Modern Wisdom12 Simple Ideas To Earn Passive Income - Ali Abdaal | Modern Wisdom Podcast 393
EVERY SPOKEN WORD
145 min read · 29,131 words- 0:00 – 1:09
Intro
- AAAli Abdaal
... the reason I think passive income is good is because theoretically, if you could make an extra 500 pounds a month, 1,000 pounds a month from a thing that you didn't have to spend your own time doing, that means you can tick that box of economic engine, and then you can spend your time doing the stuff you actually want to do. Maybe that'll involve quitting your actual job and doing something different. Maybe it involves going part-time. Maybe it involves spending more time with your family and kids and stuff. Having that financial freedom is life-changing, and passive income is one path on that route to financial freedom, which is ultimately on that route to living a happy, healthy, fulfilled life.
- CWChris Williamson
Ali Abdaal, welcome to the show.
- AAAli Abdaal
Thanks for having me on.
- CWChris Williamson
Look at this lovely studio that we're in.
- AAAli Abdaal
I know. It's still a work in progress. (laughs)
- CWChris Williamson
Beautiful. So-
- AAAli Abdaal
Yeah, we've just got loads of forest, like, plants in the background.
- CWChris Williamson
Yeah, we are in some foliage here.
- AAAli Abdaal
Haven't figured out a name for them yet, but I feel like-
- CWChris Williamson
You're gonna have to name-
- AAAli Abdaal
... Harry Potter characters or Disney characters, something like that.
- CWChris Williamson
Yeah, that's very you.
- AAAli Abdaal
Yeah, it's gotta be done.
- CWChris Williamson
Very you. Uh, so I've just recorded on your show.
- AAAli Abdaal
You have.
- CWChris Williamson
I'm gonna return the favor-
- AAAli Abdaal
Fantastic.
- CWChris Williamson
... and talk about stuff on mine. And-
- AAAli Abdaal
What are we, what are we talking about?
- CWChris Williamson
... I want to talk about passive income-
- AAAli Abdaal
Oh, okay, sure.
- CWChris Williamson
... which is another one of your specialist subjects, I think. Hmm.
- AAAli Abdaal
Yeah, I've done a lot of reading around it and dabbled with it. So, let's see, let's see where the conversation goes.
- CWChris Williamson
One
- 1:09 – 6:51
Why Bother with Passive Income?
- CWChris Williamson
of the interesting things is that for most people, income is... We're not really taught about passive income and multiple inco- income streams. The, the absolute peak that most people will get is earn more than you spend-
- AAAli Abdaal
Mm-hmm.
- CWChris Williamson
... and try and get a... Put money into a pension or some sort of ISA-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... of some kind. There's not really a very good understanding of how you spread your risk, about how you can have multiple income streams.
- AAAli Abdaal
Yep.
- CWChris Williamson
Maybe people who are not self-employed don't think that this is the sort of thing they should be doing. The people who are self-employed, they might not have the time or the understanding to actually be able to work out what they should do.
- AAAli Abdaal
Mm-hmm.
- CWChris Williamson
So, if you're talking to someone about passive income, what's a... Why should someone even be bothered? Why should someone even think about it as an option?
- AAAli Abdaal
Yeah. Um, so the way I... The reason I think of it as being, being a good thing is I think ultimately we're all trying to live a life that's, like, happy and meaningful and fulfilled and stuff. Like, that's, that's ultimately where we're all aiming at. With even, even with all the stuff, with all the stuff you talk about on the show, that's, that's our, our d- our destination. Now, the reason... A b- a big part of why we might not get to that destination... You know, there are, there are various hurdles that can get in the way. For example, if you have a major health problem, th- and, or... Y- like, yeah, yeah, for example, if you have, like, a major health problem, that kind of gets in the way of you living your best life. And so you want to try and solve that health problem. And if you... For example, people who have chronic back pain say that it just adds a real downer to their quality of life forever. Like, there's n- there's not much you can do about that. And I think when it comes to money, uh, we all need money to survive. Um, and the way that most of us make that money that we need to survive is by doing a thing, a job that we go to for 40 hours plus a week, that we spend 80,000 hours of our lives doing. Now, if you could magically make everyone not need that money to survive, then I think we would be more, more free to live our best life. And, and, and the way I think of it is, it's almost like in, in board games. I don't know. Have you, have you ever played those, like, really long, three-hour-long type board games?
- CWChris Williamson
No, but I know that you absolutely love these, so-
- AAAli Abdaal
(laughs) Fricking love that stuff.
- CWChris Williamson
... tell me about them.
- AAAli Abdaal
Um, and, and so there's a game called Agricola, which is like... It's, it's like Farmville, but, like, board game format that I used to play with my friends at uni. Um, and in a lot of these kind of strategy board games, you need to create for yourself an economic engine of some sort, whether that is, like, I don't know, breeding sheep, or getting, collecting hay, or collecting wood, or being the person who lays brick within the context of the board game. And once you've built your economic engine, at that point you can start winning, like, moving towards victory points and, and winning the game. And I think in real life, we all need an economic engine of some sort. And it would be really nice in a dream world if the thing that we did to make money is also the thing that makes... It brings us passion and joy and genuinely contributes to us living our best life. But for most people, including for me, that thing is not the same as the thing that makes me money. Uh, and so a long answer to the question, like, the reason I think passive income is good is because theoretically, if you could make an extra 500 pounds a month, 1,000 pounds a month, $1,500 a month, from a thing that you didn't have to spend your own time doing, that means you can tick that box of economic engine, and then you can spend your time doing the stuff you actually want to do. Maybe that'll involve quitting your actual job and doing something different. Maybe it involves going part-time. Maybe it involves spending more time with your family and kids and stuff. Um, but, but hav- having, having that financial freedom is life-changing, and passive income is one path on that route to financial freedom, which is ultimately on that route to living a happy, healthy, fulfilled life. (laughs)
- CWChris Williamson
W- how do you think about wealth? Like, let's say that you're talking to someone, you want to explain to them about wealth creation and wha- what it is. How do you think about that? Do you think about it in terms of you have a central job and then you try and peel cash off the top? What's the sort of basis?
- AAAli Abdaal
Um, I guess it's... For me, it's like, how much money do I need to live? And then how much money do I need to have a good life? Um, i.e. good life defined as doing the things that I wanna, I wanna do. For me personally, I don't think my lifestyle is particularly extravagant, um, and therefore, you know, figure out what that, what that amount of money is. Usually, the amount of money I need to live is different to the amount of money I would like to have in order to live a good l- to live a good life. And then I just think we need to figure out a way of hitting those numbers. And for most people that's their job, but the multiple income streams is another way of hitting those numbers. And for most people what I usually advise is, don't quit your job. Like, do your job, and then in the evenings and weekends find ways to build these side hustles and projects that can make you money. So that in the future if you want, you can quit your job if y- if that's what you want. Or you can go part-time, or you can continue doing it if you really enjoy it. But either way, it just gives you more freedom, it gives you more optionality. And certainly, like, we, we found that in the pandemic people lost their jobs and where, you know, this black swan event happens that people can't imagine happening since, like, 1919 or whatever. Uh, people lose their jobs and you realize, "Oh my God, reliance on a single source of income is not a very antifragile way of living life," as they say. Um, and so multiple streams of passive income, whether it's through investments or through businesses or whatever, is a way of de-risking yourself.... so that's sort of how I think about wealth. Like, less so in the sort of s- construct of wealth, more in the case of, "How much money do I need to live? How much money do I need to live a good life?"
- CWChris Williamson
Does anyone need to sort anything before they start thinking about passive income? Is there any, is there a step naught point five before we start with step one?
- AAAli Abdaal
Hmm. Um, probably not. I mean, I think w- the, the issue with passive income, it is, it is, actually, yeah. Most people need to start off with active income before they can switch to passive income. So, you need to have some money coming in through something that you're doing. It is very hard to just conjure up a stream of passive income. Passive defined as you're not, you're not really working for it. I guess, we, we can go into, in, in, into definitions, but I think active income, single stream. Start with a single stream of income, and then worry about, like, diversifying
- 6:51 – 14:22
Stocks & Shares for Beginners
- AAAli Abdaal
that into multiple streams.
- CWChris Williamson
Cool. Stocks and shares. Where do you start? I don't know about stocks and shares. I don't know what to put my money in.
- AAAli Abdaal
Yep.
- CWChris Williamson
I don't know what trading is. Where do I start?
- AAAli Abdaal
Okay. Uh, that leads us into a long conversation bas- so, so practical advice, don't worry about it. Put money into, if you're in the UK, into a stocks and shares ISA, which is a savings account, or in America your Roth IRA or 401K. And if you can invest money, invest it into a stock market index fund. Uh, basically what that means is that you are, instead of buying one company, like Apple or Microsoft or Tesla or Google, you're buying a stake in the top 500 companies in the, in America. Which would just so happen, like, if you put a hundred quid in something called the S&P 500, um, s- three pounds would go to Apple, and you'd own three pounds of Apple. Two pounds, you'd own two pounds of Alphabet A and B, so Google. You'd own two pounds of Microsoft, two pounds of Amazon, and so on. And that means you can invest in the stock market without worrying about trying to cherry-pick individual stocks, which doesn't work for anyone unless you're like, a very, very, very professional hedge fund manager. And even then, for those guys, picking stocks doesn't really work. So, that would be my advice to people, um, but I think it does help to have a first principles understanding of what the stock market is and, and how that kind of stuff works.
- CWChris Williamson
I saw a video of Warren Buffett and Charlie Munger giving an end of year address-
- AAAli Abdaal
Oh, yeah.
- CWChris Williamson
... a couple of years ago, and they were talking about, I think Warren had made a bet with a bunch of hedge fund managers to see if they could beat the S&P 500. Have you seen this video?
- AAAli Abdaal
Yep. (laughs)
- CWChris Williamson
So sick. So, well, can you explain w- what happened and- and why that seems to be the case?
- AAAli Abdaal
Yeah, so the- the thing with, with funds ... Basically, if you're a rich person, you wanna, you wanna, you want your money to grow. You don't want ... If your money sits in a bank account or under your mattress, it deflates over time because of inflation, uh, 'cause the government prints more money. Which gets us into a conversation about crypto and stuff, which, well, we won't go down 'cause I'm not very familiar with that space. Trying to understand it myself. But basically, money sitting on its own reduces its value over time, and therefore, if you have money, you want it to ideally increase its value over time. And one way you can do that, you can do it in real estate or you can do it by buying and investing in stocks and shares. So, you own a percentage of a company. If you do what, what, what I recommend, and what, what Warren, Warren Buffett and Charlie Munger recommends, uh, recommend, you just invest in an index fund which tracks the whole stock market, and you don't have to worry about it. But some people invest in actively managed funds, so that's basically, I would give you some money. I'd say, "Chris, here is a million pounds. I want you to grow my million pounds." You would say, "Oh, shit. Ali's given me a million pounds. I need to grow it, but I need to do something other than just invest in the fund, bec- in the index fund, right? 'Cause I need to, I need to try and beat, beat the market." That's what beating the market means. And so you think, "You know what? I think Tesla's gonna do well. I think Netflix is gonna well. I think, I think pets.com is gonna do well, and I think, I don't know, Febreze is gonna do well. I'm gonna put a, a quarter of a million of all this money into those things, and I'm really gonna hope that it outperforms what, what it would have done had I put it into just the top 500 companies in the US without thinking about it." And it apparently, according to War- Warren Buffett, I- I haven't read the research on this firsthand myself, but what Warren Buffett says, and what a lot of advice on this industry is that, the funds that do well one year, like let's say Chris's fund returns 20%, so my million goes to 1.2 million, whereas the S&P 500, the index market only returned 10%. So, if I was average Joe investing in the index fund, I'd make 10%, but if I gave my money to you, Chris, I'd make 20%. Uh, but there's no guarantee that the next year your fund is also making 20%, and there's also no guarantee that in year three your fund is still doing well. And it turns out that there are very few funds, if any, that can actually just beat the market overall, which is what this bet was that Warren Buffett did with all these hedge fund managers and he ended up winning it, um, and giving the money to charity.
- CWChris Williamson
By literally doing something that anybody could do, pressing go all in on the S&P 500, which is in itself kind of a hedged type of investment because it's across so many different companies-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... and you're talking about professional hedge fund managers that were spending time, and charging commissions-
- AAAli Abdaal
Yep.
- CWChris Williamson
... and doing research, and looking at, is this overpriced? What's the R number on the, the Fibonacci sequence-
- AAAli Abdaal
Yep. (laughs)
- CWChris Williamson
... over, over trend, all this stuff.
- AAAli Abdaal
Exactly.
- CWChris Williamson
Just put it in the S&P 500, and the S&P beat all of them.
- AAAli Abdaal
That's the one, yeah. I think, I think there are some funds in the world, like, especially the ones that invest in, like, early stage startups and things, where you probably do beat the market, but normal people don't have access to those. You have to be, like, ridiculously rich to be able to invest in those sorts of funds that do that kind of thing, is my understanding. Therefore, most people should just invest in the S&P 500 or a broad stock market index fund.
- CWChris Williamson
In the UK and in the US, how would you do that?
- AAAli Abdaal
Um, in the UK ... Uh, basically, whichever country you're in, you need to get a, um, uh, essentially a stockbroker. So, b- back in the day a stockbroker was some dude on Wall Street that you would ring up and say, "Hey, Tom, I want to put $20 on Apple." And he'd be like, "All right, I'm placing that order." These days, stockbrokers are online, so you have these online stock trading platforms, and it varies between different countries. In the UK and the US and a bunch of countries in Europe, Vanguard is the most trusted. It was the original kind of index fund place, so you just open an account with Vanguard and you put some money into it. Like, let's say you start with $10, $100, $1,000, whatever, and then you can allocate that money to one of these funds. And the one that I'm fully invested in is the S&P 500, which is just the 500 biggest companies in the US. I don't think too hard beyond it, uh, about it beyond that.... um, so that's what I'd suggest, is google "best online stockbroker" in whatever country you're in.
- CWChris Williamson
Hargreaves Lansdown is quite popular in the UK.
- AAAli Abdaal
It is.
- CWChris Williamson
That's quite easy to set up.
- AAAli Abdaal
Yep.
- CWChris Williamson
Uh, and you can tie that in. The allowance in the UK is £20,000 per year that you can put in tax free, and the returns are also not taxed on that. So over time, that 20 will be 21, 22, 23. Um, so yes.
- AAAli Abdaal
Yeah.
- CWChris Williamson
You can also set up a standing order/direct debit, which I think is a nice way to portion off a little bit of money.
- 14:22 – 24:13
Investing in Real Estate
- CWChris Williamson
Uh, real estate or houses.
- AAAli Abdaal
Yes. (laughs) The thing with real estate is that, um, it's, it's a pretty good way of making passive income, in that, let's say you own a property and you rent it out to people, and then they're paying you however much a month. I recently bought a property in Manchester, renting it out for about £1,000 a month, so making about £12,000 a year on, on the property. The issue with real estate, um... Oh, and, and the other good thing about real estate is that you have a physical thing, right? Like, no one's gonna argue with, depending on which country you're in, no one's gonna argue with the fact that you own that house. If you need to, you can live in the house. So, whereas, if you need to and you need to c- You, you can't live in your 3% equity in Apple. Like, uh, that's not really a thing. Uh, if you actually had 3% equity in Apple, you probably would be able to live in it, but like, you're 0.0000003. Um, the, the, the issue with real estate is that you have to have a lot of money to get started with it. Like, you need enough money for a deposit on a house. In the UK, if you want to do it as an investment, you need at least 25% of the purchase price. And if a house is 300K, you need 75K in cash to be able to afford that, along with all the fees on top of it. And it's also not a very liquid asset class, meaning that it's very hard to get your money out of it, because it's a ballache to sell a house. Um, so if you need the money for whatever reason, you can't just click a button on Vanguard or on Hargreaves Lansdown and click sell. You have to go through the rigmarole of trying to sell a house. There's fees on top of it. It's a nightmare. In a way, real estate is interesting because a lot of people, like probably in our parents' generation, got wealthy off of just buying a house and then not selling it. So real estate, like, it, it makes a lot of people accidentally good investors. Because the problem is like, when something is very liquid, like let's say your mum or l- let's say my mum were to invest in the S&P 500, she's probably the sort of person who'd be looking at that number every day and be like, "Oh my God, I've just lost £100. I've just lost 200." And that would affect her emotionally, and therefore she'd be tempted to hit the sell button. But obviously, like all these investments that we're talking about, these are long term investments. Your money will always go up in the stock market over time, provided you don't sell at the wrong time. And the thing that real estate does is that it forces people to not sell, 'cause it's just too much effort. Mm-hmm.
- CWChris Williamson
So (laughs) if you could, like... Yeah, that's, that's kind of why real estate, real estate is good and owning a house is kind of nice, 'cause it just has all these hallmarks which accidentally make it a good investment.
- AAAli Abdaal
It's so effortful that it locks you into holding onto the trade for so long-
- CWChris Williamson
Exactly.
- AAAli Abdaal
... that it actually works. Yeah.
- CWChris Williamson
That's funny. Yeah, I think that you're right. What we've got at the beginning here is probably one of the easiest to put money into, in terms of stocks and shares, some sort of passive cash, uh, stocks and shares ISA in the UK with Hargreaves Lansdown, where you could literally do £30 a month.
- AAAli Abdaal
Yep.
- CWChris Williamson
And then the other end of the scale, which is something which is quite cash capital prohibitive, which is buying a house. In the UK, 25% down.
- AAAli Abdaal
Mm-hmm.
- CWChris Williamson
I would budget 30% overall, which would include fees, stamp duty-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... solicitors, arrangements, surveys, uh, and maybe-
- AAAli Abdaal
(laughs)
- CWChris Williamson
... a little bit of work.
- AAAli Abdaal
Yeah.
- CWChris Williamson
Uh, a little bit more, you want to paint this wall, I want to get some photos done, whatever it might be. To give my experience with this, I've just completed on my fifth house, which is all the same, 25% down, uh, on a buy-to-let, an interest only mortgage, which means that I'm not putting any more equity into the house. However, it does mean that I get more c- It's a, a vehicle for generating cash for me. That's what I'm concerned about. So I don't want to pay any more into the mortgage than I need to. I don't want to put equity into the bricks of the building on top of the 25% that's already there.
- AAAli Abdaal
Yeah.
- CWChris Williamson
What I want to do is just pay off what I need to to the bank in order to keep ahold of the house. Then the rent that comes in from the tenants, I want to clear off as much of that as I can over the top.
- AAAli Abdaal
Yep.
- CWChris Williamson
Now, I self-managed all of my properties up until this year, and then moved over to going managed. This would be choosing a letting agent to be the person that the tenants ring when the boiler breaks-
- AAAli Abdaal
Mm-hmm.
- CWChris Williamson
... or when they snap a chair or when they've locked themselves out, or when they have a dispute about, "You've charged us for cleaning when we moved out and I don't want to."... I think, overall, if you're considering getting into property and if you're looking to do a buy to let, I think it's a good idea to self-manage, at least for a year.
- AAAli Abdaal
Hmm. Okay.
- CWChris Williamson
Reason being, this is going to be a significant portion of your net worth that's tied up in these houses. You are going to have conversations with the people that manage those properties, and you want to know what they're talking about. You want to know what the DPS is. You want to understand about the local licenses that occur within where- wherever it is that you are buying. This is also another reason for, I think, purchasing bulks of properties within one place. Find a place that has a relatively good yield and buy everything in that. Yeah, if you want to go and get holiday homes and sort of play around with things for Airbnb, then maybe you could do it that way. But I think that there will be individual licensing quirks. In Newcastle, there's this strange, uh, C4, C3 personal license HMO system that the council's got in place. It doesn't exist anywhere else. One of the first cities that's got it in all of the UK. You need to learn that. If I decide to now go to Manchester and the council has a different rating system, I've got to learn it all over again because I'd need to work out-
- AAAli Abdaal
Hmm.
- CWChris Williamson
... should I be purchasing, whatever, whatever. So, you can actually, uh, reduce the skill acquisition or the knowledge acquisition overheads by choosing to learn one area once and then just digging a bunch of money into that. Uh, if you want to look at places to purchase, I would advise, ideally, near to where you are. Means that you can go and deal with the letting agents one-on-one, you can have conversations with them. If there's problems with the tenants, you can go and deal with them. Other than that, if you are prepared... If you're somewhere that's very expensive, like London, that doesn't have fantastic yields, just go on Rightmove and look at the places that have the biggest yields. I think Nottingham came back as number one this year.
- AAAli Abdaal
Hmm.
- CWChris Williamson
There's places, um, I wanna say Bournemouth was one of them, Swansea was one of them. Newcastle, Manchester. A lot of them are student towns. So, (clears throat) that would be an overarching theme. Another thing that I would say, more bedrooms is better.
- AAAli Abdaal
Hmm.
- 24:13 – 30:04
Making Money from Digital Products
- AAAli Abdaal
- CWChris Williamson
You really do. Uh, all right. YouTube. How do people make money on YouTube?
- AAAli Abdaal
Oh. So many different ways. Uh, the most obvious one is YouTube AdSense, uh, or Google AdSense. Those five-second ads that play before videos, maybe like this one, if people are watching it on, on, on YouTube. And on average, people will make roughly-... $2.00, $1.50 per 1,000 views. So, if this video gets 1,000 views, you'll be making $2.00. Nicely done. Um, but also there are people ... YouTubers can make money through sponsorships, so you've got a bunch of sponsorships on your show. Um, and roughly you can expect to be making very, very roughly $15 per 1,000 views on a sponsorship. So, again, let's say this vid- let's say your videos on average get 100,000 views, you can probably make $1,500 through a sponsor that would be l- will pay $1,500 for you to plug their Huel or whatever, Skillshare, Audible, Squarespace, blah, blah, blah, um, to your 100,000 viewers. So, those are kind of the two main ways to make money off of YouTube. There's all these other extra bits like Super Chat and, like, subscriptions and stuff, which is a very, a very small part of it. Um, but really the way YouTubers make the big bucks isn't through Google Ads or through brand deals particularly. It's usually through creating their own products which they then, they can then sell to their audience.
- CWChris Williamson
Yes. Before we get onto that, podcasts are pretty much the same. You've got, "This episode is brought to you by." That happens beforehand. Now, we've gone from two very passive forms of income into podcasts and YouTube, which is significantly more active.
- AAAli Abdaal
Yeah.
- CWChris Williamson
So, this is more for someone that actually wants a legit side hustle.
- AAAli Abdaal
Mm. Yeah. I think it- it sort of depends how you define passive income. Like, in a way, the way I view YouTube videos is that a YouTube video is also an asset, and an asset is something that puts money in your pocket. Whereas a liability or an investment is something that puts money in your pocket, a liability is something that takes money away from your pocket. And so if I put in three hours into making a YouTube video, that YouTube video's sitting on the platform forever and it's making me money while I'm sleeping. That's pretty cool. Um, in- in fact, uh, most of my YouTube videos will perform better than the house that I've just bought as a rental property because they make more money per month than someone pays in rent. Oh, I- I won't say most, uh, but, like, rel- relative to the amount of effort it was to make the video and the amount of money I put into the property, my yield on a YouTube video or an online course is so much higher than my yield on buying- buying a house. Which is kind of weird, weird when you think about it. But yeah, YouTube videos, podcast episodes. Podcast episodes are not so much because you, like, get the money as a one-off as a brand deal, unless they happen to be on YouTube where you're making the ads as well. But it's kind of like anytime you make a video, it's like you've just bought a rental property and that video is working for you and giving you rent every single month.
- CWChris Williamson
Yes. Digital products. You've said that this is one of the ways that online creators that build up an audience can monetize more effectively.
- AAAli Abdaal
Yeah. So, um, digital products are a subset of products generally, i.e. selling- selling stuff. And the two broad ways you can stell- s- s- sell stuff, and this is like, you know, it's how they phrase it in UK law, you either sell goods or you sell services. Now, let's say I- I could sell you a service, Chris. I could sell you the service of, I don't know, personal training, you know, because you obviously need to (laughs) need a personal trainer. I can provide you personal training as a service. You can pay me for my time in giving you- in giving you personal training as a service. Now, if it just so happened that I built an audience based off of f- health and fitness content, then there are some people in my audience who might wanna pay me to be their personal trainer. That's me selling a service to someone. Alternatively, I could sell goods, and within goods I could sell physical goods or digital goods. Physical goods would be a YouTuber saying, "Hey, buy my merch, buy my T-shirt, buy my mug," and they'd make 7, 10, 20, 30 pounds on a T-shirt or a mug. And some of their audiences, some of their audience would buy the physical product. I think the most interesting form is digital products. I think it's more interesting than services and more interesting than physical goods. A digital product is someone- someone like Peter McKinnon, a f- photography/videography YouTuber saying, "Hey, buy my Lightroom presets." Or it's someone like August Bradley saying, "Hey, buy my online course or buy my Notion template or buy my website template or buy my icon pack." And there are people that have made millions, tens of millions, hundreds of millions off the back of selling digital products. And the great thing about digital products is that you, generally you make it once and then it costs you no extra money or time to give it out to- sell it to five people as it does to sell it to five million people. Whereas if I want to sell five people a shirt, I have to manufacture, produce and sell, you know, manage five shirts. If I want to sell five million shirts, I need to get a whole warehouse, need to get a whole ... It's- it's a real nightmare selling five million shirts and it eats into your margins. It's a b- it's a big hassle.
- CWChris Williamson
(coughs) .
- AAAli Abdaal
It's not at all a nightmare to sell five million copies of a website template. That's like free money basically (laughs) .
- CWChris Williamson
The scalability on the internet is a sight to behold. Other things that people have s- may have seen would be something like a workout plan, a one-off workout plan. That is different to having a course or a membership service that gives you workouts regularly.
- AAAli Abdaal
Mm.
- CWChris Williamson
So, you can write a PDF. Let's say that you're a PT. You decide to write up 30 days of EMOM workouts or 30 days of, uh, high-intensity workouts, whatever it might be. That can exist on the internet. Let's say that someone has some sort of specialty and they think, "I want to teach people to ..." They're a positive psychologist and they want to give someone a guide to the principles of positive psychology, a little e-book or something like that.
- AAAli Abdaal
Mm.
- CWChris Williamson
How would you list it and sell it in the most frictionless way?
- AAAli Abdaal
Um, probably a website called Gumroad. That's, actually I've got the- the- the guy who invented Gumroad, I've got his book there, uh-
- CWChris Williamson
Sahil Lavingia.
- AAAli Abdaal
Yeah.
- CWChris Williamson
He was supposed to be on the podcast this Wednesday, but we've had to rearrange.
- AAAli Abdaal
Oh, nice.
- CWChris Williamson
I know.
- AAAli Abdaal
Yeah, I haven't read his book yet. It l- it l- it literally ar- arrived earlier today as a advance copy, so we'll- we'll see how that is.
- CWChris Williamson
Yeah.
- AAAli Abdaal
Uh, but Gumroad is great. You make an account and you can just sell stuff, and they charge like a, I don't know, 2% commission on the-
- CWChris Williamson
But they'll host it.
- AAAli Abdaal
Yeah.
- CWChris Williamson
It'll look nice. It'll be all pre-done. You don't need to learn how to code.
- AAAli Abdaal
It's so easy to do. Exactly. You just put a link on your YouTube description. It takes three seconds to list a product on Gumroad, and then you can just literally start making money. It's great.
- CWChris Williamson
Yep.
- 30:04 – 40:33
Creating Profitable Online Courses
- CWChris Williamson
Yep. Online courses.
- AAAli Abdaal
Online courses. Online courses are an interesting class of digital products because if you're a nerd and you're teaching something to your audience, um, generally ... Okay, so if we take a step back, generally there's like, uh, the- you can split up content into entertainment content or educational content. And for people like you and me who are doing educational rather than entertainment content, no offense, um, our audience is primed to think of us as teachers. And therefore if we were to make an online course teaching the same stuff that we teach on our YouTube channels, maybe in a bit more depth, maybe with a bit more structure-... then the audience of our YouTube channel is primed to be also interested in, "Oh, I wonder, I wa- uh, I, I wanna hear Chris teach me about passive income. I wanna hear Chris teach me about his morning routine. I wanna hear Chris teach me about how to launch a podcast." 'Cause you've done well with the whole podcast thing. And the nice thing about an online course, again, is that you just record it once, if it's a kind of self-paced online course. You put the videos up online on a website like Podia, which is my favorite, or Teachable, or there's all these different platforms, where you pay a small fee, like $29 a month, but they host your product, they handle the payment, they handle the checkout page, they handle the forgot password, user login. You don't need to learn to code or anything. You just literally upload your videos, and then within a minute, you can start selling an online course to your audience. And online courses are how I've made the bulk of my money over the last, like, 10 years.
- CWChris Williamson
Passive online courses, but also this new class which you've capitalized on, which is cohort-based online courses. What's the difference there?
- AAAli Abdaal
Yeah, so we've got passive online courses, which is the, uh, the, the traditional thing you might expect from an online course. You sign up, you pay maybe a few tens or a few hundreds of dollars, and then you've got this library of videos that you can watch through at your own pace. Basically, a passive online course is glorified YouTube videos just in a structure with a pay wall behind it. This is really convenient. It's very convenient for the creator because they just have to record them once, and it's quite convenient for the viewer because they can watch it at their own pace. So-
- CWChris Williamson
Self-paced, yeah.
- AAAli Abdaal
Exactly. It's like with Netflix. You can watch a whole season in one go if you really want to. You don't have to wait for the next episodes to come out. The issue with online courses is, passive online courses, is that they have a famously low completion rate. Like, I've signed up to dozens of online courses that I've never even once opened, or watched the first two lessons and I'm like, "Oh, I can't be bothered to do this anymore." That's what most people are like. Like, I think 2%, optimistically, is the completion rate of, like, a generic passive online course. And so, there are people who have been like, "Okay, online courses benefit from the scale of the internet, but if you're really thinking about offering a transformation to your students, they're unlikely to get it through a passive online course, unless they are particularly self-motivated." So now, there's this whole new vibe of online courses, uh, that they call cohort-based courses, which is sort of actually mimicking the way that, like, real-life education is done. Like, when you sign up to do a degree, you aren't signing up for an online course that you can watch at your own pace. Although, depending on what degree you do, that ends up being, ends up being the case, and you end up teaching yourself-
- CWChris Williamson
Depends if there's a pandemic or not, yeah.
- AAAli Abdaal
... the material. Exactly, yeah. (laughs) In fact, to be honest, even pre-pandemic, most of my med school teaching was through YouTube videos. (laughs)
- CWChris Williamson
Mm-hmm.
- AAAli Abdaal
Um, but that aside, you know, you're paying a large amount of money. You're, you're getting this experience. You're part of a cohort, you're part of a community of people, you're getting these live lectures, you're getting these workshops, these tutorials, these supervisions. And at the end of it, you get some sort of skill, some sort of qualification, some sort of ... You become a doctor, maybe, if you're doing, if you're doing medicine. A live cohort online course is trying to do the same thing, just doing it over Zoom rather than in real life. So, I run one called the Part-Time YouTuber Academy. You're thinking of maybe signing up for-
- CWChris Williamson
Link below, yeah.
- AAAli Abdaal
Oh, thank you. Where every three months, we run a new cohort. It lasts for somewhere between four and six weeks. We change it up depending on how we're feeling. And twice a week, I rock up to a Zoom call, I teach people for two hours for live sessions, and then we have a bunch of interactive things. We have a bunch of, like, small group teaching sessions. That's a lot of work. It means we can charge more for it. So, we charge, at the moment, between $1,500 and $5,000 per place. It's still way cheaper than a similar course would be in real life, but it's way more expensive than a passive online course would be. But hopefully, it's good for students who can afford it because they recognize that it's, it's sort of like you don't need a personal trainer to work out, but, uh, and, and you, and you definitely could get hench by yourself by following an online workout plan or just doing it yourself. But for a lot of us who don't have a lot of time on our hands, who don't rate our own motivation or accountability very high, having a personal trainer is really, really helpful. Similarly, you could do a course passively online, and if you've, if you're self-motivated enough to get the value from it, then that's fantastic. But I think where live cohorts benefit is in the accountability and the community that you get around it, not so much the content, which makes people do the thing more. Because often the barrier between, you know, if you think about, let's say if, if you're listening to this and you've been wanting to start a YouTube channel or a podcast, the reason you haven't yet is not a lack of information. The information is, like, I, I hold my hands when I say this, it's all freely available on the internet, on the internet. The reason you haven't is because you haven't got that push, you haven't got the accountability, you haven't got that community. So, that's what you're paying for in a live cohort course. So, I'd recommend you should start one. I think it'll be fun.
- CWChris Williamson
It shows, I think, the importance of compliance-
- AAAli Abdaal
Mm-hmm.
- CWChris Williamson
... that if you get someone to actually comply to the things that you do, the vast majority of people are going to see results.
- AAAli Abdaal
Yeah.
- CWChris Williamson
And what you get is this feeling of discomfort when you do a cohort-based course, especially if you have tasks that are supposed to be handed in each week. So, with yours-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... you have, all I want you to do by the end of this course is record a YouTube video every single week. And you see other people are posting, and you go, "Oh, God. God, I haven't done my YouTube video yet." So, yeah. There's, there's an interesting... I'm sure that someone's probably created a matrix of the amount of work that it takes for the creator and the amount of money that you can get back from the customer in terms of this.
- AAAli Abdaal
Yeah.
- CWChris Williamson
It is more effortful to do a cohort-based course, significantly more, it's more time-consuming, but also the amount that you can charge and the results that you get for the customer are higher.
- AAAli Abdaal
Yeah.
- CWChris Williamson
If you have a single delivery digital product that is literally a one-and-done, if you have a passive consumption for an online course, there's usually some form of community sometimes alongside that-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... like some sort of Facebook group or something, or circle where you can go and do that. Um, I think that with those particular areas of skill sets, you really... Am I, am I right in thinking that you probably need to aim at building an audience organically with something like a podcast or YouTube or Instagram before you then try and launch a course? Like, just launching a course off your own back, posting it on your Twitter to your thousand followers and hoping that someone buys might be a-
- AAAli Abdaal
Y-
- CWChris Williamson
... poor way to invest your time?
- AAAli Abdaal
Yeah. Um, uh, this... There's a bit of, uh, a bit of nuance here. So, I think a passive online course, if you have a small audience, is not really worth very much because y- if you think, if you have 1,000 followers on Twitter, maybe, if you're really lucky, 10% of them will buy your course. More, more realistically, like, 1%. So, let's say 10 people, 1% of your audience buys your course, and let's say you charge, I don't know, $100 for your course. You're making $1,000, which is, which is good money, but it pro- yeah, probably took you, like, a large amount of time to put this course together. Now, let's say you have the same 1,000 followers on Twitter, and they are following you because they know you tweet about this one very specific thing, and you create a live cohort online course on it about the thing.... and let's say, I don't know, 0.5%, so less than that. Let's say 0.5% of your customers decide to buy the thing, but you're charging $2,000 for it instead. Now you can have this, like, very s- a very intimate experience with these, this very small group of people that knows, likes, and trusts you already, they want your expertise on the topic, and they're happy to pay you $2,000 for it. So, in fact, if you sell five of them, you've made $10,000. And if you do that a few times a year, you've made a full-time living off the back of 1,000 Twitter followers, provided the value you're providing is specific enough for people to want to pay for. So, I think in the old school model of, like, passive stuff, passive courses, it very much is the case that you should build the audience first and monetize the audience second. But I think you actually can monetize an audience that's quite, quite small, if you want to, through the back of a coaching program or a live, live cohort course. I still wouldn't recommend it. I still think, as Gary Vaynerchuk would say, it's better to put your effort into growing the audience before you try and monetize it. But-
- CWChris Williamson
When do you know when you've grown the audience enough?
- AAAli Abdaal
... uh, the way I think of it is, like, at what point, if I monetize my audience now, would it be an interesting amount of money that would change my life in some capacity? So, if I had 100 people in my audience and I was making $10 a month, it's not worth it. If I'm making $100 a month, it's not worth it. If I'm making $1,000 a month, uh, it depends what stage of y- uh, of, of life, life you're at. But when I was younger, $1,000 a month for me would have been sufficiently game-changing to warrant doing the monetization. Whereas $100 a month, ugh, it's, it means I can get an extra few takeaways. It d- it, it doesn't add anything meaningful to my life. So, that's how I kind of think about it. Um, I'm sure there are other, other frameworks as well.
- 40:33 – 50:17
Becoming an Affiliate Marketer
- AAAli Abdaal
kind of stuff. (laughs)
- CWChris Williamson
Yeah, disgusting.
- AAAli Abdaal
Yeah.
- CWChris Williamson
Uh, affiliate marketing.
- AAAli Abdaal
Affiliate marketing. Uh, the idea here is that instead of selling your own product, you're selling someone else's product and you're getting a percentage commission. So, the biggest affiliate program in the world is Amazon Associates. Basically, anyone can sign up to be an affiliate for Amazon. So, that, let's say you do a video reviewing, I don't know, the latest Sony camera, and you put an Amazon affiliate link in the video description. If someone buys the product through your affiliate link, you make maybe somewhere between a 1% and 3% commission. Which, if they're paying $3,000 for a camera, is actually not bad. That's, uh, you know, $30 to $90, I think, if my maths is right. If they're paying $4.99 for a Kindle e-book, you have to sell a lot of them to make any decent money off of that. So, that's how affiliate programs work. Amazon gives you very low commissions, like broadly s- broadly speaking, but if you can partner up with, uh, individual brands, uh, I work with a company called Paperlike, a keyboard company called IQUnix. Uh, at that point you can negotiate things like 10%, 20%, 30%, sometimes even 50% affiliate commissions off of the things that you sell. And it doesn't have to be just digital products or physical products; it can also be online courses. So, I'm an affiliate for, like, my friend Pat Flynn's and Thiago Forte and David Perell's online courses. We've got a bunch of affiliates for our course. It's generally like a win-win way of selling someone else's product that you believe in that your audience will then be more likely to buy because you recommended it and you get a percentage of, y- you get a commission on it. It's l- it's like b- it's like being a salesman, but in, on the internet.
- CWChris Williamson
Yeah. Well, I mean, everyone believes in something. There are all things that we rate.
- AAAli Abdaal
Mm.
- CWChris Williamson
I rate my mate's barber shop because that's where I go and I know that he'll look after your hair. I rate that club night.
- AAAli Abdaal
Yeah.
- CWChris Williamson
"Man, you're going out on a Thursday, you should go to this particular place."
- AAAli Abdaal
Yeah.
- CWChris Williamson
All that we're talking about here is formalizing that agreement and getting a bit of a kickback. I think affiliate marketing, in some circles, kind of gets a bit of a bad name-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... because it creates a perverse incentive for someone to oversell you on what kind of sounds like a personal recommendation.
- AAAli Abdaal
Yep.
- CWChris Williamson
But that being said, uh, well, I mean, that identifies why it's such a low amount of commission that Amazon sells you or offers you-
- AAAli Abdaal
Mm-hmm.
- CWChris Williamson
... because you could sell anything. The fact is that everybody needs something and they're probably gonna get it on Amazon.
- AAAli Abdaal
Yeah.
- CWChris Williamson
And if you're the intermediary, what have you done?
- AAAli Abdaal
Yeah.
- CWChris Williamson
Like, what were you there for? It was either the Oral-B Diamond White-
- AAAli Abdaal
(laughs)
- CWChris Williamson
... or the Philips Sonicare-
- AAAli Abdaal
Yeah. (laughs)
- CWChris Williamson
... and you just happened to direct them one way or the other. You haven't actually brought any trade here.
- AAAli Abdaal
No.
- CWChris Williamson
Um, it's funny that you talk about if you managed to sell someone on a expensive product versus on a bunch of Kindles.I have got affiliate links in all of the e-books that I've released.
- AAAli Abdaal
Mm-hmm.
- CWChris Williamson
So, the life hacks list and in the, uh, reading list as well, both of which have got all tracked Amazon links, which I just thought would be interesting. And it's passive-
- 50:17 – 54:12
Offering Value on Membership Sites
- CWChris Williamson
Okay, I didn't know about that. Uh, membership. Membership sites.
- AAAli Abdaal
Membership sites. So the idea here is that, um, you get some of your audience, you charge them a monthly membership fee, and bring them into some sort of premium offering. Patreon is one example of a membership site, uh, where the vibe of Patreon is, "Hey, support my work for $5 a month, and in return you'll get early access to my videos, or you'll get, uh, a live Q&A with me every month." Um, Gary Vaynerchuk often says that if someone is your super fan, the thing they'll pay for is more access to you. So, more of your content, more of your behind the scenes, that kind of stuff. Um, that's one way of doing a membership thing. And the nice thing about m- memberships is that people will pay you monthly, so you've got recurring income. The annoying thing about memberships is that you do then have to be showing up every single month to provide value. Otherwise, it's a bit unfair. And so actually, I tried to do a membership thing with my YouTuber academy. We called it the Inner Circle, which was afterwards for alumni, charging $50 to $100 a month. Uh, and we had, like, weekly events going on and we had, like, we had, we, we had a lot of activities. But even with weekly events, and sometimes twice weekly events, I still felt we weren't providing enough value, uh, compared to the ridiculous amount of value we provide in the course. And so we ended up canceling it after six months and just refunding everyone any money they'd ever paid, which was like $150,000 worth of refunds that we did. But it was for the sake of that trust, because I was like, "No, there's no way." It, it, it wasn't fair for us to, like, I wouldn't, I, I didn't feel good about charging people for that value that we were offering. So Patreon is one way to do a membership. You can build your own membership site using something like Ghost, which is what I use for my personal website, which is very good. Um, there's a few other options like paid newsletters on Substack. Um, you can get people in through YouTube paid subscriptions, which is built into YouTube, uh, where you can get them into a Discord community. There's all sorts of different ways of doing membership content. But the idea is that some of your fa- some of your audience will be happy to pay a certain amount of money each month. But if you're, if you're, if you want to be kind of integrity about it, you want to give them decent amounts of value every month.
- CWChris Williamson
Yeah.
- AAAli Abdaal
So it is more worth it.
- CWChris Williamson
You can't, you can't just put people into a group and hope for the best.
- AAAli Abdaal
Yeah.
- CWChris Williamson
So Locals, which is the platform that I've just started using, one of the reasons that I really like that over Patreon, and I vacillated for ages and ages thinking, "Do I want to use Patreon? Do I want to go with Locals?" And I ended up choosing Locals mostly because it permits inter-community bonding.
- AAAli Abdaal
Yes.
- CWChris Williamson
So, community members can post in there. They can have discussions between themselves. Every day that an episode goes up, there's a thread talking about it.
- AAAli Abdaal
Yeah.
- CWChris Williamson
Whereas Patreon, because it's established and there's, there's an expected, uh, modus operandi on there, it's, "Here is a new piece of content for you. Enjoy. Here is a new piece of content for you. Watch."
- AAAli Abdaal
Yeah.
- CWChris Williamson
"Here is a," whatever, like a little update or something. It doesn't feel as organic and natural.
- AAAli Abdaal
Yeah.
- CWChris Williamson
So Locals, for me, felt like a really, really good platform choice. There's another platform that's owned by Patreon.
- AAAli Abdaal
Owned by Patreon?
- CWChris Williamson
And it's, I think it's called Memberful.
- AAAli Abdaal
Oh, yes.
- CWChris Williamson
That paywalls-
- AAAli Abdaal
Like a WordPress, but then-
- CWChris Williamson
Yeah, paywalls Word- WordPress sites. So let's say that you've got a WordPress site that you want to have some work behind a paywall on it, and they can integrate that. I think there's a way that they can actually integrate those member lists-
- AAAli Abdaal
Mm.
- CWChris Williamson
... with some other, some other fancy things through Zapier or through-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... IFTTT. And, um, yeah, that would be interesting.
- AAAli Abdaal
Why- why didn't you go for Patreon plus Discord?
- CWChris Williamson
Uh, I wanted everything to be in one-
- AAAli Abdaal
Okay.
- CWChris Williamson
... site. Uh, I also think that Discord itself as a platform is a very particular portion of the internet-
- AAAli Abdaal
Yep.
- 54:12 – 58:34
How to Automate Your Business
- CWChris Williamson
been. Uh, automating a business. What's that mean?
- AAAli Abdaal
Automating a business. Um, a good reading on this is Tim Ferriss's 4-Hour Workweek, which, uh, kind of, I guess, put this, this idea on the map. But basically, if you have a business, let's say, I don't know, you're ... let's say you're selling a physical product. Let's say I'm selling a T-shirt. That, that actually is more like a traditional business than an online business. Like, even if I take orders online, I still have to fulfill the orders. I have to figure out a way of, like, you know, getting the customer's size, getting the payment from the customer, um, printing the T-shirt they want printed, or getting it shipped from my warehouse to their address. Tracking the fact that it's shipped to their address, making sure they're happy with it. Making s- having someone monitor the support inbox, 'cause if they email me for whatever reason, I need to be able to reply to them. Having someone deal with refunds if for, for whatever reason their T-shirt didn't arrive. There's a lot of stuff associated with that. Now, if you run a, if you're trying to do this all yourself, it ends up taking a large amount of time, and you realize, hang on-... I, if I want to scale this business, I don't have enough hours in the day to be able to manually package up and ship out all my orders. And therefore, you can start adding ways you can delegate and automate aspects of your business. So, bits that you can delegate is you could theoretically hire someone to manage your support inbox, or you could hire someone to ship the orders from the warehouse. Um, a way you can automate it is you can create, you can use something like Zapier to say that, "Okay, whenever a customer places an order, I want it to automatically send an email to my warehouse person to say, 'Hey, someone has placed an order.'" That means I don't have to send them a WhatsApp message anymore. When a customer emails our support inbox, I want it to automatically send a ping to our Slack channel, which my support person is handling so they can get, th- th- they can re- they can reply to the message immediately. If someone sends us an email with the word "refund" in it, I want it to automatically just refund them on Stripe or PayPal without even me having to think about it, 'cause I don't really care. There's all these different things you can do to automate and delegate aspects of your business, which is ultimately what you need to do to scale because your own time as a business owner is limited to 24 hours in a day. And as a business owner, you can probably do more valuable things than reply to refund requests or, or things like that.
- CWChris Williamson
So, this is about freeing up time around the business as opposed to particularly creating separate streams of income?
- AAAli Abdaal
Yes, generally. Um, you probably could create separate streams of income if you had a business with some automated elements. Uh, that would be a b- a bit more unusual. Generally, automation and delegation is to free up your own time, and then that makes your business a bit more passive. So, a lot of passive income sources start out as being very active, and then you passivify them through automation and delegation.
- CWChris Williamson
Yep. Building an app and a we- or a website.
- AAAli Abdaal
Okay. Building an app is really hard. Um, if it's a mobile app.
- CWChris Williamson
Have you tried?
- AAAli Abdaal
Uh, yes. Have you?
- CWChris Williamson
No. (laughs)
- AAAli Abdaal
Okay. Yeah. It's, uh, it's hard.
- CWChris Williamson
It sounds like a nightmare.
- AAAli Abdaal
Yeah. Building a website is easier. Uh, tools for websites and stuff, HTML, CSS, fairly easy to learn. You can learn those in about a week if you find a YouTube, YouTube video and do a few ... and dabble with it a little bit. There's all this stuff around, like, progressive web applications. There's ways of building iOS and Android apps through building a website and porting it onto Android and iOS. It's all, it all gets very complicated. Um, I think the thing is, if you can build a website ... And y- there's a, there's a branch of software called Software as a Service, SaaS, S-A-A-S. That is where some- so something like Patreon is actually Software as a Service. Um, y- Patreon has built the software that allows memberships to work, and therefore when creators sign up to Patreon, they are paying a subscription or paying a commission to Patreon. Something like PayPal is, weirdly, Software as a Service. It is a piece of software that allows people to accept payments. Um, when I was in med school, my brother and I built something called BMAT and UCAT Ninja, which was Software as a Service. It was a website that allowed people to subscribe for 30 pounds a pop to do questions to prepare for their medical school entrance exams. These are all the things, these are all things that you can do if you want to build a website from scratch. It's a, it's quite hard to do that. Um, but, I mean, most ... Like, Uber is an, an app which someone built. Twitter, Facebook, all these, like, incredibly high valuation, ridiculously successful apps are all ultimately someone starting off. Mark Zuckerberg building Facebook in his dorm room, or building Hot or Not in his dorm room. It's an interesting skill to have, and I still recommend to this day if anyone wants to get rich on the internet, learning to code is a really, really useful skill to have. Um, but it's not easy.
- CWChris Williamson
Is there anything that you've missed off? 'Cause you did this video
- 58:34 – 1:01:59
Conclusion on Passive Incomes
- CWChris Williamson
a while ago about different passive income streams, and we've gone through some of them today. Looking back, is there anything that you've developed since then that you wish that you'd put in?
- AAAli Abdaal
I think one interesting passive income stream that we haven't really talked about is coaching. And we mentioned it a little bit with the personal trainer stuff, but if you can become a coach for someone ... I know a lot of personal trainers do online coaching, whereby they don't even need to be on a Zoom call with someone. They can just sort of create, like, a workout plan. And for example, Athlean-X probably has a online coaching program. He's probably not the one actually tr- tracking people's macros and stuff. There's probably some level of automation and delegation there. So, I think that i- coaching is an interesting income stream because you don't need that many coaching clients to make a decent amount of money. If you have a small audience, you can monetize them pretty effectively through coaching, provided you're teaching something useful and you're providing value to your audience. Um, so that's an income stream that people can dabble with if they want.
- CWChris Williamson
Chris Sparks has an interesting article about that, talking ... So, just search Chris Sparks and consultancy, I think he called it. And it was just discussing how people don't really see service-based businesses on the internet the same as many others. He was identifying the fact that a lot of weight lies on your shoulders if you want to be ... Whether that be an online coach or a mindset coach or someone that's helping someone with teamwork or working through relationships-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... or dating advice, whatever it might be. It is great, but the scalability of that is inherently downturned because you, for the most part-
- AAAli Abdaal
Yep.
- CWChris Williamson
... are the person. You're the product.
- AAAli Abdaal
Exactly. Yeah.
- CWChris Williamson
Y- one half an hour of your time equals one half an hour of your customer's time.
- AAAli Abdaal
Yep.
- CWChris Williamson
Which means that if you only want to work eight hours a day, you can only have 16 customers a day-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... as opposed to the scalability that you get from products and online courses.
- AAAli Abdaal
No, exactly. Yeah. Coaching is a very ... It's, it's not passive, unless you find a way to automate and delegate it, which kind of takes away from the charm of it being you as their personal coach.
- CWChris Williamson
Yep. Yep. So, to recap. We've got differing amounts of input in terms of both time and capital that we need to use.
- AAAli Abdaal
Yep.
- CWChris Williamson
Looking to try and have a spread of a, uh, a variety-
- AAAli Abdaal
Yeah.
- CWChris Williamson
... of income streams if possible is good because it hedges you against different markets either moving up or moving down.
- AAAli Abdaal
Yeah.
- CWChris Williamson
It also means that you can monetize more effectively across different streams. And building an audience, going audience first, adding value first, thin end of the wedge-
- AAAli Abdaal
Yep.
- CWChris Williamson
... over-delivering on the freemium side.
- AAAli Abdaal
Yep.
- CWChris Williamson
That is something that's going to help. Anything else?
- AAAli Abdaal
Yeah.
- CWChris Williamson
What else has been missed off from the, from the recipe for success?
- AAAli Abdaal
Um, I find, like, w- when, when I'm thinking about passive income, uh, I kind of often think of the three Cs, which is, I think, something that Naval talks about. Uh, capital, code and content. And you can make money through capital by investing in stocks and investing in real estate. You can make money through code by building an app or building a website. And you can then make money through content by creating a YouTube channel, podcast, Twitter, Instagram, TikTok, writing a blog, writing a book, all that kind of stuff. And then the, then you've got the actual traditional businesses like selling a thing or selling a service and then applying the delegation and automation processes to that. But capital, code and content have an unfair advantage in that they benefit from the scale from, uh, preexisting passiveness, i.e. capital, and the internet, i.e. code and content. Whereas a traditional business, you have to do a bit more extra work to make that into a passive income source by delegating and automating. And even then, traditional businesses are so much lower margin. Like, you know, if you're selling a physical product, it's just going to be lower margin than if you're selling a piece of code or a piece of content. So, that's sort of how I think about it in my head. I think might be useful for people to, to s- have that, uh, framework.
- CWChris Williamson
I like it. Ali Abdaal, ladies and gentlemen.
- 1:01:59 – 1:02:30
Where to Find Ali
- CWChris Williamson
If people want to keep up to date with what you do, give us, shill your online wares. What are they?
- AAAli Abdaal
Shill my online wares. Yeah, just check out my YouTube channel. Search Ali Abdaal on YouTube. It'll probably be linked in the video description. It's all good.
- CWChris Williamson
Sick. Thanks, man.
- AAAli Abdaal
Thanks for having me on.
- CWChris Williamson
What's happening, people? Thank you very much for tuning in. If you enjoyed that episode, then press here for a selection of the best clips from the podcast over the last few weeks. And don't forget to subscribe. Peace.
Episode duration: 1:02:30
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