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15 Little Life Hacks

Book Review: Rich Dad, Poor Dad (this books irks me)

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I decided to start reviewing some books that I read. I’ll do books on personal finance, entrepreneurship, and whatever else I think is cool. (If you have books you like, let me know.) First off…

richdad.jpg
Rich Dad, Poor Dad: What The Rich Teach Their Kids About Money–That The Poor and Middle Class Do Not!

This book is like the kid you hated in high school, but he let you cheat off his test a couple of times so you kind of like him. I have grudging respect for this book, but every time someone raves about it, I usually just want to punch them in the face.

Rich Dad, Poor Dad is an absolute juggernaut of a book–it’s been on the bestseller lists for as long as I remember. I re-read this book yesterday. Man, there are some really great points, like how rich people make money work for them and how everyone else works for money. The first chapter is pure magic–read it. One of my favorite quotes is from his Rich Dad:

Most people never study the subject [money]. They go to work, get their paycheck, balance their checkbooks, and that’s it. On top of that, they wonder why they have money problems. Few realize that it’s their lack of financial education that is the problem.

He takes a dim view of people who blindly make decisions without stopping to ask themselves why:

A friend of mine in Hawaii is a great artist. He makes a sizable amount of money. One day his mother’s attorney called to tell him that she had left him $35,000. This is what was left of her estate after the attorney and the government took their shares. Immediately, he saw an opportunity to increase his business by using some of this money to advertise. Two months later, his first four-color, full-page ad appeared in an expensive magazine that targeted the very rich. The ad ran for three months. He received no replies from the ad, and all of his inheritance is now gone. He now wants to sue the magazine for misrepresentation.

This is a common case of someone who can build a beautiful hamburger, but knows little about business. When I asked him what he learned, his only reply was that “advertising salespeople are crooks.” I then asked if he would be willing to take a course in sales and a course in direct marketing. His reply, “I don’t have the time, and I don’t want to waste my money.”

The book does a fantastic job teaching how to think about work and money. Its early parts are some of the best I’ve read. But I don’t agree with the book’s focus on real estate, which is far too complicated for beginning investors, and the high-level advice with few actionable recommendations. Many people love this book for teaching them how they they’re supposed to think about money–but if you ask them what they’ve done to get there, in my experience, the people who rave about this book haven’t done much. Unfortunately, Rich Dad, Poor Dad doesn’t have many actionable suggestions. I’d recommend this book as an excellent way to challenge your thinking about work and money, but only if you combine it with other books that make tactical recommendations of financial issues. I’ll cover more books I love and hate later.

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48 Comments

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  1. Here’s the obligatory Kiyosaki == huckster link:
    http://www.johntreed.com/Kiyosaki.html

    What I dislike about him is his use of language and generalites to manipulate. Things like “I read the stock market.” What does that mean? And “If you didn’t make a million dollars in the stock market in the 90’s you need to reevaluate how to pick stocks.” His tone implies that this was a piece of cake if you knew what you were doing.

    I don’t deny that some of his ideas are good, but there are many others who say the same things and you don’t have to sift out the deceptions.

  2. I agree that Kiyosaki is a good motivator and can get people to think about money in ways that they haven’t before. However, it should be noted that Kiyosaki’s message that is at once inspirational and incredibly vague is basically a formula for getting you to buy more of his stuff, which includes books, seminars, board games, etc.

    I do believe that the books have value, but they should be taken with a big grain of salt. The below link is an in-depth look at Kiyosaki’s claims of owning multiple corporations, having myriad investment properties, and making vast fortunes. While the link makes him out as a fraud, i believe that the truth is probably somewhere in the middle.

    http://www.johntreed.com/Kiyosaki.html

  3. Good review. I am glad you didn’t bodyslam the book.

    Although the Rich Dad advice clearly does not hold your hand through making your first chunk of passive income, most critiques of this book lose all credibility with me because they can’t say “These techniques don’t work, I’ve tried them so I know.” More frequently, all I see them say is “These techniques are too vague/advanced/risky/expensive/hard/unrealistic for me to try.”

    Despite the claims of any author, I think every reasonable person could conclude that no honest money-making system is going to be really really easy. I think the real challenge that people face is not the fact that they don’t have money for a down payment on a rental home, or that they don’t have/can’t afford an accountant/lawyer/advisor to help them. These problems are relatively easily solved.

    The real challenge is starting from square one in a field where your perceived expertise is nil (all you’ve done is read a book!) vs. all those Donald Trumps out there who have this stuff mastered. If you’re going to be defeated before you start, there was never any hope for you in the first place.

    I think the best use of a book like this is as a springboard into a whole new kind of education. And I think you have to choose to be inspired by the success of others in these fields rather than being intimidated, or else any book like this will be worthless to you.

  4. Whatever you do, don’t buy his game. Rich dad is a decent read for someone who has never thought about money, but he doesn’t seem to have much substance in any of his books.

  5. I think you created a perfect summation of what the book is supposed to do. It’s not supposed to tell you to buy some shares of GE every year, it goal is to get you thinking differently and move you in the direction of buying other books and reading more information. It’s creating a different mindset, not a different investment strategy.

  6. I think the biggest problem with this book is it doesn’t tell people what to do. The first book I read when I got interested in personal finance was Automatic Millionaire, and that gives you steps to go out and do today in order to make money work for you. This book just says you should make money work for you, but it doesn’t tell you how.

  7. You put into words my EXACT feelings about this book. Only thing I’d like to add is that I purchased some followup books of his thinking that I could pick up some practical information that was lacking from the first book. I could not and therefore do not bother recommending them. Yes they did have some gems of wisdom and insight but not as much as the first and I was a bit disappointed; also because he does over-do the real estate angle.

    Looking at his site and all the followup material, I almost had this feeling that he’s turned into a marketer of the “how to get rich by selling books on how to get rich” school of getting rich.

  8. I’ve noticed the more books people have in their “success” library, the less successful they are.

    One of my least affluent, struggling clients has untold numbers of success books and seminars on nearly every recorded audio and visual format in existence.

    And nearly all of my very affluent clients have no “success” or “financial advice” books on their shelves.

    One or two good books with sound advice and inspiration should do it.

    A little known title is “Millionaire’s handbook” by H. Peter R. Miller – filled to the brim with little gems of business/wealth advice and wisdom.

  9. Ramit, good review, it echoes my own thoughts on this book. I recently purchased this book on a friend’s recommendation-> Dave Ramsey – Total money makeover

    I have yet to read it but would love to hear your thoughts if you have any familiarity with it.

    sean

  10. Ramit, since you’re a guy who likes proof, I think you need to take a look at the comments this guy gets on yahoo, and then take a look at the net worth compilations of various internet bloggers. You’ll see nothing but complaints about this guy on yahoo and the Kiyosaki adherents with blogs usually have a net worth equal to that a of fourth grader’s toy fund.

    http://neos-nest-egg.blogspot.com/2006/02/personal-finance-bloggers-net-worth_11.html

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