Let money work for you! There, that’s the giveaway; the whole of it.
Robert Kiyosaki, soliciting the accounting expertise of Sharon Lechter, spent years writing a series of books on financial literacy, and yet everything they wished to preach could be summed up in one overly clichéd sentence—which is nothing more than a restatement of what economists since Adam Smith and Karl Marx took pains explaining to the literate world more than a hundred years ago.
So if you think you know economics, don’t buy the Rich Dad, Poor Dad series. These books will not teach
you much. But they will teach you to become wealthy. Meaning, the books will guide you, really guide you, to- wards a life of total financial freedom. If you think you know economics, but may wonder why you find it hard even to make ends meet, then save up and buy anything written by the duo.
The last time I picked up a self-help book was in high school, back when Og Mandino was the craze and everyone wanted to be the greatest salesman in the world. Mandino did inspire millions of millionaire-wannabes. But until now, the great majority of them have remained just that—wannabes. Because while Mandino had the keen ability to push you into the financial battlefield, he would send you there without a sword; only the drive, the chi and an armor of good second-hand anecdotes.
And that’s where Kiyosaki, who brandishes himself as an inspirational-slash-business guru succeeds. He isn’t good at just egging you on to be rich, he actually teaches you how. Not by dwelling on motivation, like Mandino does, nor lecturing you the way most real business writers like Peter Lynch or Michael Gerber do. He talks from actual experience—from being homeless to being a multimillionaire.
In Rich Dad, Poor Dad, Kiyosaki tells his own story of failure and success. But mostly failure. He does a lot to remind you about the mistakes of the poor and middle class mindset, that you begin to abhor poverty and everything about it.
The first of the Rich Dad series dwells on the contrast between how the rich think and how poor people propagate the philosophy of poverty to and through their kids. A vicious cycle.
Kiyosaki’s story is about, well, his dad, a smart, prominent and accomplished educator in Hawaii who had a PhD and completed his undergraduate degree in less than two years. He went to Stanford University, the University of Chicago, and Northwestern, all on full financial scholarship. As Hawaii’s Superintendent of Education (He reported directly to the governor), he never failed to teach young Robert a thing or two about wealth. And he was poor.
Realizing this, Robert rarely sought his father’s advice on money, but instead listened to his neighbor, a man who dropped out of school at age 13. He was a friend’s dad who worked hard to put up his own business and went on to become one of the richest men in Hawaii.
Robert’s business education under rich dad started as a business proposition—that the young boy work for the old man without getting paid, in return for a measly six lessons in making money, which seemed a rip-off even for Robert back then. In the end, he found them priceless, of course.
Lesson # 1: The Rich Don’t Work for Money. Instead, the rich make money work for them. No mystery here. Marx, the communist ideologue, dissected capitalism a century ago and taught us the detailed mechanics on how money (capital) makes more money for the rich. Kiyosaki shows how you can use this knowledge to help yourself become rich.
Lesson # 2: Why Teach Financial Literacy? The rationale, according to Kiyosaki, is because financial literacy is not taught in school. Therefore, parents should teach their kids the science of wealth. It is intelligence, not more money, that solves money problems, according to Kiyosaki. Confused yet?
Lesson # 3: Mind Your Own Business. Kiyosaki explains here that financial struggle (poverty in his terms) is often the result of people working all their lives for someone else, not themselves.
Lesson # 4: The History of Taxes and the Power of Corporations. To me, this is the most useful of Rich Dad’s lessons. Kiyosaki is in his most subversive here– he practically teaches us how to dodge the taxman by using legal instruments.
Lesson # 5: The Rich Invent Money. Buy the books, read them, and learn how.
Lesson # 6: Work to Learn – Don’t Work for Money. Work too could be a very fruitful learning experience, if you know how to use that learning to your advantage. The knowledge you pick up from work should be looked at as an end in itself. Wages, then, are just a reward from your boss for a job well done.
There are four kinds of people in the world: the Employee, the Self-Employed, the Businessman, and the Investor. These make up the four axes of Rich Dad’s Cashflow Quadrant.
The mode by which we accumulate wealth determines to which quadrant we belong. But more than that, a person’s core values and perception of money decides whether he is an “E”, “S”, “B,” or an “I”.
E: “I am looking for a safe, secure job with good pay and excellent benefits.”
S: “My rate is $35 per hour.”
“I’m doing the job myself because I can’t seem to find people who want to work and do the job right.”
B: “I’m looking for a new manager to run my company.”
“Why should I do it myself when I can hire someone else to do it for me, and do it better?”
I: “The stocks I just bought will add another million dollars to my annual cash flow.” “The telecoms market may pick up in five years. I should invest in it right now.” “I don’t need a job. My money is working for me.”
According to Kiyosaki, it is the “I” quadrant that we should aspire for to be financially free. It is in this quadrant where we could say that our money is truly working for us.
Kiyosaki also debunked the common notion that a house is an asset. He said it’s not. But he also said that commonplace things like a fridge or a blender could be assets. How? Well, Kiyosaki defined an asset as something you own that could make more money for you. So, if you have a fruit shake stall, then a blender and a fridge would be valuable assets to you. A house on a mortgage, on the other hand, is a liability simply because instead of earning from it, you go on paying for it; in most cases, until death. Incidentally, the word “mortgage” comes from the French “mortir,” meaning, “until death.”
Cashflow Quadrant touches on technicalities for the most part, but Kiyosaki dedicated a whole chapter on the power of faith and self-belief. The problem, he said, is that the poor and middle class all too often allow the power of money to control them, because they fear trying to take control. We should change this mindset, he said. Take risks. And if you can’t, try taking calculated ones. We are the only ones who hold the key to our financial salvation.
So, wanna be rich and escape the rat race? Follow Kiyosaki’s best advice: Believe in yourself and start today! But first, buy the books.
print ed: 01/08