The Passive Income Scam

Summary

This video script challenges the allure of 'passive income', arguing that it is often misrepresented or fabricated to exploit financial desperation. It explains that true passive income is rare, and what's commonly referred to as such is actually investment income or entrepreneurial income. The script debunks common passive income strategies like investment bots and drop shipping, revealing the significant effort and capital required for success. It advises viewers to approach such opportunities with skepticism and to understand that substantial rewards without effort are usually a gimmick. The video concludes by suggesting that while pursuing passive income strategies isn't discouraged, one should be aware of the time and capital involved and not fall for costly courses that promise easy money.

Takeaways

• 😀 The concept of 'passive income' is often misrepresented; it's not truly effortless money-making.
• 💡 So-called passive income strategies are frequently exaggerated or fabricated, especially online.
• 💰 Investment income and entrepreneurial income are commonly misunderstood as 'passive' but actually require significant upfront effort or capital.
• 🏦 Investment income requires substantial capital to generate meaningful returns, often more than the average person can muster.
• 📈 The idea of earning passive income through investment bots or real estate with minimal down payment is flawed and risky.
• 🛑 Entrepreneurial income, such as from a business, is not passive; business owners often work much harder than their employees.
• 📦 Drop shipping and similar online ventures may seem low-effort but are fraught with competition and require ongoing effort to succeed.
• 🤔 Success in passive income ventures often relies on timing, luck, and significant personal effort, contrary to what is advertised.
• 📚 Selling courses or strategies on how to achieve passive income can be more lucrative than the strategies themselves.
• 🚫 Be wary of high-priced courses promising easy passive income, as they may not deliver on their promises.
• 💡 The speaker encourages pursuing passion projects that could generate income, but advises doing so with realistic expectations and effort.

Q & A

What is the main argument of the video regarding passive income?

The video argues that true passive income, where no effort is required after initial setup, doesn't exist. Most strategies advertised as passive income require significant upfront capital or ongoing effort to be sustainable.

What are the two main types of income that are often misrepresented as passive income?

The two main types are investment income and entrepreneurial income. Investment income requires capital to purchase income-producing assets, while entrepreneurial income requires ongoing effort to maintain the business.

Why does the video suggest that investment income is not truly passive?

Investment income is not truly passive because it requires an initial investment of capital to purchase assets that generate returns. Additionally, it may involve managing investments and dealing with unexpected costs and risks.

What is the average small business owner's work schedule according to a New York Enterprise report?

According to a New York Enterprise report, the average small business owner works twice as hard as their employees, with 25 percent working at least 60 hours a week.

Why are investment bots mentioned in the video not a viable passive income strategy?

Investment bots are not viable because they promise to grow your capital faster than the market using proprietary software, which is not only risky but also often based on survivorship bias and misleading success stories.

What is the average personal income in the US, and how much net savings would be needed to replace it with a 7% return on investment?

The average personal income in the US is roughly $42,000 per year. To replace this with a 7% return on investment, one would need to accumulate $600,000 in net savings.

What is the basic premise of a drop shipping business model?

Drop shipping involves setting up an online store that sells products manufactured and shipped by a third party, allowing you to earn a markup without handling the logistics or inventory.

Why do some people succeed with entrepreneurial ventures like drop shipping, despite the challenges?

Success with entrepreneurial ventures like drop shipping can be attributed to factors such as timing, luck, and effort. Early adopters may benefit from a first-mover advantage, while others may succeed due to sheer luck or by putting in significant effort to customize products and market them effectively.

What is the video's stance on selling passive income strategies as a business model?

The video suggests that selling passive income strategies can be a lucrative business model because it preys on people's desire to earn money without effort. However, it warns viewers to be cautious and not to fall for misleading promises.

What advice does the video give to those considering pursuing a passive income strategy?

The video advises people to go into any passive income strategy with open eyes, understanding that success requires upfront work, ongoing effort, and sometimes significant capital. It also suggests being wary of expensive courses or programs that promise easy money.

What is the role of luck in entrepreneurial efforts, as mentioned in the video?

The video acknowledges that luck plays a role in every entrepreneurial effort, including online courses, eBooks, blogs, and digital products, where creators are competing in a crowded market to be recognized and successful.

Outlines

00:00

💸 The Myth of True Passive Income

The first paragraph addresses the allure and misconception of 'passive income' as a personal finance topic. It challenges the idea that one can earn money without effort, suggesting that most advertised passive income strategies are misleading or even fraudulent. The author critiques the notion that millionaires earn multiple streams of income without acknowledging the initial effort and capital required. Investment income and entrepreneurial income are identified as the two main types of income often mislabeled as passive, with the former requiring substantial capital upfront and the latter involving significant ongoing effort. The paragraph also warns against 'get rich quick' schemes and emphasizes that any income-generating strategy that promises high rewards with no effort is likely a gimmick.

05:00

🚀 The Reality of Investment and Entrepreneurial Incomes

This paragraph delves deeper into the specifics of investment income and entrepreneurial income, explaining why they are not truly passive. Investment income, such as from stocks, bonds, or rental properties, requires an initial investment and carries risks and responsibilities. The author uses the example of needing a significant amount of capital to achieve meaningful passive income through investment. Entrepreneurial income is discussed as even less passive, with statistics showing that business owners often work harder than their employees. The paragraph also critiques various online business models promoted as passive, such as drop shipping, ad placements, and digital product sales, highlighting the competitive nature and the need for continuous effort to succeed in these ventures.

10:01

🎯 The True Nature of 'Passive' Income Strategies

The final paragraph focuses on the reasons behind the promotion of passive income strategies and the reality behind their success. It points out that selling passive income strategies can be lucrative, as there is a strong appeal to the idea of effortless money-making. The author argues that many success stories are anecdotal and not representative of the broader outcomes. Factors such as timing, luck, and effort are identified as critical to success in any income-generating venture. The author encourages a realistic approach to these strategies, emphasizing the importance of understanding the time and capital investment required and not falling for overly optimistic promises. The paragraph concludes with an invitation for viewers to share their thoughts and experiences with passive income strategies.

Keywords

💡Passive Income

Passive income refers to earnings derived from a source that requires minimal to no effort to maintain after initial setup. In the video's context, it's portrayed as a somewhat mythical concept that many people aspire to achieve as it implies earning money without actively working. The video challenges the notion of truly passive income, stating that most strategies advertised as such are either misrepresented or fabricated.

💡Personal Finance

Personal finance encompasses the methods by which individuals manage their financial resources. In the video, it is mentioned as a backdrop to discuss the allure and misconceptions of passive income, which is a popular topic within personal finance discussions.

💡Investment Income

Investment income is the money earned from investments such as stocks, bonds, or rental properties. The video explains that while investment income can be a source of passive income, it requires an initial capital outlay to purchase income-producing assets, thus it's not truly passive but rather a result of prior active income generation.

💡Entrepreneurial Income

Entrepreneurial income is the revenue generated from a business venture. The video points out that this type of income is often mistakenly considered passive, but in reality, it requires significant effort and work, as illustrated by the New York Enterprise report that states the average small business owner works twice as hard as their employees.

💡Effort Requirement

The term 'effort requirement' in the video highlights the notion that most forms of income, even those labeled as passive, necessitate some level of ongoing work or initial effort. It's used to debunk the idea that one can generate income without any work, emphasizing that success in generating income is tied to the amount of effort invested.

💡Gimmick

A gimmick is a promotional trick or device intended to attract attention or public interest. In the video, the term is used to describe certain passive income strategies that promise high rewards without any effort, which are often misleading and fail to represent the true risk-reward trade-off.

💡Survivorship Bias

Survivorship bias is the logical error of focusing on the survivors or successes while overlooking those that have failed. The video mentions this concept to critique the promotion of passive income strategies that highlight only successful cases, ignoring the many who have not achieved the same results.

💡Drop Shipping

Drop shipping is a retail fulfillment method where a store does not keep the products it sells in stock but instead transfers the customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer. The video uses drop shipping as an example of a business model that is often oversold as a passive income generator, but in reality, it requires effort and strategic planning to be successful.

💡Content Creation

Content creation refers to the process of making and publishing digital content, such as videos, blogs, or e-books. The video discusses content creation as a potential source of income that might seem passive but actually requires consistent effort to produce quality content and maintain an audience.

💡Pyramid Scheme

A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. The video mentions pyramid schemes as deceptive passive income strategies that promise financial freedom but often result in financial loss for most participants.

💡Luck

Luck refers to the chance occurrence of events, especially those deemed to be fortunate. In the video, luck is identified as one of the factors that can contribute to success in entrepreneurial ventures, including online content creation, but it is also highlighted that relying solely on luck is not a sustainable strategy for generating income.

💡Selling Passive Income Strategies

The video concludes by pointing out that one of the most successful passive income strategies is ironically the selling of passive income strategies themselves. This refers to the business of offering courses, books, or advice on how to achieve passive income, which can be lucrative but is often promoted without fully disclosing the effort required.

Highlights

Passive income is often touted as the Holy Grail of personal finance, but it doesn't truly exist in the way people imagine.

Millionaires are said to earn from seven different income streams, but this is often misrepresented.

Most passive income strategies advertised online are either misrepresented or completely fabricated.

Passive income usually refers to investment income or entrepreneurial income, which still require effort.

Investment income requires upfront capital to purchase income-producing assets.

To achieve meaningful passive income, a significant amount of savings is necessary.

Investment bots and real estate empire courses often promise high rewards without effort but are risky and misleading.

Entrepreneurial income from businesses like drop shipping requires hard work, contrary to the passive income myth.

The average small business owner works twice as hard as their employees, debunking the passive income claim.

Many online ventures that promise passive income are oversaturated, leading to an insurmountable supply.

Success stories in passive income strategies are often biased and do not represent the majority's experience.

Timing, luck, and effort are the three main factors for success in entrepreneurial ventures.

E-commerce stores, including drop shipping, often fail within the first four months due to lack of effort and customization.

Selling passive income strategies is itself a lucrative business, as people are attracted to making money without effort.

The video encourages viewers to pursue their passions and entrepreneurial ventures with open eyes and realistic expectations.

Passive income strategies require upfront work and continued effort to sustain, rather than eliminating work altogether.

The video advises viewers to be aware of the time and capital spent on passive income strategies and to assess their worth.

The speaker invites viewers to share their thoughts and experiences with passive income strategies in the comments.

Transcripts

passive income the Holy Grail of

personal finance topics the ability to

earn money without doing

anything it quite literally doesn't get

any better than that does it and it's

something that you'll see video after

video and add after ad talking about

pushing the idea that millionaires earn

seven different streams of income so so

should you there's just one problem

passive income doesn't exist not really

anyway there are of course ways of

making money that deviate from your

standard nine to five where time spent

working and compensation have a pretty

linear relationship but the vast

majority of these so-called passive

income strategies that you see

advertised online especially here on

YouTube are at best misrepresented and

at worst completely fabricated to prey

on the financially desperate now it's

not to say that some of these strategies

don't have their merits well I don't

like the term passive income some of

these things might make you money over

time but for the ones that sound too

good to be true where you quite

literally don't have to put in any

effort you're often more likely to lose

money when you consider the fees and

registration costs that you're being

charged to even try this thing so let's

break down why passive income isn't all

that promising but why you keep hearing

about it on today's clean bagel

passive income is usually used to

reference an income stream that is

somewhat self-sustaining in that once

you set it up it doesn't necessarily

require your active involvement meaning

that you can have more time to yourself

to hang by the pool side or play video

games or do whatever you want but

outside the lottery or a lucky

inheritance there's not really such a

thing as passive income at least in that

truest sense instead when people say

passive income they're really referring

to one of two things investment income

or entrepreneurial income now certainly

there's nothing wrong with these

approaches and they do change how your

effort is rewarded but they don't

eliminate that effort requirement and

there's a very easy explanation as to

why anything that promises a high reward

without any effort is in most cases a

gimmick but let's start by explaining

these two streams of income starting

with investment income the idea of

owning assets that generates some sort

of yield whether that be stocks bonds or

I'll throw on rental properties here as

well now obviously as an investment

Focus Channel I have no problem with

people making money from their

Investments

I would naturally hope that you do but

as a passive income strategy it comes

with a pretty big caveat

it requires that you have money in the

first place to purchase those income

producing Assets in fact when people

reference millionaires earning seven

different streams of income which stems

from a 2002 report from the IRS it's not

often mentioned that four of those

strategies dividend rental interest and

capital gains income require money in

the first place to achieve and a good

amount of it if you really want to earn

anything meaningful if you could

reliably achieve a seven percent return

on your money for example and you wanted

to replace your annual active salary of

forty two thousand dollars a year which

is roughly the average personal income

in the US you would need to accumulate

600 000 in net savings

not an easy first step for passive

income now there are some strategies

that I've seen that do promise to earn

you that passive income without needing

that upfront capital or effort for

example investment Bots that take

whatever you have and grow it faster

than the market using proprietary

software or courses that promise to show

you how to start building a real estate

Empire by putting five percent down on

several different properties when you're

19. the problem is that these products

never represent the true risk reward

trade-off that you face implementing

them the idea for example that someone

should take everything they have and put

it into a down payment on a rental

property

is stupid it's bad financial advice

because while real estate on average is

a good investment category and is a

legitimate strategy for Building Wealth

given the rental income and the

appreciation it also comes with large

unexpected costs and risks like a broken

water heater a hole in the roof that you

need to repair

that's a real thing my parents had to

deal with that over the summer and I

helped them cut a tree out of their roof

there's also the risk of your payments

increasing something that many are

becoming painfully aware of as interest

rates rise so clearly if you don't have

a cash buffer to help absorb these extra

costs or a couple months of unpaid

tenant rent then it could be enough to

sink any thinly run operation as for

trading Bots they don't work I don't

care what YouTuber told you that they

made 20 this past month it's utter

survivorship bias that may as well be

advertising a roulette wheel because

it'll give you the same odds so right

away you can see why I struggle with

people emphasizing the passive nature of

investment income yes if you get to a

point where you have enough Capital it

can be a very powerful tool for freeing

up your schedule if you end up relying

on that type of income but it requires

more savings from actively generated

income than the average individual will

likely ever achieve but what about other

forms of passive income well going back

to the seven streams of millionaire

income which people like to focus on

when you exclude the earned income since

that's for losers there are two

remaining Avenues royalties slash

licensing and business profits AKA

entrepreneurial income now the idea of

an entrepreneur's income being passive

should sound a little laughable

according to a New York Enterprise

report survey the average small business

owner Works twice as hard as their

employees with 25 percent working at

least 60 hours a week so leaving your

nine to five for a business venture to

free up your schedule

probably isn't going to work out still

there are some Ventures advertised

online that allegedly let you set up

some sort of self-sustaining business

that doesn't require any amount of

effort something that you can set up and

leave to its own devices to earn you

money this includes your drop shipping

stores at ad placement strategies

selling digital products content

creation and convoluted pyramid schemes

that promise you Financial Freedom if

you get three other suckers to pay for

the program that you just sunk a few

thousand dollars into yourself now as

someone who makes money from YouTube

obviously I'll concede that there's

Merit to some of these strategies some

of these strategies can make you money

with digital products for example the

idea is that once you create this thing

of value and put it on the internet you

can sell it and keep making money for it

over time and there's some truth and

validity to that strategy it doesn't

require the same type of Maintenance as

a traditional business but the idea is

that to get to that point where you have

this thing of value you oftentimes still

require a good amount of effort among

other things and there's a very easy

explanation as to why the promise of

high returns with low effort with some

of these strategies

doesn't hold any water take Drop

Shipping for example the basic idea of

Drop Shipping is that you build a

storefront online that sells products

manufactured and shipped by a third

party so that you can earn a markup

without dealing with any of the

logistics a basic setup can take just a

few hours and likely costs under 500 to

get set up with a web domain or online

storefront perhaps even less if you use

a site like Amazon to sell your product

or a service such as Teespring where you

can design your own shirts and sell

through their website after that you

won't need to sit at a cash register or

stock any shelves to make any type of

sale and it's all pretty well automated

for you awesome so what's the catch to

this low effort and low-cost strategy

well just that ironically because of how

easy it is for an individual to set up a

store and drop ship something as novel

as a fancy coffee mug you can bet that

there will be thousands of others doing

the exact same thing possibly with the

exact same product providing an

insurmountable supply of Novelties when

there are probably 10 people out there

who actually want this thing but then

Richard why are some people successful

using these strategies why do we have

any case example of Jimmy making 10

grand a week thanks to him signing up

for so-and-so's course on YouTube

well firstly I want to address that most

case examples shown in these ads are

incredibly biased and shouldn't be

relied upon and the people who take the

route of showing individual success

stories rather than showing the strategy

success rate at a high statistical level

probably have thousands of other

students who fail to break even using

their approach even still some people do

at times make money with these

entrepreneurial Ventures and there are

typically three reasons why the first is

timing as with most Ventures there is

some first mover advantage and the first

drop shippers probably did make a good

amount of money with their low effort

storefronts at a time where online

stores weren't as prevalent but returns

from these Ventures quickly diminish

over time as more and more people take

advantage of it leading to that

oversupply situation that quickly

eliminates the opportunity for everyone

else

it's basic Arbitrage even those that

make money from this Venture probably

won't see sustainable cash flows a

successful Drop Shipping Store for

example might make money for a few

months perhaps even a year but we'll

eventually see activity die down if it's

truly left to its own devices so by the

time you see an ad for a course that

someone spent a few months putting

together after trying a passive income

strategy themselves and getting three

other success stories to back it

you can bet that the opportunity has

probably already passed now the second

factor for success with these online

strategies as you can probably guess is

luck as someone who makes money on

YouTube I would love to say that there's

a Surefire way to get to this position

but I don't believe there is there are

over 720 000 hours of content uploaded

every day on YouTube alone and nearly 90

of that will never pass the 1000 view

Mark at which point you might make a few

dollars luck plays a role in every

entrepreneurial effort and the same

applies to online courses ebooks blogs

any digital product where you're

fighting in a sea of content creators to

stay afloat and be recognized and then

that brings in the third factor of

success effort nearly 90 of e-commerce

stores fail within the first four months

including companies with a unique

product set but the ones that will do

well are likely the ones where people

put in more time and effort to customize

their products work with suppliers to

secure new drops before competitors

Market their goods in other words

actively earning their keep and true if

you have a successful product there

might be some recurring Revenue

thereafter but oftentimes that Revenue

will slow down over time sustained

revenue on YouTube for example requires

that you put in continual content as you

use often trickle Out YouTube for me has

been a second job one that I love and

I'm definitely not complaining about it

but between researching script writing

filming and editing I wouldn't say

there's anything passive about it but

then why do we keep seeing others

promote these different strategies

well that's an easy one because truly

one of the most successful and lucrative

passive income strategies that I'll let

you in on

is selling passive income strategies the

reason one of the most watched Finance

videos on YouTube is nine passive income

ideas how I make twenty seven thousand

dollars a week is because there's quite

literally nothing more financially

appealing than making money without any

effort and the reason you'll be served

ads about how Drop Shipping is making

people rich is not because Drop Shipping

is actually making people money but

because the person that is giving that

ad makes money from selling that idea

with the sign up fees for their course

or their Academy even though you'll

likely make less on an hourly basis

using that type of strategy than you

would driving for Uber for example

so it's been a little negative so far

but my intent here isn't actually to

discourage you from pursuing one of

these passive income strategies if

that's what you want to do if you think

there'd be demand for an online course

or an ebook on a subject that you happen

to be an expert in I actually say go for

it you might just happen to make some

money along the way of pursuing your

passion in this Venture but my point is

that you need to go into it eyes open

passive income really just means front

loading your work not eliminating it in

the vast majority of strategies do

require some form of continued effort to

sustain the money that you're making you

get out what you put in and your success

will be a function of your application

opportunity and most importantly your

effort now none of this is to criticize

people who use the term passive income

or share ideas freely on how to make

extra cash on the side and there is of

course something to be said for trying

your handed entrepreneurship to try and

build some supplemental income so if you

want to try out one of these strategies

all the power to you but be aware of the

time and the capital that you're

spending to make this money to deem

whether it's worth it

and maybe don't add to your break even

hurdle by buying a two thousand dollar

course on Drop Shipping from someone

who's just trying to fund their own

passive income strategy if their

strategy was still successful that it

lets them make money poolside without

any effort they wouldn't need to sell

you an ad on YouTube thanks for watching

I hope you found this video helpful if

you did please do make sure to like And

subscribe all that good stuff papa needs

to earn his passive income and if you

have any thoughts on these strategies

that we've talked about today I would

love to hear your thoughts especially if

you've tried one of them and even

especially if you disagree with me maybe

you think there's opportunity here that

I'm overlooking I'd love to hear your

thoughts in the comments down below

thanks for joining and be safe out there