“Passive income” is not a fair term

The intent is there – we’d like to go about our day doing what we please, and watch a steady stream of money flow into our pockets. “Passive income”. You have risked absolutely nothing of yours, and you still get to collect.

In reality, this is impossible. Any investment comes at a cost of time, money, or things. What truly matters to the investor is the *rate* at which an investment pays, the *limit* at which the investment can earn money for you, and the *risk* that the investment bears onto you.

For a savings account, dedicating 15 minutes/month could put $10/month in your pocket. Its rate to you is $40/hr, decent in of itself. Its limit is only 15 minutes. You probably can’t earn more by spending more of your time banking. Its risk to you is low. Though capitally intensive, your money is very safe. If your normal job earns you $20/hr, then this investment would effectively raise the value of your time alive. Maybe worth considering.

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In comparison, you could drive for Uber. You dedicate 20 hours/week and pocket $300. Its rate to you is $15/hr, far less than the banking option. Its limit to you is over 20 hours. You could drive many more hours and make proportionally more. Its risk to you is higher than banking; you’re responsible for maintaining a car and dealing with bad customers. If your normal job earns you $20/hr, then this investment would effectively dilute the value of your time alive. Maybe worth avoiding.

I think this philosophy is something many in this subreddit ought to bear in mind when considering new revenue streams. Things that feel free, easy, and casual, aren’t, and more often than not will dilute the value of your time in a non-obvious way. You want “the four-hour workweek”. Much easier said than done, obviously, but that mindset would quickly filter out investment opportunities that could get you closer to that goal, and which will distance you.

Because of this, I am elevating my tolerance for risk by trying to build something that has appealing rate and limit indicators. I might fail entirely and lose out on my time, money, and resources. Sucks. But as I see it, risking these resources is the only way I will ever get remotely close to that “passive income” dream.

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