A question in the FI/RE movement came up recently: “What do you think of Robert Kiyosaki”?
I’ve spent a lot of time studying Robert Kiyosaki. I think there are lots of good things (and some bad things) about him:
The Good:
* Investing is largely about psychology, and very little about “how to”. There are lots of ways to make money – it’s not hard to find any of them. But what distinguishes those who do from those who don’t? (My belief: It’s largely about psychology). So I think one of the key elements he’s trying to invoke is to get you to think for yourself, not to puppet back what he believes (or some strategy). I think this causes him to take an almost Socratic approach to how to he teaches. Instead of telling you “how” to do something, he’s often trying to get you to question your assumptions of the world you live in. (For instance: “Is your home really an asset?”, “Do housing prices always go up?”)
For instance, if you were told to buy index funds because the market always goes up over the long term, what happens that first day when you lose 25% of your savings after you’ve bought at the top? Some one with confidence in themselves and the strategy will stay in and ride it out. But someone who doesn’t have that confidence (but has done it because some “expert” told them to do it) will panic and realize the loss. (Ask me how I know!).
* He points out some of the flaws of the education system. I think one of the most obvious ones is that the educational system (aside from Montessori, and some weird ones on the fringes) are really trying to set you up to fit into a very specific mold – one that obeys authority and thinks there are “right” answers instead of seeing the world as a place of exploration, learning through failure, and lots of grey area.
I think the system leads to a lot of good in society (a hard working work force, etc), but leads to problems when investing (aka, “buy when others are fearful, sell when others are greedy” or “buy when theres blood in the streets”). So every one from warren buffet to sir john templeton, etc. understand the power of defying the crowd to make large sums of money (exactly how the system is trying to discourage you from thinking).
* He thinks education (although a reformed education) is one of the major keys to alleviating people from poverty (The story of his “poor dad” comes to mind). I couldn’t agree more.
* He’s onto something between the idea of good vs. bad debt, and it’s obvious that this idea has made some people a lot of money (namely: Trump) – although obviously not the only way to play the game. I do wish he gave some more warnings about the power of leverage, though.
* I think he’s been a huge inspiration in terms of the FI/RE movement. In fact, I think I originally got inspired into FI though him.
* I think he’s right in pointing out some of the hypocrisy with how the rich have different rules that the poor/middle class when it comes to investing. (He notes how accredited investors are the only ones with access to the best deals that contain asymmetric risk/reward). Also, how Moody’s was really to blame about the housing market crash + MBS valuation, but instead the big banks took the rap for it.
* I think he’s generally right about gold and dollar devaluation, and in some ways saying the same thing a lot of other people in finance are saying re: a coming crash (for instance Ray Dalio – that all things go in cycles and we just haven’t experienced them yet since they haven’t happened to us or in our lifetime).
* I think his cash flow quadrant is one very useful way of thinking about how wealthy you can grow and the potential for growth + taxes. I also found one of his advisors books (“Tax Free Wealth”) very useful for understanding taxes.
* I really like his cash flow quadrant board game, which you can play for free online – and does provoke a new way of thinking about things.
* He points out John Burley’s stages of wealth. For me, it’s important to have a framework of where you are and where you can go.
* I do think he’s trying to do good things for people.
The Bad:
* I haven’t taken his training or courses, but they seem like a total scam. Not only do they charge a lot, they seem very thin in content. DANGER – STAY AWAY.
* His books are obviously thin on the “how to”. And the how to is clearly a necessary (although not sufficient) to being a good investor.
* I think his didactic style isn’t very good (at least for me). One thing that I’ve realized: I first need a plan, and only then, when I can’t follow it, I have to wonder “Why?” which leads me to my own psychology.
Instead, he approaches it from a psychological standpoint first, but I think most people aren’t ready for that.
* He is no savior and won’t give you “the answer”. I think this is what most people want (at least it’s what I wanted).
* I think he could give some ready made strategies that would work for the masses, but doesn’t. He + his wife Kim talk about debt pay down acceleration + have recycled the Dave Ramsey snowball style of quickly paying down debt, but it’s not obviously in any of his articles. I think someone like Dave Ramsey has actually done way more for people, despite Kiyosaki having a similar reach.
Unsure:
* I think he thinks the way a rich person does, and this often conflicts with a lot of the mindsets of the middle class, which is where I think most of the FI/RE movement is. For instance, I highly doubt Kiyosaki would ever be focused on savings rates. Why would you focus on saving when you could use your brain and just by thinking, make 10x what you’ve spent in the whole year?
* Interestingly, I think there are a lot of common ways that the rich and the poor think that would just appall many of the middle class. For instance, why would you ever work hard at something you don’t like to do? For more on this, see “The Millionaire Fastlane”. Also, consider Ray Dalio who at one time was broke, but it was OK because he was doing what he really liked to do. Also see CD Baby’s founder Derek Sivers tiny book.
I think many CEOs fall into this category. The old joke: only a CEO would trade a 40 hour work week working for someone else in exchange for an 80 hour work week working for yourself.
* I’ve realized that one way you might look at things is in terms of “How much education does this require to do well?”. For instance, how much education does it take to buy stock and sell covered calls on the S&P vs. passively buying an index fund? How much education does it take to raise private money in a JV deal vs. use your own money for a buy and hold 4 unit?