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John T. Reed' analysis of Robert T. Kiyosaki' book Rich Dad, Poor Dad 5 Contempt for traditional education and the educated The book is almost entirely contemptuous of formal education and those who have graduated from universities. He wrote another book called If you want to be rich and happy, don't go to school? On page 64, he delights in the fact that "educated people" now "came at [rich dad'] beck and call, and cringed when he did not approve of them." This is a bit sick. To borrow a phrase that is now a common sitcom punch line, I think Kiyosaki has "some issues" regarding educated people and his relationship with his highly educated "poor dad." He seems to have some psychological need to dominate and demean people like his father. At my guru-rating page, I said Dave Del Dotto was the dumbest of the real-estate gurus. Kiyosaki takes the prize for the real-estate guru with the most tangled psyche. He says, "...the main reason people struggle financially is because they have spent years in school but have learned nothing about money." I disagree. The main reason people struggle financially is bad decisions about getting an education, bad luck, too much spending, too little savings and investing, too much reliance on organizations for their livelihood, and not enough reliance on themselves. Kiyosaki says that our schools focus on "preparing today' youth to get good jobs by developing scholastic skills." He thinks that' a bad thing. It' 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-one years, and that' not such a hot educational experience either. As someone said, in the School of Hard Knocks they give the test first, then the lesson. That is a slow, costly, painful way to learn. Unfortunately, it' the only "school" that teaches many things you need to know. Obviously, the best way to prepare for life is a combination of formal traditional education, reading, seminars, experience, and asking more experienced people for advice. Want to know what "the rich" REALLY teach their children? Rich Dad, Poor Dad' subtitle is "What the rich teach their kids about money"”that the poor and middle class do not!" Unfortunately, you will not learn that in Kiyosaki' book. Fortunately, the real version of what "the rich" teach their kids, or ought to, was the subject of a cover story ("Rich, but not spoiled"”How to raise your kids in an age of wealth") in the 6/12/00 issue of Forbes. Forbes knows rich. ( https://www.johntreed.com/https://www.forbes.com/premium/archives/purchase.jhtml?storyURL=/forbes/2000/0612/6514266a.html&_requestid=27740)They publish the annual "Forbes 400," which is a list of the richest people in the world. If you have money and kids, that article and its bibliography are worth a trip to a library. The article bears no resemblance to Kiyosaki' 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." 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. 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. Politicians also use meaningless slogans. Kiyosaki' book has many of those. He even adopts Jesse-Jackson-like one-of-these, one-of-those, pep-rally cadences. For example, Jackson says, "Up with hope. Down with dope."

Kiyosaki says, "Don"t work for money; make money work for you." "Don"t work for money; make money work for you," sounds smart, but what does it really mean? Quit your job and live off your investments? Most of his readers are not yet in a position to do that. And when they are, they do not need his book. Obviously, the correct advice is work hard at a job or your own business, save, and invest. Kiyosaki' version is muddled and risks giving people a dangerous wrong impression, but, like a politician, he seems more interested in sweeping the audience along than in teaching them what they need to learn. A Thomas Sowell column that appeared in the 9/25/00 edition of my local paper contained several phrases that reminded me of Kiyosaki' book: ""¦political demagogues who exploit the voters" ignorance to gain power" ""¦people whose chief talent has been the emotional manipulation of the public for political purposes" "Sound bites are usually very unsound." [people who] ""¦can"t see beyond a media image or some catchy phrases and emotional attitudes" "There are people out there whose job it is to manipulate your emotions for political purposes"”and they get paid big bucks." Here are some other meaningless slogans in Kiyosaki' book: "Learn to use your emotions to think, not think with your emotions" (page 42), "It' not the numbers, but what the numbers are telling you" (page 53), "I"d rather welcome change than cling to the past." (page 110), "Winners are not afraid of losing, but losers are." (page 114) The 6/28/01 Dilbert comic strip has an employee saying, ""¦work smarter while broadening our focus." The pointy-haired boss responds, "That doesn"t mean anything." The spouting of catchy meaningless slogans is widespread. The habit of stopping and thinking about whether they really mean anything is not. In this, Kiyosaki also reminds me of Robert Blake, the movie and TV actor best known for starring in the late-70' TV series Baretta. Blake' 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 didn"t. [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 Blake' 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 Kiyosaki' lifelong pursuit of money and status as an overreaction to insults he received in elementary school.] 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 taxpayer' money on government programs as "investments." 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 non-muddled way from the excellent book, The Millionaire Next Door. 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 Fear On page 31 "...it's fear that keeps most people working at a job." 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." Timing markets on page 109, Kiyosaki brags about timing real estate markets "Wise investors buy an investment when it's not popular." (page 154) Also on page 154. "Smart investors don't time markets." Federal income tax law On page 95, he tells you to write off car expenses, vacations to Hawaii, health club memberships On page 109 he says, "I recommend playing within the rules." Main reason people do not get rich "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) The wisdom of joining a union Page 126. "Personally, I take no sides because I can see the need for and benefits of both sides." ("Rich dad" was extremely antiunion.) Same page. Highly specialized people should join a union. ("Poor dad" was a union organizer.) Good credit "When I occasionally come up short. I still pay myself first. I let the creditors and even the government scream." Page 159 "My wife and I have excellent credit." Same page Use of inside information in securities trading The reason you want to have rich friends who are close to the inside is because that is where the money is made. It' 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) I"m 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 can"t afford it," while his "rich dad" said, "How can I afford it?" There' another one of those Jesse Jacksonisms. I agree that a knee jerk "I can"t 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 is question 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? 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 wife' 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 real-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, What' the point?" question said Kiyosaki' 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. Risk management Kiyosaki' advice on risk taking borders on thrill seeking. He approvingly quotes a Texas saying, "If you"re 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. That' 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. 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 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) About the only asset you would sell at a gain would be real estate. All other assets like cars, golf clubs, furniture would sell at a loss for tax purposes. You don"t 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 that' why most investors do Section 1031 tax-free exchanges. Kiyosaki himself mentions tax-free exchanges two pages later. the income-tax rate of the corporation was less than the individual income-tax rates An individual with the knowledge of the tax advantages and protection provided by a corporation can get rich so much faster than someone who is an employee or a small-business sole proprietor. Sole proprietors are only taxed once. Corporation owners are taxed twice on corporate profits: once at the corporate level and again on dividends. 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. It' 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. The only tax benefits of a corporation are the following: A corporation can deduct various forms of employee insurance. Sole proprietors can usually only deduct 80% of 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. my [corporation] bought me my first Porsche 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" (IRC§162) expenses are deductible and whether a corporation is involved is irrelevant. 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. A corporation can do so many things that an individual cannot. Like pay for expenses before it pays taxes. Both corporations and sole proprietors pay expenses before they pay taxes. Sole proprietors pay taxes only on the net income of their businesses, which means after expenses. "by owning your own corporation"”vacations are board meetings in Hawaii. Car payments, insurance, repairs are company expenses. Health club membership is a company expense. Most restaurant meals are partial expenses." 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. Business-related car expenses are deductible for both corporations and sole proprietors. Health-club memberships are nev  Â

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