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A number of people asked me about Robert T. Kiyosaki and his book Rich Dad, Poor Dad. When I said I didn’t think he was a real-estate guru, they insisted he was. Several told me I would like him, that he preaches a message like mine. Eager to find such a guru, I bought his book, Rich Dad, Poor Dad, in a bookstore.

Summary

Rich Dad, Poor Dad is one of the dumbest financial advice books I have ever read. It contains many factual errors and numerous extremely unlikely accounts of events that supposedly occurred.

Kiyosaki is a salesman and a motivational speaker. He has no financial expertise and won’t disclose his supposed real estate or other investment success.

Rich Dad, Poor Dad contains much wrong advice, much bad advice, some dangerous advice, and virtually no good advice.

Wikipedia says, “On August 20, 2012, Kiyosaki's company, Rich Global LLC, filed for bankruptcy in Wyoming Bankruptcy Court.”

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    Dangerous advice

  • "If you're gonna go broke, go broke big"
  • Convinces people that college is for suckers
  • Law-breaking advice

  • Advocates committing a felony: have rich friends for trading stock based on non-public inside information, he says "That's what friends are for."
  • Recommends tax fraud by deducting vacations and health club dues
  • Brags about using a partner weasel clause in which his cat is his partner
  • Bad liar

  • Can't keep track of his story
  • Shouts from the rooftops how rich he is, but refuses to disclose real estate portfolio because he "doesn't want people to know he has money"
  • Apparently lied about going bankrupt in 1985
  • Claimed his net worth is $50-$100 million depending on the day; his Rich Dad Poor Dad coauthor said in court that he only made $9 million
  • His "best teacher ever" changed repeatedly
    1. '92 - Ralph Kiyosaki (Poor Dad)
    2. '97 - Rich Dad
    3. '06 - Buckminster Fuller
  • The blueprint to becoming a "Financial Genius"

    I'm not the only critic

  • Wall Street Journal: "Rich Men, Poor Advice"
  • Smart Money Magazine: "Karma Chameleon"
  • Fiction posing as non-fiction

  • Oprah needs to confront Kiyosaki about calling a fiction book non-fiction just like she did with James Frey
  • He asks why Rich Dad has to be any more truthful than Harry Potter
  • Admits fictionalizing on copyright page of Rich Kid, Poor Kid
  • Admits to 20/20 that he doesn't teach people how to get rich
  • "Marine corps made him what he is today" - he was laterally transferred to the Marine Corp from the Merchant Marine and Navy, he never went through the entry-level Marine training
  • Lied about desertion while serving in Vietnam (admitted later he just missed the boat)
  • Became a helicopter pilot to "lead men" (platoon leaders and company commanders lead men; pilots lead machinery)
  • Rich Dad, Poor Dad triggers the following items on my Real Estate B.S. Artist Detection Checklist: 1, 6, 7, 10, 11, 13, 20, 26, 27, 28, 29, 30, 31, 38, 39, 46, 49.

Kiyosaki sued by co-author Sharon Lechter

Sharon Lechter, Kiyosaki’s co-author of Rich Dad, Poor Dad, sued him in Clark County, NV (Civil Case #07-A-549886-C). It was filed on 10/12/07. I would be interested in seeing the complaint. Apparently, little has happened in the case other than motions to dismiss.

On 9/4/08, the Arizona Republic newspaper carried a story that said Kiyosaki had paid an undisclosed sum to Lechter to settle the suit.

Creature of Amway

Over time, I have received numerous reports that Kiyosaki is primarily a creature of Amway (now Quixtar) and other multi-level marketing organizations. Reportedly, his books were not selling until he allied himself with that crowd. Then the volume of sales to those MLM guys made him a “best-selling author,” which caused normal non-MLM people to think the book must be good. Click here for an email I received along those lines. There is an unauthorized Web site about Amway at www.amquix.info.

Some readers have said that if I am going to criticize Kiyosaki’s book, I must offer a version of how to better yourself that does not have the flaws of Rich Dad Poor Dad. No problem. That would be my book Succeeding, which, somewhat to my surprise, is my top seller of the 30+ different books I sell.

In the summer of 2007, the Ohio state government Division of Real Estate and Professional Licensing published an extraordinary statement by a consumer of Robert Kiyosaki’s book Rich Dad Poor Dad and Cash Flow game. Be sure to read it at www.johntreed.com/Ohioaction.html.

Selected emails from visitors to this page

Collection of age-old clichés about money

A reader suggested that Rich Dad Poor Dad is nothing but a collection of clichés about money. Old clichés. Clichés that have been around since way before Kiyosaki claims “rich dad” originated them. The reader further said that Kiyosaki then appears to have simply made up a bunch of accompanying phony stories to fill the cliché collection out to the length of a book. She may be right. For example, Kiyosaki’s fear-and-greed advice (see below) is an age-old Wall Street cliché about securities prices.

Another reader put it this way,

But you have to admire a guy who can spin two or three paragraphs of very ordinary financial platitudes into such a range of books.
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Now admits 'fictionalizing'

On 8/15/01, a reader told me Kiyosaki now has the words “Although based on a true story, certain events in this book have been fictionalized for educational content and impact,” in the fine print on the copyright page of Rich Kid Poor Kid. I had not previously been aware that “educational content and impact” justified lying. Also, I am now confused as to why Kiyosaki’s books are on the nonfiction best seller list if they are fictionalized. Probably because as A Million Little Pieces author James Frey discovered, it’s a lot easier to be a “best-selling author” with a fictional book labeled non-fiction than with a novel.

John T. Reed's Youtube video on get-rich-quick gurus

Here are some clips where I mention get-rich-quick gurus from a speech I gave at the Bay Area Investor's Educational Services on June 2, 2009 in San Francisco. The topic was my new book, Best Practices for the Intelligent Real Estate Investor.

See more YouTube videos of
John T. Reed

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'Poor dad'

The idea behind Kiyosaki’s title is that his real father was upper middle class. He graduated from Stanford, Chicago, and Northwestern Universities, all on full scholarship, ultimately earning a Ph.D. He pursued a career in education and became the head of the education department of the State of Hawaii. He owned the home in which the Kiyosaki family lived. Kiyosaki calls him his “poor dad.”

'Rich dad'

One day, he asked his father how to make money. His father said he had not made much money and did not know how to make it. He suggested that Robert ask the father of his next-door playmate, Mike. That boy's father was a successful local businessman. He was also an eighth-grade dropout and ultimately a multimillionaire with a bunch of small businesses like construction, restaurants, and convenience stores. Kiyosaki developed a father-son relationship with the neighbor. That is who he is referring to when he uses the phrase “rich dad.”

One visitor to this site asked me if I was sure “Rich Dad” really exists. No, I’m not. In fact, I now lean to believing that there never was a “Rich Dad,” that Kiyosaki made the whole thing up. If I had written such a book, I would have named him in the book, if only out of gratitude. It is noteworthy that Kiyosaki refuses to identify “Rich Dad” and the Honolulu Star-Bulletin was unable to figure out who it was, in spite of the rather obvious “next-door neighbor Mike whose father owns convenience stores, restaurants, and a construction company” clues. The man was purportedly around 30 to 45 years old in 1955. So he would be 83 to 98 now. How many people on that one street in Honolulu could possibly fit that description?

As I recall, the first convenience store was 7-11 and I believe they became widespread around the 1960s. It’s possible Kiyosaki is using the phrase “convenience store” loosely and really means corner groceries, which did exist in the 1950’s.

But I also find the mix of business unlikely. The guy owns “convenience stores, restaurants, and a construction company.” I guess I can imagine a guy who owns convenience stores and a construction company. It’s odd, but not impossible. However, I have less ability to picture a restaurateur who also owns a construction company. I knew one. His restaurant went out of business. For one thing, the restaurant business is extremely management-intensive. At good restaurants, the owner is usually there almost all of the time. Same is true of construction. Plus restaurateurs that I’ve known are very different kinds of people from construction guys.

Kiyosaki’s real father (“Poor Dad”) was named Ralph Kiyosaki. I encourage readers in Hawaii to try to research Ralph’s home ownership when Kiyosaki was nine years old (1955) and try to figure out which adjacent or nearby homeowner might have been “Rich Dad.” If we can find a person who fits the description, and he is either a public person or dead, I will publish the identity.

A bunch of people have told me “Rich Dad” was a now-dead guy named Kim or Kimi. Fine. Get Kiyosaki to say that. Or get Kim’s surviving relatives, like Kiyosaki’s friend Mike, to say it. A bunch of yahoos on the Internet saying it means nothing. People on the Internet see Elvis at their 7-11.

1992 book versus 1997

In 1992, Kiyosaki wrote a book called If You Want to Be Rich and Happy, Don’t Go To School? It is “dedicated to Ralph H. Kiyosaki, former Superintendent of Education, State of Hawaii, the best teacher I ever had.” This would be “Poor Dad.” But Rich Dad Poor Dad, which came out in 1997, says quite emphatically that Rich Dad was the best teacher he ever had.

So maybe “Rich Dad” was the second best teacher he ever had. No. Actually, the 1992 book also identifies the second best teacher Kiyosaki ever had: F. Marshall Thurber.

OK. So maybe “Rich Dad” was third. No. Kiyosaki’s 1992 book has an unusually long acknowledgment section. It lists 111 people, none of whom appears to be “Rich Dad.” That is, none are singled out except for his “Poor Dad” parents, in-laws, business partner, and editors.

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Mind you, according to the 1997 book Rich Dad Poor Dad, “Rich Dad” supposedly became central to Kiyosaki’s life starting in 1955 when he was nine. So where was “Rich Dad” in 1992 when Kiyosaki was so diligent at identifying the people who had been important in his life?

In a 4/18/06 Yahoo! column, Kiyosaki now says the best teacher he ever had was Buckminster Fuller. It would be a bit of an understatement to say that Fuller was not an eighth-grade dropout who owned convenience stores.

“Getch yer programs right here! Ya can’t keep track of Kiyosaki’s best teacher he ever had without a program!”

EST then Money and You

A man who says he has known Kiyosaki since the military in Hawaii says Kiyosaki got his start in the “tell other people how to live their lives” business as a result of taking then becoming a speaker in the Money and You organization.

Money and You was a seminar company started by Marshall Thurber, an est graduate. Est was a notorious seminar company in northern California run by Werner Erhard. Werner Erhard is apparently one of many aliases used by John Paul (Jack) Rosenberg, a Philadelphian who started in life as a car salesman and who then moved through a series of aliases, sales careers, and wives before coming up with the name Erhard and the est seminars. They were famous for not letting participants go to the bathroom and for maddeningly vague advice. For a while, they were going to cure world hunger by getting a lot of people just to think about it.

Money and You was reportedly a useful seminar. Shortly after Kiyosaki went to mainland U.S. from Hawaii to run away with Thurber’s circus, Thurber decided to shut it down. Thurber let Kiyosaki and some other speakers take over the business. They promptly emphasized the Australian and New Zealand markets which have, at times in their history, overvalued products and services from the U.S.

Their run in Australia ended when the Australian equivalent of 60 Minutes did an exposé about Money and You.

Basically, it appears that Kiyosaki is a good salesman, although we sort of have to take his word for it pending confirmation from Xerox. Good salesman is the universal description of all the expensive so-called real estate investment gurus. They are sales guys, not real estate guys. Apparently Kiyosaki is yet another example.

This caller also said that Kiyosaki’s wife Kim appears to be the one who invested in Phoenix real estate. “Bob” appears to be the Ralph Kramden (main character of the Honeymooners TV series) of the family, perennially hatching one-hare-brained get-rich-quick scheme after another (like Kiyosaki’s Money and you, velcro surfer wallets, and Rock T-shirt businesses) while his wife invests in basic stuff. I am not ready to anoint her a financial genius. One would have to inquire as to whether their real estate investments in Phoenix appreciated more than those owned by the average person. Most likely, they made the same return on their properties as Joe and Jean Average Phoenix homeowner. If so, they would be as qualified as Joe and Jean homeowner to write a book about it. As I have said in many articles in my newsletter Real Estate Investor’s Monthly, extraordinary performance in real estate is measured by the degree to which your returns exceed those of ordinary homeowners who claim no expertise. In fact, in most periods since World War II, ordinary homeowners have done great return-wise just because they were in the right place at the right time. On Wall Street, they say that in a bull market, everyone thinks he a genius. And some, like Kiyosaki, who are merely married to people who invested in real estate during a bull market, claim that they (the non-investing spouse) are geniuses as a result.

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Reportedly, Kim got the idea to invest in Phoenix real estate from a female fellow employee of Money and You who said the Phoenix market was going to be good. That female Money and You employee is the one who should have written us a book on real estate investment. She may be the brains of the outfit if Kim did not add any value to her advice. (Actually, the employee probably was just guessing and her having guessed right is meaningless. In fact, predicting marketwide appreciation in real estate values is impossible to do. Decisions can only be evaluated based on what the decisionmaker knew at the time, not on results. You can get good results from bad decisions, e.g., a winning lottery ticket; and vice versa, e.g., attempting a 25-yard field goal that goes wide right when you are down by two points with three seconds left in the game.)

If Kiyosaki claims to be a competent real estate investor, he needs to show addresses of properties he bought that reveal greater returns on those properties than were earned on similar properties at the same time by persons who claim no extraordinary expertise. I suspect an examination of properties he or his wife owned will show that he earned that same returns as local homeowners and that the only thing extraordinary about his purchases is that he had a large amount of book royalties to use to buy them.

The guy who called me has the impression that Kiyosaki’s tortured psyche and insecurities stem from growing up as an obese kid in Hilo in the 1950s. Since he did not know Kiyosaki until the military, that information must have come from Kiyosaki.

No more Bob

Kiyosaki went by Bob for most of his life. Since he became the famous author, he insists that everyone call him “Robert.” Sure, Bob.

20/20 investigation of Kiyosaki

ABC 20/20 did a program about Kiyosaki who has now written 18 books. You can read their story about it at http://abcnews.go.com/2020/story?id=1982669&page=1. The date on the Internet story is May 19, 2006 so the story must have been aired on 20/20 around then. Basically, they gave three people $1,000 each and told them to try to start a business that would show a profit within 20 days. One lost all he money. Another made zero. The third made $243.

Kiyosaki was brought in to coach them and to advise them during the 20 days. Based on the article, it sounds like about all he did was whine about the three would-be entrepreneurs, the short time frame, and so forth. He also pronounced their failures a success—typical Kiyosaki logic—because they learned from them. The ABC 20/20 story ends with,

“Which begs the question: Does anyone really need 18 books to learn to fail?”

Obviously, Kiyosaki has sold 26 million books on the promise that they would help you succeed. Then, when people who have been personally coached by him fail, he blames them and, like the Queen in Alice in Wonderland, declares their failures to be successes.

I guess it would be too much to ask for him to admit, “Gee, I guess my advice was of no value to these three.”

If I had been asked to participate in such a challenge, I would have said I have no expertise in telling anyone how to make a profit with $1,000 in 20 days. I do not know how I would have done that if I had been given the money. Probably write a short book and use the $1,000 to print it and create a series of Web pages about it. See my book How to Write, Publish, and Sell Your Own How-To Book for the details on how to do that.

It would be interesting for 20/20 or a similar program to give $1,000 to Kiyosaki himself and let he himself show how to turn it into a profit using some method open to his readers. You would have to have a microscope on him every second and prohibit any undisclosed actions or conversations to prevent him from using methods not available to his readers.

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What business has Kiyosaki ever made a profit in? With regard to his 26 million books, he is not a businessman. He is only an author. The businessmen generating those sales and profits are his publishers.

'Couldn't put my finger on it...'

I have received numerous emails about this analysis by me that you are currently reading of Rich Dad Poor Dad. There have been several recurring themes in those emails. One is people saying that they liked Kiyosaki’s book, but that it caused them some discomfort or second thoughts or unease. They often say they could not put their finger on what was bothering them—or words to that effect—until they read this analysis.

'Made me think about my finances'

The most common favorable comment I get about Kiyosaki from those who generally agree with my analysis is that “At least he got me to think about my finances.” That’s pretty lame.

The IRS makes you think about your finances every April 15th. You have to think about your finances whenever you fill out a loan or credit-card application. I also think about my finances frequently when I pay bills or receive income. People who are unhappy with their financial lives—which is the typical Kiyosaki fan—probably think about their finances every time they get into their shabby car or return to their unsatisfactory home (e.g., living with parents, bad neighborhood, too small, etc.).

There are lots of books that do a better job of getting you to think about your finances. I suggest my Succeeding and How to Get Started in Real Estate Investment as well as The Little Book of Common Sense Investing by John C. Bogle and Jane Bryant Quinn’s Smart and Simple Financial Strategies for Busy People. These are books that actually have what Kiyosaki falsely claims to provide.

I think these “made me think about finances” comments are inarticulate at best and dishonest at worst. What is really going on is a lot of people are schlepping along doing a half-ass job of managing the financial aspects of their lives. Rich Dad Poor Dad slaps them up side the head and tells them to clean up their acts. That’s good, but the book goes on to deliver a pack of lies that make getting rich seem much easier than it really is and make education sound much less valuable than it really is. Basically, people want to get rich quick without effort or risk. Kiyosaki is just the latest in a long line of con men who pander to that fantasy.

Can the ordinary person get rich? Yes
Is it as easy as Kiyosaki makes it sound? Not even close.
Can it be done as fast as Kiyosaki says? Nope.
Is education as worthless as Kiyosaki says? Every pertinent study has shown that the more education you have, the higher your net worth and income. Also, educated people live longer, have fewer divorces, better health, and so forth.

Here are U.S. Bureau of Labor Statistics figures on education that were released on 8/17/07:

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Weekly earnings by amount of education

amount of education median weekly earnings
doctoral degree $1,441
professional degree $1,474
master’s degree $1,140
bachelor’s degree $962
associate degree $721
college dropout $674
high school grad $595
high school dropout $419

Unemployment rate by amount of education

amount of education
unemployment rate
doctoral degree

1.4%

professional degree

1.1%

master’s degree 1.7%
bachelor’s degree 2.3%
associate degree 3.0%
college dropout 3.9%
high school grad 4.3%
high school dropout 6.8%

On the other hand, the public-school system is an easy target for criticism. It is generally run by union bureaucrats who graduated at the bottom of their college classes. Colleges are also subject to criticism for letting students spend five or more years getting low-income educations in subjects like philosophy and social work. Wisely-chosen education—defined broadly as reading books, talking to successful people in the field you are interested in, attending courses, and subscribing to trade publications—generally provides the highest return you can earn on your money and time.

Kiyosaki is just telling lazy and/or stupid students a line of bull that lets them avoid responsibility for their poor academic performance and gives them a convenient scapegoat to blame for their lousy financial situations. There is also more value to education than just its financial rewards. If you like philosophy and are willing to take a vow of poverty, you ought to study philosophy. Not everyone suffers from Kiyosaki’s need to impress people with how much money he has made (or claims to have made from sources other than selling books to Amway distributors).

…most people want to believe rather than to know, to take for granted rather than to find out
James Thurber

Motivation

Another compliment readers often pay Kiyosaki is along the lines of, “Well, at least he motivated me.”

Yeah, by lying to you. That’s like me telling you I buried $100,000 in your backyard which is yours for the taking. Would that motivate you? No question. You would probably spend the next two weeks digging up your backyard. After you found out it was a lie, would you think I was a great guy for having thus motivated you to get all that healthy exercise? I doubt it.

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‘Missing the point’

Since I posted this analysis, a number of Kiyosaki “cult members” have contacted me to denounce me for “missing the point” of Kiyosaki’s book. “OK, Please tell me the point.” The odd thing is that each person has a different version of what the point of Kiyosaki’s book is—and it is never something I recall reading in the book. In fact, if a book has a point, multiple readers ought to come up with the same answer when asked what that point is. If they come up with different answers, it is either because the author was incompetent at communicating his point, or because the book has no point, or because the author deliberately obfuscated the point.

From now on, if you think I missed the point, don’t paraphrase Kiyosaki’s point to me. Give me an exact quote and the page number in Rich Dad, Poor Dad where it appears. I suspect everyone who is tempted to send me the point of Rich Dad will be unable to find in the book any of the wonderful advice they imagined was in there. It has been several years since I first said this and I have yet to get my first quote of “the point.”

On 7/18/06, I finally got a quote from someone who says I missed the point. Here it is.

Please open your copy of Rich Dad Poor Dad and turn to page 77. Look half way down the page. You will see this:

"Rule one:You must the know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. Its rule No. 1. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this this rule is. Most people struggle financially because they do not know the difference between an asset and a liability."

I did not miss that at all. In fact, I discussed the matter of his definitions of assets and liabilities squarely and repeatedly in this review. Furthermore, the vast majority of the book has nothing to do with that point and some of the book contradicts that point, like Kiyosaki bragging about his Rolex. I also note that in eight years, this is the only person who thought that was the point of the book.

The only time different people look at the same thing and come up with different answers as to what it is they are looking at is when the thing they are looking at is amorphous, like a cloud or a Rorschach inkblot—or a politician. Politicians try to be all things to all people. That requires them to say nothing (amorphousness), but to sound like they are saying something (“the point”). They toss in a little spin to try to get all those people with those different views to see in the politician things that they like. Kiyosaki slogans like “Don’t work for money. Make money work for you,” are amorphous in their actual meaning, but have the effect of “spinning” the reader into thinking he has just gotten good advice.

Here’s a pertinent passage from Temple University professor John Allen Poulos’s book A Mathematician Reads the Newspaper.

A similar argument helps clarify why inane I Ching sayings or ambiguous horoscopes seem to many to be so apt. Their aptness is self-provided. In effect, their cryptic obscurity provides a random set of ‘answers’ that the devotee fabricates into something seemingly appropriate and useful.…psychologists count on the amorphousness of Rorschach ink blots to elicit evidence of a person’s core concerns.

My own supporters occasionally commit the mistake of reading things into my writings. I once got an email complimenting me on my writings. The writer’s favorite quote by me was, “When everyone is digging for gold, sell shovels.” I thanked him for his compliments, but said, “I never said that.” He then wrote back that he searched all over my Web site, but could not find it.

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Cult

What Kiyosaki is really doing is operating a cult of personality. Anna Quindlen had an excellent article about such cults in the 8/14/00 Newsweek. She was talking about politicians and said they seek to elicit the words, “I don’t know why. I just like the guy.” Politicians want to be judged by their personalities, not their character or policies. To members of Kiyosaki’s cult, it matters not how many false or probably-false statements I find in Kiyosaki’s writings. They just like the guy. Personality is an appropriate criterion for selecting someone to hang around with. But it is a highly inappropriate criterion for evaluating Kiyosaki’s advice, because he’s not going to let you hang around with him and your family’s finances are serious business.

I am not a politician. When I write something, I want to make sure everyone gets the point—the same point. Here is the point of this analysis:

Rich Dad, Poor Dad contains much wrong advice, much bad advice, some dangerous advice, and virtually no good advice.

The 48 Laws of Power

Here’s an interesting letter I got from a reader:

“I'm glad I found your Web site on Kiyosaki, and all the other snake oil salesmen. I was deluding myself into believing him, even though I had that little voice in the back of my mind sending me warning signals (not to mention my wife)... Anyway, thanks for the info. Every once in a while, I do a search on Google and come up with a gem like your Web site. This is living proof that the Internet can be used for good purposes by people who are TRULY generous. Once again thanks for your work.

A few years ago I read a book by Robert Greene and Joost Elffers called "The 48 Laws of Power" (Viking, 1998). It is a "Machiavellian approach to the systematic study of power." Basically, it is written as a how-to book. It gives the cynical lowdown on increasing and maintaining one's power over others. It is truly an interesting and thought-provoking study in human nature. I thought you might be interested in the following quote, which I feel is particularly apt in describing the power strategy that gurus like Kiyosaki like to follow:

"Law 27 - PLAY ON PEOPLE'S NEED TO BELIEVE TO CREATE A CULTLIKE FOLLOWING. Judgment - People have an overwhelming desire to believe in something. Become the focal point of such desire by offering them a cause, a new faith to follow. Keep your words vague but full of promise; emphasize enthusiasm over rationality and clear thinking.

Give your new disciples rituals to perform, ask them to make sacrifices on your behalf. In the absence of organized religion and grand causes, your new belief system will bring you untold power." (p. 215)


Keep up the good work,”

Another reader said Law of Power 32 is pertinent too.

Law 32—Play to People’s Fantasies

“The truth is often avoided because it is ugly and unpleasant. Never appeal to truth and reality unless you are prepared for the anger that comes from disenchantment. Life is so harsh and distressing that people who can manufacture romance or conjure up fantasy are like oases in the desert: Everyone flocks to them. There is great power in tapping into the fantasies of the masses.”

You can see all the laws at http://www2.tech.purdue.edu/cgt/courses/cgt411/covey/48_laws_of_power.htm.

Short on specifics

About every third email I get about this analysis me that they agree with me that Kiyosaki is short on specifics about how to get rich. In the first week of February, 2008, yet another woman told me she “agreed with my saying he is short on specifics,” I said Kiyosaki had made her blind to the statement I made in huge letters (below after this sentence) and she switched subjects to my ungentlemanly behavior in making such a comment. Although she did not deny that I had pointed out in huge letters that I never said any such thing.

I never said Kiyosaki was short on specifics!

Not only does Kiyosaki’s hypnotic effect on many people result in their seeing things in his book that are not there, now they are seeing things in my analysis that are not here. Amazing! No wonder the guy can sell 26 million copies of nothing.

I would say that Rich Dad covers an overly broad array of financial subjects—real estate investment, stock market investment, note investment, and going into business for yourself. No one could adequately cover all those areas in such a short book. On the other hand, Rich Dad has a lot of specifics—as you will see below in this analysis. The problem is not that he is short on specifics, it is that the book is a bunch of bull, including when he gets specific. To say that the only fault of the book is that it lacks specifics is ridiculous.

Since I posted this item with huge letters saying I did not say he was short on specifics, the quantity of emails I get “agreeing” with me that he was short on specifics is unabated. Have these people all had lobotomies? Actually, yes. Rich Dad Poor Dad is a lobotomy by book reading.

Money is all that matters

On page 14 he approvingly quotes “rich dad” as saying, “Money is power.” [Since I wrote this analysis, Kiyosaki has changed the layout of the book making these page numbers wrong for subsequent editions. They are correct for my edition, which says published by TechPress, Inc. and has 1997 and 1998 copyrights.] On page 92, he tells of his “rich dad” keeping him waiting for long periods—when he was nine years old!! “He was ignoring me on purpose. He wanted me to recognize his power and desire to have that power for myself one day.” On page 172, he says, “I have found the principles of finding value are the same regardless if it’s real estate, stocks,...or a new spouse...”

On page 154, Kiyosaki says “the reason you want to have rich friends” is to get inside stock market information that you can make low-risk profits. He ends that discussion with the sentence, “That is what friends are for.” That is the narrowest, most mercenary definition of friendship I have ever seen. I doubt Kiyosaki is the only person who feels this way about his friends, but he may be the only one dumb enough to say it in a book.

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My Succeeding book tries to get you to always keep in mind the paramount importance of living a balanced life with emphasis on friends and family and doing the things that you find rewarding for reasons other than mere monetary income.

Although his family was not rich, he attended a predominantly wealthy elementary school because of an anomaly in the school-district boundaries. The wealthy kids had newer toys and refused to invite Kiyosaki and his friend to parties, telling Kiyosaki it was because they were “poor kids.” Sounds like he was scarred deeply by that humiliation and has lived his whole life since trying to prove to some rude nine-year olds from the 1950s that he now has the money to be worthy of their party invitations. He told Meet the Street that he has never been back to Hawaii. I suspect such a visit would rid him of these demons from his childhood.

How much money does Kiyosaki have?

A number of people have accused me of being jealous of Kiyosaki—I guess because they think he has more money than I have. Others have said they are going to follow him because he is fabulously wealthy and that’s what they want to be.

How do we know this?

I know approximately what my net worth is. But I have no idea of what Robert Kiyosaki’s net worth is. Neither does anyone else.

He implies he has money. He has had four books about how to get rich on the business best-seller list. He brags about owning a Porsche, Mercedes, Rolex watch, $400 golf club. The Honolulu Star Bulletin—the newspaper where Kiyosaki grew up—wrote a puff piece about him. You can see it at http://starbulletin.com/2000/07/10/features/story1.html. In it, Kiyosaki says a number of things that imply he is rich. For example,

I’m free to do exactly what I want, when I want, where I want. I can stop working if I want to. Money buys me freedom.

I once investigated best-selling real-estate author Robert Allen who wrote Nothing Down. At first, he claimed to own his home. But when I checked the address which appeared on IRS liens filed against him, it was nonexistent—no house at that address. When I again asked where he owned his home, he admitted, “I rent.” I have the conversation on tape.

One of my MBA classmates, Paul Bilzerian, became a very successful corporate raider for a time. He stood silent while others claimed he was a wiz who had made $150 million in Florida real estate before age 30. I called him up to ask if that were true. He said I should read the article in the Wall Street Journal carefully. Indeed, it said he was “reported” to have made that much and all Paul would say in the article was, “That’s a good guess.” In other words, Paul was pointing out to me that it was not he who said he had made all that money. Paul subsequently was the subject of a Forbes story. They said they investigated his purported Florida real-estate profits and could not find a “trace” of him in Florida real estate. He later got into trouble with the law and was the subject of a 60 Minutes segment about his mansion in Florida that creditors could not get at after he declared bankruptcy.

According to the Honolulu Star-Bulletin, “Kiyosaki won’t say how much he is worth or in what he’s invested.” Kiyosaki claims, “I own companies. I’m a major shareholder in oil and mining companies, plus real estate companies. I have intellectual property companies.” But he won’t identify any of them. Why? As you will read below, one of my readers checked Kiyosaki’s claim that he was a major shareholder out in a securities industry data base and found not a trace of him in spite of the fact that major shareholders are required by law to be identified. If he is a “major” shareholder, it is in minor corporations so small that their shares are not traded publicly.

A book editor unrelated to Kiyosaki used industry statistics to tell me he figures Kiyosaki has netted at least $11 million from his book royalties since 2000.

With regard to Kiyosaki’s “Money buys me freedom” statement, my Succeeding book has a chapter on Wealth that discusses both the advantages and disadvantages of being rich. Yes, there are disadvantages, like making your family members kidnap targets or making yourself a lawsuit target. Last I heard, Kiyosaki was being sued by the co-author of Rich Dad Poor Dad, Sharon Lechter.

Mr. Privacy

Kiyosaki says, “I keep my holdings private. You know why that is? Lawsuits. If you have money, you get sued.”

Let me get this straight. Kiyosaki says he is rich, that he “makes millions of dollars,” and is about as high profile about his wealth as you can get about it—best-selling how-to-get-rich books, appearances on TV shows like Oprah, interviews to daily papers and national magazines. Yet he won't disclose any details because he doesn't want people to know he has money.

Not only is the guy a B.S. artist, he insults our intelligence.

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Somebody needs to give Kiyosaki a book on how to be low profile. I’m sure it has a chapter that says going on Oprah to discuss your best-selling book on getting rich is not a good way to prevent would-be litigants from knowing you have money. Kiyosaki is, in fact, shouting from the rooftops that he has money. He just refuses to prove it. Or to let anyone investigate how he got it if he does have it.

I have always felt that implying you have money was worse than revealing your net worth. When I was in grad school, I took a labor relations course where actual union leaders were in every other seat with us MBAs. One said that one of the things they love about employers is when they keep earnings secret. That allows the union to tell the employees that the company is “getting rich on their backs.” That, in turn, causes the employees to vote for the union. Kiyosaki’s implying he is wealthy, but refusing to disclose how wealthy, will almost certainly cause would-be litigants and others to overestimate his net worth, thereby increasing the chances of his being sued over what they would be if he were more forthcoming.

Many small businesspeople adopt grandiose company names, like Pritchco Interplanetary, that make them sound much larger than they really are. I tell my readers not to do that because such names encourage lawsuits. I encourage small real-estate investors to use their own name, because people are more inclined to sue big-sounding corporations than an individual. I recommend that you read an article I wrote on how to take title with regard to privacy and other aspects of money.

I suspect the real reason Kiyosaki refuses to disclose any evidence of his purported wealth is either

For the record, I created another page to address the jealousy issue. Click here to see it.

Meet the Street interview

On 1/14/02, a reader told me Kiyosaki was more forthcoming about his wealth at http://www.thestreet.com/funds/meetthestreet/10006507.html. Indeed, in an interview at that Web site, he says his net worth is “between $50,000,000 and $100,000,000 depending on the day.” (I don’t believe that. He also says he was bankrupt and homeless in 1985. More about that later.) So which is it—Kiyosaki will not talk about his wealth because he doesn’t want to be sued or he will give figures, locations of his properties, and the nature of his corporations as he does in the Meet the Street interview? What happened to the lawsuit threat?

There were a number of points in that Meet the Street interview that deserve a response

Kiyosaki said
Reed comment
avoid mutual funds and 401(k)s because they are too risky Mutual funds vary in their risk. Some are very low risk. 401(k)s have tax benefits that are hard to ignore. Also, you can invest them in almost anything you want in many cases. If they are invested in broad-based, low-cost index funds, like Vanguard 500 Index, they have no risk other than the risk that the entire market will collapse.

Bogus gurus like to give extremely simple rules. Ignorant readers love them. That’s fine when the subject permits. But this is an extremely simple rule that is not valid because of the complexity of the subject.

says his net worth is “$50 million to $100 million depending on the day” I don’t believe that. He was bankrupt and homeless in 1985 by his own admission. Although a lawyer who searched the federal case management system on line says he could find no bankruptcy filing for Kiyosaki. He claims to have sold 26 million books. The highly successful book What Color is Your Parachute? has only sold seven million copies since it first came out in 1970. But even if you accept the 26 million figure, Kiyosaki’s co-author royalty would appear to be about 72¢—not enough to get you anywhere near $50 million even if you had no living expenses. He claims to make money in other businesses, but will not disclose enough detail that anyone can check that.

Also, what’s this “depending on the day” nonsense? I presume that’s a shameless effort to impress people who are really ignorant about the world of finance. What he is saying is that his net worth doubles or halves within 24 hours. He implies that causes him not the least bit concern. Gimme a break! If my net worth dropped in half in one day, I would be pretty upset about it.

What must he be invested in to enable his net worth to double or halve in 24 hours? Pork belly futures? No one in his right mind would invest his entire net worth in an investment vehicle that could double or halve in 24 hours.

In the 2/03 Smart Money magazine article, he said his net worth was $35 million. Must have been a really bad day in pork belly futures. Actually, his book-selling success notwithstanding, I would guess his net worth is more like $3 million, virtually all of it from book and related sales.

the investments of the wealthy are managed well Laymen think that. I don’t. The main thing in managing an investment is stock picking. That is impossible to do well on purpose except for a few alpha money managers who are excruciatingly hard to identify before the fact. Otherwise, it’s a crap shoot. If anybody ever figured it out, he would not need to work—for the wealthy or anyone else. There have been numerous studies proving this, most notably the classic book, a Random Walk Down Wall Street by Burton G. Malkiel. The wealthy do get good advice on legal implications of their portfolios, but not on how to earn a high return. The notion that anyone gets good advice on how to earn a high return in securities is a laymen’s myth. The truth is there are extremely few money managers who can beat the market consistently over the long run and who they are changes from time to time. Essentially, only a few institutions have been lucky enough to find them. Not, as Kiyosaki says, all the rich.
says he was able to retire at 47 So why didn’t he? He’s still hustling his butt off to sell stuff.
there are three different types of income: earned, portfolio, and passive This is primarily an income-tax-rate distinction as Kiyosaki explains it. He says these types of income are taxed at 50%, 20%, and 0% respectively.

The phrases “passive income” and “portfolio income” do appear in the Internal Revenue Code. I have used “earned income” to describe money you make from your salary or business.

In fact, Kiyosaki is spouting nonsense. The federal income tax rates on earned income, passive income, and portfolio income are the same—not 50%—but your overall rate can get to that level when you add state income taxes. The distinction between the different types of income involves whether the losses from one category can be deducted from income of another category.

The 20% tax rate of which Kiyosaki speaks only applies to long-term capital gains. Those come from selling assets at a profit after holding them for a specified number of months. You can have such 20%-tax-rate gains in both the passive and portfolio categories.

The only income that is taxed at a 0% rate are special things like municipal bonds and gains of less than $250,000 per spouse from the sale of certain personal residences.

It is possible to do transactions where there is no tax due at present, like IRC §1031 exchanges, but the tax-free nature of such transactions stems from the fact that you received no income. Rather you put the proceeds from the sale of one rental property into the purchase of another rental property. If and when you eventually take out your profit by selling your rental property, you will be taxed on the gain that you had when you exchanged. See my books Aggressive Tax Avoidance for Real Estate Investors and How to Do a Delayed Exchange.

I own 10 rental buildings in Miami, Austin, and Phoenix. Most investors use more specific terminology like “apartment complex” or “office building” or “shopping center.” Investors usually use the phrase “rental building” to hide the fact that their properties are mere rental houses.

You should not own rental property in three states unless you have a specific reason for doing so. Why not own all ten rental properties in Phoenix, where he lives? With Kiyosaki, I suspect he thinks having property in three states makes him sound like more of a tycoon. To experienced investors, it makes him sound like more of a dilettante. You want the property in the same region—preferably where you live—so you can use the same people to work on all the properties and save on air fares, hotels, and so forth. Actually, I believe I have the only books on absentee management: How To Manage Residential Property For Maximum Cash Flow and Resale Value and absentee purchasing: Checklists for Buying Rental Houses and Apartment Buildings.

One reader said investing in three different regions gives you diversification benefits. Only against regional economic downturns and possibly rent control if the buildings are bigger than one family. But rent-control risk is better dealt with by staying out of multifamily and states that do not have a rent-control preemption in state law. The risk of regional economic downturns is not great enough to overcome the disadvantages of spreading yourself that thin in terms of travel, personnel, need to learn different laws and markets, etc.

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If the advice of “Rich Dad” back in 1955 was so great, how come Kiyosaki says he was homeless and bankrupt 30 years later? (A lawyer checked the federal court records and said no one named Kiyosaki ever went bankrupt. So he apparently is “bragging” about a non-existent bankruptcy. I’m not ready to declare him nuts, but that would be evidence if I were.)

What kind of financial genius does it take to be homeless and bankrupt when you are a college graduate who had no student loans and were trained as a helicopter pilot by the military. With all those advantages, and “Rich Dad’s” brilliant financial advice, the guy still ends up homeless at age 38? And if “Rich Dad’s” advice wasn’t good enough to keep Kiyosaki from becoming homeless in 1985, how did it suddenly become something the rest of us should be following in 1997?

I suspect Kiyosaki has done well from his books with the help of Oprah and Amway et al. A reader who refused to let me use his name said he attended an Amway meeting where Kiyosaki spoke and that Kiyosaki said his book was unknown until an Amway “Diamond Distributor” started buying it in quantity. He further said that Kiyosaki urged the audience to focus on their Amway distribution business, not on buying duplexes and such.

I further suspect that his secrecy has nothing to do with avoiding attracting lawsuits and everything to do with preventing the public from finding out how much he really made and how he made it.

Clever life plan?

Kiyosaki would have us believe that he followed a coherent life plan laid out with the help of “rich dad.”

He says he went to the U.S. Merchant Marine Academy because he wanted to learn international business. People who want to learn international business while in college should go overseas to school, like to the London School of Economics or to a U.S. college with a strong international business or international relations department. The U.S. Merchant Marine Academy is a grueling ordeal that prepares its students to operate oceangoing ships. Going there to study international business is like studying construction and building maintenance to become a school teacher because teachers work in buildings.

U.S. Naval Academy

I did not put my suspicion that Kiyosaki was rejected by a major service academy in this analysis originally because I had no evidence of it. Now I do. A reporter for People magazine interviewed me about Kiyosaki. In the course of the interview, he mentioned that Kiyosaki admitted to him that he had applied to the U.S. Naval Academy at Annapolis, but was rejected for academic reasons. So if he went to the Merchant Marine Academy to learn international business, why did he apply to the Naval Academy? Let me guess. To study oceanography? And I guess if we are to believe that he went to the Merchant Marine Academy to study international business, he must have deliberately flunked admission to the Naval Academy because going there would have interfered with his plan to learn international business. What international-business purpose was served by applying to the Naval Academy is a part of Kiyosaki’s tangled web that I have no clue about.

In his 1993 book …Don’t Go To School?, he said, “In 1964, I received two nominations: one to the U.S. Merchant Marine Academy in Kings Point, NY, another to the U.S. Naval Academy in Annapolis, MD. I accepted the Kings Point nomination.”

The Naval, Military, and Air Force Academies are part of the Department of Defense. Their students are salaried, active-duty U.S. military personnel. I believe the Merchant Marine Academy comes under the Department of Transportation. They seem to have mandatory Naval ROTC at the Merchant Marine Academy which comes with some sort of military reserve commission and status. The USMMA students seem to have a sort of scholarship as opposed to the salaried, active-duty status of the Department of Defense academies.

‘Nomination’

I am a West Point graduate, so I am familiar with the terminology and procedure associated with admission to service academies. Kiyosaki says he received two “nominations.” Admission to the U.S. Naval Academy, like admission to my alma mater, the U.S. Military Academy at West Point, is a multi-step process.

His statement, “I accepted the Kings Point nomination,” is extremely misleading.

The first step is to obtain a nomination from a Congressman or Senator. A nomination is not an admission. Rather it just lets you begin the rest of the application process. Furthermore, there are two kinds of nomination: principal and alternate. I got a principal nomination from Congressman William T. Cahill. That meant that I would be admitted if I passed the three categories of criteria. Those who receive alternate nominations, which are ranked first, second, third, fourth, and so forth, only get admitted if the principal and alternates above them fail to gain admission. The detailed facts about Kiyosaki’s nominations, if any, were almost certainly listed in his hometown newspaper in late 1964 or 1965.

During the post-nomination application process, you undergo an extensive physical exam more demanding than to enlist in the military—and a physical aptitude test of your athletic ability. I had to go to Fort Dix, NJ for those two tests. Simultaneously, you send your high school transcript and test scores to the service academy and they decide whether you meet their standards academically. If you pass all three tests, and you were the principal nominee, you get an appointment from the President of the United States. That means you are admitted. It is only then that you can claim to have turned down the opportunity to attend that academy.

Kiyosaki seems to imply that he was admitted to the Naval Academy, but turned it down. However, the use of the word “nomination” and the admission to People seem to indicate that he was, in fact, never accepted by the Naval Academy and therefore could not have chosen the Merchant Marine Academy over the Naval Academy.

A midshipman at Kiyosaki’s alma mater said that in Kiyosaki’s 5th book, he does not mention the Merchant Marine Academy by name. Rather he says only that he went to “the military academy in New York.” You gotta be kidding me! To 99% of the people, “the military academy in New York” is West Point. If his book Rich Dad Poor Dad is any indication, Kiyosaki would have lasted about two weeks at West Point before they threw him out for violating the cadet honor code. For chrissake, he’s even lying about having lived by the West Point honor code for four years.

Pilot

Taking an indirect and barely relevant route to an educational goal is a recurring theme in Kiyosaki's book. He seems to have a fascination with extremely roundabout, “reverse psychology” methods of teaching or learning. Kiyosaki states that he became a U.S. Marine Corps helicopter pilot so he could learn how to lead men. Pilots fly helicopters. A pilot may lead his copilot and door gunner, but no one else when they are airborne. Furthermore, the actions of a copilot and door gunner are largely standard operating procedure. They do not need to be led much. And if they did, the pilot would be in a poor position to lead them because flying a helicopter is a task that consumes 100% of your attention. Only if he stayed in the service for many years would a pilot be put in charge of a group of helicopters and then be a leadership position. Kiyosaki did not stay in the military. If you want to lead men in the military, you become a platoon leader and company commander.

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Also, in the 1993 book, he says, “…I…became a fighter pilot and went to Vietnam…and probably enjoyed combat more than most pilots ever do.” A Marine fighter is a fixed-wing jet aircraft that generally operates off an aircraft carrier. Helicopters sometimes operate off carriers, too, but no military person would call a helicopter a fighter.

‘Never returned to my ship’

The 1993 book contains a very strange discussion. He says that he found a “little boy in my helicopter one day and “had the right, if not the duty, to shoot and kill him on the spot. This was the code of war we were taught as military officers.”

I am aware of no such right, duty, or “Code of War.” The Third and Fourth Geneva Convention, to which the U.S. is a signatory, prohibits shooting a surrendering enemy soldier, as does the U.S. Uniform Code of Military Justice. Furthermore, a child would generally not be considered a soldier at all. To be sure, in Vietnam, children sometimes attacked U.S. soldiers with deadly weapons like mines, grenades, or guns. They brazenly stole from our moving vehicles—engineer stakes and gas cans—when we were in convoy, because they knew we would not harm them. I suspect a Vietnamese child in a helicopter would be trying to steal something—although he could be just fascinated by the aircraft like any kid.

Kiyosaki then melodramatically describes that after aiming and starting to pull the trigger, that he “put my gun away that day forever. I committed myself to finding new ways of doing things, instead of simply responding to what I’d been told to do by a person who supposedly had more authority than I.”

Murder

In the absence of an immediate threat from the boy—and he mentions no such threat—shooting the boy would be murder, not obedience to any U.S. military authority. Indeed, it would be gross disobedience.

The “supposedly had more authority” line is rather weird for a U.S. Marine officer. A member of the U.S. military is required to carry out all lawful orders of his superiors and there is no ambiguity about authority in the military.

He then says that three weeks later, when his aircraft carrier was in Hong Kong harbor, they were ordered to return to Vietnam. “We were about to engage in a large military operation near the DMZ” It would be unlikely that the details of an operation would be revealed to military personnel who were ashore in Hong Kong—a British colony surrounded by Communist China at the time. For secrecy, such details are usually only revealed once the ship leaves the shore. Plus, by the time Kiyosaki got to Vietnam, virtually all U.S. combat troops had been withdrawn from the country.

“I never returned to my ship. To this day, that was one of the hardest decisions I had to make. I trembled for hours as I walked the streets with my mind screaming. I was called a coward and a traitor by some of the other pilots. I realized it was not the most honorable way to handle my refusal to fight any more. But I also knew I could not fight and kill simply because I had been ordered to do so. What the other pilots never understood was that for me to fly and kill again would have been the coward’s way out.”

Well! Now that’s a heck of a passage! Not returning to your ship when ordered to do so is desertion. One of my readers said Kiyosaki appeared to be trying to claim that he was a “conscientious deserter.”

I hesitate to say that he is confessing to that. It is one of the most serious crimes in the military. The punishment can be death. But it is hard to find any other explanation in this passage. The fact that his peers called him a coward and a traitor suggests that explanation or possibly turning into a conscientious objector while on the streets of Hong Kong. I requested his military records from the National Archives.

‘Once a Marine…’

Kiyosaki makes much of his Marine background—at least when he’s not claiming to be an anti-war protestor. The Marine Corps, to their discredit, bragged about him on their official Web site, apparently without checking out what he told them.

How do you get to be a Marine? On cable TV, I learned that you have to go through Marine Corps boot camp culminating in a multi-day test called “The Crucible.” If you successfully complete it, you are awarded the right to wear the coveted “eagle, globe, and anchor” badge of the Marine Corps.

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Did Kiyosaki go through Marine boot camp? Nope.

He did go through the U.S, Merchant Marine Academy plebe year which is arguably harder and longer. But that makes you a Merchant Marine Academy cadet, not a Marine.

Marine officers generally do not go through boot camp. That’s for enlisted men. Officers typically graduate from the U.S. Naval Academy—the one that rejected Kiyosaki for not being smart enough. Or they graduate from a college ROTC program. The Merchant Marine Academy probably had that. But even then, I believe you have to go through something called Marine Platoon Leader Class after college. I would expect that they may not wear the “eagle, globe, and anchor” badge until they successfully complete that Marine training.

Did Kiyosaki go through Marine Platoon Leader School? Nope.

So how did he get to be a Marine?

He was a Navy officer in helicopter school. The Vietnam war was winding down, so the Navy decided they had too many pilots and decided to stop training Kiyosaki and his fight-school classmates to save money. The Marines, on the other hand, still wanted more helicopter pilots. By letting Kiyosaki and his helicopter classmates make a lateral transfer to the Marine Corps, the Marines could save the amount of money the Navy had already spent training them. In other words, to the Marine Corps, Kiyosaki was a pilot trainee who was “on sale” for half price or “overstock.”

In World War II, officers who graduated from Officer Candidate School were called “90-day wonders.” By that standard, Kiyosaki is a “zero-day wonder” in terms of Marine training—an instant Marine. He passed no “crucible” or its predecessor tests. He just filled out some paperwork and made a wardrobe change.

Did he serve in the Marine Corps? Yes.

I have no problem with his claiming he served in the Marine Corps. But in his interview on the Marine Corps Web site and elsewhere, he has laid on the “Marine Corps made me what I am today” stuff pretty thick for a guy who came through the Marine Corps’ “back door,” skipping the notoriously difficult training that virtually all other Marines had to complete successfully before they could “claim the title of United States Marines.” (a line from the U.S. Corps Marine Corps Hymn)

If any military training made Kiyosaki what he is today, it is the Merchant Marine Academy, not the Marine Corps. The U.S. Marine Corps has a magnificent reputation. Unlike a relatively unknown institution like the Merchant Marine Academy, they do not need the likes of Kiyosaki to add to their name recognition. The Marine Corps should be eager to make sure that the Merchant Marine Academy gets all the “credit” for making Kiyosaki what he is today.

In the spring of 2010, I saw a Marine Corps recruiting poster. It had the slogan:

Always earned, never given.

That is false. Kiyosaki is evidence of that.

Are the Marines that proud of a ‘conscientious deserter?’

So let me get this straight. The U.S. Marine Corps’s official Web site is bragging about Robert Kiyosaki and touting him as an exemplary Marine in spite of the facts that:

The fact that these seem to be a pack of lies designed to make himself a hero to the anti-war crowd ameliorates them somewhat, but why would the U.S. Marine Corps brag about a former Marine officer who told such lies for such a purpose?

Kiyosaki military records

Robert Toru Kiyosaki was a US Naval Reserve officer from 6/4/69 to 10/3/70 reaching the rank of lieutenant j.g. Then he switched to the Marine Corps from 10/4/70 to 6/30/74 and was honorably discharged as a first lieutenant.

He was awarded an air medal for “courage and devotion to duty in the face of hazardous flying conditions” during combat support missions in Vietnam from 6/16/72 to 10/19/72, as well as several other medals which appear to be merely for being in the military or being in Vietnam. I have several such medals myself. For example, you get the Vietnam Service Medal for setting foot in the country. Kiyosaki has that with 2 Bronze Battle Stars. Bronze battle stars are for being in country during certain campaign time periods. See my article on whether military people deserve all the medals they get and whether those medals mean what civilians think they mean.

Also, civilians should know that all military medals have criteria and citations that make them sound very heroic. In fact, the vast majority of medals with subjective criteria are probably awarded to guys who did little more than serve at a particular place and time. For example, in 1965, when I was a West Point cadet, I and everyone else in the military at the time was suddenly awarded the National Defense Service medal. We called it the “I was alive in ’65” medal. We also had a joke about its colors: “The red is for the blood we never shed. The blue is for the oceans we never crossed and the yellow is the reason why.”

A Vietnam-era Marine fighter pilot told me an air medal means twenty missions (flights) in a combat area (like the entire country of Vietnam and environs) Really!? Then I think the Army owes me an air medal or two. My jobs in Vietnam required me to travel around to widely scattered bases—which I did in Hueys, Loches, Chinooks, Piper Cub-type planes, and C-130’s. It never occurred to me that I should get a medal for it and I will not be trying to get any now.

The air medal citation says “The Numeral ‘1’ to represent One Strike/Flight Award is authorized.” The meaning of this varied from unit to unit and time to time. In some units, it could be merely for a guy taking a ride in an aircraft with minimal duties, especially in 1972. Almost all U.S. military personnel were removed from Vietnam on 3/28/73. The last major combat units left in the summer of 1972. Kiyosaki’s Air Medal was for the period June to October, 1972. The Air Medal Citation was signed by Louis H. Wilson, Lieutenant General, U.S. Marine Corps, Commanding General, Fleet Marine Force, Pacific. Perhaps he or a member of his staff at that time could clarify what this medal really involved.

His military records show that in 1972, his unit HMM-164 was on board the USS Okinawa, a helicopter carrier.

I am a little surprised that I have not heard from anyone in his unit.

Now that we know the name of the ship, we can obtain its log through the Freedom of Information Act, but I am not that interested because Kiyosaki came back off his conscientious deserter story in the Smart Money Magazine article. He now admits he was just one of hundreds of sailors and Marines who missed the boat when it unexpectedly left early.

His military records also contain the following “Combat History—Expeditions.”

From To Details
5/24/72 5/25/72 OP SONG THANH 6-72
6/29/72 7/1/72 OP LOMSON 72 Phase-1 RVN This was a major operation by the South Vietnamese military with some U.S. air power support.
7/11/72 7/12/72 OP LOMSON 72 Phase-2 RVN This was a major operation by the South Vietnamese military with some U.S. air power support.
7/11/72 7/12/72 OP SONG THAN 9A-72 RVN
7/24/72 8/29/72 Participated in special search and rescue operations with 31st MAU in the contiguous waters of RVN
9/29/72 10/21/72 Participated in special search and rescue operations with 31st MAU in the contiguous waters of RVN

OP = Operation?
RVN = Republic of Vietnam
contiguous waters of RVN = ocean off the coast
SONG THANH and LOMSON = probably Vietnamese villages or provinces

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The Marines often listed combat expeditions on a serviceman’s military record even though he had nothing to do directly with the operation in question. It may only mean that some other members of his unit were involved. These combat expeditions could appear on your record even if you were on R&R in Hawaii during the whole operation.

I would not have looked into his military records at all were it not for the strange story about not shooting a boy and refusing to return to his ship. Now I am trying to figure out whether his accounts in his books jibe with his military records. My preliminary conclusion is that the whole melodramatic story of not going back to the ship seems not to be supported by his military records. He also appears to have had a Vietnam tour, but without either distinction or misconduct. His decorations, including the air medal, are all analogous to the gold stars kids get in school for attendance. That is, they are for being somewhere or for being somewhere for a certain period of time.

Here’s is an email I got from a former Marine:

“I couldn’t help but notice that he was attached to H&MS-24 (Headquarters and Maintenance Squadron-24) Marine Air Group 24, 1st Marine Brigade. MAG-24 was the entire air group with H&MS-24 as maintenance support efforts. They include support such as airframes, avionics, ordinance, which was my military occupational specialty (#6541). [Kiyosaki] also said that he was 1st Marine Brigade. Brigade was ground side. Grunts, infantry, artillery. There is no way for him to have been both airwing and ground at the same time without changing M.O.S.

[Reed note: I do not know Marine procedures during Vietnam, but Kiyosaki seems to have been trained as a forward observer to direct artillery and/or air support at ground targets. Forward observers are typically attached to infantry or artillery units.]

A Marine major said this M.O.S. is for an enlisted man and that he did not believe the man’s comments would apply to officers.

The making of a financial genius

There are probably many ways to became a financial genius, but Kiyosaki has certainly chosen an unlikely route:

Kiyosaki tries to make a virtue from all his failures and false starts—saying that’s how you learn and you have to get back up and all that. Fine. But couldn’t we see a little more actual success after all these great lessons were learned? And how did all this screwed-up stuff happen to a guy who had the benefit of “Rich Dad’s” brilliant wisdom back at age nine?

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What is his background really? I am impressed by Xerox salesmen as a general rule, but that aspect of his background sure stands out from the rest. Did he really do that? He claims he was a “top-five” guy at Xerox—one of the nation’s most well-managed companies at the time. Really? And this after being something like a bottom-five guy everywhere else! (A man who called me said he understood Kiyosaki was a top salesman at Xerox, but since he is a friend of Kiyosaki rather than a Xerox guy, his knowledge may come entirely from Kiyosaki.)

College grad?

I was so skeptical that a college graduate could have written this book that I took the unusual step of calling his college to confirm that he really attended and graduated. He did. If I were a Merchant Marine Academy graduate, I would request that they do a recount of Kiyosaki’s college grades. This book is an embarrassment to the U.S. Merchant Marine Academy.

I have heard from two USMMA guys who generally agreed with my analysis. One noted that USMMA grads have an obligation to stay in the merchant marine for a certain amount of time, because taxpayers pay for their education, but that serving in the military either reduces or eliminates the remainder of that obligation. Maybe getting rid of that obligation, not “learning how to lead men,” was Kiyosaki’s real motive for joining the Navy then Marines.

Archie Bunker on Wealth

Archie Bunker on Wealth would be a more accurate title for Rich Dad Poor Dad. The overall high-school-dropout tone of the book is likely the influence of “rich dad.” To be sure, “rich dad” as depicted by Kiyosaki is street smart and has entrepreneur’s genes and energy. But like most high-school dropouts, “rich dad” has not done his homework on many of the opinions he passed on to Kiyosaki. For example, Kiyosaki says, “Prices go up because of greed and fear caused by ignorance.” In fact, prices are determined by supply and demand, as anyone who is reasonably well read knows. The “fear and greed” line is a common old saying about the prices of publicly-traded stocks, bonds, and commodities.

Real estate expert?

On pages 106 and 107, he brags of taking back $190,000 worth of 30-year notes at 10%. Competent note investors would never agree to such long terms. One expert I consulted called it a “nutty note.” I asked Bill Mencarow, owner of Paper Source if he knows of any note investors who routinely take back 30-year notes. He said, “To paraphrase Eisenhower speaking about Nixon’s vice-presidential accomplishments, give me a week and I might think of one.” Mencarow further states that 30-year self-amortizing notes, at best, would sell at about a 50% discount for cash. He actually asked around for me and found three guys who would pay only $90,000 to $120,000 for Kiyosaki's “$190,000” face-value notes.

If the notes are interest-only with a balloon of $190,000 at the end of the 30 years, they would sell for even less. Trading $190,000 worth of real estate for paper that is only worth $90,000 to $120,000 does not get you a financial genius secret decoder ring.

Kiyosaki says “much of [the $19,000 a year interest income is] sheltered through our private corporation.” In fact, corporations do not shelter income. The corporation’s income is taxed when received at corporate tax rates. When that income is subsequently distributed to Kiyosaki, it will be taxed again at individual rates. Real estate investors generally do not incorporate. Accountant Bob Baldassari of McLean, VA says he and his colleagues almost never advise a small real-estate investor to incorporate because the disadvantages far outweigh the advantages.

Smart note investors generally buy notes through their pension fund, which is not a corporation. Apparently Kiyosaki is not a smart note investor.

He says he hopes they never pay off the $190,000 because he would have to pay taxes on the principal and because $19,000 paid over 30 years is $500,000. In fact, taxes must be paid whenever any principal payment is made, partial or complete payoff. Taxes must also be paid whenever any interest is paid. There is no way to avoid paying the taxes. And the only way to defer paying the taxes is to defer receiving the income, which is cutting off your income to spite the IRS.

If he did these deals, which involve buying and selling six houses, in a short enough period of time, he would almost certainly be considered a dealer for tax purposes. Dealers are not allowed to use installment-sale treatment. That means he has to pay all the tax on the gain with the next quarterly income tax return after the closing, even though he has not received a penny of principal from the deal.

If the borrowers literally never paid the $190,000 off, Kiyosaki would be out $190,000. Wanting to lose $190,000 is insane. Measuring your return on a 30-year note by multiplying the annual interest by the term of the loan is extremely misleading. The only way to measure payments received over a period of years is in terms of interest rate or present value. Bragging about cumulative interest paid on a 30-year note indicates that either Kiyosaki does not understand the first thing about finance, or he thinks you don't.

A reader and I got into a dialogue about these notes and I came to the conclusion that the typical Kiyosaki follower literally does not know the first thing about finance. The people that guys like Kiyosaki and Sheets target are sort of the Thomson’s gazelles of real estate—people who are the weakest and most vulnerable because of their ignorance of real-estate-investment principles. Click here for a quick overview of some basic principles.

On page 108, Kiyosaki brags that “$190,000 was created in the asset column and no taxes were paid.” Not paying taxes in this case is hardly an accomplishment. The reason he has not yet paid any taxes is he has not received any money. He will start paying taxes the moment he receives any interest or principal payments on the $190,000.

On page 24, Kiyosaki speaks of “building a track [sic] of houses.” This does not demonstrate the command of real-estate terminology one would expect of a real-estate expert. (He means “tract.”)

Kiyosaki recommends various financial books, but only two real estate books: Donald Trump’s Art of the Deal and Robert Allen’s Creating Wealth. I think it’s safe to say that no other experienced real-estate investor in history ever gave a list of recommended books that included only those two. Trump is a publicity-hungry, New York City high-rise developer whose book is only somewhat useful to the typical real-estate investor. It would rank very low on most lists aimed at individual investors. For a discussion of Allen, see the guru rating page of my Web site.

There is a lot of incorrect conventional wisdom in this book.

Kiyosaki book The whole truth about the subject in question
The rich get richer. Sometimes, they get poorer.
It’s not how much money you make, it’s how much money you keep. The more you make, the more you keep. Only a tax rate greater than 100% would change that. There is no such rate.
By working harder, you simply increase the amount of taxes taken by the government. Working harder increases both your before-tax income and your after-tax income, as well your tax liability. What Kiyosaki says would only be true if the tax rate were 100%, which it never is.
An intelligent person hires people who are more intelligent than they are. As a general rule, people who are smarter than you will not apply to work for you until you have reached a rather high level of success.

On 8/21/00, the comic strip “Dilbert” made fun of this old platitude by having it uttered by the pointy-haired boss. His subordinates then gleefully pointed out that each boss in the company must therefore be dumber than his subordinates and that the CEO must be the dumbest person in the corporation.

Here is an email I got from a reader of this page: “I have a friend that is following the Kiyosaki mentality.  He wants to hire/partner with me cause I have more skills and talents than he does.  He wants me to come up with the business idea, come up with the business plan, the capital, the investors, the operations, and etc...  I asked him, so what is your contribution to the business then.  He tells me that he is going find people smarter than him to make this business work.  This logic is so nonsensical. If I'm smarter than the entrepreneur than why should he even be an entrepreneur?  I could keep all the profits to myself.

“I told my friend that it takes many hours of sweat and late night candle burning to run a business.  I know because I've started one before.  Unfortunately, he refuses to understand my message, instead he continues on with this Kiyosaki talk about starting a corporation!?  Without a business idea, business plan, he requested me to incorporate first.  This is exactly the crap that Kiyosaki is preaching in his books.

“Then we had a huge argument about who should write up the business plan once he comes up with an idea.  He comes up with some ideas, then he wants me to write the business plan.  I ask him a few details about the target customers, SWOT, and financial forecast.  He's response was classic, ‘You figure it out.’  Gotta love the Kiyosaki mentality.”

Cheng

Most people work all their lives paying for a home they will never own. With each payment, their equity increases—as long as the property value does not fall. Many people pay off their mortgage in full before they die. Almost all thoroughly enjoy their home both during and after the mortgage.
Most people, working for a paycheck, are making the owner, or the shareholders richer. Irrelevant. You should choose what you do only according to how it relates to your goals. You should not resent others benefiting from your efforts. Indeed, you will prosper most when you help others achieve their goals.
You work for the bank. After taxes your next largest expense is usually your mortgage and credit-card debt. Irrelevant. You should use mortgage and credit card financing whenever they will help you achieve your goals. Resenting bank profits is childish.
The rich do not play by the same set of rules. Yes, they do. This is sour grapes less successful people use to rationalize their inability to succeed. They lack the character to simply admit that they got beat fair and square in the economic aspects of the game of life.
It is the knowledge of the power of the legal structure of the corporation that really gives the rich a vast advantage over the poor and middle class. None of my rich friends make any use of corporations. I became a millionaire in 1983 and never used a corporation. Corporations have both advantages and disadvantages. Most real estate investors do not use corporations. Note investors use IRAs and such. Kiyosaki claims to be mainly a real-estate investor. See my discussion below on corporation advantages and disadvantages.
The reason I minimize my income is because I don’t want to pay it to the government. Minimizing one’s income is idiotic. You are always better off with more income. His advice would only make sense if the tax rate were 100%.
You should have a corporation and a board of directors. One of my graduate-business-school professors called this, “Managing the company from the fiftieth floor when you only have a one-story building.” Having an outside board of directors when you are an individual real-estate investor, with or without a corporation, is a silly affectation.

Corporations are costly, time-consuming, and complicated and have many disadvantages like preventing you from employing your minor children and deducting the wages without having to pay social security, withholding and so forth. Corporations cannot escape those taxes or paperwork on minor employees. In some states, the owner of an incorporated company cannot represent himself in small claims court and must hire an attorney for every little legal matter.

I love it when my real estate broker or stockbroker makes a lot of money. Because it usually means I made a lot of money. It means no such thing. Brokers profit strictly from transactions, regardless of whether they are also ultimately profitable for the clients. “Where are the clients’ yachts?” is an old question that points up the fact that the stock brokers make money while their clients lose money.
I only play with money I can afford to lose. A loss is a loss. All losses make you worse off. There is no line which separates losses that matter from those that do not. You should not invest in something unless you have a reasonable degree of confidence that you will not lose. There are several books, like Innumeracy and Why Smart People Make Big Money Mistakes, that condemn this kind of thinking, which is a form of erroneous financial thinking known as “mental accounting.”
Action always beats inaction. Sometimes inaction is the best course, like when you are thinking about selling real estate or a stock that subsequently goes up.

Contempt for traditional education and the educated

The book is almost entirely contemptuous of formal education and those who have graduated from universities. He wrote another book called If you want to be rich and happy, don't go to school? On page 64, he delights in the fact that “educated people” now “came at [rich dad’s] beck and call, and cringed when he did not approve of them.”

This is a bit sick. To borrow a phrase that is now a common sitcom punch line, I think Kiyosaki has “some issues” regarding educated people and his relationship with his highly educated “poor dad.” He seems to have some psychological need to dominate and demean people like his father. At my guru-rating page, I said Dave Del Dotto was the dumbest of the real-estate gurus. Kiyosaki takes the prize for the real-estate guru with the most tangled psyche.

He says, “...the main reason people struggle financially is because they have spent years in school but have learned nothing about money.” I disagree. The main reason people struggle financially is bad decisions about getting an education, bad luck, too much spending, too little savings and investing, too much reliance on organizations for their livelihood, and not enough reliance on themselves.

Kiyosaki says that our schools focus on “preparing today’s youth to get good jobs by developing scholastic skills.” He thinks that’s a bad thing. It’s probably the right thing. Only a small percentage of people are suited to entrepreneurship. Even future entrepreneurs usually need to begin as employees to get their starting capital and to learn while they work.

I would be among the first to agree that traditional formal education is lacking in many ways. I attended Catholic and public schools, graduated from college and got an M.B.A. But I also attended the School of Hard Knocks for thirty-five years, and that’s not such a hot educational experience either. As someone said, in the School of Hard Knocks they give the test first, then the lesson. That is a slow, costly, painful way to learn. Unfortunately, it’s the only “school” that teaches many things you need to know. Obviously, the best way to prepare for life is a combination of formal traditional education, reading, seminars, experience, and asking more experienced people for advice.

Want to know what ‘the rich’ REALLY teach their children?

Rich Dad, Poor Dad’s subtitle is “What the rich teach their kids about money—that the poor and middle class do not!” Unfortunately, you will not learn that in Kiyosaki’s book. Fortunately, the real version of what “the rich” teach their kids, or ought to, was the subject of a cover story (“Rich, but not spoiled—How to raise your kids in an age of wealth”) in the 6/12/00 issue of Forbes. Forbes knows rich. (
http://www.forbes.com/premium/archives/purchase.jhtml?storyURL=/forbes/2000/0612/6514266a.html&_requestid=27740)They publish the annual “Forbes 400,” which is a list of the richest people in the world. If you have money and kids, that article and its bibliography are worth a trip to a library. The article bears no resemblance to Kiyosaki’s advice, never mentions his best-selling book in spite of its obviously related subtitle, nor is his book listed in their list of five recommended books on the subject of “Advice for the affluent parent.”

The main issue for wealthy parents is finding a way to motivate their kids to not coast because of their parents’ affluence. Also, the vast majority of parents, wealthy or otherwise, will tell you that kids are not big on listening to their parents. Kiyosaki’s naiveté about raising kids is to be expected considering that he has never had or adopted any kids. Why he feels qualified to tell those of us who do have kids how to raise them is a mystery.

More to life than money

Also, there is more to life than making money. Traditional, formal education has opened up tens of millions of new, non-wealth-building horizons for students. But Kiyosaki seems to judge all educational experiences by the single criterion: does this tell me how to get rich?

Kiyosaki talks like a politician

Kiyosaki uses phrases like “the rich” and “the poor” a lot. If you ran a Nexis computer search to see how and where those phrases have been used in the news media, I predict you would find they are almost exclusively used by leftist politicians and quasi-politicians.

A number of Democrats have complained that the Republicans are no angels either. I know. I agree. But with regard to Kiyosaki, the politicians who are most comparable are on the left because both Kiyosaki and the left pander to “the poor.” While use of Republican demagoguery might work in some cons, it certainly would not fit the get-rich-quick-in-real-estate con. Even among get-rich-quick gurus who try to rip off “the poor,” Kiyosaki is unique in using political tricks as heavily as he does. I come closest to being a Libertarian so I could not care less about either the Democrats or the Republicans.

The way politicians talk is intellectually dishonest. They stereotype (e.g., “the rich”). They engage in name calling. (e.g., Kiyosaki dismisses cost-conscious accountants as “bean counters” and critics as “Chicken Littles.”) They change the subject. They scapegoat. They try to arouse envy. There should be no politicking in a how-to real-estate book like Rich Dad, Poor Dad. See my article on intellectually-dishonest debate tactics.

Meaningless slogans

Politicians also use meaningless slogans. Kiyosaki’s book has many of those. He even adopts Jesse-Jackson-like one-of-these, one-of-those, pep-rally cadences. For example, Jackson says, “Up with hope. Down with dope.” Kiyosaki says, “Don’t work for money; make money work for you.”

“Don’t work for money; make money work for you,” sounds smart, but what does it really mean? Quit your job and live off your investments? Most of his readers are not yet in a position to do that. And when they are, they do not need his book. Obviously, the correct advice is work hard at a job or your own business, save, and invest. Kiyosaki’s version is muddled and risks giving people a dangerous wrong impression, but, like a politician, he seems more interested in sweeping the audience along to his selfish ends than in teaching them what they need to learn. A Thomas Sowell column that appeared in the 9/25/00 edition of my local paper contained several phrases that reminded me of Kiyosaki’s book:

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Here are some other meaningless slogans in Kiyosaki’s book: “Learn to use your emotions to think, not think with your emotions” (page 42), “It’s not the numbers, but what the numbers are telling you” (page 53), “I’d rather welcome change than cling to the past.” (page 110), “Winners are not afraid of losing, but losers are.” (page 114) The 6/28/01 Dilbert comic strip had an employee saying, “work smarter while broadening our focus.” The pointy-haired boss responds, “That doesn’t mean anything.” The spouting of catchy, meaningless slogans is widespread. The habit of stopping and thinking about whether they really mean anything is not.

Here is a pertinent email I got on 3/17/06:

John --

For several days I've skimmed Kiyosaki's book "Rich Dad's Guide to Investing" at my local Barnes & Noble, and found the experience mesmerizing. My wife and I own a professionally managed portfolio of stocks, thanks to a modest inheritance, but apart from keeping a worried eye on the financial pages we really take little action to grow our nest egg. I'm increasingly interested in my alternatives, and I am potentially a prime candidate for Kiyosaki's mantra of "Don't work for money; make money work for you." (I'm just that lazy.)

I would have bought the book but for its poor writing. As a newspaper reporter and former copy editor, I can spot padded prose and logical fallacies a mile off. Inexperienced writers, or those who do not understand their subject, usually go on at great length to say almost nothing. I seldom see even inexperienced writers try to bog the reader down, or avoid a clear "so what," as I saw in Kiyosaki. And it didn't help that his writing style is lifeless, his characterization unconvincing.

In any event, I thought I'd Google around for expert reactions to Kiyosaki's books, as they are generally compelling in the way that infomercials and seances are compelling. I read two things: his Web site, in which he promotes board games and a $2,500-per-head weekend seminar targeted at people who, on average, likely can ill-afford the expense, and your analysis. I have to say I found your site refreshingly thorough and public-minded, and I'm glad I ran across it. Another thing I know as a reporter is when someone has done his homework. You have clearly done yours, and I'll be sure not to put any stock in Kiyosaki.

Incidentally for your readers who have seen the movie Mystery Men (1999), a tongue-in-cheek spoof of comic book super heroes, this exchange may feel apt in considering Rich Dad, Poor Dad:

Mr. Furious: Okay. Am I the only one who finds these sayings just a bit formulaic? "If you wanna put something down, you gotta pick it up". "If you wanna go left, you gotta go right". It's...
Sphinx: Your temper is very quick, my friend. But until you learn to master your rage —
Mr. Furious: Your rage will become your master? That's what you were gonna say, right? Right?
Sphinx: Not necessarily.

With gratitude,

John Snyder
Western Massachusetts

Robert Blake

In this, Kiyosaki also reminds me of Robert Blake, the movie and TV actor best known for starring in the late-70’s TV series Baretta. Blake’s TV-talk-show appearances were invariably interrupted by audience applause. Why? Like Kiyosaki, he was given to spouting platitudes so grandly and self-confidently that the audience assumed he must have had said something great. He didn’t.

[Oddly, long after I posted this comment about Kiyosaki reminding me of Blake, Blake emerged from obscurity when his wife was shot to death as he returned to a restaurant to get the gun that he forgot there. My comparing Kiyosaki to Blake had nothing to do with guns and murdered wives. Also, a Los Angeles Times article about Blake’s murdered wife, Bonny Lee Bakely, said she told friends that she wanted to marry a celebrity like Blake “to show up kids who made fun of her in school.” That is reminiscent of my analysis of Kiyosaki’s lifelong pursuit of money and status as an overreaction to insults he received in elementary school.]

Redefining words

Politicians also give new, bogus meanings to established words and phrases in order to mislead people. For example, Democrats refer to almost all spending of taxpayer’s money on government programs as “investments.” They call abortion “choice” and Republicans call opposition to abortion being “pro-life.” Kiyosaki does this, too. For example, he says, his book will “challenge the belief that your house is an asset” and “Define once and for all an asset and a liability.” His quibble with the notion that your house is an asset is the mortgage and other carrying costs and lack of rent income.

Trust me, your house is an asset. The mortgage on your house is a liability. As they accrue, carrying costs of your house like taxes and insurance are also liabilities. Once again, Kiyosaki may hurt some people with this sort of rhetoric if he discourages people from owning a home. Maybe what he is trying to say in his muddled way is that it is wise to live beneath your means, that is, buy a smaller home than you can afford, so that you have a smaller carrying costs and therefore have more money to invest. I agree. But you can learn that lesson in a non-muddled way from the book, The Millionaire Next Door.

Some have ordered me to be “fair and balanced” by attacking Republicans every time I attack Democrats. I am not trying to be Fox News. They, like politicians, are trying to please masses of people for ratings. I am stating my views honestly, not twisting them to make them fit into some equal-time formula.

I wrote an article listing the various intellectually-dishonest debate tactics at www.johntreed.com/debate.html.

Taking both sides

Another thing politicians do is take both sides of an issue. Kiyosaki is on both sides of many issues.

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Issue Kiyosaki takes one side... ...then the other
Fear On page 31 “...it's fear that keeps most people working at a job.” Page 37 “...many rich people are rich not because of desire but because of fear.”

On page 40, “rich people with lots of money often have more fear the richer they get.”

Timing markets on page 109, Kiyosaki brags about timing real estate markets

“Wise investors buy an investment when it's not popular.” (page 154)

Also on page 154. “Smart investors don't time markets.”
Federal income tax law On page 95, he tells you to write off car expenses, vacations to Hawaii, health club memberships On page 109 he says, “I recommend playing within the rules.” The advice on page 95 is tax fraud.
Main reason people do not get rich “the main reason people struggle financially is because they have spent years in school, but have learned nothing about money” (back cover) ...the main reason most people are not rich is because they are terrified of losing (page 114)
The wisdom of joining a union Page 126. “Personally, I take no sides because I can see the need for and benefits of both sides.” (“Rich dad” was extremely antiunion.) Same page. Highly specialized people should join a union. (“Poor dad” was a union organizer.)
Good credit “When I occasionally come up short. I still pay myself first. I let the creditors and even the government scream.” Page 159 “My wife and I have excellent credit.” Same page
Use of inside information in securities trading The reason you want to have rich friends who are close to the inside is because that is where the money is made. It’s made on information. ...the sooner you know, the better your chances are for profits with minimal risk. That is what friends are for. (page 154) I’m not saying do it illegally. Same page [see below]
Treatment of real-estate brokers Pay your brokers well (page 160) Has an agent show him six properties then says he wants to make half-price offers on all six, which the agent refused to do. (page 170)

Extravagance

Kiyosaki says his “poor dad” frequently said, “I can’t afford it,” while his “rich dad” said, “How can I afford it?” There’s another one of those Jesse Jacksonisms. I agree that a knee jerk “I can’t afford it” is a bad habit. I also agree that asking, “how can I afford it?” is a good habit. However, this little yin-and-yang platitude leaves off the question of whether the expenditure represents good value for the money? Kiyosaki buys extravagant things like a Mercedes and a Porsche and a Rolex watch and seems to regard the “How can I afford it?” question as the only appropriate response to any conspicuous-consumption impulse.

This puts him at odds with the behavior pattern depicted in the book The Millionaire Next Door. That book, which is based on a study of many real millionaires, found that actual millionaires generally buy used American cars. “How do you think a man like me got to be a man like me?” Think about it. One of the keys to success in business is holding your costs down and getting good value for every dollar spent. How could the same person be in the habit of spending money on extravagant items for which a large show-off premium must be paid? (Note: The Millionaire Next Door book, although written by college professors, has been criticized by other college professors as illogical. For example, they found that real millionaires had taken more risks than the average person and concluded that risk-taking leads to millionaire status. That’s an error called “winner bias”—concluding that characteristics of winners caused them to be winners. Most likely a study of the bankrupt persons next door would find that they, too, took more-than-average risk. If so, the proper conclusion would be that risk-taking leads to extraordinary results, which can be positive or negative. I do not recommend the Millionaire Mind book written by one of the Millionaire Next Door authors, although it makes a few good points.)

Conspicuous consumption is for pretend millionaires

The authors of The Millionaire Next Door found conspicuous consumption was typically a sign of a non-millionaire who was trying to impersonate a millionaire. Ostentation is item number one in my real estate B.S. artist detection check list. The fact that Kiyosaki goes out of his way to talk about his Porsche; his wife’s Mercedes; travel to Peru, Norway, Malaysia, and the Philippines; his “expensive attorneys, accountants, real estate brokers and stockbrokers,” and his $400 titanium driver, makes me wonder whether he is really a financial success or a walking (driving?) Potemkin Village.

Kiyosaki likes Texans. They have a saying: “All hat and no cattle.” Kiyosaki has a big “hat” (showy displays of wealth) and he talks about it a lot.

The millionaire real-estate investors I know generally try to do their own legal and accounting work. They often buy through agents, but try to sell without agents. Kiyosaki is the first real-estate investor I ever heard of who was eager to employ expensive accountants, attorneys, and to use brokers always.

One woman who responded to my “OK, What’s the point?” question said Kiyosaki’s point was that you should not waste money on expensive toys. I wrote back, “Huh?! The guy who brags about his Porsche, Rolex watch, and $400 titanium golf club taught you not to buy expensive toys?!!!” She admitted that I had a point.

I also have an article on how wealthy people real ought to spend their money.

Risk management

Kiyosaki’s advice on risk taking borders on thrill seeking. He approvingly quotes a Texas saying, “If you’re going to go broke, go broke big.” This is dangerous, adolescent-level advice and may be why he has a bankruptcy (or not depending upon whom you believe) on his resume.

Taking calculated risks is a prerequisite for a successful life. Thrill seeking is taking risks for their own sake without calculating. On page 13, he says, “Learn to manage risk,” but the book gives no indication of how to do that. Nor does it give any indication that Kiyosaki knows how to manage risk or ever cared about the subject. Indeed, risk management is a rather sophisticated skill that would not be the forte of an eighth-grade dropout like “rich dad.” I recommend the following books which discuss risk management. Kiyosaki’s head would explode if he tried to understand them.

Against the Gods, Capital Ideas, and Capital Ideas Evolving by Peter Bernstein
The Little Book of Common Sense Investing by John Bogle
Winning the Loser’s Game by Charles D. Ellis
The Four Pillars of Investing by William J. Bernstein
Fooled by Randomness by Nicholas Taleb

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Kiyosaki says he buys stock in small-cap companies that are just about to go public in Rich Dad Poor Dad. That’s rather unlikely. How do you buy stock in a company before it goes public? In theory, you could buy stock in closely-held corporations from the founder or his family or associates, but just before they go public seems like an extremely unlikely time for the owners of closely-held stock to be selling. He refuses to name any such stock that he bought.

Ethics

His recommendations on using inside information in securities trading and deducting vacations in Hawaii are not likely to get him appointed professor of ethics.

Factual errors

This book has many important factual errors.

Error Correct version
One of the main reasons net worth is not accurate is simply because the moment you begin selling your assets, you are taxed for any gains. (page 80) About the only asset you would sell at a gain would be real estate. All other assets like personal cars, golf clubs, furniture would sell at a loss for tax purposes. You don’t have to pay tax on up to $500,000 of gain (married couple filing jointly) on your residence because of Section 121 of the Internal Revenue Code. You would have to pay tax on the sale of a rental property, but that’s why most investors do Section 1031 tax-free exchanges. I have three books about tax-free exchanges: Aggressive Tax Avoidance for Real Estate Investors, How to Do a Delayed Exchange, and Reverse Delayed Exchanges. Kiyosaki himself mentions tax-free exchanges two pages later.
the income-tax rate of the corporation was less than the individual income-tax rates

An individual with the knowledge of the tax advantages and protection provided by a corporation can get rich so much faster than someone who is an employee or a small-business sole proprietor.

Sole proprietors are only taxed once. Corporation owners are taxed twice on corporate profits: once at the corporate level and again on dividends that leave the corporation to its stockholders. Even if the corporate tax rate were just 1% you would be worse off because it is added to your individual rate, not instead of it as Kiyosaki implies. It’s true that you can receive a reasonable salary from the corporation and that will only be taxed once, but Kiyosaki disdains mere salaries as highly-taxed “earned” income.

The only tax benefits of a corporation are the following: A corporation can deduct various forms of employee insurance. Sole proprietors can also deduct their health insurance premiums. Corporations can also create “cafeteria plans” to deduct limited amounts of child care and some medical expenses that are not normally covered by insurance. In a one-man or mom-and-pop operation, these small savings would probably not give you a net benefit after paying the extra setup and annual costs of incorporation.

my [corporation] bought me my first Porsche He implies that you can deduct a Porsche if you simply have your corporation buy it instead of buying it as an individual. In fact, only “ordinary and necessary” (IRC§162) expenses are deductible and whether a corporation is involved is irrelevant. Furthermore, the tax law contains explicit limits that prevent full deductions for new luxury cars. He says all his Porsches are used. This one could have cost $100.
A corporation can do so many things that an individual cannot. Like pay for expenses before it pays taxes. Both corporations and sole proprietors pay expenses before they pay taxes. Sole proprietors pay taxes only on the net income of their businesses, which means after expenses.
“by owning your own corporation—vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses.” There is no difference between the ability of a corporation to deduct these expenses compared to a sole proprietor's ability to deduct them. Furthermore, it would often be fraud to deduct these items. For example, a trip to Hawaii is only deductible if the principal purpose of the trip were business and it was “ordinary and necessary.” IRS would look carefully at a business trip to a popular vacation destination like Hawaii. Even if the trip were predominantly for business, only the airfare and meals and hotels during the business days of the trip would be deductible. Hotel and meal expenses for the purely vacation days would not be deductible.

Business-related car expenses are deductible for both corporations and sole proprietors.

Health-club memberships are never deductible for either corporations or sole proprietors.

In order for a meal to be deductible or partially deductible, you must be away from home overnight on business or you must entertain a client or customer at the meal and you must discuss business or negotiate immediately before, during, or immediately after the meal. Since entertaining forces you to buy somebody else a meal, and you can only deduct half the cost, at best, you are no better off than if you had eaten a totally nondeductible meal alone in the restaurant.

“I earn 16% from the state government.” No, he doesn’t. He is referring to tax lien certificates which can pay interest rates that high. They are secured by real estate, but payments are not guaranteed by any government entity.
There are forms of insider trading that are legal It is generally illegal to buy or sell stock when you are in possession of material, non-public information about the corporation in question. The only legal insider trading is non-short-sale trading which is done by an insider who is registered with the SEC, reports his trades within ten days after the end of the month in which the trades occurred, and who did not have material, non-public information at the time of the trades.
Says friend did a tax-free exchange from a sole-proprietorship rental house to a mini-storage limited partnership. (Page 176)  That is explicitly prohibited by Internal Revenue Code Section 1031(a)(2)(B,C,D). Errors like this cause me to marvel at the fact that Kiyosaki's co-author is a CPA. In 2008, she was suing Kiyosaki for some reason.

Kiyosaki, like many other successful politicians, has been able to get people to stay loyal to him even after they find out he has lied to them. I find this fascinating and have created a page where various Kiyosaki dupes explain why they still love him even though he has given them false information.

“People do not believe lies because they have to, but because they want to.” Malcolm Muggeridge

The Rolex watch

A reader tells me that Kiyosaki’s corporation course says that he bought a $4,000 Rolex watch through his own corporation. He had them deduct it as a bonus to him for his sales that year.

  1. Rolex watches are not a good value. They are an extravagance whose main purpose is to enable their owner to show off.
  2. A bonus from your employer, whether in the form of cash or goods or services, is taxable income at the federal level, at the state level in most states, and at the municipal level in some areas. If Kiyosaki received a $4,000 Rolex watch from his corporation, he would have to pay tax on that $4,000 of income on his next quarterly income tax return. In other words, from an income-tax standpoint, purchasing the watch through the corporation is a completely meaningless exercise. Whether Kiyosaki buys the watch from his own funds or receives it from his corporation, he is out $4,000 (either as owner of a corporation that now has $4,000 less in its bank account or as an individual who now has $4,000 less in his bank account) and he gets no personal tax deduction whatsoever from it. While it is a deduction for his corporation, so is just paying him $4,000 in cash, and it is also ordinary income to him individually, so it’s a complete wash.
  3. I surmise that Kiyosaki is implying this is a clever way to get a Rolex watch for free or at a discount by making it deductible. It is neither. If Kiyosaki does not know what I have just said about this transaction, he is too ignorant of this subject to be writing and lecturing about it. If he does know, then he has a rather low opinion of the intelligence of his readers and an equally low regard for their best interests.

Not likely

Kiyosaki’s book also contains many stories which I cannot say for sure are not true, but I can say I am familiar with the subject matter he is describing and his scenario is highly unlikely. Even if he actually did these things, it is inappropriate for him to present them without a warning that they are quite atypical.

Kiyosaki scenario More likely real-world version
Can buy $75,000 house for $20,000 or less at bankruptcy auction or “on courthouse steps” with five hours work Elias, Renauer, and Leonard, authors of How to File For Bankruptcy, say a typical home sells for 10% to 30% below market value, not the 73% “or more” less that Kiyosaki would have you believe. My book How to Buy Real Estate for at Least 20% Below Market Value has over 166 actual case histories of bargain purchases, including some involving bankruptcy and “courthouse steps.” Few of them involve 73% discounts. Those that do are almost all sheriffs’ sales, which Kiyosaki does not mention.

The late, longtime California foreclosure millionaire Paul Thompson said he saw one or two deals per year, out of about 1,200, with this sort of discount, but never one that could be had for only five hours work.

Kiyosaki says he bought and sold six properties to create $190,000 of notes with a total of 30 hours work. Kiyosaki is claiming to have made $190,000/30 hours = $6,333 an hour. In the 7/90 issue of my newsletter, Real Estate Investor's Monthly, I analyzed the amount of time it took Paul Thompson to do his deals. In 20 months, Thompson spent about 25 hours per week and bought 13 properties. His average deal made $42,361, but he still only made about $256 per hour over the 20-month period.

Either Kiyosaki, who flunked a year of high school, is $6,333/$256 = 25 times smarter than former Lawrence Livermore National Laboratories computer scientist Thompson, or he figures you and I are dumb enough to believe that he is.

I would appreciate it if someone would find the addresses of those six properties and the date of this transaction so we can check it out whether it happened at all, and if so, the details.

In real estate, I can go out and in a day come up with four or five great potential deals. Based on the 166 actual case histories in my How to Buy Real Estate for at Least 20% Below Market Value, and thousands of other interviews over the years, I said that professional bargain-purchase investors literally consider between 50 to 1,000 properties for every one they buy. Using the ratio most favorable to Kiyosaki’s claim, 50 to 1, his boast means he looks at 200 to 250 properties a day. That’s about ten properties per hour or one property every six minutes if he does not sleep or eat. Kind of reminds me of the 20,000 women Wilt Chamberlain claimed to have had sex with—until somebody ran the daily numbers.

Thompson says the most properties he ever found in one day was two and that was the tip of an iceberg of months of efforts culling out those two properties from hundreds that didn’t pan out.

Simple math and common sense is [sic] all that is needed to do well financially. The world is full of non-wealthy people who can do simple math and have common sense. Many additional qualities are needed to succeed in business.
I offered $275,000 for a $450,000 building. They agreed to $300,000. More likely you would be shown the door if you offered $275,000 on a $450,000 building. Negotiations, if they occurred at all in the case of such an extreme low-ball offer, usually split the difference. The seller coming down $150,000 while Kiyosaki only comes up $25,000 would only occur in a very rare situation. Get him to give you the address of this building.
For the average individual, a passive income of more than $100,000 a year is nice and not hard to achieve. Depending on the market and how smart you are, it could be done in five to ten years. If you achieved a 10% return on investment, which would be extraordinary, you would need $100,000/10% = $1,000,000 of principal in order to achieve a passive income of $100,000. Only about 2% of the population has a net worth that big. The “average individual” neither has such a net worth, nor is such a net worth “not hard to achieve” for average individuals, as evidenced by the fact that so few have done so.
my starting pay was $42,000 a year including overtime after I graduated from college in 1969, and I only worked seven months a year. I have no firsthand knowledge of the actual starting salaries of merchant-marine officers in 1969, but I note that the salary he claims, annualized to a twelve month year is $42,000 /(7/12) = $72,000 (in 1969 dollars or $321,000 in 1999 dollars). The basic wage of able-bodied seamen including extra pay for weekends in 1970 was $7,824 (working 12 months a year). In 1975, the median income of all college graduates, not just recent grads, was $14,656 a year. The 1969 median income for all households (all ages and education) was about $8,800.

A visitor to this page sent me an email with the following:

My father in-law graduated from the Merchant Marine Academy five years before Kiyosaki and my wife says it is likely that Kiyosaki was making that much money in 1969. Apparently, her dad (a ship’s captain for 35 years) was extremely well compensated in those days, before the industry started drying up and going foreign flag. Her dad chose King’s Point for two reasons. One, he had a scholarship and two, he knew that he could make a ton of money immediately out of school. I haven’t spoken with him about Kiyosaki in particular, but my wife says that $42,000 for a Third Mate in 1969 sounds about right. The part about only having to work seven months out of the year is also correct.

Another visitor who is involved in the shipping industry said he thought Kiyosaki’s figures sounded a bit high, but not completely out of the question. I would add that this sort of legal rip-off is what has virtually wiped the U.S. merchant marine off the face of the earth.

I could have easily doubled my pay had I taken the run to Vietnam with a subsidiary shipping company It’s not clear exactly which figure he is doubling, but the most optimistic interpretation would be $144,000 in 1969 dollars or $642,000 in 1999 dollars.
In 1977, I formed my first company. Whenever I meet a guy who brags about starting multiple companies I always wonder what was wrong with the first one. Were Hewlett and Packard a couple of losers because they only started one company?
Today my investment company invests in South America, Asia, Norway, and Russia.   Sounds like a real jet setter, but the sentence is worded in such a way that it could mean he owns one share of stock in a stock market in each of those regions.
In 1973, I was watching TV and this guy came on advertising a three-day seminar on how to buy real estate for nothing down. The nothing-down movement was started by seminar speaker Robert Allen in 1978. His book Nothing Down came out in 1980. Cable TV did not become widespread until the early 80's. Advertising real-estate seminars on cable TV infomercials started around 1984.
A good real estate broker should take the time to educate you I used to be an agent. Many is the time I heard fellow agents say, “Never educate the public.” Agents want to work with the buyers who will take the least amount of their time so they can maximize their earnings per hour. Educating buyers takes time, plus the smarter the buyer, the more time it takes him to find a property. Agents want dumb buyers and they want to keep them that way. That’s one of the reasons I stopped being an agent.
When I interview any paid professional, I first find out how much property or stocks they personally own and what percentage they pay in taxes. And that applies to my tax attorney as well as my accountant. It would be appropriate to ask a professional you were considering hiring whether they own any rental property. But how much property they own, whether they own stocks, and how much tax they pay is none of your business and virtually all professionals will tell you that if you ask these questions.
The bank wanted $60,000, and I submitted a bid for $50,000, which they took, simply because, along with my bid, was a cashier's check for $50,000. My wife is a banker. I cannot imagine a banker saying, “Wow! A cashier’s check!” They see dozens of cashier’s checks a day.

It is true that sellers of all kinds will sometimes drop their price slightly for a fast, clean, all-cash deal. But a cashier’s check alone is not likely to get you very many 17% discounts from banks.

Frequently, my broker will call me and tell me [to buy] a company that he feels is just about to make a move that will add value to the stock, like announce a new product. It is against the law for a broker or anyone else to provide material, non-public information about a publicly-traded corporation to a person who buys or sells stock in that corporation and it is against the law to buy or sell stock when you are in possession of such information unless you first disclose it to the public following SEC procedures to do so.
I always make offers with escape clauses. In real estate, I make an offer with the words “subject to the approval of business partner.” Most people do not know the partner is my cat. Competent real-estate agents and sellers would strike such a clause. They would either substitute an early deadline for removing all such contingencies, or they would simply say “Come back when you are ready to make a firm offer.” If an investor truly ever pulled this stunt, and it was discovered that his partner was his cat, he would be shunned by everyone in his local market from then on. This is a childish, fraudulent clause. If an investor ever invoked this clause in a lawsuit and admitted his “business partner” was his cat, a sane judge would not only find against the guy who used it, he would chew him out and might impose sanctions.
Says a friend wanted some land but didn’t have time to look. So Kiyosaki went out an optioned a large parcel and sold part of it to the friend for the amount Kiyosaki had to pay for the whole parcel. The chances that a friend would want the same parcel you optioned are extremely slim. If the friend did not want it, and you could not find another buyer within the option period, you would lose all your option money. Guys who really do deals of this nature, like packagers, work closely with the builders who buy ready-to-build land from them, and have numerous political connections to get needed zoning changes.

Trading on inside information

Kiyosaki says,

The reason you want to have rich friends who are close to the inside is because that is where the money is made. It’s made on information. ...the sooner you know, the better your chances are for profits with minimal risk. That is what friends are for. (page 154)

It is against the law to provide material, non-public information about a publicly-traded company to a person who trades in the stock of that company based on that information without first disclosing to the public what that information is. It also against the law to buy or sell stock based on such information without first disclosing that information to the public. To make the disclosure, you have to fie a particular form with the SEC.

Persons who provide inside information are called “tippers.” Person who receive such information are called “tippees.” Both are breaking the law if the “tippee” profits from such information. Here is the Black’s Law Dictionary definition of a “tippee.”

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Legal definition of a “tippee”

“Persons given information by insiders in breach of trust. The purpose of [SEC] Rule 10b-5 is to prevent corporate insiders and their ‘tippees’ from taking unfair advantage of the uninformed outsiders. Conspiracy between corporate insiders and person to whom insiders have furnished information is not required for such person to be declared a ‘tippee’... ”

Registration and reporting requirements if you receive inside information

Persons who are not corporate executives of the company in question and who possess inside information about that corporation are required to file a personal statement with the SEC. If they buy or sell the stock of the corporation, they must report those sales within ten days of the end of the month in which they occur. They are generally barred from any short selling. If a person trading based on material, non-public information makes a profit within six months of trading the stock, the corporation and contemporaneous traders can legally recover that profit.

Bounty for reporting inside traders

If you report an apparent illegal inside trader to the SEC, you are eligible to collect a bounty of up to 10% of the amount of improper profits he is forced to give back. 17 CFR §§201.61 to 201.68

As stated above, Kiyosaki says in his book, “Frequently, my broker will call me and tell me [to buy] a company that he feels is just about to make a move that will add value to the stock, like announce a new product.” Perhaps Mr. Kiyosaki would like to prove this has really happened to him by providing the name of the broker, the date, and the stock in question for just one of these “frequent” occurrences. As far as I know, he has not responded to this invitation.

Simply stated, it is generally illegal to buy or sell a stock based on material, non-public information. In 2002, long after I first posted the above discussion, Martha Stewart was being investigated for precisely the behavior that Kiyosaki advocates in his book and says he has engaged in: trading stocks based on inside information.

More research on this page than in his book

One visitor to this Web site commented that she thought I did more homework analyzing Kiyosaki’s book than he did writing it. I suspect that’s true, but then it’s not saying much.

Property manager is the key to real estate?

Kiyosaki says, “A great property manager is key to success in real estate.” He’s nuts. Experienced property owners do not hire independent 5%-of-the-gross property-management companies. When syndication was big, those companies owned income properties all over the U.S. They tried to use local companies for everything they needed, but they found they could not get good service out of local property-management companies so they all started their own in-house property-management companies.

I heard the head of a major pension fund say at a speech that his company tried to hire local property managers for office buildings and finally concluded they had to create their own in-house property-management company. All my millionaire friends manage their properties themselves and would never use an outside property-management company. The property-management industry has almost no happy private clients. They mainly work for owners who are not spending their own money like government agencies, nonprofit entities, corporations, and bank trust departments.

The problem with property-management companies is that they neglect properties and use expensive suppliers and subcontractors. I estimate that approximately 90% to 95% of property managers take kickbacks from those expensive suppliers. When I was a property manager I reported a number of bribe attempts to my boss. Both my predecessor and my successor at the job took kickbacks. (A subcontractor showed me a canceled check cashed by my predecessor and my successor was fired for taking kickbacks.) My secretary had worked for a major property-management company before working for me. She said every property manager in her old company took kickbacks.

If you ask the typical successful investor if he ever used a property manager, he will shudder at the memory, admit that he did once, and somberly swear, “Never again.” See my book on How to Manage Residential Property for Maximum Cash Flow and Resale Value to learn how to manage your property yourself, which is the only way to go.

Real-estate commissions equivalent to restaurant tips?

Kiyosaki says he finds it “funny” that “so many poor and middle-class people insist on tipping restaurant help 15 to 20 percent even for bad service and complain about paying a broker 3 to 7 percent.”

I can help him understand that. Restaurant meals generally run about $10 to $40. The 15% tip, therefore, runs only about $1.50 to $6. Furthermore, the wages of waiters are deliberately depressed below comparable non-restaurant wages because waiters receive their income partly in the form of tips. In other words, they count on that money and it has the effect of raising their hourly income to a normal wage level.

Real-estate prices, however range from about $50,000 up to millions of dollars. But the work required to sell a listing is about the same regardless of the price of the property. I am a former agent and I figure it takes about twenty man hours to sell a home, maybe thirty or forty man hours to sell a commercial property. The appropriate hourly compensation level is about $25 an hour given the training and experience levels of the average agent. Therefore, commissions ought to be about $500 for a house and about $800 for a commercial property. Add another $1,000 per deal for the broker's overhead.

Six percent of, say $100,000, is $6,000, which is a lot more than $1,500. Sensible people think it’s dumb to pay that much. If they can sell it without an agent, they save thousands and only have to do 20 hours work. The problem with the real-estate-brokerage business is that there are too many agents. You can confirm that by opening any Yellow Pages. The real-estate agent section is the biggest of all, even though the average homeowner only needs a real-estate agent about every ten years or so. Real-estate agents are the only “profession” that will give you free pumpkins or mow your lawn or whatever to get your business.

Hustling for listings

Individual agents do not make extraordinary amounts personally because they have to spend so much time hustling for listings, even though that effort contributes absolutely nothing to helping sell your property. The root of all this evil is widespread refusal to cut commissions and refusal to cooperate with agents who do. If and when commissions become truly competitive, houses will be sold for a flat commission of about $1,500 to $2,000 and commercial property will sell for a flat commission of about $3,000 to $5,000. Institutional deals involving platoons of lawyers and such will cost a lot more, but the commission will still not be a percentage of the sale price. If and when breaking the agents’ 6%-commission cartel happens, there will be far fewer agents, but the ones who remain will make a nice living and they will no longer give you free pumpkins in the hopes of getting a listing. Until that happens, anyone who does not try to avoid paying a 3% to 7% commission when he sells needs his head examined.

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Smart real-estate investors generally do not try to avoid commissions when they buy. Rather they judge the price alone. If it's a good deal, they buy. If not, they don't. If there is an agent, they support his right to the commission to encourage that agent and others to bring them deals in the future.

Taken companies public?

A visitor to this site sent me the following email:

“...when I read that Kiyosaki had taken companies public, I searched the SEC files online for his name and found no hits. That means he does not own 5% or more of any public company in the USA. If he did, he’d have to be listed as a beneficial owner with the SEC and on quarterly statements.”

‘My money’

In his Meet The Street interview, Kiyosaki says, “…I was able to retire at age 47, after just nine years of putting my money to work in business, real estate and options, all without owning a single share of a stock or a mutual fund.”

I’m getting confused by his inability to keep his story straight. He says he makes money off inside information on stocks, but never owned a single share of stock. What did he do with the inside information? Stand on the corner near the stock exchange saying, “Pssst! Wanna hot tip?”

And what money did he put into business, real estate and options starting nine years before he was 47? That would be 1985, the year he was bankrupt (or was he?) and homeless.

Main speaker at Jon Richards’ note convention

Jon Richards invited me to speak at his 2000 convention. I declined on the grounds that I do not know the note-brokering business. I later learned that one of the other speakers at that convention was Robert Kiyosaki. Jeez!! Jon needs to raise his standards, both in terms of making sure the speakers have note expertise and in terms of not headlining B.S. artists—best-selling author or not.

[Here’s an email I got from Richards after he read the above.]

“Wow! You could not have been more correct. The guy was extremely arrogant, and gave us no information about Real Estate or notes or how he made his money. He seems to have come up with one idea about investing in assets and is riding that pony to lots of best sellers. I have never been so appalled at a speaker’s ability to talk for over an hour and share no substantial knowledge. How in the world could he have 3 best sellers? It’s frightening. In fact, I think if you look at the Wall Street Journal’s list of best selling business books you will find primarily a list of simple minded garbage. (e.g. Who Moved the Cheese?)”

Best seller status

One Kiyosaki supporter (they call him “RK”), said Kiyosaki has several best-selling books, but he’s never heard of me, therefore Kiyosaki obviously knows what he’s talking about and I don’t. (Click here to read that email and others) The list of best-selling books on real estate and related topics includes two excellent ones: William Nickerson’s How I Turned $1,000 in $5,000,000 in Real Estate in My Spare Time and Al Lowry’s How to Become Financially Independent by Investing in Real Estate. But it also includes real-estate/financial authors who later went bankrupt or got locked up for their real estate-related activities like Robert Allen, Wade Cook, Sonny Bloch, Charles Givens, and Bill “Tycoon” Greene. For the most part, the list of best-selling financial authors is a rogue’s gallery. There have also been best-selling books that recommended quack cures, unhealthy diets, and nutty conspiracy theories.

Click here to see a list of best-selling real estate authors and the various troubles almost all got into.

Conclusion

All I know about Robert Kiyosaki is what I read in his book (and from other sources noted above). Based on what I read and what I know about the subject matter in question, I am extremely skeptical as to whether he has done or seen many of the investment things he claims to have done or seen. He claims to be an experienced, millionaire, real-estate investor, yet the book is full of statements that I would expect only from a rather ignorant, not very bright, novice, investor wannabe.

Rich Dad, Poor Dad is one of the dumbest financial advice books I have ever read. It contains many factual errors and numerous extremely unlikely accounts of events that supposedly occurred.

Rich Dad, Poor Dad triggers the following items on my Real Estate B.S. Artist Detection Checklist:
1, 6, 7, 10, 11, 13, 20, 26, 27, 28, 29, 30, 31, 38, 39, 46, 49.

Oprah

I understand Kiyosaki appeared on Oprah and was recommended by her. That was after this Web page was posted. Either she and her staff did virtually no checking to make sure Kiyosaki was giving good advice or they found this page and totally disregarded the factual allegations it contains.

I have been on a number of TV shows like 60 Minutes, Good Morning America, and Larry King Live. I have also been in various magazines and newspapers like Money and the Wall Street Journal. They vary considerably in their quality control. Kiplinger’s Personal Finance magazine is the best. They fact check every word you write for them. The worst I experienced was Good Morning America. They were clearly more interested in ratings than whether they were broadcasting accurate financial advice. 60 Minutes was excellent at getting it right. In the case of personal-finance information, Oprah would appear to be interested only in the ratings a guest produces, not the value of his information. Best-selling authors will produce more ratings than non-best-selling authors. If Oprah was interested in good information, she would have someone like Jane Bryant Quinn on.

I once watched an Oprah show about youth sports, a subject about which I also write. During the show, she said a man was trying to get his kids Ivy League athletic scholarships for ice hockey. They also put up a screen graphic saying that, which means it was not just a slip of the tongue. My son was an Ivy League football player. There are no athletic scholarships whatsoever in the Ivy League. They are prohibited by league rules. If the Oprah staff had done even the most minimal homework, they would have learned that.

So what does it mean that Kiyosaki was recommended by Oprah? About as much as it means when she talks about Ivy League athletic scholarships. Oprah, like Kiyosaki, is running a cult of personality. Neither one of them knows what they are talking about—or cares.

The Jim Frey/A Million Little Pieces incident with Oprah

On January 12, 2006, another best-selling “non-fiction” author whom Oprah highly recommended admitted his book contained a number of lies. That would be James Frey and the book is A Million Little Pieces.

Oprah’s response? She said she will continue to recommend it in spite of the fact that, “…some of the facts have been questioned.” “Some of the facts have been questioned!?” The author admitted he lied, Oprah. It has gone way beyond “questioning of facts.”

So you can see where Oprah’s coming from when the truth of “non-fiction” books is discussed. And you can see how willing she is to admit to a mistake. The one thing Kiyosaki, Frey, and Oprah share is high ratings—and apparently that’s all that matters to the three of them.

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Follow-up

My 1/27/06 San Francisco Chronicle says that Oprah reversed herself on Frey, that she had him and his publisher Nan Talese of Doubleday on for an hour and ripped them a new one on live TV. She did this because she was criticized by Washington Post columnist Richard Cohen and New York Times columnist Frank Rich and others who ripped Oprah for not caring about the truth. She had those two guys on the same show.

Oprah apologized and said, “To everyone who has challenged me on this issue of truth, you are absolutely right.” Well, I would be one of those. You’re welcome, Oprah.

Frey was exposed by the Web site www.thesmokinggun.com (http://www.thesmokinggun.com/archive/0104061jamesfrey1.html). That led to the various columns and editorials condemning Oprah.

I am glad to see that Oprah has belatedly decided the truth is important with regard to James Frey. But what about Kiyosaki? He sold about ten times as many books as Frey in large part because of Oprah’s help. Is she really interested in integrity? Or is she only interested in integrity when the Washington Post and New York Times shine their spotlight?

There is no spotlight on Kiyosaki’s lies other than this Web page and an old Smart Money article. Now we will find out whether Oprah has integrity in general, or just when the spotlight is on. If she has integrity in general, she will have Kiyosaki on her show again and rip him a new one for lying to her and her audience and to his readers. I will not be holding my breath. Furthermore, I do not believe there is a snowball’s chance in La Jolla that he or his publisher will show if she schedules such a show.

Character has been defined by many as, “What you do when no one is looking.” Compared to the Washington Post and New York Times, I’m no one. Now let’s see what Oprah does when no one is looking at her endorsement of Robert Kiyosaki.

I wrote an article about the Frey incident at www.johntreed.com/HTWPfrey.html.

Sociopath?

Recently, I have read a number of articles that discussed sociopaths. A famous one said Bill Clinton was a sociopath. Both Clinton and Kiyosaki are politicians. The more I read about sociopaths, many, but not all, of the characteristics, sound like many of my comments about the various bad gurus. Here is a link to an article about whether Clinton is a sociopath. I draw your attention, however, to the portion of the article that gives the definition of “antisocial personality disorder,” which is the scientific name for sociopath behavior, from the American Psychiatric Association: Diagnostic and Statistical Manual of Mental Disorders, (DSM-IV) fourth edition, 1994. I would provide that definition here, but it is copyrighted.

Here is a link to another similar discussion. Both articles say that 3% of all males and 1% of all females are sociopaths. 2% of the U.S. population is 5.6 million people—more than enough to get a sociopathic book onto the business best seller list. (In 2006, I was told these links no longer work. Try www.Internetarchive.org or some other Web site that lets you see no longer available Web pages.)

I hasten to add that this definition contains many behaviors that I have no reason to believe Kiyosaki or any other guru have engaged in—particularly those relating to private, family, or childhood behavior. What is noteworthy is the number of public behaviors that are on the list. It should also be noted that I never saw this definition until 4/4/01, long after I first posted this analysis of Kiyosaki.

Why I spend so much time on this page

A number of people have commented that I spent too much time creating this page. Probably true, but you might be interested in how that came to pass. Initially, I bought Rich Dad Poor Dad and read it. Whenever I read a book, I underline it thoroughly and make marginal notes. So the vast majority of the work was done while I was reading the book. Once I did that work, it was simple to just carry it forward to this Web page.

I bought and read it in order to write a review of Rich Dad Poor Dad in my Real Estate Investor’s Monthly newsletter. The review was only 1/3 of a page long. Space is at a premium in my newsletter. However, on the Internet, space is roughly infinite and free so I saw this page as away to get some use out of more of the work I did reading Rich Dad Poor Dad to begin with.

Initially, this analysis was not anywhere near as long as it is now. I added to it as I received comments from readers and as I came across pertinent stuff in the normal course of my life. Much of it was provided by readers who sent helpful passages and links. In that sense, it is somewhat Wikipedia-ish. I did not create it. My readers and I did.

Kiyosaki is hurting people

This man is doing damage. I got an email from a surgeon. Her 17-year-old son read Rich Dad Poor Dad and now does not want to study or go to college. He just wants to get rich and believes Kiyosaki’s pitch that education is a waste of time. He now puts down and criticizes his mom for not being richer. I never knew a surgeon who was fighting the pigeons for something to eat. And this particular surgeon says she finds her profession extremely rewarding in non-monetary ways as well.

Another guy wrote from Israel. He got so pumped by Kiyosaki’s books that he told his boss off and quit his job. Now he is unemployed and hurting and wrote to thank me for this page, but to lament that he did not read it until it was too late.

If I do not try to set the record straight, who will? Almost everyone but me is either unqualified or unwilling to say anything. See Why I created and maintain this Web page for some comments on why I am unwilling to sin by silence when I should protest.

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Australia and New Zealand

At one point, I suddenly started getting emails and a phone call from Australia and New Zealand about my real-estate stuff. Why? Apparently Robert Kiyosaki and a guy named John Burley went to Australia and made speeches about getting rich in real estate. Some Australians type Kiyosaki’s name into an Internet search engine and find this page.

There is an old saying that an expert is someone who carries a briefcase and is at least 50 miles from home. By that standard, Kiyosaki and Burley must be absolute geniuses in Australia. Australians who are considering following Messrs. Kiyosaki and Burley might want to contact real-estate people in their home area of Phoenix and ask how highly regarded they are among the people who actually would see them do real-estate and other business deals, if, in fact, they do any.

Here is an email I got from an Australian:

Dear John,

I am writing to you after reading your article on Robert Kiyosaki.

You may be interested to know that Mr. Kiyosaki has not always been so well regarded in Australia. He has been involved with various money making enterprises especially in the motivational/self help industry. Of particular note is a seminar he was conducting over five years ago called "Money and You". This seminar ran over a couple of days and subjected the participant to an almost "brainwashing" type of personal and financial rhetoric from Kiyosaki. After numerous participants and their families complained, a television current affairs programme called Four Corners (the most respected current affairs programme in this country) investigated the seminar and detailed Kiyosaki's dubious credentials and advice. Probably the most tragic side of this seminar was that people who attended left and made terrible decisions which they later regretted deeply. This was the main thrust of the programme which sought to show how people could be manipulated and be given bad advice.

What is of interest with the seminar is the same point as you raise.......... that is the cult of personality and the amorphous advice/statements. When questioned Kiyosaki was both vague and ambiguous in his responses.
This I believe points to a man who has such a low self image and sense of self that he believes he can only be realized and accepted by obtaining wealth. I also believe that such a man only seeks to exploit others in order to do so.

Having listened to some tapes of RK given to me by friends. I find gross generalizations, mercenary attitudes and a high degree of perhaps "self loathing".

Anyway thank you for your article and let us hope there are many more who see RK and his kind for what they truly represent. T. Fraser

I do not know anything about Australian real estate. It is likely that Kiyosaki and I share that characteristic, although he no doubt learned a little during his speaking visit. My only visit to Australia was when I was on R&R from Vietnam in 1970 and I wasn’t looking for real estate.

Unlike Kiyosaki, I have no territorial ambitions. But my wife does and after she retired on 1/1/07, we began shipping to foreign addresses

The act of selling a real-estate book to Australia or Canada implies that it is valid there. I do not know what validity, if any, my books have in foreign countries, so I refuse to even imply that they have any validity there. I also refuse to research what validity they have there because the market is too small and it is almost certain that special editions would have to be developed and continuously updated to prevent Australian and New Zealand readers from getting into trouble following U.S.-oriented advice.

I am not interested in speaking in person in Australia. It’s unbelievably far away. My jet from San Francisco to Vietnam had to stop for refueling in Hawaii and Guam. Then my jet from Vietnam to Sydney had to stop for refueling in Darwin. I understand they now have non-stop flights, but I think flights that long violate the U.S. Constitution’s prohibition against “cruel and unusual punishment.”

If you are in Australia or New Zealand and really want one of my U.S. books, order them. My late mother used to say, when my brothers and I were little kids and running around, “If you break your leg, don’t come running to me.” Similarly, if you buy my book and it doesn’t apply to Australia, don’t come running to me. I never said it did.

As a substitute for my books in Australia, I recommend Australian visitors to this Web site also visit my Real Estate B. S. Artist Detection Checklist. It should apply universally.

An Australian reader says that all the multi-level marketing (MLM) salespeople like Amway distributors are pushing Kiyosaki’s books because of his encouragement to go into business for yourself. The MLM distributors then say that they are a way to do that. He further says that the Kiyosaki discussion groups on the Net are overrun with MLM people trying to get you to become one of their distributors. I would not be surprised. The adoption of Kiyosaki’s book by MLM companies could be the primary reason it is a best seller. MLM cults are sort of a human equivalent of a computer virus, replicating themselves all over the place.

Smart Money story

The 2/03 Smart Money magazine did a story about Kiyosaki. They turned up a few details I had not dug up.

Kiyosaki is chameleon-like, changing his speech radically to pander to each audience. I said he was a financial demagogue. That would be what a demagogue would do. To a religious audience, he’s a preacher. To entrepreneurs, he’s a Marine drill sergeant and combat veteran. To Amway distributors he’s an MLM guy, and so forth. It’s called telling people what they want to hear.

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Component depreciation

At the end of a seminar to a religious group, he says he recently did a real estate deal where he got a 17% cash-on-cash return and that “there’s 24% component depreciation on the property.” Really? Gee, and I thought component depreciation was explicitly outlawed by the Economic Recovery Tax Act of 1981. Actually, I’m sure of it. It’s right there in Section 168(f)(2) of the Internal Revenue Code.

Smart Money cannot find his deal

Kiyosaki claims to have done many highly profitable real estate deals. But Smart Money could not find them in the Maricopa County (Phoenix) records. He claimed to have bought one property for $20,000 and sold it immediately for $60,000. Smart Money could find no purchase for which he paid less than $40,000 (one had no price) and no property which he sold in less than 20 months. When asked about the discrepancy, Kiyosaki said, “I don’t pay attention to those things.”

Huh?

This may explain why Kiyosaki does not seem fond of going to court. Give an answer like that in a court room and the judge will say, “Answer the question, Mr. Kiyosaki. The court is not interested in what you pay attention to. Nor are you going to get away with evading answering a question by giving an unresponsive answer like that.”

Kiyosaki tried to claim the deal in question was done in a partnership. Smart Money could find no evidence of such a partnership. Kiyosaki refused to provide the information or documents that would prove his claim.

Took Yamana Resources public?

Kiyosaki claims he has taken a number of businesses public. When asked to name them, he could only cite Yamana Resources, a Toronto Stock Exchange corporation. The CEO and founder of that corporation, Victor Bradley, told Smart Money that Kiyosaki’s only connection with Yamana is that he owned some shares of Platero Resources, a privately held corporation that Yamana acquired in 2001—six years after Yamana went public.

Desertion?

The melodramatic incident Kiyosaki relates about refusing to return to ship as a Marine officer in Hong Kong changes in Smart Money. Now he says he was one of 480 guys who got left behind when the ship left early. In his first book, described above, he seems to nominate himself for the Nobel Peace Prize as an active-duty, Marine officer, anti-war protestor. Now, we learn that he just missed the boat.

Wanted—dead or alive?

As to the whereabouts of Rich Dad—at one point, Kiyosaki tells Smart Money that he died in 1992. Poor man.

Later, he says Rich Dad is still alive, but a reclusive invalid. Uh huh.

Later, he tells Smart Money that Rich Dad was a composite of several persons.

Finally, he gets angry at Smart Money. “Is Harry Potter real? Why don’t you let Rich Dad be a myth, like Harry Potter?”

That would be fine, Robert, just as soon as you remove Rich Dad from the non-fiction best seller list and go over and compete with Harry Potter on the fiction best-seller list.

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So I guess the final word is that Rich Dad is as real as Harry Potter. I suppose that, in turn, means that the way to become financially independent is to get a magic wand—or to write book about fictional characters who did.

One reader of this page and of Rich Dad Poor Dad says “Rich Dad” is really Ayn Rand. He says he is quite familiar with Ayn Rand’s books and that Kiyosaki appears to have copied much of “Rich Dad’s” advice from Rand. In particular, he cited “Rich Dad’s’” Robin Hood story as a Rand story. Interesting.

Kiyosaki was a seminar instructor

Almost all of the bad real estate gurus got their real start as pitchmen or instructors for other bad gurus. Kiyosaki was an instructor for attorney and real estate investor Marshall Thurber for nine years. I know nothing about Thurber other than that Kiyosaki loved him when he wrote his first book and failed to mention him at all when he wrote his second.

Kiyosaki on PBS

I have heard that Kiyosaki was doing pledge breaks on PBS TV in 2005 and 2006. PBS TV never tires of telling us how intellectually and morally superior they are compared to the for-profit networks and cable channels. But there is a lot more to intellectual and moral superiority than merely restricting the length of the commercials you air. When it comes to hustling a buck by using a charlatan like Kiyosaki, PBS bears more resemblance to the late-night get-rich-quick infomercials than they do to NBC, CBS, and ABC.

The fact that Kiyosaki was one of the more successful recent pledge break offerings also reveals that the PBS audience is nowhere near as bright as PBS would have us believe. Most people know that when something sounds too good to be true, it’s not true. Apparently, a significant percentage of PBS viewers are not smart enough to know that. And that situation sure as heck is not improved by PBS recommending Kiyosaki for their financial education.

They used to recommend people like Wall Street Week’s Lewis Rukeyser and Newsweek’s Jane Bryant Quinn for financial advice. They did not switch to Kiyosaki because he gives better financial advice—or even because he gives decent financial advice. They switched to Kiyosaki because he inspires PBS viewers to part with more pledge bucks than Rukeyser and Quinn did. Like the bad get-rich-quick gurus, the people who decided to put Kiyosaki on PBS are more interested in helping themselves to your money than helping you with your money.

‘But they have Sesame Street’

Some readers have also told me, essentially, that PBS can do no wrong because it has Sesame Street and The Jim Lehrer News Hour, etc.. As long as PBS put on only shows that met those standards, my wife and I supported them. Now that they have decided to go sleazy, if only in part, we are done supporting them.

Now, every PBS employee’s paycheck includes an amount that PBS derived from foisting Kiyosaki off on its viewers. They should be ashamed of themselves. Actions speak louder than words. PBS has sold its viewers out.

KQED response

A reader complained to KQED, the San Francisco PBS station.

The reader directed KQED to the above review of Rich Dad Poor Dad. In it I say that Kiyosaki is a liar and a charlatan and a danger to his readers. Seems to me that KQED has a responsibility to check whether I am right. After all, the above discussion is full of quotes, links to laws, and other facts that PBS could check on their own or by consulting experts.

So did they? No. They just sent the reader an empty-suit, spin letter that referred him to Kiyosaki’s “rebuttal” of the above comments on Rich Dad Poor Dad which is out on the Web somewhere. He calls it “response to Reed.” You can probably find it with a Google search. PBS does not know which of us is telling the truth, or so they imply. But it is quite clear that they also have no interest in finding out. PBS’s policy with regard to whether their pledge break stars are frauds is “Don’t ask. Don’t tell.”

Simple math: running Kiyosaki get-rich-quick infomercials makes money for PBS. Worrying about whether Kiyosaki is a fraud does not. Thus does PBS reveal who they really have become and what they are now really about.

I read Kiyosaki’s “rebuttal” of this Web page and was amazed at how lame it was. One of Kiyosaki’s biggest fans was on his side after he read both Rich Dad Poor Dad and my above review of it. Then he came across Kiyosaki’s “response to Reed” and thought it was so inadequate that he concluded my review must be accurate after all.

Here’s an idea. Some programs on PBS actually still claim to be interested in truth, like the Jim Lehrer News Hour. How’s about writing to them and ask them to look into Kiyosaki?

One email I got said PBS is more than just Sesame Street and Lehrer. It’s also

Frontline
NOVA
History Detectives
Ken Burns documentaries
Charlie Rose

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Fine. Ask them to look into Kiyosaki, too. But don’t hold your breath waiting for the empty suits at PBS to approve their having anything critical to say about Kiyosaki.

Where have you gone Education TV?

I live in the San Francisco area. I appeared on KQED radio a number of times back in the 1980s. I once debated Nothing Down author Robert Allen there. Back in that era, when KQED still had integrity, they also produced a series of personal-finance programs hosted by Newsweek Personal Finance Columnist Jane Bryant Quinn.

PBS likes literary. Here is a literary quote they might want to consider before they promote the likes of Kiyosaki: “A single lie destroys a whole reputation for integrity.” Baltasar Gracian, Spanish philosopher and writer 1601-1658

It is painfully ironic that PBS, which used to be called the Education Television Network, is now touting Robert Kiyosaki whose first book was titled If You Want to Be Rich and Happy, Don’t Go To School. It is a betrayal of its charter and principles that the Education Television Network is now promoting a man whose book Rich Dad Poor Dad makes a hero of an anti-education, 8th-grade dropout—“Rich Dad.” It is astonishing that PBS, which is the favorite TV network of teachers and professors, is promoting a book that trashes Ralph Kiyosaki (“Poor Dad”), Robert Kiyosaki’s biological father, for wasting his time getting degrees from Stanford, Chicago, and Northwestern Universities, all on full scholarship, ultimately earning a Ph.D and rising to head the State of Hawaii’s Department of Education.

The former Education network has turned into the “whatever it takes to make a buck” network. I thought NOT being that was their whole reason for existence.

PBS ombudsman comments on Kiyosaki

PBS has an ombudsman and he felt compelled to comment on complaints he received about Kiyosaki pledge breaks. You can read what he and the complainers said at http://www.pbs.org/ombudsman/2006/03/pledging_allegiance_or_march_madness.html. He strikes me as a pretty wimpy ombudsman. For example, like a politician or other person whose main goal is to not offend anyone, he characterizes some of Kiyosaki’s advice as “controversial.” Controversial?! How about dead wrong? Like Kiyosaki advising readers to befriend executives of publicly-traded corporations so they can get advance information about stuff that will change the price of the stock, then use that information to profit on trading the stock. That’s not controversial. It’s illegal. For details, see my discussion of that elsewhere on this page.

A reader told me he was not surprised that PBS airs Kiyosaki because they had already been airing “medical quacks and New Age idiots” for several years before Kiyosaki. I once wrote that book stores ought to have a button under the counter. When a person tries to check out with a New Age book, the clerk pushes the button and men in white coats come and take the customer away.

Kiyosaki gets Yahoo! financial column

Yahoo! made Kiyosaki one of its financial columnists. In view of the fact that he is a liar and a charlatan, that tells us much about Yahoo! Finance and nothing about Kiyosaki. Here is one reader’s email about Kiyosaki’s Yahoo! Finance column babblings.

Mr. Reed,

Thank you for thoroughly shredding this deluded huckster.

I probably never would have known who Robert Kiyosaki was if Yahoo Finance wasn't my start page. Several months ago I started noticing his far fetched ramblings on how "cash is trash" and how we are now on the cusp of the biggest oil crisis in history.

Due to my mistake of assuming that all content on Yahoo Finance was fairly credible, I actually read some of Kiyosaki's articles. I came away with the impression that this guy was either the most forward thinking finance expert on the planet or a crack smoker who simply placed his hands on the keyboard, attached electric stimuli to his genitalia, flipped the switch and started typing.

It's downright scary that Yahoo allows his absurd pontification on their finance gateway. Many people consider the site to contain legit financial information, which is why I felt the need to google and (thankfully) find your pants-down ass whipping. Guess I'll be changing my start page.

Here's some advice for Kiyosaki's advocates that I offer free of charge: Instead of downloading the 48th ring tone on your Razr or fellating the great Dr. Phil while he dispenses the "common sense" that you already have, take the time to form an original thought just for once.

Don Jones
College Station, Texas

Kiyosaki teams up with Russ Whitney

Kiyosaki and Russ Whitney are reportedly involved in a joint venture that sells information on financial matters. See my Web pages on Whitney.

Kiyosaki teams up with Donald Trump to write book reviewed by Wall Street Journal

There is a review of a book that contains portions written by Kiyosaki and portions written by Trump. It’s called Why We Want You to Be Rich. The Wall Street Journal reviewed it at http://online.wsj.com/article/SB116052181216688592.html?mod=money_page_left_hs. They did not care for it.

Kiplinger’s Personal Finance also reviewed it at http://articles.moneycentral.msn.com/SavingandDebt/Advice/TheyWantYouToBeRich.aspx?GT1=8690&wa=wsignin1.0. They did not like it either.

Click here to read a review of the book by one of my readers.

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G.K. Chesterton review

A visitor to this Web site pointed out to me that G.K.Chesterton reviewed Kiyosaki’s book, in effect, in 1909. Pretty amazing. You can read that review at http://www.cse.dmu.ac.uk/~mward/gkc/books/success.html.

Email exchange about Kiyosaki’s Yahoo.com financial column

Here is an email I received about Kiyosaki’s financial advice column on finance.yahoo.com and my response to the email writer.

Dear Mr. Reed,

Like some other people mentioned on your debunking site, I began reading Robert Kiyosaki's columns on Yahoo Finance because I thought he must be at least a semi-credible financial advisor.  But I found so many egregious distortions and logical non sequiturs in his writing that RK has gradually become a source of humorous entertainment for me rather than a source of knowledge or advice.

In his most recent Yahoo column, as of January 24, 2007, RK claims that you would have needed $100,000 in 2006 to have the same purchasing power as $50,000 in 1996.  That implies an annual inflation rate of 7%, but of course the US inflation rate was more like 2-3% over the decade in question.  How could anyone take him seriously after one or two mistakes like this?

In an earlier column, RK claimed that the US dollar had declined in value against other currencies because it was de-linked from gold in the 1970s.  But all other developed-country currencies are also floating freely and have no link to gold, so the lack of a gold link explains nothing about why one’s value has declined relative to others.

In yet another column, RK contradicts extensive research about human happiness, which says wealth beyond a certain point contributes very little to happiness, and says with a wink and a nudge that we (he and his readers, I guess) know better.  Yet surveys show that Filipinos and Nigerians are among the happiest people in the world, while the Japanese and Hong Kong Chinese are among the unhappiest.  I think RK is failing to distinguish between a lack of financial worries and happiness, which are two very different things.  The fact that he’s too obtuse to recognize the difference makes me wonder what happened to distort his vision.

Your Web site on RK is a wonderful public service. Keep up the good work.

Greg Brockelbank
Kanagawa-ken, Japan

[Reed answer]

There is a CPI calculator at http://minneapolisfed.org/Research/data/us/calc/. I plugged in 1996 and $50,000. It has $64,276.61 in 2006 purchasing power, not $100,000.

Kiyosaki is childlike in his lying, that is, he lies about things that are easily disproved. A Time magazine cover story of a few years ago was called “The Science of Happiness” and confirms what you say and disproves what Kiyosaki says.

May I quote your excellent email?

John T. Reed

Email from a private investigator

Mr. Reed:

I am a Private Investigator here in NY. Yesterday, my firm was hired to become involved in a civil matter SDNY in which Robert Kiyosaki will appear as a witness. I read many of your posts with regard to Mr. Kiyosaki. It sounds like you may have done some research on him and I was wondering if you found out anything factual that supports Kiyosaki is a fraud and if so would be willing to share it with me. Thanks for your time. My contact information is listed below if you have the time to talk. Thank you.

These are some of the things about Kiyosaki's background that strike me as questionable:

1) that he was a marine pilot in Vietnam
2) he claims to have been shot down 3 times while in Vietnam

3) he claims to have "flown behind enemy lines in 1873 in order to go buy gold" and that he made a "fortune" doing this

4) claims to have owned hundreds of apartments in Phoenix and to have made millions in real estate

5) claims his father was the head of education for the state of Hawaii

6) claims to have started a "velcro" wallet business in his 20's which made him a millionaire and which got him featured in Playboy and GC

7) claims to have done business with Duran Duran, Iron Maiden, Van Halen and other major bands in the wallet business

8) claims he is "not affiliated" with a company named Reef Securities which he promotes

Best,

Joe

Joseph P. Dwyer
Chief Investigator & Director of Operations
Investigative Resource Group, INC
PO BOX 873 Shoreham, NY
Telefax/ 631-821-7105
Cell 917-495-1872
Email privatei@optonline.net

From: John Reed [mailto:johnreed@johntreed.com]
Sent: Tuesday, June 28, 2011 8:03 PM
To: Joseph P.Dwyer
Subject: Re: Robert Kiyosaki

I already did. It's at my Web site. I continue to get more stuff regularly but it just buttresses what I said.
5 is true

Fom: Joseph P. Dwyer

Thanks for your response. I'm talking about factual evidence either from documents or persons you may have spoken to. Respectfully, your opinion about Kiyosaki's books or misrepresentations he may have made about himself are not something I can use. If you have any documents or interviewed any persons that I can contact who factually can dispute some of Kiyosaki's claims that I previously listed, please let me know. Thanks again for your time.

Joe

Joseph P. Dwyer
Chief Investigator & Director of Operations
Investigative Resource Group, INC
PO BOX 873 Shoreham, NY
Telefax/ 631-821-7105
Cell 917-495-1872
Email privatei@optonline.net

from: John Reed <johnreed@johntreed.com>
Date: Tue, 28 Jun 2011 17:31:44 -0700
To: Joseph P. Dwyer<privatei@optonline.net>
Subject: Re: Robert Kiyosaki

Respectfully, read my article again, more carefully. I am an investigative journalist. I have been sued, unsuccessfully, for libel by a guy like Kiyosaki, indeed, his erstwhile partner. I cited chapter and verse of the documents in my article.
Your question about his father would not suggest you ever set foot in an investigative role of any kind.

From Joseph Dwyer:

We got this case yesterday. You are a fool to question my experience and I don't appreciate your sarcasm. I'm retired from a special narcotics enforcement unit with NYPD and have run a PI firm that specializes in RICO death eligible cases. Since 1995 I have been the lead investigator in over 2 thousand federal cases in both the EDNY and SDNY. Look for me on Dateline this August. My response to you was indeed respectful. Your response to me shows your an egotistical, sensitive, jerk!!! Bye now.
Sent via BlackBerry from T-Mobile

From John T. Reed

And I was on 60 Minutes 25 years ago. Fact is you did not read my article before alleging it was all opinion. I doubt there is any opinion in it. Look for this email exchange on my web site.

[Reed supplement to the email exchange]

I’m guessing this guy will now not use my article. That would mean he has to reinvent about a thousand wheels. Do PI’s charge by the hour?

Kiyosaki and Whitney's old company sued

Robert Crewe sued Rich Dad Education LLC, Rich Global LLC, Rich Dad Operating Co. LLC, Cashflow Technologies Inc. Tigrent Inc; Tigrent Learning Inc., Tigrent Brands Inc., and Robert Kiyosaki. Tigrent is the new name of Whitney Information Network (WIN). Real estate investment guru Russ Whitney sued me from 2002 to 2005 when the suit was settled on confidential terms. Whitney was subsequently forced out of the company he founded which also changed its name to Tigrent and changed its stock symbol from RUSS.
Crewe seeks costs and damages for breach of contract, breach of implied covenant of good faith and fair dealing, violation of the Florida Deceptive and Unfair Trading Practices Act, unjust enrichment, negligent misrepresentation, and fraud.
Crewe's complaint alleges almost exactly what my web site comments on Kiyosaki and Whitney allege. Rich Dad Poor Dad author allied with Whitney around the time Whitney settled the suit against me. I always suspected they got together because they each had me as their main critic. National Association of Real Estate Investment Gurus Criticized by John T. Reed?
The suit is in U.S. District Court in Manhattan. Too bad it's not in Florida. Whitney sued me in U.S. District Courts in Fort Myers, Fort Lauderdale, and Miami. His lawyer was Scott Rothstein, the "Bernie Madoff of Fort Lauderdale "we later learned and is now serving a 50-year federal prison sentence. Unless there has been a lot of personnel turnover in the Florida federal Courts, they remember Whitney/Rothstein.
The allegations are that Kiyosaki et al.:
use their "free classes" and $199 seminars about financial success as a come-on in a high-pressure "sales scam" to sell worthless courses for tens of thousands of dollars
Defendants did not provide any training or education at the workshop
not provide attendees with any financial education that leads to financial success or independence
defendants' training instructors who hold themselves out as experts in their investment field but have no discernible investing expertise or successful track record.

I wonder if there is some legal theory the defendants could escape liability on the grounds that each and every one of the allegations in question was described in great detail on my web site since the early 2000s. In other words, had Mr. Crewe made any effort, like a Google search that led him to my web site, he would have had thorough notice in the form of about 50 pages on Kiyosaki and 500 pages, literally, on WIN/Tigrent.

 

Copyright 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007 by John T. Reed