Discussion
The "Passive Income" trap ate a generation of entrepreneurs
yoyohello13: “Passive Income” is just the positive spin on rent seeking.
beloch: Rent seeking is for those who already have capital and can use it to influence those with political power. "Passive income" is for those who don't own capital. One works. The other... often not.
jazz9k: Passive income are just get rich quick schemes that were common decaded ago.I started a business like this, but it wasn't passive. I shipped everything to my office before inspecting and shipping product out.It lasted almost 10 years with 1 million annual revenue.It was not passive.
Ifkaluva: Sounds like you were running an import and distribution business. Not the same thing as drop shipping :) as the drop shipping people will joyfully tell you, “you’re not supposed to touch the product”
paulpauper: Isn't passive income a cornerstone of of the Rich Dad Poor Dad Books? This long predates 2020. I would say selling masks and only being $800 in the hole is a lot better than starting a "regular business" and down $80k-800k.
ryandrake: Yes, it was the exact same scheme. Rich Dad Poor Dad was basically "Buy lots of cheap, crappy houses and become a slum lord" expanded into thousands of pages of books, seminars, and self help guides.
qurren: > Free to do what? Sit on a beach, apparently.Quite the opposite for me. I'd like to have freedom to work on things I want to work on without "paying rent", "paying medical bills", or "short term profitability" being a constraint.
entropicdrifter: Yeah, I'm a musician and a certified audio engineer. I'd rather be writing and recording music than working for healthcare/mortgage costs
wj: You’re right. Books like the Four Hour Workweek and Escape From Cubicle Nation were guides to passive income twenty years ago.
faanghacker: This article has a narrow definition of passive income, limiting it to these low-barrier-to-entry schemes. Other parts of the FIRE world have emphasized being a landlord or flipping houses, for example.I personally made it happen by working a FAANG SWE job for 13 years, not getting sidetracked by the startup cult, saving and investing 70% of my after tax income, etc. And no I didn't get into crypto, but I still managed to make it with conventional investments.In fact, I chose to pursue a career in the tech industry in order to pursue financial independence in the first place. Because I knew back then (circa 2005) all the tech Kool aid was BS. That "don't be evil" was just a facade. And time has proven me right and my haters wrong, those who thought it was unethical for me to place wealth building ahead of career building.It's been four years since I've been out of a job. Now I'm creating more passion oriented content. I'm never bored.
paulpauper: This is the way. There is huge survivorship bias when it comes to start-ups, even AI start-ups. When it comes to wealth creation, it's hard to beat a 20-30% CAGR with big tech stocks since 2010 or so, which was doable.
secretsatan: Met a guy that ran some dropshipping thing in a bar once, once he found out i was a programmer he kept on trying to get me to fix his website for free because it was easy, would not take no for an answer. I just kept upping how much money i would charge him till i got sick of it and left.I knew a few guys like that in crypto too, before crypto came along and they got into that, this guy told me he’d written a twitter app, it was a bot that pumped gold at some influencers command. Spurred me to write an app though.
nobleach: "My nephew makes websites, and he's 14... I could just have him do it"- Every client of mine during my contracting days. It took me way too long to reply with, "Oh that's great news! I wasn't sure of my availability, and was certain I was going to be way too expensive. Glad you got it figured out."
hannahstrawbrry: "It was an ouroboros that had incorporated in Delaware and was running Facebook ads," is my favorite line I've seen in a minute, great read
zem: my favourite bit was8<------------Free to do what? Sit on a beach, apparently. Every single one of these people wanted to sit on a beach. I've never understood this. Have they been to a beach? There's sand. It gets everywhere. You can sit there for maybe three hours before you want to do literally anything else.8<------------I laughed out loud when I read it, because it's so true.
ghaff: I “retired” about a year ago. Back to actively doing some tech industry analyst stuff with some folks I know. Keeps me as busy as I care to be.
coredog64: "Rent seeking" has a specific definition* and it is not "I use large capital investments to generate regular payments". Buying housing with the intent of renting it is not rent seeking.This is Wikipedia, which is as good as most other definitions: Rent-seeking is the act of growing one's existing wealth by manipulating public policy or economic conditions without creating new wealth
valiant55: In what way does buying a property and renting it create wealth? Isn't buying a property with the intent to rent it manipulation of economic conditions?
pc86: If you think buying a house and renting it out "manipulates economic conditions" you need to prove it because that's a claim, especially with regard to "manipulate."
quercusa: Got trapped in an Amway pitch in my teens and have been inoculated against such things ever since.
pc86: I wish Amway was bigger so more people would be exposed to it and be similarly inoculated.
recursivecaveat: I appreciated when "passive income" was the flavor of the week because it was a good signpost for people you could ignore. In particular anybody who didn't understand that you could assign a present value to future income, or that infinite series can sum to finite values. Seriously, the prototypical example of being an author is not particularly passive income lol! A book being print-on-demand indefinitely != infinite income. 99% of copies will almost certainly be sold within a few years, not least due to active marketing on your part. It's very likely to be a worse deal than getting paid a quite modest and disappointing sounding amount up front.
sfRattan: The way it shakes out is that there's no widely accessible way of escaping actual, ongoing work, which is what unmotivated people actually hear behind the words "passive income." Whatever the industry/vertical/field, a tiny number will hit it so big that they can actually stop working. Everyone else can bolster their income with passive sources, but that passive income ultimately depends on continuing new stimulus into the market (new products/services, more work marketing) to keep the "passive" flow stable.If you look at the world of indie tabletop RPGs, for example: Kevin Crawford of Sine Nomine Press makes a very good living and a significant percentage of it is "passive" sales of his back catalog. But if he stopped publishing and promoting new game projects, sales of that back catalog would very likely shrivel to nothing within a calendar year.The open-secret ingredient is always more work.It's why someone like Crawford can afford to tell everyone exactly how he does what he does... Giving away extensive production files that show you his whole creative process, soup to nuts: 99% of people aren't going to put in the work necessary to sustain the passive portion of an individual income.
dlcarrier: I went the lean FIRE route, and now work on whatever open-source projects I feel like, plus local in-person volunteer activities. It's a much better quality of life, even though my job had been enjoyable, the extra scheduling flexibility is really nice.
eek2121: As someone who had actual passive income (small amount, a few hundred USD/mo) prior to my life being ruined by a medical accident: I agree (I killed my site because it was the right thing to do, I could not generate content for it because I couldn't function, so I did not want to waste the time/money of my users).One thing the author does NOT see, however, is that the local folks doing all the hard work like mowing lawns, building furniture, etc. are in absolute panic over "AI" because their niche little lawn mowing/car washing/house cleaning business has been determined to be irrelevant by ChatGPT, etc. Oh and before you ask, there are folks claiming they can solve that exact thing, and those hard working folks are buying those products, hoping it will solve their downtrend in internet leads.
bluGill: often the real value of writing a book is you can convince people to pay you to speak. I've had several classes at work where they gave me a book that had everything in the class.
mrdependable: Dropshipping is just logistics. There is a lot of dropshipping that has nothing to do with ordering off Alibaba.
butterlettuce: > Buying housing with the intent of renting it is not rent seeking.That’s… that’s rent seeking.And if you buy a house with the intent of renting it out, you’re a piece of shit.
em-bee: i could not afford the capital investment to buy a house, and i am not interested, it would only lock me down. my family once bought an apartment. we lived there for a few years. the mortgage payments were twice as high as the rent would have been. when we moved out we were told the place could not be sold. the family still has the place and it is probably still empty. lots of money wasted.when you buy a house with the intent to sell it for a profit, then you are driving up housing costs. i'd say that's even worse than renting it out.
Glyptodon: My memory of RDPD was that it preaches getting assets which generate income, not that your management of those assets would be passive. Though obviously it also did have a subtext of "scale some kind of assets that generate income to a certain point and you can pay someone else to do more of the grunt work while you look into a new opportunity."
pdonis: People who can't afford to buy a house need a place to live too. Believe it or not, there are people who buy houses with the intent of renting them out to those people, to actually help them.
paulddraper: I love the beach.Living near the beach is nice.You can sit on it, walk on it, swim on it, surf on it, run on it, fish on it.Better than a cement sidewalk, IMO.
zem: I love the ocean, but I have to confess I don't care much for beaches. sand gets everywhere.
ghaff: It’s not totally risk-free income (but what is) but a decent pile invested sensibly makes for pretty good passive income depending on your goals.
bluGill: now where do you get that pile to invest? I have a pile invested - but I'm close to retirement and it took me many years to save it up.
teamonkey: I would dearly love to be as busy as I care to be.
HeyLaughingBoy: Right? That's my ultimate goal.
fred_is_fred: I'm not sure passive income is the right way to describe a drop shipping operation where you have to interact with customers. Passive income is $VT.
hn_throwaway_99: This article really felt like a misdiagnosis to me.Sure, a lot of these people were just buying hype from these "get rich from drop shipping!" influencers, just like a million other suckers who got dollar signs in their eyes with real estate schemes, pyramid sale schemes, yada yada, a tale as old as time. I don't think this "passive income" trap is really anything new, and I don't think it was some unique thing that "ate a generation of entrepreneurs", as if that trap didn't exist then instead we'd see all these successful people.Instead, what I think has drastically changed over the past 40 years or so is the ability of a solopreneur to make real money. Just look at all the posts on HN asking about how much people make on their side gigs. You rarely see anything more than a couple hundred bucks a month. There are notable exceptions, but unfortunately a lot of those notable exceptions are scammy, spammy business models. It's just simply much harder as a small/smaller business to make money and compete with the big boys. Wealth inequality doesn't just apply to people, but also companies. For example, in the past many entrepreneurial types may have started retail stores, while now it's incredibly difficult to compete with the likes of Amazon et al. I read an article recently that the number of public companies has halved compared to a few decades ago. The Wilshire 5000 stock index, for example, actually only include about 3400-3700 companies now.
ghaff: By working and investing. More successfully at some points than others. But you’re totally right that different people are better set up and more or less inclined to move on from a job than others.
fmajid: Get-rich-quick schemes/scams existed long before this generation.
grebc: Thanks for posting, great article and I read one of Joan’s pieces earlier this week without realising.
Loughla: We started a trophy and award business because my spouse was already making shirts and stuff so we had most of the equipment. The overhead is really low thanks to quick shipping from a large employee owned national supplier (seriously, JDS industries is fucking awesome).It's enough to pay for itself easily and pay for a vacation or two a year, for about 4 hours of work a week. If we really put effort in, it could replace our day jobs.Where most people go wrong is their expectation. We expected this to fund a vacation and maybe car payments. That it's doing that is exactly right and we don't want to take it any further. If people had that view, instead of feeling like they have to make a billion dollars, I think side gigs would be a different beast entirely.
davidw: Yeah, I don't think I could do a pure 'passive income' thing with no 'soul' to it, but there is something to be said for building a business that runs and makes money even when you are asleep or on vacation. This is something that some 'passion businesses' where it's all about the founder and their skills, fail to do.
paulddraper: A lot of beaches happen to be near oceans.
c22: Fortunately a lot of ocean isn't anywhere near a beach.
just-the-wrk: Have we all forgotten Tim Ferriss' book 'The 4 Hour Work Week'?It was enormously influential and was likely involved in every one of these failed entrepreneur's venturesThis discussion reads like 'staying inside from 2019-2022 changed social structures' without saying COVID once
aridiculous: “The game looks easy, that’s why it sells” - Elliott Smith
homeonthemtn: >But zoom out and what you had was just an enormous machine converting human ambition into noise.Ah, the story of a generation
entropicdrifter: Just one?
toyg: Indeed. In the case of music-obsessed boomers, that saying rings true in a very literal way.
nitwit005: The article's example is a person can't even be bothered to understand what the product he's selling is for, and doesn't appear to fully grasp they're losing money. Even in much better circumstances, success would presumably remain elusive.Some people just lack the capacity for this sort of thing, and unfortunately fraudsters target them by trying to convince them otherwise.
cucumber3732842: Everything I'd want to do on a "side gig to iron out the kinks and then eventual business" basis is regulated to the point where that path is economically impossible and the only way to be in the black is to take out a big f-ing loan, quit your job and go all in on your new business. And it's not just me, all my buddies have this gripe. We've all got skills and experience and equipment outside our immediate careers and we'd like to use those to provide value to people but there's just no way to do that inside the rules and none of us our interested in risking our retirements operating outside them.I just upped my retirement contribution and decided that the big evil BigCos can do all the value creating and the finance middle men can have their take.I guess that's the reason everyone does the slumlord or VRBO thing.
mothballed: Where I live out in the country there are a lot of people with those kind of businesses. They bring you the goods and services to/from in a truck. If you ask to look at what they have... they have no address and won't tell you anything more than their goods/services dropped from the sky. At that point, I don't try to probe further... if I am happy I would rather not know.
cucumber3732842: >Where I live out in the country there are a lot of people with those kind of businesses. They bring you the goods and services to/from in a truck. If you ask to look at what they have... they have no address and won't tell you anything more than their goods/services dropped from the sky.Yeah there's a fair amount of that here too.Thinking about it on a meta level I think on the "low end" it's basically just a hack around how expensive employees are when you consider exposure. Sure you could have your $15/hr guys stay late and power wash your box trucks, deep clean your facility, etc, but some guy with a van will come in and do it on the weekend for a flat fee and if he falls off the ladder that's not your problem.And on the high end it's a hack around overhead. You can have some guy show up on a jobsite, set up a tent to keep predatory eyes off and weld up the broken thing on your backhoe or the rental company calls that guy and repairs it on your job site without telling you giving you deniability. No expensive compliance costs of adding hot work to your job site or running a shop where that stuff happens regularly.>if I am happy I would rather not know.Always better to be able to say you don't know rather than "I asked and the answer seemed fishy but I didn't probe".
saulpw: There are many levels between "pays for a vacation or two a year" and "billion dollars". I think most people just want to make a comfortable living (which includes eventual retirement) and not have to work themselves to the bone.
happybuy: > Instead, what I think has drastically changed over the past 40 years or so is the ability of a solopreneur to make real money.Hard disagree.As the article notes, I think if you concentrate on a real business, not a scam-y 'get rich quick scheme' business then, especially with the internet, its never been easier to run a solo business at scale.For myself, I wrote an app as a side hobby, which then took off, so I started working on it part-time, then moved to full-time when the revenue justified.It's now growing to where it exceeds what I would have made working for someone else.Note this took 7+ years of constant work, improvements and care.It's the type of dedication that makes you competitive with even larger organisations.And the time required to be a 'success' ensures that you won't have any competitors who just want to make a quick buck or get to "passive income" within a year or two.
bawolff: I don't think there was ever a time where a solo-entrepenur could make real money without putting in lots of effort and taking lots of risks.We remember the success stories, we don't remember the bankruptcies.
zem: > those who thought it was unethical for me to place wealth building ahead of career building.that might well be the first time I've seen "career" and "ethical" conflated in that way. I've definitely seen the people who think you're a fool and possibly a sucker if you chase short term wealth over career stability, and there's definitely a veneer of unethicalness clinging to the notion of get-rich-quick, but I cannot understand how "establish yourself in a career" is an ethical concern.
faanghacker: Keep in mind that for me it was before the FAANG companies became the new evil tech overlords, and to some extent even before the Great Financial Crisis of 2008. Back then it was much easier for naive young college students or new grads to buy into that narrative of using our talents to make the world a better place through professional careers.
Marsymars: > Instead, what I think has drastically changed over the past 40 years or so is the ability of a solopreneur to make real money.Part of that was accurately diagnosed by the article in the bit about the dog walking business vs dog walking platform.My partner bootstrapped a successful full-time cleaning business that she ran for a few years and the limiting factor was basically her ability to hire and retain good employees. A physical cleaning business has no path to scale like a tech company though.
bawolff: > I've met dozens of smart, capable people who had actual energy, and who spent their entire twenties bouncing between passive income schemes instead of building real skills // real businesses // real careers.The author is acting like it hasn't always been this way. But it always has.There have always been people who felt the allure of the get rich quick scheme. Its always been true that if they just spent the same effort on doing things properly they would probably make it but instead they bounce from one stupid scheme to the next.Often its combined with some ideology about how the normal world is full of suckers and they are going to escape by not playing the game. Fraudsters love to target people who want to pull one over on the world. They are easy to manipulate so they usually fall for it when presented with an opportunity too good to be true.The article, with a couple details about the specific examples changed could have probably been written in victorian times.
Marsymars: > One thing the author does NOT see, however, is that the local folks doing all the hard work like mowing lawns, building furniture, etc. are in absolute panic over "AI" because their niche little lawn mowing/car washing/house cleaning business has been determined to be irrelevant by ChatGPT, etc.How does what ChatGPT thinks about lawnmowing matter? Like, specifically, who's going to be mowing the lawns if it's not the people who are currently doing it?
georgemcbay: "Passive Income trap" wantrepreneurs haven't really gone away, they have just shifted to crypto rug pull culture and now prediction markets and app-based gambling.They'll keep existing as long as the root cause that creates them (massive wealth inequality in general and the growing delta between productivity and wages) exists, so probably until our financial systems fully collapse in about 2032.
ryandrake: These people migrate like geese through the exact same stuff. I knew a couple of people way early on into affiliate marketing, then they all migrated to LeadGen, then to Drop Shipping, then online poker, then crypto, then NFTs, and now of course, they're all doing AI gigs. It's the exact same group of people migrating like birds from scheme to scheme.
conorcleary: I think this is what the 'forest for the trees' phrase is getting at...
mtlynch: >You rarely see anything more than a couple hundred bucks a month. There are notable exceptions, but unfortunately a lot of those notable exceptions are scammy, spammy business models.I suspect this is largely sampling bias.I host meetups for indie founders, and several attendees earn their living through solo businesses. When I go to conferences like Microconf, I meet lots more.The problem with measuring financial success by who posts about it on HN is:* The more someone is making at their solo business, the less they want to attract competitors.* The people earning at the low end are more desperate for people to see what they're doing so they can pick up new customers, so they're more likely to talk about their work.* The more successful founders are busier and spend less time posting on HN.
toast0: > The way it shakes out is that there's no widely accessible way of escaping actual, ongoing work, which is what unmotivated people actually hear behind the words "passive income."25x expenses in s&p 500 works ok. (Adjust the multiplier for your level of pessimism) Funding it isn't easy, but save a good amount of your income for a few decades and control your expenses and you can get there.
sfRattan: I generally agree, but that basically sounds like prudent investing for eventual retirement. Yes, tune the degree of aggression both in terms of work input and spending restraint, but the "work input" has to be high (and effective) for those few decades.
Loughla: You can see it in the comments though. Many many many people who fall for get rich quick schemes, whether it's an app or saas or drop shipping or whatever genuinely want that billion dollars.You can be comfortable on not very much money with realistic expectations while not working yourself to the bone was kind of my point.
NordStreamYacht: Running an online store isn't "passive income."Passive income is from rental properties, mutual funds and (my dream) a rich uncle's trust fund.
rootusrootus: Indeed, I'd just like to decouple my earning from the whims of corporate overlords who may decide at any moment that I am redundant. I have no serious ambitions to be a billionaire. For that dream I just buy a Powerball ticket once a year or so.
TZubiri: There's a type of similar trap for devs, not necessarily a passive income trap because most go for a saas and accept the infinite-version release cycle.What some devs usually fall for ( not by watching some youtube video, but by falling into the idea organically on their own as a kind of emergent behaviour ) is doing the minimal effort of a saas, like a template of the necessary part without adding the actual value.The way this most often presents itself is a payment proxy, think about the minimal requirements for any software service, it charges money, so that's where they start, a stripe account, maybe an LLC, payment links or payment tables, they can now charge money. Then they make a frontend, a website, of any kind, this comes first, not to serve some kind of need, a landing page, and the actual product is a landing page as well, use react as well because that's the thing you do.Finally, what is computing, it has something to do with data, so let users upload some images or videos, then you let them charge users for it. Bam, you have now reached the same app SaaS that millions of indie devs developed, like a patreon thing, an OnlyFans if you allow that shit, a gumroad. A host that allows uploaders to charge money.If you don't even want to go through the hassle of hosting the images or content, you can just let the users upload a link, and charge for thatMust be thousands of these Linktree, campsite, taplink, patreon, cafecito, matecito, tecito.The dropshipping thing is similar to this but it has a physical component, the idea of a business is just the minimal core, a caricature conception of what a business is, you buy a thing, and you sell it for more.
jandrese: I think the bar has risen for what a comfortable life requires now. Housing costs have outpaced inflation for a couple of decades now. Health insurance has rocketed into the stratosphere, especially in states that dropped the Obamacare subsidies. Even staples like food and fuel are hard to keep up with. Lord help you if you have children and are trying to save for college. Projected costs for universities are getting to "buy a brand new luxury car every year" levels. Not to mention all of the school costs on top of that. It adds up so fast.
mlmonkey: I blame Tim Ferriss and his "4 hour work week" book. I belive he talks about selling vitamins and letting some guys in India manage his site. Doesn't get his hands dirty. (This is from memory, so please forgive any misconceptions about it).
redwood: Sounds like he means the methods that they used to use to advertise to find customers online have broken
datadrivenangel: and Kiyosaki has declared bankruptcy at least once!
bilegeek: I appreciate you setting the bar on necessities. Too many people focus on the... "cheap" "luxuries" like air conditioning, smartphones, internet access.
hellopineapple: There is nothing wrong with pass income, exchange time for Money by definition has its limit and only when your money compound you still to build savings then wealth. I scroll through half the article and the only under luring reason the author came up with is that dropshipping guy don’t care. People who don’t care have little chance at successful entrepreneurship anyway.
hunter-gatherer: Didn't feel like a misdiagnosis to me. My spouse around 2017 was one of those that got sucked into a course to earn income with an Amazon store. As I read the article basically every point resonated with my experience.The dog walking business example was also appropriate in my mind. My spouse fortunately broke even, minus time, on her attempt with drop shipping garbage nobody really needs. Now she makes decent money with her oil paintings. Not "passive income" but real money and profit. Not enough to retire (that's what I am for!) but actual money nonetheless.
brunoborges: > The more someone is making at their solo business, the less they want to blab about it and attract competitors.Exactly! And this is why every time I see someone selling a course while bragging about making a lot of money, I know for sure they are _not_ making money.
dsr_: > successful founders are busierI thought it was supposed to be "passive".
zaptheimpaler: Yeah, it feels like the author is blaming his personal bugbear but entrepreneurship and independent businesses are facing systemic issues of massive concentration of market power and zero antritrust enforcement.
yieldcrv: I'm partially familiar with this ideology that the author refers to, but I think it's important to separate it from actual passive income:dividends and treasury bonds give passive earnings, you need capital. the "passive income" savants did not and do not have capital.case in point: it should not be noteworthy that the author's friend was "$800 in the hole", it should be such a rounding error that it couldn't be any of Joan's concern. And honestly, it probably isn't and Joan put an obsessive amount of weight into an off-comment.$800,000 in treasuries, on the other hand, now you have passive income - only ~$37,000/yr - but enough to live like a royalty in South East Asia for the next 30 years, passively, followed by getting all $800,000 back.Class inequality aside, throwing darts at the wall and seeing what sticks isn't a bad business strategy, and you really don't need to be passionate about any particular business idea to collect income.I hope Joan's friends found something that worked from them. I've never watched dropshipping influencers but I did sell some of my own electronics on eBay and noticed some opportunities in the process. Sometimes I put up identical listings as someone else's at a wildly inflated price, and people would buy from me because it seemed more serious. I would buy from the cheaper ad and put my own buyer's address in the shipping destination. Never seeing the product. Not scalable as I think its again the one of the terms, but you can do it between marketplaces too.
xivzgrev: As the old saying goes: the best way to make money on the internet, is to tell other people how to make money on the internet
Raidion: Creating an additional 30%-50% on top of whatever a normal person would consider passive income in order to actually have passive income is NOT a realistic option for a huge % of the population.
qzw: There really should be a special category for business books written by people who’ve gone bankrupt. I know at least two well known examples, but there’s got to be a whole lot more.
nemomarx: Well you never know, maybe selling the course is the profitable part?
dpb001: I think the 14 year old nephew has been around for every iteration of technology - there are probably clients now threatening to just have their nephew vibe code the thing you're trying to spec out.Once, when fed up with this during a discussion on a small moonlighting job I said "Yeah, kids are pretty good with this stuff these days, Tell you what - have him get started and I'll be available to give him any help he needs at 2x my rate".
Aurornis: > I appreciated when "passive income" was the flavor of the week because it was a good signpost for people you could ignore.This is why I still do random sampling of Reddit, Twitter, Threads, and a few other social media sites: It’s a good way to keep up with some of the discussion trends that start spreading in online discussions.I can pick up quickly when someone is parroting the latest info memes from Reddit or Twitter now. It’s very helpful for identifying who isn’t really thinking for themselves and will latch on to the first opinion they see on a topic.I can’t bring myself to watch TikTok or other video shorts, though.
SudheerTammini: Very well written article, it gets into the core of the problem and explains the hidden patterns. I want to articulate few other variations of this just as a reference.- The productivity gang, if everyone is so productive and so well organised then what are the outcomes of this productivity?- Self help - if self help books are solving real problems then where is the need to buy multiple self help books?- The course trap - if someone is already earning millions dollars where is the need for him to sell $699 courseThese are some questions I would ask myself regularly, there is nothing right or wrong because end of the everyone has to servive.
TremendousJudge: yeah, but the guys selling the courses were/are all obsessed with being at the beach
bluefirebrand: I'm pretty sure that being at the beach is really just universal marketing shorthand for "being somewhere that no one would ever expect you to even reply to emails from"
bawolff: Or more generally, just doing whatever you want. I dont think anyone literally wanted to sit on a beach 24/7 365 days a year. However plenty of people would want the ability to just wake up one day and on a whim fly to a hawaii until they get bored then fly somewhere else.
hyperadvanced: This is horribly written but largely true.
jimbokun: I note neither your post or the one you replied to contain any quantitative data about how many profitable solo businesses there are.
VirusNewbie: Is it possible this has things backwards?When I was in high school 25 years ago, unless you got lucky with an IPO, tech didn't pay all that well. (I worked in software while I was in high school, so I know some of this first hand).It was office space. It didn't matter how smart you were, if you didn't go into management, or join Apple/Microsoft at just the right time, you weren't going to live a rich lifestyle.Not only that, you'd probably be reporting to some MBA type biz guy who has no idea how software works, you'd not be well respected, and your perks were drip coffee and occasional donuts on friday.Of course brilliant, hard working, talented engineers said "fuck that" and go build something awesome themselves. Things have changed drastically. Now, brilliant hard working people can literally make millions at dozens of companies .You will report to another engineer who has slightly optimized for soft skills, you get lavish perks (except amazon, but at least you get paid well there), and real equity.There's a whole spectrum of options for ambitious software folk that didn't texist ~25 years ago.
bawolff: > Housing costs have outpaced inflationIn fairness though, given inflation is the average, housing costs outpacing means something else underpaced.
jimbokun: Or the writings of the guy who created this web site.
ilamont: > Free to do what? Sit on a beach, apparently.The author apparently never read Tim Ferriss’ The 4 hour work week which not only whiteboarded some of the described schemes 20 years ago, but also had an illustration of a hammock suspended between two palm trees on the cover.That was the dream. Set up a system, live on a beach.
_nivlac_: Great read. Didn't realise how widespread this was, and I know someone who is stuck in this system.How would you approach someone to help them out of it? Don't think I can just throw them this article and say "you're wrong".
balderdash: I literally roll my eyes when people tell me about about some massive market opportunity that they feel like they’re better positioned to arbitrage away than people with more capability / infrastructure / domain expertise - and can’t explain why those market participants are ignoring this “obvious” opportunity
bawolff: I think its pretty obvious that "sit on a beach" is a metaphor for being able to do whatever you want not literally sitting on a beach for the rest of your life.At the same time, you guys really can't imagine relaxing on a beach for more than a few hours? Like i'm not really a beach person but back when i lived near the ocean i spent the odd saturday just unwinding on the beach with a book. Certainly wouldn't want that every day, but y'all acting like it would be impossible to enjoy say abeach vacation for a few days seems crazy to me.
nightski: A real business is simply one that makes money. Not some gatekeeping criteria presented by the ridiculous OP.Just because you took 7+ years to develop a business does not mean that all businesses require that or that it is the only way.
jimbokun: You keep telling yourself that.
jimbokun: Hope your rich uncles are watching their backs!
zem: yes, but that didn't prevent the passage from being funny :) it's a rant, being literal about stuff like that is part of its schtick.(also I could happily relax anywhere for a few hours, but ideally not on a beach because that's uncomfortable)
aianus: Working from the beach is much more enjoyable than working from a cubicle in Toronto in January all work tasks being equal.Much cheaper too, ridiculously enough.
jimbokun: When the Internet was a quite new a guy who knew I was a programmer met with me to pitch an Internet business and it took me a while to figure out he was literally pitching Amway online.
encoderer: I know over a dozen 1-2 person SaaS, not including my own. Some of them have hired some help now but they are still more on the "lifestyle business" side. They are in many different spaces, and founders from around the world. I am not a big networker, but this is my niche and it's big enough that I just know a slice.
selcuka: You are right about "house prices", but not all housing costs. Home loan interest repayments are not included in official inflation calculations.
tombert: Tangential, but in my previous apartment one of my neighbors really wanted me to build him a website after he found out I work with computers.I told him that I don't really build websites, and what I mostly do is write things that move information from one computer to another and that I haven't really enjoyed web development so it's not something that I do in my free time so I'm not good at it, and he should check out SquareSpace or Wix something.He kept assuring me that it would "be easy". To shut him up, I gave him a quote of my daily rate for contract work (which honestly wasn't even that high by software engineering standards), and he backed off because he didn't realize how expensive software engineering is.
jimbokun: The core was simply that he created a successful business, but was spending more time running it than he would be working a normal full time job.Then he delegated more and more responsibilities, allowing them to make decisions for anything up to a certain dollar amount, then kept raising the dollar amount.This ended in him checking email a few times a week totaling about 4 hours altogether.
stockresearcher: I’ve met a lot of “passive income” folks over the last few years, and all of them sounded like their businesses were very actively managed. Never made much sense to me.I do disagree that all sub$100 blenders are the same, though. But still! The main reason restaurants use Vitamix blenders is that they are so much safer when blending burning hot stuff, like soups. When you turn off a normal blender, you’re fairly likely to create an air bubble that pops a little later, sending drops of very hot liquid into the face/eyes of the operator. A Vitamix, if you turn it off correctly, does not create the bubble. This is irrelevant for most home users, including me. So I don’t have one.
semireg: Blending hot liquids requires care because turning on and heating the air causes the lid to blow off. Most blenders are limited by physics. Vitamix have an analog dial for speed which allows you to heat the air more slowly. Turning off bubble? Maybe I’ve experienced that … but seems like an inexperienced operator with hot liquids and powerful motors is just a recipe for disaster.
selcuka: They are busy sipping martinis on the beach, not working.
scuff3d: Legit Vitamix blenders are great though
jimbokun: Dave Ramsey went bankrupt but to be fair he incorporates it into his teaching.“Hear are the things that led me to bankruptcy, and here are the things I did to climb out of it and become financially stable again.”
icedchai: I’d argue that unless you’re using a property manager, rental property isn’t really passive, either. Do you want that call at 3 am to fix a flood?
jimbokun: The YCombinator era where you could start a web business for low cost for a still unserved market was a short lived anomaly.The cost of starting a new business has returned to the historical baseline.
tombert: Someone told me that in 2013 when I was trying to do contract work. I gave him a quote that I thought was reasonable, and he thought it was too much and he told me that his thirteen year old son could do it for free.I responded that he was the one who had reached out to me, and if he feels like his son can do it then he shouldn't have wasted his time trying to find a contractor since that will be more expensive.The client didn't like the attitude and I didn't get the job, but I was kind of glad because it was pretty clear to me that he would have tried to weasel out of paying me regardless.
icedchai: The way to escape is through consistent, long term investing in the stock market. You get a regular job and live below your means, investing the difference. Buy and hold. Invest regularly. Not day trading, long term. The problem is most people don’t have the patience, the right temperament, to do this.
TuringNYC: So true. The latest rage on IG is "this guy built a trading system on OpenClaw and is now making 10k, comment MONEY and i'll DM you the recipe."No indy hedgefund algotrader gives away their golden goose, that would crowed out the trade.
ButlerianJihad: I was in community college taking some real basic, entry-level I.T. classes. And one of my classmates seemed nice, normal young guy about 20, already married.And one day on campus I see him drive up in a Mercedes. And I ask him what’s going on.Well, he tells me that he learned a little bit about cryptocurrency, and now he had gone into business where he advises people on how to invest in cryptocurrency. And I thought, “That’s really wise!” and I hope he is still doing well!Basically a great way to stay above the hype and scams. Surely some sort of federal regulations would begin to apply... but good luck!
atomicfiredoll: My current read of the situation is similar. If you go to other countries, there are slews of small shops, even in run down areas. On top of that, in places within Asia, the malls are also open and full of regional chains. It also feels like there's such a wider variety of certain goods available, because the little bakeries are doing their own thing, while in the U.S. seemingly everybody is eating Costco danishes."Passive income brain" people are not the only one's trying to "build revenue engines," that same sort of talk exists in corporate America. There are already people that that own companies which are there "to generate passive income for me," right now--there's a whole class of millionaires and billionaires that don't have to work. Passive income people didn't ruin the "content quality of the entire internet" and are far from the only ones doing so. Many of these folks are likely the ones that would have owned a hardware store if America didn't ignore it's regulatory duties while preaching about how "important" small business is.In the U.S. situation really seems to have fossilized into a few big players/platforms, and they continue to freeze up through the process of things like private equity roll-ups. There's a thread on the front page right now about Amazon's alleged price-fixing tactics, which hurt customers and small businesses. Further: Real-estate is an investment, so for most being able to pay commercial rents is a pipe dream. Healthcare is tied to employment, so people are less free to try and start something other than "on the side."American's choose "convenience" when shopping and to put people in power that serve these large companies or their owners, not small businesses or communities. Dropshipping, creating a "sweaty startup," etc... it's all just people trying to make do within the system they're trapped in.
icedchai: The key is living below your means by ~30%. You make 150k? Live like you make 100k. Every time you get a raise, 30% goes towards investing. For most engineers this is achievable.
dasil003: This is such a middlebrow dismissal. Like yeah, people are speculating based personal experience and knowledge, so what? If you have a different viewpoint or something specific you'd like to see data on call it out and engage in the discussion. Don't just be the "data or GTFO" guy because that's a super bland and pointless take.
pharrington: You're conflating "passive income" with "real money". Competing with the big businesses is completely off topic.
lotsofpulp: >Healthcare is tied to employment, so people are less free to try and start something other than "on the side."It has long been easy for anyone to buy health insurance without an employer in the US. If you are self employed, you can even pay for it with pre tax income.The problem is it costs $500 to $2,500 per month per person plus $10,000 out of pocket maximum per year, which means you need a high income to be able to afford it.
jldugger: > I host meetups for indie founders, and several attendees earn their living through solo businesses. When I go to conferences like Microconf, I meet lots more.Isn't this also sampling bias?
tesse: Nice blog post, but I have to say that having a link on top of the page to some creative agency subscription service is quite ironic. These services are a dime a dozen, providing the same zero value product to the users, advertising on a cool looking website done by outsourcing to some guy that vibecoded it.A more hasty fellow might have flagged this post as self-advertisement without necessary tags.
Marsymars: Yeah, I get that, but I'm asking why that matters in the aggregate. Presumably there are still the same number of lawns that need mowing. Like, is chatgpt going to result in a significant change in who is mowing those lawns, or the frequency of lawn mowing, or the composition of yards?
bryanrasmussen: >what I think has drastically changed over the past 40 years or so is the ability of a solopreneur to make real money. Just look at all the posts on HN asking about how much people make on their side gigs.is someone making money on a side gig really a solopreneur? By definition a side gig is not something you expect to make significant amounts of money on. if a side gig starts generating significant amounts of money then you would probably make it your primary gig.
phil21: This is not what people mean by passive income. Yeah, if you have a few million dollars of capital already you can easily just toss it in the market and collect 4% every year indefinitely. Pretty much one of the only truly passive income streams there is.The problem is how long and what you have to do to get that 3-5 million number. No one who is drawn to the “passive income” hustle is thinking “work a normal job for 30 years, live under my means, and invest everything I can”. They want to get much more immediate results so they can enjoy life on easy street because grinding it out for so long sounds extremely depressing.What you describe is a retirement plan, not a passive income lifestyle. Kinda the opposite of escaping.
mathgladiator: Me too. It has been great. Im working on projects that are fundable, and now I have joy from it (did go through a lonely pity party phase).
littlexsparkee: Same - I wasn't sure where I'd stop (always been a minimalist anyways, savings rate above 2/3) but ran into a health issue so seeing what the future holds: taking another crack at the 'career' or maybe something more low key that aligns with my passions or a side project. It had always been my goal to get more agency but quite different being forced to chill by your body.
atomicfiredoll: I think we're saying the same thing. Most people don't necessarily [functionally] have the option (or at least don't think they do, there are sometimes ways through.)But, public hospitals with low or no cost care exist in some of these places, and from my observation, I do currently think it's a contributing factor to why small businesses are more likely to exist. But, it's only one knob to turn.
xboxnolifes: Sure, things like phones are much more feature packed and only slightly more expensive, so they get to be inflation adjusted as being significantly below inflation.
hn_throwaway_99: I was a software engineer 25 years ago, and tech paid very well - and in a non-Bay area location, and I'm only counting my cash comp as my stock options ended up being worthless (dot com bust and all). I made more my second year out of college than a family member's first year as a physician post-residency.
phyzix5761: Please keep up this mentality because it means less competition for the rest of us.
parineum: It for sure is but it's being ised to refute an affirmative assertion, not make it's own assertion.
chii: one word from the parent post sums up everything you said: patience. Or lack thereof (two words).
hn_throwaway_99: I'm not in any way doubting that lots of people were swept up in Amazon drop shipping scams. My argument is that this was not some sort of unique "passive income trap that ate a generation of entrepreneurs".Years before your spouse enrolled in that Amazon course, people were spending tens of thousands of dollars on Trump University. Many years before that I had a friend that got sucked into the Equinox International MLM scam. Point being those types of promises of easy money after paying for a course, or outright scams, are not something new or unique.
hackable_sand: Lol what
robocat: A home on the beach is seen as an expensive status symbol.House maintenance costs in sea air cost at least double. Appliances and aircon rusts and corrodes. Everything needs regular painting.Cars rust out. I buy second hand shitters and replace them every ~5 years. Certainly not worthwhile owning anything collectable or precious.If you want a garden, be prepared to spend twice the time and money and, perhaps plants and trees still struggle or die.I live in New Brighton in Christchurch, mostly because it is cheap housing (for no reason I can understand). Plus the coastal wind from the sea avoids hayfever (town is irritating for me).It has a good community. Many people that choose a beach vibe are relaxed and friendly.
margalabargala: "Oh yeah, you think you know something about entrepreneurs? Name every business."
thaumasiotes: There are a lot of people out there hawking a lot of different schemes that they say will get you where you want to go. “Build relationships,” they’ll say, or “work smarter, not harder,” or “first, decide what it is you really want.” And it sort of seems like they must know what they’re talking about, because aren’t they successful themselves? Don’t they have trophy spouses and expensive haircuts and mansions on the coast? Surely they’re in possession of some secret system for achieving one’s dreams!Well, yeah, they’ve got a system. Their system is selling hope to schmucks like you. Their seminars, their self-help books, their crazy diets and exercise plans? That stuff doesn’t help you. It helps them.This text can currently be found in the blurb for a shirt at https://shirt.woot.com/offers/steamworks-operatica .It's possible that's where I found it originally, but my memory suggests to me that I found it somewhere else, on a blog, and that the continuation was different.
trick-or-treat: > You rarely see anything more than a couple hundred bucks a monthFrom my perspective, you have to take a lot of shots, I did around 20 side hustle ideas last year and 2 are making over $100/mo. The other 18 I dropped. The only note I will give is that the 2 that succeeded really played to my strengths.About me: I once had a hustle that did around $6k/month but that was many years ago and I decided I would be happier as a hired gun coder. The rise of AI made me rethink this so I'm clawing my back to providing services.
littlexsparkee: You don't need millions - if things go modestly well and you have a high savings rate, you can get out in 5-10 and draw enough to cover modest means. I do agree that people eying passive income maybe have a different patience / willingness to sacrifice & self-teach threshold but the calculus of grinding for a few years to escape has its adherents.
madaxe_again: Yup. This was my approach. Left my business a decade ago with low six figures cash in my pocket. It would have lasted about 18 months at my existing burn rate.So I moved to a cabin in the woods in a country with a low cost of living, and stuck pretty much all of it in the markets.Had I not done that, I would have had to go back to work - instead I lived a modest life (€500/mo, max) off the income from putting my apartment on Airbnb, and regained my sanity after a decade of relentless work while my investments did their thing.Anyway, it’s a decade on, still haven’t done a jot of “work”, and the assets are now worth several million, and are being redeployed to continue to maximise value growth - and we now treat ourselves to spending months travelling at exorbitant budgets, real estate, expensive toys - and had enough stability to decide to have a kid.So yeah, it’s possible - although had we grown at 6%/yr rather than an average of 80%/yr, it would be a different picture - but I firmly believe there are plenty of other opportunities for rapid capital growth elsewhere in the markets, and yet to come. I’m just some average dude who buys equities on vibes and then sits on them for a decade. If I of all people managed it, others can.
Animats: > The way it shakes out is that there's no widely accessible way of escaping actual, ongoing work.Real estate. Historically, that's the way to escape work. It helps to inherit it.
Animats: > The Wilshire 5000 stock index, for example, actually only includes about 3400-3700 companies now.That amazed me when I heard it recently. The number of tradeable things continues to increase, but most of them are two or three steps removed from real-world production.
littlexsparkee: Did you do a ton of research to make those picks? These days I just do broad market ETFs, don't trust myself to beat the market.
Tcehrarzy: Actually it also reminds me of one of my friends. He is doing everything very shallowly and yeah, chasing passive income, but never succeeded on building anything lasting. I think the only way is to realize that labor and work is some basic human conditions like what Arendt said before, then you start to have some awe towards work, which is not something hated by passive income chaser.This is a good article indeed.
bawolff: Everyone getting income passively is not going to work for society in general. Work still needs to happen. Until we live in a post-scarsity society, if nobody works then everything collapses.That's not to say that passive income is impossible, its just not going to work if large swaths of the population are doing it.
wsmhj: I think the article conflates two different things: the idea of passive income and the grift around it. Having a SaaS product that runs while you sleep isn't a trap — it's just good business design. The trap is paying $997 for a course on how to do it. And what makes it worse is the survivorship bias baked into these communities. The ones loudly promoting passive income strategies are almost always making their money teaching passive income — not from the strategies themselves. The actual successful indie founders I know are pretty quiet about it. The concept isn't broken; the ecosystem around selling the dream is.
fittingopposite: Hey mister AI!
madaxe_again: Nope. I just think about the probable shape of the future, and who benefits.I stick with the fields I know and understand - tech, engineering, sciences - don’t go for long bets so much as “if this relatively predictable set of circumstances arises, who will inevitably benefit”.For example, in 2017 I was keeping abreast with ML research, and realised that within a decade this stuff was going to be huge - so I bought Nvidia and their supply chain and sat on it. Also Tesla as I figured as if I saw them as an adjacent incumbent beneficiary of an AI boom, then others would, too.I’ve followed that chain of logic through - caught the nuclear renaissance in its entirety, as well as predictable resource squeezes.So - that’s just one of my trees of bets - but my whole thesis is “predict a future, model out what that looks like, place bets accordingly”.
Ekaros: At that point I wonder why not just invest in REIT. And then look at how those compare to other possible companies... And then figure out nothing makes much sense.
Nasrudith: Have you seen the taxes for REITs? They are complicated and often taxed as ordinary income instead of capital gains. I have heard recommendations to only use them in Roth IRAs.
thih9: I’ve seen people bragging about making a lot of money selling a course about selling courses. That somehow felt honest.
pas: a very entertaining, highly-recommended, and intense gonzo video essay on the topic of the courses scamshttps://m.youtube.com/watch?v=biYciU1uiUw
pas: the robotaxi-ification of any and all movable capital goods is coming... ([insert intense Helms deep music!])so some guy with a robot, Elon Mows, of course initially it will be just kids from India remote controlling the robots, but ... the AI is coming!(okay, it's likely about leads and advertising, the negative sum game, and OpenAI wants to have an ad-supported free tier)
rozumem: > It's just simply much harder as a small/smaller business to make money and compete with the big boys.You're conflating two different things. Thanks to software, it's easier today than it's ever been to make money as a small business / solopreneur. It's also harder to compete with the big boys, possibly for the same reason and due to economies of scale.That's why I don't bother entering the same markets the big boys are in. There are plenty of niche markets which they don't bother touching where a small business can thrive.
atoav: [delayed]
pas: the obvious problem with any such scheme is that things are already priced in.if it would be so easy to build personal passive income businesses hedge funds would be going around recruiting people and funding them. or the government. or the Effrctive Altruist.but most small business are bad, inefficient, hard to scale them, etc.(that doesn't mean there are no way to make money this way, but economically those boil down to bets. sure, sure, the aforementioned fancy investment funds also do bets, usually more sophisticated ones, and who doesn't, right? unless you are actively building a bunker somewhere around the Darién gap and recruiting people to your doomsday cult you are betting on the global economy chugging along.but! eventually one has to price in risks-weighted return, and usually "passive income" is pretty poor compared to a boring job that pays really well.)
wolvesechoes: > It for sure is but it's being ised to refute an affirmative assertion, not make it's own assertion.To refute assertion you need to claim negation of that assertion, which is assertion in itself, as every negation can be rewritten to become affirmation, and vice versa.
wolvesechoes: Stop telling people this bullshit.It is good to encourage people to save money and invest them, but 8 out of 10 people out there don't earn enough to gather so much capital to live off it.
wolvesechoes: There is no other word that reeks more of ideology than entrepreneur. It is a name of the fake promise fed to masses by people having wealth and power, and not willing to share it.
naryJane: While I agree with the sentiment, I need to point out your numbers are exaggerated. There are calculators available on these healthcare marketplaces. The calculator for my state shows I would owe less than $130/mo unless I earned above a particular amount ($36k IIRC). The next “bracket” would have me paying around $240/mo up to around $90k earnings IIRC.If you were earning above six figures then your numbers may be correct but let’s be honest and not dissuade folks from doing their own research. Everyone’s goals are different.
nottorp: That's just a modernization of the selling shovels thing...
dailymorn: Yes, passive income businesses didn't fail because operators stopped caring. They failed because the markets were structurally broken.Dropshipping, affiliate SEO, print-on-demand... these face the same margin compression regardless of how engaged you are. Ad cost inflation, platform saturation, algorithmic displacement, etc... it doesn't matter whether the operator is engaged or not.Caring's a moat only where differentiation is possible. In commoditized markets, it doesn't move the needle.
pipes: A family member of mine has done really well out of Amazon fba. She took someone's course and that got her going. I did the same course but really struggled to get going. I gave up. It wasn't for me.But yeah I'm guessing the guy selling the course makes more off that than his fba business
What actually makes money hasn't changed. You find something people need. You get good at providing it. You charge a fair price and you keep showing up even when it's tedious and even when you don't want to. You build relationships over years. You build reputation over years.
pdonis: One thing in the article struck me as way too optimistic:> What actually makes money hasn't changed. You find something people need. You get good at providing it. You charge a fair price and you keep showing up even when it's tedious and even when you don't want to. You build relationships over years. You build reputation over years.You can make money doing this, yes--but most people who are really rich don't. There are lots of ways to game the system that don't involve the kinds of wacky things the article talks about.
grebc: She does just mention passive income covering your monthly spend, which to be fair is not ‘really rich’.
pdonis: In what I quoted, she wasn't talking about passive income; she was talking about making money by actually creating value. I'm saying it's a shame that our system is set up so people who actually create value don't end up really rich, while people who game the system do.
jimbokun: Apple makes devices people like and use. Many people loved their Teslas. Netflix makes shows people enjoy. Facebook really did help people stay in touch with friends and family before replacing it with the Feed of Rage. Google was far better than anyone else at finding things on the early web.I would say really successful companies at least go through a stage of Building Something People Want. Even if they stray from that as they become more successful.
