Why they want YOU to be rich
December 29, 2006 by gbrown
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Robert Kiyosaki’s latest offering is the subject of my second Audiobook posted. I managed half of the book on the plane, finding it a little more challenging than his previous Rich Dad Poor Dad series.
Kiyosaki, the millionaire, has teamed up with Donald Trump, the billonaire to produce “Why we want YOU to be rich”. According to the Amazon blurb, Get a behind-the-scenes peek at Why We Want You to Be Rich in this video interview with Donald Trump and Robert Kiyosaki. They pair talk about their very different backgrounds, their mutual admiration for one another,and how they came up with the idea to write Why We Want You to Be Rich together.
A little background. Kiyosaki has sold over 26 million of the RDPD series globally. The reason for the success is two fold 1) Firstly, Kiyosaki uses the first person storytelling narrative so effective in relaying the “moral” to the reader and 2) Secondly, the books are the “missing link” in our financial education.
You see it’s like this - we go to school, get good grades, progress to university, get a good job, work hard and hopefully by the time we retire had amassed enough $ to start enjoying life. The received wisdom is, however, fatally flawed as we shall find out in Kiyosaki’s collaborative effort with Donald Trump “Why we want you to be rich”.
Unfortunately, Trump’s better at business than he is at teaching business (despite claims to being a “teacher”). Kiyosaki became famous through writing, whereas Trump’s fame enables him to get his books published.
If you can get over the Trump-Kiyosaki mutual appreciation society’s numerous references to the other party, you’ll find the subject matter very interesting.
Kiyosaki puts it like this. The US government’s financial obligations in social security and medicare total more than $71 trillion dollars in 2006. That’s a lot of money. Put it into context, that’s more than the combined values of world’s stock markets. Some liability for the balance sheet.
Well what’s new? We all know most western developed economies live on borrowed money and the PSBR increases daily. What’s new here is the message that the government cannot afford its financial obligations to the growing number of dependants. What this means is the collapse of defined salary pension funds is just the beginning. Today’s pensions are not pensions - they are tax efficient saving schemes - that’s all.
What Kiyosaki & Trump deliver in this book is a reconfirmation of the messages in the RDPD series - that no-one teaches you financial education. Today’s economy moulds its people on the industrial model where lifetime employment, pension schemes and hard work represent the cornerstones of financial security (albeit when you are possibly too old to be able to enjoy it fully).
It’s no coincidence that both men made their money out of real estate. Trump possibly had the more ostentatious of goals of the two (see Trump tower below) - located 73 5th Avenue, New York.
However, although these guys are rich, their success has been based on observing the strategies of the rich rather than middle class. These are:
1) Middle class attempt to grow through ownership. Rich grow financially through control, own very little.
2) Middle class acquire what they think are assets but are in fact actually liabilities. Rich focus on acquiring cash positive assets. As their pay increases, MC buy a larger house (liability), larger cars (liabilities), larger credit facilities on their cards (liabilities).
3) Middle class try to grow financially through salary. Rich do this through OPM (other people’s money). You’ll never get rich on income alone. I found this out some time back. The harder you work, the more tax you pay, and what’s left is easily accounted for by your growing lifestyle requirements. Income should only be seen as a method to fund the acquisition of assets - i.e. things that make money for you whilst you sleep (ah yes - it’s leverage again).
Put into perspective - I work pretty hard like most people, but will make more $ this year through the asset appreciation and cash flow of my real estate portfolio than through my salary. Furthermore if rolled forward, the appreciation is capital gains tax free (Gordon Brown has yet to work out a way to tax debt, so that strategy will be safe for some time to come.) It’s easy money, but like most overnight successes takes a lifetime of work and (effective rather than academic) study to prime the pump.
What they didn’t teach us at school was it’s not how hard you work, but how much value you create that forms the basis of financial growth.
How much value would you place on 5 hours of this kind of financial education?
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I’ve read the Rich Dad Poor Dad book. If you can put up with the repitition and the EXTREMELY long drawn out introduction, then its got some great, sound, proven advice. I only wish that he had cut the word count in half. It sounds as though the new book has similar issues!