On this episode of The Impatient Investor, Andrew explains why you should not get rich for the get-rich-quick schemes that are popularized online right now, and urges you to look to set it and forget it approaches to investing that will provide you with true passive income. Tune in next week for part two.
“I took a look at all of the books and videos and courses out there on the topic of passive income. And I realized are all full of cheesy tactics bordering on scams. Unless you’re interested in dropshipping Amazon purchases for 25 cents a package, don’t waste your time.”
Jerry Seinfeld wasn’t out of his mind in the late 1990s when he turned down, CBS’s unprecedented offer of $5 million per episode to shoot a 10th season of his blockbuster, award-winning show Seinfeld. Jerry didn’t need to work for a fixed salary anymore, even a massive one because he shifted his focus from active income to passive income. And just a few years previously, Seinfeld had entered syndication and that put Jerry in a very unique position.
The comedian was not only the show’s main star, but he was also the creator, executive producer, and head writer. This combination meant Jerry earned a much greater share of the show’s royalties than any other TV star before or since. Jerry saw there was much more money to be made by signing syndication and licensing deals for his show than there ever would be in filming more episodes. And over the next 10 years, Jerry sat back and collected royalties.
And by 2015, the show had grossed over $3.1 billion. The majority of which found its way right into his bulging pockets. And that’s when he signed a six-year deal with Hulu for the rights to stream Seinfeld online until 2021, the Hulu contract brings in an estimated $400 million per year. Most of which arrives directly into Jerry’s mailbox.
Beginning in 2021, Seinfeld will be made available on Netflix. The details of this new contract have not been publicized, but sources indicate Netflix outbid, Hulu, Amazon, Warner Media, NBC Universal, and Viacom for the right to stream the show. Insiders have reported the dollar amount for this deal is considerably larger than even the Hulu contract. And in other words, Jerry Seinfeld is set for life. Of course, we all can’t create, produce, write, and star in one of the most beloved shows of all time. Most of us aren’t hilarious, well connected, or Jewish enough to be in the next Seinfeld. But that doesn’t mean we can’t all earn enough passive income to be set for life in exactly the same way as Jerry.
It is not merely possible, in my world it’s fairly common, and no I’m not an online marketer or an internet entrepreneur. I’m not going to tell you to start a YouTube channel or go write an eBook. Those kinds of tactics might make sense for millennials, fitness models, or bored housewives with hours of free time and no starting capital, but the types of sophisticated investors I work with at my firm Four Peaks are looking for more of a set it and forget it approach.
I decided to write this series of articles because I took a look at all of the books and videos and courses out there on the topic of passive income. And I realized are all full of cheesy tactics bordering on scams. It reads like the kind of juvenile get-rich-quick schemes my friends that I used to concoct back in third grade, and unless you’re interested in dropshipping Amazon purchases for 25 cents a package, don’t waste your time.
Most of the books and articles I found on passive income, start off with a story of Pat Flynn, the architect who was laid off in 2008 and decided to create a website to help him study for the leadership in energy and environmental design or the LEAD Exam. He hoped a lead certification would help him land a new job as an architect. And just after a few months after launching his website, it started to generate thousands of unique visits every day. He received emails from all kinds of grateful visitors all over the world saying things like Pat, your stuff is nice. I would pay for it. At that point, Pat realized that he didn’t have to wait around for a call from LEAD. He could take his financial future into his own hands.
So soon, Pat had authored an eBook study guide, which he started selling for $19.99. At the end of his first month, he’d made $7,008. Next, he created a YouTube channel and podcast. Then he launched three other websites. Amazingly Pat has made $3 million in the last six years, strictly from passive income. What an incredible success. Except, Pat’s income doesn’t really sound all that passive to me. In fact, building numerous websites from scratch, writing eBooks, hosting a podcast, shooting YouTube videos, and managing a collection of social media channels actually sounds like a full-time job.
Would Pat continue to earn the same $500,000 a year if he stopped working around the clock on his businesses? Maybe, but probably not. Also Pat’s magical success story skates over another important fact. 98% of all websites never earn any money or achieve any significant level or traffic. I’m a big numbers guy. And I strongly believe in checking out the numbers closely before diving into any potential investment and starting a YouTube channel is not a sound investing strategy.
Tune in next week for part two.