09-01 Passive Income Systems

​To generate passive income, you need a way to maintain your income without having to do so much grunt work to keep it going. If you have to keep working each day to avoid seeing your income drop, then you’re earning active income, not passive income. Passive income continues to flow even when you aren’t actively working.

Many forms of passive income still require daily or weekly maintenance activities, such as fulfilling orders or handling customer service, but this doesn’t mean that you have to perform those maintenance tasks yourself. You may delegate such tasks to other people, to businesses, or to technology. For your income to be passive (meaning that you don’t have to do much to maintain your cash flow), you need to remove items from your plate, but those items still need to get done.

A passive income system is a form of delegation.

What is being delegated, and to whom? How will the necessary active tasks being handled if you won’t be doing them yourself? Your passive income system must provide these answers.

I love delegating to technology because it’s fast, efficient, consistent, and inexpensive.

Technology also tends to scale well, meaning that you can add more computing resources, which generally requires little more than paying for those resources. This works well for an Internet business.

For example, I’m delegating the distribution of this information to a file format known as PDF.

Without this technology I would have to use some other distribution method, perhaps a traditionally printed book.

Technology is so ubiquitous these days that it’s easy to overlook what it does for us and take it for granted, but it can perform a vital role in any passive income system. Without this technology what would it take to distribute copies of every article I’ve written every month? It would be a massive effort if this had to be performed by human hands.

Notice then that when you rely on technology to communicate, you’re already taking advantage of passive systems. Your messages pass through equipment that’s designed, built, and maintained by others. You may not be paying those people directly, but they’re working for you every day. You’re already taking advantage of these systems now. So if you currently rely on such systems for your communication needs, then why not leverage them to handle your income as well?

​You can also delegate tasks to other people and to businesses to get them off your plate. In a typical affiliate deal, you may delegate the order processing, fulfilment, and customer service to another company. For example, if you use Amazon’s affiliate program to sell items, you’re effectively delegating a significant portion of the work to Amazon. From your perspective an affiliate sale may seem very passive, but that’s because Amazon provides the active labour to make your affiliate commissions possible.