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 quite 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.”
Here is my attempt at a clever life plan. Of my 38 books, this one sells the most.
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.
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.
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.
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.
Kiyosaki was in Vietnam flying helicopters in 1973 after almost all the U.S troops went home. He was supporting South Vietnamese ground troops in their losing effort.
‘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.”
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.
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.
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:
- he libels the Navy and Marines by accusing them of teaching him a “code of war” that required him to shoot an unarmed child in Vietnam
- he says he committed, during his services as a Marine Officer in Vietnam 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.” In other words, he was going to refuse to follow the officers of his Marine superiors to kill enemy soldiers in combat. (“I also knew I could not fight and kill simply because I had been ordered to do so.”)
- he says his fellow Marine pilots called him a “coward and a traitor” because of his “refusal to fight anymore”
- he says he refused to return to his ship which sailed without him to Vietnam
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.”
|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
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.
There are probably many ways to became a financial genius, but Kiyosaki has certainly chosen an unlikely route:
- flunked sophomore year of high school and had to repeat
- U.S. Merchant Marine Academy
- 3rd mate oil tanker (or was it “Love Boat” type cruise ship as he said in one of his books?)
- Marine helicopter pilot (or was it fighters?)
- refused to return to ship when it was ordered to return to combat (or just missed the boat)
- Xerox salesman
- failed businessman (nylon surfer wallets)
- failed businessman (rock and roll memorabilia)
- failed author (1993 book If You Want to Be Rich & Happy, Don’t Go To School?)
- failed MBA applicant
- homeless person
- bankruptcy (or maybe not) One of his corporations did declare bankruptcy more recently
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?
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.)
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.
If you want the straight story on taxes as they relate to real estate investment, read my book Aggressive Tax Avoidance for Real Estate Investors.
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.
|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 forty-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.”
What I say to teach your children is in my Succeeding book.
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.
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:
- “…political demagogues who exploit the voters’ ignorance to gain power”
- “…people whose chief talent has been the emotional manipulation of the public for political purposes”
- “Sound bites are usually very unsound.”
- [people who] “…can’t see beyond a media image or some catchy phrases and emotional attitudes”
- “There are people out there whose job it is to manipulate your emotions for political purposes—and they get paid big bucks.”
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:
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...With gratitude,
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.
Click here to go to part 3.