
Why 'Passive Income' Is A Dangerous Fantasy (2011) - nanodeath
http://www.forbes.com/sites/michaelellsberg/2011/06/24/the-top-4-reasons-why-passive-income-is-a-dangerous-fantasy/
======
md224
> 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.

~~~
batgaijin
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.

~~~
md224
This is actually a pretty interesting post, though I'm a bit confused as to
how it relates to my earlier comments.

I may add more later, but for now I will just say: welcome to the singularity.

Also:
[http://en.wikipedia.org/wiki/Future_Shock](http://en.wikipedia.org/wiki/Future_Shock)

~~~
datalus
The documentary on youtube, narrated by none other than Orson Welles, is
awesome too:
[http://www.youtube.com/watch?v=6Ghzomm15yE](http://www.youtube.com/watch?v=6Ghzomm15yE)

------
k-mcgrady
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
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)

------
soup10
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
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
Who would get bored with immortality? There are so many things to learn, and
even more to discover! It would be amazing.

~~~
icebraining
You should read _Gulliver 's Travels_.

~~~
StavrosK
I half-read it a while ago, what are you referring to?

~~~
icebraining
Well, to the Struldbrugs, the immortals of Luggnagg.

~~~
StavrosK
Ah, I will read that again, I have no recollection. Thanks.

------
greghinch
#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?

~~~
hcarvalhoalves
> 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.

~~~
carlob
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.

~~~
coldtea
> _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.

~~~
carlob
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.

~~~
coldtea
> _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.

------
nrivadeneira
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.

------
rodolphoarruda
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.

------
mitchellh
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.

~~~
mkl
This is a fascinating comment, but one bit leaves me confused: How come you
still have to pay rent?

~~~
mitchellh
I'm not sure I understand this question?

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.

~~~
prawn
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.

~~~
kintamanimatt
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.

~~~
prawn
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.

~~~
kintamanimatt
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.

~~~
prawn
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.

~~~
kintamanimatt
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!

~~~
prawn
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.

------
tryitnow
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.

------
chipsy
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.

------
sytelus
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.

------
wallflower
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
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.

------
Theodores
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)

------
jackschultz
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.

------
dylandrop
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
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".

------
josephjrobison
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.

~~~
phaus
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
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
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
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.

------
hkmurakami
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
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
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.

------
rhc2104
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!

------
clavalle
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.

------
ChrisNorstrom
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.

------
johngalt
Is retirement a dangerous fantasy?

~~~
ccera
Yes.

------
EugeneOZ
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".

------
abritishguy
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).

------
mathattack
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.

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

------
6ren
one page (print dialog)
[http://www.forbes.com/sites/michaelellsberg/2011/06/24/the-t...](http://www.forbes.com/sites/michaelellsberg/2011/06/24/the-
top-4-reasons-why-passive-income-is-a-dangerous-fantasy/print/)

------
adios
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.

------
glup
6\. You have no reason to read Forbes...

------
michaelochurch
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.

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

------
Yourfags
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
> 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
Not exactly a fair bundle; unlike investment bankers, musicians and artists
create real value.

~~~
theorique
_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_.

~~~
ricardobeat
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.

------
Dewie
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.

