Rich Dad, Poor Dad, Bankrupt Crackpot
I don't know if it's just my newsfeed, but investment self-help author Robert Kiyosaki has been in the news a lot lately. It seems like every week recently I've seen another article or two about him. Kiyosaki is author of the classic financial literacy book, Rich Dad, Poor Dad.
I picked up a copy of the book in the 2010s and devoured it. I kinda wish I'd grabbed a copy in the late 90s (it was first published in 1997) to read years earlier as it would've helped crystalize some of my understanding of finances and building wealth that I'd had to figured out on my own. But it wasn't a big loss reading it later as first, like I just said, I did figure it out on my own; and second, not all of Kiyosaki's advice was actually sound.
A Classic Tale of Two Archetypes
Kiyosaki's Rich Dad, Poor Dad is part financial literacy guide, part motivational self-help book, and part biography/autobiography. With the subtitle "What The Rich Teach Their Kids About Money-- That The Poor & The Middle Class Do Not!" Kiyosaki weaves in stories about his own father vs. a man who lived nearby.
Kiyosaki's dad, who earned numerous college degrees and worked his way up to the highest echelons of his career in education, was actually the poor dad. For all his degrees and professional accolades, he never built lasting wealth for himself or his family. And when he was dismissed from his job for (literally) political reasons he had few employment alternatives. Meanwhile the author's neighbor, a man with limited formal education, built a business in landscaping and property management. He lived modestly and retired wealthy- mainly because the business he built and the assets he purchased continued to provide him income even once he stopped working full time.
I'd summarize the lessons in Kiyosaki's book as these- and keep in mind I'm going on memory from ten-ish years ago:
You can probably tell from the way I'ved worded the third point, above, that I saw problems with Kiyosaki's advice. The main one was his fixation on real estate investing as the only path to financial success. Real estate isn't a bad category of investment, generally speaking, but it's certainly not the only one worth considering. And in certain markets it's way harder to invest in- and way slower to deliver returns- than in others.
My real estate market in Silicon Valley is/was one of those areas that doesn't work like Kiyosaki insists. The challenge here is that the price of residential real estate is too high relative to the rent you can collect on it. Unless you can put a significant amount of money into the purchase you'll be left with a mortgage that costs way more in interest each month than the property brings in in rent. In other words, you'll be cash flow negative. And the cruciality of being cash flow positive was something Kiyosaki repeatedly emphasized. But in his book and in multiple speeches and media appearances for years he dismissed this factual reality and criticized anyone who asked about it as unintelligent.
Bankrupt Crackpot
Several years ago Kiyosaki changed his own tune on real estate. He went from rejecting the argument that pricey real estate markets are poor options for middle-class people looking to build wealth to embracing it. "Of course I'd never buy in San Francisco, Los Angeles, New York, or Seattle," he said in his changed tune, betraying zero self-awarness of the fact he'd insisted on just that for... oh... 20 years.
Moreover, Kiyosaki went from saying that real estate (where it was still worthwhile buying) was a better investment to saying that it was the only worthwhile investment- save for gold. He was predicting a massive destruction of the stock market claiming it was, essentially, a mass shared delusion. "He's gone from being a real estate guru to a permabear," I remember reading in an investor forum. ("Permabear" is an investing term basically for a perpetual sky-is-falling pessimist.) Mind you, this was back in 2016 or so. The stock market has nearly tripled in value since then.
As far as today? Kiyosaki is still a perpetual pessimist. Except now he's hawking crypto as a "real" investment while still saying equities are fake and a trap. Oh, and a big part of why he's in the news is that he's basically bankrupt. He publicized in December that he's $1.2 billion in debt. So much for his brilliant investment techniques! The full picture of his finances is secret, but analysts know that his main source of income- cash flow- is royalties from his books. Thus part of his "in the news twice a week" thing is him and his publicist trying to keep him in the news so more people buy his now-old books to help bail him out.
No, thanks.
I picked up a copy of the book in the 2010s and devoured it. I kinda wish I'd grabbed a copy in the late 90s (it was first published in 1997) to read years earlier as it would've helped crystalize some of my understanding of finances and building wealth that I'd had to figured out on my own. But it wasn't a big loss reading it later as first, like I just said, I did figure it out on my own; and second, not all of Kiyosaki's advice was actually sound.
A Classic Tale of Two Archetypes
Kiyosaki's Rich Dad, Poor Dad is part financial literacy guide, part motivational self-help book, and part biography/autobiography. With the subtitle "What The Rich Teach Their Kids About Money-- That The Poor & The Middle Class Do Not!" Kiyosaki weaves in stories about his own father vs. a man who lived nearby.
Kiyosaki's dad, who earned numerous college degrees and worked his way up to the highest echelons of his career in education, was actually the poor dad. For all his degrees and professional accolades, he never built lasting wealth for himself or his family. And when he was dismissed from his job for (literally) political reasons he had few employment alternatives. Meanwhile the author's neighbor, a man with limited formal education, built a business in landscaping and property management. He lived modestly and retired wealthy- mainly because the business he built and the assets he purchased continued to provide him income even once he stopped working full time.
I'd summarize the lessons in Kiyosaki's book as these- and keep in mind I'm going on memory from ten-ish years ago:
- Understand the difference between assets and liabilites- and invest in assets.
- You're very unlikely to become rich solely by working for someone else. You've got to build something you own, whether it's a business or a portfolio of assets, that generates positive cash flow- and keep investing part of that cash flow to grow it.
- Buying real estate and renting it out is the classic way to do this. Other forms of investment are suspect, while real estate always works. There are no exceptions. It works in all markets.
You can probably tell from the way I'ved worded the third point, above, that I saw problems with Kiyosaki's advice. The main one was his fixation on real estate investing as the only path to financial success. Real estate isn't a bad category of investment, generally speaking, but it's certainly not the only one worth considering. And in certain markets it's way harder to invest in- and way slower to deliver returns- than in others.
My real estate market in Silicon Valley is/was one of those areas that doesn't work like Kiyosaki insists. The challenge here is that the price of residential real estate is too high relative to the rent you can collect on it. Unless you can put a significant amount of money into the purchase you'll be left with a mortgage that costs way more in interest each month than the property brings in in rent. In other words, you'll be cash flow negative. And the cruciality of being cash flow positive was something Kiyosaki repeatedly emphasized. But in his book and in multiple speeches and media appearances for years he dismissed this factual reality and criticized anyone who asked about it as unintelligent.
Bankrupt Crackpot
Several years ago Kiyosaki changed his own tune on real estate. He went from rejecting the argument that pricey real estate markets are poor options for middle-class people looking to build wealth to embracing it. "Of course I'd never buy in San Francisco, Los Angeles, New York, or Seattle," he said in his changed tune, betraying zero self-awarness of the fact he'd insisted on just that for... oh... 20 years.
Moreover, Kiyosaki went from saying that real estate (where it was still worthwhile buying) was a better investment to saying that it was the only worthwhile investment- save for gold. He was predicting a massive destruction of the stock market claiming it was, essentially, a mass shared delusion. "He's gone from being a real estate guru to a permabear," I remember reading in an investor forum. ("Permabear" is an investing term basically for a perpetual sky-is-falling pessimist.) Mind you, this was back in 2016 or so. The stock market has nearly tripled in value since then.
As far as today? Kiyosaki is still a perpetual pessimist. Except now he's hawking crypto as a "real" investment while still saying equities are fake and a trap. Oh, and a big part of why he's in the news is that he's basically bankrupt. He publicized in December that he's $1.2 billion in debt. So much for his brilliant investment techniques! The full picture of his finances is secret, but analysts know that his main source of income- cash flow- is royalties from his books. Thus part of his "in the news twice a week" thing is him and his publicist trying to keep him in the news so more people buy his now-old books to help bail him out.
No, thanks.