{"id":55309,"date":"2021-12-09T16:20:00","date_gmt":"2021-12-09T20:20:00","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=55309"},"modified":"2026-01-23T16:07:19","modified_gmt":"2026-01-23T20:07:19","slug":"rich-dads-cashflow-quadrant-book","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/rich-dads-cashflow-quadrant-book\/","title":{"rendered":"Rich Dad\u2019s Cashflow Quadrant: Book Overview"},"content":{"rendered":"\n

What is the book Rich Dad’s Cashflow Quadrant<\/a> <\/em>about? What is the secret to wealth, according to its author Robert Kiyosaki? <\/p>\n\n\n\n

Rich Dad\u2019s Cashflow Quadrant <\/em>is the sequel to Robert Kiyosaki\u2019s international bestseller, Rich Dad, Poor Dad<\/em><\/a>. The central principles in Rich Dad\u2019s Cashflow Quadrant <\/em>and Rich Dad, Poor Dad <\/em>are the same: The best way to achieve wealth is to eschew security and to work hard at a \u201cgood job\u201d in favor of cultivating boldness and developing assets that will generate passive income.<\/p>\n\n\n\n

Below is a brief overview of Robert Kiyosaki\u2019s book Rich Dad\u2019s Cashflow Quadrant<\/em>. <\/p>\n\n\n\n\n\n\n\n

Rich Dad’s Cashflow Quadrant: Guide to Financial Freedom<\/em><\/h2>\n\n\n\n

Kiyosaki uses the concept of four \u201ccashflow quadrants\u201d to emphasize that it\u2019s not what you do<\/em> that makes the difference between achieving financial freedom and being stuck in a cycle of job dependency, but what kind of income you earn<\/em><\/strong>. <\/p>\n\n\n\n

The Rich Dad <\/em>books have appealed to millions. Many readers credit them with waking them up to the concept of passive income. The books also have their fair share of critics. By Kiyosaki\u2019s own admission, the books are less a step-by-step guide to achieving wealth than a readable, engaging rundown of the core concepts and values about money Kiyosaki says you need to rethink. The downside to that, and perhaps the most common critique of the Rich Dad<\/em> series, is that the books can lack convincing supporting evidence. <\/p>\n\n\n\n

To Become Wealthy, Develop Assets <\/strong><\/h3>\n\n\n\n

Most people believe that the key to wealth<\/a> is getting a \u201cgood,\u201d high-paying job. But according to Kiyosaki, the <\/strong>type of income<\/em><\/strong> you generate is more important than the <\/strong>type of work <\/em><\/strong>you do. <\/strong>He divides income into four categories, which he calls \u201ccashflow quadrants\u201d:<\/p>\n\n\n\n

    \n
  1. Employees (E)<\/li>\n\n\n\n
  2. The self-employed and small business owners (S)<\/li>\n\n\n\n
  3. Big business owners (B)<\/li>\n\n\n\n
  4. Investors (I)<\/li>\n<\/ol>\n\n\n\n

    According to Kiyosaki, the first two income categories<\/a>, employees (E) and the self-employed and small business owners (S), are usually dead-ends on the road to wealth. The other two categories, big business owners (B) and investors (I), are the most conducive to accumulating wealth because those are the categories in which you can develop passive income in the form of assets<\/strong>. In his book Rich Dad\u2019s Cashflow Quadrant<\/em>, Robert Kiyosaki explains how to move from the E and S categories to the B and I categories, or at least add I income to existing E or S income. <\/p>\n\n\n\n

    The 4 Cashflow Quadrants <\/strong><\/h3>\n\n\n\n

    Kiyosaki\u2019s \u201ccashflow quadrants\u201d represent four ways of generating income. The way <\/em>you generate income defines your category, not what <\/em>you do to earn it. You can, and in many cases should, generate income in multiple categories. <\/p>\n\n\n\n

    The E and S Categories: The Traditional Path<\/strong><\/h4>\n\n\n\n

    Traditional wisdom tells us to go to college to get a stable \u201cgood job\u201d that will pay enough for a comfortable life and provide retirement benefits. That job is usually in the E<\/strong>mployee (E) or S<\/strong>elf-employed (S) category. <\/p>\n\n\n\n

    In the E category, employees generate income by agreeing to do work in exchange for a salary.<\/strong> They have a boss and a paycheck. Kiyosaki says employees choose the E category because they value security and certainty. Traditional thinking says E category jobs are stable because they offer steady income and a clear job description<\/a>. But there are downsides\u2014Kiyosaki says the biggest disadvantage of an E category job is lack of control over your own work.<\/p>\n\n\n\n

    (Shortform note: While Kiyosaki is quick to point out the downsides of being an employee, many people seek out E category jobs because they enjoy work<\/a> they can only<\/em> do in the E category. Professors, researchers, chefs, and teachers, for example, all make a salary and often attract people interested in the particular kind of work offered in the E category.) <\/p>\n\n\n\n

    In the S category, small business owners and the self employed <\/strong>are <\/em><\/strong>their business. <\/strong>They are their own boss, and they can also be the boss of other people, but without their labor, expertise, and management, their businesses can\u2019t run. Their income is the profit from their business. <\/strong>Kiyosaki says people choose the S category because they value security and excellence in their work. According to Kiyosaki, people in the S category see it as the most stable way to generate income because they have the most control. The biggest disadvantage to trying to make a living in the S category is that most small businesses fail. <\/p>\n\n\n\n

    (Shortform note: Kiyosaki doesn\u2019t mention that one of the biggest dangers of self-employment or owning a small business is not being able to fully plan for the amount of money you\u2019ll make within a given period<\/a>. E category workers are subject to job insecurity, like a round of layoffs because of trouble at the company or an economic downturn, but an S category worker\u2019s job is also inherently at least a little insecure because they are not in a long-term contract with an employer.) <\/p>\n\n\n\n

    Kiyosaki notes that in the E and S categories, the harder you work, the more you have to work. <\/strong>As you work hard and become more successful in the E and S categories, you gain responsibility, which translates to more work. Even though your pay may jump, you\u2019ll have less time to enjoy yourself spending it. <\/p>\n\n\n\n

    While these categories offered security in the 20th century, Kiyosaki argues that changes in the economy mean that they\u2019re anything but secure in the 21st century. Kiyosaki lists five reasons the E and S category job trajectory no longer provides the \u201cgood jobs\u201d of the past and is instead now a trap for job dependency. <\/strong><\/p>\n\n\n\n

    Reason #1: College Doesn\u2019t Guarantee a Good Job or Wealth<\/strong><\/p>\n\n\n\n

    While higher education is still usually necessary, the skills we learn in college aren\u2019t the skills that will lead us to wealth. Financial security and\/or freedom is now detached from a job and attached to knowing the skills to succeed in business and investing, which we don\u2019t usually learn in our undergraduate education<\/strong>, unless we study business. <\/p>\n\n\n\n

    (Shortform note: Due in part to the trend known as \u201cdegree inflation\u201d<\/a> where college degrees are required for jobs that don\u2019t actually demand them, a college education may be more necessary than ever for getting a job. At the same time, 57% of Americans say a college degree doesn\u2019t provide its money\u2019s worth. Between 1989, four years before Rich Dad\u2019s Cashflow Quadrant <\/em>was published, and 2016, the cost of college (adjusted for inflation) nearly doubled.<\/a>) <\/p>\n\n\n\n

    Reason #2: There Aren\u2019t Enough Good Jobs<\/strong><\/p>\n\n\n\n

    Kiyosaki identifies downsizing<\/strong> as one reason there are fewer \u201cgood jobs.\u201d <\/strong>Because of cheap labor overseas, a trend toward consolidation in business, and automation, employers are cutting jobs and cutting pay. <\/p>\n\n\n\n

    (Shortform note: Experts also recognize the rise of the gig economy<\/a>, labor laws that favor employers over employees<\/a>, and income inequality<\/a> as reasons there are fewer good jobs to go around.) <\/p>\n\n\n\n

    Reason #3: Your Job Won\u2019t Provide a Secure Retirement <\/strong><\/p>\n\n\n\n

    One of the biggest advantages to an E category job is a pension. From the 20th to the 21st century, however, the norm has shifted from a defined benefit system to a defined contribution system. <\/strong>In the defined benefit<\/em> system, you were guaranteed a pension, which meant income for life after you stopped working. In the defined contribution<\/em> system, you only get what you and your employer contribute during your working years. Consequently, you\u2019re at risk of running out of income during your retirement. Since you aren\u2019t guaranteed income for life, your pension is susceptible to market forces. In a crash, you could sustain significant losses. <\/p>\n\n\n\n

    (Shortform note: Until the 1980s, defined benefit pension plans were common, and originally, defined contribution plans were meant to exist alongside defined-benefit plans.<\/a> Now, just 17% of private-sector workers have pension plans available to them. Companies prefer defined contribution systems because they\u2019re cheaper and easier to manage.)<\/p>\n\n\n\n

    Reason #4: Debt and Taxes Will Bleed You Dry<\/strong><\/p>\n\n\n\n

    The traditional path from higher education to a good job to a secure retirement doesn\u2019t account for what Kiyosaki says your two biggest expenses<\/a> will be in the E and S categories: debt and taxes. <\/p>\n\n\n\n