In other words, do all the promises of a better life hold up?

First, let’s consider the traditional lifestyle, so you can understand what I mean by the word robust. Traditionally, you’re supposed to work on maximizing your SAT scores, so you can get into a good college. There you will take on student debt while trying to maximize your GPA. You will do an internship every summer to pad your resume to get your first job. Once you get your first job you will buy a car on credit. You will meet someone and marry them within a year. Together you will buy the most house you can afford. You will likely have a couple of rug rats. Shortly thereafter either you or your partner will get laid off. You will have some financial trouble and maybe a nervous breakdown. You will start fighting. Repeat that a couple of times and maybe you’ll get divorced too. You will cash out the pithy 401k savings to pay to have car and/or roof repaired when it caves in. Two years later, you declare bankruptcy. At 40 you will be on cholesterol lowering drugs and maybe heart medicine and begin to wonder whether a string of jobs in middle management was all there was to the glorious career you were promised. You’re still working on your student loans and you have $8000 in revolving credit card debt; you are underwater on your house, but on the other hand you got good credit and you just financed a new car; you just replaced your 32″ TV with a 36″ TV.

This lifestyle is robust. If you follow standard advice, it is likely to pan out this way. Or maybe even better than this, e.g. a 40″ TV at the end!

Blogging for a living is an example of a lifestyle design that is not robust.
There are two groups of lifestyle bloggers. There is the geo-arbitrage blogger who lives in a poor country and makes money blogging about how you can make money blogging while living in a poor country. There are other bloggers who make money blogging about how you can make six figure incomes blogging.

The first is reminiscent of what we called backpackers back in the 1990s—you’re just out of college or high school and you’re genetically disposed to seek out new territories. You pack your backpack, buy an airplane ticket and fart around until you run out of savings. The more enterprising types will find a job that either pays very little (because it’s in an exotic place, dude!) or nothing at all (room and board).

Today there’s a new breed called travel minimalists which are basically backpackers except they take pictures of the contents of their backpack; count them, and then talk about how minimalist they are. Yeah sure, if you own 47 things and live in a house, I’d consider that remarkable (in the literary sense, not in the lifestyle blogger sense where everyone and his dog are “remarkable”), but if you have 47 things in your backpack, you’re just an ordinary traveler with a big SLR camera and a strange obsession ๐Ÿ˜‰ … Nobody in their right mind brings the f@#king kitchen sink along when they’re backpacking.

I want to draw your attention to a great article by The Salty Droid and in particular I wish to emphasize the Zipf law distribution (the one with the unicorn).

What this shows is what the people who sell the dream of making a living income as a blogger (or world conqueror or whatever the term of the day is) is that a few bloggers at the top make all the money. Most bloggers make very little money.

It is somewhat disingenuous to make money telling other people how to make money on the Zipf curve, because the method is not robust. In order to actually make it, you have to displace the guy who’s at the top. If you try that, you’ll find that it’s pretty easy to set up a blog. However, it becomes harder and harder and harder … etc… oh, and harder to climb up the curve, the higher up you get.

Big blogs have a substantial advantage. Often they are big, not because they are great (meritocracy doesn’t work very well in the online world!) but because they are early. Being early, they started building their network early and so they are already well-networked. This means that new people are more likely to find the old boys network than the new start-up blogger.

This is not simply a problem with blogs. It is the problem with ANY lifestyle design that follows a Zipf law. eBay drop shipping is a recent one. It is easy to set up. However, given that ease, you should also expect that once the methods become well-known, the margins are going to get razor thin.

At this point more money will be made telling people how to make money than actual money will be made.

So you gotta ask yourself one question when considering a given lifestyle: Are people currently making more money telling other people how to make money? If so, be very careful! There are two rules. One is ascribed to PT Barnum; I don’t know the origin of the other one.

  • There’s a sucker born every minute.
  • If you don’t know who the sucker is, it’s you.

So think about that one before you hand over $87 for an inspirational 80 page e-book that promises to solve all your problems.

Of course I must also consider my own case. I have a blog and I write about lifestyle design. Could I make a living doing this? Well, current traffic is about 150000 impressions per month. Blogs which deal with personal finance can be monetized at $1-6 eCPM or so. This means I could make somewhere between $150-900/month with this one—I make about $100/month, because I don’t like dealing with advertising; most of it is of a fairly questionable nature. Some would make more, some would make less—I’m telling you what to expect. It would be disingenuous for me to sell you an early retirement lifestyle based on blogging about it though. Why? Because you’d have to displace either me or one of the other early retirement blogs. Well, you could try to displace someone else in another field (say real estate or puppy dogs), but that’s the same problem. Unless you can find an area to blog about which NOBODY has thought about before, you’re fighting an uphill battle.

Furthermore, in particular when it comes to financial independent using blog income, you’d have to make sure you can stay on top for the rest of your life. I would consider that highly unlikely for anyone—even if you owned a dozen blogs. It’s hard work staying at the top.

Now, I have also written a book. If it keeps selling like it has been (1100 copies in the first 3 months and about $7500 in royalties) I can certainly live on that too. If it doesn’t keep selling, well, then I could live on the proceeds for a year. However, it took 2.5 years to make it so….

In that regard, one author who makes a living writing about how to “be happy not having a job” is Ernie Zelinski. He has written a lot of books about that. However, I’ve never seen him encouraging people become authors to do what he does.

ERE is robust because it does not rely on a Zipf law. The point is to reduce your expenses (see the 21 day makeover in the sidebar) the most bang for the buck being had in reducing your housing and transportation costs. Such reductions are completely noncompetitive. Your main battle is not with others but with yourself and how well you can adjust to spending less money. The paradigm shift and the skills to be learned are going to be hard in the beginning, but it’s similar to how to learn to swim, when you’re competing against yourself rather than others.

Your savings compete on the investment market which is HUGE. It would take millions of ERE people to make a dent in the going global interest rates. We don’t have to worry about what would happen if 10,000 or 1,000,000 other people “bought into it” much like you don’t have to worry what would happen is 10,000 or 1,000,000 other people went to college. The labor market is big enough to absorb them just like the stock market is big enough to absorb our savings. Zipf’s law is not a problem, so the ERE and the college/career designs are robust.

Conversely, you would indeed have to worry about adding 10,000 bloggers trying to make a living blogging or 10,000 people selling plastic junk trinkets on eBay. Here Zipf’s law tells you that you have to beat most of them to make it—but if you do beat them, you will indeed be rich. However, this is unlikely, because only a few make it. There’s just not enough room at the top. In particular, for every 1 success story (which will be heavily marketed in the next product launch) there will be 99 failures.

Originally posted 2010-12-21 12:23:21.