Rich Dad's Prophecy?

[TStoneMBD]

this reply is going to seem useless because i dont care to debate with you over whether kiyosaki is a stand up guy or not so im not going to rebuddle rebuddles in the way that i could. nevertheless, i think i should tell you that those reed rebuddles are entirely retarded. they are trying to break kiyosaki down to technicalities by quoting him out of context when the application of his quotes probably applies well to its situation. to be fair however, kiyosaki certainly has made some logical errors in some of his books, but he never claimed to be a logician nor a genius. hes just a guy who wanted to help people learn about money. in fact, he would tell you that hes never been a smart guy.

as someone who has read many, many kiyosaki books, listened to many kiyosaki audio tapes and seen kiyosaki speak in person, i can tell you that my personal opinion of him is that he truly is a genuine guy. i think it is very unlikely that "rich dad" actually ever existed, but that is besides the point. kiyosaki sends out a message to those who havent been given the fundamental skills to analyzing value. he bridges the gap between the uneducated to the educated. his books are the theory of poker of the real estate industry. the kiyosaki books might appear mundane to you now, but theory of poker appears mundane to me at this point in my career because ive already learned the fundamentals outlined in that book (mostly from reading it btw, great book).

kiyosaki is not a very rich man. he is a multimillionaire but certainly not an extraordinary one. his net worth might peak at 20 million and before writing his books it likely wasnt nearly that high. his rich dad company probably provides far more income for him than his real estate does. while he likes to keep his personal finances fairly private, i do not recall him ever saying anything that would have you think otherwise. kiyosaki might come off as a big spender, but i have never seen him that way. he believes that you should enjoy the money you have. i believe a paraphrased quote of his is "noone likes a rich tightwad". he doesnt believe you should be pinching pennies just so you can obtain networth while your life passes away. he believes you should learn the necessities to be able to produce so much income that you dont need to worry about money and can spend it however you like, which leads into his teachings on passive income. he is not a saver, he generates passive income.

his books arent revolutionary. he didnt invent the concept of real estate investing. you may even say hes a knock off of robert allen (ive read creating wealth). he just explains important concepts about money to people who didnt understand these concepts before. while hes not an excellent writer, which is why he needs an editor, he allows you to grasp concepts vividly while being entertained and feeling new found wisdom after reading his books. his books have become as popular as they have because they have taught masses things about money they otherwise wouldnt have known. do i expect you to get much out of his books? no. you already have a great grasp on the concept of money from what ive seen of your posts in the past, that doesnt mean kiyosakis books suck. does sesame street suck?

[treo650]

I've not read his book either, but I've been looking at his
free articles on the Yahoo! Finance page:

http://finance.yahoo.com/columnist/a...hricher/2006/1
http://finance.yahoo.com/columnist/a...hricher/2005/1

which might give a (free) glimpse of where he's coming from.
He seems to be talking less about real estate and
more about issues like gold, oil and
non-US investments now.

Any comments on his Yahoo! Finance articles?

[Falang]

great post and points

i think the point that d-cat and many others who have a strong grasp of finance miss is that this book was not aimed at them. it was aimed at people with little or no financial education. like me when i read it. the book opened my eyes to these things in a way that i could understand and served as a gateway for me to learn other things. about the 5th book that i came accross was the intelligent investor. i still can't read that book w/out falling asleep but i have learned a lot from it thus far. if i had found that book first, there is nooooo wayyyyy i would ever had read it or been able to progress beyond where i was at w/ my financial senses.

i have given copies of that book to all of my little brothers and reccomended it to just about every 19-21 year old pro poker player i know who's dropped out of college and has way too much money to know what to do with. for people like that, its the perfect book. if you are already a professional investor with years of experience, it wasn't aimed for you, quit trying to pick it apart and let it serve its purpose.

[Falang]

[ QUOTE ]
John Reed's review/rebuttal has the following table that summarizes most of the problems with Rich Dad Poor Dad. I put the Kiyosaki assertions in quotes, followed by Reeds rebuttals.

"The rich get richer." Sometimes, they get poorer.


An entire book filled with examples and explanations is rebutted by this one useless meaningless little line.

"It’s not how much money you make, it’s how much money you keep." The more you make, the more you keep.


This was aimed at teachers and mechanics who likely have little control over how much more they can make. This is a motivation tool to make them realize they can escape the rat race. His rebuttal is pretty useless in that context.


"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.

This guy is great at taking things out of context, I'll give him that. Kiyosaki is using this as a way to motivate people to work for themselves, in corporations. His model states that the poor/middle class work, then pay taxes, then spend what is left over. The rich work, then spend, then pay taxes on what is left over. That is what he is referring to here.

"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.

Another idiotic statement. Where did he get this general rule? When did intelligence become a key factor in working for somebody else? Having big brains is not what makes an entrepreneur an entreprenuer. I've hired many computer sciense degree'd people, every one of them has been far smarter than me and I'm fairly certain they all knew it before they started. His rebuttal here is less than meaningless, its just not true.

"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.


In the most simple exercise, we have Fred and John. John owns an orange cart Fred works at. John sleeps into the mid afternoon most days while Fred sells oranges. For each orange sold Fred gets twenty cents and John profits eighty cents after expenses. This angers Fred. John sleeps most days and he isn't very smart (in Fred's opinion) anyway. So Fred reduces his expenses, pays off his credit card debt and saves as much of his twenty cents as possible. After long enough, Fred is able to buy his own orange cart and make the whole dollar for himself.

"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.

Every dollar spent on interest is a dollar that cannot be saved. He is telling people to reduce their spending by any means necessary, this is one of his ways. This guy thinks paying down credit cards to save more 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.

No, they do not. He is referring to corporations. I can also think of another great example, the justice system. Who do you think has more of a chance of ending up in prison. A 19 year old black thuggish looking kid from Compton caught with three ounces of marijuana, or the 19 year old son of a big corporate lawyer (he can be white, black, mexican...whatever) in New York caught at a Fraternity party at Duke with that same three ounces of marijuana? Anyboody who doesn't say the kid from Compton is living in a dream world.

"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.

I think we can give Kiyosaki credit for knowing when he is going to profit from a transaction, and being able to do simple math and deduct the transaction costs first. What he is doing (that Reed took out of context...again) is explaining that people should not be cheap when deciding which broker to go with for real estate deals. A good broker will make you many times more than you pay him in commissions, whereas if you try and shortchange him, he may not come to you with the 'hot' deal next time.
"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.

Evidently this guy doesn't play much poker. Aces get cracked, nothing you can do about it. Only putting chips in the middle you didn't have set aside for food and rent is a smart piece of advice.

"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. [

[b]What a way to finish. I'm sure this was taken from a chapter where Kiyosaki was vigorously proposing that people flip their properties and stocks as much as possible. Sounds to me more like he was telling them to get off of their ass and start doing something with their lives. [b]

[/ QUOTE ]

[shagjohn]

Falang, your 'rebutting the rebuttal' post is similiar to my initial reaction after reading his book. The problem with Kiyosaki is that you get out of his books just what you want; there isn't much subtance in them.

The list you've rebutted is just a small snippet from Reed's website. Your claim about Kiyosaki's quotes being out of context is stronger for Reed's rebuttals. Check out his website for a much more indepth look at Reed's research into Kiyosaki.

I'm surprised at Kiyosaki's rebuttal letter linked to in Sniper's post, since Kiyosaki has already admitted that 'rich dad' was just a mythical figure. Here's a quote from this link (googled) that references a Smart Money article:
---
SmartMoney magazine (Karma Chameleon by Eleanor Laise, February 2003, pages 97-103) provides the best summary of Kiyosaki's deceptions regarding Rich Dad.

When questioned by Laise, Kiyosaki gave this string of answers regarding Rich Dad's existence.

1. "Rich Dad passed away at around the same time as his biological father -- in 1992."

2. "Two weeks later...Kiyosaki [claims] Rich Dad...is very much alive -- he's just a reclusive invalid."

3. Later when asked again, Kiyosaki "insists there was an original Rich Dad, but he admits that the character in the books is actually a 'composite' of seven different mentors..."

4. When pressed further, "Kiyosaki finally loses his cool. 'Is Harry Potter real?' he demands. 'Why don't you let Rich Dad be a myth, like Harry Potter? The real issue is, am I credible?'"
---

I think Reed is right about Kiyoski simply being a cult of personality. Those that like him will come up with any justification or perspective so he makes sense.

[Sniper]

[ QUOTE ]
I'm surprised at Kiyosaki's rebuttal letter linked to in Sniper's post, since Kiyosaki has already admitted that 'rich dad' was just a mythical figure.

[/ QUOTE ]

What I linked to was Kiyosaki's first rebuttal of the reed website written 6 years ago... the material on the reed site has substantially increased since then, but I figured it might be interesting to look at anyway.

However, this discussion has focused on RDPD and Kiyosaki in general, and OP was asking about the Prophecy book... has anyone read it?

[DesertCat]

[ QUOTE ]

"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.

In the most simple exercise, we have Fred and John. John owns an orange cart Fred works at. John sleeps into the mid afternoon most days while Fred sells oranges. For each orange sold Fred gets twenty cents and John profits eighty cents after expenses. This angers Fred. John sleeps most days and he isn't very smart (in Fred's opinion) anyway. So Fred reduces his expenses, pays off his credit card debt and saves as much of his twenty cents as possible. After long enough, Fred is able to buy his own orange cart and make the whole dollar for himself.


[/ QUOTE ]

Your example is a bit biased, if all businesses were that easy of course it's a no brainer. But businesses often require capital which is the reason they make excess profits, so in your example, maybe the orange cart required thousands of dollars of capital to start. Maybe the 80 cents per orange is a very poor return on that capital. But John is stuck, he can't sell his cart but for a fraction of what he invested in it. Fred, on the other hand, can get another job anytime he wants. And will, when John goes out of business.

I'm certain I made my last software company millions of dollars through my efforts as an employee. I was only compensated a fraction of that. But I never had to invest the millions in startup costs that the founder and other investors did. And I was very well paid by market standards and that put me on the path to becoming financially secure. It was a win-win situation for both of us.

[ QUOTE ]

"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.

Every dollar spent on interest is a dollar that cannot be saved. He is telling people to reduce their spending by any means necessary, this is one of his ways. This guy thinks paying down credit cards to save more is childish?


[/ QUOTE ]

That's not what he said, he said resentment was childish. Whether you should pay down loans always depends upon whether you have other, higher return uses for that money. If you can use debt for your deals, it may make a lot of sense. Debt is what can make real estate such a great investment.

[ QUOTE ]

"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.

No, they do not. He is referring to corporations. I can also think of another great example, the justice system. Who do you think has more of a chance of ending up in prison. A 19 year old black thuggish looking kid from Compton caught with three ounces of marijuana, or the 19 year old son of a big corporate lawyer (he can be white, black, mexican...whatever) in New York caught at a Fraternity party at Duke with that same three ounces of marijuana? Anyboody who doesn't say the kid from Compton is living in a dream world.


[/ QUOTE ]

Your example is irrelevant, read the quote again. REed's talking about "the economic aspects of life". Andy Beal came from a very poor background and used investments in distressed real estate to become a billionaire. This country is full of self made millionaires that didn't get there with "inside information" from "wealthy friends" or the "magic" of starting corporation with a full board of directors, but through hard work and typically, owning their own businesses.

[ QUOTE ]

"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.

I think we can give Kiyosaki credit for knowing when he is going to profit from a transaction, and being able to do simple math and deduct the transaction costs first. What he is doing (that Reed took out of context...again) is explaining that people should not be cheap when deciding which broker to go with for real estate deals. A good broker will make you many times more than you pay him in commissions, whereas if you try and shortchange him, he may not come to you with the 'hot' deal next time.


[/ QUOTE ]

This is a point where Reed is showing how naive and clueless Kiyosaki is about real estate. His experience is that brokers aren't going to bring you "hot deals" (if they were hot, why not do the deals themselves?), their motivation is to have you do more deals, not better ones. He's also said that when you get started every dollar counts, so being your own broker and saving those commissions directly increases your profitability.

[ QUOTE ]

"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.

Evidently this guy doesn't play much poker. Aces get cracked, nothing you can do about it. Only putting chips in the middle you didn't have set aside for food and rent is a smart piece of advice.


[/ QUOTE ]

In poker, you try only to invest in pots where you have a positive expectation. You shouldn't take the worst end of the deal just because it's a "small pot".

[ QUOTE ]

"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. [

What a way to finish. I'm sure this was taken from a chapter where Kiyosaki was vigorously proposing that people flip their properties and stocks as much as possible. Sounds to me more like he was telling them to get off of their ass and start doing something with their lives.

[/ QUOTE ]

Warren Buffett has told investors over and over again that flipping stocks is a very bad investment technique, he calls it a "casino mentality" that only makes the house rich. Warren simply has a better track record than Kiyosaki in this area, so I'd give his advice more weight.

I don't care if the "rich dad" ever existed or stuff like that. I do care if Kiyosaki is giving people bad specific advice on investing or how to structure real estate transactions, or to start expensive corporations and try to commit tax fraud with them. Reed makes some compelling points on his site that Kiyosaki does this.

And I don't doubt that Rich Dad Poor Dad is uplifting and inspirational. But book like the Millionaire Next Door and The Richest Man In Babylon can also be inspirational, and show you how to be successful in life without misleading you or giving you patently wrong advice.

I give Reed a great deal of weight because he says it's hard, not easy, and he's actually done it. Where are all of Kiyosaki's real estate deals and investments, why won't he ever document those to show you his techniques work?

[skierdude1000]

The one thing I didn't really understand is the corporation thing because you'd be paying a lot in taxes from the self-employment tax. Can someone explain this to me?

[HoldingFolding]

FWIW:

1. I thiink Kiyosaki is more an inspirational speaker/writer in the Tony Robbins' mold than a serious advisor on real estate investing. That said, for someone who hasn't thought about these things he can provide the impetus to research further.

2. I would imagine the vast majority of Kiyosaki's wealth comes from the RDPD franchaise. As with any get rich guru (be it real estate, stocks, horseracing or whatever), if they were really that successful they wouldn't need to invest so much time & energy into their get rich franchaise.

3. The Millionaire Next Door is the worst book in this line I've ever read. (As Falang stated) Live an incredibly boring life and be a tight-fisted git & you will become 'rich'. Great!

4. DC is spot on regarding loans, providing you are making more with the borrowed money and are in a position to pay back the loan should the environment change it would be cretinous to pay them back early. Case in point, I have some loans at 2.45% for investment properties that are earning a leveraged net return of over 20%.

5. My own rich dad story. When I was a kid there was a Greek guy in my neighbourhood who always took his son to school. I asked my Dad how he managed to do that and he said by buying up a bunch of Victorian houses and renting them out. I think that always stuck in my mind & now I collect my daughters from school [img]/images/graemlins/grin.gif[/img]

[jtollison78]

I read this last summer. I don't remember a lot of specifics, but I believe the premise was that ERISA(a retirement account law) had improperly inflated the stock market, adn there would be a significant problem both in the stock market, and the general economy, when that generation retired and started pulling money their retirement investments out of the market.

John