Multiple Streams of Income—Magic or Myth?

> Now, let's say that when he adds up his
> revenue, and subtracts his costs, and takes
> his time into account, that stream A makes
> him a measly $5 per hour....

> Let's say that stream B does a bit better,
> and makes him $15 per hour.

> And stream C does the best - what he makes
> there is $40 per hour.

> If he divides his time equally between these
> 3 streams, he makes $20 per hour on average,
> which isn't too bad.

I think both Mike and Dien's posts have valid points. The distinction to draw is between activities that can be greatly improved through experience, learning, and specialisation, and those that improve to a lesser extent or not at all.

The example above gives income streams for different activities as static, unchanging amounts. Although this is no doubt true for some endeavours, it isn't true for all endeavours.

Let me illustrate with an example.

Let's say stream B is "doing web design", and by engaging in three different activities, you are able to earn $15/hour doing web design.

It could be the case that you earn $60 for 1 job, and 1 job takes you 4 hours on average.

If you were to specialise in web design, however, two things may happen. The time it takes you to complete a job could go down, and/or the quality of your work could increase. These efficiency gains are reasonable, given you are now spending more time on this activity.

And thus, through specialisation, a $15/hour income stream may grow into a $40/hour or $60/hour income stream.

A few times the concept of "risk" has been raised, and the question of which strategy -- specialisation vs multiple streams of income -- is riskier.

I would say that both have risks, but the risks are different.

With multiple streams of income, there is probably more "business risk" because the environment is likely to be more competitive, and prices lower, and so forth, as Mike has pointed out.

With specialisation, however, you have the risk that some factor beyond your control will wipe out your income. If you're working for a company, perhaps it will suddenly go bankrupt. If you're specialising in a single type of product online, perhaps a competitor will come out with a better model and greatly lower your sales. This risk is diminished somewhat when following a "multiple streams of income" approach.

- Thomas.