Red Yellow Green: What Color is Your Money?

THE SURVIVAL MANUAL FOR GIG WORKERS AND CONSULTANTS

Noah Gift

This book is for sale at http://leanpub.com/greenmoney

This version was published on 2020-05-17

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This is a Leanpub book. Leanpub empowers authors and publishers with the Lean Publishing process. Lean Publishing is the act of publishing an in-progress ebook using lightweight tools and many iterations to get reader feedback, pivot until you have the right book and build traction once you do.

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© 2020 Noah Gift

Table of Contents

1. Introduction

1. Why I wrote this book

2. Your boss doesn’t want you to read this book

3. Don’t leave success in the hands of others

4. My Red, Yellow, Green numbers

5. Planning your escape

6. What success could look like

2. Chapter 1: PEAR Revenue Model

1. Passive Income

2. Positive Experience

3. Autonomy

4. Exponential Potential

5. Rule of 25% When Consulting

6. How to be a good consultant

7. What is better than one job? Ten jobs

3. Chapter 2: Predator, Partner or Platform

1. Predator

2. Partner

3. Platform

4. Chapter 3: Growth Hacking in the Social Media Age

1. How to grow your audience without tricks

2. Build your brand

3. Get Your First Consulting Client

5. Chapter 4: YAGNI (You Ain’t Gonna Need IT)

1. Eliminating useless work

2. Avoiding unproductive people

3. Warning Signs of a Dysfunctional Business Partnership

6. Chapter 5: How to get paid as a consultant

1. Getting Paid

2. Setting Terms for Payment

7. Chapter 6: Remote Work

1. Setting up a remote office

2. Being a 10X worker for YOU

3. Do you need to expensive mortgage or rent?

8. Chapter 7: Passive Income with Publishing

1. Publishing a Kindle Book

2. Publishing a Mainstream Book

3. Creating a course on Udemy

9. Chapter 8: Passive Income with Apps

1. Building an app for the Apple Store

10. Chapter 9: Passive Income with E-Commerce and SaaS

1. Creating revenue with Shopify

11. Chapter 10: Passive Income with Investing

1. Index Funds

12. Chapter11: College and High School Students

1. The Wounded Zebra Gambit

Introduction

Why I wrote this book

After spending most of my life working for other people, I decided I needed to escape. The year was 2016, and the company I was a CTO and General Manager for was laying off around half the company. In many ways, we had achieved wild success going from zero in revenue to millions from two product lines: merchandise and influencer marketing. We also at one point in talks with most of the significant sports personalities on earth and had millions of users each month that visited our site.

Startups are risky, though, and we made a massive bet to partner with a major soccer club. It was an “all-in” bet, and it didn’t work. I put every last ounce energy into making this company money, hiring employees, and building the software, and it was on fire. It was at that point that I decided to quit. I had a good run working from major brands my entire life: Disney, Sony, AT&T, and more. I wanted autonomy. I needed to escape the corporate grind.

At the peak of the craziness, I had been working 100 hour weeks straight to get the company to continue the hyper-growth, and I was running on fumes. My family and I decided to take a one week vacation to Maui. My boss that Friday came into my office and told me I couldn’t take a week off. The investors felt I was too valuable to get a vacation.

To say I was upset was an understatement. I was so angry that it took several days for the anger to surface. My family went on the trip without me, and I slowly turned into a raging river of molten lava. It culminated in me telling my boss I was going anyway and I didn’t care what happened. I hopped on a plane, turned off my cellphone, and joined the family on their trip. Ultimately the job was still there when I got back, which wasn’t a big surprise.

This showdown set the seed for my escape. The layoff and implosion of the company was the final straw. I had to escape the corporate prison of high wages that restricted my freedom. No matter how much money I made, my life was not truly free. Even running a company didn’t make me free. I kept thinking about the movie Shawshank Redemption. The main character, played by Tim Robbins, was falsely imprisoned and spent years plotting his escape. I knew I could do flee as well, but it would require a strategy.

Your boss doesn’t want you to read this book

The number one reason people leave a job is that they have a terrible boss. When you work for someone else, you are ultimately subservient to another human being, or in a pathological case, many bosses. Just like the movie “Shawshank Redemption,” it institutionalizes you. You start to say what the boss wants you to say. You begin to think about what the boss wants you to believe. The way to escape corporate life is to stop pleasing your boss.

Only in sporadic cases does a boss have your best interests in mind. It isn’t necessarily their fault, but corporate America creates subservience. Our educational system also rewards this by giving grades for compliance. An “A” grade is often a proxy for obedience. As you enter the workforce, what makes you successful is doing what you are told to do. Eventually, you get at…obeying.

What is the alternative? If you want to escape corporate America and optimize your life for autonomy, the first step is to consider yourself. An excellent first step is to create a plan to learn skills that will help you earn revenue that will give you the freedom to make more significant moves. When are you going to get the time to do this?

You can do it at work. Almost all jobs, even startups, are full of waste. You can efficiently work six hours a day and spend two hours a day training yourself on skills that your company “doesn’t approve” of your learning. This process is very similar to going to bed in prison at night and secretly digging a tunnel behind a poster. Learning on the job is like the Google 20% time, but it is for you. Make your own 20% time, and don’t ask for permission.

Learn to develop “side-hustle” while fully employed. It is one of the best complementary strategies to escape. This process serves many purposes. First, you can practice what you learn in your 20% time. Second, it provides income, which you want to put into an index fund and not touch. Third, it provides a network, and maybe this side-hustle client becomes one of the pillars of your consulting company. Fourth it serves as proof to future clients that you solve a problem for them.

It is a cliche now for a startup executive to talk about how the company is a “rocket-ship.” Also that it is on the path to a billion-dollar company. 95% of startups fail, so 95/100 times, this executive is spouting bullshit. Often 12 months later, 25% of the company is quietly laid off.

rocket-ship

Doing what your boss tells you and blindly following it is perhaps the worst career move you can make. Be thoughtful about what leaders say, and be careful to always consider your quality of life first before jumping into a 100-hour workweek. The day you are laid off, you can count on the boss, forgetting your name in most scenarios. Instead, bet on yourself. You cannot afford any other bet.

Why do I know about this scenario, because I have been on every side of this? Sometimes I have been the stupid boss who told people to work 100 hour weeks to build a billion-dollar company, sometimes I was told it. In all cases, betting everything on a company is a risky strategy, and it doesn’t always pay off.

Another way to put this scenario is the following:

Option A: Work 100 hours for a startup

If you work for ten startups in your lifetime, you would have failed at least nine times. Success, if achieved, is what? Is it a 100K equity grant? Is it worth a 1 million equity grant? What are the nine failures at 100 hours a week worth?

Option B: Work 40 hours for a startup (or another company) and invest 60 hours on yourself

Are you, as a person, worth the investment? If you cannot bet on yourself, then why would anyone else? What if you did your job, but spent the other 60 hours doing the following:

- Getting 8 hours sleep

- Eating healthy food

- Being physically and mentally fit through daily exercise

- Learning skills

- Making real money on side-gigs, consulting and investing

In option B, your odds of success are 100%. You are in control of the outcome. Either you work to make extra money and invest it, or you don’t. In option A success in the hands of others. If you picked the right company at the odds of roughly 5/100, it might just work. Hope is not a strategy.

Don’t leave success in the hands of others

Let me be clear that while you are employed while you are doing consulting, and while you work on the passive income, you need to work hard. Getting a reputation for poor performance in your job can negatively impact your ability to get consulting work. Additionally, as you look for side-gigs and consulting work often, the first opportunities come from people you know.

My Red, Yellow, Green numbers

Here is a chart that shows my income ratios from 2014 to 2019. Red is W2 income, Yellow is 1099/consulting, and Green is passive (royalties, digital goods, and investments).

Red, Yellow, Green

At first, in 2016, I was only doing consulting using the “rule of 25%”, where I never let one client take up more than 25% of my revenue (no matter how good the money was). What is compelling about consulting cash is that one client can “pay the bills,” and the rest, say 75% can go to an index fund.

This strategy allows you to make an income while you sleep. Next, I ramped up writing books and creating courses, intentionally reducing my consulting hours. The consulting I did keep was only on projects that I found exciting and paid well.

Planning your escape

Your escape starts with the four whats.

Four Whats

Have a vision for what you want to accomplish. Let’s say it is generating 80% of your income from passive sources like royalties, stocks, or e-commerce. Next, make sure you have the skills to pull it off. If not, train yourself on these skills. Finally, every day, work hard for yourself to achieve your vision. No one is going to rescue you. You need to save yourself.

What success could look like

What would success look like in the red, yellow, green strategy? The number outcome is the ability to be autonomous. Working fulltime and being in prison have many similarities. Let’s look at a checklist.

Prison and Corporate America

- Be in the same location every day

- Often requires a uniform

- Obedience is required

- Your success is in the hands of others

Financial independence

- Work in any place you want

- Work any time of day you want

- Work as hard as you want

- Do what you want every day

- Continued success is your responsibility, not others

In practice, it changes the way you think when you don’t have to pretend. I wake up every day, and I do whatever I choose. I still work very hard, but it is for me. Success is in my hands, and the hard work I put in rewards me for the rest of my life. If I become 10X more efficient, I make 10X more money. Working for a corporation, they will be happy to capture the extra 10X value you bring and give you a modest 10% increase in salary. Just enough to entice you to buy a more beautiful car and get further entangled in working for a paycheck.

This book gives you real recipes based on what I have done to free myself from a paycheck. Ultimately the choice is yours though to put in the effort to build passive income. Digging out of a corporate prison is tough work, but it is your life. Why not escape and see what is on the other side of the prison walls?

Chapter 1: PEAR Revenue Model

We live in a new era. It is possible to start a business with a laptop and an internet connection. As a long time consultant and entrepreneur, I have come up with a framework that works for me. When evaluating whom to work with and what project to work on, I think of PPEAR or “pear”.

- P(Passive)

- P(Positive)

- E(Exponential)

- A(Autonomy)

- R(Rule of 25%)

PEAR

Passive Income

- Does this action lead to passive income: books, products, investments?

- Do you own the customer? Ideally, you focus on holding the customer.

- What is the royalty relationship?

- Predator (20% or lower)

- There should be a very compelling reason to work with a predator. Perhaps they get you exposure, or they take a chance on you.

- The downsides of predators are they often have bloat in process. How many layers of people do you have to interact with to get something done? How long does it take to get something done? It could be 10-100 times longer than working by yourself.

- Partner (50% or higher)

- There is a lot to like with an equal partnership. The partner has “skin in the game” in terms of money and their time.

- Platform (80% or Higher)

- There are pros and cons to using a platform. The advantages of a platform are that you can retain most of the revenue if you are self-sufficient.

- The disadvantages are that you may not have a framework for what good. You may want to work with a predator and see how they do things before going right to the platform.

Note: Not everyone wants to be an author, creator, but everyone can be an investor. Maybe this is putting 50% of your W2 income into an index fund or renting out a house.

Positive Experience

When working on a project or working with a partner, it must be a positive experience. Even getting paid very well eventually gets old if the environment is toxic. Some questions to ask are:

- Am I happy every day?

- Do I respect the people I work with on a project?

- Are the people I am working with high achievers with a track record of success?

- Does my health increase or maintain: sleep, fitness, nutrition?

- You are the average of the five people you spend the most amount of time with

Autonomy

Another important question on a project or working with a partner is autonomy. If you are good at the way, you do you need freedom. You know what good is, your partner may not. How much independence do you have? Are you able to ultimately bet on yourself or is success in the hands of other people.

- Does this action increase autonomy or create a dependency?

- Do I learn and grow? A new skill, new prestige, or brand affiliation.

- Is it automatable or manual? Avoid tasks that cannot be automated.

- Am I betting on myself, or I am dependent on others for my success?

Exponential Potential

Another important question on a project or working with a partner is exponential potential. Perhaps you have decided to work with a predator partner because of the exponential potential of the project. If you are working with a predator, but the project doesn’t have exponential potential, then perhaps it isn’t a good project.

- Does this action lead to an exponential reaction?

- Revenue

- Users

- Traffic

- Press or Prestigage

Rule of 25% When Consulting

What color is the money you make? Making money may be valuable to you if you are an employee because you are learning skills and building a network. Keep in mind that this is “red” money, however. This red money can disappear at any time. You are not in control.

Consulting is “yellow” money. It is a massive step in the right direction. You can do some consulting while you work as an employee. Consulting takes away some of the risks of being an employee. As a consultant, though, you have to be careful never to have one client that is more than 25% of your total income and ideally not more than 25% of your consulting income. Familiarity breeds contempt. The best relationships are when people are on their best behavior and know the link is only there to solve a problem.

Investments like real estate, index funds, and digital products are “green money.” This income stream will always pay you. The ideal scenario is to make 80% of your income with green money and limit consulting or employment to 20% of your income.

PEAR

* One revenue stream cannot exceed 25% of gross revenue for the year.

* What color is money: red, yellow, green? Optimize toward green money.

* Red == Employee

* Yellow == Consulting (see the rule of 25)

* Green == Passive

How to be a good consultant

Why do organizations hire a consultant? They want results. To be a good consultant is to deliver results consistently without excuses. There is no other metric for consulting than this. If you provide results, you get paid. It is one of the purest forms of work.

If you struggle with producing results consistently each week, then consulting is not a good fit for you initially. It would be better to learn how to deliver weekly results and master them before doing consulting. Conversely, if you do well in a “results-first” environment, you may want to add consulting to your existing 9-5 job immediately.

What is better than one job? Ten jobs

When I was first starting writing this book, it was in late 2019 before the global pandemic known as covid-19. It was a much harder sell to tell people about the risk of employment when unemployment is at 3.6%. A job is, by definition, fragile. The more money you make, the more fragility you have introduced.

Now with covid-19, it has laid bare the truth. It is scary only to have one form of income. The more one single source of income is, the scary it is. Having a job is like having a fast car. A fast car with 400 horsepower gets increasingly dangerous, the more you use the power of the vehicle. Going 150 miles/hour on the freeway and making 300K/year have much in common in that a crash is highly probable.

The alternative is to design for failure. Instead of optimizing income in one job, it is better to optimize for a distributed income scenario. Don’t work 100 hours/week to make 300k. Instead, determine how to create multiple forms of income unlinked to each other. The alternative could mean working as a consulting for 2-3 companies, writing a book, and investing in the stock market, real estate, or small business.

NOTES

* Thank you to feedback and inspirational ideas from Andrew Hargadon and Dickson Louie

* Some good related advice in 1,000 True Fans? Try 100

Chapter 2: Predator, Partner or Platform

When working with clients and content publishers, it is crucial to understand with whom you are talking. Generally, there are three kinds of organizations you will deal with: Predator, Partner, and Platform.

Predator

Let’s break down each one of these.

Predator

A predator is reasonably straightforward to spot. The conversation often starts with you, pitching yourself with a book proposal, or an outline. Usually, the process is oppressive. Part of this is a hazing ritual designed to weed out people who won’t do any work. Part of it is because of Parkinson’s Law, which states “work expands to fill the time available for its completion.”

A bloated bureaucracy is complicated to deal with, but it is the price to pay for the exposure that working with a predator can give you. Another item to consider is there many different kinds of predators. An energetic and powerful predator like T-Rex is genuinely something to behold. Sure, they take all the money, but you can learn a lot about producing something. This where you learn “what good is.” Eventually, you want to sneak away from the predator while they aren’t looking, but there is a lot to gain by studying it.

Predator

source:Tyrannosaurus sculpture, Sosnowiec

The predator you want to avoid at all costs is an organization that is an actual triple threat: they take all the money, are 10-100X slower, and don’t know what good is. You may waste YEARS on projects that spend your time. Just like a real-life Komodo dragon, they will take a bite of you and your project and slowly walk toward you, their prey, until your project dies of sickness.

Predator

source:Komodo dragon walking and sampling air with his tongue (Komodo National Park)

Partner

A synonym for a spouse is a partner. In theory, a marriage is about an equal split of the good and bad of combining a household. Likewise, in a business relationship, a partner is willing to split the revenue and work with you. This dynamic is an equal relationship. If deciding on what type of connection to form with another person, this should be the starting point.

If the partner is not willing to share both the work and revenue, walk away. Many partners want the income or the prestige, but don’t want to do the hard work. It is much better to go it alone than to pick a partner who is unreliable or untrustworthy.

Platform

A platform has decided to create tools that make their customers money. Building a company that enables others to make money is the purest form of entrepreneurship. An excellent example of a platform designed to make their customer’s money is Leanpub. They take 20% of the profit, leaving the customer, the writer, with most of the revenue. A platform is one of the best avenues to proceed down when you can make your own decisions about the quality of work.

Chapter 3: Growth Hacking in the Social Media Age

How to grow your audience without tricks

Build your brand

Get Your First Consulting Client

Chapter 4: YAGNI (You Ain’t Gonna Need IT)

Eliminating useless work

Avoiding unproductive people

Warning Signs of a Dysfunctional Business Partnership

MUSHROOM FARMING

A mushroom farmer feeds you shit and keeps you in the dark, even for trivial things. How can you recognize a mushroom farmer? They will slip up and supply you bullshit about inconsequential things. When you spot someone who feeds you shit and keeps you in the dark in a business relationship, it is time to get out immediately.

mushrooms

source

ARROGANCE

An arrogant person is in love with their power and ego. You can rest assured they won’t be thinking about your best interests. This relationship won’t end well. Be careful because an arrogant person who is seasoned will hide it well. You may only spot it in brief glimpses, but arrogance is arrogance, it doesn’t go away.

PING PONG

Things take between two to one hundred times longer than they should. This slowdown is most likely the sign of a malignant bureaucracy. The incentives misalign between what you need and what the organization can provide. The organization may be, implicitly, focused on doing the least amount of work possible in a year. You are focused on producing the most you can in a year. You are rewarded by how successful your product is. The organization rewards “butts in seats,” and ultimately how well something performs is irrelevant to the organization.

PREDATOR, PARTNER, OR PLATFORM?

What kind of business partner do you have? A predator wants all of your value and gives as little as they can in return. This exploitation means they take 80% or more of the profit and leave you with 20% or less.

A partner wants an equal 50% relationship, and they wish for you to succeed. A platform allows you to do the work and also get all or most of the benefit.

IGNORANCE

Are they insightful? Do they understand in-depth the detail of the industry? If not, are they ignorant of trends and details? If they are not curious enough to know what “good” is, how can they be the right partner?

Chapter 5: How to get paid as a consultant

Getting Paid

Getting paid is the first rule of consulting or doing a “gig.” It is also the hardest rule to follow. There is no shortage of grifters who want you to work for free. Even worse, the best ones convince you to let your guard down. They could be charming and pleasant. A business contact could introduce them, or they are associated with a significant brand like a top University, a Fortune 500 company, or a publicly-traded company.

The only way to avoid the grift is to get paid upfront before you start work. One easy way to do this is to work off a monthly retainer. Once the money is in your account, then start work, never before. What business lets you walk out the door with the product without paying for it first? Why should you let other’s trick you into working for free?

What are the stages of the con according to Confessions of a Confidence Man, Edward H. Smith. There are six stages (five of which apply to consulting):

- Foundation of work: Preparations including hiring assistants starts

- Approach: The victim, you, is approached with a deal

- Build-up: The victim, you, are given on a chance to participate in the scheme, and they tap into your greed. “This is BIG money.”

- Pay-off: The victim, you, receive a small payout (this may be a fake contract of paper or a small amount of cash)

- The “hurrah”: A sudden manufactured crisis forces you, the victim, to commit. “We just got a HUGE contract. Please sign today”.

I have seen this process first hand. The bottom line is you must be disciplined and never expose your business, which is you, to the risk of work for days, months, or years for free. The only way to do that is to get paid upfront.

Setting Terms for Payment

Chapter 6: Remote Work

Setting up a remote office

Being a 10X worker for YOU

Do you need to expensive mortgage or rent?

Chapter 7: Passive Income with Publishing

Publishing a Kindle Book

Publishing a Mainstream Book

Creating a course on Udemy

Chapter 8: Passive Income with Apps

Building an app for the Apple Store

Chapter 9: Passive Income with E-Commerce and SaaS

Creating revenue with Shopify

Chapter 10: Passive Income with Investing

Index Funds

Chapter11: College and High School Students

The Wounded Zebra Gambit

I got two Master’s degrees at different points in my life while I worked full-time. I also got certifications and built a passive income on the side. This led me to a strategy I call the “Wounded Zebra Gambit”.

If the reason you are in school is to get straight A’s and then get a PhD, this is not the strategy for you. If the reason you are in school it makes money, increase your career opportunities or get a new job, then hear me out.

School of any kind is best when you are working full-time, doing side-gigs, getting certifications and building your portfolio. This is hard work. How can you possibly do this? Grades are just a game. Game the game, by finding the “wounded zebra” and run just a little harder than that student. Just like the savannahs of Africa, you want to be careful about burning yourself out too quickly. Pace your self, but run a little faster than the “wounded zebra”.

Predator

Table of Contents

Introduction

Why I wrote this book

Your boss doesn’t want you to read this book

Don’t leave success in the hands of others

My Red, Yellow, Green numbers

Planning your escape

What success could look like

Chapter 1: PEAR Revenue Model

Passive Income

Positive Experience

Autonomy

Exponential Potential

Rule of 25% When Consulting

How to be a good consultant

What is better than one job? Ten jobs

Chapter 2: Predator, Partner or Platform

Predator

Partner

Platform

Chapter 3: Growth Hacking in the Social Media Age

How to grow your audience without tricks

Build your brand

Get Your First Consulting Client

Chapter 4: YAGNI (You Ain’t Gonna Need IT)

Eliminating useless work

Avoiding unproductive people

Warning Signs of a Dysfunctional Business Partnership

Chapter 5: How to get paid as a consultant

Getting Paid

Setting Terms for Payment

Chapter 6: Remote Work

Setting up a remote office

Being a 10X worker for YOU

Do you need to expensive mortgage or rent?

Chapter 7: Passive Income with Publishing

Publishing a Kindle Book

Publishing a Mainstream Book

Creating a course on Udemy

Chapter 8: Passive Income with Apps

Building an app for the Apple Store

Chapter 9: Passive Income with E-Commerce and SaaS

Creating revenue with Shopify

Chapter 10: Passive Income with Investing

Index Funds

Chapter11: College and High School Students

The Wounded Zebra Gambit