The Millionaire Fastlane (22 page)

Software, when tapped into potent distribution, can be replicated to millions. It scales without significant degradation to passivity.

Seedling 3: Content Systems (Passivity Grade: B+)
Content systems are systems of information. That information can be fused to a variety of other systems, like the Internet and physical distribution systems. This book is a content system that I can effectively move through other channels, like the Internet or a book distributor.

In the old days of wealth, striking it rich via content meant you had to be a newspaper mogul, magazine publisher, or successful author. Control the press. Distribute content. Information, like software, often has ease of replication. I can print 10 million of these books. I will never own 10 million pieces of real estate, nor do I have any desire. Like their software counterparts, some of the richest people on the planet are successful authors.

In a few short years, JK Rowling, author and owner of the
Harry Potter
brand, went from being a 32-year-old divorced English teacher to a media mogul worth over $400 million. The single mom has sold over 30 million copies of her books in 35 different languages. I guess she didn't hear the excuse, “I'm a single mom and I don't have time.” Ms. Rowling recalls the happiest point of her life-not the acquisition of millions, but the point at which she could write full-time.

Similarly, Dan Brown has sold over 80 million copies of the
DaVinci Code
in 51 languages. Let me be perfectly clear: If you sell 80 million of ANYTHING, you will be a very rich human being.

The latest trend of content distribution has merged with computer systems. Blogs, social networks, e-books, and online magazines all serve the newest hybrid of computers systems and content distribution. In fact, this new combination is so powerful that it is driving many of the old, hard-line models out of business. Paper newspapers and magazines are officially endangered to be extinct in the coming decade.
Change creates millionaires
. Those who observe and take advantage of change will be the new millionaires and billionaires.

Content also survives time. This book might have taken me years to write, but it also survives years. If someone buys this book five years from now, I will earn a small profit on a time investment I made years earlier. The content is an asset that is salable, over and over again, and with each sale, the effective time cost declines while the hourly rate of return expands.

Seedling 4: Distribution Systems (Passivity Grade: B)
A distribution system is any structure or organization designed to move products to the masses. Distribution systems can be hybrids with the other seedlings, such as content and computer systems.

If you invent and manufacture a new product and sell it on QVC, you are leveraging a distribution system. If you sell that product via infomercial at 2 a.m., you are leveraging a distribution system. If you sell your product to four wholesale distributors that, in turn, sell it to retailers like Wal-Mart and Target, you are leveraging a distribution system.

When inventing any product, the invention is always half the battle. Distribution is the other. The greatest product in the world goes unused if it isn't leveraged into the proper distribution system-either one that exists, or one that you create.

Amazon.com is one example of a distribution system that I use. This book sells on Amazon and is available to millions. However, a book sitting on Amazon represents unrealized potential, like a 1,000 horsepower car sitting in the garage. It is my job to turn the engine on and drive the power of the distribution system. The tool exists, ready to be exploited by successful (or failed) execution.

Our iPhone developer leveraged the iPhone “App Store” to move his software. This was his distribution point. Without the distribution, he couldn't sell software. Distribution is a means to move product to the masses. Some systems are better than others and when it comes to distribution, it all depends on the control structure. If you create a network marketing company to sell your new vitamin product, you are creating a powerful distribution network capable of earning millions. If you join a network marketing company, you are electing to be a gear in the distribution process.

Another potent form of distribution is franchising and/or chaining. When a successful store concept is branded and systemized, it can be replicated and sold to other individuals. Savvy Fastlane entrepreneurs recognize that a successful local business with weak leverage can be made highly leveraged by franchises or chains. Does this path sound familiar? It should; this is what Starbucks did to become the biggest coffee chain in the world.

Other restaurants deploy a combination of chains and franchises. Dairy Queen and McDonalds have both chains and franchises. If your business operates in limited scale, it can be conquered with chains and franchises. If you own one hot-dog cart and sell at one location, there is no leverage. If you own 500 hot-dogcarts and sell at 500 locations through 500 owner-operators, suddenly leverage appears. The Fastlane wealth equation has power.

Seedling 5: Human Resource Systems (Passivity Grade: C)
Amazon.com is a distribution system backboned by a computer system and operated by a human resource system. Human resource systems are the most expensive and complicated to run. Humans are unpredictable, expensive, and difficult to control. Ask anyone with a company that relies on employees how challenging its to keep employees happy.

I came to the employee crossroads with my own company. I had to either suffer Internet technology obsolescence or hire two more people to scale my company to the next level. Since my business was already 80% passive, I knew that adding employees would erode the passivity of my business because employees need management. At a certain level, even managers need managers.

The other alternatives were to keep my company on autopilot and watch it slowly degrade over the years (Web companies need to be constantly reinvented), dig in and return to “startup” mode (long hours in “Chuma” mode), or sell it. After evaluating the options, I chose to sell. In my case, human resource additions would have subtracted to passivity, not added. While I would have made more money hiring more people, I wasn't willing to forgo my free time for it.

A year after I sold my company, I examined the possibility of a parking business near the airport. Local travelers to the Phoenix airport could valet-park their car in a neighboring parking lot and get chauffeured to the airport. In general, this was a rental system. People would pay to park their car and I would earn a daily fee for each parked car. It had Internet-like qualities; it ran 24/7 and generated income with the simple passage of time. It was great idea with high potential for passivity. I found land for sale near the airport and it was perfect. I started to run numbers, projections, and scenarios to see how I could make this business a reality.

The numbers uncovered something important. While the business model was truly a “rental system,” the operation itself was a “human resource system.” To make this idea a successful business, it would have required at least two-dozen people on payroll at all times. That stopped me cold and I didn't pursue it further. I wasn't willing to risk trading passivity for a human resource system that is unpredictable and difficult to manage.

A member of the Fastlane community owns a few self-storage facilities. Her business is a rental system. People pay money to store their junk and she receives monthly income. You'd assume that her facility is run by a human resource system-managers, property assistants-but it isn't. Her properties have automated kiosks that run each property-a computer system. This makes her business 85% passive. Remove the kiosk, add human resource systems, and passivity drops.

Does this suggest that human resource systems are a drain to passivity? It depends. First, what is the existing level of passivity to the business as it is now? If you own a coffee shop and work 80 hours a week, you have ZERO passivity. A general manger-a human resource system-would raise passivity by an estimated 40%. In my business, I was operating at 85% passivity. Adding any human resource system would have lowered passivity.

Human resource systems can add passivity or erode it. Good employees nurture money trees. Bad employees pluck the fruit of money trees and require pruning. However don't let that scare you. If you want to make millions of dollars, or billions, human resource systems are needed, because you can't do everything yourself.

Chapter Summary: Fastlane Distinctions

• To divorce yourself from the Slowlane's transactional relationship of “time for money,” you need to become a producer, specifically, a business owner.
  
• Business systems break the bond between “your time for money” because they act like surrogate operatives for your time trade.
  
• If you have a passive income that exceeds all your needs and lifestyle expenses including taxes, you're retired.
  
• Retirement can happen at any age.
  
• The fruit from a money tree is passive income.
  
• A Fastlane objective is to create a business system that survives time, exclusive of your time.
  
• The 5 money-tree seedlings are rental systems, computer systems, content systems, distribution systems, and human-resource systems.
  
• Real estate, licenses, and patents are examples of rental systems.
  
• Internet and software businesses are examples of computer systems.
  
• Authoring books, blogging, and magazines are forms of content systems.
  
• Franchising, chaining, network marketing, and television marketing are examples of distribution systems.
  
• Human resource systems can add or subtract to passivity.
  
• Human resource systems are the most expensive to manage and implement.
  

CHAPTER 20: RECRUIT YOUR ARMY OF FREEDOM FIGHTERS

The rich rule over the poor, and the borrower is slave to the lender.
~ Proverbs 22:7 (NIV)

How the Rich Explode Wealth

I spent a few years chauffeuring clients in limousines, so I heard a lot. I remember Gary, a young 20-something client who hired our limousine several times a month to serve as his personal escort to parties and drunken excursions. Oddly, this guy wouldn't just hire us on Friday or Saturday; he'd hire the limousine during the week. Every day of his life was his weekend. When he hired us, I knew it was going to be a long night and a profitable one, since he tipped fabulously.

Being broke and a student of wealth, I couldn't bottle my curiosity. I asked the limo company owner, “What's Gary's story?” He told me that Gary was semi-retired and just sold his administrative office company for millions. Wow. This guy couldn't have been much older than I and he was already retired and living large! The next few times I chauffeured the man, I eavesdropped on his conversations hoping to catch a tasty tidbit of the rich.

And I did.

To his club wingman, I heard Gary drunkenly declare: “Thanks to municipals and treasuries, I never have to work another day of my life.”

Another piece of the wealth puzzle solved.

The Best Passive Income Venue in Existence

In the prior chapter, I neglected to mention the best money-tree seedlings in existence. I omitted it because it isn't really a business seedling but
a seed you already possess
. Whether you're broke, in a dead-end job, or without a business, you already have the raw materials for the best money-tree seed in existence.

What is it? Guess.

Real estate? An Internet business? A network marketing company? Licensing an invention?

No. No. Hell no. And no.

The best money tree inexistence sits right in your pocketbook: The good old-fashioned buck. Yes,
money
. Money is the king of money trees.

How is money passive? If you have a lot of money, you're given the gate key to switch teams from consumer to producer. Specifically, you move from borrower to lender. You move from employee to employer. You move from customer to owner. In other words, people pay you to use YOUR MONEY in the form of interest or ownership.

For example, let's examine interest, which is a fee earned to lend money. Right now you're probably someone who doesn't earn interest, but pays it. Someone lent you money for the mortgage on your home, and in return you pay the note-holder interest. That interest is profit or income to someone else.

While the act of becoming a lender sounds complicated, it isn't. Anytime you buy a certificate of deposit from a bank, you become a lender. Anytime you buy a municipal bond, either directly from the source or indirectly via mutual fund, you become a lender. When you deposit money in the bank, you become a lender. As a lender, you don't administer the loans; you just sit back and collect checks. It's super easy and super passive. Gary, my rich limousine passenger, was a lender who never had to work another day in his life.

Savers Become Lenders, Owners, and Producers

I heard a radio commercial the other day from a self-proclaimed “Double-Dad” guru who declared: “Savers are losers!” I couldn't believe my ears.

Savers are losers? And who are the winners? The people you advised to borrow millions on risky real-estate investments? Savers aren't losers. Savers are winners because they eventually become lenders. Savers are winners because they become owners in companies. Savers are winners because they become producers and build assets.

Open your wallet and look at a dollar. One buck. It doesn't buy much but it is the embryonic start to a passive income stream. One dollar has the power to give you a nickel of passive income for life. Yes, for life. While one nickel buys squat, it unlocks the DNA implicit in money-it's fully passive.

I retired in my thirties because of this simple reality. I'm a lender, and when you have a lot of money to lend, you live free because passive income arrives every month. If you had $10 million and lent it at a mere 5% interest, you'd enjoy a passive income of $41,666 every single month. At 8% your monthly income would be $66,666 per month-fully passive. Over $60,000 every month! This is WITHOUT touching the principal. You can do this for years and still have 10 million dollars left over!