Shocking Revelation: "Rich Dad" is Not Real, but a Myth Like Harry Potter. Robert Kiyosaki bluffed! Is There Poor Dad?
After reading and re-reading Rich Dad Poor Dad, I discovered some aspects of the book that sounds good at first, but later I realize are conflicting, or may actually be outright wrong or even illegal. And some quick research on the Internet, revealed that I am NOT the only one who spotted the problems.
This is a troubling discovery for me. I enjoy a lot of Rich Dad's advice, as they do match up with a lot of the stuff I learned from other places. However, the problems are too numerous and serious to ignore. I will analyze a few of them.
There is No "Rich Dad", Really
One of the most frequent complaints about the "Rich Dad" series is nobody can find any evidence of "Rich Dad".
Mr. Kiyosaki have stated in the book that Rich Dad owned some of the best real estate on Waikiki Beach, and is one of the richest man on the island of Hawaii. However, several researchers for various magazines have scoured the real estate records of Hawaii, and can't find such a person. In fact, Mr. Kiyosaki allegedly told several different stories about the current whereabouts of Rich Dad (tm). In at least one instance, he claimed that Rich Dad (tm) has passed on. In another instance he claimed that Rich Dad (tm) is now an invalid. In yet another book he claims that the family of Rich Dad (tm) asked NOT to be identified. And in yet another instance he reportedly admitted that Rich Dad (tm) is not a single real person, but a composite character based on several of his advisors, including his best friend's father (the original "Rich Dad"), Dr. Buckminster Fuller, and many others.
In an interview by SmartMoney magazine, published February 2003, Robert Kiyosaki gave an answer that is surprisingly vague, yet real: ""Is Harry Potter real? Why don’t you let Rich Dad be a myth, like Harry Potter?"
Frankly, Mr. Kiyosaki had stated several times in Rich dad Poor Dad about "this is a true story about my two dads..." And the book "Rich Dad Poor Dad" is published as non-fiction. So to find out that the character of Rich Dad is just that, a character, not a real person, sure puts his credibility in doubt.
Wait, Is That Actually Legal?
Another aspect of the "questionable" advice is the story about how he gets out of contracts that does not look right to him. There is nothing wrong with a contingency clause in the contract that allow you to back out of the deal if you spot a problem. However, Mr. Kiyosaki claims that he just puts down something like "subject to approval of my partner", except he then claims that his partner is actually his pet cat. Frankly, this is borderline fraud. Let's say you try something like this, and the other party, with too much to lose, decides to call your bluff, and SUE you in court, you will be ordered by the judge to reveal your partner. And now you are ****ed. Mr. Kiyosaki, if he had actually tried it, was lucky that no one called his bluff.
There are also many "questionable examples" given in his whole series of books. And as always, it was real estate investing that drew the most fire. He gave examples that are just too good to be true, according to most real estate investors. Even in foreclosures, one does not find houses that are 50% off or more. Usually it's about 20-30% off market price, with an occasional 40%. However, if you are to believe Mr. Kiyosaki, he found a house for 72% off market price! He suggests that you can do so too. However, other real estate investors explained that those are "once in a lifetime" type deals.
For other erroneous advice given in the Rich Dad books, see John T. Reed's Kiyosaki Critique.
When questioned about these errors, Mr. Kiyosaki stated that the examples given are just that: examples, and should not be taken literally.
Is Financial World Coming to an End?
Two of Robert Kiyosaki's hypothesis attracted even more criticism: a) all of our problems have root cause in Nixon taking the US currency OFF the gold standard back in 1971 and b) the baby boomers, reaching retirement, will deplete the entire paper asset market due to them spending their retirement funds, causing a TOTAL collapse of the market. Let us examine the plausibility of each idea / hypothesis.
Mr. Kiyosaki, in "Raise your Financial IQ", claims that the US currency is now worth MUCH MUCH less than even just 20 years ago, and that's because Nixon had taken the dollar off the gold-standard (i.e. backed by actual gold stored by US Treasury) and allow it to free-float against other currencies.
The problem with this idea is virtually all currencies around the world now are free-floating. Nobody use gold-backed currencies any more. So if the US dollar falls consistently against other currencies (also not backed by gold), there must be some OTHER explanation for the falling worth of the dollar, not just because it had gotten off the gold-standard. (I remember when it was 220 yen to 1 dollar. It's now like 90 yen per dollar.)
Another idea, explained in "Rich Dad's Prophecy", basically says that the stock market WILL collapse, MUCH bigger than this subprime mortgage mess, because baby boomers are retiring, and thus they will start taking money out of mutual funds, 401(k)s, CD's, stock markets, and so on so they actually can live on them. This will cause the market to crash. Thus, you should diversify your holdings by investing in real estate and precious metals like gold and silver. Which, of course, Mr.Kiyosaki will sell you lessons on, be it seminars and coaches to books and tapes and whatnot.
A book that discusses Wall Street rumors discussed the idea, and found it to be "chicken-little" "Sky is falling" type alarmist view, sorta like the 2012 alarmists. Basically, while it's true that babyboomers are retiring, they don't do so all at once, and thus, the threat of all that money leaving the market will be over period of decades, and the effect on market should be minimal, or at least, nowhere as close as Mr. Kiyosaki claim to be. The total collapse *can* happen, but it is so unlikely, it is almost ridiculous to think about it.
Storyteller, NOT Adviser
So why would Mr. Kiyosaki... embellish his stories? Well, let's just say that some people are natural-born storytellers. They can take a simple story, and add a lot of dramatic flair to it, so it becomes more than a story, but an inspirational legend. A lot of the folk heroes and anti-heroes are handed down this way from generation to generation, and the story grew in each retelling. The story of Robinhood, Sherwood Forest, Sheriff of Nottingham, and Maid Marion probably did happen, but it was nowhere as glamorous as the story was. In fact, folklorists have found that Maid Marion was inserted later, MUCH later. That is what is going on here, with Robert Kiyosaki's stories and books.
Even Mr. Kiyosaki had said that the Rich Dad series is really meant as motivational, instead of actual practical advice. The problem is, once you do have a book, even the examples given are going to be taken as gospel, 100% correct, and thus, assumed to be 100% accurate.
In the book "Rich Dad's Guide to Becoming Rich (without cutting up your credit cards)", he gave the example of his prized Porsche. He bought it, but he also bought a business and used the excess cashflow to fund the luxury car's monthly payments, thus, "turned bad debt into good debt". Okay, that almost sounds reasonable, until you realize somehow he was able to afford the down payment on the car (which won't be cheap, as it is a collectible, probably in the 100K range), AND the down payment for the business, which presumably costs even MORE than the car, to generate that sort of excessive cashflow to pay for the car. However, no actual figures were mentioned. Somehow you're lead to believe that the business paid for the vehicle, period. Most of us don't have that much cash around.
While it is important to illustrate the advice with examples that inspire, the inspiration can lead people down the wrong path if not explained properly.
Getting the Wrong and Conflicting Advice
it is possible to get the wrong idea from the various "Rich Dad" books. It is a common theme in his books that the educational system is outdated, not teaching the stuff one should learn in the real world, and teaching people to become employees and self-employed. The problem is, it is very easy to take that idea out of context. At least one parent have reportedly complained that her child read Rich Dad Poor Dad and now refuses to go to school, cites the book to be his inspiration, claims education is useless, and that his parent (a single mother) is feeding him obsolete information to keep him poor.
However, Mr. Kiyosaki himself have stated in his books that one must finish college, because it is a good investment in oneself, and that the money one can earn as a college grad is like five times higher than a high school grad. It is implied that you should graduate college THEN think about being an entrepreneur. However, then he starts to cite Michael Dell and Bill Gates and such, who never DID graduate from college (both Dell and Gates dropped out of college after 2 years to pursue their dreams of being entrepreneurs). And since one of the ways to financial freedom is to be an entrepreneur, that part about being college grad is quickly tuned out and lost among the message that education is obsolete and useless.
What was NOT mentioned was that Michael Dell was building/customizing and selling computers out of his dorm room because he saw a need and he fulfilled it. Bill Gates may have dropped out of college, but he was in Harvard for two years, and he was not quite successful until IBM went to him for PC-DOS, and he basically bought someone else's version, customized it a little, and sold it to IBM. I doubt even Bill Gates had actually anticipated the success of the PC, but he was able to capitalize on the success and build his fortunes by studying the market and react to customer needs as well as go after all threats by assembling a good team such as Paul Allen. In other words, entrepreneurship require more than will. You also need hard work, luck, right space, right time, right product/service, team, and other things in that B-I triangle. So you see, there is some use after all.
In another case, the advices conflict with each other. In one book, the advice is "go big or go broke". In another book, one is recommended to start with small real estate deals, and trade up later.
Motivation Is Not Solid Advice
So what is one supposed to get from the Rich Dad series of books? After amassing a collection (I have all books except Rich Dad's Prophecy, and several of the advisor series books as well) I can tell you this: Mr. Robert T. Kiyosaki is an exceptional presenter/speaker. Despite his allegedly failing English, he is excellent in reducing problems down to a soundbyte that one would care about, and present equally succinct and pithy answers which he then attributes to "Rich Dad", then comes up with a lot of examples, anecdotes, experiences, and such that enhances his answers (but those may be embellished).
The problem is, the financial world is NOT quite as simple as it sounds, and some of his answers are a bit TOO succinct and pithy that it can easily be misunderstood, or taken out of context. And the supporting evidence or anecdotes or experiences he gave may or may NOT have happened to himself, but *could have*.
In his latest book, Improve your Financial IQ, he related a story about facing down an IBM hiring manager who was about to tell him to take a hike as he didn't have an MBA unlike the other candidates. He claims he ranted about how he had more courage than any of the other draft-dodgers by facing down VC and death every time he flew in Vietnam as a gunship pilot, and sales is about courage to fail, and he practically shamed the hiring manager into picking him instead of the other candidates who came in suits (he came still in khaki uniform). Personally, I think the story got embellished in the retelling. The real incident is probably nowhere as dramatic as that.
Stories do get embellished in the retelling. I am a Star Trek fan but I am not a Star Trek celebrities fan. Thus, I found it interesting to discover that Nichelle Nichols, who played Uhura on the original Star Trek series, regularly repeats her encounter with Dr. Martin Luther King Jr. at every convention appearance. And from people who have gone to a lot of conventions, the story gets longer and more embellished in each telling. While there's no doubt that she decided to quit, but later stay on the series despite it's a "bit part", and she probably did meet MLKjr at an NAACP convention, she claims that MLK jr told her personally that he's a fan of the show, and that she must stay on the show because there must be a black person in space in the future, or something like that. However, some reported that in the earliest conventions, she merely claimed that MLK jr "inspired her" to stay on Star Trek. However, if you search on the Internet now, it's full of articles about how a meeting with MLKjr turned her around. Is it embellishment? I don't know.
Trust, but Verify
Take Rich Dad series of books for what they're worth... some rather generic advice that may or may not apply to you, with illustrative examples that may or may not be true, and personal anecdotes that may be completely true, completely false, or somewhat true but embellished. The Rich Dad books are for MOTIVATION instead of practical advice. When you are past the motivation, and need actual practical advice, seek out some MORE books, such as the Rich Dad's Advisors series. Those books have the actual how-to steps that are of practical use, and are written by people who were actually there and do things. Just beware of the motivational claptrap that got tossed in there along with the book.
As I read more and more of Mr. Kiyosaki's books I found that he is starting to rehash his own ideas. Cashflow Quadrant is basically an expanded idea upon the concept of asset and liability, and rich vs. poor in Rich Dad Poor Dad. He conveniently divided each side into two and came up with the quadrants. Rich Dad's Guide to Investing is basically a slightly more detailed version of Cashflow Quadrant, with explanations on how to move into the I and B quadrants. The latest book, "Improve your Financial IQ", is another expansion upon the original Rich Dad Poor Dad's concept... "It's not how much you earn, but how much you keep". He expanded that into "5 Financial IQ", #2 of which is "protecting your money". #1 of which is "Making more money", which is covered in yet another book: Rich Dad's Guide to Becoming Rich (without cutting up your credit cards). You *could* almost say that the subsequent books are repackaged versions of previous book(s), albeit with a bit more stuff.
So, are the books worth reading? Yes, it will give you a paradigm shift, so to speak, as it will present you with a new way of thinking, a new viewpoint that you may not have considered before. And that is always useful. However, you may want to note the difference between generic advice/philosophy, vs. practical advice. You'll find that most of the advice given in the books are more philosophical than practical. Thus, those who seek formulas i.e. do A, B, then C, and you'll get D, will be disappointed. Mr. Kiyosaki said so as much in one of his books. If you need philosophical advice to get through your lack of motivation, then yes, his books will help.
Keep one thing in mind: trust, but verify. Don't take all of his assertions for granted. Just because he says so doesn't necessarily mean it's true.