How to Generate Passive Income Through Investing (Not Side Hustles)

Passive Income Isn’t a Myth—But You’ve Probably Been Lied To

“Passive income” is one of the most overused phrases on the internet today. From late-night infomercials to flashy YouTube ads, it seems like everyone’s trying to sell you on the idea of making money while you sleep—usually by convincing you to buy their course, launch a blog, or start a side hustle with zero experience.

Let’s cut through the noise.

Is passive income real? Yes. But it’s not what most people think. It’s not about selling e-books or monetizing your TikTok following. It’s about understanding how real wealth is built—and it's something you can absolutely do if you follow the right strategy.

I’ve spent the last 40 years doing exactly that, and I want to show you what’s actually possible when you stop trading time for money and start planting the right seeds.

From Ditch Digger to Investor: My Journey from Active to Passive Income

Like most people, I started my career trading hours for dollars. I dug ditches for plumbers, served in the military, and worked as a Grand Canyon river guide for years. I’d load boats, haul gear, and guide tourists through the canyon on two-week expeditions. It was hard work. And it paid about $4,000 a season back then.

That’s what we call active income—you work, you get paid. You stop working, the money stops.

But there’s a huge problem with this setup. If you get injured, laid off, or the economy tanks, your income can vanish overnight. I saw it happen to millions of people during COVID. That’s when many realized they had to find a better way.

What Passive Income Really Looks Like

True passive income comes from owning something that grows and generates cash flow on its own—even when you're not actively working. It’s like planting a tree. You do the work up front—find good soil, water the roots, nurture it early—and eventually it produces fruit season after season with no extra effort.

The key is ownership. The wealthy don’t sell their time—they own assets that grow over time. Warren Buffett, Bill Gates, Elon Musk… they didn’t get rich by clocking in and out. They bought businesses (or built them), and those businesses paid them back exponentially.

That’s the core of Rule #1 investing—we buy wonderful companies at attractive prices and let those companies grow our wealth through the power of compounding.

Compounding: The Secret to Exponential Wealth

Albert Einstein is rumored to have called compound interest the "eighth wonder of the world." And whether or not he actually said it, he was right. Compounding is the most powerful financial force I know.

When you invest in a company that grows internally—meaning it reinvests its profits efficiently—it doesn’t just make you money. It makes you money on the money you already made. That snowball effect accelerates faster than most people realize.

Let me give you an example. Let's say I bought shares of a mid-sized outdoor gear company—we’ll call it “Summit Outfitters.” It was already a respected brand among hikers and campers, but the market had beaten the stock down after a temporary supply chain hiccup. Over the next six years, the company’s sales and profits skyrocketed, and my investment doubled every year. A $1,000 investment turned into $65,000. $10,000 became $650,000. And $100,000? That grew into $6.5 million.

That's what passive income looks like when you're doing Rule #1 Investing the right way.

Warren Buffett’s $700 Million a Year in Passive Income

Warren Buffett—my mentor from afar and one of the greatest investors of all time—perfectly embodies this approach. In the early 1990s, he bought shares of Coca-Cola for the equivalent of about $2.50 per share in today’s dollars. Then he did... nothing.

He didn’t show up at Coke HQ. He didn’t drive delivery trucks or manage bottling plants. He simply owned part of a great business and let it do what great businesses do—grow.

That investment has ballooned into over $25 billion today. But here’s the kicker: last year alone, Coca-Cola paid Buffett $700 million in dividends. And that number is set to double to $1.4 billion annually in the next seven years. That’s more than he paid for the entire investment.

That’s not a side hustle. That’s real passive income—the kind that changes lives and builds generational wealth.

Why Most People Miss Out

You’re probably thinking, “Well, why aren’t more people doing this?”

The truth is simple. It’s not because they can’t. It’s because they don’t know how.

Most people haven’t been taught how to evaluate businesses, how to know when a stock is on sale, or how to avoid the traps Wall Street sets. They’re told to invest in index funds and cross their fingers, or worse, to chase the next crypto trend or startup gamble.

But with a Rule #1 investing education, you can learn to take control of your financial future. If you're earning a salary, you can set aside 10–20%, invest it in wonderful businesses, and let compounding do its work.

Even at a conservative rate—doubling your money every 5 to 7 years—you’re on a path to serious wealth. Let me break it down: if you invest just $10,000 when you start your career and it doubles 10 times, that grows to $10.2 million by retirement. That’s how powerful this is.

So, Is Passive Income a Myth?

Not at all. But most “passive income” promises are either exaggerated or impractical. The only strategy I’ve seen consistently work for regular people over the decades is Rule #1 investing.

Buy a piece of a great company when it’s on sale. Let it grow. Reinvest the returns. And watch what happens over time.

It’s worked for Warren Buffett. It’s worked for Monish Pabrai, Li Lu, Charlie Munger, and me. And it’s working for thousands of our students today—people just like you who got the knowledge and started planting seeds.

If you're ready to take that next step and start building true passive income the Rule #1 way, join me at one of our upcoming workshops. We teach everything you need to know, and I promise—it’s the best investing education you’ll find anywhere.

Ready to Build Your Passive Income?

Join our 3-Day Rule #1 Investing Workshop and learn how to build wealth by investing in wonderful companies—just like Buffett. Spots are limited, so reserve yours now.