Passive Income Lies and An Entrepreneur Reality Check

Passive income is a lie. The following blog post will lay out the logic with facts and reasoning on why I believe this to be true. I will provide examples of how dishonest marketers use vague words to manipulate your buying behavior through mythos of shortcuts to success. I realize that might shock some readers. Is reality a hard pill to swallow? Say it again. There is no such thing as passive income. Let us put this in more conventional terms.

There are no shortcuts to success. Shortcuts have always been a thing of myth and often lead to our demise. This is a fundamental lesson passed down for the last 2000 years and probably many more before that. We see the lesson to avoid the shortcuts in almost every TV show and almost every comic book ever written. When we put it in those words, it makes more sense. Why then, would anyone attempt to sell or buy into the lie shortcuts to success known as promises of passive income?

Here comes another shocker! Words mean things. We are not grade school children playing a game of pretend on the playground. We are professionals. Doctors, lawyers, writers, welders, mechanics, teachers. As professionals, we do not create alternative meanings to well establish terms. To get to wherever we are in our career status of today, we all had to pass grade school English writing courses. Many of us went on to endure countless hours of college level English courses while pretending to pay attention. Some of us were even subjected to courses in law, business, mathematics, and science where we learn precision is important. Precision of calculations, precision of processes, precision of language. Question: Do they still teach English and how words mean things at U.C. Berkely and Harvard? Let us examine the word “passive” as used in the context of passive income. Merriam-Webster Dictionary provides three sets of definitions for the word “passive”:

  1. Not active or operating. (A.K.A. inactive.)
  2. Receiving or enduring without resistance. (A.K.A. easy.)
  3. Relating to, or being business activity in which the investor does not actively participate in the generation of income. (A.K.A. gambling, the stock market.)
In the most fundamental sense, income earned is never passive. You either do the work now or do the work later but to earn income, you or someone else, will work. It is also possible that someone else does the work and passes the income on to you. That is what the IRS does. Ok, just kidding but not really. Even if you receive income through the work of others, that is still not passive since someone else did the work. The phrase “passive income” does not exist in the dictionary of choice. Based on the establish definition of the word passive, we must assume that the concept of passive income is income gained by being “not active”, earned “without resistance”, or income gained while “not actively participating”. We already established that shortcuts to success are foolish and often dangerous. It should also be clear that

An Old Lie of Something for Nothing

The concept of passive income is nothing new. The DOT COM bubble of the 1990’s is a good example. Many working professionals with great careers quit their jobs. They dumped their careers to become what was known as Day Traders. These were hordes of Americans who saw the brief and uncommon spike in stock prices and convinced themselves they could become quickly rich by picking the winning stocks. They were wrong. Everyone made money until the inevitable stock market tumble came. Several million highly educated, talented professionals lost their careers, their homes, their savings, and sometimes their marriages over their foolish belief in the shortcut of passive income. Consider the following examples which are, in my opinion, effective but dishonest types of marketing in promising something for nothing:
  1. I recently heard a radio advertisement where the announcer promises to show the listener how he “could make” $17,000 in just seven clicks of a mouse.
  2. Another proclaims supermodel beach body abs in just 20 minutes per day. Last year it was 30 minutes. Will next year be 10 minutes?
  3. One con-artist promised to show me how to make millions by flipping real estate with no experience and no upfront money needed.
  4. A late night TV advertisement told me to take their pill and lose ten pounds of “belly fat” because it “really works”.
  5. A burned out ex-corporate executive wanted me to buy his book to show me how to write a blog and make a six figure income.
  6.  And, finally, my favorite is the legions of self proclaimed online gurus who claim they are “earning” upwards of 1.2 Million annually on “passive income”.

Words Mean Things

Are we there yet? Can I stop the rant? Once more, words mean things. Let’s briefly examine the vague words of slick marketers. “Could make”, “belly fat”, “really works”, “income”. Let’s start with belly fat, gross! To the marketer it means nothing. Lawyers would tie themselves up in court for a decade debating the words “belly” and “fat” with no resolution. To the late night TV watcher, belly fat is something different and it serves the marketer well to the detriment of the foolish consumer. The phrase “it really works” is one of the most common tools of the unethical marketer. In legalistic venues, it means nothing. To the late night TV consumer, it means whatever he or she wants the shortcut pill to do. Remember that selling hope is more lucrative than selling reality.

The term “income” does not mean what you put in your bank account to spend on your new boat, Lexus, mini-mansion. Income is a vague term that can mean just about whatever the user wants it to mean. Slick marketers use these vague terms because they know you assume it means something different than what their intent is. Thus, they cannot be held legally accountable for your misunderstanding. If someone professing a passion to want to see you succeed and if hat someone professed her honesty by sharing “income reports” with followers to show what “really works” then would it not be more honest to use precise terms instead of slick marketing vagueness? Consider these questions next time you see someone pretending to be honest but using classic vague marketing tactics:

  1. Instead of sharing “what really works” how about sharing the performance data of each tool?
  2. Instead of sharing “income reports”, how about sharing net income, gross income, and expense reports?
  3. How bout reminding us about how much the promoter of these tools that really work got paid for such promotions?
  4. How about suggesting alternative tools to the paid promotions to show true honesty and concern for each follower’s success.
  5. Finally, share the specific skills, industry connections, and years spent in building the “passive income” type of empire.

The Oldest Profession

Some say the oldest profession is prostitution. To be fair, what we are discussing here is nothing of that sort but you will soon see the connection. Entrepreneur coaching is now a billion dollar shadow industry with almost no regulation. There is no generally agreed upon certification required to offer coaching services. There are no generally accepted standards. It is purely a buyer beware type of marketplace. Desperate, scared, broke, exhausted, and often unemployed people are flocking to these self professed gurus of the no skills needed, no money down, four hour work week, passive income liars.
In my opinion, one of the greatest modern shams is the promise of overnight success in the online market place.

The Victims

Here is an example of the harsh reality of many consumers who buy into the shortcut scams to get rich online. Mr. Smith loves to fish. He is laid off from a cubicle job at a corporate telecom giant. He has four years of general studies education with little knowledge of marketing, communication, sales, computer coding, graphic design, or finance. He listens to a podcast by a master marketer who, over time, convinces Mr. Smith that he can earn a six figure income too by simply by creating an online presence for himself and his passion for fishing through a blog, podcast, social media, etc. All Mr. Smith needs to do is buy the guru’s books, buy the products he promotes, and pay for his “mastermind courses” to make big bucks.

Does anyone see the problem in in this scenario? That is correct! Mr. Smith has ZERO training in the basic skills he needs for this effort and he is even less prepared to tackle the massive challenge it is to create a competitive website.  Mr. Smith cleans out his savings and maxes out his credit card chasing that shortcut to riches myth buying the products and services promoted by the online guru. The end result is predictable. Broke, frustrated, possibly halfway to a divorce, Mr. Smith sadly gets a job as a greeter at Wal-Mart. Meanwhile the online guru suffered no risk in the venture. He got paid for his hourly consulting fees. He got paid nice referral fees for the products he touted. He got a nice royalty from his newest book deal. He moves on to the next sucker. The following is a short list of some of the fundamental skills required to build a competitive online presence:

  1. Time. This is a long venture. Thanks to modern Google type search engines, ranking high in searches takes countless hours of content creation and promotion.
  2. Masterful English writing skills. No one will read a blog with poor grammar and scary spelling errors. Judging from social media, 99% of us need to retake 5th grade English.
  3. Expert marketing skills. The online universe is endless. It is not good enough to write well. No one will care without effective marketing.
  4. An understanding of graphic design, website layouts and coding basics. The millionaire gurus have the best of the best with deep pockets to create their online presence. What? You thought you could do it yourself? They did not tell you how much they spent on marketing, website, graphic design, and custom coding?
  5. Formal education. Not mandatory but proper education like a Master’s level diploma in Business Administration, English, Graphic Design would certainly help. Whatever your niche of expertise, you better know what you are talking about. Consumers are not as foolish as we once thought and they know a fraud when they see one.
  6. Risk! What’s that? You did not realize one might fail at this? 50% traditional businesses fail within 5 years. How about you ask that friendly guru what the success rate is of his followers.
Let us summarize the facts on what it takes to be successful in the online marketplace. The vast majority of bloggers never make a dime from their effort. Most give up the effort within months. Most podcasts do not last more than 7 episodes before the same thing happens. Of the bloggers that do earn money from their effort, the vast majority of them never earn enough to quit their day job. Do not shoot the messenger here, the facts are the facts. What if your local online marketing guru told you these things before he sold you that book and convinced you to quit your day job?

Lost in Translation, The Passive Income Myth

In the deep south, there is an old saying: “I’m not sayin, I’m just sayin”. Loosely translated, it means the words I use are not what you think they mean and do not hold me accountable if you are too dumb to catch the truth between the lines. Southerners are famously passive aggressive. Marketers spend millions on research studying what words Americans use with implied meanings but are not legally binding. Passive, by definition means no work.  But it must mean something very different to the online marketers who promise passive income because, based on the argument above, online success requires decades of study and endless hours of hard work to get that passive dollar into your bank account. We must conclude a few things from this logic:
  1. Someone who offers the falsehood of shortcuts to success like passive income, losing belly fat, no money down and no risk investments definitely know how to use words rich with vague meanings.
  2. These master marketers use these words for a few reasons, none of which are honorable.
  3. Reason 1 – They might be ignorant of that fact that, within professional circles, words have precise meaning and nothing less is tolerated.
  4. Reason 2 – They possibly deliberately pick those words and phrases known to trick unwary consumers with the intent to trick you.
  5. Reason 3 –  They are possibly illiterate in what is likely the only language they speak, English.

But Wait, There is More!

All of this is not to say that one should not shoot for the moon and tempt fate in the online marketplace. By all means, please, start a blog, learn the art of podcasting, perfect your message on social media. Compete with products and services that people want and need in an honest way. Flip real estate as an investment. Play the stock market gambling game. Just do your homework before you do. Know the requirements, know the odds, and know the consequences. The goal of this extensive rant was not to single out or pick on any specific person or brand. The point is to help reach just a few budding entrepreneurs who want build their success, their way with quality, honesty, integrity, and no shortcuts.

Let us be clear. We love stories of success. Rich is not a four letter word to avoid.  We believe in American Capitalism and competition. To he whom much is given, much is expected. Personal accountability in a free society. Those who take advantage of open markets by pushing fraud and legal but unethical marketing should be wary of their deeds and the consequences for all of us.

The good news is that quitting your day job and building your success, your way in the flipping houses, trading stocks, or as an online marketer can definitely be done. There are gifted people out there who took the risk and have amazing stories to share about their success. Many of them know what it is like to be in dead end jobs where they slowly strangling themselves into hopelessness. They want to help and they want to see others claw their way out of the iron fisted boss locking you in your cubicle. The challenge for those honest and passionate Life Coaches, Marketing Consultants, and Professional Bloggers is to compete in an increasingly noisy and dishonest niche where most consumers are still buying the age old lie of a shortcut where one has never existed. Buyer beware!

About the Author

Business Strategist, Bennett Johnson, is a MBA graduate and Ph.D. Candidate. He has two decades of experience from entrepreneurial endeavors to corporate leadership positions with work experience in five countries. He teaches college level Business Management courses to students around the globe in an online format. An avid reader and passionate skeptic, Bennett loves a great story of rags to riches success but is always wary of the untold story behind the hype.
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