A lot has been said about Rich Dad Poor Dad by Robert Kiyosaki, the self-proclaimed number one selling personal finance book of all time. While it certainly has been popular over the years, it has also garnered its fair share of detractors as well. While this was probably the first book I ever read about managing money, and can honestly say it made a lasting impression on my life, that doesn’t mean that I don’t share some of these criticisms. On that note, I wouldn’t go so far as to say it is terrible either — in fact I recommend Kiyosaki’s book all of the time, albeit with a few caveats.
What is “Rich Dad Poor Dad” about?
As the title suggest, the author tells the story of his two dads (one biological, the other a friend’s dad who became a father figure) and how both influenced his thinking about money. Rather than complimenting each other, however, the two fathers serve to contrast each other’s financial outlook. In one case (poor dad), Kiyosaki describes a man who chooses to live the traditional middle class route: having a mortgage, a longterm professional career and eventually depending on a pension to pay his way through retirement. Not surprisingly, the author decides to ignore this dad’s advice.
On the opposing end is his millionaire “dad” who, unlike his real dad, doesn’t have a real job and relies on various business ventures to make himself rich. Although we’re never told if the stories are actually true, what follows is a series of parable like stories taken from the author’s life that show him learning and trying to apply the lessons that were taught to him by his rich dad. Some of these are comical, like the story trying to make coins by melting the lead in empty toothpaste tubes. Obviously Kiyosaki doesn’t recommend that you do this.
Despite some serious flaws, there’s a lot to like about Kiyosaki’s book. Probably the single most important point most people will take away from Rich Dad Poor Dad is the incredibly simple yet powerful idea of prioritizing assets over liabilities. When I read this for the first time, it had such a profound impact on my financial world view that it even influenced the name of this blog. If you’re unfamiliar with these terms, assets (more on this latter) are things you own that make you money (real estate, stocks, bonds, etc) while liabilities are things that cost you money (cars, clothes, etc). One of the author’s more controversial claims is that your home (the one you live in) should be considered a liability since it rarely if ever makes you money (once you factor in all related expenses, like upkeep, property tax, mortgage interest, etc).
Another great point about the book is that it eagerly promotes financial intelligence, urging you to learn as much as you can about various investment vehicles. According to the author, there are opportunities to be found virtually everywhere. It’s just up to you to find them — and to actually pursue those opportunities when they present themselves to you. This is obviously sprinkled with a lot of entrepreneurial spirit, which while scary for many, is never a bad thing.
“Winners are not afraid of losing. But losers are. Failure is part of the process of success. People who avoid failure also avoid success.”
– Robert Kiyosaki
Perhaps my biggest criticism about the book is the lack of real world examples. Most of the stories given are taken from the author’s youth, which could hardly be applied in the real world — a comic book library? And while it’s clear that the author has had financial success in his own life (based on what he says), it’s never entirely clear how he became successful in the first place. There are a few stories about his investments in real estates, but the few stories he tells could hardly be responsible for his wealth (cynics will say he wasn’t truly rich until he wrote this book, but I digress).
On the other hand, perhaps all of the vagueness is intentional; Kiyosaki might be more interested in teaching you how to discover your own opportunities instead of giving you the successful strategies of other rich people for you to merely imitate. Think of it this way – instead of teaching you which dots you need to connect in order to become rich, the author wants you to know how to recognize your own dots to connect. At that point, it’s up to you to find and connect them. If this is the case, I would say the book is fairly successful.
Another quibble — and this is if only because I’ve taken accounting — is how the writer defines both “assets” and “liabilities”. Whereas the definitions given by the author work perfectly fine for the purposes of the book, they aren’t exactly accurate according to accounting standards (to say the least). If you have no interest in creating/reading balance sheets, however, this probably won’t be an issue for you. But if you’re serious about investing, it would be good to know what assets and liabilities truly are. Just saying’.
Finally, the book has a tendency (whether intentional or not) to promote the idea that rich people are somehow better or more successful than poor people. Granted this is never explicitly said, others have commented on feeling this way as well (just read amazon reviews). Whether this is true or even a bad thing really depends on your perspective, but I would argue that “being better” isn’t what the Financial Independence movement is about. Personally, I would never buy a McMansion even if I could. Financial independence is about being free to pursue your life without having to worry about how you’re going to provide for yourself. It has nothing to do with feeling superior over other people. On this point, at least for me, the book misses the mark.
I haven’t consumed any other of the author’s books, and have never attended any of his seminars, which is probably why I feel uncomfortable mentioning this, but I think it’s important to note that some have accused Kiyosaki of being a self-promoter and that this book is really a funnel to get you to spend more money on his other expensive products/services. I can’t really comment on this objectively, since I’ve only ever read this book.
Perhaps I’m a little biased, since again this was the first book that got me excited about my personal finances, but I generally like this book. It has it’s share of problems, as most books do, but that does not make it useless as some have described it. My recommendation would be to ignore the investment tips it provides (there are so few anyway) and read it to be inspired and to perhaps look at your personal finances in a different way. If there’s anything to take away from this book, is that it’s a modern, entrepreneurial spin of the old protestant ethic/virtue of self-reliance.
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