I was deleting emails in a company issued laptop when I stumbled upon this very interesting story in my sent items. This story explains what “Passive Income” is, and I forwarded this same story to my friends way back in January 2006, a few months after I first read “Rich Dad Poor Dad” by Robert Kiyosaki.
This was the time when I experienced a paradigm shift in my head after reading the book and started to devote most of my spare time to learn all about passive income, getting out of the rat race, and financial freedom.
Although I read this story almost 4 years ago, I still want to share it with all of you here as I believe that the story clearly illustrates the difference between earned income and passive income. Enough of the chitchat, please continue reading the story below…
A Parable: Creating a Stream
Adapted from an audio segment by
Robert Kiyosaki, best selling author of “Rich Dad, Poor Dad”
A Spring Runs Dry
The story is told of a spring that ran dry in a small mountain village. The leaders gathered to determine how they would supply the village with clean water. There was another spring and reservoir about a mile away but was too far for the villagers to travel.
One of the men volunteered to solve the problem by carrying water into the village himself each morning for a set fee. Since the need for water was clear, the leaders agreed to the offer and determined a fair price for each bucket of water delivered.
Early the next morning the “bucket carrier” arose and began transporting water. It was hard work but he was pleased with the immediate pay for his efforts. He awoke each day and hurriedly carried water.
The more he delivered, the higher the pay.
As time went on, he began to think there had to be a better way. So,he designed buckets that could hold more water and were easier to carry. He bought better shoes and discovered a quicker route between the reservoir and the village.
The problem was, despite all his improvements, the bucket carrier still had to get up each day to carry water.
A Better Solution?
Some time later, another villager came forward with an offer to supply water. He planned to build a pipeline from the reservoir to the village.
The leaders were skeptical but eventually agreed to the competing plan, especially since the new proposal would cost the villagers less for the same amount of water.
So, while the bucket carrier continued his daily routine, the second man began work on the pipeline.
The digging was tedious through the treacherous mountain terrain. The necessary tools and materials proved costly but he continued his work diligently for many months.
Finally, the “pipeline builder” installed the last piece of pipe and ceremoniously opened the valve while a crowd gathered. Everyone cheered as they watched clean water flow into the village cistern.
How Things Changed!
The following day the two men’s worlds changed dramatically.
The bucket carrier had to lower his prices significantly to remain competitive. He worked harder and yet found himself worrying about losing his job.
The pipeline builder, however, began enjoying the fruit of his labor. He stopped working long days and began enjoying the income his venture generated. He found the pipeline required minimal maintenance, so he was free to spend his days fishing the mountain streams and enjoying time with his kids.
Many years later, after both men had died, the pipeline was still an integral part of village life and the pipeline builder’s children continued to enjoy the benefits of a father’s entrepreneurial spirit.
Bucket Carrier Pipeline Builder Description Employee – Has a job Entrepreneur -
Owns a system
Income Type Linear Income Ongoing Income Effort Constant Intensive early with
Implications Time Poverty Time Freedom Reward Immediate gratification (paycheck) Delayed Gratification (fees for service or royalties) Examples Construction worker, Doctor, Secretary, Lawyer, etc. Author, Inventor, Artist, Musician, Business Owner, Entrepreneur, etc. (Real Estate Investor)
Consider building a pipeline…
It doesn’t matter how efficient you are at “carrying water” (your job). Nor does it matter the size of your paycheck. Going to work tomorrow, next week and ten years from now will still be the prerequisite to collecting a paycheck.
When I forwarded this story to my friends almost 4 years ago, I had no idea where this adaptation came from as this was not in the book Rich Dad Poor Dad.
Now I’m quite sure that this was adapted from a story in “The Cashflow Quadrant”, also authored by Robert Kiyosaki as I have just finished listening to the audiobook version for the nth time and I heard this story near the beginning of the book.
Coincidentally, I also remember that a friend of mine and I were able to watch another version of this story just a few weeks ago when we were invited to a presentation by a certain multilevel marketing company.
They showed a video of this story to prospective recruits. By the way, my friend Roel of bloggista.com also shared a video of this version of the story through one of his posts and you may also watch it below:
This is exactly the kind of passive income stream that I started to create through rental income by investing in foreclosed properties.
It wasn’t easy at the start and it took quite some time. Keep in mind that I started on my quest 4 years ago. I guess what really matters is I decided to start and take action and I am still able to sustain it after all these years in spite of the challenges that I faced, and I’m sure there will be more challenges ahead.
One of the things that keeps me going is the vision that as long as I continue doing this, I will eventually be able to create a big enough passive income stream which would allow me to stop carrying buckets.
So are you carrying buckets, or building a pipeline?!
To our financial freedom!
Real Estate Investor
Real Estate Broker License #: 3194
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Text by Jay Castillo. Copyright © 2009 All rights reserved.
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