Build and Defend: Passive Income

One email a week - something from which I hope you'll get real value. We talk about things we can build, and how to defend them. That can apply to cybersecurity, physical buildings, digital products, and .... just about anything. It gives me a lot of latitude in what I can write about, but the two concepts are important for progress - as individuals, and as society.

Today's topic is passive income.

🔨 BUILD: Passive Income

Some of you may have heard about Celsius Network. Back in 2018, it was a novel site where you could deposit your cryptocurrency and earn "interest". I joined back then, and started earning interest right away:

(This is a screenshot of the first email I received 29 October, 2018.)

By the middle of 2021, I had taken what was then a fair amount of crypto, and put it onto the platform. I was making from 4 to 5 figures in interest per week. It was paid in CEL token (a token native to the platform) and I quickly became a top holder of CEL.

An example of what my 2021 "interest" income looked like. If it’s hard to see, the important number is: $375,579.49, which is ~$5300 a week.

An example of what my 2022 "interest" income looked like. If hard to see, that number is $199,531.56, which is ~$7100 per week.

(I keep putting "interest" in quotes because though they called it that, they were forced to call it "rewards" later to cover themselves.)

So as you can see I had a very nice income going.... I was re-investing, and at the start of 2022 I was looking at potentially retiring. So, I know what it's like to have that kind of income coming in. Of course, when the bankruptcy hit, all the money on the platform was frozen in the bankruptcy proceedings, and we've all been getting some of it it back slowly over time. (We'll end up at about 80% probably.) That said, I'm using the $30k per month number I was mostly at as a goal, to build back that amount of passive income.

(I've been using some money in early stage investing, as below, but may also be a separate newsletter in the future.)

So what am I doing?

Right now, I'm at about $300 per month. That's mostly from running a $DASH masternode (dash.org). I'm doing some other things (this newsletter is part of that) to work on getting more:

Digital products: these are relatively easy to make (especially w/ AI (but they have to be valuable)) and cost nothing after the initial investment of time. I've got a gumroad store for those things.
Books: I wrote "Adventures in Cybersecurity" in 2015. It sells a copy every once in a while. I've written my first children's book, "Hayley the Horsepillar" which is also out for Kindle. It sells a copy every once in a while too.
Apps: I wrote (well, ChatGPT / Claude wrote) my Mac App "Battery Lens". It's on the App Store, just hit version 2.0, and now is in freemium model.
Openclaw projects: I've asked Talos (my OpenClaw AI) to build me some things; he's done that, and we're working on some more. The most successful one so far is a range trading bot which is making about $3/day so far. I've just increased the capital allocation there, so hopefully that will increase. We're also working on trying to do something with my domain portfolio (300+ domains).

🛡️ DEFEND: Figure Out Your Income Plan and Stick To It

So .... how does one defend passive income?

Well, there's two answers to this:

First, develop a plan and stick to it. (That's a repeat from last week, but it's still true!) That's what I'm doing - Talos & I are going to focus on digital products as a way to work on passive income. I like making apps, and I like writing. I'm going to do both regularly. (This is newsletter 3, so I've got at least that much of a track record.) I'm not going to be producing AI slop - Talos works on things I think are valuable to others but doesn't publish anything. I also still do all the writing, and will keep it that way. (He may outline, which is helpful.))

The second answer is more pragmatic. There's a lot of digital infrastructure to manage, and it gets easier when you have something like OpenClaw working with you. That said, there's still quite a bit of cybersecurity involved in maintaining an OpenClaw (which is a potential newsletter on its own - next week?) as well as simply things like account management and password security. I've got Apple accounts, Google accounts, domain accounts, hosting accounts, a gumroad account, various AI accounts, and then all the various API keys for integrating everything together after all that! It's all quite a lot, so I need to keep track of it all. I use a password manager for that - and if you're not using one, you should.

How many passwords do you have? How many should you have? I'm guessing the first number is WAY lower than the second. You should be using unique passwords for everything, and that's what I'm doing at this point. I use 1Password, something I'll recommend even without sponsorship. (To be clear: they don't know I'm writing this and are not sponsoring anything.) It not only stores passwords, it stores API keys, credit cards, etc. You can keep track of everything! Add to that that it also creates passwords for you, and you can't go wrong because those passwords will be WAY more secure than the ones you might create. There's a free alternative - Bitwarden - if you don't want to pay for 1Password.

Here's the 15 minute set up:

Download 1Password or Bitwarden (for both your phone and your computer).
Create your account with a strong master password. I usually use some kind of sentence or something that’s easy-ish to remember and hard to guess. This will be the most important password, so don’t forget it! (Try not to write it down, too.)
Install the browser extension in your favourite browser(s).
Start logging into your accounts. Each time, let the password manager save the credentials.
Gradually change your passwords to generated ones. Start with email and banking.

You don't have to do everything today, but start with that.

Is it possible then, though, that you've just introduced a single point of failure? What if the password manager software or the company that makes it (or both) get hacked? That's always a possibility, but it's still miles better than using the same password over and over or having weak passwords or both. (These companies obviously take a great interesting in getting things right, as their entire business models depend on it.)

One last thing: set up emergency access. Both 1Password and Bitwarden allow you to set up emergency access in case something happens to you. In the case of 1Password, they also do Shared Vaults, where you can choose to share passwords (so I have a vault with my wife for shared accounts) but setting up emergency access is a really good thing. Do it via the paper choice, where a trusted person can find the paper.

💰 STACK: Other Forms of Income

One thing that's always interested me is venture capital. It's being democratised these days, via various platforms. In the UK, I use Crowdcube, and in the US, StartEngine. I also do direct investing. This is less of a passive income thing, and more of a "long term plan" thing. It's also A LOT riskier. That said, the pay off for investing well can be huge. But you need to diversify, because of twenty investments, two might be good, and one might be great, and one spectacular, but sixteen are likely to fail. That's kinda how it works, and kinda how it's supposed to work. I find direct investing to be a lot more fun - it involves a much more personal angle. That said, if you invest enough in any company through any platform, you'll invariably have access to founders. (As an aside, I'm also working on something to teach investing like this; more to come on that in the future.)

(As another aside, I am also helping raise money for two very promising startups, so if you're interested, please let me know.)

There is another really good part to this: tax advantages. Here's a quote from Claude: "In the UK, SEIS (Seed Enterprise Investment Scheme) and EIS (Enterprise Investment Scheme) offer incredible tax relief. SEIS gives you 50% income tax relief on investments up to £200,000 per year. EIS gives you 30% on up to £1 million. Plus loss relief if the company fails. The government is basically subsidising your angel investing. It's one of the best-kept secrets in UK personal finance. In the US, QSBS (Qualified Small Business Stock) can exclude up to $10 million in capital gains from federal tax if you hold for five years and meet the criteria. That's not a typo. Ten million dollars, tax-free."

So while investing can be risky, and early stage especially so, that changes the math a bit. So start small, with money you wouldn't necessarily cry over if it disappeared, and build and defend from there.