Wednesday, September 20, 2006

The one issue I don't have with Robert Kiyosaki

One of the big criticisms that's always leveled at Kiyosaki is that he's long on encouragement and short on practical ideas. Well, that's pretty true. You can read a great overview of the book here at Adventures in Money Making. Kiyosaki is mainly trying to give people an insight into the psychological mindset of how a person who made themselves wealthy would think, and it's much the same message as The Millionaire Next Door (about people who did make themselves wealthy) - you shouldn't buy things you can't afford, you should strike out for yourself, and you should live according to your principles and not what you think someone of your income should be doing. That's all fine.

Then there's kind of a disconnect between what Kiyosaki says you should do in the books, and what he says you should do specifically. It seems to me that the best way to accumulate wealth in his mindset is to either buy assets (like real estate) that create money, or to create an asset (like a business) that creates money. This is where he and The Millionaire Next Door begin to part ways. The Millionaire Next Door comes to the conclusion that being in business for yourself is the way that most wealthy people get there, but if you read Kiyosaki's Yahoo column, he talks a lot about gold (which just sits there) and disdains mutual funds and stocks (which seem to fit well with his idea of money that makes money, but he doesn't think they're fast enough.) So that doesn't make much sense there. I realize that owning a successful real estate or business empire makes money faster than a mediocre mutual fund, but investing is one good step towards creating a mindset that believes saving for the future is more important than living it up today.

The principal issue, I think, is this: Most People Don't Have Any Good Ideas. They hear that owning your own business is a great thing to do, but they don't have any idea of what they want to do. Or they don't have the desire to go out and find something that they think would make money. This is why stocks and mutual funds are easy and appealing - someone else has already thought up the business and got it going, and now all you have to do is buy part of it, or tiny parts of many businesses in the case of a mutual fund. You can do all that while holding down a different job, and not getting up at 2AM to fix somebody's overflowing toilet. Even owning real estate is a comparatively easy idea to actually thinking up a new business that works - I'll give it that. (Not an easy job, note.)

I'm not really sympathizing with the people who complain that Kiyosaki doesn't provide any follow-through. He's just providing a change of mentality - are you then going to complain that he doesn't personally show you how to file for incorporation or retain good employees? No, there are a thousand books about how to run the business. You're not supposed to get a complete handbook of action out of him - you're just supposed to get inspired to Do Something. Evidently, he believes the actual ideas will follow.


MoneyDummy said...

You said it well. Unfortunately, my only exposure to Kyosaki was in an article in which he proceeded to thoroughly shred (translation: vilify and mock) every means by which the "poor man" has been taught to build financial stability, and failed to provide any alternative at all. He left me with such an overwhelming impression that he was a pompous jerk with nothing useful to say that I've not picked up another books of his sense.

prlinkbiz said...

RK really does help provide a change in thinking. The wealthy generally have or make their money in real estate, business, and/or paper. Many have all three (diversification).
When you start to change your mind set from one of scarcity to one of abundance, a whole new world will open up to you. You will have more ideas than you know what to do with- because you will start to see opportunities everywhere. Opportunity is about seeing a need and filling it, solving a problem, making a connection,etc.

More Bread said...

I also noticed RK's multiple postings on Gold on Yahoo! Finance and wondered if he owns some and is trying to boost the price by encouraging others to buy. I would agree that RK has some good insights but that's about it.

Bob said...

The problem with Kiyosaki is that he wants to teach you to think rich, but doesn't tell you HOW to get rich. He doesn't really speak to the majority of people who will never own a business or real estate. He doesn't believe in working and saving money, but this is how most people become wealthy. On top of this his main source of income seems to be his books. There is not much record of his real estate holdings, his U.S. and international companies, or his international mining interests.

Looks like Big Hat, No Cattle to me.

Ken said...

Bob, I disagree with you. He say's invest in real estate, build businesses. You can't write a step by step book on how to get rich. In fact, there are many books out there with titles like 'How to get rich', 'Get rich with stocks', etc... Go browse them and see if they are any better. No book will give you a step by step. You just need to understand the concepts and implement them.

I also don't believe that most people get wealthy working and saving money. Saving money doesn't make any more money, investing it does.

J.D. @ Get Rich Slowly said...

Though I've never written about it, I think "investing" in precious metals is fairly stupid, and this lowers my opinion of Kiyosaki even more.

The funny thing is, I just found the notes I made on Rich Dad, Poor Dad after I first read it a couple of years ago (when I was first beginning my financial turnaround. Reading through the notes, the advice is actually fairly sensible. But you're right: he doesn't offer a lot of practical advice.

I think that most people don't have a good idea for a business because they go about it the wrong way. From my experience, nearly all successful businesses are built by people who have a passion for what they do. A person takes a hobby, or a job they like, and they create a niche for themselves. For fifteen years, I've been running my families box business, and I've seen a lot of entrepreneurs come and go. The ones that fail or those who have some big idea that they think can't lose, but for which they have no experience or passion. The ones that stay or those where the owner has some real knowledge of what she's doing.

I'm reading Loral Langemeier's The Millionaire Maker right now, and she sort of skirts around this in the opening chapters. (It's a tacit assumption, I think.)

Hm. Sounds like I have an entire weblog in me on this subject, eh? :)

Anonymous said...

Kiyosaki is a bunch of hot air.
Sure you can agree with many things he writes, but they are so obvious: the school system is screwed up, our currency is inflated, social security and medicare are ticking bombs. So what? I just read part of one of his books, but it got so awfully repetitive. And I got some DVDs too. Very, very repetitive. Pretty thin and did I say he is repetitve?

Anonymous said...

I think I read in one of his articles that his wife owns(ed) a commercial building and brings in something like 60k a month. I think it was luck of timing. They also own some rental homes in Hawaii. Anyway, I think they lucked out and use their income from real estate to try and establish credibility and speak like inspriational speakers in order to make the big bucks through selling books and speaking engagements. I do like reading some of his articles, though, I think he is a bunch of hype and not much substance. At least Phil
Town gives you substance.