I recently reread Robert Kiyosaki’s Rich Dad, Poor Dad book. I read the book when it first came out in 2000, and I was still somewhat of a budding entrepreneur. I figured I would re-read the book now that I have more experience under my belt. I also wanted to see if it’s held up to the test of time, and if I like it as much as I did when I first read the book. A lot has happened financially in the past ten years, and I’m curious if some of his predictions came true.
There seems to be a group that either loves or outright hates Robert’s books and thinks they are all trash. The Simple Dollar review for example, adds a lot of personal bias, and I don’t think it’s a fair review. I have somewhat of a neutral viewpoint and will review the book based upon my experience in the business world.
Rich Dad, Poor Dad, should be viewed as a general starting point – a investment/startup summary, rather than a list of specific items to do as an entrepreneur. Robert Kiyosaki emphasizes six key points through out the book. It’s the differentiator between his “poor” dad (his real dad), and the “rich” dad that helped him understand business and become wealthy.
- The rich don’t work for money
- The importance of financial literacy
- Minding your own business
- Taxes and corporations
- The rich invent money
- The need to work to learn and not to work for money
The Good
Flawed Educational System
As Robert mentions many times in the book, our traditional educational system is flawed. Our education system is designed primarily to create employees and could be a negative influence for an entrepreneur. As Kiyosaki mentions, he’s not suggesting don’t go for higher education, he’s suggesting higher education does not assist with “street smarts”. Financial literacy is something that is rarely discussed in school, and if it is discussed, it is only at basic levels. Based upon my personal background, I’ve made this a personal focus and will make sure my children are well educated in this subject.
The cost of education continues to increase much faster than the rate of inflation. It’s becoming more clear our education system is broken. Robert’s statements about this topic are accurate.
Being An Entrepreneur Is Less Risky
It’s typically stated: owning a business is more risky than working for someone else. In my opinion, owning a business gives you all sorts of self-reliance skills you will not get when working for someone else. If anything with today’s “cradle to grave” mentality, we are creating more dependent individuals.
Owning a business has given me much more independence and invaluable skills I could still use if I were to work for someone else. Things I used to consider risky or could never imagine doing before owning a business, I now do on a weekly basis.
Your Primary Residence Is NOT An Asset
Over the years it was generally accepted that your primary residence was an asset. Robert flat out states (and I believe correctly), your home is not an asset, since it does not generate positive cash flow. The housing bubble and collapse proved this correct.
“Rich people acquire assets. The poor and middle class acquire liabilities, but they think they are assets”
While rental properties have also gone down in value, if you focused on positive cash flow, you still are bringing in money every month. Robert even states in his book, home values do not always go up.
Pretty much all consumable goods are liabilities, and something even I got tripped up with. He states you should buy investments that generate cash flow to help pay for your “doodads”. I think this is a great way to look at how to purchase your toys.
What is an Asset or Liability?
“An asset is something that puts money in my pocket. A liability is something that takes money out of my pocket.”
A load of naysayers of Robert’s books point out this statement doesn’t follow general accounting standards. This is true, and Robert acknowledges this. The point, which many miss, is that you should be focusing on cash flow to get wealthy.
“Wealth is a person’s ability to survive so many number of days forward… or if I stopped working today, how long could I survive?”
This statement I still use today and devoted a few posts about this topic:
The Bad
There are many reports that Robert’s “Rich Dad” does not exist and was made up. This is more than likely true, but there have been many personal finance books that are works of fiction. The book “Wealthy Barber” comes to mind. The issue some people have with Robert is he makes his book a work of non-fiction when it’s not, and I agree with this issue. I find it interesting on John Reed’s web site he puts down Robert’s work, but at the same time he’s also selling his own work.
Robert does somewhat downplay the role of risk in the investment suggestions. This is somewhat true, but he does suggest you fully understand your investments before diving in. Robert states investing is only risky if you don’t fully understand what you are investing in.
Summary
While I still recommend this book, especially for starting entrepreneurs, the book has some flaws. Take some of what Robert Kiyosaki says with a grain of salt. It should be read, if not for the motivation, just to get you to think differently than a salaried employee. I don’t love or hate it, and hence the reason why I give this book a 3 out of 5 stars. In my opinion, many topics he discusses hold the test of time.
If you do decide to read Robert’s books, I only recommend reading Rich Dad, Poor Dad, and Rich Dad’s Cashflow Quadrant. Most of the other books are simply a rehash of these two books. I DO NOT recommend attending any local seminars.
I will keep his book on my list of best personal finance books for the primary reason to get you to think outside the box.
I have to agree with your assessment. The main thing I got out of the book is looking at assets as putting money in my pocket and liabilities as taking money away. That leads right into the concepts of cash flow, passive income, and financial freedom.
I think the main criticisms of Robert are as you suggest, that a lot of the story was fictional and that he’s never even been in the military (or if he was, not in the role that he suggests he was).
However, shoot the message not the messenger. I think the message is still pretty inspirational, and it has had a big impact on me.
The guy’s a liar about the nature of the book (ie. it’s pure fiction). In several places he advises readers to commit criminal acts (fraudulent contracts, insider trading etc.). He’s a complete accounting failure, not understanding even the basic terminology. His basic advice (buy real estate because it’s an “asset”) was the worst possible advice to give at the time the book came out. He’s now selling stock trading scams.
Kiyosaki’s a loser. The book is horrible. I will never see what good anyone could possibly see in him.
Hi,
You are aware his book came out in 1999/2000, way before the housing bubble. He also says to buy rental properties, not a big primary residence. That’s a big difference. Rental properties, even underwater should be still generating positive cash flow.
Fraudulent contracts – I assume his cat partner? If a contract is truly made that’s with a cat, it’s an invalid contract no question.
Insider trading – I took the excerpt from the book, since it appears you are referencing John T. Reed’s info. Let’s put it in full context as Reed does not.
How is what he’s describing illegal and in fact states NOT to do anything illegal. Reed kinda omits this part of it.
There is “inside” information that is legal to the eyes of the SEC.
There is also been discussion over the years to legalize some aspects of insider information.
The Wikipedia link discusses this in depth.
http://en.wikipedia.org/wiki/Insider_trading
Overall John T. Reed has a beef with Robert, and he obviously is trying to sell his own stuff. Basically saying Robert’s work stinks, buy my stuff instead. If the guy had nothing to sell that would help his credibility, but directly on this page he’s selling his own books…hmmm.
Regarding trading scams, can you elaborate on those details? I do know the local seminars are pure crap. Check out this news article:
http://www.cbc.ca/marketplace/2010/road_to_rich_dad/main.html
I’m only reviewing what’s in the book, and my experience as an entrepreneur – Does what’s discussed in the book apply and is it accurate? Anything else outside of the book is not relevant for the review. Meaning don’t throw out the baby with the bathwater.
I have no idea who John T. Reed is (although I’ve googled him since you mention him). But trading US equities on material inside information is illegal. There is essentially no way to do it legally. Advising people to do so is simply stupid. And while it is something the rich sometimes do, it’s not a smart thing to emulate.
Whether it OUGHT to be legal or not is a different question. Being a bond man myself, I think insider trading laws are stupid. But it is the law, and as Martha Stewart can tell you it’s a law worth following.
As to the stock seminar stuff, it’s just junk. It’s a field I have some knowledge and hard won experience in, and nothing he’s selling is going to make anyone any money. There’s just no simple push-button method for making outsized market returns with any consistency. In order to do that, you need real trading and/or analysis skills and real capital. The people being targeted by his seminars are poor – no capital. And it takes a minimum of a year’s immersion to teach trading skills. Not a weekend seminar.
W, the link I mentioned is about real estate. My question was about stock seminars. Robert is offering them? I’m not aware of any he is offering hence my question to you.
I’m a value investor so I think all technical trading systems are junk anyways. If Robert or anyone else offers one. The one who makes the money is the one selling the “system”.
Yes, he is now selling stock seminars – [rich dad stock].
For what it’s worth, there ARE technical systems that work. That said, anything worth trading is likely NOT for sale – they’re the property of private trading firms both big and small who have no intention of killing the goose laying golden eggs.
Ahh, typo: google [rich dad stock] to find them.
The performance of the Quantitative mutual fund and hedged quant funduant funds has been relatively poor over the past 3 years.
You might be right but remember every body has some where to start and no body is going to get rich or capital after attending one seminar. But if it inspires them to change their old mentalities about money and they general perception regarding making money then that might as well be a good start.
The tone and harshness of your criticism tells me you have a problem. Th enook is a simple motivational book with a story. It does not do the awful things you claim. As I remember it, heclearly and often tells the reader to get expert advice.
I really like how peopel who don’t know him can just claim te hstory is made up! How do you know?
You don’t.
I totally agree with everything you said
I think “Rich Dad” is a composite of all the financial books authors that Robert read, and even partially himself. In some ways, I think he’s saying his way was better than his dads (Poor Dad), so I wonder is in a small sense he’s writing that he was right and his dad was wrong? lol
You think? Where is your evidence?
There are a lot of negatives that have been written about the rich dad series of books and Kiyosaki – a lot of which is probably true. That being said, though, I still find the books inspirational.
These books are very inspirational and regardless what the cynics say about them, so many people have benefited directly and indirectly from reading them. Most of the stuff that this guy brings out; Old capitalism versus new capitalism, Financial intelligence and education and the importance of both, the possible pitfalls of the American social security system and medicare, Taxation system-who it favors and who it hurts the most, all the stuff about residential homes not being assets, the dollar and how it continues to decline in value and the rest all this stuff is absolutely true. We can argue about it but we still have to objectively look at what this guy is saying, regardless of whether he is saying is factual or otherwise.
Totally agree with the article writers assessment of the book. As with everything in life one must look at the information presented and apply what works for them. The book is not a manual of actuals steps on how to make money, it is however an eye opener and a good start to “minding your own business”. The book does have some far fetched stories which I presume Robert thought would add credence to his theories. Shame he didn’t just say this is the story of My Rich dad, Poor Dad… However, sometimes I think people take what is written in these types of books as pure gospel, and forget that some of these ideas are just theories and one mans way of doing something. I think that as the writer says take some of what Robert K writes with a pinch of salt and only take the info that relates to, and can help you move forward in minding you own business…
I agree with the points in this article and many of the comments others have posted. I was raised by loving parents that unfortunately follow “poor” thinking – i.e. go to school to get a degree, then go to work for someone else, followed by going into debt for a house, car, etc., then work until you are too old to enjoy retirement. Rich Dad, Poor Dad gave me a different perspective on personal finance using a story to illustrate his points. Whether these stories were fiction or non-fiction does not matter to me, my main concern is the underlying message that the author is trying to get across.
This book ranks up there on my personal finance list, right next to the Richest Man in Babylon. Thanks for posting this as it made me revisit the ideas Robert put forth as the rich way of thinking!
Agree entirely that the book has some good points. For me about half the book felt fairly useless since I didn’t intend to go into real estate (and he focuses on that heavily, not just on the one chapter but throughout the whole book), and I also am turned off by stories that are purported to be true but you’re not sure if they are (ie, as mentioned the whole ‘rich dad’ scenario). However, my philosophy in reading books is to take out as much as I can, read it with a grain of salt as is suggested, and let the rest go. The primary takeaways for me were the fact that you don’t need a university education to be a success, you need to think differently about money, and owning your own business is an excellent thing to do. All good!
Agree 100% the book is PERFECT for a person’s first read during their journey to financial freedom, independence, and education but it is FAR from the end all be all. I have taken issue with some of Robert Kiyosaki’s teachings for years and have found it difficult to explain to people how it is a great book but a horrible one at the same time. The best take away from the book for me was creating positive cash flow with your own finances in order to invest in other opportunities.
I know this comment is a little late, but, what do you think about “paying yourself first”… I believe a passage in the book outlines rewarding yourself first, which creates a cycle of putting more pressure on yourself to come up with new ways to pay for all of your doodads.
My reaction to Robert’s book was not of enlightenment, or criticism – but I felt more of a confirmation that I’m not crazy for thinking differently from others. When one is surrounded by people who blindly subscribe to the rat-race, it can make one feel like an outsider. I found his book to be reassuring and encouraging. My only problem now is that I don’t know how to get from point A to point B.