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The "Passive Income" trap ate a generation of entrepreneurs

joanwestenberg.com

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Re: The "Passive Income" trap ate a generation of entrepreneurs

#191

Post by Animats »

hn_throwaway_99 wrote: post #74

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…

> 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.

Re: The "Passive Income" trap ate a generation of entrepreneurs

#192

Post by Animats »

sfRattan wrote: post #69
recursivecaveat wrote: post #51

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 != infinit…

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 in…

> 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.

Re: The "Passive Income" trap ate a generation of entrepreneurs

#193

Post by madaxe_again »

littlexsparkee wrote: post #186
phil21 wrote: post #171

Earlier quoted context omitted.

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 fo…

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.

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.

Re: The "Passive Income" trap ate a generation of entrepreneurs

#194

Post by bawolff »

atomicfiredoll wrote: post #172
lotsofpulp wrote: post #164

Earlier quoted context omitted.

>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 abl…

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.

I live in canada with free health care. People are always complaining about how we are much less entrepreneurial than our southern neighbours.

Maybe free health care would help, but i think its kind of minor compared to other factors.

Re: The "Passive Income" trap ate a generation of entrepreneurs

#196

Post by bawolff »

phil21 wrote: post #171
icedchai wrote: post #155

Earlier quoted context omitted.

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.

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 fo…

> This is not what people mean by passive income.

This is literally the traditional definition of passive income - using your capital to generate more capital.

There is no free lunch, you need to provide something to get $$$. If you are providing labour it is by definition not really passive. That leaves land or capital.

Re: The "Passive Income" trap ate a generation of entrepreneurs

#197

Post by 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.

Re: The "Passive Income" trap ate a generation of entrepreneurs

#198

Post by fittingopposite »

wsmhj wrote: post #197

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…

Hey mister AI!

Re: The "Passive Income" trap ate a generation of entrepreneurs

#199

Post by bawolff »

Raidion wrote: post #119
toast0 wrote: post #104

Earlier quoted context omitted.

> 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.

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.

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.

Re: The "Passive Income" trap ate a generation of entrepreneurs

#200

Post by Tcehrarzy »

_nivlac_ wrote: post #139

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".

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.

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