Passive Income Is A Myth. Focus On Scalable Income Instead.

Oct 07, 2021
Photo by the author of the author

 

If you’re reading online today searching for the secret thing that’s going to make you rich with no effort, I’ve got bad news for you.

It doesn’t exist.

The internet often uses a liberal definition of the word “passive” to sucker people into clicking. Everybody wants the idea of free money so it’s hard for creators to resist selling the unrealistic dream.

Let me be clear.

Writing an article or making a video every single day is not passive.

Spending weeks building an online course is not my idea of passive.

Messaging everyone you went to elementary school with individually on Facebook begging them to buy your e-book is not passive.

The only one I’ll concede is automated investing where it goes straight out of your bank account into some form of asset. Even then prices can go up and down so there’s no guarantee.

The idea of scalable income is far less misleading. It does make sense to focus your efforts on channels where there’s the potential for the same amount of effort to lead to far higher revenue in the future. You just need to make the important shift of understanding you have to put in some work.

 

You only see the tip

If you follow me, you see a few articles a week and a podcast episode through Mindful & Driven. You have no idea what I do outside of that time.

The problem is we tend to glamourize those in passive-like industries without stopping to think about what their actual days are like or how they got there. A lot of my revenue-generating activity is behind NDAs. I don’t talk about the boring side of my work which can distort people’s mental images. This is common across many successful-looking people online.

I’ve grown multiple income streams fast but there’s a lot of work behind it you don’t see. I also benefitted from a sea of unfair advantages that I know the average reader won’t have.

I was born in a rich English-speaking country. I went to a top university and studied economics. I have a stable middle-class family. I had a tech career where I worked with big multinationals. My parents supported me in any of the hobbies I wanted to pursue.

You could say I was an overnight online success story but it ignores the skills I built through my 28 years of life before I started. There’s a lot of accumulated hard work. For many others who work less than me and earn more, these unfair advantages will be more extreme.

 

Red light, green light

In Squid Game, the contestants play a kid’s game called Red Light, Green Light. The aim is to catch the person at the other end but you can only move when they aren’t watching. This is what happens in business, if you turn your back, you can be damn sure people will catch up with you.

The world doesn’t stand still for you while you’re sipping cocktails on the beach.

If you create a product or online course, it won’t be long before it becomes outdated or someone builds a better one. I created a course about this platform in spring but things have changed so much since then. I will be recording everything again and launching another marketing campaign as a result. Passive my foot!

For any product, you need to continue to get customers in the door and the traffic needs to come from somewhere. If you stop producing content then it won’t be long until your supply dries up. Evergreen is a myth too unless you produce something out of this world. One of my articles received half a million views and there have been half a million copycats since.

You’re going to need to either update your products, work to generate leads, or pay someone to do it for you. Sorry to shatter your cocktail dream.

 

Perfect market

Be skeptical.

As an editor, I’ve seen so many articles sent my way about how to become a millionaire through passive income. None of the writers were millionaires. Funny that isn’t it.

Making extraordinary money isn’t so easy otherwise everyone would do it. A tiny percentage of YouTubers make any money and most “passive income” ideas aren’t worth the pixels they take up. It’s impossible to get rich doing something everyone else can also do unless you get lucky and are early.

To have an income source that continues to feed you long after you’ve done the work, you must have robust barriers to competition. It must be something other people can’t just replicate which probably isn’t going to be found in “101 PASSIVE INCOME IDEAS THAT ANYONE CAN DO TO MAKE YOU RICH NOW!!!!”.

 

One to many

The question isn’t how can you make money without any effort. The question is how can you maximize the return on the effort you put in.

The answer is scalable income. Where you do the work once and each additional sale doesn’t take up much of your time. You’ll need to continue to invest time throughout the stream’s lifetime to ensure it stays healthy. This is a more honest description of what online courses and ebooks are.

There’s also the inherent risk that you can do everything right and do the work then it doesn’t scale. Nothing is guaranteed yet it’s better to focus on scalable income which has the growth potential. When you are stuck trading hours for income then there’s no possibility of your rewards going into the stratosphere.

 

The forgotten path

The basic revenue equation is price x units sold.

Everyone seems obsessed with how many products they sell rather than the potentially smarter route of increasing prices instead. If you have a product worth $10k then you need to sell less than one a month to make six figures. You can scale your income by entering an industry where greater skills convert to higher prices at a steep rate.

Break out of the mindset of how many $5 ebooks can you sell and think about how can you build your brand so you can sell a $500 ebook instead. Gaining this kind of expertise is active work but it could lead to the results you’re hoping for.

This is what I’m aiming for long term. Trying to grow a huge presence to sell everyone a budget product is exhausting. I’d rather focus on high quality so I can deliver exceptional results for a few people whilst others can benefit from my free content.

Scalable income is often mislabeled as passive income. Pursue scalable income all you want but don’t let anyone trick you into thinking it’s easy.

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