Rich Dad Poor Dad’s investing principles - GOOD or BAD?
Shiloh LundahlPro Member
Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votesRich Dad Poor Dad’s investing principles - GOOD or BAD?
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I don't view Rich Dad Poor Dad so much as an investment book, but more a lifestyle/self help book. It tells you to invest, but doesn't spend a whole lot of time talking about actual investments.
-You can learn from both dads. He compares the two "dads" and saying how the poor one focuses on the "wrong" things. Financial IQ, interpersonal communication, sales are all great skills, but he downplays, at least to my memory, things like science, math, history ect, in favor of the money making "hard" skills. Looking at the truly successful people, they all study things outside their profession and have many "mental models" to base their choices on. Biology, physics, history, math, ect, even at a basic level can teach us a lot.
-Data doesn't lie. Getting a bachelor's degree, means on average, you'll make more than if you have a High School Diploma. Same for Masters vs bachelors. That's not a guarantee, but it increases your odds of making a higher income. He ignores the fact that his rich dad's success could be an outlier.
-What is wrong with working hard, living below your means, saving money? If you don't have the skill set of the "Rich dad" maybe that is your best bet for success? After all The Millionaire Next Door, did a pretty good job laying out that's how most people got a net worth of seven figures. Unpopular opinion here but, starting one's own business and investing full time is not for everyone. Heck, buying investment property isn't for everyone. Capitalism can be a brutal place.
A fun read for someone who may not have had the opportunities to think/learn about money as a tool rather than an end in and of itself, but not a wonder book that changes the world.
80 Replies
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes8y
Originally posted by @Shiloh Lundahl:
Many people on BiggerPockets (at least on the podcasts) have credited their start to investing in real estate to reading Robert Kiyosaki’s book Rich Dad Poor Dad; myself included. However, there are also some investors who disagree with his philosophies. I would like to open up this post to anyone familiar with Kiyosaki’s investing principles taught in any of his books to debate his teachings.
Which of his teachings do you feel are sound teachings and which are unsound in your opinion? I would like to invite everyone into the conversation but I would like to extend a specific invitation to @Omar Khan, @Jay Hinrichs, @Mike Dymski, @JD Martin, @Joel Owens, @Steve Vaughan, @Sterling White, @David Greene, @Dave Van Horn, and @Ben Leybovich.
Thanks to all who care to share their opinion on the subject.
Thanks for the invitation!
I come at the question as someone that didn't read RDPD until well after buying some houses. In fact, it was the podcast that got me to read the book, as so many people mentioned it as one of their influences.
On the positive side, I thought the best takeaway was for the habitually poor to understand how to change their mindset. To me, as someone that grew up ridiculously poor, I completely understand the mindset of spending every dime that comes in; no one who lives that way worries about next week, much less next year. The thought is always to get through this week and then see what happens. Thus, when unexpected windfalls come - a bonus; a gift; you win $500 on the lottery - the habitually poor never consider how to make that money make more money. The money always goes to either postponed needs (braces; fixing the car) or postponed wants (that nice vacation; a new TV).
On the negative side, I didn't think it gave enough credence to other ways of making money. Truthfully, owning real estate is really a place to park money after you've already made it, unless you're going to non-stop leverage your way into a business. Real money is almost always made by starting a business, owning a business or inventing a business. Then that money is dispersed into different investments - stock market, real estate, commodities, etc. I think RDPD has a way of denigrating work as if it's not meaningful if you're not raking in millions of dollars. It's intellectually dishonest to pretend that everyone can be a millionaire; as George Carlin used to say, "If everyone is special, then no one is special because the entire word loses its meaning". If everyone did what we did, then no one would be able to do what we do. Owning real estate may provide a service, but it is not really creating value, just maybe improving upon an existing product - or, more likely, simply leveraging an existing product, no different than a guy that buys a dozen bikes and rents them to people on the boardwalk in the summer. Beyond that, I don't think it serves humanity by suggesting that work that doesn't make one wealthy enough to have people running around doing this for you is not useful. There are a lot of jobs in the world that need doing, and there's no way we can afford to pay every one of those jobs a million dollars with finite resources.
Skyline Properties - Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes8y
Theres a lot of dogma on BP around "quitting the rat race", "passive income" and the fact that college is useless. I dont think its true. Coming from an immigrant Indian background, education is considered the most important thing and if I look at my extended family they are full of doctors, PhD's, lawyers, entrepreneurs and all of them are highly educated and all of them highly successful. All of them have fulfilling careers and love what they do. I use Real Estate as an investment vehicle but its not my life. And my career has made me far more money than investments. I have a great job working with smart people, travel the world and get well paid. And it was my education that led me there. Same is true for most of my friends and family. They would not trade their education for anything. So before you drop out of school and try to be a full time RE investor, think again.
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes8y
Originally posted by @Shiloh Lundahl:
As far as the RDPD series goes, I liked Rich Dad’s Cashflow Quadrant the best. This book is not about specific investment strategies either but it is about the mindset differences between an employee, a self-employed small business owner, a large business (500+ employees) owner, and an investor.
My views on wealth were formed early in my life by people who were honest about their beliefs.
My first book on personal finance was Dick and Jane Open Savings Accounts, which was given to me by a bank teller when I was 7 years old (1950s). After reading the book, I just had to have a savings account. My fellow second graders, who had not read the book, thought I was silly. In subsequent years, my grandparents would put a $5 bill in my birthday card and I had to put the money in my savings account rather than use it to by comic books and bubble gum. Because of the strong impression this made on me, later in life, I would immediately sign up for payroll deductions into the company credit union before I got my first paycheck.
I'm told "rich families" give their children a few shares of stock (such as Disney) as stocking stuffers because they know their kids would enjoy looking at the pictures in the annual report even if they didn't understand financial statements at an early age. My parents were born around the same time Buffet and Munger were born, which means they all grew up during the Great Depression. My parents were told the hardships they had to endure were caused by gamblers who treated stocks as lottery tickets and stocks were a fraud to begin with. It took me many years to change my mindset and realize stocks were ownership interests in businesses (business school helped, but I struggled with it in my classes).
My second book on personal finance was Think and Grow Rich by Napoleon Hill, which I found by accident in the book rack at the supermarket (1970s). I was skeptical, but the words "this book is worth a million dollars to you" on the cover convinced my to risk the $2 to buy it. When I asked my professor at business school about it, the question I got back was did the author have a PhD? When I said no, the response was that the book wasn't worth reading. Of course, I read it anyway and the book changed my life (it took a while for the lessons to sink in).
The incentive system in education and employment is to reward achievements with merit pay raises. Earning an advanced degree means an $X/week pay raise. When I was a senior in college and pushing a broom across the floor, I earned the New York State minimum wage of $1.85 an hour. If I had stayed there, my pay the day after graduation would have doubled to $3.70 an hour simply by earning the college degree (instead, I moved to California to earn the equivalent of $6 an hour working in the aerospace industry). After T&GR and business school starting sinking in (my favorite class was Entrepreneurship and Venture Initiation) did I realize my value to others mattered more than the "merit badges" I had earned. Briefly doing door-to-door selling (which is what multilevel marketing was called in those days) helped drive home this point.
What I liked about the RDPD series is to replace "I can't afford it" with "how can I afford it?" because the mind keeps working on the problem in the background (T&GR refers to this as the subconscious mind working on autosuggestion). I got the Cashflow Quandrant concept. The E-Myth Revisited reinforces the idea in The Millionaire Next Door of working on your business rather than in your business (whenever possible). When my financial adviser at a major Wall Street brokerage firm advised me to maximize my contributions to my retirement and invest an additional 10% of my income in taxable accounts (1990s), I discovered it worked and tried to spread the gospel to others. I was surprised when my friends and co-workers did not want to hear it.
Perhaps we're wired to hate finance and economics ("the dismal science") and perhaps parents need to do more. The PBS show Wealthtrack last year aired an episode about how people who engage in financial planning are happier and this angle might be an approach to consider (replace "don't worry, be happy" with "plan ahead, be happier").
- Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes8y
@Account Closed thank you for your addition to this thread. I hear you as to what you are saying with regards to your cultural belief of the need for education. As a therapist I have worked with several families from India who have shared those similar cultural beliefs and they have had conflicts with their kids who have grown up in the US.
I have a strong belief in education and I absolutely support it. My point in some of the things that I have written is people can get a self-directed education. Some professions, such as my own, need a formal education in order to be licensed to provide a service. I think that that education is very valuable. Now, in my education, just as in many other professional people’s education did not include a financial education but just focused on my particular field of study which was social work. Don’t get me wrong. I love being a social worker and I love helping families. However, after graduating with my master’s degree I got my first job earning 40k a year. Whereas that is above the poverty line, when you subtract a mortgage, student loans, health insurance, and the other costs of supporting a family of 5 at that time, there was no money left. In order to change my situations, I had to change my understandings of money and investing. Now, 10 years later, I am now probably earning within the top 10% (probably top 5%) of social workers. But it is due to the financial education that I got after I finished college, not the fact that I went to college.
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes8y
Originally posted by @Shiloh Lundahl:
@Account Closed thank you for your addition to this thread. I hear you as to what you are saying with regards to your cultural belief of the need for education. As a therapist I have worked with several families from India who have shared those similar cultural beliefs and they have had conflicts with their kids who have grown up in the US.
I have a strong belief in education and I absolutely support it. My point in some of the things that I have written is people can get a self-directed education. Some professions, such as my own, need a formal education in order to be licensed to provide a service. I think that that education is very valuable. Now, in my education, just as in many other professional people’s education did not include a financial education but just focused on my particular field of study which was social work. Don’t get me wrong. I love being a social worker and I love helping families. However, after graduating with my master’s degree I got my first job earning 40k a year. Whereas that is above the poverty line, when you subtract a mortgage, student loans, health insurance, and the other costs of supporting a family of 5 at that time, there was no money left. In order to change my situations, I had to change my understandings of money and investing. Now, 10 years later, I am now probably earning within the top 10% (probably top 5%) of social workers. But it is due to the financial education that I got after I finished college, not the fact that I went to college.
I hear you about the Indian parents and pressure on kids. You are correct about saying what you go to college for is important. All my examples are people who went to school for a professional degree and they are all doing well. If you go get an expensive degree in English you may not fare as well. Also, in Indian families it is every parents obligation to fully pay for college and even grad school if they can. So most of those examples are people coming out with a valuable degree and zero debt.
For the next generation born in the US (like my daughter) they see a lot more choices than we did. She has chosen to go to Art and Design school and I am supporting her decision to follow her dreams. She is still getting the fully paid education though :-) so at least she doesnt come out in a hole. Then she can take a lower paying job that she enjoys and is good at. And I do believe that if you do something you like and are good at, eventually you will succeed.
- All Over, USA · Member since 2017 · 689 posts · 756 votes8y
Originally posted by @Account Closed:
Theres a lot of dogma on BP around "quitting the rat race", "passive income" and the fact that college is useless. I dont think its true. Coming from an immigrant Indian background, education is considered the most important thing and if I look at my extended family they are full of doctors, PhD's, lawyers, entrepreneurs and all of them are highly educated and all of them highly successful. All of them have fulfilling careers and love what they do. I use Real Estate as an investment vehicle but its not my life. And my career has made me far more money than investments. I have a great job working with smart people, travel the world and get well paid. And it was my education that led me there. Same is true for most of my friends and family. They would not trade their education for anything. So before you drop out of school and try to be a full time RE investor, think again.
Funny you mention it. Some of the biggest multi-family investors I personally know in Berkeley are physicians (volume wise and revenue wise). They generate WAY more from their investments than they do from their practice as physicians (and it's not even close!) Surely enough, rather than their kids taking those investments and growing it further, they take the "tough route" and decide to go into medicine themselves.
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes8y
One approach to consider is a dual major or major-minor. For example, if someone wants to major in journalism, then minoring in economics makes it easier to be a business reporter. But regardless of the major, understanding money is important to run a successful household.
The need in Silicon Valley is STEM and STEAM (science, technology, engineering, arts, and math). Developing faster, better, cheaper computers requires strong computer engineering skills. Developing AI-based systems to solve society's problems requires a strong knowledge of human nature (liberal arts) and the capabilities of AI technology.
When I was a kid growing up on a dairy farm, the visiting salesmen (farm machinery, crop seeds, and so forth) would ask my father that if I wanted to be a farmer when I grew up, would he send me to agriculture school. His answer was always the same. If I wanted to be a farmer when I grew up, he would send me to business school.
In fact, if you wanted to be a dairy farmer today, understanding the farming business is critical (it's a competitive low-margin business). But understanding how robots fit in to your operation is also important. As a teenager back in the 1960s, my parents had a good chuckle when I said someday computers would be milking cows.
I admit I haven't read the other responses, so no idea if anything I say will be a repeat or contrary or what.
People can say what they want about the Rich Dad principles, but I've yet to have read one that I have thought to be inaccurate. In fact, I can say quite confidently that had it not been for a lot of my Rich Dad readings (I have a whole bookshelf of those books) that I wouldn't be where I am today. No doubt about it. Some specific things he taught literally are the crux of how I started my business, how I survived through the building period of it, and how I run it today, and certainly the crux for my investment choices. And it's all worked out very well.
I think everything about the cash flow quadrant is on point, I fully agree with his take on budgeting, and I fully agree with his stance on passive income and also about primary homes not being an asset but rather a liability.
Maybe I should read more of the responses to see if anyone mentions this, but I'd love to know what people think to be inaccurate about his teachings. I understand people being upset by how the education piece is structured- sales pitches and costly programs, etc.- but that's different than the quality of the principles.
And, great topic idea for Father's Day! ;)
- Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes8y
Originally posted by @Aaron Hunt:
Originally posted by @Account Closed:
Theres a lot of dogma on BP around "quitting the rat race", "passive income" and the fact that college is useless. I dont think its true. Coming from an immigrant Indian background, education is considered the most important thing and if I look at my extended family they are full of doctors, PhD's, lawyers, entrepreneurs and all of them are highly educated and all of them highly successful. All of them have fulfilling careers and love what they do. I use Real Estate as an investment vehicle but its not my life. And my career has made me far more money than investments. I have a great job working with smart people, travel the world and get well paid. And it was my education that led me there. Same is true for most of my friends and family. They would not trade their education for anything. So before you drop out of school and try to be a full time RE investor, think again.
Funny you mention it. Some of the biggest multi-family investors I personally know in Berkeley are physicians (volume wise and revenue wise). They generate WAY more from their investments than they do from their practice as physicians (and it's not even close!) Surely enough, rather than their kids taking those investments and growing it further, they take the "tough route" and decide to go into medicine themselves.
I agree: Anish could have earned more over the years out of investing than out of his career!
The fact that he chose to not use RDPD principles in a greater way, doesn't change that.
I hope my son will get more benefit out of my investing, than I will out of my Dad's...
[But please, don't anyone think that I'm recommending paying for a RDPD "education"!]
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes8y
"Cash is trash."
In some situations, cash is trash. In other situations, cash is a strategy.
I stopped reading the RDPD books 15 years ago, so maybe he doesn't talk about cash is trash in print. But he talks about it publicly. Maybe he's right and will wave at me with all five of his fingers someday when he flies over my home in his private jet.
- Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes8y
Originally posted by @Brent Coombs:
The fact that he chose to not use RDPD principles in a greater way, doesn't change that.
I hope my son will get more benefit out of my investing, than I will out of my Dad's...
[But please, don't anyone think that I'm recommending paying for a RDPD "education"!]
I could have earned more money doing a lot of things. Like Kiyosaki does by ripping off people. The point is I ENJOY my career and life and am happy with it. I can do everything my heart desires and I do! And it was my education that took me there.
Originally posted by @Account Closed:
"Cash is trash."
In some situations, cash is trash. In other situations, cash is a strategy.
I stopped reading the RDPD books 15 years ago, so maybe he doesn't talk about cash is trash in print. But he talks about it publicly. Maybe he's right and will wave at me with all five of his fingers someday when he flies over my home in his private jet.
RDPD is a good examples of a motivational book but that's it. It offers little or no actionable advice. The advice Kiyosaki does offer are either old cliches about money, dangerous and in some cases illegal. Plus, the author has admitted that he just made up the whole story. There is no rich dad, there is no poor dad!
John Reed has an excellent point-by-point analysis: John T. Reed's analysis of Robert T. Kiyosaki's book Rich Dad, Poor Dad, Part 1.
Kiyosaki's true genius is spinning 2-3 paragraphs of very ordinary (and banal) financial platitudes into a range of books. That and being a MLM beast. For that he deserves A LOT of credit.
Plus, the guy can't even keep his story straight... lol.
Look if you get motivation and the book helped you better yourself financially - all the more power to you. But that is a more a testament to your hard work, consistency of effort and intelligence. It isn't due to any of the cliched "investing" principles of which none exist in RDPD.
P.S. Kiyosaki keeps boasting about his massive wealth. The guy has admitted he's worth less than $9 million in court (and declared bankruptcy - so much for asset protection strategies... lol) and has a habit of making up stories about his supposed investing prowess. He can't prove any investing track record. He is simply a creature of marketing and hype.
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes8y
I like parables as a learning tool to expand on textbook material. When I was doing door-to-door selling earlier in my career, The Richest Man in Babylon was recommended as a good book to read. I like the book because I'm not left with the feeling someone is trying to up-sell me.
https://en.wikipedia.org/wiki/The_Richest_Man_in_Babylon_(book)
Good self-help books stand the test of time. Think and Grow Rich claims its secrets are inside, but are not explicitly identified because they reveal themselves silently to the readers. The book helped me greatly when I read it in the 1970s and 1980s. I reviewed the book again a few years ago when something kept gnawing at me about what I was going to do for retirement. The Six Ghosts of Fear at the end of the book had the secrets I needed to discover.
@Account Closed My impression of his message with "cash is trash" is not to say it's not a vehicle, because it certainly is a vehicle. I think he's more saying the vehicle we're forced to use (which is cash) is a trash vehicle. Not that it's not the vehicle. Or the strategy, same word in this context.
- Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes8y
@Account Closed I believe he was talking about the Fiat money system. That our monetary system is not backed by anything with actual value like it used to be when it was backed by gold and silver in the early 70s.
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes8y
Originally posted by @Shiloh Lundahl:
@Account Closed and @Ali Boone I believe he was talking about the Fiat money system. That our monetary system is not backed by anything with actual value like it used to be when it was backed by gold and silver in the early 70s.
I agree with your observation about fiat money. People who keep their life savings in a bank account paying 0.01% interest are going to be disappointed when they retire years or decades later because the purchasing power of their money will not have kept up with inflation.
But precious metals are not the only way to hedge against inflation. For example, the dividend growth rate of my portfolio of cherry-picked Dividend Aristocrats is 10% per year (I use 7% as my derated value for planning purposes). For every $1 of dividends today, I'll be generating $2 of dividends a decade from now assuming the companies in my portfolio continue to deliver (Rule of 72). As long as inflation remains under 7%, I'm outrunning it.
Real estate is another way to hedge against inflation. In the 1970s, we had an inflation rate that exceeded 10% a year. Property taxes increased so fast in California that taxpayers revolted and passed Propostition 13 (which I voted for then and will vote for again if it ever appears on any ballot where I live). Whether I buy my real estate directly or on Wall Street (REITs), I need to keep in mind the possibility of the high inflation rate scenario.
But the blanket statement "cash is trash" is misleading because it gives the impression if I keep any amount of money in cash, I'm doing something foolish. During the early 2000s when NINJA loans were the norm, a real estate investing group I attended kept insisting "real estate prices never go down." When I refused to move my money from the stock market to the group's real estate investments, the co-founder of that group stormed out of the room saying "I would come around." I did come around, but to the conclusion the guy was a crook who was trying to swindle me out of my life savings.
Since then, I treat the "X is the only way to go" statement out of someone as a litmus test. For some people, X is the right way to go. For other people, Y is the right way to go. I realize Kiyosaki is a Branding Master, but he strikes me as someone who's incompetent with his own money (his bankruptcy). I support the First Amendment and defend his right to speak his mind. I learn more from Robert Kiyosaki now than I do from Warren Buffett because whenever I hear Kiyosaki speak, I'm forced to rethink all of the reasons why I shouldn't believe him (I do, however, like his Cashflow game and I found the Cashflow Quadrant to be a good way to conceptualize the various ways to build wealth).
I've been watching capitalism at work for a long time. Whenever the price of gold starts to go up, storefronts open with the marketing message: We'll exchange our soon-to-be-priceless gold for your soon-to-be-worthless Federal Reserve Notes. In business, it's called giving the customers what they want.
- Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes8y
@Account Closed I agree with questioning blanket statements. My comment on the fiat money system was not just to focus on precious metals as much as to recognize that our money system is not infallible and history has shown money systems such as ours becoming worthless and not too far in the past. Assets are real whereas money is what we agree that it is. After all it is just paper with picture of dead presidents (and Franklin of course). With the quantitative easing, the influx of money, raising minimum wage, and inflation, my assets increased in value while my purchasing power decreased. So I can understand the concept of cash being trash even though it is an extreem view point.
I do agree with how helpful the Cash Flow Quadrant book was to me. It really was a game changer and completely helped me understand money and earning money in a very simple and understandable way.
With regard to his bankruptcy, he talks about going broke after his first business in his books. Since then, I believe he has had one of his businesses file bankruptcy. I don’t believe he did personally. I also believe his net worth is in the 80 million rage from what I heard on a podcast. I think it was Keith Weinhold’s but I’m not certain as I listen to many podcasts. But what I do know is that he surrounds himself with with very capable experts in their fields know as Rich Dad’s advisors.
Originally posted by @Shiloh Lundahl:
@Account Closed I agree with questioning blanket statements. My comment on the fiat money system was not just to focus on precious metals as much as to recognize that our money system is not infallible and history has shown money systems such as ours becoming worthless and not too far in the past. Assets are real whereas money is what we agree that it is. After all it is just paper with picture of dead presidents (and Franklin of course). With the quantitative easing, the influx of money, raising minimum wage, and inflation, my assets increased in value while my purchasing power decreased. So I can understand the concept of cash being trash even though it is an extreem view point.
I do agree with how helpful the Cash Flow Quadrant book was to me. It really was a game changer and completely helped me understand money and earning money in a very simple and understandable way.
With regard to his bankruptcy, he talks about going broke after his first business in his books. Since then, I believe he has had one of his businesses file bankruptcy. I don’t believe he did personally. I also believe his net worth is in the 80 million rage from what I heard on a podcast. I think it was Keith Weinhold’s but I’m not certain as I listen to many podcasts. But what I do know is that he surrounds himself with with very capable experts in their fields know as Rich Dad’s advisors.
lol @ $80M! That is marketing hyperbole. In court he was forced to admit that he had less than $9M to his name. This was because he was sued by his co-author, Sharon Lechter.
$9M is nothing to scoff at but it's not $80M. His so-called investing prowess do not exist. All his claims about being a superstar investor are just that - claims. Also, the podcast you heard him on gets affiliate marketing fees and is under the Rich Dad banner i.e. conflict of interest + what are they going to say? The guy who's teachings they promote just made stuff up on the go (and none of his story checks out).
Every system will eventually fail. That type of prediction doesn't make you a seer. E.g. With 100% confidence I can claim that there will be a massive recession bigger than 2008 in the next 200 years. Are you going to start selling your investments now in the hope of cashing in on this "brilliant" prognosis?
What use are predictions if they do not provide you specific, actionable advice? If you claim that you have a fool-proof system, then results should back it up. Otherwise it's hokey "self help" (which has its own, very important, place) and not investment advice you should bank you future on.
I do think he's a genius marketer and deserves a lot of credit. Through good luck, timing and his marketing abilities he provided vague sounding generalities that come across advice to a non-sophisticated investor.
Any success you have had from following his advice isn't because of him. It's because:
- you live in the greatest economy in man's history: USA
- you have access to capital and the ability to recover from minor mistakes (due to the hard work you put into getting a solid education, something Kiyosaki looks down on).
- in all likelihood, you really got things going after 2008 i.e. enjoyed massive increases in wealth early in your career due to sheer timing and luck
- on average, have a solid, dependable income which comes from a safe, stable, non-cyclical career
- Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes8y
@Omar Khan Thanks for your input. I specifically invited you into the thread because of your perspective on Robert Kiyosaki and his books so I appreciate you sharing that with us.
I for one am not sure about Robert Kiyosaki's actual net worth. I just shared what I heard on a podcast which may be accurate or inaccurate. I don't know what was said in court about his net worth or how he has it calculated or protected. But I for one know that there is a net worth range that rich people can state depending on the question, how it is worded, and whether they want to state the upper end of the range or lower end of the range. For example you can ask me what I make and I could say 40k because I give myself a salary of 40k. But then I have owner draws for much more than that. Additionally I have real estate income and I have depreciation. Some of the real estate I own by myself, other real estate I own with a partner. Then I could divide it in half because my wife technically owns half of everything that I own. So depending on the question, I can state anywhere from 40k to 250k. I think this is why banks ask for tax returns to find out what is claimed on the tax returns. My CPA sometimes asks me how I want to account for certain things on my taxes depending on if I want to show more income (for more bank loans) or less income (to reduce tax liability) because things can legally be claimed in more than one way. Then of course, there are the multiple write-offs that one can have owning their own business or corporation where many expenses can be claimed as business expenses which are then reduce income. So, other than what my tax return states, I don't know how much I make or what the exact total value of my assets are at any given time and it would be easy to state at the upper end or the lower end of the range depending on my purpose in sharing.
One thing that I do know is that you can get to know someone by the people they hang around with, thus the phrase birds of a feather flock together. Some of the people Robert Kiyosaki associates with are Tom Wheelwright, Garrett Sutton, Ken McElroy, Robert Helms, Russell Grey, John Burley, Peter Shift, Hal Elrod, G. Edward Griffin, Keith Weinhold, and Chris Martenson.
So from my experience with Robert Kiyosaki and his books, I have gained a lot of mindset changes. His book Cash Flow Quadrant was life changing for me. And I liked many of his other books like Rich Dad's Guide to Investing, Unfair Advantage, Rich Dad's Guide to Investing, Second Chance, and so on. I recognize that his books are not specific how-to books and that his perspective is just one perspective, but for me it has been a valuable perspective.
Whose perspectives with regards to financial management or wealth building do you follow?
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes8y
Originally posted by @Shiloh Lundahl:
@Account Closed But what I do know is that he surrounds himself with with very capable experts in their fields know as Rich Dad’s advisors.
I'm aware of the Rich Dad's Advisers and I agree they are highly competent in their fields.
In the early 2000s, I discovered Dolf de Roos (I liked him, but not everyone agrees with his real estate qualifications, http://www.johntreed.net/DeRoos.html) and Van K Tharp (no longer affiliated with RD Advisors). What I liked about Tharp's book Trade Your Way to Financial Freedom is that it had equations on expected value right out of my engineering course Engineering Applications of Probability Theory. Other trading books I read at the time were a variation on comedian Will Rogers Depression Era gallows humor ("if the stock's going to go up, buy it; if the stock's not going to go up, don't buy it").
This led me to Tharp's 2004 book Safe Strategies for Financial Freedom, which covers ways to build wealth requiring less intensity than publicly-traded securities. One of the chapters is on real estate and the subauthor who wrote it did it in San Jose, California, where I was living at the time and could relate to the locations mentioned in the examples. The book also has a chapter on big picture assumptions. Investing and trading during times of high inflation is different than times of deflation. When I brought this idea up with people, I was told we could never have deflation because the Fed would inflate us out of it (I know the Federal Reserve already knew this after the Financial Crisis of 2008).
The high inflation of the 1970s was great for student loan debt. With raises in the 10% to 20% each year, I was able to pay mine off with cheaper dollars. Today's student loan debt are not so lucky, but maybe that will change in the future. The 1970s decade was ideal for real assets: real estate, gold, and baseball card collections. Then the 1980s decade had to spoil the party and make it ideal for financial assets: stocks and bonds (although real estate didn't do too badly depending on where in the United States it was located). I'm sure the tide will turn again; I just don't know when.
Originally posted by @Shiloh Lundahl:
@Omar Khan Thanks for your input. I specifically invited you into the thread because of your perspective on Robert Kiyosaki and his books so I appreciate you sharing that with us.
I for one am not sure about Robert Kiyosaki's actual net worth. I just shared what I heard on a podcast which may be accurate or inaccurate. I don't know what was said in court about his net worth or how he has it calculated or protected. But I for one know that there is a net worth range that rich people can state depending on the question, how it is worded, and whether they want to state the upper end of the range or lower end of the range. For example you can ask me what I make and I could say 40k because I give myself a salary of 40k. But then I have owner draws for much more than that. Additionally I have real estate income and I have depreciation. Some of the real estate I own by myself, other real estate I own with a partner. Then I could divide it in half because my wife technically owns half of everything that I own. So depending on the question, I can state anywhere from 40k to 250k. I think this is why banks ask for tax returns to find out what is claimed on the tax returns. My CPA sometimes asks me how I want to account for certain things on my taxes depending on if I want to show more income (for more bank loans) or less income (to reduce tax liability) because things can legally be claimed in more than one way. Then of course, there are the multiple write-offs that one can have owning their own business or corporation where many expenses can be claimed as business expenses which are then reduce income. So, other than what my tax return states, I don't know how much I make or what the exact total value of my assets are at any given time and it would be easy to state at the upper end or the lower end of the range depending on my purpose in sharing.
One thing that I do know is that you can get to know someone by the people they hang around with, thus the phrase birds of a feather flock together. Some of the people Robert Kiyosaki associates with are Tom Wheelwright, Garrett Sutton, Ken McElroy, Robert Helms, Russell Grey, John Burley, Peter Shift, Hal Elrod, G. Edward Griffin, Keith Weinhold, and Chris Martenson.
So from my experience with Robert Kiyosaki and his books, I have gained a lot of mindset changes. His book Cash Flow Quadrant was life changing for me. And I liked many of his other books like Rich Dad's Guide to Investing, Unfair Advantage, Rich Dad's Guide to Investing, Second Chance, and so on. I recognize that his books are not specific how-to books and that his perspective is just one perspective, but for me it has been a valuable perspective.
Whose perspectives with regards to financial management or wealth building do you follow?
See below for some of my favorites.
Would love to get yours as learning is a lifelong process.
- The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel
- Common Stocks and Uncommon Profits and Other Writings
- Berkshire Hathway Inc - Shareholder Letters
- Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger (the funniest of the lot)
- Real Estate Finance & Investments: Risks and Opportunities
- The Real Estate Game: The Intelligent Guide To Decisionmaking And Investment
- Sam Walton: Made In America (if you ever need jolt of adrenaline... this is it! an "only-in-America" story that will pump you up)
- The Black Swan: Second Edition: The Impact of the Highly Improbable: With a new section: On Robustness and Fragility (Incerto)
- Thinking, Fast and Slow
FYI: I find myself referring to these multiple times because I invariable pick up new perspectives. This is a testament to the wisdom of these great minds.
All of these are investors with a significant verifiable public track record of success (and some failures). They do not make empty claims nor offer predictions. Only charlatans are in the business of offering predictions.
They have ALL extolled the virtues of higher education not just as a means to make money but as an enlightened way to live a purposeful life.
You (and I) could be the smartest person in a hunger ravaged refugee camp in a war-torn country and would not get far in life.
Your current level of success is down your high levels of intellectual curiosity, capacity/willingness to learn, deferred consumption, emotional intelligence and, most importantly, luck to be born into the greatest economy known to mankind.
P.S. Would like to emphasize that I am NOT against Robert Kiyosaki. Personally, I think the guy is a marketing genius. He is just not an investing genius. The same way as LeBron James is a basketball genius but not a prodigy in snowboarding.
- Lender · Pensacola, FL · Member since 2017 · 658 posts · 626 votes8y
Originally posted by @Shiloh Lundahl:
@Omar Khan Whose perspectives with regards to financial management or wealth building do you follow?
I found a how-to book for every asset class imaginable: real estate, stocks, bonds, rare stamps, precious art, whatever
The Best Trading Book Ever by Ken Long
http://www.iitm.com/Weekly_update/Weekly_435_Aug_05_2009.htm#tradingtip
- 8yDave Van HornPro MemberFund Manager · Wayne, PA · Member since 2009 · 1k+ posts · 1k+ votes
Thanks for the tag @Shiloh Lundahl! And good idea for a post.
I'm not sure there is any one correct answer on the college argument, but I do like much of what @Account Closed have to say. Not sure I have much to add in that regard :)
As for Kiyosaki's seminal book, despite it's flaws I can easily say that I probably wouldn't be where I am today without reading it. As a budding entrepreneur, learning some of his concepts about cash-flow and the investor mindset really marked a paradigm shift in my worldview. It showed me my then "herd" mentality and that nothing could really change in my life until I changed my own personal philosophy on money and work. He brought an awareness to my situation that changed my life and for that I'm grateful.
There are two major disadvantages to his book in my opinion. One is he describes things in a matter that's too cut and dry. For example, although I sort of like the Cash Flow quadrant design he doesn't factor the complexities of someone's income earning - i.e. I happen to be in all 4 quadrants at the moment (ideally maximizing all the benefits each has to offer).
The other disadvantage is that he also has too much of a "doom and gloom" way of thinking. I'm an optimist so I don't always agree with that. And because his world view tends to be more cautious for whatever reason, his strategy is geared too much towards cash flow. The problem with that is...the whole world isn't based on cash flow. His simple idea of essentially putting as many dollars that enter into your pocket into cash flowing assets can be a powerful one but it's not always so simple. He conveniently brushes over the economic reality of people around the world, avoiding any sort of acknowledgment towards market conditions, abject poverty, or how a person's physical or mental health could affect this one size fits all philosophy. But then again, how could he? He wrote a book for the masses.
Having just written a book myself where I talk about some intricate Real Estate deals I've done in the past, I'm starting to understand the limitations your own material can have especially the wider your audience is. But at the end of the day I think his work in this book at least, has done more good than bad when it comes to easy, digestible education on the subject of money and financial literacy. Sharon Lechter who co-wrote the book with him also makes some accounting concepts easy to understand for the layman as well, which is always a good thing. Oh and last but not least, his financial education for children is hard to top - CashFlow for Kids is a great tool that I often suggest to friends and family.
So his book may not be perfect, and it may stop short in many ways but it really serves as a gateway drug where many other more specific books can pick up where his left off...like The Banker's Code for example. Kiyosaki opened me up to a new way of thinking and led me to people I've gained so much from like Jim Rohn (who I highly suggest looking to for sound, timeless philosophy), that it's tough for me to not recommend investors to at least give him a shot.
@Account Closed listed a lot of the books I'd recommend and added a few to my reading list. I'll highlight, Common Stocks, Uncommon Profit. Fischer is under appreciated.
I'd toss out, Joel Greenblatt, Farnam Street, Seth Klarman, Tren Griffin (both his blog and his books).
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes8y
Originally posted by @Omar Khan:
Any success you have had from following his advice isn't because of him. It's because:
- you live in the greatest economy in man's history: USA
- you have access to capital and the ability to recover from minor mistakes (due to the hard work you put into getting a solid education, something Kiyosaki looks down on).
- in all likelihood, you really got things going after 2008 i.e. enjoyed massive increases in wealth early in your career due to sheer timing and luck
- on average, have a solid, dependable income which comes from a safe, stable, non-cyclical career
I pretty much agree with this word for word. Taking advantage of opportunities, financially speaking, is only really possible when you live in a society that has already covered the bulk of Maslow's Hierarchy of Needs. In the majority of the world, the idea of walking into a bank and getting a loan for anywhere from 75-96.5% of the purchase price of a home, building, apartment complex is a joke, much less one that you don't plan on living in yourself. My main objection to RDPD is that I feel it is dismissive of education as something only pursued by chumps. I've read a lot of biographies, including some of the richest people in the world, and virtually all of them became wealthy through education. Note that this does not necessarily mean organized education. Andrew Carnegie learned how to identify telegraph words by ear so that he could take down messages faster, and thus deliver them faster. This led him to eventually be named telegraph operator, and then be lured into that position with the railroads. Carnegie was a voracious reader, spending virtually all of his evenings in self-education while his cohorts spent their evenings in the Pittsburgh saloons. He parlayed his education into better paying jobs, which he parlayed (through savings) into investments, and then into bigger circles, ad infinitum. Bill Gates learned everything he could learn about computers and programming, eventually parlaying that into Microsoft. These guys took advantage of opportunities, sure, but without education you would have never heard of either of these guys.
The most successful people combine education with creativity and a keen eye for recognizing innovation opportunities or inefficiencies in a market that can be exploited. Even Kiyosaki has to credit his success to education, from learning how to put ideas to paper in the form of a book to creation of his marketing branches.
Skyline Properties
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