> 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.
I haven't had a job in over a year because I've been living at home in the middle of nowhere, but I have no dearth of purpose in life. It is a great time to commit to open source, learn new technologies and I developed a plethora of sysadmin skills in that time I never had anything close to when graduating college with a java degree while still dual booting Windows and Ubuntu.
While I intend to seek out employment this fall in Texas, right now I have a dozen foss projects I want to work on and have a larger issue finding the projects that most need the development effort and are willing to accept new contributions than finding things to do. I have patches in the works for 4 projects right now, in varying levels of bug tracker hell, and I'm eyeing another 3 for this weekend.
I'm much more concerned about looking lost after spending 6 months writing some java crapware for a faceless company 8 hours a day after losing all my passion.
So you are right, the money and the purpose are completely distinct, and for some they can completely conflict with one another. I always intended to try freelancing instead of going into a droll office setting to grind myself to hate my profession, but I've realized it takes way too much networking and social engineering to get a start that I just don't have, which sucks.
Hey, I'm in TX, too (Fredericksburg, though I used to be in Lubbock and Amarillo)... I found that about 8mos of stupid job BS was all I cold take. I haven't had a W2 job in 5 years, though I did spend 6mos getting screwed as a "1099" 9-5 on-site "contractor".
It really isn't hard to find a normal salary level of freelance gigs if you like working with other people making software, though you do have to want to do it and you have to be both open minded and (oddly) selective about the kinds of projects you take on. Not to mention that you do have to send out a lot of feelers and try and learn how to read prospective situations.
Most of what I do isn't as nice as adding features to FOSS projects, but it's fun in the same way.
... just an attempt to encourage you to freelance (even if you take a job first). To be honest, it doesn't take "social engineering"... it just takes a while to learn how to present yourself better than the alternatives and learn it as a business (it took me about 2 years). I work 3-6 billable hours a day, and spend the rest of my 8-10 hour work day (when I don't have a gig or go hiking) learning new stuff (which I find fun).
Personally, I like freelance developing a lot more than "passive income" strategies... I spend a lot of time working for people trying to flesh out those strategies, and sometimes it works, sometimes it doesn't. But I think I have more fun, and will keep on this path until doing it when I'm 75 doesn't sound appealing.
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.
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.
> What percentage of the worlds GDP is founded in open source technology?
Everything built on the Internet, to begin with.
> I mean we use emacs/vim
Because they work.
> pretend that virtualization can count as security
No one thing can 'count as security' but virtualization makes a lot of secure systems easier to build.
> and seem utterly choked in our own miasma of complexity.
You are, maybe.
> Integrating old ideas with new is not a matter of mixing software like a chemical mixture but a dick sizing competition without a ruler.
This sounds profound but means nothing.
> We are mechanics who barely understand our own tools and more than that are philosophically against questioning the separation between programming language/user.
This is wrong. On every level, it is wrong. It is fractally wrong. Worse, parts of it aren't even wrong.
> 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.
What? Are you saying nothing again, or are you implying you believe that Strong AI exists and is running the world?
> 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?
None of these ideas are new. You're saying absolutely nothing that hasn't been said thousands of times before, and you're saying it much, much worse.
> 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.
Well, no shit. Why did humans end up in the Americas? Was it by planning or was it just following the game and winding up going across the Bering Land Bridge?
> 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.
Waffle waffle whine. You have a platform. By all means, use it to say something.
> > 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?
> None of these ideas are new. You're saying absolutely nothing that hasn't been said thousands of times before, and you're saying it much, much worse.
Maybe not new, but I think this may be the first time I've thought that anything other than a godlike AI may have enough foreknowledge to usefully manipulate our view of reality through carefully curated content presentation.
I think we're really just a bit of research and applied knowledge away from the beginning of this, if we haven't already arrived.
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.
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)
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.
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.
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?"
I'm getting a little OT, but Neil Gaiman's Robert "Hob" Gadling is my favorite example of an immortal thus far. Nothing special about him except that he hasn't died yet. No spectacular wisdom. No incredible feats. No extreme torment. Just a guy who changes identities every few decades and likes to experiment with different livelihoods.
While I do agree to a certain extent you have to think about the scale of the time frame of immortality and factor in the other circumstances you'd have to face. Is everyone else immortal? Fancy watching everyone you love die while you're stuck rebuilding your emotional trust? Immortality, I assume, is forever and that's honestly a terrifying duration for any circumstance.
#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?
> 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.
Yeah. That's what "The Man" wants you to believe in.
Back in the day, people used to be largely self-sufficient, filling their time with tasks for themselves (farming, weaving, building things), profiting by selling the surplus or charging to do something they were good at, and using the money to buy the things they needed.
As you know, industrial revolution and large scale monoculture changed that. People would sweat all day, and because there was no time (or energy) left for anything else, they couldn't build anything for themselves, making employees heavily dependent on their jobs. That power player had two important effects: because the employer has the upper hand, it can command lower wages; in turn, those lower wages drive credit, creating an entire economy based on debt, which reinforces the importance of securing a job, again driving wages lower, in a feedback loop.
So, why that "find a job that you love" is utter bullshit then? Because, ultimately, every job is bad. Every job is an asymmetric negotiation where the employee exchanges his lifetime to a monetary reward that is, guaranteed, smaller than the value he adds. Not to say that it isn't useful, but is certainly a sub-optimal way of using oneself's limited time on earth.
"Passive income" strategy is the exact opposite of that, since the rewards are not bound to how much you can charge your hour, and more to how valuable your work is. Historically, that's how writers, artists, inventors and such have made money. Nowadays, though, the potential is enormous given the cost of automation and reproduction of creative work is ever decreasing.
If you stop and think, this is mind-blowing. Of course, Forbes doesn't want you to realize that.
Of course the passive income bootstrappers are getting slammed all day today on HN, the VCs don't make any money off of them.
So hey, maybe you had an awesome idea and some ambition to build a company, you can be your own boss! Nah, just sell your soul to some investors, then you can have a master all over again just like you wanted.
While I agree with your general sentiment, I think you need to check your historical facts.
Up to the industrial revolution the vast majority of the workforce was in agriculture, namely either in serfdom or working somebody else's land for a pittance. Not many were really self sufficient.
Secondly, artists, scholars, inventors where either nobles, priests or depending on the local court for their income.
>Up to the industrial revolution the vast majority of the workforce was in agriculture, namely either in serfdom or working somebody else's land for a pittance. Not many were really self sufficient.
Depends on the country -- not all places had feudalism. In freer places, people were self sufficient for millenia.
Heck, people were self succicient even in the US mainland in the 17th-18th century, and that was far from any "industrial" landscape.
You don't really need to have feudalism to have servitude, if you're working somebody else's land and you're allowed to keep just barely enough to eat, that'll basically turn you into a serf (and it's still the case in many places around the word, seasonal tomato pickers in Italy is one I know of).
On the other hand you are right that in the colonies the situation was somewhat freer — at first -, that's how they got people to move from the old world, but I'm pretty sure that the situation got back to inequality pretty quickly.
The point I'm trying to make is that this Arcadian paradise that conservatives like to call 'back in the day' is really more of a myth.
>The point I'm trying to make is that this Arcadian paradise that conservatives like to call 'back in the day' is really more of a myth.
In some parts of the world yes. In others no.
But not for the reasons the progressives put forward (toil, lack of progress, etc). For political reasons: people being in command of other people.
There were villages and regions all over Europe that such was not the case, and people were free. Sure, you had to work, but that's just as it is now (minus the modern conveniences).
Actually, even in medieval Europe, agrarian societes had so many festivity days that almost half the year was off.
>So, why that "find a job that you love" is utter bullshit then?
Those things are not related. So what if you get paid less than the value you add? That doesn't mean that suddenly its not a job that you love.
>Nowadays, though, the potential is enormous given the cost of automation and reproduction of creative work is ever decreasing.
I'd argue the opposite actually. Because its so trivial to make a copy of something. Income based off of royalties can be sustainable for a very small minority. And this has always been the case.
>Of course, Forbes doesn't want you to realize that.
Why not? Large corporations - music producers, book publishers, movie producers, pharma companies, manufacturers, etc all run on the assumption that they will find enough people with passive income on their brains...
>Those things are not related. So what if you get paid less than the value you add? That doesn't mean that suddenly its not a job that you love.
For some the cognitive dissonance that comes with such alienation doesn't sit well.
>Why not? Large corporations - music producers, book publishers, movie producers, pharma companies, manufacturers, etc all run on the assumption that they will find enough people with passive income on their brains...
Forbes has vested interest in maintaining a populace that ultimately doesn't have a choice in whether they have to undersell their labor to survive, nor question their employer-employee relations. Again, this comes back to the cognitive dissonance that being forced into an unequal relationship elicits.
>For some the cognitive dissonance that comes with such alienation doesn't sit well.
Well duh, its only cognitive dissonance if you accept the premise of the argument. I am challenging the premise itself ! The claim that unless you are paid a certain amount you cannot derive enjoyment from your work is silly.
Obtaining financial security while giving up the additional value of your work to your employer is the basis of every single company under a capitalist model. Also keep in mind that this is all theory. I doubt anyone can accurately quantify the value their individual work brings to the company. This value will fluctuate from month to month, week to week, year to year. And if the company briefly goes into loss you might be adding negative value ! So does that mean one week you love your job, next week you hate it? I mean.. seriously.. the argument as it stands does not pass the smell test.
Peter Gibbons: Our high school guidance counselor used to ask us what you'd do if you had a million dollars and you didn't have to work. And invariably what you'd say was supposed to be your career. So, if you wanted to fix old cars then you're supposed to be an auto mechanic.
Samir: So what did you say?
Peter Gibbons: I never had an answer. I guess that's why I'm working at Initech.
Michael Bolton: No, you're working at Initech because that question is bullshit to begin with. If everyone listened to her, there'd be no janitors, because no one would clean shit up if they had a million dollars.
Only if everyone ended up having a million dollars :)
Jobs like that are supposed to be transitional, for students, etc, and they tend to be automated away. There isn't a real need for every human on earth to work, so it's feasible that everyone could focus at least part-time on what they really want. That's what tends to happen in advanced societies (more time spent on voluntary activities vs employment).
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?
Well, I read it more as "if work is going to provide the meaning of your life, might as well have it be something you like to do." However, aside from the PWE, centuries of history tell us that liking your job is a luxury.
I find meaning in work because it's what I leave behind once I'm dead. What I create, build, and put out into the world is part of my legacy. That's pretty important to me, perhaps not the same for others.
I always feel sorry for people who make statements like, "my work isn't my life"
We don't want your pity. I enjoy my work, but it isn't my life, because you know what? Aside from sleep and work, I have another perfectly good 8 hours a day that I elect to spend on things completely different from my day jobs.
So while work is half of my life, work is not my life, and I do not intend to let it become my life.
The world still needs janitors, ditch diggers...etc (at least for the moment), it's simply not realistic that everyone should like their jobs. Is it then logical that everyone should pursue fulfilling jobs? Perhaps, we do have a competitive economy after all but for those that "work-to-live", is that not a healthy outlook for our society's janitors and ditch diggers?
Your last sentence suggests that 1) not finding real meaning to your life is a tragedy and 2) work is the only way to ever achieve that. I'm the one feeling sorry for you now.
Or how about we stop feeling sorry for people who obviously place value in different things than us?
> 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". [...] And if your mindset is always that all work is bad,
The first part is not inherently hateful towards working while the latter one is.
> 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.
Maybe they are. But people that say that they don't "live to work" seem to be more in opposition to the mindset of viewing everything through the lens of productivity and utility. They are against the idea that free time is chiefly about "recreation", ie about recharging your batteries/not burning out so that you can go back to being a fully productive worker bee at 9 am the next morning. In this "recreation" view, free time serves office time. In the view of "I don't live to work", work chiefly is about survival, and free time is about actually living.
Does that mean they are necessarily against finding fulfilling work? No: work can be life-affirming (though I realize that some people might have such a chip on their shoulder towards work that they will never see it that way). But it certainly means that they refuse to delude themselves into thinking that working 60 hours a week at a job they at best feel lukewarm about is their grand purpose in life.
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.
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.
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.
If you're asking why I don't own a house, its because I'm not quite ready to make that commitment at this point in my life. :) I'm happy with the flexibility of paying rent, and I pay a REALLY low amount of rent (by San Francisco standards) in a nice place. I'm content.
Obviously much depends on your exact financial position and the state of the real estate market, but you don't have to live where you buy forever. It can be advantageous to get into the market and rent out your property if you get bored, leveraging your tenants rental payments.
It can be extraordinarily disadvantageous too. Property prices are still extremely high and it's not clear whether this is sustainable over the long-run. Buying or selling a house (at least where I have experience) is a slow, expensive, and fragile process; there are significant costs for both parties.
Renting out a property isn't fun either. Finding suitable tenants and dealing with repairs and other silliness, or paying a property management company that's often despised by tenants, isn't necessarily trivial. Rents might not cover mortgage payments in certain economic periods, especially when factoring in additional expenses. The time that's spent dealing with this headache could be better used doing something else.
Lastly, certain types of mortgages might prohibit renting, and I've seen people caught with their pants down over this.
Owning a place is a burden. It can make financial sense to do so in some situations but I'd be reluctant to buy unless I truly felt I was going to remain in one location for a long (>10 years) period of time. I certainly wouldn't feel like I could just rent it out if I wanted to hop, skip, and jump to a new location after a year or two, or less.
Of course, all my experience is based on buying and renting in the UK. It might be different wherever you are.
It is different in Australia though it's not an especially liquid asset anywhere. Market has flattened, but it's still strong. Prices tend to double every ten years but moved more quickly recently. Haven't heard of anyone not able to rent their property out. Most people who can afford to will buy property. There is no expectation that rent will cover a mortgage - you pay the shortfall and it's still a deal worth considering.
The difference between the UK and Australia is Australia has tight controls on foreign property ownership, and it can be quite a hassle to buy if you're not a long-term visa holder or citizen. Long-term visa holders also have to sell the property at the end of their stay.[0] Australia also has a decent number of moderate-stay (<=12 months) temporary residents (working holiday, etc) that aren't allowed to buy under FIRB guidelines, or don't have the fiscal means, both of which increase demand for rentals.
I strongly doubt whether the increasing price of housing is sustainable. If it's increasing beyond that of inflation, it's a bubble and people simply just aren't going to be able to afford it. People on the upswing of any market become complacent that prices will always continue to rise, but this isn't necessarily true. The future is yet to be determined, and who knows what will happen.
I have known landlords who have had their properties vacant for several months at a time. Their mortgages continued though and this put a lot of pressure on them financially. There's also the issue of tenants that end up not paying, or paying late, etc.
You're not wrong and your strategy has a strong superficial appeal: property ownership with flexibility! Properties can be rented out, it's possible to find great long-term tenants, and it's even possible to break even or make a slight profit as an amateur landlord. Your strategy can be made to work, it's just the costs probably aren't worth it unless you're a landlord with a good number of properties. I'd argue the actual flexibility is marginal compared to renting; if I want to leave my rented property, I can do so quite easily and with minimal moving costs. I do appreciate the cost of this flexibility too though: I'm paying someone else's mortgage with nothing to show for it in the long term. Also, owning has the distinct advantage of control: nobody's going to be a more accommodating landlord to me than me!
[0] This assumes that the property is a second-hand dwelling, not one bought from a new developer, or been renovated, or any of the other exceptions that come to mind.
There is a fixed amount of land, a growing number of people, and social norms limiting high-density. Of course property will be sustainably outpacing inflation, until at least one of those changes. It's not a bubble when demand is increasing for legitimate reasons rather than speculation.
Which isn't to say there is not a speculative bubble - the price of real estate may well be growing faster than it should - but just the fact that it's growing faster than inflation doesn't demonstrate this.
Have to admit that I find this perspective on property baffling as an Australian. People here in SA act like its the end of the world if the market appears to flatten or a property takes a few weeks to sell. Not denying that a bubble could exist, but there are always tenants here and land is consistently in demand. The stories of doom are generally anchored to a glut in apartment development and/or Eastern states. Property with land is not so susceptible with ever-rising demand (immigration, investment properties, etc); e.g., my place is 750sqm, I demolished an older house and built new; within two years of buying, the land value alone was $100k up on the original purchase price.
In the UK, from the time a property is listed with an estate agent to the time conveyancing is completed can be on the order of several months, if not vastly more. It's not fast, especially because the buyer's and seller's lawyers doing the conveyancing take their sweet time to talk to each other, the surveys take time, and dealing with the local council and land registry, etc isn't immediate. Also, buyers in a property chain can cause problems if one of the deals in that chain falls through and they don't recover. It's hard work buying or selling somewhere in the UK. It's not a happy process!
The reason I think there's still a bubble is that housing costs are increasing faster than wages. More and more of peoples' budgets are being spent on just protecting themselves from the rain and scorpions, and at some point this cost just becomes untenable and a correction, or worse a crash will occur as the market can no longer bear such prices.
I'm very skeptical when I hear someone articulate that prices must always go up in the long term because they have in the past. They might continue to rise for a while, but eventually ... pop goes the bubble!
Future stock of tenants (people who can't afford to buy) requires home owners to rent to them. In fact, housing affordability can be problematic here because investors are usually in a stronger position to buy a property to rent it, outbidding someone wanting to live there. You might be aware of negative gearing, too.
Just curious, were your parents an influence in how you view property? I imagine here that many 18-30s whose parents bought property would be more likely to buy for themselves.
Thinking about it, the only friends I can think of immediately who doesn't own their own house here (out of say 20-30 people) are still studying or recently finished. And both would be planning to buy within 2-3 years.
It is only a deal worth considering because the rest of us taxpayers get to pick up the bill for a portion of the loss via the bullshit tax scheme known as negative gearing, where you can claim losses on you investment property as a deduction against your personal income (cf. places like the USA where I believe you can do this with only your primary residence).
As a result, the price of houses in Australia is completely disconnected from the rental returns, and instead driven by speculators chasing capital gains, and/or income tax minimisation by engaging in negative gearing.
Quite a lot of people aren't better off. In fact, a lot of them have underwater mortgages because they listened to the "house is an investment" crowd. Buying a house and losing your job / income source, can cause some pretty long term unemployment since it is hard to move with an anchor around you. As a country, we would have been a lot better off if a lot more people had been renters.
I have had passive and active (?) income for over 20 years now (started during uni); I write code and manage my company actively, but I have ventures which bring me money without even looking at them.
I have always done the same thing; build something up in a niche, wait until I think it reached it's peak, sell it. Most things I did made between $5k-$10k / month and so sold for a nice amount. With that money I bought a house. Sure you lose some 'freedom' (not really as you can rent something anyway), but you always have the security that you can live somewhere rent and mortgage free. If I would have to do it again, I'd buy several run down houses on big plots of land and one smaller modern house.
Anyway; crisis or no crisis; I don't care; I live for free; next to that there is very little you need (in times of downturn that is; if you make enough next to that you can do anything you like). House IS an investment, but only if you just pay cash (IMHO). With that $100k income/year OP had coming in, in college I would've saved over $50k off that. Few years and plop; cash house. Even if you don't want to live in it the rest of your life it's good to have; takes away heaps of stress later on. At least did for me.
Many of those with underwater mortgages who treated their house as a investment came out nicely. Like a business would, they defaulted on their loan, then a few years later put their saved payments toward a house down the street at half price. Even got another loan too. Of course this is more difficult to do if you need to move for work.
But with rent you have zero chance of accumulating capital - your just throwing money at the landlord. With a mortgage you have a > zero chance of making money over say 10-15 years.
It depends on your locale and employment situation. Many home owners are "house poor." Their only asset is their house, and they have no savings or other investments. I moved to a locale where I could make 3-4x what I could in my hometown, rented for 10 years and with investments, stock options and savings am way ahead of where I would be if I would have bought a house where I started out. My parents on the other hand are trying to sell their house for almost the same price they paid for it 15 years ago. My cousins with homes are not financially doing well at all.
If I would have had the money and foresight to buy the brownstone in Brooklyn that I was renting, I wouldn't have even had to bother with the working and saving for 10 years part, but you don't need to rub that in on a Saturday morning.
With a mortgage you also have an opportunity of accumulating a loss.
A really simple calculation with the numbers from http://homeguides.sfgate.com/calculate-30-year-mortgage-bala... I will be nice and assume that the monthly cost of renting is equal to the monthly mortgage payment. Usually renting is cheaper. I'm ignoring the mortgage interest deduction, but also property taxes, homeowners insurance, maintenance, etc.
After 5 years of renting you have: 5 times 12 times -600 = -36000.
After 5 years of owning you have: 5 time 12 times -600 + your equity. your equity is $100,000 - ~$93,000 + difference between what you bought it for and what you sold it for. And that last term can easily be negative. It only takes a 7% decline in value to wipe out the first 5 years of principal payments. If your property declines in value 10% and you sell after 5 years you come out behind.
The numbers for 10 and 15 years respectively are 16% and 29%. Now consider that the average home value in places like Stockton fell over 50% during the great recession.
I'm not the parent but I have to say that's an over-generalisation. The costs involved with buying mean that the balance between renting and buying can be tipped firmly in favour of renting even for 10+ years. I ran several calculations earlier this year as I was considering buying for the first time (it seems easier for those who are already on the ladder) and this turned out to be true for me. I pay an incredibly low amount of rent for Silicon Valley's current rates.
Given the area and amenities I want from a property, I save significantly more money renting and can live somewhere I actually like; unless I decide to commit to the country for 10+ years -- and I would lose my entire cushion of savings for startup runway funding in the process -- renting makes a ton of sense, even though at the base level the equation of "paying money for someone else's mortgage vs paying money for my own" seems a no-brainer.
Tsss.. I'm alwyas disturbed by such analysis. See. When you buy a house, not even an investment, you get a place of your own which gives you quite a peace-of-mind (you know where you live, you can break some things inside it without fighting the landlord and should things go really bad, you can still sell it). Moreover, moving around when you have children is much more difficult (because those little kids like to have their friends). Etc. Not every body is made to follow his work wherever it is. There's a reason why humans settled and stopped being nomads.
They are. What people neglect to mention is that some investments, houses included, fail to pan out, and leave you worse off than you were before. Simply assuming that a mortgage builds useful equity is financially illiterate: If houses were a sure thing, everyone and every institution would buy them.
The really insidious idea is the idea that buying a house is what a mature, responsible person does, and that you can't be a mature, responsible person unless you're paying down a mortgage. This is marginally less potentially harmful to your future happiness than the idea that mature, responsible people smoke five packs of cigarettes a day.
To make your argument clearer: if you buy a house and don't bring a significant amount of your own money to the deal (let's say 20 to 30% of the whole), as during the first years of the mortgage you're mostly paying interest and almost no capital, you're actually throwing your money down the drain in exactly the same way as you'd do paying a rent, BUT with the added responsibilities coming with the mortgage on one hand, and owning the house on the other hand.
Nicely stated (wish I had done a better job of it). That's basically the trap. Some people can do that and a house makes sense. People like to own.
A lot of people bought a house and fell into the trap you describe. A lot of those people didn't have good job mobility in the local area[1].
1) I would love to see a study from about 2000 to now on all the folks that defaulted and what their down payment was combined with the job outlook for their profession.
Investment houses are an investment. Your primary residence is not an investment.
Case in point: I lost over $100k on my previous primary residence. I couldn't write that off on my taxes because it wasn't an investment. If it were an investment property, I could've.
> If houses were a sure thing, everyone and every institution would buy them.
We give tax breaks to individuals owning their own home that we don't give to institutions or individuals owning homes to rent. It's conceivable that this makes the difference between "sure thing" and a loss.
This isn't at all to say that buying a house is a guaranteed win - look at it carefully before making any sort of major decision like that - but there's not an automatic theoretical refutation.
Note that most countries do not provide tax breaks to homeowners, this is a uniquely US phenomenon.
There are many cases where renting makes more sense, but the factors are multiple: taxes, interest rates, up front equity, property values, closing costs, rental market, etc.
> Note that most countries do not provide tax breaks to homeowners, this is a uniquely US phenomenon.
I was certainly aware it wasn't universal - I should probably have called that out more clearly.
> There are many cases where renting makes more sense, but the factors are multiple: taxes, interest rates, up front equity, property values, closing costs, rental market, etc.
My previous house I bought in 2005. I paid $492,000 for it and sold it 5 years later for $420,000. Oh and I paid 6% commission to sell it, 1% transfer tax to buy it, 1% transfer tax to sell it and I put about $60,000 of capital improvements into it.
My current house I paid $567,000 for it and it's worth $540,000 based on my most recent appraisal. Again, paid 1% transfer tax to buy it and if I ever sell it (I hope to God not) I will pay 1% transfer tax and 6% Realtor "tax".
Notice I didn't mention routine maintenance and fixing things that broke during the last several years?
Believe me when I say I wish I would've rented. I'd have about $200,000 more in my bank account right now.
You seem to forget that you got a place to live for those years, even if your investment didn't turn a profit. I don't know what the rental market is like where you are, but a ~$200k "loss" seems comparable to what you would've paid to rent a modest house-sized space in a major metropolitan area over those 8 years. That works out to 2k/month cost to live in a house, which seems like a pretty great deal to me after paying ~$1500/month for crappy 1bdrm or studio apartments.
"Believe me when I say I wish I would've rented. I'd have about $200,000 more in my bank account"
Because you had a bad outcome.
So first w/o getting into the math numbers which I will assume are correct I will say the following.
Looking at any decision strictly by the numbers may make you come to the wrong conclusion and is a reason why it sometimes can be a mistake to look at only one angle (financial or, say, engineering) when making a decision.
For example the housing stock when renting tends to be more transient and less stable than with buying (people coming and going). Now even if you can rent a house in a stable neighborhood (rather than an apartment building) that is primarily owned and occupied by owners (as opposed to renters) you still end up with the issue of a) having to rely on someone else (the landlord) to fix things. b) not being able to make improvements to the property (because you need approval or because why put in a new kitchen to something you don't own?) and c) The neighbors may treat you differently if you are a renter (may or may not happen may or may not matter simply pointing out). You are of course also susceptible to the whims of the landlord rent wise and have the costs of moving if you need to do so.
Owning (as does owning a business rather than being an employee) also comes with certain "psychic" benefits that are hard to quantify and, most importantly, have different value to different people.
Personally (and I've rented obviously) I prefer to own because that way I can do what I want when I want even recognizing that it might cost me more to live that way. I also buy cars I never lease. I like to sell when I want to sell and not have to wait for the term to end. Other people are looking for another type of certainty (that isn't important to me) or perhaps don't have the cash flow or need the cash flow for something else. Everybody is different.
As far as your situation you bought in 2005 and in hindsight you are not happy with the decision. I've had ups and downs with real estate as well (more ups though over time).
"I paid $567,000 for it and it's worth $540,000 based on my most recent appraisal."
Doesn't mean anything until you decide to sell it though.
I have a property (investment) that I bought for about 50k, could have sold at the top for, say, 180k, is worth now perhaps 125k. Unless I want to sell none of that really matters (don't need to finance it or anything) only thing that really changes is the property tax.
"Notice I didn't mention routine maintenance and fixing things"
Once again some people may prefer to take care of this in something they own and not be bothered by it (just like some people don't want to wait for the "tech guy" to come and get the PC running). Personally there are pros and cons to each thing. If the A/C breaks in my house I would rather not have to wait for a management company to scramble a repairman to fix it. Everyone is different.
I don't have the renting experience myself. I bought my first house when I was 21 and easily made over $500,000 on buying and selling houses. At my height I owned 3 rental properties.
But those days are done. For the past 5 years, renting would've been much better than owning in most areas of the U.S. I don't see that changing any time soon.
Your "not a loss until you sell" is a myth. The reality is that assets have a book value and that book value should reflect reality. Assets can also be used for leverage - good luck telling the bank you're trying to borrow money from that your assets' current value "doesn't mean anything". You're arguing the "feelings" argument of investing which is vastly inferior to the mathematic reality of investing.
"You're arguing the "feelings" argument of investing which is vastly inferior to the mathematic reality of investing."
I am not talking primarily about "investing". I'm talking about owning a home vs. renting a home not as a way to make an investment. Consequently the "feelings" (if you want to call it that) as well as the practical aspects of ownership (such as improvements and control) are important to some people. But not all. Depends on many factors. Which is what I said in my parent comment.
You are saying "For the past 5 years, renting would've been much better than owning in most areas of the U.S."
If you incorporate a time frame into investing anything can seem like a good or bad investment. For example using a 10 year time frame or even a 3 year time frame (before the RE market tanked). Different results? I'm sure you are not unhappy about the 500,000 you did make which if you had shifted the time frame would not have happened.
I am not taking issue with what you are saying. I thought I layed out the case whereby there were other non-economic reasons that someone might make a particular decision to own vs. rent.
As far as bank value and leverage I am well aware of that. Just like I am aware that if you are in a divorce an appraisal can come into play even though you are not selling anything (one party might retain the residence and be subject to a high or low value that may or may not benefit). Also the fact that people tend to spend more money if they feel rich and that their RE (which they have no intention of selling) is more "valuable". And so on.
For the past 5 years, renting would've been much better than owning in most areas of the U.S. I don't see that changing any time soon.
In many 2nd tier markets renting has gotten much more expensive over the past 5 years, though. A mortgage payment is less than rent in Minneapolis, for example. The rentals suck and it's hard to find one. Renting a nice place is surprisingly expensive, approaching Seattle costs.
Aside from the personal financial risks detailed (quite well) in the comments below, there's also the PITA factor. Homeownership is a Pain In The Ass. Especially if you live in a "shared community," such as a condo building in SF, with a strong-willed HOA. Especially if you live in a home or building with any sort of construction issues -- most of which will reveal themselves, by Murphy's Law, the week after you lift contingencies and close escrow. Especially if you are the least bit neurotic about home prices, the state of the market, and the preservation of your principal (to say nothing of positive ROI).
Buying is not for the faint of heart, the easily stressed, or anyone who's even slightly uncertain about the direction of the next 5-10 years of his life.
Some people just don't want the headache. And you don't know how big a headache it really is until you've taken the plunge. I know more than a few former homeowners who have sworn they'll never buy again, regardless of whether it makes financial sense.
In many countries that's a normal, reasonable course of action. I wouldn't buy a home unless I had a proper reason to do so (most likely wanting modifications that wouldn't go past the landlord, though I'd rather look for something for-rent that already fits me first).
Unless you have cash, the failure scenario in case of buying is extremely nasty. Also, there's a lot of administrative and maintenance related work that, in case of rented, is not my problem anymore.
My wife & I bought a house about 7 years ago, and we still like the house, but wish we hadn't bought it.
There are quite a few areas of expertise required to manage a property, and if you don't have them yet it can cost you (both in money and time).
Sure, you can hire someone else to do repairs. But how will you know what repairs are required (do you ask the roofer if this is a patch job, or if a new roof is needed)? How do you know what a given repair or renovation should reasonably cost? How do you find trustworthy contractors? The ones everyone recommends will be busy through next year, more or less, and the unknowns are exactly that.
What tasks can you reasonably do yourself (without experience) as opposed to hiring someone? I.e., shower grout, replacing a light fixture, installing a dishwasher/stove, installing shelving, replacing a door lock, putting weather stripping around windows, small painting jobs, etc..
My wife & I had a few years with significantly lower income. If we had been renting, we would have rented a cheaper place for those years. But we own a house -- so we basically just spent a few years unable to afford to maintain it properly.
More recently, we now have kids and have been thinking of leaving the area entirely -- moving to a different city, or possibly leaving the country.
But to sell or rent the house, we should finish renovation/repairs first. And the selling market isn't great now, but becoming a landlord -- especially remotely -- would require a whole new set of skills.
I've learned a hell of a lot (mostly through error) over these years, but these are not all skills I have wanted to learn, or how I've wanted to spend my time; the fact of buying the house forced an awful lot of experiences after it.
If you rent, you pay someone else to handle all that. If they do a poor job, you look for a better place (and it's not fun to find a new place and move, but it's not a huge deal).
I live in the UK and the place I currently live in isn't great so i've been looking to change up.
Unfortunately, every decent house i find is only available for purchase but not for rent. Seems the houses available for rent are for people that don't care too much for having a nice home. At least that's how it feels to me at the moment.
Ah, I guess it's a reasonable disclaimer: I live in cities, in flats, and prefer it strongly — I think that's also cultural, though I also think it makes for better cities, though I realize there's a bit of controversy here (and, also, it depends on having a good public transport/pedestrian/cycling infrastructure). I currently rent from a guy who rents out an entire building, and around here it's pretty common (but not so much to make single-flat landlords unlikely to encounter).
What this means is, renting out is at least a side-business to someone, and they usually either at least somewhat care for customer experience (YMMV, of course), and either do a lot themselves, or hire people to help along if they don't.
On the other hand, while in Poland renting is common, it's treated as temporary, and most landlords only have a single place that they treat as a side income, or just a way to keep the cost of having an empty flat "for later" down. That makes the entire experience way worse — for example, contacting them is essentially an emergency measure. OTOH, they usually care less about what you do to the flat (so, they're more likely to be okay with drilling holes or painting walls into odd colors — if you rent serially, you may have only a week or less between tenants, if you just kick people out and move in yourself you probably take a full redo into account).
> But to sell or rent the house, we should finish renovation/repairs first. And the selling market isn't great now, but becoming a landlord -- especially remotely -- would require a whole new set of skills.
Yes -- which means you have to find someone to do that for you, and figure out if they're asking the right price for their services. Then you need to keep track of how well they're doing it.
If they do a poor job by doing too little maintenance, your renter will let you know about it.
If they do a poor job by doing unneeded or unimportant maintenance, and/or charging you too much for the tasks they're doing, your renter will be perfectly happy... so how will you know?
Granted, it's important not to obsess about this stuff -- if they're cheating you just a little bit, it's not worth worrying about. But if you don't know what you're doing, they may be able to cheat you pretty seriously, and you won't know.
They can also screw up horrifyingly in a way that will bite you a year or two down the line once someone hooks up a washing machine and refrigerator to those power sockets and everything goes down in flames (or, more likely, just takes down every single fuse until the one out in the street).
You'd have to treat it like any other professional you're hiring where you lack expert knowledge. And yes, there is some risk - I was just pointing out that becoming a domain expert is not your only option.
I don't know what country you live in but in my country you still have to pay rent for apartments you own. This fee goes to maintaining the building etc.
Thanks for clearing that up. I was about to mention that passive income people are almost always extremely vague about what they did. Maybe they are afraid of others picking up on their niche, but I also tend to assume that what they did was shady or shameful, like they charged $10 for information that was available free elsewhere.
It won't usually work if you force it, but you can certainly do things that encourage it. e.g., you're not going to build up a side project with earning potential if you never create/do anything.
(Don't quite have your history, but I do have one main passive source that pays my two mortgages for less than five minutes/year of work. Like you, I didn't build it to make money - just mucked around to create something as filler for a domain I'd bought, and people keep clicking the ads.)
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.
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.
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.
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).
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.
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.
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.
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.
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.
I agree. It was filled with platitudes and self-aggrandizing, vacuous anecdotes, but never offered any indication as to how one increases their income or reduces their time commitments.
I can soundly say that those first few chapters are literally about nothing. (At least, nothing pertinent to work or income).
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.
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.
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.
The whole book is like that, the author is a douche (or presents himself as one) and the entire concept is to find some area where you can sell an info product or get away with reselling something for an 88% margin, and hire VAs to do the majority of the workload.
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?
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.
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!
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.
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.
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".
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).
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.
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.
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.
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!
> 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.
> everyone who is wealthy enough to live off their investment portfolio ... trust-fund kids ... artists and musicians and writers who make their money off royalties.
The people you listed make up less than 1% of the population (unlikely by definition). As for people living off disability and SSI (social security income) checks, that only affords an average livelihood (or below).
The middle class mental block is how an economy can function if everyone (or most people) were to live from passive income. It is well understood that most "financially independent" had their good fortune through inheritance.
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.
The reason I commented is that an artist living off royalties is (usually) reaping results of actual work done, while putting cash into a fund + sitting and waiting, or being a trust-fund kid equals zero effort, so it's not fair to put these in the same basket. I agree investment/trading can amount to real value at the end of the chain, but these are worlds apart.
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.
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.