There are three ways to generate passive income; start a business, invest or speculate. The key word in that sentence is passive. Passive means you can generate economic benefits without the requirement of your personal exertion. Since it doesn’t require personal exertion, it frees up your time to spend it on activities or with the people you love.
Each of these three options have merit. But the important thing to note is that not all three will suit everyone. This point is very important to appreciate, and could save you a lot of time, stress and money!
A quick bit of theory first
Legendary author and prolific researcher, Jim Collins formulated a concept called the “
Hedgehog Concept”. The Hedgehog Concept was based on the famous essay by Isaiah Berlin in which he refers to an ancient Greek story: “The fox knows many things, but the hedgehog knows one big thing.”
It was Collins’ thesis that successful companies are laser-focused on the Hedgehog Concept, which is the intersection of 3 important considerations or questions (i.e. the orange portion in the illustration below):
1. what you are deeply passionate about,
2. what you can be the best in the world at, and
3. what best drives your economic or resource engine.
Successful companies focus on delivering products or services that they can be the best at and ignore all other opportunities.
(By the way, Jim Collins’ book,
Good to Great is one of the best business books I have read.)
Let me share a quick story about me
Before I relate this theory to personal investment, let me share a story with you.
I have some friends that are successful property developers and make substantial six-figure profits. In the past, I have considered whether I should get involved in property development too, especially since I have the property, finance and taxation knowledge. However, many years ago, I decided to focus on my Hedgehog. Property development just isn’t for me.
Property developing takes a lot of time. So, I could either spend my time on developing property with the aim of generating a once-off profit. Alternatively, I could spend that time thinking about and
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