing the power of digital creation to the horde of consumers? Considering the lacking macro facilities in algol-syntax derivatives it's important to understand that programmers are not any more rational than economists. Complexity has gone from being a price of performance to being the crux of a fallen generation, of individuals unable to shower themselves of their neighborly turing tarpits. I guess at this point what I am trying to say is that there are new fundamentals for the tech economy that are simply unknown. They aren't variables, they are completely off the board. I mean we use emacs/vim, pretend that virtualization can count as security and seem utterly choked in our own miasma of complexity. Integrating old ideas with new is not a matter of mixing software like a chemical mixture but a dick sizing competition without a ruler. We are mechanics who barely understand our own tools and more than that are philosophically against questioning the separation between programming language/user. It is this behavior that puts more fear in me than what the government does or what tragedies may occur... because it is a sign that our communal process, despite making progress, is a frictional force that doesn't abide by logic. I know most people are going to latch on to stereotypes or how the models used by an editor/os are still useful... but that isn't the point. The point is that the dynamics and decisions we see reflected everywhere are issues of personalities and groups, and thus the source and solution is via communal interaction. The solution is of course deeply unsettling but luckily novelized throughout our televisors in the form of AI systems that are doing there best to hide their HAL face. When google shows you custom results, what are they doing? They are acting as a moderator or parent would. But it has always been seen under the guise of the friendly mentor. What happens when our mentors start making suggestions? Do you think that same data could be used to find the most efficient manner to shift your opinion? How deeply does the ranking of links affect your judgement about a subject? Are these new questions to you, or have you simply been holding your hands over your ears? This isn't about google being malicious, or about another entity forcing their hand. The point is much more unsettling... that there are incredibly important and influential decisions being made not by individuals or beliefs, but by circumstance and yet they remain unquestioned despite their significant social and economic impact. I am supposed to be afraid of the NSA or some entity but what I truly fear is how blinded we all our own confidence with predicting the next day of this collective delusion. I do not fear the man in Washington, the man in the Vatican or the man in Moscow. Instead I fear our inability to hold ourselves accountable as individuals and as a community to taking the stance for quantifying decisions based on potential impact and not limiting the debate to mob rule or to hand picked numbers. It is only through the somehow supply/demand immunized Moore's law will humanity be given its mirror, and that truly is an act of a fearful god if there ever was one.

chipsy 13y ago

The formulation of passive income the author talks about is specifically addressed to the crowd that wants(or is being instructed by "self-help gurus") to turn around a product of minimal or transient value. Although that sector makes an undeserved amount of noise, it's not representative of all the possible ways in which one could make a low-maintenance product, and the reasons for doing so.

michaelochurch 13y ago

Technology is not fertile ground for truly passive income. It might be one of the best places to go for long-term active income, and of course there are the outlier startup successes, but technology is all about change. I've seen enough people go from thinking they were rich on $30k per month to losing the golden faucet and not knowing what to do. What most people want is more freedom-- so they don't sweat the prospect of losing this job or that client-- and that's an admirable and worthy thing to strive for, but not necessarily long-term passive income. This is just the wrong business for that. The idea that an iPhone app is going to be making the same money, with no improvements, 20 years out, is laughable. What people are experiencing and calling "passive income" is actually a result of the fact that good engineers are so underpaid in comparison to their value that, by going alone and interacting with the market directly, they can often do better than they would under an employer and taking a 90% haircut (largely, to pay for all the less competent people) on the value they deliver.

jackschultz 13y ago

The author seems to be aiming this article at people who decide to spend their time on something that can generate passive income because it generates passive income. And I agree with that sentiment. That being said, if you enjoy doing something that can generate passive income, the by all means go for it. The author almost gets there by saying, >Of course, you can make honest money in Internet info-products, or affiliate marketing, or other such areas where people tend to get drawn to “passive income” fantasies. But, to make real money over the sustainable long-haul, you must treat these like any other business. If this were true, then no one is able to generate such income. Not sure if I agree with that then. Interesting read though.

tryitnow 13y ago

The author has some good points, but the most important thing to keep in mind is that in a free society, anyone else can come along and do what you're doing and do it cheaper (which is apparently what has happened after Ferriss et al. widely publicized various passive income approaches). I do like setting "passive income generation" as a goal, but only as a useful thought experiment. It helps to think about "what would have to be true for me to remove myself from this business indefintely?" That's great as a thought experiment; it can facilitate some creative brainstorming, but it's not so wise as a business strategy.

johngalt 13y ago

Is retirement a dangerous fantasy?

ccera 13y ago
Yes.

nrivadeneira 13y ago

Just as I'm hesitant to take advice from a personal trainer who has never worked out, I'm hesitant to take advice on starting a business from a guy who has never started a business. While I agree that info products and affiliate marketing are not the passive cash cows that a lot of people are being tricked into believing they are, those are not the only forms of passive income. In addition, it's completely possible to enjoy the passive business you've created while at the same time enjoying stuff that brings you no monetary value. I personally enjoy snowboarding, track racing, rock climbing, and power lifting, but I don't have any desire to try to turn them into income generating activities. It's like the author is completely unaware that there are other things to do with your non-work time than partying on a beach. I find my most fulfilling moments when setting and accomplishing goals in activities that give no other reward than the meaning and gravity I have given it. This whole article reads more like SEM/lead-gen for his book. I read it a bit over a year ago and found it disappointing.

wallflower 13y ago

As someone wiser than me once said, true wealth is how long you can maintain your preferred lifestyle without working. By that definition, I've only met a handful of people who are wealthy. Some people who I've thought are relatively wealthy have alimony, child-support, large mortgages on 2nd homes in nice coastal areas. Even consultants I've met who have charged $10k/day (healthcare), they can't sit around and play golf - they go nuts. The best passive income is selling something that improves people's lives in a small way (whether it be an entertaining iPhone game that connects friends for a game or a healthy meal planner that brings a family together for dinner).

badman_ting 13y ago
Interesting, but I'm not sure how much sense it makes to redefine wealth as a length of time. If your goal is to sustain a lifestyle without working, I can certainly see the appeal of that, but to me the standard definition of wealth is fine -- something along the lines of abundance of resources.
wslh 13y ago
As someone wiser than me once said, true wealth is how long you can maintain your preferred lifestyle without working. I don't see it in that way because wealth is also about protection against risks. If a big economic crisis arises being wealthy gives you, in general, more weapons to defend you and your family.

mathattack 13y ago

I find the quest for passive income comes from a laziness - it's like wanting an easy way out. Those folks rarely do well in the long term.

mitchellh 13y ago

I don't disagree absolutely with what this post is saying, but as someone who has run multiple successful ventures that I'd consider "passive" income, I have to say its not a fantasy. But maybe my concept of "passive" is different from yours. Here we go. My first passive income business was in high school. I sold video game cheats I made through the internet. I made around $400 a month (a fortune for a high schooler). I considered it "passive." Sure, I'd make some cheats per month, but not because I had to, but because I wanted to. It took me maybe a handful of hours per week to do this. No support. My next passive income venture was in college. I built a service for students that I scaled up to almost $100,000 a year. I would work on this around 8 hours _every 3 months_. I considered that passive. I also had a full time job. So I was basically raking it in. PayPal transfers every night, a few thousand would show up per week. Passive. My current passive income venture is a SaaS. It almost pays my rent every month. It takes up about 1 hour a month of my time for support. At the same time, I'm starting a real, very not passive company that is unrelated to anything above. So each and every passive income venture shared the following traits for me: * I built it to solve my own problem, then charged for it because I figured other people would have that problem as well. * I didn't expect to get "rich" from it, but if the income to hours spent ratio breaks down well, I'm happy. i.e. I'm paying rent on an hour or two of work a month right now. That is pretty good. * I never had a "team" of more than 2 people. This was not a _business_. It is just a thing that makes money. Legally it is a business, it is taxed like a business, but from a managerial perspective, it just runs itself. The "employees" (all two of them) run themselves. * When I felt like I didn't need it anymore, I let it go. So far, I'm 2/2 at selling my ventures. The first I sold for a few thousand dollars, the second I sold for much much more. The third I have no intention or plans on selling, but if I feel like I'm not giving it the time it deserves, maybe I will (but don't plan to anytime soon). And if I don't sell it? I'll keep running it, because it is easy. * During all my passive income ventures, I've had a real job. I think passive income works best when supplementing your natural income. I've had steady passive income for the past 8 years of my life. This can really change your quality of life or your ability to save for retirement or that "next big thing" (car, house, etc.). My point is: Don't try to build a life on passive income. Just let it happen if its going to happen. You can't force it. You shouldn't force it. Just do what you like to do. And if you make money doing it, that is pretty darn cool. But if not, you're still doing what you like to do, so smile.

sehugg 13y ago

... says the blogger who makes money pennies at a time on page views from people wanting to read about passive income.

6ren 13y ago

one page (print dialog) http://www.forbes.com/sites/michaelellsberg/2011/06/24/the-top-4-reasons-why-passive-income-is-a-dangerous-fantasy/print/ http://www.forbes.com/sites/michaelellsberg/2011/06/24/the-t...

rodolphoarruda 13y ago

Oh Forbes, you pay writers like this guy to come up with some discomforting topics along a text broken into X number of pages on purpose to force readers to reload all those ads each time. That looks like a form of "passive income" to me.

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Theodores 13y ago

Call it 'rent seeking' and there is not a lot of danger or fantasy to it: http://en.wikipedia.org/wiki/Rent-seeking http://en.wikipedia.org/wiki/Rent-seeking

hkmurakami 13y ago

The first time I ran into this idea in a somewhat 'formal' message was in Tim Ferris' "4 Hour Workweek". Was it this book that brought the idea of passive income (especially using the leverage of outsourcing) to the masses, or was there some other mass media fad generator before this book?

jurassic 13y ago
Passive income was definitely a thing before Ferriss. I actually admire Ferriss because what he describes is building the simplest thing that actually delivers a valuable product to a customer, whereas most others who I've seen try to explain "passive income" for the masses just recommend writing ebooks. People have been googling about "how to make money online" as long as Google has been a thing, and after researching for a while you are likely to end up finding advice about creating "information products". This is because, for most people, writing and selling an overpriced niche ebook online is one of the few borderline legitimate ways they can make better-than-McJob money if they do a good job on market research and actually possess some knowledge that's valuable to others. There was an epidemic of this among leaders of the "minimalist lifestyle" fad a while back: Leo Babauta, Tammy Strobel, Ev Bogue, and others. I'm sure it's cropped up in other niches too. That's where I learned about it. I think the reason passive income gets a bad rap, in this forbes piece and others, is that most people don't possess the skills to create a passive income source that is not a scam. Paying $1/page for an ebook that doesn't deliver leaves a bad taste in peoples' mouths. But simple SaaS businesses can absolutely create real value to others without significant maintenance as many people in this thread have already described.
- thenomad 13y ago
  It's also worth noting that it's possible to write an ebook that does deliver. I've bought quite a lot of ebooks in that category.

glup 13y ago

6. You have no reason to read Forbes...

k-mcgrady 13y ago

I couldn't even finish reading this it was such BS. 1. An ebook is a shitty source of passive income. People buy it once and there will be a limited market for it, specifically if you are targeting a niche. Anyone who thinks an ebook is the path to financial freedom is an idiot. You need to find a market you can serve where people pay monthly or have to order your product regularly (something that runs out/gets used up). 2. If you're aiming for passive income why are you building a team?? When you need something done you hire a freelancer for a few weeks, solve the problem and move on. If you require a team and 'great talent' you're running a startup, not a passive income business. 3. Your customers won't leave if they realise you aren't spending all your time on the business. This doesn't mean you don't care about them. Of course you do. Without them you would be working 9-5. If you have a superior product they will stay with you. Your customers only care that you have a good product and are there to help when they need you. How much free time you have is your own business. 4. You can stay ahead of the competition. People who run these types of businesses don't spend all day doing nothing. With the business generating income passively you have more time to research how to stay ahead of the competition. If someone is coming out with a better product you can spend 100% of your time improving yours and once you're competitive advantage is maintained, go back to living your live.

walshemj 13y ago
The best passive income are some good equity/income Investment trusts. Just before Christmas a checked one of my Investment accounts and found that I had an extra £1500 in dividend income that I hadn't realised I had. And in the UK maxing out your share save (share options) should your company offer it is a no brainer - the one that is just due to end at BT is returning over 50K (tax free) on an investment (over 5 years of 8k)
antidaily 13y ago
Actually, I'm continuously shocked by what people are able to earn off ebooks and guides. It's more than you think. But takes real marketing legwork and finesse.

sytelus 13y ago

Looks like a lot of young people are taking page directly from from Time Ferris's book Four Hour Work Week. A LOT of people I know have a singular goal in their life: Make X million dollars in shortest possible time and then live off of that for rest of the life. It would be astonishing how much of the activities are generated in software world from this goal compared to other areas of engineering and art. The net effect is large number of short lived and/or crappy products that is designed for nothing but cashing out as quickly as possible. Founders creating companies not to create a long term value or advance humanity or state of the art or make people's lives better but find people with money who can be talked in to to shell away some money with promises of future. Someone had stated before that best minds of our generation are busy increasing ad revenue by 1%. I think things are more worse than that. Best minds of our generation are busy plotting shortest possible path to retire at youngest possible age.

paulhauggis 13y ago

The problem I see with many of these "passive income" businesses is that they are not long-term. You might make money for a couple of months or even a year..and then it dries up and you have to start over. It also don't know any business that is actually making money that is considered passive. You will have customer complaints, returns (or chargebacks), the market changes, If you are attempting any of the passive techniques you see on the various SEO forums, you may get banned by Google and have to start over.

mike_esspe 13y ago
That is exactly what "passive income" is in my experience - you spend several months working, then several years resting. Rinse and repeat.

Dewie 13y ago

The author doesn't seem to factor in the idea of creating passive (more or less) income from software development. At least ideally, a lot if not most of the software that is out there has the purpose of creating relative passivity (automation) with regards to some endeavour. The author's point that if you are creating (again, more or less) passive income you are most likely not creating value yourself is hogwash.

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abritishguy 13y ago

I'm 18 and starting university in September, it is my intention to entirely fund my university education on passive income (I've been earning an increasing amount for almost 3 years with very little work).

adios 13y ago

the ironic thing is that the audience for this magazine consists largely in people who are making bales of money the entire time they're reading that article, most of it ``passive'' by the lights of the author.

ChrisNorstrom 13y ago

Why do I feel like there's a hint of Jealousy? Jealousy that others have found a way to make money with minimal work while the average person has to work their ass off for it. Like it undermines others' work ethic and that drives them to want passive income hackers to stop.

rhc2104 13y ago

Company idea to anyone that wants one- a website that just sells fitted sheets. I pick my bed size, and see a list of the various type of fitted sheets. Then I select a type and pick a color. This might work as a dropship company. I do not want to buy a sheet set. I don't use flat sheets. When I look on Amazon, some bed sheets list "1500 thread count" in their title, but there are one star reviews explaining that it's microfiber, not cotton. At my local Bed Bath & Beyond, all the fitted sheets available are for Cal King beds, not King beds. In fact, as of typing this post, "buyfitted.com" is still available!

EugeneOZ 13y ago

Well, I saw absolutely controversial article and I have little (4 years) expirience in passive income, so I think advice "don'd even try" is worse than "it will not be easy, but try harder".