Passive Income

Posted by Kirsten Gibbs on April 15, 2019
  • Everyone, it seems, is looking for ‘passive income’ – money you don’t have to work hard for, that simply flows from the ownership of an asset.

    The most popular asset of this kind is property – land or the buildings on it.   The problem with this is that the underlying resource is finite, and the more people want these assets, the higher the price.

    Next comes intellectual property – patents, design rights, licenses.  These take deep pockets to defend, and ultimately expire.

    Then there is debt.  This too is limited as a passive income stream because ultimately it kills the source.

    There is a type of asset that has none of these limitations.   The autonomous enterprise.   A business that runs without you, generating income by continuously creating new value for the people it serves, and continually finding new ways to create that value.

    Paradoxically, this kind of asset is only possible when you fully devolve management and reward to the people who work in it.   That’s not easy to do, it takes courage and a long-view.   But those are the only factors that make it scarce.

    Given a framework it can thrive in, there is no limit to human ingenuity.

    P.S. I discovered writing this that the word ‘asset’ actually comes from the French for ‘enough’.   That’s an interesting fact worth remembering.

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