Defining Passive Income and Traditional Wealth Building Strategies
Is passive income just some sort of myth peddled by snake oil salesman? Or is it actually a real thing, a legitimate path for everyday people, normal people to build real wealth? Learn More
Invitation to the Live Rule One Investing Workshop
What does passive income actually mean? And how do people like Buffett and Gates and Bezos and Musk generate billions of dollars every year in passive income when they only have the same 24 hours a day as the rest of us?
Moving Beyond Trading Time for Dollars
Here’s the secret. They don’t make their money trading time for dollars. Chances are, the primary way that you make money, most of us, is by going to your job, trading your hours for dollars.
Lessons from Digging Ditches and Grand Canyon River Guiding
As a river guide, packing boats and food, getting the boats loaded at Le Ferry, then guiding folks for two-week adventures down the Colorado River through the Grand Canyon, there was a direct link to how much time was worked and how much money was made. Working a full season, April to October, back in the 1970s and early 1980s, meant making $4,000 a year.
That’s active income trading hours for dollars. Nobody’s replacing Colorado River Guides with AI in the future. Of course, a guide could get fired, or get hurt, or the company could fail, and suddenly the income is gone with no plan B. That’s what happened to millions of people during COVID. Boom. Gone. No plan B.
But there’s another kind of income. The kind that builds real wealth. And eventually this kind provides the kind of financial security that simply can’t be obtained with a job. And that’s called passive income.
Real World Challenges with Common Passive Income Ideas
Passive income is the kind of income where instead of trading hours for dollars, a kind of flywheel is put in motion. Some effort is required at first, but once that flywheel gets going and starts to generate income, it just keeps that income coming and growing no matter whether actively working or not. Passive income, another metaphor, is kind of like planting a seed. The work is done up front, the seed is planted, and then over time, if the right kinds of seeds have been planted, they grow all on their own.
Why Courses and YouTube Channels Require Significant Hidden Effort
The problem is that in reality, there are a lot fewer sources of passive income than commonly advertised. Sell a course, write an ebook, start a blog, get a YouTube channel going. But these are all extremely tough to put together. There’s a lot of hidden work and most of these ideas are simply not available to most people. But there is one passive income strategy that is 100% legit and it’s been working for at least 95 years this is what is called rule one investing. For people who follow the rule one investing strategy, a seed is planted by taking a small piece of ownership of a very specific kind of business.
The Eighth Wonder of the World and Compounding Magic
The hard work is done up front learning if this is the right kind of business to plant. If it is, then the wait begins until that business can be bought at a fair price and then it is watched as it grows consistently year after year. Nothing more is done after that. The right kind of business is one that knows how to grow itself internally. What that means is it grows from its own success and it doesn’t need anything from outside itself. When it does that, it creates enormous wealth through a concept known as compounding. Albert Einstein was supposed to have said, “Compound interest is like the eighth wonder of the world. He who understands it earns it. He who doesn’t pays it.”
Case Study: Chipotle as a High Flyer for Rule One Investors
The magic of compounding is that a business grows money. It also starts to grow the money made on that money, and the money made on that, and then the money made on that and that money is earning even more money. It’s like a tree that grows seeds which grow into more trees which grow into more seeds, and the growth just accelerates. For example, Chipotle purchased in 2018 long after the company was well known, it was a high flyer, it was a great grower saw the investment double from 2018 every year for six straight years. $1,000 became $65,000. $10,000 became $650,000. $100,000 grew to $6.5 million.
Analyzing the Massive Passive Success of Coca Cola Investments
This is the magic of compounding as a rule one passive investor. Leelu, one of the best investors in the world and a rule one type investor, said that this way of generating wealth building passive income through investing in wonderful businesses has created more wealth than any other form of income creation, more than real estate, more than crypto, more than startups, more than anything. Warren Buffett, the man who taught this kind of investing, has been doing it for over 70 years. He started with nothing and he’s worth $145 billion.
Coca Cola in the early 1990s is a clear example. Buffett bought Coke shares when it was briefly on sale. In today’s dollars, $2.50 a share. He didn’t have to show up at Coca Cola headquarters every day or drive a Coke delivery truck or work in their bottling plant. And he just bought a piece of a good business and left it up to the people running Coca Cola to grow his money. He was passive.
How Snowballing Capital Replaces the Need for Traditional Employment
Fast forward to now. Buffett still owns the passive investment, but his money looks a little different today. His original investment has snowballed to $25 billion. That’s the difference between working a whole life 9-to-5 versus learning to create passive income. The money Coca Cola paid Warren every year as they grew his money that’s called dividends. Last year, Coca Cola paid Warren $700 million in cash in just one year. And that number keeps growing so much that in just another 7 years, he will be getting $1.4 billion in cash every year. And that’ll be growing. That’s more than he paid for the entire investment originally. This is the unbelievable power of compounding in a great passive investment.
Why aren’t more people doing this? Because they don’t know how. That’s the only reason. And isn’t that the primary difference between those who simply work away at 9-to-5 jobs and those who get passive income? It’s just knowledge. The knowledge of how to do rule one investing for passive income. Because with this kind of knowledge and a salary being earned, just setting aside 10 to 20% and investing it rule one style means that even doing just okay, doubling money every 5 to 7 years becomes likely.
Creating Generational Wealth through Consistent Long Term Investing
When this approach is mastered, it becomes easy to think in terms of creating generational wealth. By the time a 40-year career is finished, there should be millions in the bank to enjoy with family. Putting just $10,000 to work at the start of a career, and doubling it 10 times over 40 years, results in $10.4 million. $10.4 million from just that first seed of $10,000. It’s not as good as Buffett did, but it’s pretty good.
Turning a Ten Thousand Dollar Seed into Millions over Forty Years
That is exactly how some rule one students have retired early and left jobs they hated. This is very, very real for rule one investors. So what’s the conclusion? Is passive income a myth or is it real? There’s the snake oil stuff that exists. But the one true passive income approach that has worked time and time again for ordinary people is rule one investing. Taking savings, investing in the right kind of companies at discounted prices, and then sitting back and letting those businesses do what they do. Compounding magic. It’s worked for Warren Buffett, Manesh Parry, Lee Louu, Bill Ackman, and Charlie Munger, and it’s worked for over 40 years for rule one investors.
Accessing Elite Investing Education and Live Coaching Opportunities
The live workshop covers everything needed to become a rule one investor like Warren, Charlie, and others who have applied this strategy. With over 25,000 graduates, it is simply the best investing education available. NPS scores averaging 82 far better than Harvard or Yale MBA programs back that up. Read More