Original question from Quora:

What are some good passive startup ideas?

I know startups require hard work but I’m talking about ones that, once you build momentum, it starts working in your favor without much effort.

My Answer:

There is no such thing as a truly passive startup. In fact, every business that you’ve ever heard of looks very much the opposite.

However, there does exist something similar to supposed “passive income”, but it is not truly passive.

Actually, before I tell you what that is, there is one kind of business that could be truly passive…

If you took say $1,000,000 and invested it in a reasonably safe bond that pays you say 5% coupon every year for a long period of time, that could be a pretty passive $50,000 in income each year.

Although, if you had a million dollars you probably wouldn’t be in Quora asking this question, so back to my original thought.

Passive income is a unicorn that people chase endlessly in hopes that they never have to work again. And frankly, it doesn’t exist because unicorns don’t exist.

Realistically speaking, instead of chasing so called passive income, there is a much better way that feels passive, and gives you a realistic hope of making money while you sleep.

As a side note, what I’m about to tell you is how JK Rowling became a billionaire and bands like Metallica make millions of dollars.

I call it “Time Leveraged Income”, but most people call it selling a product. However, unlike selling something in a traditional brick and mortar system, Time Leveraged Income is designed to allow you to make money outside of your involvement with a sale.

To put it simply, Time Leveraged Income is when you put time into building and growing your business, but are not directly involved in each transaction.

Let me give you an example…

I am an author. I will spend a year or more writing and editing a book. That is north of a thousand hours of effort up front to create the book. I then spend potentially hundreds or thousands of hours marketing the book. It’s a lot of hustle and grind to create and promote a book.

However, when you go to Amazon to buy the book, Amazon handles that entire transaction and at the end of the month sends me a royalty check. I am not involved in fulfilling orders, printing books, handling customer support, doing refunds, and all of those kinds of things.

So, the time I spend up front is leveraged into a stream of transactions that can happen twenty-four hours a day, 365 days a year.

This is the same way that JK Rowling made her billions of dollars in book and movie royalties from Harry Potter. She wrote the books and promoted them with book tours and such, and through her publisher and bookstores worldwide, millions of books were sold without her involvement in each transaction.

Some people might pretend that being an author is “passive income”. Hell, you might have seen some get rich quick products telling you that selling ebooks is easy money or passive income.

Making money with Time Leveraged Income is not easy or passive. It’s work, just like anything else. You have to put the time in to create a great product. You have to put the time into marketing. You have to hustle and grind and work until the business makes money.

Now, that being said, there are many great opportunities to build Time Leveraged Income. Any product you can sell through a 3rd party, wholesaler, etc. can be a good candidate for this. Any content or creative work that can be sold for royalties can be a good candidate. Even building software products that are ad-supported can start looking like Time Leveraged Income.

The point is really to decouple the direct connection from dollars to hours.

I don’t ever want to find myself selling a $10 item on ebay where I have to package it, address it, and drop it off at the post office every time I get a sale. That’s not a very fun way to make $2–5 profit.

I’d rather find a way to make the same $2–5 profit without being involved in the transaction itself.

So that is why I build around Time Leveraged Income. If I get good enough at it, all that work up front builds up quite the income stream over time. It might look passive, but I know better.

I’m a lot happier working hard to build Time Leveraged Income than chasing the myth of passive income and no work.


P.S. I unpack more ideas in Creative Genius.