John T. Reed's analysis of Robert T.

Kiyosaki's book Rich Dad, Poor Dad

Part 2
Sep 03, 2015
Posted by John Reed on
If the advice of Rich Dad back in 1955 was so great, how come Kiyosaki
says he was homeless and bankrupt 30 years later? (A lawyer checked
the federal court records and said no one named Kiyosaki ever went
bankrupt. So he apparently is bragging about a non-existent
bankruptcy. Im not quite ready to declare him nuts, but that would be
evidence if I were.)
What kind of financial genius does it take to be homeless and bankrupt
when you are a college graduate who had no student loans and were
trained as a helicopter pilot by the military. With all those advantages, and
Rich Dads brilliant financial advice, the guy still ends up homeless at
age 38? And if Rich Dads advice wasnt good enough to keep Kiyosaki
from becoming homeless in 1985, how did it suddenly become something
the rest of us should be following in 1997?
I suspect Kiyosaki has done well from his books with the help of Oprah
and Amway et al. A reader who refused to let me use his name said he
attended an Amway meeting where Kiyosaki spoke and that Kiyosaki said
his book was unknown until an Amway Diamond Distributor started
buying it in quantity. He further said that Kiyosaki urged the audience to
focus on their Amway distribution business, not on buying duplexes and
such.
I further suspect that his secrecy has nothing to do with avoiding
attracting lawsuits and everything to do with preventing the public from
finding out how much he really made and how he made it.

Clever life plan?

Kiyosaki would have us believe that he followed a coherent life plan laid
out with the help of rich dad.
Here is my attempt at a clever life plan. Of my 38 books, this one sells the
most.

He says he went to the U.S. Merchant Marine Academy because he

wanted to learn international business. People who want to learn
international business while in college should go overseas to school, like
to the London School of Economics or to a U.S. college with a strong
international business or international relations department. The U.S.
Merchant Marine Academy is a grueling ordeal that prepares its students
to operate oceangoing ships. Going there to study international business
is like studying construction and building maintenance to become a
school teacher because teachers work in buildings.

U.S. Naval Academy

I did not put my suspicion that Kiyosaki was rejected by a major service
academy in this analysis originally because I had no evidence of it. Now I
do. A reporter for People magazine interviewed me about Kiyosaki. In the
course of the interview, he mentioned that Kiyosaki admitted to him that
he had applied to the U.S. Naval Academy at Annapolis, but was rejected
for academic reasons.
So if he went to the Merchant Marine Academy to learn international
business, why did he apply to the Naval Academy? Let me guess. To study
oceanography? And I guess if we are to believe that he went to the
Merchant Marine Academy to study international business, he must have
deliberately flunked admission to the Naval Academy because going
there would have interfered with his plan to learn international business.
What international-business purpose was served by applying to the

Naval Academy is a part of Kiyosakis tangled web that I have no clue

about.
In his 1993 book Dont Go To School?, he said, In 1964, I received two
nominations: one to the U.S. Merchant Marine Academy in Kings Point,
NY, another to the U.S. Naval Academy in Annapolis, MD. I accepted the
Kings Point nomination.
The Naval, Military, and Air Force Academies are part of the Department
of Defense. Their students are salaried, active-duty U.S. military
personnel. I believe the Merchant Marine Academy comes under the
Department of Transportation. They seem to have mandatory Naval
ROTC at the Merchant Marine Academy which comes with some sort of
military reserve commission and status. The USMMA students seem to
have a sort of scholarship as opposed to the salaried, active-duty status
of the Department of Defense academies.

Nomination
I am a West Point graduate, so I am familiar with the terminology and
procedure associated with admission to service academies. Kiyosaki says
he received two nominations. Admission to the U.S. Naval Academy, like
admission to my alma mater, the U.S. Military Academy at West Point, is a
multi-step process.
His statement, I accepted the Kings Point nomination, is extremely
misleading.
The first step is to obtain a nomination from a Congressman or Senator. A
nomination is not an admission. Rather it just lets you begin the rest of
the application process. Furthermore, there are two kinds of nomination:
principal and alternate. I got a principal nomination from Congressman
William T. Cahill. That meant that I would be admitted if I passed the three
categories of criteria. Those who receive alternate nominations, which
are ranked first, second, third, fourth, and so forth, only get admitted if
the principal and alternates above them fail to gain admission. The

detailed facts about Kiyosakis nominations, if any, were almost certainly

listed in his hometown newspaper in late 1964 or 1965.
During the post-nomination application process, you undergo an
extensive physical exam more demanding than to enlist in the military
and a physical aptitude test of your athletic ability. I had to go to Fort Dix,
NJ for those two tests. Simultaneously, you send your high school
transcript and test scores to the service academy and they decide
whether you meet their standards academically. If you pass all three tests,
and you were the principal nominee, you get an appointment from the
President of the United States. That means you are admitted. It is only
then that you can claim to have turned down the opportunity to attend
that academy.
Kiyosaki seems to imply that he was admitted to the Naval Academy, but
turned it down. However, the use of the word nomination and the
admission to People seem to indicate that he was, in fact, never accepted
by the Naval Academy and therefore could not have chosen the Merchant
Marine Academy over the Naval Academy.
A midshipman at Kiyosakis alma mater said that in Kiyosakis 5th book, he
does not mention the Merchant Marine Academy by name. Rather he says
only that he went to the military academy in New York. You gotta be
kidding me! To 99% of the people, the military academy in New York is
West Point. If his book Rich Dad Poor Dad is any indication, Kiyosaki
would have lasted about two weeks at West Point before they threw him
out for violating the cadet honor code. For chrissake, hes even lying
about having lived by the West Point honor code for four years.

Pilot
Taking an indirect and barely relevant route to an educational goal is a
recurring theme in Kiyosaki's book. He seems to have a fascination with
extremely roundabout, reverse psychology methods of teaching or
learning. Kiyosaki states that he became a U.S. Marine Corps helicopter
pilot so he could learn how to lead men. Pilots fly helicopters. A pilot may

lead his copilot and door gunner, but no one else when they are airborne.
Furthermore, the actions of a copilot and door gunner are largely standard
operating procedure. They do not need to be led much. And if they did,
the pilot would be in a poor position to lead them because flying a
helicopter is a task that consumes 100% of your attention. Only if he
stayed in the service for many years would a pilot be put in charge of a
group of helicopters and then be a leadership position. Kiyosaki did not
stay in the military. If you want to lead men in the military, you become a
platoon leader and company commander.
Also, in the 1993 book, he says, Ibecame a fighter pilot and went to
Vietnamand probably enjoyed combat more than most pilots ever do. A
Marine fighter is a fixed-wing jet aircraft that generally operates off an
aircraft carrier. Helicopters sometimes operate off carriers, too, but no
military person would call a helicopter a fighter.
Kiyosaki was in Vietnam flying helicopters in 1973 after almost all the U.S
troops went home. He was supporting South Vietnamese ground troops in
their losing effort.

Never returned to my ship

The 1993 book contains a very strange discussion. He says that he found
a little boy in my helicopter one day and had the right, if not the duty, to
shoot and kill him on the spot. This was the code of war we were taught
as military officers.
I am aware of no such right, duty, or Code of War. The Third and Fourth
Geneva Convention, to which the U.S. is a signatory, prohibits shooting a
surrendering enemy soldier, as does the U.S. Uniform Code of Military
Justice. Furthermore, a child would generally not be considered a soldier
at all. To be sure, in Vietnam, children sometimes attacked U.S. soldiers
with deadly weapons like mines, grenades, or guns. They brazenly stole
from our moving vehiclesengineer stakes and gas canswhen we were
in convoy, because they knew we would not harm them. I suspect a
Vietnamese child in a helicopter would be trying to steal something

although he could be just fascinated by the aircraft like any kid.

Kiyosaki then melodramatically describes that after aiming and starting to
pull the trigger, that he put my gun away that day forever. I committed
myself to finding new ways of doing things, instead of simply responding
to what Id been told to do by a person who supposedly had more
authority than I.

Murder
In the absence of an immediate threat from the boyand he mentions no
such threatshooting the boy would be murder, not obedience to any
U.S. military authority. Indeed, it would be gross disobedience.
The supposedly had more authority line is rather weird for a U.S. Marine
officer. A member of the U.S. military is required to carry out all lawful
orders of his superiors and there is no ambiguity about authority in the
military.
He then says that three weeks later, when his aircraft carrier was in Hong
Kong harbor, they were ordered to return to Vietnam. We were about to
engage in a large military operation near the DMZ. It would be unlikely
that the details of an operation would be revealed to military personnel
who were ashore in Hong Konga British colony surrounded by
Communist China at the time. For secrecy, such details are usually only
revealed once the ship leaves the shore. Plus, by the time Kiyosaki got to
Vietnam, virtually all U.S. combat troops had been withdrawn from the
country.
I never returned to my ship. To this day, that was one of the hardest
decisions I had to make. I trembled for hours as I walked the streets with
my mind screaming. I was called a coward and a traitor by some of the
other pilots. I realized it was not the most honorable way to handle my
refusal to fight any more. But I also knew I could not fight and kill simply
because I had been ordered to do so. What the other pilots never
understood was that for me to fly and kill again would have been the

cowards way out.

Well! Now thats a heck of a passage! Not returning to your ship when
ordered to do so is desertion. One of my readers said Kiyosaki appeared
to be trying to claim that he was a conscientious deserter.
I hesitate to say that he is confessing to that. It is one of the most serious
crimes in the military. The punishment can be death. But it is hard to find
any other explanation in this passage. The fact that his peers called him a
coward and a traitor suggests that explanation or possibly turning into a
conscientious objector while on the streets of Hong Kong. I requested his
military records from the National Archives.

Once a Marine
Kiyosaki makes much of his Marine backgroundat least when hes not
claiming to be an anti-war protestor. The Marine Corps, to their discredit,
bragged about him on their official Web site, apparently without checking
out what he told them.
How do you get to be a Marine? On cable TV, I learned that you have to go
through Marine Corps boot camp culminating in a multi-day test called
The Crucible. If you successfully complete it, you are awarded the right
to wear the coveted eagle, globe, and anchor badge of the Marine
Corps.
Did Kiyosaki go through Marine boot camp? Nope.
He did go through the U.S, Merchant Marine Academy plebe year which is
arguably harder and longer. But that makes you a Merchant Marine
Academy cadet, not a Marine.
Marine officers generally do not go through boot camp. Thats for
enlisted men. Officers typically graduate from the U.S. Naval Academy
the one that rejected Kiyosaki for not being smart enough. Or they
graduate from a college ROTC program. The Merchant Marine Academy
probably had that. But even then, I believe you have to go through

something called Marine Platoon Leader Class after college. I would

expect that they may not wear the eagle, globe, and anchor badge until
they successfully complete that Marine training.
Did Kiyosaki go through Marine Platoon Leader School? Nope.
So how did he get to be a Marine?
He was a Navy officer in helicopter school. The Vietnam war was winding
down, so the Navy decided they had too many pilots and decided to stop
training Kiyosaki and his fight-school classmates to save money. The
Marines, on the other hand, still wanted more helicopter pilots. By letting
Kiyosaki and his helicopter classmates make a lateral transfer to the
Marine Corps, the Marines could save the amount of money the Navy had
already spent training them. In other words, to the Marine Corps, Kiyosaki
was a pilot trainee who was on sale for half price or overstock.
In World War II, officers who graduated from Officer Candidate School
were called 90-day wonders. By that standard, Kiyosaki is a zero-day
wonder in terms of Marine trainingan instant Marine. He passed no
crucible or its predecessor tests. He just filled out some paperwork and
made a wardrobe change.
Did he serve in the Marine Corps? Yes.
I have no problem with his claiming he served in the Marine Corps. But in
his interview on the Marine Corps Web site and elsewhere, he has laid on
the Marine Corps made me what I am today stuff pretty thick for a guy
who came through the Marine Corps back door, skipping the
notoriously difficult training that virtually all other Marines had to
complete successfully before they could claim the title of United States
Marines. (a line from the U.S. Corps Marine Corps Hymn)
If any military training made Kiyosaki what he is today, it is the Merchant
Marine Academy, not the Marine Corps. The U.S. Marine Corps has a
magnificent reputation. Unlike a relatively unknown institution like the
Merchant Marine Academy, they do not need the likes of Kiyosaki to add

to their name recognition. The Marine Corps should be eager to make

sure that the Merchant Marine Academy gets all the credit for making
Kiyosaki what he is today.
In the spring of 2010, I saw a Marine Corps recruiting poster. It had the
slogan:
Always earned, never given.
That is false. Kiyosaki is evidence of that.

Are the Marines that proud of a conscientious deserter?

So let me get this straight. The U.S. Marine Corpss official Web site is
bragging about Robert Kiyosaki and touting him as an exemplary Marine in
spite of the facts that:
he libels the Navy and Marines by accusing them of teaching him a
code of war that required him to shoot an unarmed child in Vietnam
he says he committed, during his services as a Marine Officer in
Vietnam to finding new ways of doing things, instead of simply
responding to what Id been told to do by a person who supposedly
had more authority than I. In other words, he was going to refuse to
follow the officers of his Marine superiors to kill enemy soldiers in
combat. (I also knew I could not fight and kill simply because I had
been ordered to do so.)
he says his fellow Marine pilots called him a coward and a traitor
because of his refusal to fight anymore
he says he refused to return to his ship which sailed without him to
Vietnam
The fact that these seem to be a pack of lies designed to make himself a
hero to the anti-war crowd ameliorates them somewhat, but why would
the U.S. Marine Corps brag about a former Marine officer who told such
lies for such a purpose?

Kiyosaki military records

Robert Toru Kiyosaki was a US Naval Reserve officer from 6/4/69 to

10/3/70 reaching the rank of lieutenant j.g. Then he switched to the
Marine Corps from 10/4/70 to 6/30/74 and was honorably discharged as a
first lieutenant.
He was awarded an air medal for courage and devotion to duty in the
face of hazardous flying conditions during combat support missions in
Vietnam from 6/16/72 to 10/19/72, as well as several other medals which
appear to be merely for being in the military or being in Vietnam. I have
several such medals myself. For example, you get the Vietnam Service
Medal for setting foot in the country. Kiyosaki has that with 2 Bronze
Battle Stars. Bronze battle stars are for being in country during certain
campaign time periods. See my article on whether military people deserve
all the medals they get and whether those medals mean what civilians
think they mean.
Also, civilians should know that all military medals have criteria and
citations that make them sound very heroic. In fact, the vast majority of
medals with subjective criteria are probably awarded to guys who did little
more than serve at a particular place and time. For example, in 1965,
when I was a West Point cadet, I and everyone else in the military at the
time was suddenly awarded the National Defense Service medal. We
called it the I was alive in 65 medal. We also had a joke about its colors:
The red is for the blood we never shed. The blue is for the oceans we
never crossed and the yellow is the reason why.
A Vietnam-era Marine fighter pilot told me an air medal means twenty
missions (flights) in a combat area (like the entire country of Vietnam and
environs) Really!? Then I think the Army owes me an air medal or two. My
jobs in Vietnam required me to travel around to widely scattered bases
which I did in Hueys, Loches, Chinooks, Piper Cub-type planes, and C130s. It never occurred to me that I should get a medal for it and I will not
be trying to get any now.
The air medal citation says The Numeral 1 to represent One Strike/Flight
Award is authorized. The meaning of this varied from unit to unit and time

to time. In some units, it could be merely for a guy taking a ride in an

aircraft with minimal duties, especially in 1972. Almost all U.S. military
personnel were removed from Vietnam on 3/28/73. The last major combat
units left in the summer of 1972. Kiyosakis Air Medal was for the period
June to October, 1972. The Air Medal Citation was signed by Louis H.
Wilson, Lieutenant General, U.S. Marine Corps, Commanding General,
Fleet Marine Force, Pacific. Perhaps he or a member of his staff at that
time could clarify what this medal really involved.
His military records show that in 1972, his unit HMM-164 was on board
the USS Okinawa, a helicopter carrier.
I am a little surprised that I have not heard from anyone in his unit.
Now that we know the name of the ship, we can obtain its log through the
Freedom of Information Act, but I am not that interested because Kiyosaki
came back off his conscientious deserter story in the Smart Money
Magazine article. He now admits he was just one of hundreds of sailors
and Marines who missed the boat when it unexpectedly left early.
His military records also contain the following Combat History
Expeditions.
From

To

Details

5/24/72

5/25/72

OP SONG THANH 6-72

7/1/72

OP LOMSON 72 Phase-1 RVN This was a major operation

by the South Vietnamese military with some U.S. air
power support.

7/11/72

7/12/72

OP LOMSON 72 Phase-2 RVN This was a major operation

by the South Vietnamese military with some U.S. air
power support.

7/11/72

7/12/72

OP SONG THAN 9A-72 RVN

7/24/72

8/29/72

Participated in special search and rescue operations with

31st MAU in the contiguous waters of RVN

9/29/72

10/21/72

Participated in special search and rescue operations with

31st MAU in the contiguous waters of RVN

6/29/72

OP = Operation?
RVN = Republic of Vietnam
contiguous waters of RVN = ocean off the coast
SONG THANH and LOMSON = probably Vietnamese villages or provinces
The Marines often listed combat expeditions on a servicemans military
record even though he had nothing to do directly with the operation in
question. It may only mean that some other members of his unit were
involved. These combat expeditions could appear on your record even if
you were on R&R in Hawaii during the whole operation.
I would not have looked into his military records at all were it not for the
strange story about not shooting a boy and refusing to return to his ship.
Now I am trying to figure out whether his accounts in his books jibe with
his military records. My preliminary conclusion is that the whole
melodramatic story of not going back to the ship seems not to be
supported by his military records. He also appears to have had a Vietnam
tour, but without either distinction or misconduct. His decorations,
including the air medal, are all analogous to the gold stars kids get in
school for attendance. That is, they are for being somewhere or for being
somewhere for a certain period of time.
Heres is an email I got from a former Marine:
I couldnt help but notice that he was attached to H&MS-24
(Headquarters and Maintenance Squadron-24) Marine Air Group 24,
1st Marine Brigade. MAG-24 was the entire air group with H&MS-24 as
maintenance support efforts. They include support such as airframes,
avionics, ordinance, which was my military occupational specialty
(#6541). [Kiyosaki] also said that he was 1st Marine Brigade. Brigade
was ground side. Grunts, infantry, artillery. There is no way for him to
have been both airwing and ground at the same time without changing
M.O.S.
[Reed note: I do not know Marine procedures during Vietnam, but Kiyosaki

seems to have been trained as a forward observer to direct artillery and/or

air support at ground targets. Forward observers are typically attached to
infantry or artillery units.]
A Marine major said this M.O.S. is for an enlisted man and that he did not
believe the mans comments would apply to officers.

The making of a financial genius

There are probably many ways to became a financial genius, but Kiyosaki
has certainly chosen an unlikely route:
flunked sophomore year of high school and had to repeat
U.S. Merchant Marine Academy
3rd mate oil tanker (or was it Love Boat type cruise ship as he said
in one of his books?)
Marine helicopter pilot (or was it fighters?)
refused to return to ship when it was ordered to return to combat (or
just missed the boat)
Xerox salesman
failed businessman (nylon surfer wallets)
failed businessman (rock and roll memorabilia)
failed author (1993 book If You Want to Be Rich & Happy, Dont Go To
School?)
failed MBA applicant
homeless person
bankruptcy (or maybe not) One of his corporations did declare
bankruptcy more recently
Kiyosaki tries to make a virtue from all his failures and false startssaying
thats how you learn and you have to get back up and all that. Fine. But
couldnt we see a little more actual success after all these great lessons
were learned? And how did all this screwed-up stuff happen to a guy who
had the benefit of Rich Dads brilliant wisdom back at age nine?
What is his background really? I am impressed by Xerox salesmen as a

general rule, but that aspect of his background sure stands out from the
rest. Did he really do that? He claims he was a top-five guy at Xerox
one of the nations most well-managed companies at the time. Really?
And this after being something like a bottom-five guy everywhere else!
(A man who called me said he understood Kiyosaki was a top salesman at
Xerox, but since he is a friend of Kiyosaki rather than a Xerox guy, his
knowledge may come entirely from Kiyosaki.)

College grad?
I was so skeptical that a college graduate could have written this book
that I took the unusual step of calling his college to confirm that he really
attended and graduated. He did. If I were a Merchant Marine Academy
graduate, I would request that they do a recount of Kiyosakis college
grades. This book is an embarrassment to the U.S. Merchant Marine
Academy.
I have heard from two USMMA guys who generally agreed with my
analysis. One noted that USMMA grads have an obligation to stay in the
merchant marine for a certain amount of time, because taxpayers pay for
their education, but that serving in the military either reduces or
eliminates the remainder of that obligation. Maybe getting rid of that
obligation, not learning how to lead men, was Kiyosakis real motive for
joining the Navy then Marines.

Archie Bunker on Wealth

Archie Bunker on Wealth would be a more accurate title for Rich Dad Poor
Dad. The overall high-school-dropout tone of the book is likely the
influence of rich dad. To be sure, rich dad as depicted by Kiyosaki is
street smart and has entrepreneurs genes and energy. But like most
high-school dropouts, rich dad has not done his homework on many of
the opinions he passed on to Kiyosaki. For example, Kiyosaki says, Prices
go up because of greed and fear caused by ignorance. In fact, prices are
determined by supply and demand, as anyone who is reasonably well read
knows. The fear and greed line is a common old saying about the prices

of publicly-traded stocks, bonds, and commodities.

Real estate expert?

On pages 106 and 107, he brags of taking back $190,000 worth of 30year notes at 10%. Competent note investors would never agree to such
long terms. One expert I consulted called it a nutty note. I asked Bill
Mencarow, owner of Paper Source if he knows of any note investors who
routinely take back 30-year notes. He said, To paraphrase Eisenhower
speaking about Nixons vice-presidential accomplishments, give me a
week and I might think of one. Mencarow further states that 30-year selfamortizing notes, at best, would sell at about a 50% discount for cash.
He actually asked around for me and found three guys who would pay
only $90,000 to $120,000 for Kiyosaki's $190,000 face-value notes.
If the notes are interest-only with a balloon of $190,000 at the end of the
30 years, they would sell for even less. Trading $190,000 worth of real
estate for paper that is only worth $90,000 to $120,000 does not get you
a financial genius secret decoder ring.
Kiyosaki says much of [the $19,000 a year interest income is] sheltered
through our private corporation. In fact, corporations do not shelter
income. The corporations income is taxed when received at corporate tax
rates. When that income is subsequently distributed to Kiyosaki, it will be
taxed again at individual rates. Real estate investors generally do not
incorporate. Accountant Bob Baldassari of McLean, VA says he and his
colleagues almost never advise a small real-estate investor to incorporate
because the disadvantages far outweigh the advantages.
Smart note investors generally buy notes through their pension fund,
which is not a corporation. Apparently Kiyosaki is not a smart note
investor.
He says he hopes they never pay off the $190,000 because he would
have to pay taxes on the principal and because $19,000 paid over 30
years is $500,000. In fact, taxes must be paid whenever any principal

payment is made, partial or complete payoff. Taxes must also be paid

whenever any interest is paid. There is no way to avoid paying the taxes.
And the only way to defer paying the taxes is to defer receiving the
income, which is cutting off your income to spite the IRS.
If he did these deals, which involve buying and selling six houses, in a
short enough period of time, he would almost certainly be considered a
dealer for tax purposes. Dealers are not allowed to use installment-sale
treatment. That means he has to pay all the tax on the gain with the next
quarterly income tax return after the closing, even though he has not
received a penny of principal from the deal.
If the borrowers literally never paid the $190,000 off, Kiyosaki would be
out $190,000. Wanting to lose $190,000 is insane. Measuring your return
on a 30-year note by multiplying the annual interest by the term of the
loan is extremely misleading. The only way to measure payments received
over a period of years is in terms of interest rate or present value.
Bragging about cumulative interest paid on a 30-year note indicates that
either Kiyosaki does not understand the first thing about finance, or he
thinks you don't.
A reader and I got into a dialogue about these notes and I came to the
conclusion that the typical Kiyosaki follower literally does not know the
first thing about finance. The people that guys like Kiyosaki and Sheets
target are sort of the Thomsons gazelles of real estatepeople who
are the weakest and most vulnerable because of their ignorance of
real-estate-investment principles. Click here for a quick overview of
some basic principles.
On page 108, Kiyosaki brags that $190,000 was created in the asset
column and no taxes were paid. Not paying taxes in this case is hardly an
accomplishment. The reason he has not yet paid any taxes is he has not
received any money. He will start paying taxes the moment he receives
any interest or principal payments on the $190,000.
If you want the straight story on taxes as they relate to real estate

investment, read my book Aggressive Tax Avoidance for Real Estate

Investors.

On page 24, Kiyosaki speaks of building a track [sic] of houses. This

does not demonstrate the command of real-estate terminology one would
expect of a real-estate expert. (He means tract.)
Kiyosaki recommends various financial books, but only two real estate
books: Donald Trumps Art of the Deal and Robert Allens Creating
Wealth. I think its safe to say that no other experienced real-estate
investor in history ever gave a list of recommended books that included
only those two. Trump is a publicity-hungry, New York City high-rise
developer whose book is only somewhat useful to the typical real-estate
investor. It would rank very low on most lists aimed at individual investors.
For a discussion of Allen, see the guru rating page of my Web site.
There is a lot of incorrect conventional wisdom in this book.
Kiyosaki book

The whole truth about the subject in

question

The rich get richer.

Sometimes, they get poorer.

Its not how much money you make,

its how much money you keep.

The more you make, the more you

keep. Only a tax rate greater than
100% would change that. There is no
such rate.

By working harder, you simply

increase the amount of taxes taken by
the government.

Working harder increases both your

before-tax income and your after-tax
income, as well your tax liability. What
Kiyosaki says would only be true if the
tax rate were 100%, which it never is.
As a general rule, people who are
smarter than you will not apply to work
for you until you have reached a rather
high level of success.
On 8/21/00, the comic strip Dilbert
made fun of this old platitude by
having it uttered by the pointy-haired

boss. His subordinates then gleefully

pointed out that each boss in the
company must therefore be dumber
than his subordinates and that the
CEO must be the dumbest person in
the corporation.

An intelligent person hires people who

are more intelligent than they are.

Here is an email I got from a reader of

this page: I have a friend that is
following the Kiyosaki mentality. He
wants to hire/partner with me cause I
have more skills and talents than he
does. He wants me to come up with
the business idea, come up with the
business plan, the capital, the
investors, the operations, and etc... I
asked him, so what is your
contribution to the business then. He
tells me that he is going find people
smarter than him to make this
business work. This logic is so
nonsensical. If I'm smarter than the
entrepreneur than why should he even
be an entrepreneur? I could keep all
the profits to myself.
I told my friend that it takes many
hours of sweat and late night candle
burning to run a business. I know
because I've started one before.
Unfortunately, he refuses to
understand my message, instead he
continues on with this Kiyosaki talk
about starting a corporation!? Without
a business idea, business plan, he
requested me to incorporate first.
This is exactly the crap that Kiyosaki
is preaching in his books.
Then we had a huge argument about
who should write up the business plan
once he comes up with an idea. He
comes up with some ideas, then he
wants me to write the business plan. I
ask him a few details about the target
customers, SWOT, and financial
forecast. He's response was classic,
You figure it out. Gotta love the

Kiyosaki mentality.
Cheng

Most people work all their lives paying

for a home they will never own.

With each payment, their equity

increasesas long as the property
value does not fall. Many people pay
off their mortgage in full before they
die. Almost all thoroughly enjoy their
home both during and after the
mortgage.

Most people, working for a paycheck,

are making the owner, or the
shareholders richer.

Irrelevant. You should choose what

you do only according to how it relates
to your goals. You should not resent
others benefiting from your efforts.
Indeed, you will prosper most when
you help others achieve their goals.

You work for the bank. After taxes

your next largest expense is usually
your mortgage and credit-card debt.

Irrelevant. You should use mortgage

and credit card financing whenever
they will help you achieve your goals.
Resenting bank profits is childish.

The rich do not play by the same set

of rules.

Yes, they do. This is sour grapes less

successful people use to rationalize
their inability to succeed. They lack
the character to simply admit that they
got beat fair and square in the
economic aspects of the game of life.

It is the knowledge of the power of the

legal structure of the corporation that
really gives the rich a vast advantage
over the poor and middle class.

None of my rich friends make any use

of corporations. I became a millionaire
in 1983 and never used a corporation.
Corporations have both advantages
and disadvantages. Most real estate
investors do not use corporations.
Note investors use IRAs and such.
Kiyosaki claims to be mainly a realestate investor. See my discussion
below on corporation advantages and
disadvantages.

The reason I minimize my income is

because I dont want to pay it to the
government.

Minimizing ones income is idiotic. You

are always better off with more
income. His advice would only make
sense if the tax rate were 100%.
One of my graduate-business-school
professors called this, Managing the
company from the fiftieth floor when
you only have a one-story building.

Having an outside board of directors

when you are an individual real-estate
investor, with or without a corporation,
is a silly affectation.

You should have a corporation and a

board of directors.

Corporations are costly, timeconsuming, and complicated and have

many disadvantages like preventing
you from employing your minor
children and deducting the wages
without having to pay social security,
withholding and so forth. Corporations
cannot escape those taxes or
paperwork on minor employees. In
some states, the owner of an
incorporated company cannot
represent himself in small claims court
and must hire an attorney for every
little legal matter.

I love it when my real estate broker or

stockbroker makes a lot of money.
Because it usually means I made a lot
of money.

It means no such thing. Brokers profit

strictly from transactions, regardless
of whether they are also ultimately
profitable for the clients. Where are
the clients yachts? is an old question
that points up the fact that the stock
brokers make money while their
clients lose money.

I only play with money I can afford to

lose.

A loss is a loss. All losses make you

worse off. There is no line which
separates losses that matter from
those that do not. You should not
invest in something unless you have a
reasonable degree of confidence that
you will not lose. There are several
books, like Innumeracy and Why
Smart People Make Big Money
Mistakes, that condemn this kind of
thinking, which is a form of erroneous
financial thinking known as mental
accounting.

Action always beats inaction.

Sometimes inaction is the best course,

like when you are thinking about
selling real estate or a stock that
subsequently goes up.

Contempt for traditional education and the educated

The book is almost entirely contemptuous of formal education and those

who have graduated from universities. He wrote another book called If
you want to be rich and happy, don't go to school? On page 64, he
delights in the fact that educated people now came at [rich dads] beck
and call, and cringed when he did not approve of them.
This is a bit sick. To borrow a phrase that is now a common sitcom punch
line, I think Kiyosaki has some issues regarding educated people and his
relationship with his highly educated poor dad. He seems to have some
psychological need to dominate and demean people like his father. At my
guru-rating page, I said Dave Del Dotto was the dumbest of the realestate gurus. Kiyosaki takes the prize for the real-estate guru with the
most tangled psyche.
He says, ...the main reason people struggle financially is because they
have spent years in school but have learned nothing about money. I
disagree. The main reason people struggle financially is bad decisions
about getting an education, bad luck, too much spending, too little
savings and investing, too much reliance on organizations for their
livelihood, and not enough reliance on themselves.
Kiyosaki says that our schools focus on preparing todays youth to get
good jobs by developing scholastic skills. He thinks thats a bad thing. Its
probably the right thing. Only a small percentage of people are suited to
entrepreneurship. Even future entrepreneurs usually need to begin as
employees to get their starting capital and to learn while they work.
I would be among the first to agree that traditional formal education is
lacking in many ways. I attended Catholic and public schools, graduated
from college and got an M.B.A. But I also attended the School of Hard
Knocks for forty-five years, and thats not such a hot educational
experience either. As someone said, in the School of Hard Knocks they
give the test first, then the lesson. That is a slow, costly, painful way to
learn. Unfortunately, its the only school that teaches many things you
need to know. Obviously, the best way to prepare for life is a combination
of formal traditional education, reading, seminars, experience, and asking

more experienced people for advice.

Want to know what the rich REALLY teach their children?

Rich Dad, Poor Dads subtitle is What the rich teach their kids about
moneythat the poor and middle class do not! Unfortunately, you will
not learn that in Kiyosakis book. Fortunately, the real version of what the
rich teach their kids, or ought to, was the subject of a cover story (Rich,
but not spoiledHow to raise your kids in an age of wealth) in the
6/12/00 issue of Forbes. Forbes knows rich.
http://www.forbes.com/premium/archives/purchase.jhtml?
storyURL=/forbes/2000/0612/6514266a.html&_requestid=27740) They
publish the annual Forbes 400, which is a list of the richest people in the
world. If you have money and kids, that article and its bibliography are
worth a trip to a library. The article bears no resemblance to Kiyosakis
advice, never mentions his best-selling book in spite of its obviously
related subtitle, nor is his book listed in their list of five recommended
books on the subject of Advice for the affluent parent.
What I say to teach your children is in my Succeeding book.
The main issue for wealthy parents is finding a way to motivate their kids
to not coast because of their parents affluence. Also, the vast majority of
parents, wealthy or otherwise, will tell you that kids are not big on listening
to their parents. Kiyosakis naivet about raising kids is to be expected
considering that he has never had or adopted any kids. Why he feels
qualified to tell those of us who do have kids how to raise them is a
mystery.

More to life than money

Also, there is more to life than making money. Traditional, formal
education has opened up tens of millions of new, non-wealth-building
horizons for students. But Kiyosaki seems to judge all educational
experiences by the single criterion: does this tell me how to get rich?

Kiyosaki talks like a politician

Kiyosaki uses phrases like the rich and the poor a lot. If you ran a
Nexis computer search to see how and where those phrases have been
used in the news media, I predict you would find they are almost
exclusively used by leftist politicians and quasi-politicians.
A number of Democrats have complained that the Republicans are no
angels either. I know. I agree. But with regard to Kiyosaki, the politicians
who are most comparable are on The Left because both Kiyosaki and the
left pander to the poor. While use of Republican demagoguery might
work in some cons, it certainly would not fit the get-rich-quick-in-realestate con. Even among get-rich-quick gurus who try to rip off the poor,
Kiyosaki is unique in using political tricks as heavily as he does. I come
closest to being a Libertarian so I could not care less about either the
Democrats or the Republicans.
The way politicians talk is intellectually dishonest. They stereotype (e.g.,
the rich). They engage in name calling. (e.g., Kiyosaki dismisses costconscious accountants as bean counters and critics as Chicken
Littles.) They change the subject. They scapegoat. They try to arouse
envy. There should be no politicking in a how-to real-estate book like Rich
Dad, Poor Dad. See my article on intellectually-dishonest debate tactics.

Meaningless slogans
Politicians also use meaningless slogans. Kiyosakis book has many of
those. He even adopts Jesse-Jackson-like one-of-these, one-of-those,
pep-rally cadences. For example, Jackson says, Up with hope. Down
with dope. Kiyosaki says, Dont work for money; make money work for
you.
Dont work for money; make money work for you, sounds smart, but
what does it really mean? Quit your job and live off your investments?
Most of his readers are not yet in a position to do that. And when they are,
they do not need his book.
Obviously, the correct advice is work hard at a job or your own business,

save, and invest. Kiyosakis version is muddled and risks giving people a
dangerous wrong impression, but, like a politician, he seems more
interested in sweeping the audience along to his selfish ends than in
teaching them what they need to learn. A Thomas Sowell column that
appeared in the 9/25/00 edition of my local paper contained several
phrases that reminded me of Kiyosakis book:
political demagogues who exploit the voters ignorance to gain
power
people whose chief talent has been the emotional manipulation of
the public for political purposes
Sound bites are usually very unsound.
[people who] cant see beyond a media image or some catchy
phrases and emotional attitudes
There are people out there whose job it is to manipulate your
emotions for political purposesand they get paid big bucks.
Here are some other meaningless slogans in Kiyosakis book: Learn to
use your emotions to think, not think with your emotions (page 42), Its
not the numbers, but what the numbers are telling you (page 53), Id
rather welcome change than cling to the past. (page 110), Winners are
not afraid of losing, but losers are. (page 114) The 6/28/01 Dilbert comic
strip had an employee saying, work smarter while broadening our focus.
The pointy-haired boss responds, That doesnt mean anything. The
spouting of catchy, meaningless slogans is widespread. The habit of
stopping and thinking about whether they really mean anything is not.
Here is a pertinent email I got on 3/17/06:
John -For several days I've skimmed Kiyosaki's book "Rich Dad's Guide to
Investing" at my local Barnes & Noble, and found the experience
mesmerizing. My wife and I own a professionally managed portfolio of
stocks, thanks to a modest inheritance, but apart from keeping a
worried eye on the financial pages we really take little action to grow

our nest egg. I'm increasingly interested in my alternatives, and I am

potentially a prime candidate for Kiyosaki's mantra of "Don't work for
money; make money work for you." (I'm just that lazy.)
I would have bought the book but for its poor writing. As a newspaper
reporter and former copy editor, I can spot padded prose and logical
fallacies a mile off. Inexperienced writers, or those who do not
understand their subject, usually go on at great length to say almost
nothing. I seldom see even inexperienced writers try to bog the reader
down, or avoid a clear "so what," as I saw in Kiyosaki. And it didn't help
that his writing style is lifeless, his characterization unconvincing.
In any event, I thought I'd Google around for expert reactions to
Kiyosaki's books, as they are generally compelling in the way that
infomercials and seances are compelling. I read two things: his Web
site, in which he promotes board games and a $2,500-per-head
weekend seminar targeted at people who, on average, likely can illafford the expense, and your analysis. I have to say I found your site
refreshingly thorough and public-minded, and I'm glad I ran across it.
Another thing I know as a reporter is when someone has done his
homework. You have clearly done yours, and I'll be sure not to put any
stock in Kiyosaki.
Incidentally for your readers who have seen the movie Mystery Men
(1999), a tongue-in-cheek spoof of comic book super heroes, this
exchange may feel apt in considering Rich Dad, Poor Dad:
Mr. Furious: Okay. Am I the only one who finds these sayings just a bit
formulaic? "If you wanna put something down, you gotta pick it up". "If
you wanna go left, you gotta go right". It's...
Sphinx: Your temper is very quick, my friend. But until you learn to
master your rage
Mr. Furious: Your rage will become your master? That's what you were
gonna say, right? Right?
Sphinx: Not necessarily.

With gratitude,
John Snyder
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