John T. Reed's analysis of Robert T. Kiyosaki's book Rich Dad, Poor Dad, Part 1
Posted by John Reed on
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.
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.
You may wonder if I just criticize or have I written a better book. I wrote a bunch of them. Here’s one on advanced fundamentals of real estate investment and another on basics. Click on either for more information about it or to order it. My Succeeding book is more similar to the actual subject of Rich Dad.
Wikipedia says, “On August 20, 2012, Kiyosaki's company, Rich Global LLC, filed for bankruptcy in Wyoming Bankruptcy Court.”
I'm not the only critic
Fiction posing as non-fiction
Below I provide the back-up for the above accusations.
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 38 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 http://johntreed.com/blogs/john-t-reed-s-real-estate-investment-blog/69580419-ohio-real-estate-investor-s-warning-statement-on-robert-kiyosaki-and-bill-gatten-s-complex-pactrust-for-real-estate-investing.
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.
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.
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.”
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.
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.
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 market-wide appreciation in real estate values is impossible to do. Decisions can only be evaluated based on what the decision-maker 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.
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:
Weekly earnings by amount of education
|amount of education||median weekly earnings|
|high school grad||$595|
|high school dropout||$419|
Unemployment rate by amount of education
amount of education
|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
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.
‘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.
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 tells 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.
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.
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.
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
- It was much smaller before he got rich from his book than his followers imagine
- He did not get it the way he implies—for example, his wealth may come almost entirely from telling people how to get wealthy and he may not have been wealthy himself until he told people how to get wealthy
- He achieved wealth in an unethical or illegal way
- All of the above
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
|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.
Click here to go to Part 2
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I love facts and truth, Kiyosaki,Trudeau and Joe Blow are salesmen. Their product: BS
Unfortunately, there’s always a herd that buys a “treasure map” then looks for the “short cut”. Appreciated your insight.