Robert Kiyosaki - John T. Reed Analysis of Robert Kiyosaki Book Rich Dad Poor Dad

John T. Reed's analysis of Robert T.
Kiyosaki's book Rich Dad, Poor Dad
John T. Reeds analysis of Robert T. Kiyosakis book Rich Dad, Poor Dad
Copyright 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006 by John T. Reed Seminar and home-study course ratings | Real estate investment page A number of people asked me about Robert T. Kiyosaki and his book Rich Dad, Poor Dad. When I said I didnt think he was a real-estate guru, they insisted he was. Several told me I would like him, that he preaches a message like mine. Eager to find such a guru, I bought his book, Rich Dad, Poor Dad in a bookstore. I was unpleasantly surprised. I do not like his book at all. Over time, I have received numerous reports that Kiyosaki is primarily a creature of Amway (now Quixtar) and other multi-level marketing organizations. Reportedly, his books were not selling until he allied himself with that crowd. Then the volume of sales to those MLM guys made him a best-selling author, which caused normal non-MLM people to think the book must be good. Click here for an email I received along those lines. There is an unauthorized Web site about Amway at www. amquix.info. Some readers have said that if I am going to criticize Kiyosakis book, I must offer a version of how to better yourself that does not have the flaws of Rich Dad Poor Dad. No problem. That would be my book Succeeding.
Last updated 7/26/06
Selected emails from visitors to this page
Collection of age-old cliches about money A reader recently suggested that Rich Dad Poor Dad is nothing but a collection of cliches about money. Old cliches. Cliches that have been around since way before Kiyosaki claims rich dad originated them. The reader further said that Kiyosaki then appears to have simply made up a bunch of accompanying phony stories to fill the cliche collection out to the length of a book. She may be right. For example, Kiyosakis fear-and-greed advice (see below) is an age-old Wall Street cliche about securities prices. Another reader put it this way, But you have to admire a guy who can spin two or three paragraphs of very ordinary financial platitudes into such a range of books. Now admits fictionalizing On 8/15/01, a reader told me Kiyosaki now has the words Although based on a true story, certain events in this book have been fictionalized for educational content and impact, in the fine print on the copyright page of Rich Kid Poor Kid. I had not previously been aware that educational content and impact justified lying. Also, I am now confused as to why Kiyosakis books are on the nonfiction best seller list if they are fictionalized. Probably because as A Million Little Pieces author James Frey discovered, its a lot easier to be a best-selling author with a fictional book labeled non-fiction than with a novel. Poor dad The idea behind Kiyosakis title is that his real father was upper middle class. He graduated from Stanford, Chicago, and Northwestern Universities, all on full scholarship, ultimately earning a Ph.D. He pursued a career in education and became the head of the education department of the State of Hawaii. He owned the home in which the Kiyosaki family lived. Kiyosaki calls him his poor dad. Rich dad One day, he asked his father how to make money. His father said he had not made much money and did not know how to make it. He suggested that Robert ask the father of his next-door playmate, Mike. That boy's father was a successful local businessman. He was also an eighth-grade dropout and ultimately a multimillionaire with a bunch of small businesses like construction, restaurants, and convenience stores. Kiyosaki developed a father-son relationship with the neighbor. That is who he is referring to when he uses the phrase rich dad.
http://www.johntreed.com/Kiyosaki.html (1 of 42)13-09-06 4:12:19 PM
John T. Reed's analysis of Robert T. Kiyosaki's book Rich Dad, Poor Dad
One visitor to this site asked me if I was sure Rich Dad really exists. No, Im not. In fact, I now lean to believing that there never was a Rich Dad, that Kiyosaki made the whole thing up. If I had written such a book, I would have named him in the book, if only out of gratitude. It is noteworthy that Kiyosaki refuses to identify Rich Dad and the Honolulu Star-Bulletin was unable to figure out who it was in spite of the rather obvious next-door neighbor Mike whose father owns convenience stores, restaurants, and a construction company clues. The man was purportedly around 30 to 45 years old in 1955. So he would be 75 to 90 now. How many people on that one street in Honolulu could possibly fit that description? As I recall, the first convenience store was 7-11 and I believe they became widespread around the 1960s. Its possible Kiyosaki is using the phrase convenience store loosely and really means corner groceries, which did exist in the 1950s. But I also find the mix of business unlikely. The guy owns convenience stores, restaurants, and a construction company. I guess I can imagine a guy who owns convenience stores and a construction company. Its odd, but not impossible. However, I cannot imagine a restaurateur who also owns a construction company. For one thing, the restaurant business is extremely management-intensive. At good restaurants, the owner is usually there almost all of the time. Same is true of construction. Plus restaurateurs that Ive known are very different kinds of people from construction guys. Kiyosakis real father (Poor Dad) was named Ralph Kiyosaki. I encourage readers in Hawaii to try to research Ralphs home ownership when Kiyosaki was nine years old (1955) and try to figure out which adjacent or nearby homeowner might have been Rich Dad. If we can find a person who fits the description, and he is either a public person or dead, I will publish the identity. A bunch of people have told me Rich Dad was a now-dead guy named Kim or Kimi. Fine. Get Kiyosaki to say that. Or get Kims surviving relatives, like Kiyosakis friend Mike, to say it. A bunch of yahoos on the Internet saying it means nothing. People on the Internet see Elvis at their 7-11. 1992 book versus 1997 In 1992, Kiyosaki wrote a book called If You Want to Be Rich and Happy, Dont Go To School? It is dedicated to Ralph H. Kiyosaki, former Superintendant of Education, State of Hawaii, the best teacher I ever had. This would be Poor Dad. But Rich Dad Poor Dad, which came out in 1997, says quite emphatically that Rich Dad was the best teacher he ever had. So maybe Rich Dad was the second best teacher he ever had. No. Actually, the 1992 book also identifies the second best teacher Kiyosaki ever had: F. Marshall Thurber. OK. So maybe Rich Dad was third. No. Kiyosakis 1992 book has an unusually long acknowledgment section. It lists 111 people, none of whom appears to be Rich Dad. That is, none are singled out except for his Poor Dad parents, in-laws, business partner, and editors. Mind you, according to the 1997 book Rich Dad Poor Dad, Rich Dad supposedly became central to Kiyosakis life starting in 1955 when he was nine. So where was Rich Dad in 1992 when Kiyosaki was so diligent at identifying the people who had been important in his life? In a 4/18/06 Yahoo! column, Kiyosaki now says the best teacher he ever had was Buckminster Fuller. Getch yer programs right here! Ya cant keep track of Kiyosakis best teacher he ever had without a program! EST then Money and You A man who says he has known Kiyosaki since the military in Hawaii says Kiyosaki got his start in the tell other people how to live their lives business as a result of taking then becoming a speaker in the Money and You organization. Money and You was a seminar company started by Marshall Thurber, an est graduate. Est was a notorious seminar company in northern California run by Werner Erhard. Werner Erhard is apparently one of many aliases used by John Paul (Jack) Rosenberg, a Philadelphian who started in life as a car salesman and who then moved through a series of aliases, sales careers, and wives before coming up with the name Erhard and the est seminars. They were famous for not letting participants go to the bathroom and for maddeningly vague advice. For a while, they were going to cure world hunger by getting a lot of people just to think about it. Money and You was reportedly a useful seminar. Shortly after Kiyosaki went to mainland U.S. from Hawaii to run away with Thurbers circus, Thurber decided to shut it down. Thurber
let Kiyosaki and some other speakers take over the business. They promptly emphasized the Australian and New Zealand markets which have at times in their history overvalued products and services from the U.S. Their run in Australia ended when the Australian equivalent of 60 Minutes did an expose about Money and You. Basically, it appears that Kiyosaki is a good salesman, although we sort of have to take his word for it pending confirmation from Xerox. Good salesman is the universal description of all the expensive so-called real estate investment gurus. They are sales guys, not real estate guys. Apparently Kiyosaki is yet another example. This caller also said that Kiyosakis wife Kim appears to be the one who invested in Phoenix real estate. Bob appears to be the Ralph Kramden (main character of the Honeymooners TV series) of the family, perennially hatching one-hare-brained get-rich-quick scheme after another (like Kiyosakis Money and you, velcro surfer wallets, and Rock T-shirt businesses) while his wife invests in basic stuff. I am not ready to annoint her a financial genius. One would have to inquire as to whether their real estate investments in Phoenix appreciated more than those owned by the average person. Most likely, they made the same return on their propertties as Joe and Jean Average Phoenix homeowner. If so, they would be as quaified as Joe and Jean homeowner to write a book about it. Reportedly, Kim got the idea to invest in Phoenix real estate from a female fellow employee of Money and You who said the Phoenix market was going to be good. That female Money and You employe is the one who should have written us a book on real estate investment. She may be the brains of the outfit if Kim did not add any value to her advice. The guy who called me has the impression that Kiyosakis tortured psyche and insecurities stem from growing up as an obese kid in Hilo in the 1950s. Since he did not know Kiyosaki until the military, that information must have come from Kiyosaki. No more Bob Kiyosaki went by Bob for most of his life. Since he became the famous author, he insists that everyone call him Robert. Sure, Bob. 20/20 investigation of Kiyosaki ABC 20/20 did a program about Kiyosaki who has now written 18 books. You can read their story about it at http://abcnews.go.com/2020/story?id=1982669&page=4. The date on the Internet story is May 19, 2006 so the story must have been aired on 20/20 around then. Basically, they gave three people $1,000 each and told them to try to start a business that would show a profit within 20 days. One lost all he money. Another made zero. The third made $243. Kiyosaki was brought in to coach them and to advise them during the 20 days. Based on the article, it sounds like about all he did was whine about the three would-be entrepreneurs, the short time frame, and so forth. He also pronounced their failures a successtypical Kiyosaki logicbecause they learned from them. The ABC 20/20 story ends with, Which begs the question: Does anyone really need 18 books to learn to fail? Obviously, Kiyosaki has sold 26 million books on the promise that they would help you succeed. Then, when people who have been personally coached by him fail, he blames them and, like the Queen in Alice in Wonderland, declares their failures to be successes. I guess it would be too much to ask for him to admit, Gee, my advice was of no value to these three. If I had been asked to participate in such a challenge, I would have said I have no expertise in telling anyone how to make a profit with $1,000 in 20 days. I do not know how I would have done that if I had been given the money. Probably try to buy something for less than market value then ressell it closer to market value at a flea market or on eBay or osme such. It would be interesting for 20/20 or a similar program to give $1,000 to Kiyosaki himself and let he himself show how to turn it into a profit using some method open to his readers. You would have to have a microscope on him every second and prohibit any undisclosed actions or conversations to prevent him from using methods not available to his readers. What business has Kiyosaki ever made a profit in? With regard to his 26 million books, he is not a businessman. He is only an author. The businessmen generating those sales and profits are his publishers.
Couldnt put my finger on it I have received numerous emails about this analysis by me that you are currently reading of Rich Dad Poor Dad. There have been several recurring themes in those emails. One is people saying that they liked Kiyosakis book, but that it caused them some discomfort or second thoughts or unease. They often say they could not put their finger on what was bothering them or words to that effectuntil they read this analysis. Made me think about my finances The most common favorable comment I get about Kiyosaki from those who generally agree with my analysis is that He got me to think about my finances. Thats pretty lame. The IRS makes you think about your finances every April 15th. You have to think about your finances whenever you fill out a loan or credit-card application. I also think about my finances frequently when I pay bills or receive income. People who are unhappy with their financial liveswhich is probably the typical Kiyosaki fanprobably think about their finances every time they get into their shabby car or return to their unsatisfactory home (e.g., living with parents, bad neighborhood, too small, etc.). I think these made me think about finances comments are inarticulate at best and dishonest at worst. What is really going on is a lot of people are schlepping along doing a half-ass job of managing the financial aspects of their lives. Rich Dad Poor Dad slaps them up side the head and tells them to clean up their acts. Thats good, but the book goes on to deliver a pack of lies that make getting rich seem much easier than it really is and make education sound much less valuable than it really is. Basically, people want to get rich quick without effort or risk. Kiyosaki is just the latest in a long line of con men who pander to that fantasy. Can the ordinary person get rich? Yes Is it as easy as Kiyosaki makes it sound? Not even close. Can it be done as fast as Kiyosaki says? Nope. Is education as worthless as Kiyosaki says? Every pertinent study has shown that the more education you have, the higher your net worth and income. Also, educated people live longer, have fewer divorces, better health, and so forth. On the other hand, the public-school system is an easy target for criticism. It is generally run by union bureaucrats who graduated at the bottom of their college classes. Colleges are also subject to criticism for letting students spend five or more years getting low-income educations in subjects like philosophy and social work. Wisely-chosen educationdefined broadly as reading books, talking to successful people in the field you are interested in, attending courses, and subscribing to trade publications is generally the highest return you can earn on your money and time. Kiyosaki is just telling lazy and/or stupid students a line of bull that lets them avoid responsibility for their poor academic performance and gives them a convenient scapegoat to blame for their lousy financial situations. There is also more value to education than just its financial rewards. If you like philosophy and are willing to take a vow of poverty, you ought to study philosophy. Not everyone suffers from Kiyosakis need to impress people with how much money he has made (or claims to have made from sources other than selling books to Amway distributors). most people want to believe rather than to know, to take for granted rather than to find out James Thurber Motivation Another compliment readers often pay Kiyosaki is along the lines of, Well, at least he motivated me. Yeah, by lying to you. Thats like me telling you I buried $100,000 in your backyard which is yours for the taking. Would that motivate you? No question. You would probably spend the next two weeks digging up your backyard. After you found out it was a lie, would you think I was a great guy for having thus motivated you to get all that healthy exercise? I doubt it. Missing the point Since I posted this analysis, a number of Kiyosaki cult members have contacted me to denounce me for missing the point of Kiyosakis book. OK, Please tell me the point. The odd thing is that each person has a different version of what the point of Kiyosakis book isand it is never something I recall reading in the book. In fact, if a book has a point, multiple readers ought to come up with the same answer when asked what that point is. If they come up with different answers, it is either because the author was incompetent at communicating
his point, or because the book has no point, or because the author deliberately obfuscated the point. From now on, if you think I missed the point, dont paraphrase Kiyosakis point to me. Give me an exact quote and the page number in Rich Dad, Poor Dad where it appears. I suspect everyone who is tempted to send me the point of Rich Dad will be unable to find in the book any of the wonderful advice they imagined was in there. It has been several years since I first said this and I have yet to get my first quote of the point. On 7/18/06, I finally got a quote from someone who says I missed the point. Here it is. Please open your copy of Rich Dad Poor Dad and turn to page 77. Look half way down the page. You will see this: "Rule one:You must the know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. Its rule No. 1. It is the only rule. This may sound absurdly simple, but most people have no idea how profound this this rule is. Most people struggle financially because they do not know the difference between an asset and a liability." I did not miss that at all. In fact, I discussed the matter of his definitions of assets and liabilities squarely and repeatedly in this review. Furthermore, the vast majority of the book has nothing to do with that point and some of the book contradcits that point, like Kiyosaki bragging about his Rolex, etc. I also note that in eight years, this is the only person who thought that was the point of the book. The only time different people look at the same thing and come up with different answers as to what it is they are looking at is when the thing they are looking at is amorphous, like a cloud or a Rorschach inkblotor a politician. Politicians try to be all things to all people. That requires them to say nothing (amorphousness), but to sound like they are saying something (the point). They toss in a little spin to try to get all those people with those different views to see in the politician things that they like. Kiyosaki slogans like Dont work for money. Make money work for you, are amorphous in their actual meaning, but have the effect of spinning the reader into thinking he has just gotten good advice. Heres a pertinent passage from Temple University professor John Allen Pouloss book A Mathematician Reads the Newspaper. A similar argument helps clarify why inane I Ching sayings or ambiguous horoscopes seem to many to be so apt. Their aptness is self-provided. In effect, their cryptic obscurity provides a random set of answers that the devotee fabricates into something seemingly appropriate and useful.psychologists count on the amorphousness of Rorschach ink blots to elicit evidence of a persons core concerns. My own supporters occasionally commit the mistake of reading things into my writings. I once got an email complimenting me on my writings. The writers favorite quote by me was, When everyone is digging for gold, sell shovels. I thanked him for his compliments, but said, I never said that. He then wrote back that he searched all over my Web site, but could not find it. Cult What Kiyosaki is really doing is operating a cult of personality. Anna Quindlen had an excellent article about such cults in the 8/14/00 Newsweek. She was talking about politicians and said they seek to elicit the words, I dont know why. I just like the guy. Politicians want to be judged by their personalities, not their character or policies. To members of Kiyosakis cult, it matters not how many false or probably-false statements I find in Kiyosakis writings. They just like the guy. Personality is an appropriate criterion for selecting someone to hang around with. But it is a highly inappropriate criterion for evaluating Kiyosakis advice, because hes not going to let you hang around with him and your familys finances are serious business. I am not a politician. When I write something, I want to make sure everyone gets the pointthe same point. Here is the point of this analysis: Rich Dad, Poor Dad contains much wrong advice, much bad advice, some dangerous advice, and virtually no good advice. The 48 Laws of Power
Heres an interesting letter I got from a reader: I'm glad I found your website on Kiyosaki, and all the other snake oil salesmen. I was deluding myself into believing him, even though I had that little voice in the back of my mind sending me warning signals (not to mention my wife)... Anyway, thanks for the info. Every once in a while, I do a search on Google and come up with a gem like your website. This is living proof that the Internet can be used for good purposes by people who are TRULY generous. Once again thanks for your work. A few years ago I read a book by Robert Greene and Joost Elffers called "The 48 Laws of Power" (Viking, 1998). It is a "Machiavellian approach to the systematic study of power." Basically, it is written as a how-to book. It gives the cynical lowdown on increasing and maintaining one's power over others. It is truly an interesting and thought-provoking study in human nature. I thought you might be interested in the following quote, which I feel is particularly apt in describing the power strategy that gurus like Kiyosaki like to follow: "Law 27 - PLAY ON PEOPLE'S NEED TO BELIEVE TO CREATE A CULTLIKE FOLLOWING. Judgment - People have an overwhelming desire to believe in something. Become the focal point of such desire by offering them a cause, a new faith to follow. Keep your words vague but full of promise; emphasize enthusiasm over rationality and clear thinking. Give your new disciples rituals to perform, ask them to make sacrifices on your behalf. In the absence of organized religion and grand causes, your new belief system will bring you untold power." (p. 215) Keep up the good work, Another reader said Law of Power 32 is pertinent too. Law 32Play to Peoples Fantasies The truth is often avoided because it is ugly and unpleasant. Never appeal to truth and reality unless you are prepared for the anger that comes for disenchantment. Life is so harsh and distressing that people who can manufacture romance or conjure up fantasy are like oases in the desert: Everyone flocks to them. There is great power in tapping into the fantasies of the masses. You can see all the laws at http://www2.tech.purdue.edu/cgt/courses/cgt411/covey/48_laws_of_power.htm. Short on specifics About every third email I get about this analysis me that they agree with me that Kiyosaki is short on specifics about how to get rich.
I never said Kiyosaki was short on specifics!

Not only does Kiyosakis hypnotic effect on many people result in their seeing things in his book that are not there, now they are seeing things in my analysis that are not here. Amazing! No wonder the guy can sell 26 million copies of nothing. I would say that Rich Dad covers an overly broad array of financial subjectsreal estate investment, stock market investment, note investment, and going into business for yourself. No one could adequately cover all those areas in such a short book. On the other hand, Rich Dad has a lot of specificsas you will see below in this analysis. The problem is not that he is short on specifics, it is that the book is a bunch of bull, including when he gets specific. To say that the only fault of the book is that it lacks specifics is ridiculous. Since I posted this item with huge letters saying I did not say he was short on specifics, the quantity of emails I get agreeing with me that he was short on specifics is unabated. Have these people all had lobotomies? Money is all that matters On page 14 he approvingly quotes rich dad as saying, Money is power. [Since I wrote this analysis, Kiyosaki has changed the layout of the book making these page numbers wrong for subsequent editions. They are correct for my edition, which says published by TechPress, Inc. and has 1997 and 1998 copyrights.] On page 92, he tells of his rich dad keeping him waiting for long periodswhen he was nine years old!! He was ignoring me on purpose. He wanted me to recognize his power and desire to have that power for myself one day. On
page 172, he says, I have found the principles of finding value are the same regardless if its real estate, stocks,...or a new spouse... On page 154, Kiyosaki says the reason you want to have rich friends is to get inside stock market information that you can make low-risk profits. He ends that discussion with the sentence, That is what friends are for. That is the narrowest, most mercenary definition of friendship I have ever seen. I doubt Kiyosaki is the only person who feels this way about his friends, but he may be the only one dumb enough to say it in a book. Although his family was not rich, he attended a predominantly wealthy elementary school because of an anomaly in the school-district boundaries. The wealthy kids had newer toys and refused to invite Kiyosaki and his friend to parties, telling Kiyosaki it was because they were poor kids. Sounds like he was scarred deeply by that humiliation and has lived his whole life since trying to prove to some rude nine-year olds from the 1950s that he now has the money to be worthy of their party invitations. He told Meet the Street that he has never been back to Hawaii. I suspect such a visit would rid him of these demons from his childhood. How much money does Kiyosaki have? A number of people have accused me of being jealous of KiyosakiI guess because they think he has more money than I have. Others have said they are going to follow him because he is fabulously wealthy and thats what they want to be. How do we know this? I know approximately what my net worth is. But I have no idea of what Robert Kiyosakis net worth is. Neither does anyone else. He implies he has money. He has had four books about how to get rich on the business best-seller list. He brags about owning a Porsche, Mercedes, Rolex watch, $400 golf club. The Honolulu Star Bulletinthe newspaper where Kiyosaki grew upwrote a puff piece about him. You can see it at http://starbulletin.com/2000/07/10/features/story1.html. In it, Kiyosaki says a number of things that imply he is rich. For example, Im free to do exactly what I want, when I want, where I want. I can stop working if I want to. Money buys me freedom. The article says Kiyosakis got his and that he lives in a $3.5 million dollar home in Phoenix. A real-estate broker visitor to this site ran a computer search on Kiyosaki and said Kiyosaki owned two properties in Maricopa County, AZ (Phoenix). The assessors records (http://www. maricopa.gov/Assessor/ParcelApplication/Detail.aspx?ID=164-14-005) showed a purchase price (10/6/99) of $1.2 million and a full cash value of $980,000 on his residence, 62 Biltmore Estates Circle, Phoenix, AZ 85016. Neither value is any slouch, but it aint $3.5 million. A visitor to this Web site who lives in Phoenix said Kiyosaki spent a lot of money on improvements finishing around April, 2002. A caller in July of 2003 said the house was worth about $2.5 to $3 million then. The other property (a five-room house built in 1979, 2,300 square feet, 1809 East Lane Avenue, Phoenix, AZ 85020) had a current full cash value of $171,500. He purchased that 8/8/91. It was the house he moved out of when he bought the Biltmore Estates house. A visit to the Maricopa County Recorders Web site http://recorder.maricopa.gov/recdocdata/Frame.asp? rec=19990929308&pg=1&cls=RecorderDocuments&suf=&sar=UnOfficial&bid=&naf=1&bk=0&rec2=&pgs=&map=&bdt=1/1/1900&edt=10/9/2001&nm=KIYOSAKI+KIM+L +ETAL&set=250&cde=GRNT%2BDEED&lnk=1&Pages=2 shows that he bought the Biltmore home from an odd home sellerthe National Model Railroad Association. You can see at the Web site that the down payment was originally $23,000, but that was crossed out and $300,000 was written in. The recording number from the assessors records is 990929308 10/6/99. My search of the Maricopa County recorders office by Internet found a bunch of documents related to Kiyosaki. You can see that list at http://recorder.maricopa.gov/recdocdata/ GetRecDataPgDn.asp?rec=0&nm=Kiyosaki&sar=UnOfficial&bid=&bdt=1/1/1900&edt=10/9/2001&cde=&set=250&lnk=1 Below are some deeds to Kiyosaki. I do not know Phoenix real estate so I would be interested in hearing from anyone who is familiar with these properties who can interpret whether they support or refute the notion that Kiyosaki is a big success. http://recorder.maricopa.gov/recdocdata/Frame.asp?
rec=19920657298&pg=1&cls=RecorderDocuments&suf=&sar=UnOfficial&bid=&naf=0&bk=0&rec2=&pgs=&map=&bdt=1/1/1900&edt=10/9/2001&nm=Kiyosaki&set=250&cde=WAR +DEED&lnk=1&Pages=2 http://recorder.maricopa.gov/recdocdata/Frame.asp? rec=19930001842&pg=1&cls=RecorderDocuments&suf=&sar=UnOfficial&bid=&naf=0&bk=0&rec2=&pgs=&map=&bdt=1/1/1900&edt=10/9/2001&nm=Kiyosaki&set=250&cde=WAR +DEED&lnk=1&Pages=2 I once investigated best-selling real-estate author Robert Allen who wrote Nothing Down. At first, he claimed to own his home. But when I checked the address which appeared on IRS liens filed against him, it was nonexistentno house at that address. When I again asked where he owned his home, he admitted, I rent. I have the conversation on tape. One of my MBA classmates, Paul Bilzerian, became a very successful corporate raider for a time. He stood silent while others claimed he was a wiz who had made $150 million in Florida real estate before age 30. I called him up to ask if that were true. He said I should read the article in the Wall Street Journal carefully. Indeed, it said he was reported to have made that much and all Paul would say in the article was, Thats a good guess. In other words, Paul was pointing out to me that it was not he who said he had made all that money. Paul subsequently was the subject of a Forbes story. They said they investigated his purported Florida real-estate profits and could not find a trace of him in Florida real estate. He later got into trouble with the law and was the subject of a 60 Minutes segment about his mansion in Florida that creditors could not get at after he declared bankruptcy. According to the Honolulu Star-Bulletin, Kiyosaki wont say how much he is worth or in what hes invested. Kiyosaki claims, I own companies. Im a major shareholder in oil and mining companies, plus real estate companies. I have intellectual property companies. But he wont identify any of them. Why? As you will read below, one of my readers checked Kiyosakis claim that he was a major shareholder out in a securities industry data base and found not a trace of him in spite of the fact that major shareholders are required by law to be identified. If he is a major shareholder, it is in minor corporations so small that their shares are not traded publicly. Mr. Privacy Kiyosaki says, I keep my holdings private. You know why that is? Lawsuits. If you have money, you get sued. Let me get this straight. Kiyosaki says he is rich, that he makes millions of dollars, and is about as high profile about his wealth as you can get about itbest-selling how-to-get-rich books, appearances on TV shows like Oprah, interviews to daily papers and national magazines. Yet he wont disclose any details because he doesnt want people to know he has money. Not only is the guy a B.S. artist, he insults our intelligence. Somebody needs to give Kiyosaki a book on how to be low profile. Im sure it has a chapter that says going on Oprah to discuss your best-selling book on getting rich is not a good way to prevent would-be litigants from knowing you have money. Kiyosaki is, in fact, shouting from the rooftops that he has money. He just refuses to prove it. Or to let us investigate how he got it if he does have it. I have always felt that implying you have money was worse than revealing your net worth. When I was in grad school, I took a labor relations course where actual union leaders were in every other seat with us MBAs. One said that one of the things they love about employers is when they keep earnings secret. That allows the union to tell the employees that the company is getting rich on their backs. That, in turn, causes the employees to vote for the union. Kiyosakis implying he is wealthy, but refusing to disclose how wealthy, will almost certainly cause would-be litigants and others to overestimate his net worth, thereby increasing the chances of his being sued over what they would be if he were more forthcoming. Many small businesspeople adopt grandiose company names, like Pritchco Interplanetary, that make them sound much larger than they really are. I tell my readers not to do that because such names encourage lawsuits. I encourage small real-estate investors to use their own name, because people are more inclined to sue big-sounding corporations than an individual. I suspect the real reason Kiyosaki refuses to disclose any evidence of his purported wealth is either It is much smaller than his followers imagine He did not get it the way he impliesfor example, his wealth may come almost entirely from telling people how to get wealthy and he may not have been wealthy himself until he told people how to get wealthy
He achieved wealth in an unethical or illegal way All of the above For the record, I created another page to address the jealousy issue. Click here to see it. On 1/14/02, a reader told me Kiyosaki was more forthcoming about his wealth at http://www.thestreet.com/funds/meetthestreet/10006507.html. Indeed, in an interview at that Web site, he says his net worth is between $50,000,000 and $100,000,000 depending on the day. (I dont believe that. He also says he was bankrupt and homeless in 1985. More about that later.) So which is itKiyosaki will not talk about his wealth because he doesnt want to be sued or he will give figures, locations of his properties, and the nature of his corporations as he does in the Meet the Street interview? What happened to the lawsuit threat? There were a number of points in that Meet the Street interview that deserve a response Kiyosaki said Reed comment Mutual funds vary in their risk. Some are very low risk. 401 (k)s have tax benefits that are hard to ignore. Also, you can invest them in almost anything you want in many cases. Bogus gurus like to give extremely simple rules. Ignorant readers love them. Thats fine when the subject permits. But this is an extremely simple rule that is not valid because of the complexity of the subject. I dont believe that. He was bankrupt and homeless in 1985 by his own admission. Although a lawyer who searched the federal case management system on line says he could find no bankruptcy filing for Kiyosaki. He claims to have sold 26 million books. I dont know if I believe that either. The highly successful book What Color is Your Parachute? has only sold seven million copies since it first came out in 1970. But even if you accept the 26 million figure, Kiyosakis coauthor royalty would appear to be about 72not enough to get you anywhere near $50 million even if you had no living expenses. He claims to make money in other businesses, but will not disclose enough detail that anyone can check that. Also, whats this depending on the day nonsense? I presume thats a shameless effort to impress people who are really ignorant about the world of finance. What he is saying is that his net worth doubles or halves within 24 hours. He implies that causes him not the least bit concern. Gimme a break! If my net worth dropped in half in one day, I would be pretty upset about it. What must he be invested in to enable his net worth to double or halve in 24 hours? Pork belly futures? No one in his right mind would invest his entire net worth in an investment vehicle that could double or halve in 24 hours.
avoid mutual funds and 401(k)s because they are too risky
says his net worth is $50 million to $100 million depending on the day
In the 2/03 Smart Money magazine article, he said his net worth was $35 million. Must have been a really bad day in pork belly futures. Actually, his book selling success notwithstanding, I would guess his net worth is more like $3 million, virtually all of it from book and related sales. Laymen think that. I dont. The main thing in managing an investment is stock picking. That is impossible to do well on purpose. Its a crap shoot. If anybody ever figured it out, he would not need to workfor the wealthy or anyone else. the investments of the wealthy are managed There have been numerous studies proving this, most notably well the classic book, a Random Walk Down Wall Street by Burton G. Malkiel. The wealthy do get good advice on legal implications of their portfolios, but not on how to earn a high return. The notion that anyone gets good advice on how to earn a high return in securities is a laymens myth. says he was able to retire at 47 So why didnt he? Hes still hustling his butt off to sell stuff. This is primarily an income-tax-rate distinction as Kiyosaki explains it. He says these types of income are taxed at 50%, 20%, and 0% respectively. The phrases passive income and portfolio income do appear in the Internal Revenue Code. I have used earned income to describe money you make from your salary or business. In fact, Kiyosaki is spouting nonsense. The federal income tax rates on earned income, passive income, and portfolio income are the samenot 50%but your overall rate can get to that level when you add state income taxes. The distinction between the different types of income involves whether the losses from one category can be deducted from income of another category. there are three different types of income: earned, portfolio, and passive The 20% tax rate of which Kiyosaki speaks only applies to long-term capital gains. Those come from selling assets at a profit after holding them for a specified number of months. You can have such 20% -tax-rate gains in both the passive and portfolio categories. The only income that is taxed at a 0% rate are special things like municipal bonds and gains of less than $250,000 per person from the sale of certain personal residences. It is possible to do transactions where there is no tax due at present, like IRC 1031 exchanges, but the tax-free nature of such transactions stems from the fact that you received no
income. Rather you put the proceeds from the sale of one rental property into the purchase of another rental property. If and when you eventually take out your profit by selling your rental property, you will be taxed on the gain that you had when you exchanged. See my books Aggressive Tax Avoidance for Real Estate Investors, How to Do a Delayed Exchange, and Reverse Delayed Exchanges. Most investors use more specific terminology like apartment complex or office building or shopping center. Investors usually use the phrase rental building to hide the fact that their properties are mere rental houses. You should not own rental property in three states unless you have a specific reason for doing so. Why not own all ten rental properties in Phoenix, where he lives? With Kiyosaki, I suspect he thinks having property in three states makes him sound like more of a tycoon. To experienced investors, it makes him sound like more of a dilettante. You want the property in the same regionpreferably where you liveso I own 10 rental buildings in Miami, Austin, you can use the same people to work on all the properties and and Phoenix. save on air fares, hotels, and so forth. One reader said investing in three different regions gives you diversification benefits. Only against regional economic downturns and possibly rent control if the buildings are bigger than one family. But rent-control risk is better dealt with by staying out of multifamily and states that do not have a rent-control pre-emption in state law. The risk of regional economic downturns is not great enough to overcome the disadvantages of spreading yourself that thin in terms of travel, personnel, need to learn different laws and markets, etc. 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. Im not 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 Dads brilliant financial advice, the guy still ends up homeless at age 38? And if Rich Dads advice wasnt 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. 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 Kiyosakis tangled web that I have no clue about. In his 1993 book Dont 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. Nomination 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 Kiyosakis 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 militaryand 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. 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 Kiyosakis alma mater said that in Kiyosakis 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, hes even lying about having lived by the West Point honor code for four years. Pilot 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, Ibecame a fighter pilot and went to Vietnamand 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. 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 vehiclesengineer stakes and gas canswhen 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 somethingalthough 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 Id been told to do by a person who supposedly had more authority than I. Murder In the absence of an immediate threat from the boyand he mentions no such threatshooting 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 Konga 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 cowards way out. Well! Now thats 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. Once a Marine Kiyosaki makes much of his Marine backgroundat least when hes 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. Thats for enlisted men. Officers typically graduate from the U.S. Naval Academythe 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 trainingan 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 him 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. Are the Marines that proud of a conscientious deserter? So let me get this straight. The U.S. Marine Corpss 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 Id 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. 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 baseswhich I did in Hueys, Loches, Chinooks, Piper Cub-type planes, and C-130s. 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. Kiyosakis 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 HistoryExpeditions. From To Details 5/24/72 5/25/72 OP SONG THANH 6-72 OP LOMSON 72 Phase-1 RVN This was a major operation by the South Vietnamese 6/29/72 7/1/72 military with some U.S. air power support. OP LOMSON 72 Phase-2 RVN This was a major operation by the South Vietnamese 7/11/72 7/12/72 military with some U.S. air power support. 7/11/72 7/12/72 OP SONG THAN 9A-72 RVN Participated in special search and rescue operations with 31st MAU in the contiguous 7/24/72 8/29/72 waters of RVN Participated in special search and rescue operations with 31st MAU in the contiguous 9/29/72 10/21/72 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 servicemans 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. Heres is an email I got from a former Marine: I couldnt 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 mans comments would apply to officers. The making of a financial genius 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, Dont Go To School?) failed MBA applicant homeless person bankruptcy (or maybe not) Kiyosaki tries to make a virtue from all his failures and false startssaying thats how you learn and you have to get back up and all that. Fine. But couldnt 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 Dads 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 Xeroxone of the nations 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 Xerok guy, his knowledge may come entirely from Kiyosaki.) College grad? 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 Kiyosakis 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 Kiyosakis real motive for joining the Navy then Marines. Archie Bunker on Wealth Archie Bunker on Wealth would be a more accurate title. 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 entrepreneurs 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 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 Nixons 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 corporations 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 Thomsons gazelles of real estatepeople 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.
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 Trumps Art of the Deal and Robert Allens Creating Wealth. I think its 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. Its not how much money you make, its how much The more you make, the more you keep. money you keep. Working harder increases both your before-tax By working harder, you simply increase the income and your after-tax income, as well your tax liability. What Kiyosaki says would only be true if amount of taxes taken by the government. the tax rate were 100%, which it never is. 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 pointyhaired 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. I told my friend that it takes many hours of sweat and late night candle burning to run a business. I
An intelligent person hires people who are more intelligent than they are.
know because I've started one before. Unfortunately, he refuses to understand my message, instead he continues on with this Kiyosaki talk about starting a corporation!? Without a business idea, business plan, he requested me to incorporate first. This is exactly the crap that Kiyosaki is preaching in his books. Then we had a huge argument about who should write up the business plan once he comes up with an idea. He comes up with some ideas, then he wants me to write the business plan. I ask him a few details about the target customers, SWOT, and financial forecast. He's response was classic, You figure it out. Gotta love the Kiyosaki mentality. Cheng With each payment, their equity increases. Many Most people work all their lives paying for a home people pay off their mortgage in full before they they will never own. die. Almost all thoroughly enjoy their home both during and after the mortgage. Irrelevant. You should choose what you do only according to how it relates to your goals. You Most people, working for a paycheck, are making should not resent others benefiting from your the owner, or the shareholders richer. efforts. Indeed, you will prosper most when you help others achieve their goals. Irrelevant. You should use mortgage and credit You work for the bank. After taxes your next largest expense is usually your mortgage and credit- card financing whenever they will help you achieve card debt. your goals. Resenting bank profits is childish. Yes, they do. This is sour grapes less successful people use to rationalize their inability to succeed. The rich do not play by the same set of rules. They lack the character to simply admit that they got beat fair and square in the economic aspects of the game of life. None of my rich friends make any use of corporations. I became a millionaire in 1983 and never used a corporation. Corporations have both It is the knowledge of the power of the legal structure of the corporation that really gives the advantages and disadvantages. Most real estate rich a vast advantage over the poor and middle investors do not use corporations. Note investors class. use IRAs and such. Kiyosaki claims to be mainly a real-estate investor. See my discussion below on corporation advantages and disadvantages. Minimizing ones income is idiotic. You are The reason I minimize my income is because I always better off with more income. His advice dont want to pay it to the government. would only make sense if the tax rate were 100%.
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. You should have a corporation and a board of directors. 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. It means no such thing. Brokers profit strictly from transactions, regardless of whether they are also ultimately profitable for the clients. 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. Sometimes inaction is the best course, like when you are thinking about selling real estate or a stock that subsequently goes up.
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.
I only play with money I can afford to lose.
Action always beats inaction.
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 dads] 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 todays youth to get good jobs by developing scholastic skills. He thinks thats a bad thing. Its 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 thirty-five years, and thats 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, its 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 Dads subtitle is What the rich teach their kids about moneythat the poor and middle class do not! Unfortunately, you will not learn that in Kiyosakis 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 spoiledHow 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 Kiyosakis 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. 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. Kiyosakis naivet 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. 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. Meaningless slogans Politicians also use meaningless slogans. Kiyosakis 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, Dont work for money; make money work for you. Dont 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. Kiyosakis 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 Kiyosakis book:
q q q q
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] cant see beyond a media image or some catchy phrases and emotional attitudes
q
There are people out there whose job it is to manipulate your emotions for political purposesand they get paid big bucks.
Here are some other meaningless slogans in Kiyosakis book: Learn to use your emotions to think, not think with your emotions (page 42), Its not the numbers, but what the numbers are telling you (page 53), Id 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 doesnt 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: John -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 superheroes, 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... 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. With gratitude, John Snyder Western Massachusetts Robert Blake In this, Kiyosaki also reminds me of Robert Blake, the movie and TV actor best known for starring in the late-70s TV series Baretta. Blakes TV-talk-show appearances were invariably interrupted by audience applause. Why? Like Kiyosaki, he was given to spouting platitudes so grandly and self-confidently that the audience assumed he must have had said something great. He didnt. [Oddly, long after I posted this comment about Kiyosaki reminding me of Blake, Blake emerged from obscurity when his wife was shot to death as he returned to a restaurant to get the gun that he forgot there. My comparing Kiyosaki to Blake had nothing to do with guns and murdered wives. Also, a Los Angeles Times article about Blakes murdered wife, Bonny Lee Bakely, said she told friends that she wanted to marry a celebrity like Blake to show up kids who made fun of her in school. That is reminiscent of my analysis of Kiyosakis lifelong pursuit of
money and status as an overreaction to insults he received in elementary school.] Redefining words Politicians also give new, bogus meanings to established words and phrases in order to mislead people. For example, Democrats refer to almost all spending of taxpayers money on government programs as investments. They call abortion choice and Republicans call opposition to abortion being pro-life. Kiyosaki does this, too. For example, he says, his book will challenge the belief that your house is an asset and Define once and for all an asset and a liability. His quibble with the notion that your house is an asset is the mortgage and other carrying costs and lack of rent income. Trust me, your house is an asset. The mortgage on your house is a liability. As they accrue, carrying costs of your house like taxes and insurance are also liabilities. Once again, Kiyosaki may hurt some people with this sort of rhetoric if he discourages people from owning a home. Maybe what he is trying to say in his muddled way is that it is wise to live beneath your means, that is, buy a smaller home than you can afford, so that you have a smaller carrying costs and therefore have more money to invest. I agree. But you can learn that lesson in a nonmuddled way from the book, The Millionaire Next Door. Some have ordered me to be fair and balanced by attacking Republicans every time I attack Democrats. I am not trying to be Fox News. They, like politicians, are trying to please masses of people for ratings. I am stating my views honestly, not twisting them to make them fit into some equal-time formula. I wrote an article listing the various intellectually-dishonest debate tactics at www.johntreed.com/debate.html. Taking both sides Another thing politicians do is take both sides of an issue. Kiyosaki is on both sides of many issues. Issue Kiyosaki takes one side... ...then the other Page 37 ...many rich people are rich not because of desire but because of fear. On page 40, rich people with lots of money often have more fear the richer they get.
Fear
On page 31 ...it's fear that keeps most people working at a job.
on page 109, Kiyosaki brags about timing real estate markets Timing markets Wise investors buy an investment when it's not popular. (page 154) Federal income tax law
Also on page 154. Smart investors don't time markets.
On page 95, he tells you to write off On page 109 he says, I recommend car expenses, vacations to Hawaii, playing within the rules. health club memberships the main reason people struggle financially is because they have spent years in school, but have learned nothing about money (back cover) ...the main reason most people are not rich is because they are terrified of losing (page 114)
Main reason people do not get rich
The wisdom of joining a union
Page 126. Personally, I take no Same page. Highly specialized sides because I can see the need for people should join a union. (Poor and benefits of both sides. (Rich dad was a union organizer.) dad was extremely antiunion.) When I occasionally come up short. I still pay myself first. I let the creditors and even the government scream. Page 159 The reason you want to have rich friends who are close to the inside is because that is where the money is made. Its made on information. ...the sooner you know, the better your chances are for profits with minimal risk. That is what friends are for. (page 154) My wife and I have excellent credit. Same page
Good credit
Use of inside information in securities trading
Im not saying do it illegally. Same page [see below]
Treatment of real-estate brokers
Pay your brokers well (page 160)
Has an agent show him six properties then says he wants to make half-price offers on all six, which the agent refused to do. (page 170)
Extravagance Kiyosaki says his poor dad frequently said, I cant afford it, while his rich dad said, How can I afford it? Theres another one of those Jesse Jacksonisms. I agree that a knee jerk I cant afford it is a bad habit. I also agree that asking, how can I afford it? is a good habit. However, this little yin-and-yang platitude leaves off the question of whether the expenditure represents good value for the money? Kiyosaki buys extravagant things like a Mercedes and a Porsche and a Rolex watch and seems to regard the How can I afford it? question as the only appropriate response to any conspicuous-consumption impulse. This puts him at odds with the behavior pattern depicted in the book The Millionaire Next Door. That book, which is based on a study of many real millionaires, found that actual millionaires generally buy used American cars. How do you think a man like me got to be a man like me? Think about it. One of the keys to success in business is holding your costs down and getting good value for every dollar spent. How could the same person be in the habit of spending money on extravagant items for which a large show-off premium must be paid? (Note: The Millionaire Next Door book, although written by college professors, has been criticized by other college professors as illogical. For example, they found that real millionaires had taken more risks than the average person and concluded that risk-taking leads to millionaire status. Thats an error called winner biasconcluding that characteristics of winners caused them to be winners. Most likely a study of the bankrupt persons next door would find that they, too, took more-than-average risk. If so, the proper conclusion would be that risktaking leads to extraordinary results, which can be positive or negative. I do not recommend the Millionarie Mind book written by one of the Millionaire Next Door authors, although it makes a few good points.) Conspicuous consumption is for pretend millionaires The authors of The Millionaire Next Door found conspicuous consumption was typically a sign of a non-millionaire who was trying to impersonate a millionaire. Ostentation is item number one in my real estate B.S. artist detection check list. The fact that Kiyosaki goes out of his way to talk about his Porsche; his wifes Mercedes; travel to Peru, Norway, Malaysia, and the Philippines; his expensive attorneys, accountants, real estate brokers and stockbrokers, and his $400 titanium driver, makes me wonder whether he is really a financial success or a walking (driving?) Potemkin Village. Kiyosaki likes Texans. They have a saying: All hat and no cattle. Kiyosaki has a big hat (showy displays of wealth) and he talks about it a lot. The millionaire real-estate investors I know generally try to do their own legal and accounting work. They often buy through agents, but try to sell without agents. Kiyosaki is the first realhttp://www.johntreed.com/Kiyosaki.html (24 of 42)13-09-06 4:12:19 PM
estate investor I ever heard of who was eager to employ expensive accountants, attorneys, and to use brokers always. One woman who responded to my OK, Whats the point? question said Kiyosakis point was that you should not waste money on expensive toys. I wrote back, Huh?! The guy who brags about his Porsche, Rolex watch, and $400 titanium golf club taught you not to buy expensive toys?!!! She admitted that I had a point. I also have an article on how wealthy people reall ought to spend their money. Risk management Kiyosakis advice on risk taking borders on thrill seeking. He approvingly quotes a Texas saying, If youre going to go broke, go broke big. This is dangerous, adolescent-level advice and may be why he has a bankruptcy (or not depending upon whom you believe) on his resume. Taking calculated risks is a prerequisite for a successful life. Thrill seeking is taking risks for their own sake without calculating. On page 13, he says, Learn to manage risk, but the book gives no indication of how to do that. Nor does it give any indication that Kiyosaki knows how to manage risk or ever cared about the subject. Indeed, risk management is a rather sophisticated skill that would not be the forte of an eighth-grade dropout like rich dad. Kiyosaki says he buys stock in small-cap companies that are just about to go public in Rich Dad Poor Dad. Thats rather unlikely. How do you buy stock in a company before it goes public? In theory, you could buy stock in closely-held corporations from the founder or his family or associates, but just before they go public seems like an extremely unlikely time for the owners of closely-held stock to be selling. He refuses to name any such stock that he bought. Ethics His recommendations on using inside information in securities trading and deducting vacations in Hawaii are not likely to get him appointed professor of ethics. Factual errors This book has many important factual errors. Error Correct version About the only asset you would sell at a gain would be real estate. All other assets like personal cars, golf clubs, furniture would sell at a loss for tax purposes. You dont have to pay tax on up to $500,000 of gain (married couple filing jointly) on your residence because of Section 121 of the Internal Revenue Code. You would have to pay tax on the sale of a rental property, but thats why most investors do Section 1031 tax-free exchanges. I have three books about tax-free exchanges: Aggressive Tax Avoidance for Real Estate Investors, How to Do a Delayed Exchange, and Reverse Delayed Exchanges. Kiyosaki himself mentions tax-free exchanges two pages later.
One of the main reasons net worth is not accurate is simply because the moment you begin selling your assets, you are taxed for any gains. (page 80)
the income-tax rate of the corporation was less than the individual income-tax rates
Sole proprietors are only taxed once. Corporation owners are taxed twice on corporate profits: once at the corporate level and again on dividends that leave the corporation to its stockholders. Even if the corporate tax rate were just 1% you would be worse off because it is added to your individual rate, not instead of it as Kiyosaki implies. Its true that you can receive a reasonable salary from the corporation and that will only be taxed once, but Kiyosaki disdains mere salaries as highly-taxed earned income.
An individual with the knowledge of the tax advantages and protection provided by a corporation The only tax benefits of a corporation are the can get rich so much faster than someone who is an following: A corporation can deduct various forms employee or a small-business sole proprietor. of employee insurance. Sole proprietors can also deduct their health insurance premiums. Corporations can also create cafeteria plans to deduct limited amounts of child care and some medical expenses that are not normally covered by insurance. In a one-man or mom-and-pop operation, these small savings would probably not give you a net benefit after paying the extra setup and annual costs of incorporation. He implies that you can deduct a Porsche if you simply have your corporation buy it instead of buying it as an individual. In fact, only ordinary and necessary (IRC162) expenses are deductible and whether a corporation is involved is irrelevant. my [corporation] bought me my first Porsche Furthermore, the tax law contains explicit limits that prevent full deductions for new luxury cars. He says all his Porsches are used. This one could have cost $100. Both corporations and sole proprietors pay expenses A corporation can do so many things that an before they pay taxes. Sole proprietors pay taxes individual cannot. Like pay for expenses before it only on the net income of their businesses, which pays taxes. means after expenses.
by owning your own corporationvacations are board meetings in Hawaii. Car payments, insurance, Business-related car expenses are deductible for repairs are company expenses. Health club both corporations and sole proprietors. membership is a company expense. Most restaurant meals are partial expenses. Health-club memberships are never deductible for either corporations or sole proprietors.
There is no difference between the ability of a corporation to deduct these expenses compared to a sole proprietor's ability to deduct them. Furthermore, it would often be fraud to deduct these items. For example, a trip to Hawaii is only deductible if the principal purpose of the trip were business and it was ordinary and necessary. IRS would look carefully at a business trip to a popular vacation destination like Hawaii. Even if the trip were predominantly for business, only the airfare and meals and hotels during the business days of the trip would be deductible. Hotel and meal expenses for the purely vacation days would not be deductible.
I earn 16% from the state government.
There are forms of insider trading that are legal
In order for a meal to be deductible or partially deductible, you must be away from home overnight on business or you must entertain a client or customer at the meal and you must discuss business or negotiate immediately before, during, or immediately after the meal. Since entertaining forces you to buy somebody else a meal, and you can only deduct half the cost, at best, you are no better off than if you had eaten a totally nondeductible meal alone in the restaurant. No, he doesnt. He is referring to tax lien certificates which can pay interest rates that high. They are secured by real estate, but payments are not guaranteed by any government entity. It is generally illegal to buy or sell stock when you are in possession of material, non-public information about the corporation in question. The only legal insider trading is non-short-sale trading which is done by an insider who is registered with the SEC, reports his trades within ten days after the end of the month in which the trades occurred, and who did not have material, non-public information at the time of the trades.
That is explicitly prohibited by Internal Revenue Says friend did a tax-free exchange from a soleCode Section 1031(a)(2)(B,C,D). Errors like this proprietorship rental house to a mini-storage limited cause me to marvel at the fact that Kiyosaki's copartnership. (Page 176) author is a CPA. Kiyosaki, like many other successful politicians, has been able to get people to stay loyal to him even after they find out he has lied to them. I find this fascinating and have created a page where various Kiyosaki dupes explain why they still love him even though he has given them false information. People do not believe lies because they have to, but because they want to. Marcolm Muggeridge The Rolex watch A reader tells me that Kiyosakis corporation course says that he bought a $4,000 Rolex watch through his own corporation. He had them deduct it as a bonus to him for his sales that year. 1. Rolex watches are not a good value. They are an extravagance whose main purpose is to enable their owner to show off. 2. A bonus from your employer, whether in the form of cash or goods or services, is taxable income at the federal level, at the state level in most states, and at the municipal level in some areas. If Kiyosaki received a $4,000 Rolex watch from his corporation, he would have to pay tax on that $4,000 of income on his next quarterly income tax return. In other words, from an income-tax standpoint, purchasing the watch through the corporation is a completely meaningless exercise. Whether Kiyosaki buys the watch from his own funds or receives it from his corporation, he is out $4,000 (either as owner of a corporation that now has $4,000 less in its bank account or as an individual who now has $4,000 less in his bank account) and he gets no personal tax deduction whatsoever from it. While it is a deduction for his corporation, so is just paying him $4,000 in cash, and it is also ordinary income to him individually, so its a complete wash. 3. I surmise that Kiyosaki is implying this is a clever way to get a Rolex watch for free or at a discount by making it deductible. It is neither. If Kiyosaki does not know what I have just said about this transaction, he is too ignorant of this subject to be writing and lecturing about it. If he does know, then he has a rather low opinion of the intelligence of his readers and an equally low regard for their best interests. Not likely Kiyosakis book also contains many stories which I cannot say for sure are not true, but I can say I am familiar with the subject matter he is describing and his scenario is highly unlikely. Even if he actually did these things, it is inappropriate for him to present them without a warning that they are quite atypical. Kiyosaki scenario More likely real-world version Elias, Renauer, and Leonard, authors of How to File For Bankruptcy, say a typical home sells for 10% to 30% below market value, not the 73% or more less that Kiyosaki would have you believe. My book How to Buy Real Estate for at Least 20% Below Market Value has over 166 actual case histories of bargain purchases, including some involving bankruptcy and courthouse steps. Few of them involve 73% discounts. Those that do are almost all sheriffs sales, which Kiyosaki does not mention. The late, longtime California foreclosure millionaire Paul Thompson said he saw one or two deals per year, out of about 1,200, with this sort of discount, but never one that could be had for only five hours work.
Can buy $75,000 house for $20,000 or less at bankruptcy auction or on courthouse steps with five hours work
Kiyosaki says he bought and sold six properties to create $190,000 of notes with a total of 30 hours work.
Kiyosaki is claiming to have made $190,000/30 hours = $6,333 an hour. In the 7/90 issue of my newsletter, Real Estate Investor's Monthly, I analyzed the amount of time it took Paul Thompson to do his deals. In 20 months, Thompson spent about 25 hours per week and bought 13 properties. His average deal made $42,361, but he still only made about $256 per hour over the 20-month period. Either Kiyosaki, who flunked a year of high school, is $6,333/$256 = 25 times smarter than former Lawrence Livermore National Laboratories computer scientist Thompson, or he figures you and I are dumb enough to believe that he is. I would appreciate it if someone would find the addresses of those six properties and the date of this transaction so we can check it out whether it happened at all, and if so, the details. Based on the 166 actual case histories in my How to Buy Real Estate for at Least 20% Below Market Value, and thousands of other interviews over the years, I said that professional bargain-purchase investors literally consider between 50 to 1,000 properties for every one they buy. Using the ratio most favorable to Kiyosakis claim, 50 to 1, his boast means he looks at 200 to 250 properties a day. Thats about ten properties per hour or one property every six minutes if he does not sleep or eat. Kind of reminds me of the 20,000 women Wilt Chamberlain claimed to have had sex withuntil somebody ran the daily numbers. Thompson says the most properties he ever found in one day was two and that was the tip of an iceberg of months of efforts culling out those two properties from hundreds that didnt pan out. The world is full of non-wealthy people who can do simple math and have common sense. Many additional qualities are needed to succeed in business.
In real estate, I can go out and in a day come up with four or five great potential deals.
Simple math and common sense is [sic] all that is needed to do well financially.
I offered $275,000 for a $450,000 building. They agreed to $300,000.
For the average individual, a passive income of more than $100,000 a year is nice and not hard to achieve. Depending on the market and how smart you are, it could be done in five to ten years.
More likely you would be shown the door if you offered $275,000 on a $450,000 building. Negotiations, if they occurred at all in the case of such an extreme low-ball offer, usually split the difference. The seller coming down $150,000 while Kiyosaki only comes up $25,000 would only occur in a very rare situation. If you achieved a 10% return on investment, which would be extraordinary, you would need $100,000/10% = $1,000,000 of principal in order to achieve a passive income of $100,000. Only about 2% of the population has a net worth that big. The average individual neither has such a net worth, nor is such a net worth not hard to achieve for average individuals, as evidenced by the fact that so few have done so. I have no firsthand knowledge of the actual starting salaries of merchant-marine officers in 1969, but I note that the salary he claims, annualized to a twelve month year is $42,000 /(7/12) = $72,000 (in 1969 dollars or $321,000 in 1999 dollars). The basic wage of able-bodied seamen including extra pay for weekends in 1970 was $7,824 (working 12 months a year). In 1975, the median income of all college graduates, not just recent grads, was $14,656 a year. The 1969 median income for all households (all ages and education) was about $8,800. A visitor to this page sent me an email with the following:
My father in-law graduated from the Merchant Marine Academy five years before Kiyosaki and my my starting pay was $42,000 a year including wife says it is likely that Kiyosaki was making that overtime after I graduated from college in 1969, and much money in 1969. Apparently, her dad (a ships I only worked seven months a year. captain for 35 years) was extremely well compensated in those days, before the industry started drying up and going foreign flag. Her dad chose Kings Point for two reasons. One, he had a scholarship and two, he knew that he could make a ton of money immediately out of school. I havent spoken with him about Kiyosaki in particular, but my wife says that $42,000 for a Third Mate in 1969 sounds about right. The part about only having to work seven months out of the year is also correct. Another visitor who is involved in the shipping
industry said he thought Kiyosakis figures sounded a bit high, but not completely out of the question. I would add that this sort of legal rip-off is what has virtually wiped the U.S. merchant marine off the face of the earth. Its not clear exactly which figure he is doubling, I could have easily doubled my pay had I taken the but the most optimistic interpretation would be run to Vietnam with a subsidiary shipping company $144,000 in 1969 dollars or $642,000 in 1999 dollars. Whenever I meet a guy who brags about starting multiple companies I always wonder what was wrong with the first one. Were Hewlett and Packard In 1977, I formed my first company. a couple of losers because they only started one company? Sounds like a real jet setter, but the sentence is Today my investment company invests in South worded in such a way that it could mean he owns America, Asia, Norway, and Russia. one share of stock in a stock market in each of those regions. The nothing-down movement was started by seminar speaker Robert Allen in 1978. His book In 1973, I was watching TV and this guy came on Nothing Down came out in 1980. Cable TV did not advertising a three-day seminar on how to buy real become widespread until the early 80's. Advertising estate for nothing down. real-estate seminars on cable TV infomercials started around 1984. I used to be an agent. Many is the time I heard fellow agents say, Never educate the public. Agents want to work with the buyers who will take the least amount of their time so they can maximize A good real estate broker should take the time to their earnings per hour. Educating buyers takes educate you time, plus the smarter the buyer, the more time it takes him to find a property. Agents want dumb buyers and they want to keep them that way. Thats one of the reasons I stopped being an agent. It would be appropriate to ask a professional you When I interview any paid professional, I first find were considering hiring whether they own any out how much property or stocks they personally rental property. But how much property they own and what percentage they pay in taxes. And own, whether they own stocks, and how much tax that applies to my tax attorney as well as my they pay is none of your business and virtually all accountant. professionals will tell you that if you ask these questions.
The bank wanted $60,000, and I submitted a bid for $50,000, which they took, simply because, along It is true that sellers of all kinds will sometimes drop with my bid, was a cashier's check for $50,000. their price slightly for a fast, clean, all-cash deal. But a cashiers check alone is not likely to get you very many 17% discounts from banks. It is against the law for a broker or anyone else to provide material, non-public information about a Frequently, my broker will call me and tell me [to publicly-traded corporation to a person who buys or buy] a company that he feels is just about to make a sells stock in that corporation and it is against the move that will add value to the stock, like announce law to buy or sell stock when you are in possession a new product. of such information unless you first disclose it to the public following SEC procedures to do so. Competent real-estate agents and sellers would strike such a clause. They would either substitute an early deadline for removing all such contingencies, or they would simply say Come back when you are ready to make a firm offer. If an investor truly ever I always make offers with escape clauses. In real pulled this stunt, and it was discovered that his estate, I make an offer with the words subject to partner was his cat, he would be shunned by the approval of business partner. Most people do everyone in his local market from then on. This is a not know the partner is my cat. childish, fraudulent clause. If an investor ever invoked this clause in a lawsuit and admitted his business partner was his cat, a sane judge would not only find against the guy who used it, he would chew him out and might impose sanctions. The chances that a friend would want the same parcel you optioned are extremely slim. If the friend did not want it, and you could not find another Says a friend wanted some land but didnt have time buyer within the option period, you would lose all to look. So Kiyosaki went out an optioned a large your option money. Guys who really do deals of this parcel and sold part of it to the friend for the amount nature, like packagers, work closely with the Kiyosaki had to pay for the whole parcel. builders who buy ready-to-build land from them, and have numerous political connections to get needed zoning changes. Trading on inside information Kiyosaki says, The reason you want to have rich friends who are close to the inside is because that is where the money is made. Its made on information. ...the sooner you know, the better your chances are for profits with minimal risk. That is what friends are for. (page 154) It is against the law to provide material, non-public information about a publicly-traded company to a person who trades in the stock of that company based on that information without first
My wife is a banker. I cannot imagine a banker saying, Wow! A cashiers check! They see dozens of cashiers checks a day.
disclosing to the public what that information is. It also against the law to buy or sell stock based on such information without first disclosing that information to the public. To make the disclosure, you have to fie a particular form with the SEC.
q q q q q
Securities Exchange Act of 1934 [The civil penalties (triple damages) are at 15 USC 78t-1 and 15 USC 78u-1.] Insider Trading Sanctions Act of 1984 ( Pub. L. No. 98-376, 98 Stat. 1264) Insider Trading and Securities Fraud Enforcement Act of 1988 Securities and Exchange Commission Rules 10(b)-5 and 14(e)-3 Cady Roberts Co., 40 SEC 907
Persons who provide inside information are called tippers. Person who receive such information are called tippees. Both are breaking the law if the tippee profits from such information. Here is the Blacks Law Dictionary definition of a tippee. Legal definition of a tippee Persons given information by insiders in breach of trust. The purpose of [SEC] Rule 10b-5 is to prevent corporate insiders and their tippees from taking unfair advantage of the uninformed outsiders. Conspiracy between corporate insiders and person to whom insiders have furnished information is not required for such person to be declared a tippee... Registration and reporting requirements if you receive inside information Persons who are not corporate executives of the company in question and who possess inside information about that corporation are required to file a personal statement with the SEC. If they buy or sell the stock of the corporation, they must report those sales within ten days of the end of the month in which they occur. They are generally barred from any short selling. If a person trading based on material, non-public information makes a profit within six months of trading the stock, the corporation and contemporaneous traders can legally recover that profit. Bounty for reporting inside traders If you report an apparent illegal inside trader to the SEC, you are eligible to collect a bounty of up to 10% of the amount of improper profits he is forced to give back. 17 CFR 201.61 to 201.68 As stated above, Kiyosaki says in his book, Frequently, my broker will call me and tell me [to buy] a company that he feels is just about to make a move that will add value to the stock, like announce a new product. Perhaps Mr. Kiyosaki would like to prove this has really happened to him by providing the name of the broker, the date, and the stock in question for just one of these frequent occurrences. As far as I know, he has not responded to this invitation. Simply stated, it is generally illegal to buy or sell a stock based on material, non-public information. In 2002, long after I first posted the above discussion, Martha Stewart was being investigated for precisely the behavior that Kiyosaki advocates in his book and says he has engaged in: trading stocks based on inside information. More research on this page than in his book One visitor to this Web site commented that she thought I did more homework analyzing Kiyosakis book than he did writing it. I suspect thats true, but then its not saying much. Property manager is the key to real estate? Kiyosaki says, A great property manager is key to success in real estate. Hes nuts. Experienced property owners do not hire independent 5%-of-the-gross property-management companies. When syndication was big, those companies owned income properties all over the U.S. They tried to use local companies for everything they needed, but they found they could not get good service out of local property-management companies so they all started their own in-house property-management companies.
I heard the head of a major pension fund say at a speech that his company tried to hire local property managers for office buildings and finally concluded they had to create their own inhouse property-management company. All my millionaire friends manage their properties themselves and would never use an outside property-management company. The propertymanagement industry has almost no happy private clients. They mainly work for owners who are not spending their own money like government agencies, nonprofit entities, corporations, and bank trust departments. The problem with property-management companies is that they neglect properties and use expensive suppliers and subcontractors. I estimate that approximately 90% to 95% of property managers take kickbacks from those expensive suppliers. When I was a property manager I reported a number of bribe attempts to my boss. Both my predecessor and my successor at the job took kickbacks. (A subcontractor showed me a canceled check cashed by my predecessor and my successor was fired for taking kickbacks.) My secretary had worked for a major property-management company before working for me. She said every property manager in her old company took kickbacks. If you ask the typical successful investor if he ever used a property manager, he will shudder at the memory, admit that he did once, and somberly swear, Never again. Real-estate commissions equivalent to restaurant tips? Kiyosaki says he finds it funny that so many poor and middle-class people insist on tipping restaurant help 15 to 20 percent even for bad service and complain about paying a broker 3 to 7 percent. I can help him understand that. Restaurant meals generally run about $10 to $40. The 15% tip, therefore, runs only about $1.50 to $6. Furthermore, the wages of waiters are deliberately depressed below comparable non-restaurant wages because waiters receive their income partly in the form of tips. In other words, they count on that money and it has the effect of raising their hourly income to a normal wage level. Real-estate prices, however range from about $50,000 up to millions of dollars. But the work required to sell a listing is about the same regardless of the price of the property. I am a former agent and I figure it takes about twenty man hours to sell a home, maybe thirty or forty man hours to sell a commercial property. The appropriate hourly compensation level is about $25 an hour given the training and experience levels of the average agent. Therefore, commissions ought to be about $500 for a house and about $800 for a commercial property. Add another $1,000 per deal for the broker's overhead. Six percent of, say $100,000, is $6,000, which is a lot more than $1,500. Sensible people think its dumb to pay that much. If they can sell it without an agent, they save thousands and only have to do 20 hours work. The problem with the real-estate-brokerage business is that there are too many agents. You can confirm that by opening any Yellow Pages. The real-estate agent section is the biggest of all, even though the average homeowner only needs a real-estate agent about every ten years or so. Real-estate agents are the only profession that will give you free pumpkins or mow your lawn or whatever to get your business. Hustling for listings Individual agents do not make extraordinary amounts personally because they have to spend so much time hustling for listings, even though that effort contributes absolutely nothing to helping sell your property. The root of all this evil is widespread refusal to cut commissions and refusal to cooperate with agents who do. If and when commissions become truly competitive, houses will be sold for a flat commission of about $1,500 to $2,000 and commercial property will sell for a flat commission of about $3,000 to $5,000. Institutional deals involving platoons of lawyers and such will cost a lot more, but the commission will still not be a percentage of the sale price. If and when breaking the agents 6%-commission cartel happens, there will be far fewer agents, but the ones who remain will make a nice living and they will no longer give you free pumpkins in the hopes of getting a listing. Until that happens, anyone who does not try to avoid paying a 3% to 7% commission when he sells needs his head examined. Smart real-estate investors generally do not try to avoid commissions when they buy. Rather they judge the price alone. If it's a good deal, they buy. If not, they don't. If there is an agent, they support his right to the commission to encourage that agent and others to bring them deals in the future. Taken companies public? A visitor to this site sent me the following email: ...when I read that Kiyosaki had taken companies public, I searched the SEC files online for his name and found no hits. That means he does not own 5% or more of any public company in the USA. If he did, hed have to be listed as a beneficial owner with the SEC and on quarterly statements.
My money In his Meet The Street interview, Kiyosaki says, I was able to retire at age 47, after just nine years of putting my money to work in business, real estate and options, all without owning a single share of a stock or a mutual fund. Im getting confused by his inability to keep his story straight. He says he makes money off inside information on stocks, but never owned a single share of stock. What did he do with the inside information? Stand on the corner near the stock exchange saying, Pssst! Wanna hot tip? And what money did he put into business, real estate and options starting nine years before he was 47? That would be 1985, the year he was bankrupt (or was he?) and homeless. Main speaker at Jon Richards note convention Jon Richards invited me to speak at his 2000 convention. I declined on the grounds that I do not know the note-brokering business. I later learned that one of the other speakers at that convention was Robert Kiyosaki. Jeez!! Jon needs to raise his standards, both in terms of making sure the speakers have note expertise and in terms of not headlining B.S. artistsbestselling author or not. [Heres an email I got from Richards after he read the above.] Wow! You could not have been more correct. The guy was extremely arrogant, and gave us no information about Real Estate or notes or how he made his money. He seems to have come up with one idea about investing in assets and is riding that pony to lots of best sellers. I have never been so appalled at a speakers ability to talk for over an hour and share no substantial knowledge. How in the world could he have 3 best sellers? Its frightening. In fact, I think if you look at the Wall Street Journals list of best selling business books you will find primarily a list of simple minded garbage. (e.g. Who Moved the Cheese?) Best seller status One Kiyosaki supporter (they call him RK), said Kiyosaki has several best-selling books, but hes never heard of me, therefore Kiyosaki obviously knows what hes talking about and I dont. (Click here to read that email and others) The list of best-selling books on real estate and related topics includes two excellent ones: William Nickersons How I Turned $1,000 in $5,000,000 in Real Estate in My Spare Time and Al Lowrys How to Become Financially Independent by Investing in Real Estate. But it also includes real-estate/financial authors who later went bankrupt or got locked up for their real estate-related activities like Robert Allen, Wade Cook, Sonny Bloch, Charles Givens, and Bill Tycoon Greene. For the most part, the list of best-selling financial authors is a rogues gallery. There have also been best-selling books that recommended quack cures, unhealthy diets, and nutty conspiracy theories. Click here to see a list of best-selling real estate authors and the various troubles almost all got into. Conclusion All I know about Robert Kiyosaki is what I read in his book (and from other sources noted above). Based on what I read and what I know about the subject matter in question, I am extremely skeptical as to whether he has done or seen many of the investment things he claims to have done or seen. He claims to be an experienced, millionaire, real-estate investor, yet the book is full of statements that I would expect only from a rather ignorant, not very bright, novice, investor wannabe. Rich Dad, Poor Dad is one of the dumbest financial advice books I have ever read. It contains many factual errors and numerous extremely unlikely accounts of events that supposedly occurred. Rich Dad, Poor Dad triggers the following items on my Real Estate B.S. Artist Detection Checklist: 1, 6, 7, 10, 11, 13, 20, 26, 27, 28, 29, 30, 31, 38, 39, 46, 49. Oprah I understand Kiyosaki appeared on Oprah and was recommended by her. That was after this Web page was posted. Either she and her staff did virtually no checking to make sure Kiyosaki was giving good advice or they found this page and totally disregarded the factual allegations it contains. I have been on a number of TV shows like 60 Minutes, Good Morning America, and Larry King Live. I have also been in various magazines and newspapers like Money and the Wall Street Journal. They vary considerably in their quality control. Kiplingers Personal Finance magazine is the best. They fact check every word you write for them. The worst I experienced was
Good Morning America. They were clearly more interested in ratings than whether they were broadcasting accurate financial advice. 60 Minutes was excellent at getting it right. In the case of personal-finance information, Oprah would appear to be interested only in the ratings a guest produces, not the value of his information. Best-selling authors will produce more ratings than non-best-selling authors. If Oprah was interested in good information, she would have someone like Jane Bryant Quinn on. I once watched an Oprah show about youth sports, a subject about which I also write. During the show, she said a man was trying to get his kids Ivy League athletic scholarships for ice hockey. They also put up a screen graphic saying that, which means it was not just a slip of the tongue. My son was an Ivy League football player. There are no athletic scholarships whatsoever in the Ivy League. They are prohibited by league rules. If the Oprah staff had done even the most minimal homework, they would have learned that. So what does it mean that Kiyosaki was recommended by Oprah? About as much as it means when she talks about Ivy League athletic scholarships. Oprah, like Kiyosaki, is running a cult of personality. Neither one of them knows what they are talking aboutor cares. The Jim Frey/A Million Little Pieces incident with Oprah On January 12, 2006, another best-selling non-fiction author whom Oprah highly recommended admitted his book contained a number of lies. That would be James Frey and the book is A Million Little Pieces. Oprahs response? She said she will continue to recommend it in spite of the fact that, some of the facts have been questioned. Some of the facts have been questioned!? The author admitted he lied, Oprah. It has gone way beyond questioning of facts. So you can see where Oprahs coming from when the truth of non-fiction books is discussed. And you can see how willing she is to admit to a mistake. The one thing Kiyosaki, Frey, and Oprah share is high ratingsand apparently thats all that matters to the three of them. Follow-up My 1/27/06 San Francisco Chronicle says that Oprah reversed herself on Frey, that she had him and his publisher Nan Talese of Doubleday on for an hour and ripped them a new one on live TV. She did this because she was criticized by Washington Post columnist Richard Cohen and New York Times columnist Frank Rich and others who ripped Oprah for not caring about the truth. She had those two guys on the same show. Oprah apologized and said, To everyone who has challenged me on this issue of truth, you are absolutely right. Well, I would be one of those. Youre welcome, Oprah. Frey was exposed by the Web site www.thesmokinggun.com (http://www.thesmokinggun.com/archive/0104061jamesfrey1.html). That led to the various columns and editorials condemning Oprah. I am glad to see that Oprah has belatedly decided the truth is important with regard to James Frey. But what about Kiyosaki? He sold about ten times as many books as Frey in large part because of Oprahs help. Is she really interested in integrity? Or is she only interested in integrity when the Washington Post and New York Times shine their spotlight? There is no spotlight on Kiyosakis lies other than this Web page and an old Smart Money article. Now we will find out whether Oprah has integrity in general, or just when the spotlight is on. If she has integrity in general, she will have Kiyosaki on her show again and rip him a new one for lying to her and her audience and to his readers. I will not be holding my breath. Furthermore, I do not believe there is a snowballs chance in La Jolla that he or his publisher will show if she schedules such a show. Character has been defined by many as, What you do when no one is looking. Compared to the Washington Post and New York Times, Im no one. Now lets see what Oprah does when no one is looking at her endorsement of Robert Kiyosaki. I wrote an article about the Frey incident at www.johntreed.com/HTWPfrey.html. Sociopath? Recently, I have read a number of articles that discussed sociopaths. A famous one said Bill Clinton was a sociopath. Both Clinton and Kiyosaki are politicians. The more I read about sociopaths, many, but not all, of the characteristics, sound like many of my comments about the various bad gurus. Here is a link to an article about whether Clinton is a sociopath. I draw
your attention, however, to the portion of the article that gives the definition of antisocial personality disorder, which is the scientific name for sociopath behavior, from the American Psychiatric Association: Diagnostic and Statistical Manual of Mental Disorders, (DSM-IV) fourth edition, 1994. I would provide that definition here, but it is copyrighted. Here is a link to another similar discussion. Both articles say that 3% of all males and 1% of all females are sociopaths. 2% of the U.S. population is 5.6 million peoplemore than enough to get a sociopathic book onto the business best seller list. (In 2006, I was told these links no longer work. Try www.Internetarchive.org or some other Web site that lets you see no longer available Web pages.) I hasten to add that this definition contains many behaviors that I have no reason to believe Kiyosaki or any other guru have engaged inparticularly those relating to private, family, or childhood behavior. What is noteworthy is the number of public behaviors that are on the list. It should also be noted that I never saw this definition until 4/4/01, long after I first posted this analysis of Kiyosaki. Why I spend so much time on this page A number of people have commented that I spent too much time creating this page. Probably true, but you might be interested in how that came to pass. Initially, I bought Rich Dad Poor Dad and read it. Whenever I read a book, I underline it thoroughly and make marginal notes. So the vast majority of the work was done while I was reading the book. Once I did that work, it was simple to just carry it forward to this Web page. I bought and read it in order to write a review of Rich Dad Poor Dad in my Real Estate Investors Monthly newsletter. The review was only 1/3 of a page long. Space is at a premium in my newsletter. However, on the Internet, space is roughly infinite and free so I saw this page as away to get some use out of more of the work I did reading Rich Dad Poor Dad to begin with. Initially, this analysis was not anywhere near as long as it is now. I added to it as I received comments from readers and as I came across pertinent stuff in the normal course of my life. Much of it was provided by readers who sent helpful passages and links. In that sense, it is somewhat Wikipedia-ish. I did not create it. My readers and I did. Kiyosaki is hurting people This man is doing damage. I got an email from a surgeon. Her 17-year-old son read Rich Dad Poor Dad and now does not want to study or go to college. He just wants to get rich and believes Kiyosakis pitch that education is a waste of time. He now puts down and criticizes his mom for not being richer. I never knew a surgeon who was fighting the pigeons for something to eat. And this particular surgeon says she finds her profession extremely rewarding in non-monetary ways as well. Another guy wrote from Israel. He got so pumped by Kiyosakis books that he told his boss off and quit his job. Now he is unemployed and hurting and wrote to thank me for this page, but to lament that he did not read it until it was too late. If I do not try to set the record straight, who will? Almost everyone but me is either unqualified or unwilling to say anything. See Why I created and maintain this Web page for some comments on why I am unwilling to sin by silence when I should protest. Australia and New Zealand At one point, I suddenly started getting emails and a phone call from Australia and New Zealand about my real-estate stuff. Why? Apparently Robert Kiyosaki and a guy named John Burley went to Australia and made speeches about getting rich in real estate. Some Australians type Kiyosakis name into an Internet search engine and find this page. There is an old saying that an expert is someone who carries a briefcase and is at least 50 miles from home. By that standard, Kiyosaki and Burley must be absolute geniuses in Australia. Australians who are considering following Messrs. Kiyosaki and Burley might want to contact real-estate people in their home area of Phoenix and ask how highly regarded they are among the people who actually would see them do real-estate and other business deals, if, in fact, they do any. Here is an email I got from an Australian: Dear John, I am writing to you after reading your article on Robert Kiyosaki.
You may be interested to know that Mr. Kiyosaki has not always been so well regarded in Australia. He has been involved with various money making enterprises especially in the motivational/self help industry. Of particular note is a seminar he was conducting over five years ago called "Money and You". This seminar ran over a couple of days and subjected the participant to an almost "brainwashing" type of personal and financial rhetoric from Kiyosaki. After numerous participants and their families complained, a television current affairs programme called Four Corners (the most respected current affairs programme in this country) investigated the seminar and detailed Kiyosaki's dubious credentials and advice. Probably the most tragic side of this seminar was that people who attended left and made terrible decisions which they later regretted deeply. This was the main thrust of the programme which sought to show how people could be manipulated and be given bad advice. What is of interest with the seminar is the same point as you raise.......... that is the cult of personality and the amorphous advice/statements. When questioned Kiyosaki was both vague and ambiguous in his responses. This I believe points to a man who has such a low self image and sense of self that he believes he can only be realized and accepted by obtaining wealth. I also believe that such a man only seeks to exploit others in order to do so. Having listened to some tapes of RK given to me by friends. I find gross generalizations, mercenary attitudes and a high degree of perhaps "self loathing". Anyway thank you for your article and let us hope there are many more who see RK and his kind for what they truly represent. T. Fraser I do not know anything about Australian real estate. It is likely that Kiyosaki and I share that characteristic, although he no doubt learned a little during his speaking visit. My only visit to Australia was when I was on R&R from Vietnam in 1970 and I wasnt looking for real estate. Unlike Kiyosaki, I have no territorial ambitions. I do not ship to foreign addresses, even Canada, because the volume is too small to bother with the extra procedures (customs forms, special packaging, researching shipping charges). I am a one-man company. I cannot do everything. Shipping outside the U.S. is a prime candidate for being one of the things I rule out. Furthermore, the act of selling a real-estate book to Australia or Canada implies that it is valid there. I do not know what validity, if any, my books have in foreign countries, so I refuse to even imply that they have any validity there by selling to such countries. I also refuse to research what validity they have there because the market is too small and it is almost certain that special editions would have to be developed and continuously updated to prevent Australian and New Zealand readers from getting into trouble following U.S.-oriented advice. I will not sell translation rights because I would again have to research the local market to make sure the translation was correct. I am not interested in speaking in person in Australia. Its unbelievably far away. My jet from San Francisco to Vietnam had to stop for refueling in Hawaii and Guam. Then my jet from Vietnam to Sydney had to stop for refueling in Darwin. I understand they now have non-stop flights, but I think flights that long violate the U.S. Constitutions prohibition against cruel and unusual punishment. If you are in Australia or New Zealand and really want one of my U.S. books, get a friend, relative, or private company in the U.S. to forward it to you. As a substitute for my books in Australia, I recommend Australian visitors to this Web site also visit my Real Estate B.S. Artist Detection Checklist. It should apply universally. An Australian reader says that all the multi-level marketing (MLM) salespeople like Amway distributors are pushing Kiyosakis books because of his encouragement to go into business for yourself. The MLM distributors then say that they are a way to do that. He further says that the Kiyosaki discussion groups on the Net are overrun with MLM people trying to get you to become one of their distributors. I would not be surprised. The adoption of Kiyosakis book by MLM companies could be the primary reason it is a best seller. MLM cults are sort of a human equivalent of a computer virus, replicating themselves all over the place. Smart Money story The 2/03 Smart Money magazine did a story about Kiyosaki. They turned up a few details I had not dug up. Kiyosaki is chameleonic, changing his speech radically to pander to each audience. I said he was a financial demagogue. That would be what a demagogue would do. To a religious audience, hes a preacher. To entrepreneurs, hes a Marine drill sergeant and combat veteran. To Amway distributors hes an MLM guy, and so forth. Its called telling people what they want to hear.
Component depreciation At the end of a seminar to a religious group, he says he recently did a real estate deal where he got a 17% cash-on-cash return and that theres 24% component depreciation on the property. Really? Gee, and I thought component depreciation was explicitly outlawed by the Economic Recovery Tax Act of 1981. Actually, Im sure of it. Its right there in Section 168(f) (2) of the Internal Revenue Code. Smart Money cannot find his deal Kiyosaki claims to have done many highly profitable real estate deals. But Smart Money could not find them in the Maricopa County (Phoenix) records. He claimed to have bought one property for $20,000 and sold it immediately for $60,000. Smart Money could find no purchase for which he paid less than $40,000 (one had no price) and no property which he sold in less than 20 months. When asked about the discrepancy, Kiyosaki said, I dont pay attention to those things. Huh? This may explain why Kiyosaki does not seem fond of going to court. Give an answer like that in a court room and the judge will say, Answer the question, Mr. Kiyosaki. The court is not interested in what you pay attention to. Nor are you going to get away with evading answering a question by giving an unresponsive answer like that. Kiyosaki tried to claim the deal in question was done in a partnership. Smart Money could find no evidence of such a partnership. Kiyosaki refused to provide the information or documents that would prove his claim. Took Yamana Resources public? Kiyosaki claims he has taken a number of businesses public. When asked to name them, he could only cite Yamana Resources, a Toronto Stock Exchange corporation. The CEO and founder of that corporation, Victor Bradley, told Smart Money that Kiyosakis only connection with Yamana is that he owned some shares of Platero Resources, a privately held corporation that Yamana acquired in 2001six years after Yamana went public. Desertion? The melodramatic incident Kiyosaki relates about refusing to return to ship as a Marine officer in Hong Kong changes in Smart Money. Now he says he was one of 480 guys who got left behind when the ship left early. In his first book, described above, he seems to nominate himself for the Nobel Peace Prize as an active-duty, Marine officer, anti-war protestor. Now, we learn that he just missed the boat. Wanteddead or alive? As to the whereabouts of Rich Dadat one point, Kiyosaki tells Smart Money that he died in 1992. Poor man. Later, he says Rich Dad is still alive, but a reclusive invalid. Uh huh. Later, he tells Smart Money that Rich Dad was a composite of several persons. Finally, he gets angry at Smart Money. Is Harry Potter real? Why dont you let Rich Dad be a myth, like Harry Potter? That would be fine, Robert, just as soon as you remove Rich Dad from the non-fiction best seller list and go over and compete with Harry Potter on the fiction best-seller list. So I guess the final word is that Rich Dad is as real as Harry Potter. I suppose that, in turn, means that the way to become financially independent is to get a magic wandor to write book about fictional characters who did. One reader of this page and of Rich Dad Poor Dad says Rich Dad is really Ayn Rand. He says he is quite familiar with Ayn Rands books and that Kiyosaki appears to have copied much of Rich Dads advice from Rand. In particular, he cited Rich Dads Robin Hood story as a Rand story. Interesting.
Kiyosaki was a seminar instructor Almost all of the bad real estate gurus got their real start as pitchmen or instructors for other bad gurus. Kiyosaki was an instructor for attorney and real estate investor Marshall Thurber for nine years. I know nothing about Thurber other than that Kiyosaki loved him when he wrote his first book and failed to mention him at all when he wrote his second. Kiyosaki on PBS I have heard that Kiyosaki was doing pledge breaks on PBS TV in 2005 and 2006. PBS TV never tires of telling us how intellectually and morally superior they are compared to the forprofit networks and cable channels. But there is a lot more to intellectual and moral superiority than merely restricting the length of the commercials you air. When it comes to hustling a buck by using a charlatan like Kiyosaki, PBS bears more resemblance to the late-night get-rich-quick infomercials than they do to NBC, CBS, and ABC. The fact that Kiyosaki was one of the more successful recent pledge break offerings also reveals that the PBS audience is nowhere near as bright as PBS would have us believe. Most people know that when something sounds too good to be true, its not true. Apparently, a significant percentage of PBS viewers are not smart enough to know that. And that situation sure as heck is not improved by PBS recommending Kiyosaki for their financial education. They used to recommend people like Wall Steet Weeks Lewis Rukeyser and Newsweeks Jane Bryant Quinn for financial advice. They did not switch to Kiyosaki because he gives better financial adviceor even because he gives decent financial advice. They switched to Kiyosaki because he inspires PBS viewers to part with more pledge bucks than Rukeyser and Quinn did. Like the bad get-rich-quick gurus, the people who decided to put Kiyosaki on PBS are more interested in helping themselves to your money than helping you with your money. But they have Sesame Street Some readers have also told me, essentially, that PBS can do no wrong because it has Sesame Street and The Jim Lehrer News Hour, etc.. As long as PBS put on only shows that met those standards, my wife and I supported them. Now that they have decided to go sleazy, if only in part, we are done supporting them. Now, every PBS employees paycheck includes an amount that PBS derived from foisting Kiyosaki off on its viewers. They should be ashamed of themselves. Actions speak louder than words. PBS has sold its viewers out. KQED response A reader complained to KOED, the San Francisco PBS station. The reader directed KQED to the above review of Rich Dad Poor Dad. In it I say that Kiyosaki is a liar and a charlatan and a danger to his readers. Seems to me that KQED has a responsibility to check whether I am right. After all, the above discussion is full of quotes, links to laws, and other facts that PBS could check on their own or by consulting experts. So did they? No. They just sent the reader an empty-suit, spin letter that referred him to Kiyosakis rebuttal of the above comments on Rich Dad Poor Dad which is out on the Web somewhere. He calls it response to Reed. You can probably find it with a Google search. PBS does not know which of us is telling the truth, or so they imply. But it is quite clear that they also have no interest in finding out. PBSs policy with regard to whether their pledge break stars are frauds is Dont ask. Dont tell. Simple math: running Kiyosaki get-rich-quick infomercials makes money for PBS. Worrying about whether Kiyosaki is a fraud does not. Thus does PBS reveal who they really have become and what they are now really about. I read Kiyosakis rebuttal of this Web page and was amazed at how lame it was. One of Kiyosakis biggest fans was on his side after he read both Rich Dad Poor Dad and my above review of it. Then he came across Kiyosakis response to Reed and thought it was so inadequate that he concluded my review must be accurate after all. Heres an idea. Some programs on PBS actually still claim to be interested in truth, like the Jim Lehrer News Hour. Hows about writing to them and ask them to look into Kiyosaki? One email I got said PBS is more than just Sesame Street and Lehrer. Its also Frontline NOVA History Detectives
Ken Burns documentaries Charlie Rose Fine. Ask them to look into Kiyosaki, too. But dont hold your breath waiting for the empty suits at PBS to approve their having anythhing critical to say about Kiyosaki. Where have you gone Education TV? I live in the San Francisco area. I appeared on KQED radio a number of times back in the 1980s. I once debated Nothing Down author Robert Allen there. Back in that era, when KQED still had integrity, they also produced a series of personal-finance programs hosted by Newsweek Personal Finance Columnist Jane Bryant Quinn. PBS likes literary. Here is a literary quote they might want to consider before they promote the likes of Kiyosaki: A single lie destroys a whole reputation for integrity. Baltasar Gracian, Spanish philosopher and writer 1601-1658 It is painfully ironic that PBS, which used to be called the Education Television Network, is now touting Robert Kiyosaki whose first book was titled If You Want to Be Rich and Happy, Dont Go To School. It is a betrayal of its charter and principles that the Education Television Network is now promoting a man whose book Rich Dad Poor Dad makes a hero of an antieducation, 8th-grade dropoutRich Dad. It is astonishing that PBS, which is the favorite TV network of teachers and professors, is promoting a book that trashes Ralph Kiyosaki (Poor Dad), Robert Kiyosakis biological father, for wasting his time getting degrees from Stanford, Chicago, and Northwestern Universities, all on full scholarship, ultimately earning a Ph.D and rising to head the State of Hawaiis Department of Education. The former Education network has turned into the whatever it takes to make a buck network. I thought NOT being that was their whole reason for existence. PBS ombudsman comments on Kiyosaki PBS has an ombudsman and he felt compelled to comment on complaints he received about Kiyosaki pledge breaks. You can read what he and the complainers said at http://www.pbs.org/ ombudsman/2006/03/pledging_allegiance_or_march_madness.html. He strikes me as a pretty wimpy ombudsman. For example, like a politician or other person whose main goal is to not offend anyone, he characterizes some of Kiyosakis advice as controversial. Controversial?! How about dead wrong? Like Kiyosaki adising readers to befriend executives of publiclytraded corporations so they can get advance information about stuff that will change the price of the stock, then use that information to profit on trading the stock. Thats not controversial. Its illegal. For deatils, see my discussion of that elsewhere on this page. Kiyosaki gets Yahoo! financial column Yahoo! made Kiyosaki one of its financial columnists. In view of the fact that he is a liar and a charlatan, that tells us much about Yahoo! and nothing about Kiyosaki. Here is one readers email about Kiyosakis Yahoo! column babblings. Mr. Reed, Thank you for thoroughly shredding this deluded huckster. I probably never would have known who Robert Kiyosaki was if Yahoo Finance wasn't my start page. Several months ago I started noticing his far fetched ramblings on how "cash is trash" and how we are now on the cusp of the biggest oil crisis in history. Due to my mistake of assuming that all content on Yahoo Finance was fairly credible, I actually read some of Kiyosaki's articles. I came away with the impression that this guy was either the most forward thinking finance expert on the planet or a crack smoker who simply placed his hands on the keyboard, attached electric stimuli to his genitalia, flipped the switch and started typing. It's downright scary that Yahoo allows his absurd pontification on their finance gateway. Many people consider the site to contain legit financial information, which is why I felt the need to google and (thankfully) find your pants-down ass whipping. Guess I'll be changing my start page. Here's some advice for Kiyosaki's advocates that I offer free of charge: Instead of downloading the 48th ring tone on your Razr or fellating the great Dr. Phil while he dispenses the "common sense" that you already have, take the time to form an original thought just for once.
Don Jones College Station, Texas John T. Reed, a.k.a. John Reed, Jack Reed, 342 Bryan Drive, Alamo, CA 94507, Voice: 925-820-6292, Fax: 925-820-1259, Email: johnreed@johntreed.com

Robert Kiyosaki - John T. Reed Analysis of Robert Kiyosaki Book Rich Dad Poor Dad

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Robert Kiyosaki - John T. Reed Analysis of Robert Kiyosaki Book Rich Dad Poor Dad

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John T. Reed's analysis of Robert T.

Kiyosaki's book Rich Dad, Poor Dad

Last updated 7/26/06

Selected emails from visitors to this page

I never said Kiyosaki was short on specifics!

http://www.johntreed.com/Kiyosaki.html (13 of 42)13-09-06 4:12:19 PM

http://www.johntreed.com/Kiyosaki.html (14 of 42)13-09-06 4:12:19 PM

I only play with money I can afford to lose.

Action always beats inaction.

http://www.johntreed.com/Kiyosaki.html (21 of 42)13-09-06 4:12:19 PM

On page 31 ...it's fear that keeps most people working at a job.

Also on page 154. Smart investors don't time markets.

Main reason people do not get rich

http://www.johntreed.com/Kiyosaki.html (23 of 42)13-09-06 4:12:19 PM

The wisdom of joining a union

Use of inside information in securities trading

Im not saying do it illegally. Same page [see below]

Treatment of real-estate brokers

Pay your brokers well (page 160)

http://www.johntreed.com/Kiyosaki.html (25 of 42)13-09-06 4:12:19 PM

http://www.johntreed.com/Kiyosaki.html (26 of 42)13-09-06 4:12:19 PM

I earn 16% from the state government.

There are forms of insider trading that are legal

http://www.johntreed.com/Kiyosaki.html (27 of 42)13-09-06 4:12:19 PM

http://www.johntreed.com/Kiyosaki.html (29 of 42)13-09-06 4:12:19 PM

I offered $275,000 for a $450,000 building. They agreed to $300,000.

http://www.johntreed.com/Kiyosaki.html (31 of 42)13-09-06 4:12:19 PM

http://www.johntreed.com/Kiyosaki.html (39 of 42)13-09-06 4:12:19 PM

http://www.johntreed.com/Kiyosaki.html (42 of 42)13-09-06 4:12:19 PM

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