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 eas

Software companies often forget about the humble developer. I know this too well as a former tech consultant.

The big companies focus on how to impress execs with flashy features but the product is a shambles under the covers. It’s left to developers to deal with all the bugs and somehow still deliver the requirements within the deadline. You’d be surprised how many famous products have defects that never get fixed because developers aren’t prioritized.

Jeff Lawson’s mindset is different. He’s an angel for the tech startup world. His company Twilio has gone from 0 to $64 billion in 13 years by concentrating on the problems developers face.

Do you know when you get an SMS update about your order? The developers probably used Twilio to set up the connection.

Jeff is a guy doing what he loves and changing the way businesses contact their customers. Here’s his story.

He’s a strong independent developer

At his core, Jeff is a problem solver. As a five-year-old, he would build robots out of cardboard boxes with his dad but was frustrated that they didn’t move. This led him to code at a young age because he wanted to make things work.

Jeff worked at many great startups and learned how crucial communication was to success. Yet the options to connect with users seemed primitive and it bothered him. He was told he needed to talk to communications giants like Cisco for a solution.

But these companies had no idea how to do what he wanted to achieve. They talked about installing underground wiring and three-year projects which didn’t make any sense for a fast-changing startup.

No one else seemed to be willing to take on the issue he kept facing so he decided to do it himself. The communications world was too hardware-based and slow but he came from the speedy software world.

His idea created a new business category.

“I started Twilio to solve a relatively simple problem: How do we bring communications into the realm of software and enable every software developer in the world to build out their ideas quickly and easily? That’s where we started.”

Engage in your own community

The problem with many entrepreneurs who create products to meet their own needs is they fail to check if anyone else has the same problem.

Jeff didn’t fall to this self-centered attitude.

“I know a customer segment that has a problem and I’m going to go solve it.”

He was already an active member of the software developer community so had rich connections with his potential customers. He didn’t give people a sales pitch but fed them enough to trigger their curiosity. Everyone Jeff told about it could think of ways it would make their job easier.

35% of startups fail because there is no market need for the product. If you have the contacts in an industry you care about, use them! It’s far better to find out no one cares early on than wait until you’ve sunk time and effort into building a fancy prototype.

This doesn’t apply only to tech startups. Jesse Enkamp is a world-famous karate instructor who was frustrated at how hard it was to maintain the uniforms. He asked around and everyone said they had faced the same difficulty so he built his own brand. It’s grown exponentially!

Empowering the disempowered

Venture capitalists weren’t hot on Jeff’s idea. They wanted him to make an app rather than a platform because it’s what managers look for. They thought no one pays attention to what developers want anyway.

Jeff faced a difficult choice whether to build what he knew the community needed or to take the simpler path to funding. He did what he believed was right and the VCs came running to him once he’d proved them wrong.

Jeff promotes the idea of following your customers rather than your investors. Many companies get VC backing but go nowhere so it’s not always best to trust them.

Twilio’s slogan is “Ask your developer”. It works because developers will always seek out the tools that help them do their job to the best of their ability. They don’t need to have adverts shoved in their face but they do need their bosses to listen to them.

Twilio has 10 million developers in their ecosystem now. They are being listened to. By valuing the opinions of the people who will use their software, they have created a strong sense of goodwill.

The dirty secret

“The dirty secret of every startup ever is that when you look at companies with these big, world-changing missions…those are usually retroactively put in place.”

Anybody else sick of billionaires preaching how they made money by focusing on a holier than thou mission? Jeff Lawson doesn’t do that and I love him for it.

Jeff was one of the first Amazon Web Services product managers and joined without knowing what it even meant. He was interviewed by the current CEO of Amazon, Andy Jassy, who told AWS was a secret but that “it’s really cool”. Jeff doesn’t pretend he joined for anything other than excitement. He didn’t know it would be worth $500bn someday.

Likewise, he built Twilio because he was a nerd who loved building stuff. He enjoyed the process itself rather than thinking about anything bigger than him.

Be honest with yourself, are you the same? I enjoy helping people but I love the challenge of what I do the most. I might not be changing the world but I am having a lot of fun.

Based on interviews with Secret Leaders and NFX.

The grass isn’t as green as I thought it would be.

It’s been a month and a half since I took my side hustles full-time and it’s been a less than perfect start. Spending two weeks going insane whilst self-isolating in my room with covid didn’t help.

It’s more than that though and despite being an overanalytical gremlin, there were many things I got wrong. I’m anti-hustle porn but I managed to get tangled in it myself. I’m potentially more stressed today than I was before I quit.

Yet I still believe I made the right decision and I’m optimistic about the future. I don’t want to stop you from chasing your dream life but I want you to be better prepared for it than I was.

#1 Parkinson’s Law

Amardeep of two months ago was so naive. I believed I’d have so much free time once I quit my job. I could be a man of leisure.

Work crept up on me with a vengeance.

I found I couldn’t focus because I had the mindset of an abundance of time. I’d fail to get enough done during the day and end up working late into the night. The time I gained was swallowed up by decreases in productivity. It wasn’t supposed to be like this.

Parkinson’s law states “work will expand to fill the available time”. As a new entrepreneur, my ego thought I was above the law but I wasn’t. You might find the same. You won’t plan to waste time but it will happen by itself quietly as it did for me.

What to do about it:

I’m now tracking my hours religiously using Clockify. It allows me to track exactly how long I spend on different tasks so I can plan my days more effectively.

The act of being timed brings my competitive side. I want to avoid the embarrassment of a record revealing that I spent over an hour writing an Instagram caption. If you track yourself, you’ll probably be surprised at where your time actually goes.

#2 The crippling pressure

I’m sure writing used to be more fun.

Now I’m plagued by self-doubt and never think anything I write is good enough. I smash out the first draft then rewrite it until I’m not too disappointed in myself to press publish.

Today someone slid into my DMs and said how honored they were that I liked their post. It was kind of them but it triggered my imposter syndrome. I know I’m not terrible but I’m worried I can’t live up to people’s expectations. I can’t even live up to what I demand of myself.

If you love what you’re doing on the side, consider whether taking it full-time will steal some of your joy. Your perception may change when it’s what is paying your bills.

What to do about it:

People use their side hustles as an outlet from their frustrations with their day job. Yet when it becomes the main thing, they don’t replace the outlet with something new.

I launched my podcast last week which is like my side hustle. It gives me creative freedom without any pressure because it’s so new. This alternative productive use of my time has lessened the burden on my writing.

#3 The overburdening admin

It’s weird how most people don’t mention the hassle of sorting out their taxes when they sell the entrepreneur life.

Don’t underestimate how much of a headache getting everything in order can be. I have two separate companies and a dozen income streams. Most of my income is in dollars but most of my expenses are in pounds. Then different online platforms pay in different ways and need different forms.

You also need to work out the most effective way to pay yourself. How much of your take-home pay will be in salary and how much in dividends? What pension scheme will you use and how much will you pay in?

You want to be on the right side of the law but trying to understand it is a task easily procrastinated. Then the pile gets bigger and you have even more reason to put it off. It’s a vicious cycle.

What to do about it:

I’m lucky as my father is an accountant so can guide me through the system. If I didn’t have this connection I would pay a financial advisor. It’s worth paying to get it over and done with than fighting yourself for months.

It’s a good idea to do this before you quit to allow you to have the most realistic expectations. Everyone uses their revenue numbers when they post online, you might be shocked to see how little becomes money in their pocket.

#4 The volatility

I detest the toxic culture of entrepreneurs mocking people who are employed for valuing the safety of a consistent paycheck. Don’t listen to people who need to put you down to make themselves feel better.

Some people who take the side hustle full-time are fine with the volatility of their earnings. They find it exciting (or they do when it’s working in their favor). Then others like me aren’t risk-takers by nature and miss the stability they once had.

My earnings are all over the place and I have no idea what my income for this month will be.

Yet I’m in a privileged position with my savings and investments which made me comfortable enough to take my side hustles full-time. Please be careful of comparing the risk you take compared to others. Some dive into the unknown without a parachute but many have a secret backup.

What to do about it:

I’m giving up some of my freedom in exchange for a steady income. You don’t need to spend all your time on your own projects just because you are your own boss.

Evaluate whether a hybrid model of regular client income and your own risky projects works best for you. You can get the best of both worlds knowing you can pay your bills but also potentially shoot for the moon.

#5 The paradox of choice

Have you ever been frustrated when your boss has asked you to do something outside of your job description?

If you quit then there’s no more job description.

Everything is on you.

You’ve got to decide how you use your time and money. There’s no one else to fall back on or ask for approval.

This can be freeing but overwhelming too. I’ve got several hundred items on my to-do list now including my bloody taxes. Trying to pick what to prioritize and when feels like a choice I can never get right.

A day job forces you into a structure and to pick the highest priority tasks for your side hustles. You have the comfort blanket of the valid excuse of not having enough time. It’s bittersweet to lose that.

What to do about it:

I fall back to if-then plans when I get overloaded. I make the shiny things on my to-do list wait until I get the big one-off tasks done. For example, if I sort out my taxes then I’ll start writing a book.

If you mimic this for yourself, then you take away choice from yourself which makes it easier to plan the present.

#6 No more colleagues

I’m difficult to get a conversation with. I don’t shut up once you get me talking though. If you get half an hour of my time, you’ll find I’ll still be blabbering on an hour later.

I miss going to an office and having colleagues to chat with throughout the day. Solopreneurship can be lonely and Zoom calls aren’t the same as being in the same physical space as people for me.

In-person, you can easily tell when someone is busy and when it would be ok to chat. You can talk at the coffee machine for a couple of minutes then start walking back to your desk and the other person takes the hint.

If you like the energy of working with others, make sure you take this into account. I know many people love working alone but it isn’t for everyone.

What to do about it:

I’m inviting friends to come to my flat to co-work and it energizes me to have organic conversations throughout the day. This is great while companies are letting their employees be flexible with where they work from.

I know this might not last so I’m consciously making friends with other people who have control of their time in London. I may try coworking spaces too though fear I will be a distraction!

#7 Having to explain what you do

I’m jealous of those who have jobs everyone can understand easily. They get a nod of approval and recognition and the conversation moves on. I get a funny look when I tell people I’m a writer. Then I ramble as I try to explain all the different other things I do like editing, podcasting, YouTube, freelancing, coaching, and course creating.

It’s hard to explain I’m somewhat good at what I do without resorting to humble bragging in some way. I’m an online writer with millions of views. I’m an online writer with over 40k followers. I’m an online writer look at me. I make myself sick.

It comes from a place of insecurity. Two years ago if someone told me they were a blogger, I’d have judged them and thought they were having a minor life crisis.

If you take your side hustle full-time then be prepared to be expected to justify it to everyone who doesn’t understand what you’re doing.

What to do about it:

There are two ways to explain what you do. Either the big picture or the low-level details. My problem was neglecting my reason why and focusing on what my income streams were rather than my income river.

If you talk to people about your overarching mission, you’re likely to spark more interest than the mundane details. You don’t need to simplify things for other people. Treat your decision to take a different path as something that makes you more interesting not more isolated.

Sahil isn’t your typical founder.

He was only 19 when left Pinterest to create Gumroad in 2011. Within a year he had raised $8m and truly believed he could make his company a unicorn.

But he failed.

His company went from 23 employees all the way back down to one person. This crushed Sahil but he didn’t give up.

Today, Gumroad is still alive and unlike most unicorns, it’s making a profit every month. This is impressive in itself but what amazed me was this is all without having a single full-time employee. They all work part-time yet have a mean salary of $115k and a median of $100k!

From Gumroad Founder’s Twitter account

It sounds too good to be true so I had to dive in deeper.

Freedom at all costs

Gumroad has no meetings and no deadlines.

It wasn’t born out of ideological purity but necessity because Sahil was burnt out. VC expectations in the early years had taken their toll. He wanted to work as little as possible so couldn’t demand long hours of others while he took painting and writing classes.

As a former technology consultant, I couldn’t imagine Gumroad’s system working in practice but it does.

They use Notion to manage their workload and people can pick whatever task they want from the queue. Features go live when they are ready not according to an arbitrary go-live date. Again, this is music to a former consultant’s ears.

They communicate with each other through comments and people only need to check their messages once a day. New joiners are even asked to turn off all notifications from their phones!

Almost everyone I know in the tech world is glued to their devices to check their emails and messages. It’s refreshing to know you don’t have to reply within minutes to prove you are working hard enough.

Single mission

“Make our creators more money” — Sahil

Gumroad is a marketplace where creators can sell products such as e-books securely. Some of the top users make hundreds of thousands of dollars per year.

The only reason Gumroad’s bizarre system works is that people who work there only need to care about is one thing. This is how to enable the users to make more money. The more money creators make, the happier they are and the more they evangelize.

There are no targets plucked from thin air to meet promotion criteria. Gumroad trusts everyone to use common sense and not endanger the brand.

They’re allowed to choose projects because they would be fun even if there are higher priority items. The belief is when a developer builds something they want to build, it’s going to be of higher quality.

The singular focus on making creators happy has led to some of the top creators coming on board to work for Gumroad. It makes perfect sense. The most successful creators are the company’s biggest fans and know the product intimately.

Daniel Vassallo became the Head of Product.
Randall Kanna became the Head of Community.
Philip Kiely became the Head of Marketing.

The best part is they only committed to 10 hours per week!

The downsides

If Sahil and is reading this and reaches out to hire me, I can’t deny I would struggle to say no. Yet there are downsides to his unconventional system too, which he acknowledges.

No social life

The stereotypical developer is an introvert who loves the idea of not needing to talk to. Not everyone fits the mold though. Many, like me, enjoy interactions with our colleagues. Social events and working in a team helps to make us feel like we belong but this isn’t part of life at Gumroad.

The low time commitment means you could fill the rest of your time with social activity to compensate. Whether it balances out is an individual thing for each person.

Hourly pay

Working for Gumroad differs from a traditional job in many ways. People must track their hours and get paid only for the hours they work. There’s no health insurance or other perks alongside the role. It’s great if you’re already of an entrepreneurial mind but lacks the stability you might want.

There’s an anti-overtime rule in place where your hourly rate is cut in half if you work more than 20 hours per week. While great to prevent burnout, if you need extra money or are fascinated by a piece of development, you lose out.

Lack of promotion opportunities

Gumroad is intentionally lean. If there are no teams and most people work on individual projects then there are fewer opportunities to take on new roles. This suits developers who don’t want to manage others but limits those who do.

Many people working with Gumroad are founders or creators in their own right. For them, it’s an income stream where they can work on a project they believe in while they build their own startup on the side.

Is this the future of work?

Gumroad’s model is extremely successful and an interesting case model for other tech startups.

As we can see from the downsides, it’s not for everyone but I’m sure it’s exciting for many people reading. You could earn enough money to live comfortably and fill your time with leisure or use it to build your own startup.

The increased focus on remote work in the post-Covid era means the time is ripe for startups to experiment. Gumroad has proved a hybrid model with high compensation and low hours is possible. I predict other like-minded founders will install similar systems inspired by them.

All the information in this article came from Sahil’s writing directly and he’s transparent about his processes. If I’m ever in the position where I can hire people, I’m going to rereading his outlines to mimic his system.

It feels like the future.