Alright, everybody, I’m Logan Allec, I’m a CPA, happy belated Father’s Day to all
you dads out there. I had a great Father’s Day yesterday, it was my first Father’s
Day as a dad of two, so that was pretty special. My wife got me some new glasses for Father’s
Day. Let me know what you think about them, let me know in the comments below. My old
glasses got a little wonky, one leg was a little lopsided, wonky-eyed, but I got these
new glasses, let me know what you think about them in the comments below. So yesterday having
been Father’s Day I thought I’d take some time today to discuss a fatherly book that
has become an integral part of American entrepreneurial lore so to speak in the past couple decades.
That book is of course Robert Kiyosaki’s book Rich Dad, Poor Dad. If you don’t know,
what this book is is basically Robert Kiyosaki telling the story of how his “poor dad,”
his biological father, basically worked hard his whole life, working for the government,
but then he supposedly died broke, while Robert Kiyosaki’s unnamed “rich dad,” whom
he was not biologically related to, taught Robert the principles of business and investing
and entrepreneurship and how to escape the rat race, hence the name Rich Dad, Poor Dad.
This book has really become a classic in the past twenty years, it’s inspired a lot of
people to quit their jobs and pursue business and entrepreneurship full-time, so going along
with the fatherly theme of Father’s Day yesterday, I thought I would just share some
thoughts with you on this book today. I personally read this book when I was a teenager, and
there are definitely things I like about the book but also some things that I disagree
with. Please leave a comment below letting me know whether or not you have read this
book and if you’ve read it, also let me know what you think about it. But the overall
takeaway for many people is that the American middle class should question the traditional
career path, they should disdain their safe, secure jobs with benefits and instead pursue
entrepreneurship and investing in order to eventually escape the dastardly rat race.
There are some other issues with this book that I’m not getting into: Is “Rich Dad”
even real? Probably not. Did Kiyosaki even make significant wealth before he published
this book? Probably not. I’m not going to get into all those aspects of this -- how
much of the “rich dad” story is real, how much of Kiyosaki’s pre-Rich-Dad-Poor-Dad
wealth is fictional or not, you can read up about all that on the internet. In this video
I just want to give my opinion on three things this book says that I like and three things
the book says that I don’t like. But let me preface this by saying that Robert Kiyosaki,
as a result of criticism over the years, has, shall we say, modified his positions a bit
to not be so controversial, but just with this video I’m just sticking with the original
book here, Rich Dad, Poor Dad, it’s possible that Kiyosaki’s positions on some things
have changed since he first wrote this book, so I just want to put that disclaimer out
there, but before we get into the bad news about this book in my opinion let’s get
into it with three statements from Rich Dad, Poor Dad that I really like. First one, know
the difference between an asset and a liability. Here’s a quote from Rich Dad, Poor Dad:
You must know the difference between an asset and a liability, and buy assets. An asset
is something that puts money in my pocket. A liability is something that takes money
out of my pocket. This is a real gem, and one that I wish everybody understood. And
I kind of paraphrase it like this, “Don’t buy things that make you poorer; buy things
that make you richer.” What are thing that make you poorer? The newest gadget, some fancy
sports car or truck, all the crap we own that we don’t need, and even worse is when we
buy crap with money we don’t have and put it on a credit card and our crap ends up costing
us even more due to astronomical interest rates on credit cards, those are all liabilities,
those things make you poorer. But what makes you richer? Well, in Rich Dad language, which
is not technical accounting language, but assets make you richer. A rental property
on which you generate cash flow every month and principal pay down and appreciation, through
the Rich Dad philosophy is to invest for cash flow not appreciation, and that’s a whole
‘nother discussion. Stocks, you buy shares in good companies, and the value of those
companies increase over time in the long run, generally speaking, and some companies even
pay some of its cash flow to investors as dividends. These are assets. So I like that
concept, know the difference between an asset and a liability and pursue the accumulation
of assets, not the accumulation of liabilities like the vast majority of Americans. Second
point I like about Rich Dad, Poor Dad is that it’s OK to make mistakes, here’s the quote:
In school we learn that mistakes are bad, and we are punished for making them. Yet,
if you look at the way humans are designed to learn, we learn by making mistakes. We
learn to walk by falling down. If we never fell down, we would never walk. I’m not
a psychologist, but I know myself, and I’ve known enough people to know that the fear
of failure or the fear of disappointing others or looking bad or dumb, it’s very much a
part of the human experience, and this natural fear, it can be useful, in fact, in some cases,
it can save our lives, in others, it keeps society going and the social order intact,
but when it comes to building wealth and that sort of thing, it can get in the way. The
example that specifically Kiyosaki is getting at in this book is starting a business, anybody
who starts a business, they’re going to make mistakes especially early on, and I speak
from personal experience as a business owner, if you let all those mistakes really get to
you, you’re going to close up shop and say, “Forget this,” I’m screwing up too much,
I’m just making too many mistakes, I’m not good at this, but what Kiyosaki is saying
is that it’s OK to make mistakes. This isn’t an excuse to be reckless, but I believe it’s
an encouragement to think positively about our mistakes — think “what can I learn
from my mistakes?” — rather than negatively about them with negative thoughts like, “I’m
such a failure!”. Third thing I like about Kiyosaki’s book is his point that net worth
is more important than net income. Here’s the quote from the book: It’s not how much
money you make. It’s how much money you keep. Maximizing your income is merely a means
to an end, and that end is maximizing your net worth. Your income is merely a handmaid
of your net worth. There are plenty of people who have very high incomes but how have very
little net worth because they spend it all on liabilities. And on the other hand, there
are people with very modest incomes who have very high net worth because they’ve lived
below their means and they’ve taken the modest excess they have every month and invested
in assets, if you haven’t seen my investing for beginners video, check it, out, link at
the top of the screen. So yes, there is a lot of good stuff in Rich Dad, Poor Dad. And
I have listened to enough people far more successful than I am who took life-changing
risks as a result of reading this book, and they are in a much better place today than
they would have been had they spent the next 30 years in a cubicle. But for every millionaire
who left the corporate world after reading Kiyosaki’s work, I believe there are dozens
of people for whom Kiyosaki’s message led to a path of ruin and hasty decision-making
about their life paths. I’ve personally known people, largely inspired by Rich Dad,
Poor Dad, who with no savings, no real plan, no viable product or service they’ve tested
in the marketplace, quit their jobs, thinking by doing that they would magically figure
it all out and “escape the rat race,” only to find out that they had no idea what
they were doing, and they set themselves back financially a decade or more. And I can’t
help but think they were encouraged down this path by the three things from Rich Dad, Poor
Dad that I will share with you now, here’s statement number one I don’t like: Rich
dad thought it best to go broke before 30. You still have time to recover. Yuck. I couldn’t
disagree with this statement more. It is extremely important to start building your assets as
quickly as possible because your greatest advantage is time! If you’ve taken my Prosper
course, link with a coupon code is in the description below, you know that in general
market conditions, investing for 10 years beginning in your 20s and then stopping at
30, never investing again, will result in more wealth in retirement than beginning at
30 and investing the same amount for the next forty-six years, this math is not intuitive,
but it’s real. I would much rather young people build wealth, buy assets early on in
life because those assets will grow and provide them with the cushion they need, the safety
net they need, to take risks later. Idea number two I’m not particularly fond of from Rich
Dad, Poor Dad is the notion that you don’t need money to make money, here’s the quote:
The idea that ‘it takes money to make money’ is the thinking of financially unsophisticated
people…Education and wisdom about money are important. Start early. Buy a book. Go
to a seminar. Practice. But here’s the truth, folks, unless you have incredible connections
or are presented with some once-in-a-thousand-lifetimes opportunity, you need at least some money
to make money. Now, obviously, you can go out this weekend with just the shirt on your
back and start a physical-labor-based side hustle with no money, yes, but when it comes
to acquiring the kind of wealth and financial freedom and time freedom that Kiyosaki talks
about in his book, sorry, but you need money to do that. And by the way I just love how
Kiyosaki throws in “Buy a book” and “Go to a seminar” in this quote, which are conveniently
enough the sources of his own fortune. Thing number three I don’t like is Kiyosaki basically
says that the things you learn in school aren’t important, here’s the quote: Remember that
anything important can’t really be learned in the classroom. It must be learned by taking
action, making mistakes, and then correcting them. That’s when wisdom sets in. On the
contrary, there is some pretty important information that can be learned in a classroom, and I
find it a bit ironic that Robert Kiyosaki himself surrounds himself with attorneys,
accountants, and other professionals who learned their craft in a classroom, and yet he turns
around and slams education like this. There are a lot of bogus degrees out there that
young people accumulate a lot of debt to get, but there are other degrees where a useful,
marketable job skill is taught that can transform an eighteen-year-old with no real marketable
skills making seven dollars and twenty-five cents an hour into a twenty-two-year-old with
marketable job skills who can make double that and then progress in their career and
make far more than that at thirty, at forty, maybe start their own business based on these
skills they have. And I personally know people who had the opportunity to pursue a degree
in something practical, but they dropped out or didn’t go to college, and they were largely
influenced by Robert Kiyosaki, and I’m thinking of one in particular, he’s on Instagram,
he’s not very active on there anymore, I’m not sure what he’s doing now, but I remember
on his Instagram profile, in his bio it said “entrepreneur,” he was basically one of
these fake-it-til-you-make it internet hustle culture Instagram entrepreneurs, and I think
a lot of this glorification of entrepreneurship and disdain for a traditional career path,
it’s always been an attractive notion, but I think that Robert Kiyosaki’s book, Rich
Dad, Poor Dad has a lot to do with that and led a lot of young people astray, especially
young people who may not have had the financial safety net that Robert Kiyosaki had, he calls
his biological father “poor,” but I don’t think Robert grew up in poverty, his father
was Ralph Kiyosaki, who worked his way up the Hawaii educational system and eventually
even ran for Lieutenant Governor in the State of Hawaii in 1970, most people don’t run
for state office if they’re completely broke, Robert claims his biological father died broke,
but I think that’s questionable given how loose Kiyosaki can be with details, but anyway
my point is, I think it’s a dangerous thing to put out statements like this that anything
important can’t be learned in the classroom especially for young people making huge decisions
about their life such as whether to go to college or not who may not have the safety
net of a two-parent middle-class family. And related to this, there’s this whole culture
these days that I think Kiyosaki certainly influenced that basically says, “Jobs are
dumb, the only thing worth doing is starting your own business,” and I think that’s
ridiculous. If you’re familiar with Kiyosaki’s work, you know about his Cash Flow Quadrant
that features quite prominently in his early books. It is a quadrant with the letters “E”,
“B”, “S”, and “I” in each of its corners. “E” stands for employee, “B”
for business owner, “S” for self-employed, and “I” for investor. And in Rich Dad,
Poor Dad, Kiyosaki was big on poo-pooing the “E” and “S” quadrants, urging individuals
“stuck” in those quadrants to pursue the “B” and “I” quadrants ASAP. But anybody
who has both had a traditional job and had their own business knows that there are pros
and cons of both. With a traditional job, you generally just have your thing, your skill,
that you have to worry about, this goes all the way from the individual flipping burgers
for seven dollars and twenty-five cents an hour, all that person has to do is make the
food, just keep on making the food, all the way up to the heart surgeon making half a
million dollars a year, all that surgeon has to do, is keep operating on hearts, keep operating
on hearts, that surgeon doesn’t have to worry about bringing in business for the hospital
where he works, he doesn’t have to worry about keeping employees happy or all the things
that come with being a business owner, he just has to keep on fixing hearts. Obviously
I imagine the job of a heart surgeon where someone’s life is literally in your hands
is extremely stressful, but at the end of the day there’s a lot even a highly-skilled
employee like a heart surgeon doesn’t have to worry about, he or she just has to mainly
worry about their craft, their skill, doing that well. On the other hand, a business owner,
they have to worry about bringing in business, not getting in trouble with labor laws, setting
prices, hiring and firing employees, management issues, workflow issues, on top of the doing
of the actual thing itself, in many senses it’s more stressful and not always more
lucrative than having a job. But I think a lot of this hustle culture, the glorification
of entrepreneurship, I think a lot of it has its roots at least for my generation and my
parents’ generation in Robert Kiyosaki’s Rich Dad, Poor Dad. But here’s the thing,
folks; not everybody should be an entrepreneur; some people will have a better life, a richer
life, more money by sticking with a job, a traditional career path, then by trying to
be an entrepreneur, that’s just the truth. And if and when you do leave traditional employment
to start a business, do so strategically, not just because you read a book, maybe I’ll
do a video on that at some point, but I think this video has gone on long enough, I’ve
said what I wanted to say, and I have some other videos over you might be interested
in, please be sure to check those out, and I will see you in the next video, buh-bye.