I think I heard about and read “Rich Dad, Poor Dad” right when it hit the tipping point and everyone was talking about it (I’d guess around 2004 maybe?). My aunt and uncle had read it, and I wanted to borrow another book from them and they forced this one on me. They told me it was about this guy and his two fathers (they couldn’t remember exactly how he had two fathers, but they assured me they explained it at the beginning), one of whom was a business guy, and the other was an academic. My uncle is very anti-education, so I was immediately suspicious and asked if it glorified the “business father” and denounced the “academic father”. They assured me this wasn’t the case and I foolishly read it.
From a very early age my parents taught me that its better to save then spend, and ideally you put money into things where it grows (how do you think I became Mr. Cheap?). Unfortunately they also made me ultra-conservative, and I wasted my investing youth on GICs and CSBs, but that’s a story for another day. With this background, when Mr. Kiyosaki advocated buying assets (which he defined as things that increase in value) instead of liabilities (which he defines as things that decrease in value) my reaction was “well, duh?!?!”.
I was excited when he kept promising to tell you how to find investments that would yield 13 or 17% (that range seems to be his “conservative estimated returns throughout the book”, but I got to the last page and hadn’t found anything.
John T. Reed thoroughly debunks Rich Dad, Poor Dad and if you’re at all thinking about reading this book or are enthusiastic after reading it, I’d recommend reading through his entire analysis before you gamble money on any of his ideas.
A couple of the things that Mr. Reed points out that bothered me too were that Bob seems quite unethical (I was bothered by him creating a library out of “discarded” comics that had been reported destroyed to the publisher and making money off of them the same way Mr. Reed was). I also didn’t like his re-defining the terms assets and liabilities. His “definition” of an asset is simply an appreciating asset, while his definition of a liability is a depreciating liability. Depreciating assets (like cars) aren’t liabilities and appreciating liabilities (like mortgages) aren’t assets. A car that you need to earn a living is still a depreciating asset, even though its a required expense for a business that earns money.
If you’ve read it, well at least its a fast, easy read. If you haven’t: don’t bother.
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I never finished Rich/Poor Dad. I was also bothered by the idea of making money from comic books that were meant to be destroyed. They were kids then. Luckily there was no RIAA for comic books.
There were insights in the book, though. I thought of a house as an (appreciating) asset and a car as a (depreciating) asset. Calling a house a liability made me (and my family) think. Yes, it’s appreciating but it isn’t giving us a stream of income.
I did listen to the book Kiyosaki did with Donald Trump (Why We Want You To Be Rich). There are ideas in it too, among the fluff. As long as I can learn something, it doesn’t matter if the content is fact or fiction or even whether the author “practices what he preaches”. I can still benefit.
Thanks for the debunking link and the post.
I think I’ll avoid this book. Too many good books out there to waste time on crap!
Mike
Even thought I am not a fool and I do not think we can get rich that easily, I enjoyed reading this book. However, I learned different lessons from it:
- You take as many risks by keeping your “safe job” than trying to create a business. Most people think that their job is safe a guarantee, I think it is a big mistake.
- You will definitely make more money if you are successful with a business than with your job. Can you really expect to get a steady raise of 10% per year at your regular job? Not even close right. However, self employed and business owner can aim and attempt this objective.
- Taxes and other government laws are made for self employed, business owner and other rich individuals. As simple workers, we pay a load of taxes and can not deduct anything.
I think it is a good book in the sense that it shows a different perspective than the “pay yourself first” or “reinvest your dividend in the market” type of clichés.
Also, even banks are barely considering the value of your car on a balance sheet so it is definitely not an asset.
Cheers,
FB.
Riscario: I started reading the Kiyosaki & Trump book at Chapters, and found a few questionable things in it. Then I read some awfully damning reviews and decided to pass on it.
Its true that if you find a couple good ideas it can be worthwhile. The problem as I see it though, is if you get convinced of a couple *BAD* ideas, it’ll do you far more harm. I have an uncle who is a huge bullshitter. The danger with talking to him is that he feeds you a steady stream of misinformation. Sometimes you remember something he said (but forget the source) and then your making decisions based on information that’s untrue – very dangerous!
4P: Lucky you if you haven’t spent time on the “rich dad” series!
FB: As John T. Reed says, cliches are about the only thing of value in the book. I think “The Wealthy Barber” or Bach present the idea of “pay yourself first” far more clearly and effectively then RK (I don’t even remember PYF being in Rich Dad, Poor Dad).
Being self-employed and taking risks *CAN* both be good things, I agree. The problem is they aren’t absolutes. There are times in people’s lives when being an employee would be better than being a business owner. Obviously there are BAD risks as well as good risks.
I had a landlord who wanted me to loan him some money. When he refused to provide the paperwork I required for the loan (he balked at my request for a credit report) he got quite angry. In the end he gave me 30 days notice because the deal fell through (nice guy, eh?). We’d both read (and discussed) Rich Dad, and he called me a Poor Dad. He said you have to take risks if you want to get rich. His view was that it was a good thing to wander around randomly taking risks.
This isn’t true!!! You can take a “risk” and send money to people who e-mail you “schemes” every day. These are very risky, and will make you poor, not rich. While its good to take risks beyond investing in GICs, there are foolish things that shouldn’t be done just because “its taking a risk”.
Mr. Cheap,
I think that your landlord example is a perfect illustration of risk. Most people like this landlord would take random risk and would pull out Rich Dad’s quote or other books like that to justify their behavior.
However, asking for a credit report, projected revenue and expenses or other documents are ways to control risk and make it minimal.
I will definitely goes through John T. Reed exhaustive review (man, I don’t know if I can read it all!). It seems interesting to have a second opinion on a different point of view.
Maybe the answer is on his website, but I really wonder why a rich successful entrepreneur such as Donald Trump would bother writing a book with a supposedly Amway/Quixtar creature. Don’t people learn more from their mistakes than from their success?
FB: I’ve wondered that myself. I guess Trump is enough of an egomaniac that he’ll hook up with anyone if it’ll get him in the limelight
I passed this book after reading some of it in Chapters for some of the reasons you have outlined. It made me feel slimy, not inspired.
Wooly: You’re a wiser person than me. I tend to think there must be something to it when a trend gets going and everyone is talking about it and thinking its great (this doesn’t bode well for me purchasing individual stocks.\). Initially with Rich Dad I was just perplexed as I couldn’t figure out why everyone else loved it but I saw such massive holes in it.
Rather then doubting myself, I should just realize that most people are idiots. I hereby resolveto be less tolerant of the shortcomings of others
.
“I was excited when he kept promising to tell you how to find investments that would yield 13 or 17% ”
Where did you see that? I don’t remember any of those promisis. I think you missed the point of the book. The point wasn’t to tell you how to make money, but show the differences in how the rich THINK about money than the average joe. I think it accomplishes that well.
His “definition” of an asset is simply an appreciating asset, while his definition of a liability is a depreciating liability. Depreciating assets (like cars) aren’t liabilities and appreciating liabilities (like mortgages) aren’t assets.”
That simply isn’t the case. I don’t know what book you read. He NEVER states mortgage is an asset. In fact he says quite a few times that people should view their home as an investment, jut because it MAY appreciate over time. Things like cars do have an inherent value, but they don’t really mean anything in the grand scheme of things, and thats what I think he was trying to say.
He defines says “If you don’t have a job assets feed you while liabilities eat you.” I don’t remember anything about appreciation. Like I said above, he sais time and time again you can’t count on capital gains.
“appreciating liabilities (like mortgages) aren’t assets”
FYI, no matter how you splice it a mortgage IS a liability. The home that is collateral for the mortgage is the asset, and the asset appreciates, not the mortgage. I don’t think Kiyosaki gets those confused.
Jason: I think you’ve misunderstood a fair bit of what I wrote (sorry if I was unclear). “Depreciating assets (like cars) aren’t liabilities and appreciating liabilities (like mortgages) aren’t assets.” was what *I* said, not RK. I agree that a mortgage is a liability, that’s why I called it an appreciating liability (and if you stop paying it, it quickly becomes a depreciating liability).
His definitions are significantly different then what the words actually mean (look them up in a dictionary and compare the definitions to his). His statement makes sense if you say “If you don’t have a job APPRECIATING assets feed you while DEPRECIATING liabilities eat you.” (although that’s pretty obvious, so I’m not 100% sure what the great insight is).
I’m glad you feel you’ve benefited from his book(s).
I’m not trying to start a flame war or anything, but you really only responded to one of my points.
How a word is defined is not necessarily the best way to think about something. Assets and liabilities do have a textbook definition, but they are concepts, and can be conceptualized differently by different people. I happen to think that he makes a good point for his concept. But I guess we will have to agree to disagree on that point.
I quoted you on my blog, if you are interested.
Jason: I don’t have a copy of his book any more, so I can’t respond to where he talks about specific returns. I responded to your comment about his definitions, I responded to your comment about mortgages being liabilities, I responded to your confusing my comments with Robby’s.
Thank you for responding on your blog and linking to me. Again I think you’ve misunderstood me. Any asset or debt can be good or bad, I wasn’t making an absolute statement (I was just clarifying RK’s quote so that it at least made sense, even if it still wasn’t always true).
Apparently in Thailand landlords (who often inherit their land/property or have owned it for a LONG time) charge ridiculously low rents (like 1-2% of the property value / year). This is an appreciating asset, but its not a particularly good one. If they were smart, they’d sell the property and invest the proceeds in something that would make money faster for less work (even a high-interest savings account would do better).
Alternatively, say I got a 3-year lease to rent a t-shirt making machine. Every month I pay the company $500 for the machine. This is a depreciating liability (since next year the new-and-improved t-shirt making machine will work better then the old one I’ll be renting, and as time goes on I’ll probably have to service the machine I’m renting more often, it might not print as clear T-shirts as parts wear down, etc). If I can use this machine to print t-shirts and make $5000 / month profit it is a depreciating liability that is *VERY GOOD* (I should rent a few more of them if the market could sustain the increased output).
(begin irony)Absolute statements are always dangerous(end irony).
I don’t think I’m able to write in a way that you can understand (as the writer, the fault is all mine). So I think I’ll let this go, but thanks for your comments (and the link).
Mr Cheap, I spent time reading the debunking and was pensive for days.
I was inspired to write Who Can You Trust?.
I was flipping through R.K.’s “Rich Dad’s Guide to Becoming Rich” at the library and found on pg 8:
“Yes,” replied rich dad. “It is relatively easy to get a 20 percent to 50 percent return without paying a lot in taxes or using much of your own money, if you know what you are doing – and still have security.” – page 8
I still think there’s something along these lines in his main book. Someone needs to tell Warren Buffett he’s been under-performing
. I’m not sure why you would want a high return without using much of your own money (I’d like a high return on A LOT of my money, not a little of it), but there it is.
for anyone not able to find an investment giving a 20% or higher return, look into real estate in Prince George for example. There are a ton of houses for under $200,000. You can put 5 % down which is $10,000. These houses can be rented out and can give you a $500-800.00 a month in passive income after all expenses including mortgage, taxes, utilities and property management companies are paid. If you calculate your return on investment it is between 60-90% per year. Consider that your only investment was the $10,000 down payment plus any closing costs, which you will typically get back from the appreciation of the house when you sell it.
Rich Dad, Poor Dad is a book to help you think like rich people. It is possible to do it ethically unlike some people here would like to believe. Anyone that is arguing that it is not a valuable book is being close minded in my opinion.
Anything that challenges your thinking is valuable. The moral of his story is to think outside of the box.
I have shown you 1 example of a high return on your investment with little or no money, just using leverage. I also want to note that I read the book about 2 months ago and have already found dozens of opportunities to make high returns on my investment.
I assure you that anyone out there with an open mind and the courage to follow you financial insticts that we all have, you will be rich. It is a learning experience all along the way but if you stick to it you will be more successful than you could possibly imagine.
good luck
The more money you pay for the “thing”, the more time taken to understand Rich Dad Poor Dad, it would definitely look like a scam to everybody, because you are not able to catch what the meaning of all this.
Do we all make RDPD concept to be an instant rich concept? Where do we invest our time and money then? Actually the answer is depend on us. Looking back at Robert Kiyosaki background, you would be able to know what to invest, Real Estate? Writing Books? However, I want to let you all know, if you are not familiar in the field, you would really hard to get it started. The real answer is still in your hand that is “Invest” something that you comfortable of, and make the “MONEY” work for you. This is the concept. Not necessarily into the Real Estate if you are not familiar with the term, transactions, the history of it.
In terms of the definition between the Assets and liabilities, his definition might seems confusing. But if you read some more materials, he wants us to make the “MONEY” work for us. Let see an example;
I found this from website saying:
“I am an engineer working in wireless technology. I buy the latest cell phones and PDAs when they become available. I buy a faster computer every year. Liabilities? No. Without using cutting edge technology on a regular basis, I would not have the successful career that I have. No toys, no knowledge, no promotion, no job, no income.”
Actually the meaning should be like this, making people pay for your upgrades, such as company that is willing to pay you all the expenses for learning new technologies. Getting a company sponsor your knowledge and appreciate your skills.
If you want to be successful to pay every single cents on your own, it is just like buying your house from your every single hard earning money.
Your asset = Hard earn money.
Robert Kiyosaki’s Asset = People pay for it continuously and more. That’s why you feel it is like a scam, because this Asset belongs to Robert Kiyosaki, not you. Robert Kiyosaki has proven this concept so far.
In summary, if you work for “MONEY”, you are actually BUYING.
If “MONEY” work for you, you are actually INVESTING, meaning you put a very little money inside, the rest of the time, the money is paying by itself, and pouring in while you asleep and doing nothing.