Personal Finance

What I Learned From Robert Kiyosaki About Surviving an Economic Recession

Expertise: Flipping Houses, Landlording & Rental Properties, Personal Development, Real Estate Investing Basics
44 Articles Written
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Have you ever been frustrated by the false promise an article or speaker delivers in their headline but fails to deliver on in the actual speech? You know, the kind of heading that tells you how to make money in real estate, then says the secret is, "Work hard, do your due diligence, and network!"

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This kind of advice seems to be flooding the internet right now. The authors are so general in their message, so watered down in their advice, that it really doesn’t do anything for you at all.

You click expecting lemonade. The article is equivalent to that little slice of lemon in your water that barely makes a difference at all. Best-case scenario is you don’t swallow a lemon seed.

I hate this stuff. It ruins the credibility of good authors, and it reinforces a sense of hopelessness that is bound to come when you get disappointed.

If someone has a reputation as a successful investor with extensive experience, I expect more actionable advice than the standard “work hard, be smart, take action” recommendation that any Joe Blow can provide.

The worst is when it comes from a credible source. Someone who is known for being successful, who you know has good information to share, but still they water down their message so much it’s practically useless.

Why does this happen? Well, I think it boils down to two reasons.

  1. They don’t want more competition by giving away their best secrets when there is nothing in it for them.
  2. They don’t want someone else “exposing” them as a fraud, so they keep things as general as they can.

woman with hands on face looking concerned, worried, sad, scared

That One Time I Met Robert Kiyosaki

I realized this years ago in Lake Tahoe when I got to meet Robert Kiyosaki. If that name doesn’t ring a bell, he is the bestselling author of Rich Dad Poor Dad. He's also an insanely successful businessman with a net worth in the vicinity of $80 million.

If you haven’t heard that name, listen to just about any BiggerPockets Podcast and wait for the end when they ask the guests for their favorite real estate book. Just about everyone says Rich Dad Poor Dad.

Kiyosaki was brought in to speak to an investment group I belong to. He gave a speech that detailed his history, his philosophies, and his financial opinion on the state of the American government. When the speech ended, he opened up the room for questions.

Related: Warning: 5 Reasons the 2020 Recession Will Be Far Worse Than 2008

As you can guess, pretty much everyone in the room asked the same thing: “What should I buy and where?”

We all wanted the secret, right? What does financial genius Robert Kiyosaki know that I don’t? How can I copy him and score big without doing all the research he does?

I’m sure this isn’t an isolated problem for Kiyosaki. My guess is Warren Buffet can’t go anywhere without someone asking him what the market is going to do. Same for Gary Vaynerchuk or Steve Jobs when he was around. We all want the secret.

Now, I noticed Kiyosaki seemed to be exerting a lot of effort to answer our questions without giving an actual answer. I’m sure you’ve seen this before. He would say he’s buying oil, but he wouldn’t tell us by which means. He would tell us he’s buying real estate, but he wouldn’t tell us where or why.

I think he just didn’t want someone to follow his advice, have it go bad, and then be held responsible for giving my advice. Heavy is the head that wears the crown, and there is a lot of pressure that goes along with being as successful as he is.

The 5 “Gs” That Hold Value During Recessions

Now, after a lot of prodding, he did tell us there are 5 "Gs" he has learned will always go up in value during a recession. Without further ado, they are:

  1. Guns
  2. Gasoline
  3. Grub
  4. Gold
  5. Ground

Kiyosaki said he has made a career out of researching different economies and what happens when they collapse.

Now, I’m inclined to believe this. I know when I started to accumulate a nice little amount of wealth, I got a lot more interested in researching the global economy. At first, you’re trying to grow wealth. Once you get a little, you get a lot more interested in preserving it.

Kiyosaki has an estimated 80,000,000 reasons to be interested in learning about economies, specifically recessions. I can imagine he’s pretty motivated to do so.

Guns

He went on to explain that when an economy fails, fear takes hold. People start accumulating things they believe will keep them safe. If you happen to own these things, people will pay a lot of money to buy them from you.

Front side of typical american porch colonial house with white traditional columns and pillars, beautiful garden in the back and forest

Kiyosaki shared one story of a man he knew who started buying massive amounts of ammunition in 2008 when there was talk of the economy tanking. A few years later, when the country in Africa he lived in fell into economic turmoil, he sold that ammunition for something like an 8,000% markup. That’s a pretty penny.

This man realized people were terrified and would pay anything to feel safe. Guns obviously make people feel safe in chaotic times, and the theory is they will sell for a premium because of that.

Gasoline

Gasoline falls into this same category. When you aren’t sure if gas stations are going to stay open, everyone wants to stock up on gas. Companies that make gas can do very well.

Related: How to Build Massive Wealth During a Recession: Master These 5 Principles

Grub

Grub is obvious. Owning food is vital to life. A starving person will pay anything to feed their kids. However, Kiyosaki took a bigger approach to this concept and wanted to own the land that grew food.

This qualifies for two of the “Gs” (ground and grub), and Kiyosaki believed the research showed the people who owned food-producing land at times of recession did very well.

Gold

This brings us to the final two “Gs.” Gold and ground.

Now, gold performs well in any downturn. It doesn't take a huge recession. People flock to gold because they believe it contains an inherent value when a countries currency value is in flux.

Gold is considered a standard of sorts, and people feel safe owning it or accepting it as payment when they are unsure what their national currency is going to do.

Ground

Now for the most relevant “G.” Ground. Ground is real estate, and that is what we are here to discuss.

aerial view of houses and culdesacs and tree-lined streets

When an economy goes into a huge tailspin, there are several ways it can work itself out. One of the most common is by printing more money to pay its debts.

Doing this devalues the currency. The less the currency is worth, the higher inflation goes.

In times of inflation, owning real estate is your best friend. Your property values rise. Your rents rise. Your payments stay the same.

In addition to your property being worth more and bringing in more money, you also will be paying back the money you have borrowed at a much cheaper rate than what it was worth when you bought the house with it. Double score.

If I know inflation is going to hit, I want to borrow and owe as much money as possible. Robert Kiyosaki realized this to be the case and recommended ground, or real estate, as a great thing to own during a recession.

Another reason real estate does well in a recession is people circle the wagons and cut expenses. Most people feeling economic fear will only spend money on what is needed. Real estate provides shelter, and shelter is vital.

Owning a fancy restaurant during a recession would be bad. Same goes for a luxury car dealership. But a landlord of cash flowing, high demand, well-cared-for rental property? That’s usually a good place to be.

Your investment can pay for itself, and people will always need somewhere to live. While it’s true that vacancies may go up if people are losing their jobs, it’s also true that others will be losing their houses and need somewhere to live.

Hope for the Best, Prepare for the Worst

There are many theories as to what is going to happen in the American economy. Regardless of what you believe to be the case, it is wise to consider a worst-case scenario and have a plan in place to protect your wealth and the means to provide for your family.

It is hard to get a successful person to share actionable tips like Kiyosaki eventually did, and I hope you find them to be helpful and useful.

Remember that more wealth is built during downturns in the economy than at any other time. Be researched, be prepared, and be ready to strike when the iron is hot!

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David Greene is a former police officer with over nine years of experience investing in real estate that includes single family, multifamily, and house flipping. David has bought, rehabbed, and man...
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    Jesse C. from San Francisco, California
    Replied over 3 years ago
    I think Kiyosaki’s thesis is too simplistic. During the ’09 financial crisis, we had massive deflation that even QE could not inflate it away. During these times people have liquidity crises so many asset classes get sold to raise cash, including RE. You want to sell during bubble peaks and buy during recessions. He’s also been calling for a crash for many years now and has been wrong on timing (anyone can be right eventually if they keep repeating the same call – but that’s not actionable advice). Be careful with people trying to sell something. I do credit Kiyosaki with one thing – questioning the premise that homes are assets and not liabilities but thats about it.
    Cameron Godsill from Neenah, Wisconsin
    Replied over 3 years ago
    Jesse I completely agree with your comments. This was a great read.
    David D. from Frisco, Texas
    Replied over 3 years ago
    Thanks for the article David.
    Matt Rachow Investor
    Replied over 3 years ago
    I can’t help but take what Mr. Kiosaki says with a grain of salt. Broad generalizations should not be taken as sound advice. I’ve lived through 3 harsh recessions where ALL real estate went down in value, due to job losses and reduced market demand. The reductions in equity could far outweigh stable rents (or even increasing rents as one poster stated). Specifically, raw land is one of the most hardest hit assets in a recession. Kiosaki is only good for his general advice from his first book in presenting the idea of the difference in working a job vs. being independent. The whole Rich Dad, Poor Dad is a marketing ploy that has served him well.
    Warren Currier Developer from Union Point, MA
    Replied over 2 years ago
    I’m an outlier as I found this article to be mediocre but for the fact that there are many good reader comments. David, I’m still confused with your opinion of RK’s messages. Are they useful or not? Perhaps you entire point is gently say, ‘the 5Gs suffices as useful information, therefore….” (something). I’ll say it for you: Beyond starting some good conversations Kiyosaki’s content is crap. The 5gs for me are not helpful beyond that they’re (cute) easy to remember and that they can instigate an exchange of ideas with others. If when the ‘stuff hits the fan’ you then decide you had better speed over to the ATM, you simply have not prepared properly regardless of what you want to call it. Ground: For me, ‘ground’ is meant to mean a house with a yard that’s defensible. High ground is better than low ground in a storm. ‘Defensible’ suggest a solid place to call home. Guns: ‘Guns’ may make sense for some people and may not for others. If you’re prepared for bad times and others near you are NOT prepared, you may be in a potentially bad position, although I don’t think you’re going to shoot your neighbor. Having good neighbors is a good idea. ‘NeiGhbors’. Grub: It’s always smart to have food stored up so that you can make it for at least a few weeks. (having pure water is more vital than food) Having land can mean that you can grow food. Seeds? No ‘G’ in seeds, yet these are all important. Gas: Not sure what is meant by ‘gas’. Most people will think it’s obvious but is a full tank of gas an answer for a recession? Gas to me is more complicated as gas, as in NATURAL GAS, is what will be needed when the electricity goes out to run a 24KVA water-cooled Kohler Generator. As for transportation goes: I’m partial to having a diesel fueled truck and, ideally, a diesel car as well. Oftentimes, diesel can be stored below ground in large tanks. Gold: The gold issue seems silly as using gold to buy stuff makes no sense. My parents used to have little ingots of gold when I was a kid. There was no strategic planning involved we just had a bag of pieces of gold that were valued at about $32.00 each. But with gold where it is these days I only see it as a store of wealth, not as something to be used for exchanges. Buy and safely store-away what you can afford to not touch and at the other end there will be something much more valuable. Silver is another thing to consider and the increase in value will be even greater over time as the practice uses of silver in industry are more than gold’s. Cash will be very useful as a method of payment, for exchanges of all sorts. Small bills will be better than large bills. Twenty, five dollar bills will be better than having only one one-hundred dollar bill. A suggestion: Find a bank where you can ‘buy’ many small bills, and start sooner than later. $2000 in ones, $2000 in fives, $2000 in tens, $2000 in twenties… this $8K will be more useful than six pieces of gold. Boxes of quarters are $500.00 per box each roll is $10 each. I like quarters as one roll of ten-dollars has a good feels to it and it is divisible. That, and an entire box of quarters ($500) is hard to run away with. Banks sell these (bricks!). Cash is going to be very important when there’s a crash. Gold, long-term, will be very smart have to dig up somewhere. The world is not going to be buying US Treasuries as soon as they have better options. The dollar will be worth less offshore. The dollar will continue to work as a medium of exchange in the coming years. IMF is working for a reset of the entire world system, once this happens there will be change at a whole new level. Bailouts are NOT going to be a solution at all going forward. BAIL-INS is a new thing to study. Your concept of how things are supposed to be and the plans you’ve made (if only: 401K, savings, a check from the Gov) is going to better shattered.
    Steven Ashwood
    Replied 5 months ago
    I guess Kiyosaki would be worth that much for someone who marks up real estate courses up to $50,000 and knows people will pay due to fear tactics and churns out the same books over and over. Back in 2008 his books repeated the same fluff but no substance. I’m so glad I didn’t waste my money on his courses and happy there is so much better content nowadays.
    Vaughn K. from Seattle, WA
    Replied 5 months ago
    As I've said before, Kiyosaki is good stuff to get the gears turning in a persons head. To break the lifetime of bad financial advice everybody is given. But he doesn't really give much technical advice, which is probably for the best. Just basic concepts for people who are new to thinking about money in the way wealthy/successful people think about money. I learned a lot of useful general concepts from reading his stuff years back, but none of his books are How To guides about the exact details to do anything in particular.
    Jared Bigman New to Real Estate from Irvine, CA
    Replied 5 months ago
    Great article, Dave. I have been listening to Robert's Rich Dad Radio Show saga on the demise of pensions recently. He is proudly pessimistic and refuses to give advice, only education. He never gives direct insights on his real estate investing. Glad to hear I'm not the only one who finds bait-and-switch headlines/content to be frustrating.
    Manuel Prado from Midland, MI
    Replied 5 months ago
    Great article David, thanks for always sharing such good content and specially putting them in your analogies with sports. It makes it easier to digest and more fun too. David if you were to invest in SFH today (knowing the actual uncertainties), what extra precautions would you take now that you wouldn’t have taken 3 months ago? For example stress test, reserves, vacancy, etc